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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 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1996
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 (I.R.S. Employer
of 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 281-496-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock, $.05 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 28, 1997 - $1,705,026,327
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
ON FEBRUARY 28, 1997 - 72,044,517
DOCUMENTS INCORPORATED BY REFERENCE
1) Proxy Statement for Annual Meeting of Stockholders to be held on
May 13, 1997 - Part III
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TABLE OF CONTENTS
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . .
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . .
Item 4. Submission of Matters to a Vote of Security Holders . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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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, 1996
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 mobile offshore fleet currently consists of three fourth-generation
and two third-generation semisubmersible drilling units, a third-generation
deepwater semisubmersible support vessel, two second-generation
semisubmersible drilling units, nine international-class 300-foot cantilever
jack-ups, two self-erecting tenders and one floating production vessel.
The Company's fleet is internationally diversified. Three of the
Company's drilling units 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, Egypt, India, Indonesia, Ireland, Italy,
the Netherlands, Nigeria, and the United Kingdom.
The Company has acquired and sold certain assets. See "FINANCIAL
CONDITION" under Item 7 for discussions of such acquisitions and sales.
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. 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.
On May 3, 1996, the Company announced that it had made a proposal to
Transocean Offshore ASA ("Transocean") regarding a combination of the two
companies in a transaction that would have entitled each of Transocean's
shareholders to receive 1.245 shares of the Company's common stock for each
share of Transocean common stock. Sonat Offshore had also announced that they
had made a proposal to combine with Transocean. On May 7, 1996, the proposal
was revised to entitle each of Transocean's shareholders to receive 1.28
shares of the Company's common stock for each share of Transocean common
stock. However, on June 4, 1996, the Company announced it was suspending its
efforts to pursue a business combination with Transocean unless it could be
done on terms that were clearly beneficial to the Company's shareholders. In
September 1996, Sonat Offshore completed a business combination transaction
with Transocean. The combined entity is now called Transocean Offshore Inc.
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.
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.". 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, 1996, the Company had acquired approximately 74.4%
of the outstanding stock of Drilling, at an accumulated cost of approximately
$102.9 million net of a $10.6 million distribution to the Company declared by
Drilling in the first quarter of 1996. See Note B of Notes to Consolidated
Financial Statements and "FINANCIAL CONDITION - Arcade Acquisition" under Item
7.
Mobile Offshore Unit Descriptions
Mobile offshore drilling units consist of a hull, positioning equipment
and drilling equipment. The design of a drilling unit determines the marine
environment in which it can operate. The drilling equipment determines the
drilling operations which a drilling unit 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 drilling unit also has living quarters, cranes, a heliport and
material storage facilities.
Although the Company's fleet consists of jack-ups, semisubmersibles,
drilling tenders, a support vessel, and a floating production 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 which is then jacked further up the legs so it is above
the highest expected waves. 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 may be designed to operate in a maximum water depth of
approximately 400 feet (however, most jack-up rigs have a lesser
water depth capability). 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 design limitations, 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
drill floor 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 by 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. 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.
8. Floating Production Vessels. Floating production vessels are
equipped for oil production, processing and storage. The oil
produced is discharged either to tankers by means of an offloading
facility on the vessel as on a floating production storage and
offloading (FPSO) vessel or the vessel is deployed to a shore
terminal for discharge as on a floating production storage and
shuttle (FPSS) vessel. These vessels hold their position through
the use of either a computer controlled thruster system or an
anchoring system and can operate in various water depths. The
moored vessels may be spread moored or be equipped with a mooring
turret, depending on the environmental conditions.
There are several factors that determine the type of offshore drilling
unit 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 drilling units as a function of demand for their
capabilities.
The Company's Fleet
At March 1, 1997, all of the Company's twenty mobile offshore units were
operating or committed under contract. Eight of the contracts expire prior to
the end of 1997 with twelve contracts extending past 1997. The Company's
fleet currently operates pursuant to contracts having anticipated durations
from less than one year to up to three 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, 1997.
MOBILE OFFSHORE UNITS
Water Drilling
Year Depth Depth
Type and Name Constructed Capability Capability Location Status
(expressed in feet)
Fourth-Generation
Semisubmersibles
JACK BATES (1) 1986 4,000 30,000 United Kingdom Committed
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 4,600 25,000 Angola Operating
M. G. HULME, JR. (4) 1983 3,300 25,000 Gulf of Mexico Operating
IOLAIR (5) 1982 2,000 - United Kingdom Operating
Second-Generation
Semisubmersibles
RIG 41(1)(6) 1976 660 25,000 Gulf of Mexico Committed
J. W. McLEAN (1)(7) 1974 1,500 25,000 Ireland Committed
Jack-Ups
F. G. McCLINTOCK
(1)(8) 1975 300 25,000 Netherlands Operating
RON TAPPMEYER (1) 1978 300 25,000 Australia Operating
C. E. THORNTON (8) 1974 300 25,000 Nigeria Operating
RANDOLPH YOST (1) 1979 300 25,000 Nigeria Operating
D. R. STEWART (1) 1980 300 25,000 Italy Operating
HARVEY H. WARD (1) 1981 300 25,000 India Operating
ROGER W. MOWELL (1) 1982 300 25,000 Italy Operating
J. T. ANGEL (1) 1982 300 25,000 India Operating
GEORGE H. GALLOWAY
(1)(8) 1985 300 25,000 Gulf of Mexico Operating
Drilling Tenders
CHARLEY GRAVES (1) 1975 400 20,000 Egypt Committed
W. D. KENT (1) 1977 400 20,000 Indonesia Operating
Floating Production
Vessel
SEILLEAN (9) 1990 650 - United Kingdom Operating
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(1) Subject to a first preferred mortgage in favor of Christiania Bank og
Kreditkasse. See Note C of Notes to Consolidated Financial Statements.
The "JACK BATES" is scheduled to be upgraded to operate in 4,500 feet of
water in the second quarter of 1997.
(2) 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 "JIM CUNNINGHAM"
was 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 was
upgraded to operate in 3,300 feet of water in 1996 and is scheduled to
be upgraded to operate in 4,000 feet of water in mid 1997. 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 field
support and living accommodations and is expected to be upgraded in 1998
to include a derrick floor and ancillary workover equipment. Subject to
a first priority mortgage in favor of BP Exploration Operating Company
Limited. See Note C of Notes to Consolidated Financial Statements.
(6) The second-generation semisubmersible "RIG 41" was purchased by the
Company in September 1994 and the drilling unit is currently being
upgraded to operate under certain conditions in 3,300 feet of water.
Upon completion of the upgrade, estimated to be at the end of the third
quarter of 1997, "RIG 41" will commence a one year contract with Enserch
Exploration, Inc.
(7) In September 1995, the Company purchased the second-generation
semisubmersible drilling unit "J. W. McLEAN". Following major upgrades
in 1996 and early 1997, the "J. W. McLEAN" will commence a nineteen
month drilling contract with Statoil.
(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". The Company now has title to the "GEORGE H.
GALLOWAY" and "F. G. McCLINTOCK". See Note E of Notes to Consolidated
Financial Statements.
(9) In September 1996, the Company purchased the floating production storage
and shuttle (FPSS) vessel, the "SEILLEAN". The vessel was built for
extended well testing, early production and life of field production and
is currently working in the U.K. sector of the North Sea. The vessel
will remain under its current operational contract on a life of field
basis after which time the vessel can continue to be used in its current
configuration or it can be modified to a floating production storage and
offloading (FPSO) vessel or converted to a dynamically positioned
drillship.
All of the Company's drilling units have top drive units which increase
their 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 units are capable of
drilling to depths of 25,000 feet to 30,000 feet in maximum water depths
ranging from 1,500 feet to 4,600 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 drilling
units 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
drilling unit 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 drilling unit 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 drilling unit 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. In February 1997, the "JACK BATES"
sustained substantial damage when it struck an uncharted underwater
obstruction while under tow into the port of Brindisi, Italy, resulting in the
loss of the forward port thruster and damages to the aft starboard thruster
and underside of the pontoons. The unit had recently completed a drilling
contract offshore Albania and was being towed to Brindisi to discharge
equipment in preparation for continuing its mobilization to a North Sea
shipyard for planned upgrades to the unit prior to commencing a fifteen month
contract in the North Sea area. Preparations are underway to complete
temporary repairs to enable the unit to be towed to a North Sea shipyard for
the planned upgrade and completion of permanent repairs. The Company believes
the physical damage and any business interruption sustained as a result of
this incident are adequately covered by insurance.
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 drilling unit 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 drilling unit 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 drilling unit is currently operating under a long-term contract
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 drilling unit is one of the few
drilling units capable of drilling under arctic conditions. The drilling unit
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 under a long-term contract 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 Transocean Offshore Inc. (as successor to 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
drilling units owned by Drilling and the stock of Drilling (unless, in some
cases, the terms are no less favorable to Drilling or to Transocean Offshore
Inc. 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 Transocean Offshore Inc. owns less than 5% of Drilling (the
"Standstill Period").
The Standstill Agreement further provided that during the Standstill
Period the Company could not permit Drilling to early terminate the
management agreement pursuant to which Transocean Offshore Inc. managed the
"HENRY GOODRICH" and the "PAUL B. LOYD, JR." for a variable management fee
from Drilling. Transocean Offshore Inc.'s management agreement for the "PAUL
B. LOYD, JR." expired in December 1995 and the modified management agreement
for the "HENRY GOODRICH" ended in October 1996. A subsidiary of the Company
now manages both of the drilling units.
The Company's jack-up drilling units are capable of drilling to depths
of 25,000 feet in water depths ranging between 10 and 300 feet, depending on
the drilling unit. All of the Company's jack-ups are independent leg drilling
units and have the cantilever feature, which allows the drill floor to be
extended out from the hull of the drilling unit, facilitating operations over
existing structures such as well platforms.
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's floating production storage and shuttle (FPSS) vessel, the
"SEILLEAN", was designed for extended well testing, early production and life
of field production. This dynamically positioned vessel has an oil storage
capacity of approximately 310,000 barrels and process capacity of 20,000
barrels of oil per day. It is currently contracted on a life of field basis
after which time the vessel can continue to be used in its current
configuration or it can be modified to a floating production storage and
offloading (FPSO) vessel or converted to a dynamically positioned drillship.
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
available for service, 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 available for service. 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 decrease in the
Company's jack-ups in 1995 reflects the early termination of the leased "SONNY
VOSS" in the latter part of 1994 and the decrease in 1996 reflects the sale of
the "D. K. McINTOSH" in April 1996. The increase in the Company's
semisubmersibles in 1995 reflects the purchase of the "IOLAIR" and in 1996
reflects the "J. W. McLEAN" which was purchased in September 1995 but was not
placed in service until 1996. The addition of the floating production vessel
represents the purchase of the "SEILLEAN" in September 1996.
Averages for
Years Ended December 31,
--------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Company:
Jack-Ups
Total 9 10 11 11 11
Utilization Rate
(Operating Method) 93% 84% 69% 84% 71%
Semisubmersibles(1)
Total 7 6 5 5 5
Utilization Rate
(Operating Method) 92% 92% 80% 80% 64%
Drilling Tenders
Total 2 2 2 2 2
Utilization Rate
(Operating Method) 86% 76% 100% 100% 100%
Floating Production Vessel
Total 1 - - - -
Utilization Rate
(Operating Method) 100% - - - -
Industry:(2)
Jack-Ups
Total 301 316 319 323 331
Utilization Rate 89% 81% 78% 82% 71%
Semisubmersibles
Total 126 124 133 134 141
Utilization Rate 91% 83% 74% 76% 73%
Drilling Tenders
Total 30 31 31 31 32
Utilization Rate 72% 69% 70% 77% 80%
______________________
(1) The Company's semisubmersible utilization percentage does not include
"RIG 41" as it has not yet been placed in service and does not include
the "J.W. McLEAN" prior to June 1996 when the drilling unit was placed
in service.
(2) Industry averages were calculated from data derived from the Offshore
Rig Locator. Industry averages for floating production vessels are not
presented as such data is not readily available.
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 has been on the rise since 1994, mainly due to increased
demand with a substantial tightening of the deeper water drilling markets
occurring in 1996. Late 1996 also saw substantial improvements in the jack-up
market. Dayrates for semisubmersibles and high specification jack-ups have
strengthened significantly since 1993. 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 and
jack-ups has increased accordingly. However, no assurance can be given that
such improved conditions can be sustained in the future.
The Company's operations have benefitted from a decline in the
availability of operational offshore units during the last several years. As
demand has continued to rise both as a function of technological advancements
and somewhat higher oil and natural gas prices, the Company's fleet
utilization has increased. As dayrates continue to rise, however, it may
become economically feasible for participants to consider the reactivation and
upgrade of currently idle offshore units as well as the new construction of
offshore units. The reentry of this idle capacity and the entry of newbuild
offshore units into the active market could depress dayrates and utilization
rates of the Company's offshore units. There does not appear to be any
immediate danger of this new supply adversely affecting current market
conditions, however, since recent plans for new construction and upgrades in
the industry appear to be supported by fixed contracted work for the vessels.
Recently, plans for upgrades and new construction have not normally been done
on a speculative basis. Further, in the case of new construction, there is a
long lead time for design and construction and limited shipyard facilities and
expertise in this area.
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 mobile offshore 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 or decreases
in demand.
The offshore contract drilling market is highly competitive and no one
competitor is dominant. There are over 70 competitors in the offshore
drilling industry deploying approximately 500 drilling units around the world.
Although the supply and demand balance in the markets had improved
significantly by yearend 1996, the supply of such equipment has, since 1982,
generally exceeded demand. The result has been a prolonged period of intense
price competition during which many drilling units have been idle for long
periods of time. Consequently, some drilling contractors have previously 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 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-ups, the geographical dispersion of the Company's mobile
offshore units 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 offshore units 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 offshore units, the competence of its personnel, the reputation
for reliability and condition of its offshore units and its safety record are
also important in securing drilling contracts.
Business Strategy
DRILLING OPERATIONS - 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 mobile
offshore units 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 mobile offshore units, 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 October 1996, the Company entered into a venture with an
affiliate of Conoco Inc. under which the venture will construct and operate an
ultra deepwater dynamically positioned drillship. The Company will provide
drilling services to the new venture which was awarded a five-year drilling
contract for the drillship with Conoco Inc. See "FINANCIAL CONDITION" under
Item 7 for further discussions of the purchase of mobile offshore units and
the construction of the drillship.
DEVELOPMENT OPERATIONS - The Company, through its wholly owned
subsidiary Reading & Bates Development Co., engages in the acquisition of
working interests in offshore oil and gas properties pursuant to which it
shares in reservoir and oil and gas price risks and thus profits and losses
from such properties. The Company is able, from time to time, to acquire such
interests as a result of being able to provide access to the Company's fleet
of drilling units and to the services provided by Total Offshore Production
Systems (TOPS), a joint venture in which the Company has a 75% interest, as
described below. See "FINANCIAL CONDITION" under Item 7 for further
discussion of the purchase of oil and gas interests.
In February 1996, Reading & Bates Development Co. and Intec Engineering,
Inc., announced the formation of TOPS. TOPS will provide complete field
developments and services to operators desiring to contract field developments
through a single entity and will pursue deepwater offshore developments on a
worldwide basis with a group of preferred contractors and manufacturers.
The Company may evaluate various opportunities to expand its activities
in the area 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.
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". Further in September 1996, the Company
purchased the floating production storage and shuttle vessel, the "SEILLEAN";
this purchase corresponded to the Company's strategy to expand the scope of
the Company's operations to include full service offshore field development
capability. See "FINANCIAL CONDITION" under Item 7 for further discussion of
the purchase of the "SEILLEAN".
Contracts, Marketing and Customers
Mobile offshore units 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 offshore units 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 drilling unit 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 is considering whether or not to continue
this joint venture with F. J. Brown & Associates, Inc.
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 offshore units 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 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 1996, the Company performed services for approximately 29
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:
1996 1995 1994
---- ---- ----
% of Total % of Total % of Total
Customer Revenue Revenues Revenue Revenues Revenue Revenues
------- -------- ------- -------- ------- --------
(in millions) (in millions) (in millions)
British Petroleum
and affiliates $ 58.0 20% $ 28.9 14% $ * *
Royal Dutch/Shell
Group and
affiliates $ 35.6 12% $ 29.4 14% $35.2 21%
*Less than 10%
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.
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 (normal operator's extra expense coverage is maintained, to the
extent of the Company's interest in oil and gas properties, for operations of
such properties) 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 Company's business and operations, 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 operations are subject to the many hazards inherent in the
offshore drilling and oil and gas industries. 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 or other legal fault 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, 1997, the Company had approximately 1,800 employees. As
the demand for contract drilling services has increased, the supply of
qualified personnel has decreased somewhat as compared to recent years. The
Company does not consider a possibility of a shortage of qualified personnel
currently to be a major factor in its business. However, retention of such
personnel might become more difficult without increases in compensation. The
Company does not have any material collective bargaining agreements.
Item 3. Legal Proceedings
The Company was 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 were denied, and the case was
remanded to the trial court for determination of damages. In June 1996, this
matter was settled, and the litigation was dismissed with prejudice, without
significant financial statement impact.
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 alleged, 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 purported to be an owner of the Company's
common stock and sought to represent a class of shareholders of the Company
who are similarly situated. Each of the plaintiffs sought injunctive relief,
damages in unspecified amounts and certain other relief, including costs and
expenses. In March 1996, the plaintiffs in each of the four actions
voluntarily dismissed same on a without prejudice basis, and the court entered
orders accordingly.
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 1996.
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.
Positions and Offices
Name and Age Presently Held with the Registrant
------------ ----------------------------------
P. B. Loyd, Jr., 50 (1) Chairman, Director, President and Chief Executive
Officer
T. W. Nagle, 46 (2) Executive Vice President, Finance and
Administration
W. K. Hillin, 55 (3) Senior Vice President, General Counsel and
Secretary
C. R. Ofner, 51 (4) Vice President - Business Development
D. L. McIntire, 59 (5) Vice President - Human Resources
- ------------------------------
(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. Nagle was named Director - Finance and Administration for Reading &
Bates Drilling Co. ("RBDC"), a wholly owned subsidiary of the Company 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.
(3) Mr. Hillin was named Vice President - Legal for RBDC 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.
(4) 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.
(5) 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.
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.
1996 1995
---- ----
Quarter High Low High Low
------- ---- --- ---- ---
First 20 3/8 14 1/4 8 1/8 5 1/2
Second 26 1/8 19 3/4 9 3/8 7
Third 27 7/8 20 13 1/8 8 5/8
Fourth 31 1/8 25 15 3/8 10 3/4
There were approximately 4,600 holders of record of the Company's
common stock as of February 28, 1997.
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)
Years Ended December 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Operating revenues $290,223 $212,795 $169,058 $183,752 $156,659
======== ======== ======== ======== ========
Income (loss) before
extraordinary gain $ 77,916 $ 18,392 $(17,146) $ 4,656 $ 3,402
Extraordinary gain (1) - 3,430 - - -
-------- -------- -------- -------- --------
Net income (loss) 77,916 21,822 (17,146) 4,656 3,402
Dividends on preferred
stock (2) 3,631 4,855 4,859 2,052 -
Accretion in redemption
price of redeemable
stocks - - - - 5,275
-------- -------- -------- -------- --------
Net income (loss)
applicable to common
stockholders $ 74,285 $ 16,967 $(22,005) $ 2,604 $ (1,873)
======== ======== ======== ======== ========
Primary net income
(loss) per common share:
Income (loss) before
extraordinary gain $ 1.15 $ .22 $ (.39) $ .05 $ (.04)
Extraordinary gain - .06 - - -
-------- -------- -------- -------- --------
Net income (loss) $ 1.15 $ .28 $ (.39) $ .05 $ (.04)
======== ======== ======== ======== ========
Fully diluted net income
per common share $ 1.10 $ - $ - $ - $ -
======== ======== ======== ======== ========
Total assets (3) $808,190 $605,780 $586,801 $612,474 $614,628
======== ======== ======== ======== ========
Long-term obligations
(including current
portion) and
redeemable stocks $219,078 $113,373 $126,036 $116,796 $143,385
======== ======== ======== ======== ========
Dividends on
Common Stock $ - $ - $ - $ - $ -
======== ======== ======== ======== ========
- -------------------
(1) Extraordinary gain for 1995 is due to the extinguishment of a debt
obligation.
(2) On August 5, 1996, the Company announced it would redeem all of the
outstanding shares of its preferred stock on September 30, 1996 at the
redemption price of $26.1375 per share. However, the majority of the
preferred stock outstanding was converted into approximately 8.6 million
shares of the Company's common stock on or before September 30, 1996 and
on September 30, 1996 approximately 1,041 shares were redeemed by the
Company.
(3) 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.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
Drillship Project
In October 1996, the Company and an affiliate of Conoco, Inc. formed a
50/50 joint venture to build and operate a dynamically positioned drillship
capable of drilling at water depths up to 10,000 feet. Samsung Heavy
Industries of Korea has been awarded the contract to construct the vessel at a
current estimated cost of $220 million plus capitalized interest. Immediately
following the delivery of the drillship, which is expected to be in 1998, it
will commence a five year drilling program in the deep water of the U.S. Gulf
of Mexico. The Company's portion of the project is expected to be funded
through working capital and project financing which is expected to be provided
by a third party on a limited recourse basis.
Purchase of Floating Production Vessel
In September 1996, the Company purchased the floating production storage
and shuttle (FPSS) vessel, the "SEILLEAN", for approximately $42.2 million in
cash. The vessel was built in 1990 for extended well testing, early
production and life of field production and is currently working in the U.K.
sector of the North Sea. The vessel will remain under its current operational
contract on a life of field basis after which time the vessel can continue to
be used in its current configuration or it can be modified to a floating
production storage and offloading (FPSO) vessel or converted to a dynamically
positioned drillship.
Purchase of Semisubmersibles
In September 1994, the Company purchased the second-generation
semisubmersible "RIG 41" with the intent to convert the unit to a floating
production vessel (FPV). However, the Company subsequently decided to retain
the unit as a drilling unit and as such "RIG 41" is currently being upgraded
to operate under certain conditions in 3,300 feet of water. Upon completion
of the upgrade, estimated to be at the end of the third quarter of 1997, "RIG
41" will commence a one year contract with Enserch Exploration, Inc.
("Enserch") (see "Purchase of Oil & Gas Interests" below).
In September 1995, the Company purchased the support vessel "IOLAIR".
The "IOLAIR" is a dynamically positioned third-generation deepwater
semisubmersible support vessel built in 1982 for field support and living
accommodations and is expected to be upgraded in 1998 to include a derrick
floor and ancillary workover equipment. The "IOLAIR" is currently under a
long-term contract with BP Exploration Operating Company Limited and has been
since its purchase. Also in September 1995, the Company purchased the
second-generation semisubmersible drilling unit "J.W. McLEAN". Following
major upgrades in 1996 and early 1997, the "J. W. McLEAN" will commence a
nineteen month drilling contract with Statoil. In connection with the
purchase of the "J.W. McLEAN" 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).
Purchase of Oil & Gas Interests
In October 1995, the Company purchased an approximate 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. Mobil Exploration &
Producing Inc., an affiliate of Mobil Corporation, has a 40% working interest
in the project. Enserch retained the remaining 40% working interest. As of
December 31, 1996, the Company had accumulated costs related to its ownership
in such project of approximately $36.8 million which are included in Property
and Equipment, Other. Originally, the Company's third-generation
semisubmersible, the "M.G. HULME, JR.", had been contracted to drill the
development wells, however at the Company's request, Enserch released the
"M.G. HULME, JR." from its contract and "RIG 41", which was originally
available to be converted to an FPV for the project, has now been contracted
by Enserch as a drilling unit and may be used to drill the development wells.
In addition, the working interest owners have purchased a second-generation
semisubmersible rig for possible use in the FPV conversion project.
In July 1996, the Company entered into an agreement with Shell Offshore
Inc. to drill an appraisal well at the Company's expense in Shell's East
Boomvang prospect in the U.S. Gulf of Mexico, and if the results are positive
the Company will earn a working interest and proceed with the development of
the field. The estimated cost to drill the appraisal well is approximately
$8.6 million, and the Company currently expects to complete drilling
operations in early 1997. The Company is currently assessing further
development of the field.
In December 1996, the Company entered into an agreement with Santa Fe
Energy Resources ("Santa Fe Energy") to explore five oil and gas prospects in
the U.S. Gulf of Mexico in water depths ranging from 400 to 2,400 feet. Santa
Fe Energy will operate the properties for the partners and has contracted a
drilling unit not owned by the Company to begin the drilling program in the
Spring of 1997. As of December 31, 1996, the Company had accumulated costs
related to its ownership in such project of approximately $13.2 million which
are included in Property and Equipment, Other.
Funding for the oil and gas projects mentioned above is expected to be
provided through a combination of working capital and project financing.
Investments in oil and gas interests as of December 31, 1996 are not
material to total assets. However, depending on prices, reserve developments
and accounting policies adopted, the Company could experience a future
impairment charge.
Sale of Jack-Up
In April 1996, the Company sold its mat-supported jack-up drilling
unit, the "D. K. McINTOSH", for $8.5 million in cash and recognized a gain on
the sale in 1996 of approximately $3.8 million. The gain appears as an offset
to Operating Expenses in the Consolidated Statement of Operations.
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 in October 1996 the modified management
agreement for Drilling's other drilling unit ended and a subsidiary of the
Company now manages both drilling units. See "The Company's Fleet" under
Items 1 and 2. As of December 31, 1996, the Company's direct ownership in
Drilling was 74.4%. See Note B of Notes to Consolidated Financial Statements.
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 agreed to lease the
drilling unit for ten years and could receive up to $60 million in cash,
inclusive of a $10 million funding provision for upgrades. As of December 31,
1996, the Company had received $58.9 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 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). The Company now has title to
the "GEORGE H. GALLOWAY"and "F. G. McCLINTOCK" and expects to acquire title to
the "C. E. THORNTON" in March 1997. See Note E of Notes to Consolidated
Financial Statements.
Merger Proposals
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. 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.
On May 3, 1996, the Company announced that it had made a proposal to
Transocean Offshore ASA ("Transocean") regarding a combination of the two
companies in a transaction that would have entitled each of Transocean's
shareholders to receive 1.245 shares of the Company's common stock for each
share of Transocean common stock. Sonat Offshore had also announced that they
had made a proposal to combine with Transocean. On May 7, 1996, the proposal
was revised to entitle each of Transocean's shareholders to receive 1.28
shares of the Company's common stock for each share of Transocean common
stock. However, on June 4, 1996, the Company announced it was suspending its
efforts to pursue a business combination with Transocean unless it could be
done on terms that were clearly beneficial to the Company's shareholders. In
September 1996, Sonat Offshore completed a business combination transaction
with Transocean. The combined entity is now called Transocean Offshore Inc.
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.
Preferred Stock
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. The Preferred
Stock was 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 were $1.625 per share and were cumulative and payable
quarterly commencing September 30, 1993. The Preferred Stock was 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 Preferred Stock
had a liquidation preference of $25.00 per share, plus accrued and unpaid
dividends. On August 5, 1996, the Company announced it would redeem all of
the outstanding shares of its Preferred Stock on September 30, 1996 at the
redemption price of $26.1375 per share. However, the majority of the
Preferred Stock outstanding was converted into approximately 8.6 million
shares of the Company's common stock on or before September 30, 1996 and on
September 30, 1996 approximately 1,041 shares were redeemed by the Company.
The Company declared and paid all cumulative dividends accrued on the
Preferred Stock through September 30, 1996.
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 the "J. W. McLEAN", 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 was required to maintain continuously effective shelf
registration statements with respect to approximately 2.5 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 .9
million shares) or September 14, 1996 (in the case of approximately 1.6
million shares). The Company currently maintains the effectiveness of such
registration statements on a voluntary basis.
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 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 became effective
in 1996, requires that certain long-lived assets be reviewed for impairment
whenever events indicate that the carrying amount of an asset may not be
recoverable, and that an impairment loss be recognized under certain
circumstances in the amount by which the carrying value 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.
In October 1995, Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation ("SFAS 123") was issued. SFAS 123
requires either recognition of compensation expense in the financial
statements for those companies that adopt the fair value based accounting
method or expanded disclosure of pro forma net income and earnings per share
information for those companies that retain the current accounting method set
forth in Accounting Principles Board (APB) Opinion 25, Accounting for Stock
Issued to Employees. The Company follows the accounting method set forth in
APB 25 and in 1996 included the expanded disclosure requirements. See Note A
and I of Notes to Consolidated Financial Statements.
In February 1997, the fourth-generation semisubmersible drilling unit
"JACK BATES" sustained substantial damage when it struck an uncharted
underwater obstruction while under tow into the port of Brindisi, Italy,
resulting in the loss of the forward port thruster and damages to the aft
starboard thruster and underside of the pontoons. The unit had recently
completed a drilling contract offshore Albania and was being towed to Brindisi
to discharge equipment in preparation for continuing its mobilization to a
North Sea shipyard for planned upgrades to the unit prior to commencing a
fifteen month contract in the North Sea area. Preparations are underway to
complete temporary repairs to enable the unit to be towed to a North Sea
shipyard for the planned upgrade and completion of permanent repairs. The
Company believes the physical damage and any business interruption sustained
as a result of this incident are adequately covered by insurance.
For a discussion of certain legal proceedings see Part I, Item 3.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
At December 31, 1996, the Company had working capital of $85 million
compared to $41.3 million at December 31, 1995. The $43.7 million increase is
primarily due to improved cash flow from operating activities.
Cash provided by operating activities during 1996 amounted to $102.9
million, an increase of $68.4 million from 1995. Cash provided by operating
activities during 1995 amounted to approximately $34.5 million, an increase of
$3.7 million from 1994.
Cash used in investing activities was $169.2 million in 1996 compared to
$3.5 million in 1995 and $48.8 million in 1994. During 1996, the Company
purchased $177.1 million in property and equipment which consisted primarily
of the purchase of the "SEILLEAN" for $42.2 million, major upgrades to the
"JIM CUNNINGHAM", "J.W. McLEAN" and the "M.G. HULME, JR." totalling
approximately $79.8 million and approximately $27 million for oil and gas
interests. Also during 1996, the Company sold the "D.K. McINTOSH" and
received $8.5 million in cash. 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 U.S. 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".
Cash provided by financing activities was $89.2 million in 1996 compared
to cash used in financing activities of $37.1 million in 1995 and $20 million
in 1994. During 1996, the Company received net proceeds of $146 million from
its revolving credit facility and $6.4 million from the exercise of employee
stock options, made principal payments of $54.5 million, made distributions of
$5.1 million to the minority shareholders of consolidated subsidiaries,
primarily Drilling, and paid Preferred Stock dividends of $3.6 million.
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.
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, funds available
under its existing credit facility (see "CBK Facility" below), 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 short-term and long-term working capital needs, planned
investments, capital expenditures, debt and other payment obligations.
At December 31, 1996, approximately $20.1 million of total consolidated
cash and cash equivalents of $59.1 million were restricted from the Company's
use outside of Drilling's activities. See "Drilling" below regarding such
restrictions.
Based on current estimates, management believes that the Company will
possibly fully utilize its existing net operating loss carryforwards by early
1998. If so, at such time the Company will begin recording income taxes at
the applicable statutory rate.
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 1997 are expected to aggregate in excess of $151 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 projects
estimated to be in excess of $69 million for 1997. The Company anticipates
that such capital expenditures will be funded through cash provided by
operations, its existing credit facility and/or new financing. Certain
additional 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".
CBK Facility
In November 1995, the Company entered into a credit facility agreement
with Christiania Bank og Kreditkasse (the "CBK Facility") as agent for a
syndicate of banks (including itself). During 1996, the CBK Facility was
renegotiated with an expanded bank group and currently consists of a $300
million reducing revolving credit facility to be utilized for revolving loans
and/or issuance of standby letters of credit (subject to a maximum of $30
million). The CBK Facility shall be reduced/repaid by five semi-annual
installments of $25 million commencing in May 1999 and one final
reduction/repayment of $175 million in November 2001 and bears interest at
the London Interbank Offered Rate ("LIBOR") (5.625% at December 31, 1996) plus
.85%. In addition, a fee of .85% per annum is paid on outstanding letters of
credit and a commitment fee of .35% per annum is paid on the unused portion of
the CBK Facility. At December 31, 1996, there were no letters of credit
outstanding under the CBK Facility, leaving $134 million available for
revolving loans and/or issuance of standby letters of credit (maximum of $30
million). The CBK Facility contains covenants which require the Company to
meet certain ratios and working capital conditions, and is collateralized by
vessel mortgages on thirteen of the drilling units owned by the Company,
related assignments of insurance and earnings, and a pledge of the Company's
shares of stock of Drilling. In addition, in December 1996 the Company
entered into a separate $20 million letter of credit agreement with
Christiania Bank og Kreditkasse. Under the agreement, a fee of 1.25% and .375%
per annum is paid on the outstanding and unused amounts, respectively. At
December 31, 1996, $1.7 million was available under such agreement. See Notes
C and E of Notes to Consolidated Financial Statements.
Drilling
As of December 31, 1996, Drilling had a $32.5 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 and bears interest at LIBOR (5.625% at December 31, 1996) plus
.45%. The Company has not guaranteed repayment of such obligation. Drilling
had also entered into an interest rate swap agreement which ended in August
1996. The loan is collateralized by the drilling units "HENRY GOODRICH" and
"PAUL B. LOYD, JR.". The loan agreement was amended in October 1996 which
resulted in less restrictive financial condition requirements. The amended
loan agreement requires Drilling to maintain liquid assets of at least $1.5
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) and imposes the following covenants: (i)
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, (ii) prohibits Drilling
from engaging in any merger or consolidation and (iii) 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. In
addition, the amended loan agreement allows Drilling to declare dividends or
distributions to stockholders provided that at least one of the drilling units
is employed pursuant to its current contract with no notice of cancellation
received and $1.5 million of liquid assets remain after payment of such
distribution. With the consent of the banks, Drilling declared a distribution
of approximately $14.3 million in the first quarter of 1996, of which the
Company received approximately $10.6 million. 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. Drilling expects to meet its repayment
obligations under the facility through cash flow generated from operations and
current working capital. At December 31, 1996, Drilling held $20.1 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.
NIC Financing
In December 1996, a wholly owned subsidiary of the Company entered into
a five year $38 million loan agreement with Nissho Iwai Europe PLC ("NIC").
The Company expects to receive the funds in the first quarter of 1997, subject
to the finalization of the agreement. The loan will be collateralized by a
vessel mortgage on the "SEILLEAN" without recourse to the Company and shall
bear interest at LIBOR plus 2%. Principal repayments will be monthly based on
the greater of the excess cash flow of the "SEILLEAN" or the outstanding
principal balance divided by the remaining period of the loan. In addition,
NIC has the option to purchase up to 10% of the ownership in the "SEILLEAN",
any time prior to three years after the Company has received the funds from
NIC, at a minimum price of $4.2 million. See Note E of Notes to Consolidated
Financial Statements.
ING Facility
The Company's previous principal credit facility agreement with ING Bank
(the "ING Facility") was fully repaid in November 1995 from funds provided by
the CBK Facility and the sale/lease-back of the "M. G. HULME, JR.".
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. In November
1996, the loan was repaid in full from proceeds of the CBK Facility. The loan
bore interest at the one month LIBOR plus 2.5%. Principal repayments were
$5,416,667 in November 1996, 34 monthly installments of $416,667 to have
commenced in December 1996 and one payment of $10,416,655 in October 1999.
The loan agreement contained covenants which required 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 was collateralized by
vessel mortgages on two of the drilling units owned by the Company and related
assignments of insurance and earnings.
RESULTS OF OPERATIONS
The Company reported net income for 1996 of $77.9 million ($1.15 net
income per share after preferred stock dividends of $3.6 million) compared to
net income of $21.8 million ($.28 earnings per share after preferred stock
dividends of $4.9 million) for 1995 and a net loss of $17.1 million ($.39 loss
per share after preferred stock dividends of $4.9 million) for 1994. Included
in the 1995 results is an extraordinary gain of $3.4 million related to the
extinguishment of a debt obligation.
Years Ended December 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
Operating Revenues (in thousands) . . . $ 290,223 $ 212,795 $ 169,058
========= ========= =========
Operating revenues are primarily a function of dayrates and utilization.
The $77.4 million increase in 1996 as compared to 1995 is primarily due to
increased dayrates for the fourth-generation and third-generation
semisubmersible fleets and the jack-up fleet and the addition of the "IOLAIR",
the "J. W. McLEAN" and the "SEILLEAN" to the fleet. The $43.7 million
increase in 1995 over 1994 is primarily due to increased dayrates and
utilization of the fourth-generation semisubmersible and jack-up fleets.
The Company's unit utilization measured in terms of the number of days
the units were earning revenues to the total days the units were available for
service (the operating method) for the years ended December 31, 1996, 1995 and
1994 is shown below by class:
Years Ended
Unit Utilization December 31,
---------------- --------------------
1996 1995 1994
---- ---- ----
Fourth-Generation Semisubmersibles . 100% 97% 76%
Third-Generation Semisubmersibles . . 85% 85% 85%
Other Semisubmersibles . . . . . . . 80% - -
Jack-Ups . . . . . . . . . . . . . . 93% 84% 69%
Drilling Tenders . . . . . . . . . . 86% 76% 100%
Floating Production Vessel . . . . . 100% - -
Total Fleet . . . . . . . . . . . . . 92% 85% 75%
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, 1996, 1995 and 1994 are shown below by class (in thousands):
Years Ended
Average Dayrates December 31,
---------------- ----------------------
1996 1995 1994
------ ------ ------
Fourth-Generation Semisubmersibles . $ 91.3 $ 64.9 $ 59.2
Third-Generation Semisubmersibles . . 58.4 39.6 32.7
Other Semisubmersibles . . . . . . . 67.4 - -
Jack-Ups . . . . . . . . . . . . . . 30.3 27.8 24.4
Drilling Tenders . . . . . . . . . . 22.2 28.1 29.4
Floating Production Vessel . . . . . 76.4 - -
Total Fleet . . . . . . . . . . . . . 47.0 36.7 32.0
Year Ended December 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
Operating Expenses (in thousands) . $ 126,708 $ 127,070 $ 122,981
========= ========= =========
Operating Expenses as Percentage
of Revenues . . . . . . . . . . . 43.7% 59.7% 72.7%
========= ========= =========
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.
In general, labor costs increase primarily due to higher salary levels and
inflation. Equipment maintenance expenses fluctuate depending upon the type
of activity the 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 for an offshore unit are typically
deferred or capitalized as appropriate during periods of mobilization,
contract preparation, major upgrades or conversions unless corresponding
mobilization revenue is recognized, in which case such operating expenses are
expensed as incurred.
Operating expenses decreased by $.4 million in 1996 as compared to 1995
despite increases in operating expenses in 1996 due to the addition of the
"IOLAIR", the "J. W. McLEAN" and the "SEILLEAN" to the fleet and increased
lease expense associated with the sale/lease-back of the "M. G. HULME, JR.".
The decrease is primarily due to reduced expenses associated with several
drilling units. In particular, operating expenses for the "D. K. McINTOSH"
decreased as a result of the recognition of a $3.8 million gain on the sale of
the rig. The "HARVEY H. WARD" incurred reduced operating expenses due to
operations in India for the majority of 1996 as compared with 1995 operations
primarily occurring in Australia, a relatively more expensive operating area.
The "M. G. HULME, JR." incurred reduced operating expenses due to the 1996
capitalization of expenses during a major upgrade period and the "PAUL B.
LOYD, JR." incurred reduced operating expenses primarily due to the December
1995 expiration of the management contract previously held by Transocean
Offshore Inc. (as successor to Sonat Offshore) that is now held by a
subsidiary of the Company.
Operating expenses as a percentage of revenues decreased by 16.0% in
1996 compared to 1995 due mainly to increased revenues in 1996. 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 mobile offshore units 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.
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.
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.
Years Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
Depreciation (in thousands) . . . . $ 33,584 $ 30,369 $ 28,909
======== ======== ========
Depreciation expense increased $3.2 million in 1996 compared to 1995
primarily due to the addition of the "IOLAIR", the "J. W. McLEAN" and the
"SEILLEAN" to the fleet and a significant increase in gross property and
equipment on the "JIM CUNNINGHAM" related to major upgrades. This was
partially offset by a decrease in depreciation on the "M. G. HULME, JR." due
to the sale/lease-back of the drilling unit in 1996.
Depreciation expense increased $1.5 million in 1995 compared to 1994 due
to increased utilization of the fleet.
Years Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
General and Administrative
Expenses (in thousands) . . . . $ 22,579 $ 17,139 $ 17,993
======== ======== ========
General and administrative expenses increased $5.4 million in
1996 compared to 1995 primarily due to increases in payroll and related
expenses associated with employee incentive plans and a $2.2 million charge
related to severance benefits for two executives whose employment was
terminated during 1996. See Note E of Notes to Consolidated Financial
Statements.
General and administrative expenses decreased $.9 million in 1995
compared to 1994 primarily related to the reduction of expenses for Arcade
Drilling's office located in Oslo.
Years Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
Interest Expense, net of interest
capitalized (in thousands) . . . $ 14,781 $ 15,303 $ 13,694
======== ======== ========
The decrease in interest expense in 1996 as compared to 1995 is
primarily attributable to the 1996 capitalization of interest related to oil
and gas development properties, offset by a $1.9 million write-off of
unamortized financing expenses due to the renegotiation of the Company's
revolving credit facility during 1996. Noncash interest expense also includes
amortization of discount and deferrals associated with the 8% Senior
Subordinated Convertible Debentures due 1998 which for the year ended December
31, 1996 was $2.2 million.
Despite a decrease in the average principal debt balance outstanding
during 1995 as compared to 1994 due to the refinancing of the Company's
previous 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.
Years Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
Interest Income (in thousands) . . . $ 2,185 $ 1,832 $ 3,263
======== ======== ========
Interest income increased $.4 million in 1996 as compared to 1995
primarily due to interest earned on an increased average cash and cash
equivalents balance. Conversely, interest income decreased $1.4 million in
1995 as compared to 1994 due to interest earned on a decreased average cash
and cash equivalents balance.
Years Ended December 31,
---------------------------
1996 1995 1994
-------- -------- --------
Other Income (Expenses),
Net (in thousands) . . . . . . . $ (2,272) $ (2,008) $ (2,647)
======== ======== ========
For 1996, other, net included $1.2 million of expenses associated with
the business combination discussions with Transocean and a $1 million expense
for the change in the estimate of the reserve for prior workers compensation
claims.
For 1995, other, net included $1.2 million of expenses associated with
the business combination 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.
Years Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
Income Tax Expense (in thousands) . $ 7,884 $ 2,824 $ 4,093
======== ======== ========
Income tax expense for 1996 increased as compared to 1995 primarily due
to the increase in the Company's pretax income.
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.
Years Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
Minority Interest (in thousands) . $ (6,684) $ (1,522) $ 850
======== ======== ========
Minority interest relates primarily to the results of Arcade Drilling
and the percentage attributable to stockholders other than the Company.
Arcade Drilling reported income in 1996 and 1995 of $26.3 and $5.6 million,
respectively and a loss of $3 million in 1994. The ownership percentage
attributable to stockholders other than the Company was 25.6%, 25.7% and 26.1%
for the years ending December 31, 1996, 1995 and 1994, respectively.
The impact of inflation on the Company's operations for the three years
ended December 31, 1996 has not been material.
FORWARD LOOKING STATEMENTS AND ASSUMPTIONS
This Annual Report on Form 10-K may contain or incorporate by reference
certain forward-looking statements, including by way of illustration and not
of limitation, statements relating to liquidity, revenues, expenses, margins
and contract rates and terms. The Company strongly encourages readers to note
that some or all of the assumptions, upon which such forward-looking
statements are based, are beyond the Company's ability to control or estimate
precisely, and may in some cases be subject to rapid and material changes.
Such assumptions include the contract status of the Company's offshore units,
general market conditions prevailing in the offshore drilling industry
(including daily rates and utilization) and various other trends affecting the
offshore drilling industry, including world oil prices, the exploration and
development programs of the Company's customers, the actions of the Company's
competitors and economic conditions generally.
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, 1996 and 1995, and the related consolidated statements of
operations, cash flows and stockholders' equity for each of the three years
in the period ended December 31, 1996. 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, 1996 and
1995, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Houston, Texas
January 27, 1997
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1996 and 1995
(in thousands)
1996 1995
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 59,089 $ 36,171
Accounts receivable:
Trade, net 57,277 41,324
Other 6,452 4,815
Materials and supplies inventory 13,369 8,911
Other current assets 3,903 4,567
--------- ---------
Total current assets 140,090 95,788
--------- ---------
PROPERTY AND EQUIPMENT:
Drilling 896,609 756,147
Other 57,640 29,898
--------- ---------
Total property and equipment 954,249 786,045
Accumulated depreciation (296,620) (280,440)
--------- ---------
Net property and equipment 657,629 505,605
--------- ---------
DEFERRED CHARGES AND OTHER ASSETS 10,471 4,387
--------- ---------
TOTAL ASSETS $ 808,190 $ 605,780
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1996 and 1995
(in thousands except share amounts)
1996 1995
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term obligations $ - $ 12,000
Long-term obligations due within
one year 11,500 18,333
Accounts payable - trade 21,961 3,639
Accrued liabilities 21,671 20,518
--------- ---------
Total current liabilities 55,132 54,490
LONG-TERM OBLIGATIONS 207,578 95,040
OTHER NONCURRENT LIABILITIES 52,091 51,718
DEFERRED INCOME TAXES 635 2,977
--------- ---------
Total liabilities 315,436 204,225
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 46,147 44,504
--------- ---------
STOCKHOLDERS' EQUITY:
$1.625 convertible preferred stock,
$1.00 par value, 2,990,000 shares
authorized, 2,985,000 shares issued
and outstanding at December 31, 1995 - 2,985
Common stock, $.05 par value,
425,000,000 shares authorized,
71,887,896 shares and 61,900,408
shares issued and outstanding at
December 31, 1996 and 1995,
respectively 3,594 3,095
Capital in excess of par value 389,907 362,910
Retained earnings (deficit) from
March 31, 1991 71,268 (3,017)
Other (18,162) (8,922)
--------- ---------
Total stockholders' equity 446,607 357,051
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 808,190 $ 605,780
========= =========
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)
Years Ended December 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
OPERATING REVENUES $ 290,223 $ 212,795 $ 169,058
--------- --------- ---------
COSTS AND EXPENSES:
Operating expenses 126,708 127,070 122,981
Depreciation 33,584 30,369 28,909
General and administrative 22,579 17,139 17,993
--------- --------- ---------
Total costs and expenses 182,871 174,578 169,883
--------- --------- ---------
OPERATING INCOME (LOSS) 107,352 38,217 (825)
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense, net of
interest capitalized (14,781) (15,303) (13,694)
Interest income 2,185 1,832 3,263
Other, net (2,272) (2,008) (2,647)
--------- --------- ---------
Total other income (expense) (14,868) (15,479) (13,078)
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAX
EXPENSE, MINORITY INTEREST AND
EXTRAORDINARY GAIN 92,484 22,738 (13,903)
INCOME TAX EXPENSE 7,884 2,824 4,093
MINORITY INTEREST (6,684) (1,522) 850
--------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY
GAIN 77,916 18,392 (17,146)
EXTRAORDINARY GAIN - 3,430 -
--------- --------- ---------
NET INCOME (LOSS) 77,916 21,822 (17,146)
DIVIDENDS ON PREFERRED STOCK 3,631 4,855 4,859
--------- --------- ---------
NET INCOME (LOSS) APPLICABLE
TO COMMON STOCKHOLDERS $ 74,285 $ 16,967 $ (22,005)
========= ========= =========
PRIMARY NET INCOME (LOSS) PER
COMMON SHARE:
INCOME (LOSS) BEFORE
EXTRAORDINARY GAIN $ 1.15 $ .22 $ (.39)
EXTRAORDINARY GAIN - .06 -
--------- --------- ---------
NET INCOME (LOSS) $ 1.15 $ .28 $ (.39)
========= ========= =========
FULLY DILUTED NET INCOME PER
COMMON SHARE $ 1.10 $ - $ -
========= ========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
PRIMARY 64,620 60,208 56,900
========= ========= =========
FULLY DILUTED 71,027 - -
========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Years Ended December 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 77,916 $ 21,822 $ (17,146)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 33,584 30,369 28,909
Loss (gain) on dispositions
of property and equipment (5,185) 650 (1,982)
Recognition of deferred expenses 5,123 7,051 4,640
Deferred compensation 3,230 167 265
Extraordinary gain from
extinguishment of debt - (3,430) -
Minority interest in income (loss)
of consolidated subsidiaries 6,684 1,522 (850)
Changes in assets and liabilities:
Accounts receivable, net (17,058) (8,685) 2,973
Materials and supplies inventory (2,319) (490) 288
Deferred charges and other assets (9,559) (7,880) (3,678)
Accounts payable - trade 2,456 (8,759) 4,742
Accrued interest 3,154 4,472 4,000
Accrued lease expense - - 3,344
Accrued liabilities (72) 1,367 4,692
Income taxes 1,075 462 1,649
Other, net 3,897 (4,153) (1,074)
--------- --------- ---------
Net cash provided by
operating activities 102,926 34,485 30,772
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Dispositions of property
and equipment 9,169 49,946 141
Purchases of property and equipment,
net of noncash items (177,130) (51,906) (38,424)
Decrease (increase) in investments
in and advances to unconsolidated
investees (1,243) (310) 209
Business acquisitions - (1,229) (10,738)
--------- --------- ---------
Net cash used in investing
activities (169,204) (3,499) (48,812)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payments) from short-
term obligations (12,000) (12,222) 9,487
Net proceeds from revolving
credit facility 146,000 20,000 -
Proceeds from long-term obligations - 30,000 -
Principal payments on long-term
obligations (42,500) (73,057) (24,654)
Exercise of stock options 6,446 3,000 -
Dividends paid on preferred stock (3,631) (4,855) (4,859)
Distribution to minority shareholders
of consolidated subsidiaries (5,119) - -
--------- --------- ---------
Net cash provided by (used in)
financing activities 89,196 (37,134) (20,026)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 22,918 (6,148) (38,066)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 36,171 42,319 80,385
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 59,089 $ 36,171 $ 42,319
========= ========= =========
Supplemental Cash Flow Disclosures:
Interest paid, net of capitalized
interest $ 9,391 $ 11,874 $ 9,368
Income taxes paid $ 4,609 $ 2,975 $ 3,877
Noncash investing activities:
Purchase of property and equipment
in exchange for equity or debt $ 15,866 $ 36,708 $ 24,324
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, 1996
(in thousands)
Convertible
Preferred
Stock Common Stock
---------------- -----------------
Shares Amount Shares Amount
------ -------- ------ --------
Balances at December 31, 1993 2,990 $ 2,990 55,489 $ 2,774
Net loss
Dividends paid on preferred stock
Purchase of leased drilling units 4,230 212
Activity in Company stock plans
Additional minimum liability
Other (8)
----- -------- ------ --------
Balances at December 31, 1994 2,990 2,990 59,711 2,986
Net income
Dividends paid on preferred stock
Conversion of preferred stock (5) (5) 14 1
Purchase of drilling unit 1,232 62
Activity in Company stock plans 407 20
Restricted stock grant 544 27
Additional minimum liability
Other (8) (1)
----- -------- ------ --------
Balances at December 31, 1995 2,985 2,985 61,900 3,095
Net income
Dividends paid on preferred stock
Conversion of preferred stock (2,985) (2,985) 8,650 433
Activity in Company stock plans 848 42
Restricted stock grant 489 24
Additional minimum liability
Other 1
----- -------- ------ --------
Balances at December 31, 1996 - $ - 71,888 $ 3,594
===== ======== ====== ========
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Years Ended December 31, 1996
(in thousands)
Capital in Retained
Excess of Earnings
Par Value (Deficit) Other
--------- -------- ---------
Balances at December 31, 1993 $ 312,916 $ 2,021 $ (1,158)
Net loss (17,146)
Dividends paid on preferred stock (4,859)
Purchase of leased drilling units 24,112
Activity in Company stock plans 507 265
Additional minimum liability (342)
Other (129) (3)
--------- -------- ---------
Balances at December 31, 1994 337,406 (19,984) (1,238)
Net income 21,822
Dividends paid on preferred stock (4,855)
Conversion of preferred stock 4
Purchase of drilling unit 14,643
Activity in Company stock plans 3,107 168
Restricted stock grant 7,524 (7,551)
Additional minimum liability (307)
Other 226 6
--------- -------- ---------
Balances at December 31, 1995 362,910 (3,017) (8,922)
Net income 77,916
Dividends paid on preferred stock (3,631)
Conversion of preferred stock 2,525
Activity in Company stock plans 10,710 115
Restricted stock grant 13,756 (10,588)
Additional minimum liability 1,233
Other 6
--------- -------- ---------
Balances at December 31, 1996 $ 389,907 $ 71,268 $ (18,162)
========= ======== =========
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, 1996,
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, 1996, $20.1 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 an amended credit facility provided by The Chase Manhattan
Bank, N.A. ("Chase Manhattan") which requires the maintenance of a minimum
of $1.5 million in liquid assets ($10 million if Drilling can not annually
provide to the lenders satisfactory contractual commitments for the
employment of both its drilling units for the next twelve months) and
allows Drilling to declare dividends or distributions to stockholders
provided that at least one of its drilling units is employed pursuant to
its current contract with no notice of cancellation received and $1.5
million of liquid assets remain after payment of such distribution.
Drilling declared a distribution of approximately $14.3 million in the
first quarter of 1996, of which the Company received approximately $10.6
million.
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' mobile offshore 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 mobile offshore equipment range from three to twenty-five
years. Gain (loss) on disposal of properties is credited (charged) to
income. In 1995, the Company purchased an approximate 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 Note D). In 1996, the Company entered into an agreement with Santa Fe
Energy Resources to explore five oil and gas prospects also in the U. S.
Gulf of Mexico. As of December 31, 1996, none of such oil and gas
interests had entered the production stage and the Company had accumulated
costs related to the interests of approximately $50.3 million which are
included in Property and Equipment, Other. Depending on prices, reserve
developments and accounting policies adopted, the Company could experience
a future impairment charge.
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.
REVENUE RECOGNITION - Revenues are recognized as they are earned.
Proceeds associated with the early termination of a contract for a mobile
offshore unit are recorded as deferred income and recognized as contract
revenues over the remaining term of the contract or until such time as the
mobile offshore unit begins a new contract. There were no such amounts
deferred at December 31, 1996 or 1995. In addition, when a unit's
mobilization revenue exceeds the cost of the mobilization by a significant
amount, the Company recognizes the excess as contract revenue during the
contract preparation and mobilization period on a dayrate basis. If there
is revenue that has not been recognized by the time the unit has arrived on
location the remaining amount is recognized over the primary term of the
contract.
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.
CAPITALIZED INTEREST - The Company capitalizes interest applicable
to the acquisition, exploration and development of offshore oil and gas
properties as a cost of such assets. Interest capitalized for the years
ended December 31, 1996 and 1995 was $2.7 million and $.5 million,
respectively and is shown net of interest expense in the Consolidated
Statement of Operations.
FOREIGN CURRENCY TRANSACTIONS - The net gains and losses resulting
from foreign currency transactions included in determining net income
amounted to a net gain of $.8 million in 1996, a net loss of $.8 million in
1995, and a net loss of $.6 million in 1994. The Company may enter into
forward exchange contracts to hedge specific commitments and anticipated
transactions but not for speculative or trading purposes. In the third
quarter of 1996, the Company entered into a short-term foreign exchange
forward contract to hedge a firm commitment relating to the purchase of
equipment. This contract is intended to reduce currency risk from exchange
rate movements. Gains and losses are deferred and accounted for as part
of the underlying transaction. At December 31, 1996, the Company had
outstanding forward exchange contracts to purchase Danish kroner totalling
approximately $8.2 million. 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.
NET INCOME (LOSS) PER COMMON SHARE - Primary net income (loss) per
common share is computed by dividing net income (loss), after deducting the
preferred stock dividend, by the weighted average number of common shares
outstanding during the period. Fully diluted net income per common share
assumes the conversion of the preferred stock at the beginning of the
period and is computed by dividing net income by the weighted average
number of common shares outstanding during the period and the additional
shares from the assumption of the conversion of the preferred stock. 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 net income (loss) per
share in 1995 and 1994 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 and 1996.
The Company's revenues were generated primarily from its mobile
offshore 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, 1996 and 1995 was
$1,891,000 and $1,123,000, 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, 1996, the Company's total
consolidated cash and cash equivalents were $59.1 million. Of this amount,
approximately $20.1 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, funds available under its existing credit facility 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 short-term and long-term working capital needs,
planned investments, capital expenditures, debt and other payment
obligations.
NEWLY ISSUED ACCOUNTING STANDARDS - 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 became effective in 1996, requires that
certain long-lived assets be reviewed for impairment whenever events
indicate that the carrying amount of an asset may not be recoverable, and
that an impairment loss be recognized under certain circumstances in the
amount by which the carrying value 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.
In October 1995, Statement of Financial Accounting Standards No.
123, Accounting for Stock Based Compensation ("SFAS 123") was issued. SFAS
123 requires either recognition of compensation expense in the financial
statements for those companies that adopt the fair value based accounting
method or expanded disclosure of pro forma net income and earnings per
share information for those companies that retain the current accounting
method set forth in Accounting Principles Board (APB) Opinion 25,
Accounting for Stock Issued to Employees. The Company follows the
accounting method set forth in APB 25 and in 1996 included the expanded
disclosure requirements (See Note I).
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.", 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, 1996, the Company had
acquired approximately 74.4% of the outstanding stock of Drilling, at an
accumulated cost of approximately $102.9 million net of a $10.6 million
distribution to the Company declared by Drilling in the first quarter of
1996.
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.
(C) LONG-TERM OBLIGATIONS
Long-term obligations at December 31, 1996 and 1995 consisted of
the following (in thousands):
1996 1995
--------- --------
Christiania Bank (1) $ 166,000 $ 20,000
Chase Manhattan (2) 32,500 42,500
8% Senior Subordinated Convertible
Debentures due December 1998
("New Debentures") (3) 13,078 10,873
Deferred payment obligation (4) 7,500 10,000
The CIT Group (5) - 30,000
--------- --------
Total 219,078 113,373
Less long-term obligations due
within one year (11,500) (18,333)
--------- --------
Long-term obligations $ 207,578 $ 95,040
========= ========
- --------------------------
(1) In November 1995, the Company entered into a credit facility agreement
with Christiania Bank og Kreditkasse (the "CBK Facility") as agent for
a syndicate of banks (including itself). During 1996, the CBK
Facility was renegotiated with an expanded bank group and currently
consists of a $300 million reducing revolving credit facility to be
utilized for revolving loans and/or issuance of standby letters of
credit (subject to a maximum of $30 million) (see Note E). The CBK
Facility shall be reduced/repaid by five semi-annual installments of
$25 million commencing in May 1999 and one final reduction/repayment
of $175 million in November 2001 and bears interest at the London
Interbank Offered Rate ("LIBOR") (5.625% at December 31, 1996) plus
.85%. In addition, a fee of .85% per annum is paid on outstanding
letters of credit and a commitment fee of .35% per annum is paid on
the unused portion of the CBK Facility. At December 31, 1996, there
were no letters of credit outstanding under the CBK Facility, leaving
$134 million available for revolving loans and/or issuance of standby
letters of credit (maximum of $30 million). The CBK Facility contains
covenants which require the Company to meet certain ratios and working
capital conditions, and is collateralized by vessel mortgages on
thirteen of the drilling units owned by the Company, related
assignments of insurance and earnings, and a pledge of the Company's
shares of stock of Drilling.
(2) The adjusted payment terms of this bank obligation of Drilling provide
for repayment of principal in seventeen semiannual installments which
commenced in August 1991 and bears interest at LIBOR (5.625% at
December 31, 1996) plus .45%. Drilling had also entered into an
interest rate swap agreement which ended in August 1996. 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 amended loan agreement requires
Drilling to maintain liquid assets of at least $1.5 million ($10
million if Drilling can not annually provide to the lenders
satisfactory contractual commitments for the employment of both its
drilling units for the next twelve months). 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.
(3) 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, 1996 and 1995, was $11,904,000 and
$11,907,000, 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, 1996 approximate their fair
market value. The face amount of the New Debentures and the related
unamortized discount at December 31, 1996 totalled $18,599,000 and
$5,521,000, respectively. 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. During 1996, $5,500 (face
amount) of New Debentures plus accrued interest through December 31,
1995 were converted into 243 shares of the Company's common stock.
During 1995, there were no conversions of New Debentures to common
stock.
(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%. A principal repayment of $2.5 million was paid in
September 1996 and payments of $7 million and $.5 million are due in
September 1998 and September 2000, respectively. The obligation is
collateralized by a vessel mortgage on the support vessel "IOLAIR".
(5) 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.
In November 1996, the loan was repaid in full from proceeds of the CBK
Facility (see above). The loan bore interest at the one month LIBOR
plus 2.5%. Principal repayments were $5,416,667 in November 1996, 34
monthly installments of $416,667 to have commenced in December
1996 and one payment of $10,416,655 in October 1999. The loan
agreement contained covenants which required 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 was
collateralized by vessel mortgages on two of the drilling units owned
by the Company and related assignments of insurance and earnings.
Aggregate annual maturities of long-term obligations, (including
the current portion) for the next five years are as follows (in
thousands):
1997 $ 11,500
1998 38,599
1999 8,000
2000 500
2001 166,000
---------
224,599
Less the unamortized discount
on the New Debentures (5,521)
---------
Total long-term obligations and long-
term obligations due within one year
at December 31, 1996 $ 219,078
=========
(D) SHORT-TERM OBLIGATIONS
In October 1995, the Company entered into a $12 million short-term
obligation with Enserch Exploration, Inc. for the purchase of an
approximate 20% working interest in an oil and gas development project (see
PROPERTY AND EQUIPMENT of Note A). The obligation bore interest at 8.56%
and two principal repayments of $6 million were made in March 1996 and
September 1996.
(E) COMMITMENTS AND CONTINGENCIES
CAPITAL EXPENDITURES - At December 31, 1996, the Company had
purchase commitments of $21.9 million for equipment on its mobile offshore
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 $9.5 million (1996), $2.3
million (1995) and $11.2 million (1994). As of December 31, 1996, future
minimum rental payments relating to operating leases were as follows (in
thousands):
1997 1998 1999 2000 2001 Thereafter
-------- ------- ------- ------- ------- --------
Drilling Unit $ 8,337 $ 8,337 $ 8,337 $ 8,337 $ 8,337 $ 32,655
Other 1,735 1,286 147 57 9 -
-------- ------- ------- ------- ------- --------
Total $ 10,072 $ 9,623 $ 8,484 $ 8,394 $ 8,346 $ 32,655
======== ======= ======= ======= ======= ========
In November 1995, the Company entered into a sale/lease-back of the
"M. G. HULME, JR.". As part of this transaction the Company agreed to
lease the drilling unit for ten years and could receive up to $60 million
in cash, inclusive of a $10 million funding provision for upgrades. As of
December 31, 1996, the Company had received $58.9 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 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. 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" and expects to acquire title to
the "C. E. THORNTON" in March 1997.
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.
DRILLSHIP PROJECT - In October 1996, the Company and an affiliate
of Conoco Inc. formed a 50/50 joint venture to build and operate a
dynamically positioned drillship capable of drilling at water depths up to
10,000 feet. Samsung Heavy Industries of Korea has been awarded the
contract to construct the vessel at a current estimated cost of $220
million plus capitalized interest. Immediately following the delivery of
the drillship, which is expected to be in 1998, it will commence a five
year drilling program in the deep water of the U.S. Gulf of Mexico.
NIC FINANCING - In December 1996, a wholly owned subsidiary of the
Company entered into a five year $38 million loan agreement with Nissho
Iwai Europe PLC ("NIC"). The Company expects to receive the funds in the
first quarter of 1997, subject to the finalization of the agreement. The
loan will be collateralized by a vessel mortgage on the "SEILLEAN" without
recourse to the Company and shall bear interest at LIBOR plus 2%.
Principal repayments will be monthly based on the greater of the excess
cash flow of the "SEILLEAN" or the outstanding principal balance divided by
the remaining period of the loan. In addition, NIC has the option to
purchase up to 10% of the ownership in the "SEILLEAN", any time prior to
three years after the Company has received the funds from NIC, at a minimum
price of $4.2 million.
LITIGATION - 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 was 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
were denied, and the case was remanded to the trial court for determination
of damages. In June 1996, this matter was settled, and the litigation was
dismissed with prejudice, without significant financial statement impact.
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 alleged,
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 purported to be an
owner of the Company's common stock and sought to represent a class of
shareholders of the Company who are similarly situated. Each of the
plaintiffs sought injunctive relief, damages in unspecified amounts and
certain other relief, including costs and expenses. In March 1996, the
plaintiffs in each of the four actions voluntarily dismissed same on a
without prejudice basis, and the court entered orders accordingly.
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 each of two key executives with severance benefits
(the aggregate of such benefits to both executives amounting to
approximately $3.7 million) which vest in September 2003 or earlier if an
entity in which each such executive has an interest reduces its ownership
of the Company's common stock below a specified level and such executive
gives notice of termination of his employment in accordance with the terms
of his employment contract. The Company amortizes the cost of the
severance benefits over the ten year period from September 1993 to
September 2003, unless the relevant reduction of stock ownership and
termination of employment occurs prior to September 2003 in which case the
unamortized severance cost would be expensed. In the second quarter of
1996, one of the two key executives gave such notice of termination
following the relevant reduction of stock ownership by the entity in which
he had an interest. In the same period, the Company paid the key executive
severance benefits in accordance with his employment contract and expensed
the related unamortized severance cost of approximately $.6 million. The
unaccrued severance benefits for the remaining key executive at December
31, 1996 was approximately $2 million.
LETTERS OF CREDIT - At December 31, 1996, the Company had letters
of credit outstanding and unused totalling $18.3 million and $31.7 million,
respectively (see Note C). At December 31, 1995, the Company had letters
of credit outstanding and unused totalling $13.3 million and $21.7 million,
respectively.
(F) ACCRUED LIABILITIES AND OTHER NONCURRENT LIABILITIES
The components of "Accrued liabilities" at December 31, 1996 and
1995 were as follows (in thousands):
1996 1995
-------- --------
Accrued expenses - general $ 13,759 $ 11,051
Accrued interest expense 2,807 2,657
Other 5,105 6,810
-------- --------
Total $ 21,671 $ 20,518
======== ========
The components of "OTHER NONCURRENT LIABILITIES" at December 31,
1996 and 1995 were as follows (in thousands):
1996 1995
-------- --------
Postretirement benefit obligations $ 15,697 $ 15,993
Accrued interest expense related to
the New Debentures 10,416 10,410
Deferred gain on sale of drilling unit 6,465 7,229
Net liabilities associated with
discontinued operations 6,236 5,818
Foreign income taxes 5,954 5,893
Pension obligations 3,982 5,090
Other 3,341 1,285
-------- --------
Total $ 52,091 $ 51,718
======== ========
(G) INCOME TAXES
Income tax expense for the years ended December 31, 1996, 1995 and
1994 consisted of the following (in thousands):
1996 1995 1994
-------- -------- --------
Current:
Foreign $ 5,079 $ 2,395 $ 3,825
Federal 441 527 -
-------- -------- --------
Total current 5,520 2,922 3,825
Deferred 2,364 (98) 268
-------- -------- --------
Total $ 7,884 $ 2,824 $ 4,093
======== ======== ========
The domestic and foreign components of income (loss) before income
taxes for the years ended December 31, 1996, 1995 and 1994 were as follows
(in thousands):
1996 1995 1994
-------- -------- --------
Domestic $(29,441) $(22,028) $(27,211)
Foreign 121,925 44,766 13,308
-------- -------- --------
Total $ 92,484 $ 22,738 $(13,903)
======== ======== ========
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, 1996, 1995 and 1994 due to the following:
1996 1995 1994
---- ---- ----
Statutory rate 35 % 35 % 35 %
Limitation on recognition
of tax benefits - - (35)
Use of previously reserved
tax benefits (31) (33) -
Foreign tax settlement - (6) -
Foreign tax expense 5 16 28
Other - - 1
---- ---- ----
Effective rate 9 % 12 % 29 %
==== ==== ====
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, 1996 and 1995 was as follows (in thousands):
1996 1995
--------- ---------
Deferred tax liabilities:
Depreciation $ 124,059 $ 99,513
Intangible drilling costs 5,419 3,064
--------- ---------
Total deferred tax liabilities 129,478 102,577
--------- ---------
Deferred tax assets:
Rig leases (6,255) (15,342)
Postretirement benefits (5,633) (8,183)
Tax benefit carryforwards (170,622) (153,016)
Valuation allowance 53,667 76,989
Other - (48)
--------- ---------
Total deferred tax assets (128,843) (99,600)
--------- ---------
Net deferred tax liability $ 635 $ 2,977
========= =========
Valuation allowance reflects the possible expiration of tax
benefits (primarily net operating loss carryforwards) prior to their
utilization. The reduction of the valuation allowance reflects the use of
tax benefit loss carryforwards.
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
$3.8 million annually plus certain built-in gains that existed as of the
date of such changes. Net tax operating losses of $37,981,000 arising
since the 1991 ownership change are not subject to this limitation.
(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. The
Preferred Stock was 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 were $1.625 per share and
were cumulative and payable quarterly commencing September 30, 1993. The
Preferred Stock was redeemable at any time on or 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 or after September 30, 2003, plus accrued and unpaid
dividends. The Preferred Stock had 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. On August 5, 1996, the Company announced it would redeem all of
the outstanding shares of its Preferred Stock on September 30, 1996 at the
redemption price of $26.1375 per share. However, the majority of the
Preferred Stock outstanding was converted into approximately 8.6 million
shares of the Company's common stock on or before September 30, 1996 and on
September 30, 1996 approximately 1,041 shares were redeemed by the Company.
COMMON STOCK - In September 1995, the Company issued 1,232,057
shares of the Company's common stock in association with the purchase of
the "J. W. McLEAN" 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 was required to
maintain continuously effective shelf registration statements with respect
to approximately 2.5 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 .9 million shares) or
September 14, 1996 (in the case of approximately 1.6 million shares). The
Company currently maintains the effectiveness of such registration
statements on a voluntary basis.
As of December 31, 1996, authorized, unissued shares of common
stock were reserved for issuance as follows:
Issuance under the Company's stock
plans (net of forfeitures) 2,917,387
Conversion of 8% Senior Subordinated
Convertible Debentures 944,112
Conversion of Class A Stock 81
----------
Total 3,861,580
==========
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, 1996 and 1995.
(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, 1996, 1995 and
1994 included the following components (in thousands):
1996 1995 1994
------- ------- -------
Service cost - benefits earned during
the year $ 1,754 $ 1,355 $ 1,412
Interest cost on projected benefit obligation 4,651 4,504 4,284
Actual (gain) loss on plan assets (5,221) (10,000) 1,004
Net amortization and deferral (199) 5,186 (5,953)
------- ------- --------
Net pension costs $ 985 $ 1,045 $ 747
======= ======= =======
The funded status of the plans at December 31, 1996 was as follows
(in thousands):
Domestic Offshore Replacement
Plan Plan Plan
-------- -------- --------
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 43,486 $ 12,484 $ 2,324
Nonvested benefit obligation 1,905 653 88
-------- -------- --------
Accumulated benefit obligation 45,391 13,137 2,412
Effect of projected future
compensation levels 5,010 1,782 221
-------- -------- --------
Projected benefit obligation 50,401 14,919 2,633
Plan assets at fair value 45,485 13,542 -
-------- -------- --------
Projected benefit obligation
in excess of plan assets 4,916 1,377 2,633
Unrecognized cumulative net (loss) gain (10,262) (1,273) 3,491
Prior service cost unrecognized
in pension cost 1,929 190 225
Unrecognized net implementation
asset (obligation) 1,722 - (2,412)
-------- -------- --------
Accrued (prepaid) pension cost $ (1,695) $ 294 $ 3,937
======== ======== ========
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, 1996,
1995 and 1994 included the following (in thousands):
1996 1995 1994
------- ------- -------
Service cost - benefits earned
during the year $ 126 $ 223 $ 350
Interest cost on projected
benefit obligations 794 986 1,241
Amortization (benefit) cost -
Accumulated Projected Benefit
Obligation (877) (768) (539)
------- ------- -------
Total postretirement benefit costs $ 43 $ 441 $ 1,052
======= ======= =======
The health care cost trend rates used to measure the expected cost
in 1997 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 15.8%. The accumulated postretirement benefit
obligation would increase by approximately 13.6%.
The amounts recognized in the Company's Consolidated Balance Sheet
at December 31, 1996 and 1995 were as follows (in thousands):
1996 1995
-------- --------
Plan assets at fair value $ - $ -
Accumulated postretirement benefit obligation:
Retirees 8,081 8,808
Fully eligible active plan participants 567 640
Other active plan participants 1,664 1,687
Unrecognized prior service cost 2,685 3,679
Unrecognized cumulative net gain 3,477 2,210
Other (394) (591)
-------- --------
Postretirement benefit liability recognized
in the Consolidated Balance Sheet $ 16,080 $ 16,433
======== ========
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 their base salary (15%
effective January 1, 1997) (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. Effective January 1,
1997, the Company increased its matching contributions to a rate of $.75
for each dollar contributed by the employee. Employees may direct the
investment of their contributions and the contributions of the Company in
various plan investment 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 $582,000 in 1996, $518,000 in 1995, and $531,000 in 1994.
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 years ending December 31, 1995 and 1994
totalled approximately $126,000 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 one 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. In 1996, the Company granted Stock Options under
the 1995 Plan with respect to 150,000 shares of common stock at an option
price of $28.00 per share (the market price on the date of the grant).
Such options become exercisable over a three year period from the date of
grant and are not exercisable within six months or later than ten years
from the date of grant. Also in 1996, the Company granted Restricted Stock
Awards under the 1995 Plan totalling 414,600 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. Compensation
recognized under the stock incentive plans for the years ending December
31, 1996 and 1995 totalled approximately $3,230,000 and $167,000,
respectively.
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:
1995 Weighted
1990 1992 1995 Director Average
Plan Plan Plan Plan Price
--------- ------- ------- ------- --------
Outstanding at
December 31, 1993 1,770,300 - - - 7.38
Forfeited (2,000) - - - 7.38
--------- ------- ------- -------
Outstanding at
December 31, 1994 1,768,300 - - - 7.38
Granted - 700,000 600,000 120,000 11.95
Exercised (406,833) - - - 7.38
Forfeited (2,000) (5,000) - - 8.54
--------- ------- ------- -------
Outstanding at
December 31, 1995 1,359,467 695,000 600,000 120,000 9.71
Granted - - 150,000 - 28.00
Exercised (754,000) (47,580) - (62,000) 7.46
Forfeited (2,000) (4,800) - - 8.52
--------- ------- ------- -------
Outstanding at
December 31, 1996 603,467 642,620 750,000 58,000 12.00
========= ======= ======== =======
Exercisable at
December 31,
1994 1,461,100 - - - 7.38
1995 1,359,467 - - 105,000 7.38
1996 603,467 410,180 600,000 48,000 11.00
Available for
grant at December 31,
1994 - 700,000 - -
1995 - 5,000 1,355,800 80,000
1996 - 11,600 771,700 80,000
Weighted average
fair value
of options granted - 5.83 9.07 3.21
The fair value of each grant since January 1, 1995 is estimated on
the date of the grant using the Black-Scholes option pricing model using
the following weighted-average assumptions for the 1992 Plan, the 1995
Plan, and the 1995 Director Plan, respectively: risk-free interest rates
of 5.8%, 5.4%, and 7.4%; expected lives of 5.3, 3.4, and 4.0 years; and
expected volatility of 59%, 65%, and 43%.
The Company accounts for these plans under APB Opinion No. 25, under
which no compensation cost has been recognized. Had compensation cost for
these plans been determined consistent with SFAS 123, the Company's net
income and earnings per share would have been reduced to the following
proforma amounts (in thousands except per share amounts):
1996 1995 1994
-------- -------- --------
Net income (loss): As Reported $ 77,916 $ 21,822 $(17,146)
Pro Forma $ 72,913 $ 20,655 $(17,146)
Primary EPS: As Reported $ 1.15 $ .28 $ (.39)
Pro Forma $ 1.07 $ .26 $ (.39)
Fully diluted EPS: As Reported $ 1.10 - -
Pro Forma $ .98 - -
Because the SFAS 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting proforma
compensation cost may not be representative of that to be expected in
future years.
(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 had rig management agreements with Transocean Offshore
Inc. (as successor to Sonat Offshore Drilling Inc.), a major shareholder of
Drilling, for the operation and marketing of both of its drilling units.
The management agreement for one of Drilling's drilling units expired in
December 1995 and the other expired in October 1996, and a subsidiary of
the Company now manages both drilling units. For each of the years ending
December 31, 1996, 1995 and 1994, Drilling paid to Transocean Offshore Inc.
approximately $1.2 million, $2.6 million and $2.5 million, respectively,
for such management services. In addition, Drilling had a bareboat charter
agreement with Transocean Offshore Inc. for the other drilling unit. For
the years ended December 31, 1996, 1995 and 1994, Drilling received from
Transocean Offshore Inc. approximately $15.1 million, $11.8 million, and
$13.9 million, respectively, for such bareboat charter. At December 31,
1996 and 1995, Drilling had a net receivable from Transocean Offshore Inc.
of $.8 million and $5.4 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, 1996, revenues from
two customers of $58 million and $35.6 million accounted for 20% and 12%,
respectively, of the Company's total operating revenues. 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.
Geographic information about the Company's operations for the
three years ended December 31, 1996 is as follows (in thousands):
1996 1995 1994
---------- ---------- ----------
Operating revenues:
United States $ 28,323 $ 24,451 $ 20,151
Southeast Asia 59,028 63,562 69,751
Mediterranean-
Middle East 8,662 31,406 19,344
Europe 146,899 63,639 43,646
Australia 23,686 20,940 11,516
West Africa 23,625 8,490 4,608
Other Foreign - 307 42
Corporate - - -
---------- ---------- ----------
Total $ 290,223 $ 212,795 $ 169,058
========== ========== ==========
Operating profit (loss):(1)
United States $ 7,743 $ 3,541 $ (3,691)
Southeast Asia 27,411 22,358 18,413
Mediterranean-
Middle East 2,427 10,661 463
Europe 73,897 16,230 1,874
Australia 11,370 (283) 1,500
West Africa 8,853 2,663 (3,362)
Other Foreign (27) 115 (33)
Corporate (26,594) (19,076) (18,636)
---------- ---------- ----------
Total $ 105,080 $ 36,209 $ (3,472)
========== ========== ==========
Identifiable assets:
United States $ 117,991 $ 52,564 $ 82,639
Southeast Asia 137,001 163,119 166,896
Mediterranean-
Middle East 14,021 61,022 37,892
Europe 402,248 258,934 218,755
Australia 47,855 3,947 17,175
West Africa 47,016 14,373 13,072
Other Foreign 45 45 -
Corporate 42,013 51,776 50,372
---------- ---------- ----------
Total $ 808,190 $ 605,780 $ 586,801
========== ========== ==========
(1) Operating profit (loss) represents operating revenues less
operating expenses, depreciation, general and administrative and
other, net.
READING & BATES CORPORATION
AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION
QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the two years ended December 31,
1996, are as follows (in thousands except for per share amounts):
Quarter
--------------------------------------------------
First Second Third Fourth Total
-------- -------- -------- -------- --------
1996:
- ----
Operating revenues $ 61,190 $ 61,700 $ 76,413 $ 90,920 $ 290,223
Gross income (1) $ 22,695 $ 26,772 $ 33,143 $ 45,049 $ 127,659
Net income $ 13,472 $ 15,835 $ 22,645 $ 25,964 $ 77,916
Net income per common
share:
Primary $ .20 $ .23 $ .34 $ .36 $ 1.15
Fully diluted $ - $ .22 $ .32 $ - $ 1.10
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
- ----------------------
(1) Gross income represents operating revenues less operating expenses,
depreciation, and other, net.
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 13, 1997, 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, 1996 and 1995
Consolidated Statement of Operations for the years ended December 31,
1996, 1995 and 1994
Consolidated Statement of Cash Flows for the years ended December 31,
1996, 1995 and 1994
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994
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 Partici-
pating Preferred Stock of the Registrant. (Filed as
Exhibit 3.2 to the Company's Annual Report on Form 10-K
for 1995 and incorporated herein by reference.)
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 Sub-
ordinated Convertible Debentures due 1998. (Filed as
Exhibit 4.2 to Registration No. 33-28580 and incor-
porated 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 - 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 4.6 - 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 4.7 - 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 4.8 - 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 4.9 - 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 4.10 - 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 4.11 - 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* - 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 10.2* - 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 10.3* - 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 10.4* - 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 10.5* - 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 10.6* - Surrender Letter dated as of February 7, 1995 by C. A.
Donabedian. (Filed as Exhibit 10.33 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.7* - 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 10.8* - Surrender Letter dated as of February 7, 1995 by J. W.
McLean. (Filed as Exhibit 10.35 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.9* - 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 10.10*- Surrender Letter dated as of February 7, 1995 by R. L.
Sandmeyer. (Filed as Exhibit 10.37 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.11*- 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 10.12*- Surrender Letter dated as of February 7, 1995 by S. A.
Webster. (Filed as Exhibit 10.39 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.13*- Stock Option Agreement dated as of February 7, 1995
between A.L. Chavkin and the Registrant. (Filed as
Exhibit 10.40 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.14*- Stock Option Agreement dated as of February 7, 1995
between Willem Cordia and the Registrant. (Filed as
Exhibit 10.41 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.15*- Stock Option Agreement dated as of February 7, 1995
between C.A. Donabedian and the Registrant. (Filed as
Exhibit 10.42 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.16*- Stock Option Agreement dated as of February 7, 1995
between Ted Kalborg and the Registrant. (Filed as
Exhibit 10.43 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.17*- Stock Option Agreement dated as of February 7, 1995
between J.W. McLean and the Registrant. (Filed as
Exhibit 10.44 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.18*- Stock Option Agreement dated as of February 7, 1995
between R.L. Sandmeyer and the Registrant. (Filed as
Exhibit 10.45 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.19*- Stock Option Agreement dated as of February 7, 1995
between S.A. Webster and the Registrant. (Filed as
Exhibit 10.46 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.20*- Stock Option Agreement dated as of April 19, 1995
between M.A.E. Lacqueur and the Registrant. (Filed as
Exhibit 10.47 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.21*- Stock Option Agreement with respect to the 1995 Long-
Term Incentive Plan dated February 6, 1996 between the
Registrant and Paul B. Loyd, Jr. (Filed as Exhibit
10.48 to the Company's Annual Report on Form 10-K for
1995 and incorporated herein by reference.)
Exhibit 10.22*- Amendment No. 1, dated as of December 3, 1996 to Stock
Option Agreement with respect to the 1995 Long-Term
Incentive Plan between the Registrant and Paul B. Loyd,
Jr.
Exhibit 10.23*- Stock Option Agreement with respect to the 1992 Long-
Term Incentive Plan dated February 6, 1996 between the
Registrant and Paul B. Loyd, Jr. (Filed as Exhibit
10.49 to the Company's Annual Report on Form 10-K for
1995 and incorporated herein by reference.)
Exhibit 10.24*- Amendment No. 1, dated as of December 3, 1996 to Stock
Option Agreement with respect to the 1992 Long-Term
Incentive Plan between the Registrant and Paul B. Loyd,
Jr.
Exhibit 10.25*- 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 10.26*- 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 10.27*- 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 10.28*- 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 10.29*- 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 10.30*- 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 10.31*- 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 10.32*- 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 10.33*- 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 10.34*- 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 10.35*- 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 10.36*- 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 10.37*- 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 10.38*- 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 10.39*- 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 10.40*- 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 10.41*- Restricted Stock Award Agreement dated December 5, 1995
under the 1995 Long-Term Incentive Plan between L. E.
Voss, Jr. and the Registrant.
Exhibit 10.42*- Restricted Stock Award Agreement dated December 5, 1995
under the 1995 Long-Term Incentive Plan between T. W.
Nagle and the Registrant.
Exhibit 10.43*- Restricted Stock Award Agreement dated December 5, 1995
under the 1995 Long-Term Incentive Plan between C. R.
Ofner and the Registrant.
Exhibit 10.44*- Restricted Stock Award Agreement dated December 5, 1995
under the 1995 Long-Term Incentive Plan between D. L.
McIntire and the Registrant.
Exhibit 10.45*- Restricted Stock Award Agreement dated December 5, 1995
under the 1995 Long-Term Incentive Plan between W. K.
Hillin and the Registrant.
Exhibit 10.46*- Restricted Stock Award Agreement dated December 3, 1996
under the 1996 Director Restricted Stock Award Plan
between A. L. Chavkin and the Registrant.
Exhibit 10.47*- Restricted Stock Award Agreement dated December 3, 1996
under the 1996 Director Restricted Stock Award Plan
between C. A. Donabedian and the Registrant.
Exhibit 10.48*- Restricted Stock Award Agreement dated December 3, 1996
under the 1996 Director Restricted Stock Award Plan
between Ted Kalborg and the Registrant.
Exhibit 10.49*- Restricted Stock Award Agreement dated December 3, 1996
under the 1996 Director Restricted Stock Award Plan
between M. A. E. Laqueur and the Registrant.
Exhibit 10.50*- Restricted Stock Award Agreement dated December 3, 1996
under the 1996 Director Restricted Stock Award Plan
between J. W. McLean and the Registrant.
Exhibit 10.51*- Restricted Stock Award Agreement dated December 3, 1996
under the 1996 Director Restricted Stock Award Plan
between R. L. Sandmeyer and the Registrant.
Exhibit 10.52*- Restricted Stock Award Agreement dated December 3, 1996
under the 1995 Long-Term Incentive Plan between Paul B.
Loyd, Jr. and the Registrant.
Exhibit 10.53*- Stock Option Agreement dated December 3, 1996 under the
1995 Long-Term Incentive Plan between T. W. Nagle and
the Registrant.
Exhibit 10.54*- Restricted Stock Award Agreement dated December 3, 1996
under the 1995 Long-Term Incentive Plan between C. R.
Ofner and the Registrant.
Exhibit 10.55*- Restricted Stock Award Agreement dated December 3, 1996
under the 1995 Long-Term Incentive Plan between D. L.
McIntire and the Registrant.
Exhibit 10.56*- Restricted Stock Award Agreement dated December 3, 1996
under the 1995 Long-Term Incentive Plan between W. K.
Hillin and the Registrant.
Exhibit 10.57 - 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 10.58 - Facility Agreement dated February 21, 1991 between
Arcade Drilling AS, Chase Investment Bank Limited, The
Chase Manhattan Bank, N.A. and others. (Filed as
Exhibit 10.51 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.59 - Amendment Agreement dated November 30, 1995 to Facility
Agreement dated February 21, 1991 between Arcade
Drilling AS, Chase Investment Bank Limited, The Chase
Manhattan Bank, N.A. and others. (Filed as Exhibit
10.71 to the Company's Annual Report on Form 10-K for
1995 and incorporated herein by reference.)
Exhibit 10.60 - Second Amendment Agreement dated October, 1996 between
Arcade Drilling AS, Chase Investment Bank Limited, The
Chase Manhattan Bank, N.A. and others.
Exhibit 10.61 - 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 10.62 - 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 10.63 - 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 10.64 - 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 10.65 - 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 10.66 - 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 10.67 - 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 10.68 - 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 10.69 - 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 10.70 - 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 10.71 - 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 10.72 - 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 10.73 - 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 10.74 - 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 10.75 - 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 10.76 - 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. (Filed as Exhibit 10.101 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.77 - Guarantee dated November 28, 1995 by the Registrant in
favor of Christiania Bank Og Kreditkasse. (Filed as
Exhibit 10.102 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.78 - 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. (Filed as Exhibit
10.103 to the Company's Annual Report on Form 10-K for
1995 and incorporated herein by reference.)
Exhibit 10.79 - 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. (Filed as
Exhibit 10.104 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.80 - 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.
(Filed as Exhibit 10.105 to the Company's Annual Report
on Form 10-K for 1995 and incorporated herein by
reference.)
Exhibit 10.81 - 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. (Filed as
Exhibit 10.106 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.82 - 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. (Filed as
Exhibit 10.107 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.83 - 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. (Filed
as Exhibit 10.108 to the Company's Annual Report on
Form 10-K for 1995 and incorporated herein by
reference.)
Exhibit 10.84 - 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.
(Filed as Exhibit 10.109 to the Company's Annual Report
on Form 10-K for 1995 and incorporated herein by
reference.)
Exhibit 10.85 - Credit Agreement dated as of April 30, 1996 among
Registrant, Reading & Bates Drilling Co., certain
lending institutions named therein, Credit Lyonnais New
York Branch, as co-agent, and Christiana Bank og
Kreditkasse, New York Branch, as agent.
Exhibit 10.86 - Security Agreement dated as of April 30, 1996 among
Reading & Bates Drilling Co., Reading & Bates
Exploration Co., Reading & Bates (A) Pty. Ltd., Reading
and Bates Borneo Drilling Co., Ltd, and Christiana Bank
og Kreditkasse, New York Branch, as collateral agent.
Exhibit 10.87 - Subsidiary Guaranty dated as of April 30, 1996 by
Reading & Bates Exploration Co., Reading & Bates (A)
Pty. Ltd., and Reading and Bates Borneo Drilling Co.,
Ltd.
Exhibit 10.88 - First Preferred Mortgage on the "D. R. STEWART" dated
April 30, 1996 between Reading & Bates Exploration Co.
in favor of Wilmington Trust Company, as trustee.
Exhibit 10.89 - First Preferred Mortgage on the "JACK BATES" dated
April 30, 1996 between Reading & Bates Drilling Co. in
favor of Wilmington Trust Company, as trustee.
Exhibit 10.90 - First Preferred Mortgage on the "W. D. KENT" dated
April 30, 1996 between Reading & Bates Exploration Co.
in favor of Wilmington Trust Company, as trustee.
Exhibit 10.91- Indenture of First Naval Mortgage on the "CHARLEY
GRAVES" dated April 30, 1996 between Reading and Bates
Borneo Drilling Co. Ltd. and Christiana Bank og
Kreditkasse, New York Branch, as mortgagee.
Exhibit 10.92- First Priority Mortgage on the "RON TAPPMEYER" dated
April 30, 1996 between Reading & Bates (A) Pty. Ltd.
and Christiana Bank og Kreditkasse, New York Branch, as
mortgagee.
Exhibit 10.93- Deed of Covenant on the "J. W. MCLEAN" dated April 30,
1996 between Reading & Bates Drilling Co. and
Christiana Bank og Kreditkasse, New York Branch, as
mortgagee.
Exhibit 10.94- Indenture of Trust dated as of April 30, 1996 among
Reading & Bates Drilling Co., Reading & Bates
Exploration Co., and Wilmington Trust Company, as
trustee.
Exhibit 10.95 - Collateral Assignment of Insurance dated April 30, 1996
with respect to the "JACK BATES" between Reading &
Bates Drilling Co.and Wilmington Trust Company, as
trustee.
Exhibit 10.96 - Collateral Assignment of Insurance dated April 30, 1996
with respect to the "D. R. STEWART" between Reading &
Bates Exploration Co. and Wilmington Trust Company, as
trustee.
Exhibit 10.97 - Collateral Assignment of Insurance dated April 30, 1996
with respect to the "W. D. KENT" between Reading &
Bates Exploration Co. and Wilmington Trust Company, as
trustee.
Exhibit 10.98 - Collateral Assignment of Insurance dated April 30, 1996
with respect to the "CHARLEY GRAVES" between Reading
and Bates Borneo Drilling Co., Ltd. and Christiana Bank
og Kreditkasse, New York Branch, as agent.
Exhibit 10.99 - Collateral Assignment of Insurance dated April 30, 1996
with respect to the "RON TAPPMEYER" between Reading and
Bates (A) Pty. Ltd. and Christiana Bank og Kreditkasse,
New York Branch, as agent.
Exhibit 10.100- Collateral Assignment of Insurance dated April 30, 1996
with respect to the "J. W. MCLEAN" between Reading and
Bates Borneo Drilling Co., Ltd. and Christiana Bank og
Kreditkasse, New York Branch, as agent.
Exhibit 10.101- First Amendment dated as of July 9, 1996 to Credit
Agreement dated as of April 30, 1996 among Registrant,
Reading & Bates Drilling Co., certain lending
institutions named therein, Credit Lyonnais New York
Branch, as co-agent, and Christiana Bank og
Kreditkasse, New York Branch, as agent.
Exhibit 10.102- Subsidiary Assumption Agreement dated as of July 9,
1996 by RB Drilling Co. and HRB Rig Corporation.
Exhibit 10.103- Indenture of First Naval Mortgage on the "J. W. MCLEAN"
dated July 9, 1996 by Reading & Bates Drilling Co. in
favor of Christiana Bank og Kreditkasse, New York
Branch, as mortgagee.
Exhibit 10.104- First Preferred Mortgage on the "HARVEY H. WARD" dated
July 9, 1996 by HRB Rig Corporation in favor of
Wilmington Trust Company, as trustee.
Exhibit 10.105- Amendment No. 1 to Indenture of First Naval Mortgage on
the "CHARLIE GRAVES" dated July 9, 1996 by Reading and
Bates Borneo Drilling Co., Ltd. in favor of Christiana
Bank og Kreditkasse, New York Branch, as mortgagee.
Exhibit 10.106- Amendment to First Preferred Mortgage on the "JACK
BATES" dated July 9, 1996 by Reading & Bates Drilling
Co. in favor of Wilmington Trust Company, as trustee.
Exhibit 10.107- Amendment to First Preferred Mortgage on the "D. R.
STEWART" dated July 9, 1996 by Reading & Bates
Exploration Co. in favor of Wilmington Trust Company,
as trustee.
Exhibit 10.108- Amendment to First Preferred Mortgage on the "W. D.
KENT" dated July 9, 1996 by Reading & Bates Exploration
Co. in favor of Wilmington Trust Company, as trustee.
Exhibit 10.109- Collateral Assignment of Insurance dated July 9, 1996
with respect to the "HARVEY H. WARD" between HRB Rig
Corporation and Wilmington Trust Company, as trustee.
Exhibit 10.110- Collateral Assignment of Insurance dated July 9, 1996
with respect to the "RIG 41" between RB Drilling Co.
and Christiana Bank og Kreditkasse, New York Branch, as
agent.
Exhibit 10.111- Amended and Restated Indenture of Trust dated as of
July 9, 1996 among Reading & Bates Drilling Co.,
Reading & Bates Exploration Co., HRB Rig Corporation
and Wilmington Trust Company, as trustee.
Exhibit 10.112- Second Amendment dated as of August 30, 1996 to Credit
Agreement dated as of April 30, 1996 among Registrant,
Reading & Bates Drilling Co., certain lending
institutions named therein, Credit Lyonnais New York
Branch, as co-agent, and Christiana Bank og
Kreditkasse, New York Branch, as agent.
Exhibit 10.113- Subsidiary Assumption Agreement dated as of August 30,
1996 by Reading & Bates Development Co.
Exhibit 10.114- Subsidiary Guaranty dated as of August 30, 1996 by
Reading & Bates Development Co.
Exhibit 10.115- Indenture of First Naval Mortgage on "SEILLEAN" dated
August 30, 1996 by Reading & Bates Development Co. in
favor of Christiana Bank og Kreditkasse, New York
Branch, as mortgagee.
Exhibit 10.116- Collateral Assignment of Insurance dated August 30,
1996 with respect to the "SEILLEAN" between Reading &
Bates Development Co. and Christiana Bank og
Kreditkasee, New York Branch, as agent.
Exhibit 10.117- Credit Agreement dated as of November 13, 1996 among
Registrant, Reading & Bates Drilling Co., certain
lending institutions named therein, Banque Indosuez, as
documentation agent, Credit Lyonnais New York Branch,
as documentation agent, and Christiana Bank og
Kreditkasse, New York Branch, as administrative agent,
arranger and security trustee.
Exhibit 10.118- Security Agreement dated as of November 13, 1996 among
Reading & Bates Drilling Co., Reading & Bates
Exploration Co., Reading & Bates Offshore, Limited, HRB
Rig Corporation, Reading & Bates (A) Pty. Ltd.,
Reading and Bates Borneo Drilling Co., Ltd, and
Christiana Bank og Kreditkasse, New York Branch, as
collateral agent.
Exhibit 10.119- Subsidiary Guaranty dated as of November 13, 1996 by
Reading & Bates Exploration Co., Reading & Bates (A)
Pty. Ltd., Reading and Bates Borneo Drilling Co., Ltd.,
Reading & Bates Offshore, Limited and HRB Rig
Corporation.
Exhibit 10.120- First Preferred Mortgage on the "D. R. STEWART" dated
November 13, 1996 between Reading & Bates Exploration
Co. in favor of Christiana Bank og Kreditkasse, New
York Branch, as security trustee.
Exhibit 10.121- First Preferred Mortgage on the "JACK BATES" dated
November 13, 1996 between Reading & Bates Drilling Co.
in favor of Christiana Bank og Kreditkasse, New York
Branch, as security trustee.
Exhibit 10.122- First Preferred Mortgage on the "W. D. KENT" dated
November 13, 1996 between Reading & Bates Exploration
Co. in favor of Christiana Bank og Kreditkasse, as
security trustee.
Exhibit 10.123- First Preferred Mortgage on the "RANDOLPH YOST" dated
November 13, 1996 between Reading & Bates Drilling Co.
in favor of Christiana Bank og Kreditkasse, as security
trustee.
Exhibit 10.124- First Preferred Mortgage on the "GEORGE H. GALLOWAY"
dated November 13, 1996 between Reading & Bates
Offshore, Limited in favor of Christiana Bank og
Kreditkasse, as security trustee.
Exhibit 10.125- First Preferred Mortgage on the "F. G. MCCLINTOCK"
dated November 13, 1996 between Reading & Bates
Offshore, Limited in favor of Christiana Bank og
Kreditkasse, as security trustee.
Exhibit 10.126- First Preferred Mortgage on the "J. T. ANGEL" dated
November 13, 1996 between Reading & Bates Drilling Co.
in favor of Christiana Bank og Kreditkasse, as security
trustee.
Exhibit 10.127- First Preferred Mortgage on the "ROGER W. MOWELL" dated
November 13, 1996 between Reading & Bates Drilling Co.
in favor of Christiana Bank og Kreditkasse, as security
trustee.
Exhibit 10.128- First Preferred Mortgage on the "HARVEY H. WARD" dated
November 13, 1996 between HRB Rig Corporation in favor
of Christiana Bank og Kreditkasse, as security trustee.
Exhibit 10.129- Indenture of First Naval Mortgage on the "CHARLEY
GRAVES" dated November 13, 1996 between Reading and
Bates Borneo Drilling Co. Ltd. and Christiana Bank og
Kreditkasse, New York Branch, as mortgagee.
Exhibit 10.130- Indenture of First Naval Mortgage on the "J. W. MCLEAN"
dated November 13, 1996 between Reading & Bates
Drilling Co. and Christiana Bank og Kreditkasse, New
York Branch, as mortgagee.
Exhibit 10.131- Indenture of First Naval Mortgage on the "RIG 41" dated
November 13, 1996 between Reading and Bates Borneo
Drilling Co. Ltd. and Christiana Bank og Kreditkasse,
New York Branch, as mortgagee.
Exhibit 10.132- First Priority Mortgage on the "RON TAPPMEYER" dated
November 13, 1996 between Reading & Bates (A) Pty. Ltd.
and Christiana Bank og Kreditkasse, New York Branch, as
mortgagee.
Exhibit 10.133- Pledge Agreement dated as of November 13, 1996 between
Registrant and Christiana Bank og Kreditkasse, New York
Branch, as collateral agent.
Exhibit 10.134- Letter of Credit Agreement dated as of December 30,
1996 between Registrant, Reading & Bates Drilling Co.,
and Christiana Ban og Kreditkasse, New York Branch.
Exhibit 10.135- Memorandum of Agreement dated November 28, 1995 between
Reading and Bates, Inc., a subsidiary of the
Registrant, and Deep Sea Investors, L.L.C. (Filed as
Exhibit 10.110 to the Company's Annual Report on Form
10-K for 1995 and incorporated herein by reference.)
Exhibit 10.136- 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.
(Filed as Exhibit 10.111 to the Company's Annual Report
on Form 10-K for 1995 and incorporated herein by
reference.)
Exhibit 10.137- Purchase and Sale Agreement dated October 18, 1995
between Enserch Exploration, Inc. and Reading & Bates
Development Co., a subsidiary of the Registrant.
(Filed as Exhibit 10.112 to the Company's Annual
Report on Form 10-K for 1995 and incorporated herein by
reference.)
Exhibit 10.138- 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. (Filed as Exhibit 10.113 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.139- 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. (Filed as Exhibit 10.114 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.140- 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. (Filed as Exhibit 10.115 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.141- 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. (Filed as Exhibit 10.116 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.142- 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. (Filed as Exhibit 10.117 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.143- 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. (Filed as Exhibit 10.118 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.144- 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. (Filed as Exhibit 10.119 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.145- 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. (Filed as Exhibit 10.120 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.146- 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. (Filed as Exhibit 10.121 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.147- 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. (Filed as Exhibit 10.122 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.148- Payment Agreement dated October 18, 1995 between
Enserch Exploration, Inc. and Reading & Bates
Development Co., a subsidiary of the Registrant.
(Filed as Exhibit 10.123 to the Company's Annual Report
on Form 10-K for 1995 and incorporated herein by
reference.)
Exhibit 10.149- Mortgage and Security Agreement dated October 18, 1995
between Enserch Exploration, Inc. and Reading & Bates
Development Co., a subsidiary of the Registrant.
(Filed as Exhibit 10.124 to the Company's Annual Report
on Form 10-K for 1995 and incorporated herein by
reference.)
Exhibit 10.150- 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. (Filed as Exhibit 10.125 to the Company's
Annual Report on Form 10-K for 1995 and incorporated
herein by reference.)
Exhibit 10.151- Option Agreement made effective as of May 1, 1995
between Enserch Exploration, Inc. and Reading & Bates
Development Co., a subsidiary of the Registrant.
(Filed as Exhibit 10.126 to the Company's Annual Report
on Form 10-K for 1995 and incorporated herein by
reference.)
Exhibit 10.152- Participation Agreement dated December 4, 1996 between
Santa Fe Energy Resources, Inc. and Reading & Bates
Development Co.
Exhibit 10.153- Assignment of Record Title Interest effective December
11, 1996 between Santa Fe Energy Resources, Inc. and
Reading & Bates Development Co. with respect to OCS-G
16404.
Exhibit 10.154- Assignment of Record Title Interest effective December
11, 1996 between Santa Fe Energy Resources, Inc. and
Reading & Bates Development Co. with respect to OCS-G
16405.
Exhibit 10.155- Assignment of Record Title Interest effective December
11, 1996 between Santa Fe Energy Resources, Inc. and
Reading & Bates Development Co. with respect to OCS-G
16567.
Exhibit 10.156- Assignment of Record Title Interest effective December
11, 1996 between Santa Fe Energy Resources, Inc. and
Reading & Bates Development Co. with respect to OCS-G
16568.
Exhibit 10.157- Assignment of Record Title Interest effective December
11, 1996 between Santa Fe Energy Resources, Inc. and
Reading & Bates Development Co. with respect to OCS-G
16578.
Exhibit 10.158- Assignment of Record Title Interest effective December
11, 1996 between Santa Fe Energy Resources, Inc. and
Reading & Bates Development Co. with respect to OCS-G
16579.
Exhibit 10.159- Assignment of Record Title Interest effective December
11, 1996 between Santa Fe Energy Resources, Inc. and
Reading & Bates Development Co. with respect to OCS-G
17251.
Exhibit 10.160- Assignment of Record Title Interest effective January
2, 1997 between Santa Fe Energy Resources, Inc. and
Reading & Bates Development Co. with respect to OCS-G
17355.
Exhibit 10.161- Joint Venture Agreement dated December 16, 1996 among
Shell Deepwater Development Inc., SOI Finance Inc. and
Reading & Bates Development Co.
Exhibit 10.162- Limited Liability Company Agreement between Conoco
Development Company and RB Deepwater Exploration Inc.
Exhibit 10.163- Joint Venture Agreement dated February 22, 1996 between
INTEC Engineering, Inc. and Reading & Bates Development
Co.
Exhibit 10.164- Loan Agreement dated as of December 14, 1996 among TRB
Holding Corporation, Reading & Bates (U.K.) Limited and
Nissho Iwai Europe PLC.
Exhibit 10.165- First Naval Mortgage on the "SEILLEAN" dated December
14, 1996 between TRB Holding Corporation in favor of
Nissho Iwai Europe PLC.
Exhibit 10.166- Collateral Assignment of Deposit Account, Pledge and
Security Agreement dated December 14, 1996 with respect
to the "SEILLEAN" between TRB Holding Corporation and
Nissho Iwai Europe PLC.
Exhibit 10.167- Assignment of Insurances dated December 14, 1996 with
respect to the "SEILLEAN" between TRB Holding
Corporation and Reading & Bates (U.K.) Limited and
Nissho Iwai Europe PLC.
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. (To be filed by amendment to
the Annual Report on Form 10-K.)
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 six Current Reports on Form 8-K filed during the three months
ended December 31, 1996. A Current Report on Form 8-K was: filed
October 7, 1996 announcing a voluntary commission-free oddlot selling
program for shareholders who owned fewer than 100 shares of the
Company's common stock; filed October 15, 1996 disclosing the Company's
3rd quarter 1996 earnings; filed October 31, 1996 announcing the
formation of a joint venture between the Company and Conoco to build a
DP Class 3 Drillship; filed November 8, 1996 announcing the extension of
the commission-free oddlot selling program; filed November 14, 1996
disclosing the closing of a new $300 million credit facility with
Christiania Bank og Kreditkasse; and filed November 25, 1996 announcing
the retirement of L.E. (Sonny) Voss, Jr. as President of Reading & Bates
Drilling Co. and the appointment of Andrew Bakonyi as its new President.
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 21, 1997.
READING & BATES CORPORATION
By 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 21, 1997.
By Paul B. Loyd Jr. By Tim W. Nagle
-------------------------- -------------------------
Paul B. Loyd, Jr. Tim W. Nagle
President, Chief Executive Executive Vice President,
Officer, Finance and Administration
Chairman and Director Principal Accounting Officer
By Charles A. Donabedian By Macko A. E. Laqueur
-------------------------- --------------------------
Charles A. Donabedian Macko A. E. Laqueur
Director Director
By By Ted Kalborg
-------------------------- --------------------------
J. W. McLean Ted Kalborg
Director Director
By Arnold L. Chavkin By Robert L. Sandmeyer
-------------------------- --------------------------
Arnold L. Chavkin Robert L. Sandmeyer
Director Director
Exhibit 10.22
AMENDMENT TO READING & BATES CORPORATION
STOCK OPTION AGREEMENT
This Amendment to the Stock Option Agreement between Reading & Bates
Corporation ("Company") and Paul B. Loyd, Jr. ("Optionee") is made as of
December 3, 1996.
WITNESSETH:
WHEREAS, the Compensation Committee which administers the Reading &
Bates Corporation 1995 Long Term Incentive Plan ("Plan") has determined
that it is in the best interests of the Company to amend the Stock Option
Agreement executed on March 22, 1996, effective as of December 5, 1995, in
the manner set out below, and Optionee has agreed to same;
NOW THEREFORE, for and in consideration of these premises, it is
hereby agreed as follows:
Paragraph 3 of the Agreement is amended, effective as of the date of
this Amendment, to read as follows:
"3. This Option shall not be exercisable, except upon the
death or disability of the Optionee, until after six months
immediately following the date this Option is granted, and
thereafter shall be exercisable for common stock as follows:
After one year following the effective date of grant,
this Option shall be exercised for any number of shares
up to and including 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."
IN WITNESS WHEREOF, this Amendment is executed this day of
, 1997, effective as of the 3rd day of December, 1996.
READING & BATES CORPORATION
By: __________________________
T. W. Nagle
Executive Vice President,
Finance and Administration
OPTIONEE
__________________________
Paul B. Loyd, Jr.
Exhibit 10.24
AMENDMENT TO READING & BATES CORPORATION
STOCK OPTION AGREEMENT
This Amendment to the Stock Option Agreement between Reading & Bates
Corporation ("Company") and Paul B. Loyd, Jr. ("Optionee") is made as of
December 3, 1996.
WITNESSETH:
WHEREAS, the Compensation Committee which administers the Reading &
Bates Corporation 1992 Long Term Incentive Plan ("Plan") has determined
that it is in the best interests of the Company to amend the Stock Option
Agreement executed on March 22, 1996, effective as of December 5, 1995, in
the manner set out below, and Optionee has agreed to same;
NOW THEREFORE, for and in consideration of these premises, it is
hereby agreed as follows:
Paragraph 3 of the Agreement is amended, effective as of the date of
this Amendment, to read as follows:
"3. This Option shall not be exercisable, except upon the
death or disability of the Optionee, until after six months
immediately following the date this Option is granted, and
thereafter shall be exercisable for common stock as follows:
After one year following the effective date of grant,
this Option shall be exercised for any number of shares
up to and including 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."
IN WITNESS WHEREOF, this Amendment is executed this day of
, 1997, effective as of the 3rd day of December, 1996.
READING & BATES CORPORATION
By: __________________________
T. W. Nagle
Executive Vice President,
Finance and Administration
OPTIONEE
__________________________
Paul B. Loyd, Jr.
Exhibit 10.41
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature page
hereof, between Reading & Bates Corporation, a Delaware corporation (the
"Company"), and Lucious E. Voss, Jr. (the "Participant"). Except as
defined herein, capitalized terms shall have the same meaning ascribed to
them under the 1995 Long Term Incentive Plan of Reading & Bates
Corporation, as from time to time amended (the "Plan"). To the extent that
any provision of this Agreement conflicts with the express terms of the
Plan, it is hereby acknowledged and agreed that the terms of the Plan shall
control and, if necessary, the applicable provisions of this Agreement
shall be hereby deemed amended so as to carry out the purpose and intent of
the Plan.
1. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
(a) "Cause" means Cause as defined in Company's Personnel Policies
and Procedures, in effect from time to time.
(b) "Change of Control" means a Change of Control as defined in
Paragraph 16 of this Agreement.
(c) "Disability" means Disability as defined in the Company's
Personnel Policies and Procedures, in effect from time to time.
2. Award. In order to encourage the Participant's contribution to
the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, and subject to
shareholder approval of the Plan, the Company hereby awards to the
Participant as of December 5, 1995 (the "Date of Grant"), a total of 24000
shares of Common Stock, pursuant to the Plan, subject to the conditions and
restrictions set forth below and in the Plan (the "Restricted Stock").
3. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 3
or as otherwise provided in Paragraph 7 below. (The period of time between
the Date of Grant and the vesting of shares of Restricted Stock shall be
referred to herein as the "Restricted Period" as to those shares of stock.)
The Participant shall become vested as to 100% of the total number of
shares of Restricted Stock awarded hereunder on December 5, 1998; provided,
however, that the Participant shall not be vested in shares of Restricted
Stock which would be vested as of a given date if the Participant has not
been continuously employed by the Company and its Affiliates from the date
of this Agreement through such date, in which event all of the
Participant's rights to such Restricted Stock shall terminate without any
payment of consideration by the Company, and such Restricted Stock shall be
returned to the Company and cancelled. The Restricted Period shall be
subject to an earlier termination with respect to all or a portion of the
Restricted Stock in accordance with the provisions of Paragraph 7 below.
4. No Code Section 83(b) Election. The Participant shall not make
an election, under Code Section 83(b), to include an amount in income in
respect of this Award of Restricted Stock.
5. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
6. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend as
provided by the Company, conspicuously referring to the terms, conditions
and restrictions described in the Plan and in this Agreement. Subject to
the provisions of Paragraph 8 below, upon termination of the Restricted
Period with respect to shares of Restricted Stock, a certificate
representing such shares shall be delivered to the Participant as promptly
as practicable following such termination.
7. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's employment due
to (A) death or Disability, or (B) involuntary
termination by the Company and all Affiliates for any
reason other than Cause;
the Restricted Period set forth in Paragraph 3 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's employment with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability,
involuntary termination or resignation described in Paragraph (a)(ii)
above, then all Restricted Stock awarded to the Participant that has not
previously vested in accordance with Paragraph 3 above shall be forfeited
whereupon the Corporate Secretary shall deliver to the Company the
certificates representing such shares and the stock power previously
deposited with the Corporate Secretary pursuant to Paragraph 6 above.
8. Withholding of Taxes. No certificates representing the shares
of Restricted Stock shall be delivered to the Participant by the Company
upon the expiration of the Restricted Period unless the Participant (or
Beneficiary, as defined in Paragraph 10 below) remits to the Company the
amount of all federal, state and other governmental withholding tax
requirements imposed upon the Company with respect to the issuance of such
shares or unless provisions to so pay such withholding requirements have
been made to the satisfaction of the Committee. Subject to Committee
approval, the Participant (or Beneficiary) may elect, at least thirty (30)
days (or such other period as the Committee may prescribe) prior to the
vesting of such Restricted Stock, to satisfy such withholding requirements
by having the Company withhold shares otherwise deliverable hereunder to
the Participant (or Beneficiary) having a Fair Market Value on the date
such shares became vested equal to the amount necessary to satisfy such
withholding tax requirements. Any election to have shares withheld to
satisfy the withholding tax requirements shall be made at such time and in
such manner as the Committee shall prescribe. Appropriate withholding may
also be deducted from the payment of any cash dividends with respect to
such shares of Restricted Stock during the Restricted Period, to the extent
necessary to satisfy any withholding tax requirements applicable thereto.
9. Beneficiary Designations. The Participant shall file with the
Human Resources Department of the Company a designation of one or more
beneficiaries (each a "Beneficiary") to whom shares otherwise due the
Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or Beneficiaries
from time to time; provided, however, that any change shall not become
effective until received in writing by the Corporate Secretary of the
Company. If any designated Beneficiary survives the Participant but dies
before receiving all of his benefits hereunder, any remaining benefits due
him shall be distributed to the deceased Beneficiary's estate. If there is
no effective Beneficiary designation on file at the time of the
Participant's death, or if the designated Beneficiary or Beneficiaries have
all predeceased such Participant, the payment of any remaining benefits
shall be made to the Participant's estate.
10. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate;
or
(c) confer upon the Participant the right to continue in the
employment or service of the Company or any Affiliate, or affect the right
of the Company or any Affiliate to terminate the employment or service of
the Participant at any time or for any reason.
11. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the terms,
conditions and provisions of this Agreement and the Plan which affect the
Participant or such other person shall have been complied with as specified
herein.
12. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall have
all rights as a stockholder with respect to the shares of Restricted Stock
once such shares have been registered in his name hereunder.
13. Successors and Assigns. This Agreement shall bind and inure to
the benefit of and be enforceable by the Participant, the Company and their
respective successors and assigns (including personal representatives,
heirs and legatees).
14. Governing Law. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of Delaware.
15. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
16. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean any "Person" , as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (other than (i) the Executive, (ii) the Company or any
of its subsidiaries or Affiliates (as that term is defined in the Exchange
Act), (iii) any Person subject, as of the date of this Agreement or at any
prior time, to the reporting or filing requirements of Section 13(d) of the
Exchange Act with respect to the securities of the Company or any
Affiliate, (iv) any trustee or other fiduciary holding or owning securities
under an employee benefit plan of the Company, (v) any underwriter
temporarily holding or owning securities of the Company, or (vi) any
corporation owned directly or indirectly by the current stockholders of the
Company in substantially the same proportion as their then ownership of
stock of the Company) becomes, after the date of this Agreement, the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing forty
percent (40%) or more of the combined voting power of the Company's then
outstanding securities.
This Agreement is executed and delivered, in duplicate, pursuant to
the Plan, the provisions of which are incorporated herein by reference.
Dated: ________________, 1996
ATTEST: READING & BATES CORPORATION
By:___________________________
________________________________
Secretary
Its: Vice President, Human Resources
_______________________________
(Signature, Lucious E. Voss, Jr.)
Exhibit 10.42
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and Tim W. Nagle (the "Participant"). Except as defined
herein, capitalized terms shall have the same meaning ascribed to them
under the 1995 Long Term Incentive Plan of Reading & Bates Corporation,
as from time to time amended (the "Plan"). To the extent that any
provision of this Agreement conflicts with the express terms of the Plan,
it is hereby acknowledged and agreed that the terms of the Plan shall
control and, if necessary, the applicable provisions of this Agreement
shall be hereby deemed amended so as to carry out the purpose and intent
of the Plan.
1. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
(a) "Cause" means Cause as defined in Company's Personnel
Policies and Procedures, in effect from time to time.
(b) "Change of Control" means a Change of Control as defined in
Paragraph 16 of this Agreement.
(c) "Disability" means Disability as defined in the Company's
Personnel Policies and Procedures, in effect from time to time.
2. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, and subject
to shareholder approval of the Plan, the Company hereby awards to the
Participant as of December 5, 1995 (the "Date of Grant"), a total of
20000 shares of Common Stock, pursuant to the Plan, subject to the
conditions and restrictions set forth below and in the Plan (the
"Restricted Stock").
3. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 3
or as otherwise provided in Paragraph 7 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 100% of the total
number of shares of Restricted Stock awarded hereunder on December 5,
1998; provided, however, that the Participant shall not be vested in
shares of Restricted Stock which would be vested as of a given date if
the Participant has not been continuously employed by the Company and its
Affiliates from the date of this Agreement through such date, in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 7 below.
4. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
5. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
6. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 8 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
7. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's employment
due to (A) death or Disability, or (B) involuntary
termination by the Company and all Affiliates for any
reason other than Cause;
the Restricted Period set forth in Paragraph 3 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's employment with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability,
involuntary termination or resignation described in Paragraph (a)(ii)
above, then all Restricted Stock awarded to the Participant that has not
previously vested in accordance with Paragraph 3 above shall be forfeited
whereupon the Corporate Secretary shall deliver to the Company the
certificates representing such shares and the stock power previously
deposited with the Corporate Secretary pursuant to Paragraph 6 above.
8. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 10 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
9. Beneficiary Designations. The Participant shall file with
the Human Resources Department of the Company a designation of one or
more beneficiaries (each a "Beneficiary") to whom shares otherwise due
the Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
10. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate;
or
(c) confer upon the Participant the right to continue in the
employment or service of the Company or any Affiliate, or affect the
right of the Company or any Affiliate to terminate the employment or
service of the Participant at any time or for any reason.
11. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
12. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
13. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
14. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
15. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
16. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean any "Person" , as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than (i) the Executive, (ii) the
Company or any of its subsidiaries or Affiliates (as that term is defined
in the Exchange Act), (iii) any Person subject, as of the date of this
Agreement or at any prior time, to the reporting or filing requirements
of Section 13(d) of the Exchange Act with respect to the securities of
the Company or any Affiliate, (iv) any trustee or other fiduciary holding
or owning securities under an employee benefit plan of the Company, (v)
any underwriter temporarily holding or owning securities of the Company,
or (vi) any corporation owned directly or indirectly by the current
stockholders of the Company in substantially the same proportion as their
then ownership of stock of the Company) becomes, after the date of this
Agreement, the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the combined voting power of
the Company's then outstanding securities.
This Agreement is executed and delivered, in duplicate, pursuant to
the Plan, the provisions of which are incorporated herein by reference.
Dated: ________________, 1996
ATTEST: READING & BATES CORPORATION
By:___________________________
________________________________
Secretary
Its: Vice President, Human Resources
_________________________
(Signature, Tim W. Nagle)
Exhibit 10.43
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and Charles R. Ofner (the "Participant"). Except as
defined herein, capitalized terms shall have the same meaning ascribed to
them under the 1995 Long Term Incentive Plan of Reading & Bates
Corporation, as from time to time amended (the "Plan"). To the extent
that any provision of this Agreement conflicts with the express terms of
the Plan, it is hereby acknowledged and agreed that the terms of the Plan
shall control and, if necessary, the applicable provisions of this
Agreement shall be hereby deemed amended so as to carry out the purpose
and intent of the Plan.
1. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
(a) "Cause" means Cause as defined in Company's Personnel
Policies and Procedures, in effect from time to time.
(b) "Change of Control" means a Change of Control as defined in
Paragraph 16 of this Agreement.
(c) "Disability" means Disability as defined in the Company's
Personnel Policies and Procedures, in effect from time to time.
2. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, and subject
to shareholder approval of the Plan, the Company hereby awards to the
Participant as of December 5, 1995 (the "Date of Grant"), a total of
17000 shares of Common Stock, pursuant to the Plan, subject to the
conditions and restrictions set forth below and in the Plan (the
"Restricted Stock").
3. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 3
or as otherwise provided in Paragraph 7 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 100% of the total
number of shares of Restricted Stock awarded hereunder on December 5,
1998; provided, however, that the Participant shall not be vested in
shares of Restricted Stock which would be vested as of a given date if
the Participant has not been continuously employed by the Company and its
Affiliates from the date of this Agreement through such date, in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 7 below.
4. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
5. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
6. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 8 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
7. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's employment
due to (A) death or Disability, or (B) involuntary
termination by the Company and all Affiliates for any
reason other than Cause;
the Restricted Period set forth in Paragraph 3 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's employment with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability,
involuntary termination or resignation described in Paragraph (a)(ii)
above, then all Restricted Stock awarded to the Participant that has not
previously vested in accordance with Paragraph 3 above shall be forfeited
whereupon the Corporate Secretary shall deliver to the Company the
certificates representing such shares and the stock power previously
deposited with the Corporate Secretary pursuant to Paragraph 6 above.
8. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 10 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
9. Beneficiary Designations. The Participant shall file with
the Human Resources Department of the Company a designation of one or
more beneficiaries (each a "Beneficiary") to whom shares otherwise due
the Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
10. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate;
or
(c) confer upon the Participant the right to continue in the
employment or service of the Company or any Affiliate, or affect the
right of the Company or any Affiliate to terminate the employment or
service of the Participant at any time or for any reason.
11. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
12. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
13. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
14. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
15. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
16. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean any "Person" , as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than (i) the Executive, (ii) the
Company or any of its subsidiaries or Affiliates (as that term is defined
in the Exchange Act), (iii) any Person subject, as of the date of this
Agreement or at any prior time, to the reporting or filing requirements
of Section 13(d) of the Exchange Act with respect to the securities of
the Company or any Affiliate, (iv) any trustee or other fiduciary holding
or owning securities under an employee benefit plan of the Company, (v)
any underwriter temporarily holding or owning securities of the Company,
or (vi) any corporation owned directly or indirectly by the current
stockholders of the Company in substantially the same proportion as their
then ownership of stock of the Company) becomes, after the date of this
Agreement, the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the combined voting power of
the Company's then outstanding securities.
This Agreement is executed and delivered, in duplicate, pursuant to
the Plan, the provisions of which are incorporated herein by reference.
Dated: ________________, 1996
ATTEST: READING & BATES CORPORATION
By:___________________________
____________________________
Secretary
Its: Vice President, Human Resources
_____________________________
(Signature, Charles R. Ofner)
Exhibit 10.44
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and Don L. McIntire (the "Participant"). Except as
defined herein, capitalized terms shall have the same meaning ascribed to
them under the 1995 Long Term Incentive Plan of Reading & Bates
Corporation, as from time to time amended (the "Plan"). To the extent
that any provision of this Agreement conflicts with the express terms of
the Plan, it is hereby acknowledged and agreed that the terms of the Plan
shall control and, if necessary, the applicable provisions of this
Agreement shall be hereby deemed amended so as to carry out the purpose
and intent of the Plan.
1. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
(a) "Cause" means Cause as defined in Company's Personnel
Policies and Procedures, in effect from time to time.
(b) "Change of Control" means a Change of Control as defined in
Paragraph 16 of this Agreement.
(c) "Disability" means Disability as defined in the Company's
Personnel Policies and Procedures, in effect from time to time.
2. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, and subject
to shareholder approval of the Plan, the Company hereby awards to the
Participant as of December 5, 1995 (the "Date of Grant"), a total of
12000 shares of Common Stock, pursuant to the Plan, subject to the
conditions and restrictions set forth below and in the Plan (the
"Restricted Stock").
3. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 3
or as otherwise provided in Paragraph 7 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 100% of the total
number of shares of Restricted Stock awarded hereunder on December 5,
1998; provided, however, that the Participant shall not be vested in
shares of Restricted Stock which would be vested as of a given date if
the Participant has not been continuously employed by the Company and its
Affiliates from the date of this Agreement through such date, in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 7 below.
4. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
5. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
6. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 8 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
7. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's employment
due to (A) death or Disability, or (B) involuntary
termination by the Company and all Affiliates for any
reason other than Cause;
the Restricted Period set forth in Paragraph 3 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's employment with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability,
involuntary termination or resignation described in Paragraph (a)(ii)
above, then all Restricted Stock awarded to the Participant that has not
previously vested in accordance with Paragraph 3 above shall be forfeited
whereupon the Corporate Secretary shall deliver to the Company the
certificates representing such shares and the stock power previously
deposited with the Corporate Secretary pursuant to Paragraph 6 above.
8. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 10 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
9. Beneficiary Designations. The Participant shall file with
the Human Resources Department of the Company a designation of one or
more beneficiaries (each a "Beneficiary") to whom shares otherwise due
the Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
10. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate;
or
(c) confer upon the Participant the right to continue in the
employment or service of the Company or any Affiliate, or affect the
right of the Company or any Affiliate to terminate the employment or
service of the Participant at any time or for any reason.
11. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
12. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
13. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
14. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
15. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
16. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean any "Person" , as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than (i) the Executive, (ii) the
Company or any of its subsidiaries or Affiliates (as that term is defined
in the Exchange Act), (iii) any Person subject, as of the date of this
Agreement or at any prior time, to the reporting or filing requirements
of Section 13(d) of the Exchange Act with respect to the securities of
the Company or any Affiliate, (iv) any trustee or other fiduciary holding
or owning securities under an employee benefit plan of the Company, (v)
any underwriter temporarily holding or owning securities of the Company,
or (vi) any corporation owned directly or indirectly by the current
stockholders of the Company in substantially the same proportion as their
then ownership of stock of the Company) becomes, after the date of this
Agreement, the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the combined voting power of
the Company's then outstanding securities.
This Agreement is executed and delivered, in duplicate, pursuant to
the Plan, the provisions of which are incorporated herein by reference.
Dated: ________________, 1996
ATTEST: READING & BATES CORPORATION
By:___________________________
____________________________
Secretary
Its: Vice President, Human Resources
____________________________
(Signature, Don L. McIntire)
Exhibit 10.45
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and Wayne K. Hillin (the "Participant"). Except as
defined herein, capitalized terms shall have the same meaning ascribed to
them under the 1995 Long Term Incentive Plan of Reading & Bates
Corporation, as from time to time amended (the "Plan"). To the extent
that any provision of this Agreement conflicts with the express terms of
the Plan, it is hereby acknowledged and agreed that the terms of the Plan
shall control and, if necessary, the applicable provisions of this
Agreement shall be hereby deemed amended so as to carry out the purpose
and intent of the Plan.
1. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
(a) "Cause" means Cause as defined in Company's Personnel
Policies and Procedures, in effect from time to time.
(b) "Change of Control" means a Change of Control as defined in
Paragraph 16 of this Agreement.
(c) "Disability" means Disability as defined in the Company's
Personnel Policies and Procedures, in effect from time to time.
2. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, and subject
to shareholder approval of the Plan, the Company hereby awards to the
Participant as of December 5, 1995 (the "Date of Grant"), a total of
19000 shares of Common Stock, pursuant to the Plan, subject to the
conditions and restrictions set forth below and in the Plan (the
"Restricted Stock").
3. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 3
or as otherwise provided in Paragraph 7 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 100% of the total
number of shares of Restricted Stock awarded hereunder on December 5,
1998; provided, however, that the Participant shall not be vested in
shares of Restricted Stock which would be vested as of a given date if
the Participant has not been continuously employed by the Company and its
Affiliates from the date of this Agreement through such date, in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 7 below.
4. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
5. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
6. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 8 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
7. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's employment
due to (A) death or Disability, or (B) involuntary
termination by the Company and all Affiliates for any
reason other than Cause;
the Restricted Period set forth in Paragraph 3 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's employment with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability,
involuntary termination or resignation described in Paragraph (a)(ii)
above, then all Restricted Stock awarded to the Participant that has not
previously vested in accordance with Paragraph 3 above shall be forfeited
whereupon the Corporate Secretary shall deliver to the Company the
certificates representing such shares and the stock power previously
deposited with the Corporate Secretary pursuant to Paragraph 6 above.
8. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 10 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
9. Beneficiary Designations. The Participant shall file with
the Human Resources Department of the Company a designation of one or
more beneficiaries (each a "Beneficiary") to whom shares otherwise due
the Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
10. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate;
or
(c) confer upon the Participant the right to continue in the
employment or service of the Company or any Affiliate, or affect the
right of the Company or any Affiliate to terminate the employment or
service of the Participant at any time or for any reason.
11. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
12. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
13. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
14. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
15. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
16. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean any "Person" , as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than (i) the Executive, (ii) the
Company or any of its subsidiaries or Affiliates (as that term is defined
in the Exchange Act), (iii) any Person subject, as of the date of this
Agreement or at any prior time, to the reporting or filing requirements
of Section 13(d) of the Exchange Act with respect to the securities of
the Company or any Affiliate, (iv) any trustee or other fiduciary holding
or owning securities under an employee benefit plan of the Company, (v)
any underwriter temporarily holding or owning securities of the Company,
or (vi) any corporation owned directly or indirectly by the current
stockholders of the Company in substantially the same proportion as their
then ownership of stock of the Company) becomes, after the date of this
Agreement, the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the combined voting power of
the Company's then outstanding securities.
This Agreement is executed and delivered, in duplicate, pursuant to
the Plan, the provisions of which are incorporated herein by reference.
Dated: ________________, 1996
ATTEST: READING & BATES CORPORATION
By:___________________________
___________________________
Secretary
Its: Vice President, Human Resources
___________________________
(Signature, Wayne K. Hillin)
Exhibit 10.46
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and Arnold L. Chavkin (the "Participant"). Except as
defined herein, capitalized terms shall have the same meaning ascribed to
them under the 1996 Director Restricted Stock Award Plan of Reading &
Bates Corporation, as from time to time amended (the "Plan"). To the
extent that any provision of this Agreement conflicts with the express
terms of the Plan, it is hereby acknowledged and agreed that the terms of
the Plan shall control and, if necessary, the applicable provisions of
this Agreement shall be hereby deemed amended so as to carry out the
purpose and intent of the Plan.
1. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, and subject
to shareholder approval of the Plan, the Company hereby awards to the
Participant as of December 3, 1996 (the "Date of Grant"), a total of
9,000 shares of Common Stock, pursuant to the Plan, subject to the
conditions and restrictions set forth below and in the Plan (the
"Restricted Stock").
2. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 2
or as otherwise provided in Paragraph 6 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 33- % of the total
number of shares of Restricted Stock awarded hereunder on each of January
1, 1998, January 1, 1999 and January 1, 2000; provided, however, that
the Participant shall not be vested in shares of Restricted Stock which
would be vested as of a given date if the Participant has not remained
continuously a member of the Board of Directors of the Company from the
date of this Agreement through such date (other than by reason of
Participant's death, disability, retirement after the age of 65 or Change
of Control of the Company, as defined in Paragraph 15 hereof), in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 6 below.
3. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
4. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
5. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 7 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
6. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's service due to
death or disability, or retirement at age 65 or older;
the Restricted Period set forth in Paragraph 2 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's service with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability or
retirement described in Paragraph (a)(ii) above, then all Restricted
Stock awarded to the Participant that has not previously vested in
accordance with Paragraph 2 above shall be forfeited whereupon the
Corporate Secretary shall deliver to the Company the certificates
representing such shares and the stock power previously deposited with
the Corporate Secretary pursuant to Paragraph 5 above.
7. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 8 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
8. Beneficiary Designations. The Participant shall file with
the Corporate Secretary of the Company a designation of one or more
beneficiaries (each a "Beneficiary") to whom shares otherwise due the
Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
9. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee; or
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate.
10. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
11. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
12. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
13. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
14. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
15. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean any "Person", as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than (i) the Executive, (ii) the
Company or any of its subsidiaries or Affiliates (as that term is defined
in the Exchange Act), (iii) any Person subject, as of the date of this
Agreement or at any prior time, to the reporting or filing requirements
of Section 13(d) of the Exchange Act with respect to the securities of
the Company or any Affiliate, (iv) any trustee or other fiduciary holding
or owning securities under an employee benefit plan of the Company, (v)
any underwriter temporarily holding or owning securities of the Company,
or (vi) any corporation owned directly or indirectly by the current
stockholders of the Company in substantially the same proportion as their
then ownership of stock of the Company) becomes, after the date of this
Agreement, the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the combined voting power of
the Company's then outstanding securities.
This Agreement is executed and delivered, in duplicate, pursuant to the
Plan, the provisions of which are incorporated herein by reference.
Dated: , 1997
ATTEST: READING & BATES CORPORATION
___________________________ By:
__________________________________
Secretary
Its: Chairman and Chief Executive
Officer
___________________________
(Signature, Arnold L. Chavkin)
Exhibit 10.47
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and Charles A. Donabedian (the "Participant"). Except
as defined herein, capitalized terms shall have the same meaning ascribed
to them under the 1996 Director Restricted Stock Award Plan of Reading &
Bates Corporation, as from time to time amended (the "Plan"). To the
extent that any provision of this Agreement conflicts with the express
terms of the Plan, it is hereby acknowledged and agreed that the terms of
the Plan shall control and, if necessary, the applicable provisions of
this Agreement shall be hereby deemed amended so as to carry out the
purpose and intent of the Plan.
1. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, and subject
to shareholder approval of the Plan, the Company hereby awards to the
Participant as of December 3, 1996 (the "Date of Grant"), a total of
9,000 shares of Common Stock, pursuant to the Plan, subject to the
conditions and restrictions set forth below and in the Plan (the
"Restricted Stock").
2. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 2
or as otherwise provided in Paragraph 6 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 33- % of the total
number of shares of Restricted Stock awarded hereunder on each of January
1, 1998, January 1, 1999 and January 1, 2000; provided, however, that
the Participant shall not be vested in shares of Restricted Stock which
would be vested as of a given date if the Participant has not remained
continuously a member of the Board of Directors of the Company from the
date of this Agreement through such date (other than by reason of
Participant's death, disability, retirement after the age of 65 or Change
of Control of the Company, as defined in Paragraph 15 hereof), in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 6 below.
3. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
4. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
5. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 7 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
6. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's service due to
death or disability, or retirement at age 65 or older;
the Restricted Period set forth in Paragraph 2 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's service with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability or
retirement described in Paragraph (a)(ii) above, then all Restricted
Stock awarded to the Participant that has not previously vested in
accordance with Paragraph 2 above shall be forfeited whereupon the
Corporate Secretary shall deliver to the Company the certificates
representing such shares and the stock power previously deposited with
the Corporate Secretary pursuant to Paragraph 5 above.
7. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 8 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
8. Beneficiary Designations. The Participant shall file with
the Corporate Secretary of the Company a designation of one or more
beneficiaries (each a "Beneficiary") to whom shares otherwise due the
Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
9. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee; or
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate.
10. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
11. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
12. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
13. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
14. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
15. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean any "Person", as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than (i) the Executive, (ii) the
Company or any of its subsidiaries or Affiliates (as that term is defined
in the Exchange Act), (iii) any Person subject, as of the date of this
Agreement or at any prior time, to the reporting or filing requirements
of Section 13(d) of the Exchange Act with respect to the securities of
the Company or any Affiliate, (iv) any trustee or other fiduciary holding
or owning securities under an employee benefit plan of the Company, (v)
any underwriter temporarily holding or owning securities of the Company,
or (vi) any corporation owned directly or indirectly by the current
stockholders of the Company in substantially the same proportion as their
then ownership of stock of the Company) becomes, after the date of this
Agreement, the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the combined voting power of
the Company's then outstanding securities.
This Agreement is executed and delivered, in duplicate, pursuant to the
Plan, the provisions of which are incorporated herein by reference.
Dated: , 1997
ATTEST: READING & BATES CORPORATION
___________________________ By:
__________________________________
Secretary
Its: Chairman and Chief
Executive Officer
___________________________
(Signature, Charles A. Donabedian)
Exhibit 10.48
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature page
hereof, between Reading & Bates Corporation, a Delaware corporation (the
"Company"), and Ted Kalborg (the "Participant"). Except as defined
herein, capitalized terms shall have the same meaning ascribed to them
under the 1996 Director Restricted Stock Award Plan of Reading & Bates
Corporation, as from time to time amended (the "Plan"). To the extent that
any provision of this Agreement conflicts with the express terms of the
Plan, it is hereby acknowledged and agreed that the terms of the Plan shall
control and, if necessary, the applicable provisions of this Agreement
shall be hereby deemed amended so as to carry out the purpose and intent of
the Plan.
1. Award. In order to encourage the Participant's contribution to
the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, and subject to
shareholder approval of the Plan, the Company hereby awards to the
Participant as of December 3, 1996 (the "Date of Grant"), a total of 9,000
shares of Common Stock, pursuant to the Plan, subject to the conditions and
restrictions set forth below and in the Plan (the "Restricted Stock").
2. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 2
or as otherwise provided in Paragraph 6 below. (The period of time between
the Date of Grant and the vesting of shares of Restricted Stock shall be
referred to herein as the "Restricted Period" as to those shares of stock.)
The Participant shall become vested as to 33- % of the total number of
shares of Restricted Stock awarded hereunder on each of January 1, 1998,
January 1, 1999 and January 1, 2000; provided, however, that the
Participant shall not be vested in shares of Restricted Stock which would
be vested as of a given date if the Participant has not remained
continuously a member of the Board of Directors of the Company from the
date of this Agreement through such date (other than by reason of
Participant's death, disability, retirement after the age of 65 or Change
of Control of the Company, as defined in Paragraph 15 hereof), in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 6 below.
3. No Code Section 83(b) Election. The Participant shall not make
an election, under Code Section 83(b), to include an amount in income in
respect of this Award of Restricted Stock.
4. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
5. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend as
provided by the Company, conspicuously referring to the terms, conditions
and restrictions described in the Plan and in this Agreement. Subject to
the provisions of Paragraph 7 below, upon termination of the Restricted
Period with respect to shares of Restricted Stock, a certificate
representing such shares shall be delivered to the Participant as promptly
as practicable following such termination.
6. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of Grant;
or
(ii) the termination of the Participant's service due to death
or disability, or retirement at age 65 or older;
the Restricted Period set forth in Paragraph 2 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's service with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability or
retirement described in Paragraph (a)(ii) above, then all Restricted Stock
awarded to the Participant that has not previously vested in accordance
with Paragraph 2 above shall be forfeited whereupon the Corporate Secretary
shall deliver to the Company the certificates representing such shares and
the stock power previously deposited with the Corporate Secretary pursuant
to Paragraph 5 above.
7. Withholding of Taxes. No certificates representing the shares
of Restricted Stock shall be delivered to the Participant by the Company
upon the expiration of the Restricted Period unless the Participant (or
Beneficiary, as defined in Paragraph 8 below) remits to the Company the
amount of all federal, state and other governmental withholding tax
requirements imposed upon the Company with respect to the issuance of such
shares or unless provisions to so pay such withholding requirements have
been made to the satisfaction of the Committee. Subject to Committee
approval, the Participant (or Beneficiary) may elect, at least thirty (30)
days (or such other period as the Committee may prescribe) prior to the
vesting of such Restricted Stock, to satisfy such withholding requirements
by having the Company withhold shares otherwise deliverable hereunder to
the Participant (or Beneficiary) having a Fair Market Value on the date
such shares became vested equal to the amount necessary to satisfy such
withholding tax requirements. Any election to have shares withheld to
satisfy the withholding tax requirements shall be made at such time and in
such manner as the Committee shall prescribe. Appropriate withholding may
also be deducted from the payment of any cash dividends with respect to
such shares of Restricted Stock during the Restricted Period, to the extent
necessary to satisfy any withholding tax requirements applicable thereto.
8. Beneficiary Designations. The Participant shall file with the
Corporate Secretary of the Company a designation of one or more
beneficiaries (each a "Beneficiary") to whom shares otherwise due the
Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or Beneficiaries
from time to time; provided, however, that any change shall not become
effective until received in writing by the Corporate Secretary of the
Company. If any designated Beneficiary survives the Participant but dies
before receiving all of his benefits hereunder, any remaining benefits due
him shall be distributed to the deceased Beneficiary's estate. If there is
no effective Beneficiary designation on file at the time of the
Participant's death, or if the designated Beneficiary or Beneficiaries have
all predeceased such Participant, the payment of any remaining benefits
shall be made to the Participant's estate.
9. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee; or
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate.
10. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the terms,
conditions and provisions of this Agreement and the Plan which affect the
Participant or such other person shall have been complied with as specified
herein.
11. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall have
all rights as a stockholder with respect to the shares of Restricted Stock
once such shares have been registered in his name hereunder.
12. Successors and Assigns. This Agreement shall bind and inure to
the benefit of and be enforceable by the Participant, the Company and their
respective successors and assigns (including personal representatives,
heirs and legatees).
13. Governing Law. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of Delaware.
14. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
15. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean any "Person", as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (other than (i) the Executive, (ii) the Company or any
of its subsidiaries or Affiliates (as that term is defined in the Exchange
Act), (iii) any Person subject, as of the date of this Agreement or at any
prior time, to the reporting or filing requirements of Section 13(d) of the
Exchange Act with respect to the securities of the Company or any
Affiliate, (iv) any trustee or other fiduciary holding or owning securities
under an employee benefit plan of the Company, (v) any underwriter
temporarily holding or owning securities of the Company, or (vi) any
corporation owned directly or indirectly by the current stockholders of the
Company in substantially the same proportion as their then ownership of
stock of the Company) becomes, after the date of this Agreement, the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing forty
percent (40%) or more of the combined voting power of the Company's then
outstanding securities.
This Agreement is executed and delivered, in duplicate, pursuant to the
Plan, the provisions of which are incorporated herein by reference.
Dated: , 1997
ATTEST: READING & BATES CORPORATION
___________________________ By:
__________________________________
Secretary
Its: Chairman and Chief Executive
Officer
___________________________
(Signature, Ted Kalborg)
Exhibit 10.49
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and Macko A. E. Laqueur (the "Participant"). Except as
defined herein, capitalized terms shall have the same meaning ascribed to
them under the 1996 Director Restricted Stock Award Plan of Reading &
Bates Corporation, as from time to time amended (the "Plan"). To the
extent that any provision of this Agreement conflicts with the express
terms of the Plan, it is hereby acknowledged and agreed that the terms of
the Plan shall control and, if necessary, the applicable provisions of
this Agreement shall be hereby deemed amended so as to carry out the
purpose and intent of the Plan.
1. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, and subject
to shareholder approval of the Plan, the Company hereby awards to the
Participant as of December 3, 1996 (the "Date of Grant"), a total of
9,000 shares of Common Stock, pursuant to the Plan, subject to the
conditions and restrictions set forth below and in the Plan (the
"Restricted Stock").
2. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 2
or as otherwise provided in Paragraph 6 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 33- % of the total
number of shares of Restricted Stock awarded hereunder on each of January
1, 1998, January 1, 1999 and January 1, 2000; provided, however, that
the Participant shall not be vested in shares of Restricted Stock which
would be vested as of a given date if the Participant has not remained
continuously a member of the Board of Directors of the Company from the
date of this Agreement through such date (other than by reason of
Participant's death, disability, retirement after the age of 65 or Change
of Control of the Company, as defined in Paragraph 15 hereof), in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 6 below.
3. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
4. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
5. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 7 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
6. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's service due to
death or disability, or retirement at age 65 or older;
the Restricted Period set forth in Paragraph 2 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's service with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability or
retirement described in Paragraph (a)(ii) above, then all Restricted
Stock awarded to the Participant that has not previously vested in
accordance with Paragraph 2 above shall be forfeited whereupon the
Corporate Secretary shall deliver to the Company the certificates
representing such shares and the stock power previously deposited with
the Corporate Secretary pursuant to Paragraph 5 above.
7. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 8 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
8. Beneficiary Designations. The Participant shall file with
the Corporate Secretary of the Company a designation of one or more
beneficiaries (each a "Beneficiary") to whom shares otherwise due the
Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
9. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee; or
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate.
10. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
11. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
12. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
13. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
14. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
15. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean any "Person", as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than (i) the Executive, (ii) the
Company or any of its subsidiaries or Affiliates (as that term is defined
in the Exchange Act), (iii) any Person subject, as of the date of this
Agreement or at any prior time, to the reporting or filing requirements
of Section 13(d) of the Exchange Act with respect to the securities of
the Company or any Affiliate, (iv) any trustee or other fiduciary holding
or owning securities under an employee benefit plan of the Company, (v)
any underwriter temporarily holding or owning securities of the Company,
or (vi) any corporation owned directly or indirectly by the current
stockholders of the Company in substantially the same proportion as their
then ownership of stock of the Company) becomes, after the date of this
Agreement, the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the combined voting power of
the Company's then outstanding securities.
This Agreement is executed and delivered, in duplicate, pursuant to the
Plan, the provisions of which are incorporated herein by reference.
Dated: , 1997
ATTEST: READING & BATES CORPORATION
___________________________ By:
__________________________________
Secretary
Its: Chairman and Chief
Executive Officer
___________________________
(Signature, Macko A. E. Laqueur)
Exhibit 10.50
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and J.W. McLean (the "Participant"). Except as defined
herein, capitalized terms shall have the same meaning ascribed to them
under the 1996 Director Restricted Stock Award Plan of Reading & Bates
Corporation, as from time to time amended (the "Plan"). To the extent
that any provision of this Agreement conflicts with the express terms of
the Plan, it is hereby acknowledged and agreed that the terms of the Plan
shall control and, if necessary, the applicable provisions of this
Agreement shall be hereby deemed amended so as to carry out the purpose
and intent of the Plan.
1. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, and subject
to shareholder approval of the Plan, the Company hereby awards to the
Participant as of December 3, 1996 (the "Date of Grant"), a total of
9,000 shares of Common Stock, pursuant to the Plan, subject to the
conditions and restrictions set forth below and in the Plan (the
"Restricted Stock").
2. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 2
or as otherwise provided in Paragraph 6 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 33- % of the total
number of shares of Restricted Stock awarded hereunder on each of January
1, 1998, January 1, 1999 and January 1, 2000; provided, however, that
the Participant shall not be vested in shares of Restricted Stock which
would be vested as of a given date if the Participant has not remained
continuously a member of the Board of Directors of the Company from the
date of this Agreement through such date (other than by reason of
Participant's death, disability, retirement after the age of 65 or Change
of Control of the Company, as defined in Paragraph 15 hereof), in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 6 below.
3. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
4. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
5. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 7 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
6. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's service due to
death or disability, or retirement at age 65 or older;
the Restricted Period set forth in Paragraph 2 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's service with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability or
retirement described in Paragraph (a)(ii) above, then all Restricted
Stock awarded to the Participant that has not previously vested in
accordance with Paragraph 2 above shall be forfeited whereupon the
Corporate Secretary shall deliver to the Company the certificates
representing such shares and the stock power previously deposited with
the Corporate Secretary pursuant to Paragraph 5 above.
7. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 8 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
8. Beneficiary Designations. The Participant shall file with
the Corporate Secretary of the Company a designation of one or more
beneficiaries (each a "Beneficiary") to whom shares otherwise due the
Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
9. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee; or
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate.
10. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
11. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
12. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
13. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
14. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
15. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean any "Person", as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than (i) the Executive, (ii) the
Company or any of its subsidiaries or Affiliates (as that term is defined
in the Exchange Act), (iii) any Person subject, as of the date of this
Agreement or at any prior time, to the reporting or filing requirements
of Section 13(d) of the Exchange Act with respect to the securities of
the Company or any Affiliate, (iv) any trustee or other fiduciary holding
or owning securities under an employee benefit plan of the Company, (v)
any underwriter temporarily holding or owning securities of the Company,
or (vi) any corporation owned directly or indirectly by the current
stockholders of the Company in substantially the same proportion as their
then ownership of stock of the Company) becomes, after the date of this
Agreement, the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the combined voting power of
the Company's then outstanding securities.
This Agreement is executed and delivered, in duplicate, pursuant to the
Plan, the provisions of which are incorporated herein by reference.
Dated: , 1997
ATTEST: READING & BATES CORPORATION
___________________________ By:
__________________________________
Secretary
Its: Chairman and Chief
Executive Officer
___________________________
(Signature, J.W. McLean)
Exhibit 10.51
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and Robert L. Sandmeyer (the "Participant"). Except as
defined herein, capitalized terms shall have the same meaning ascribed to
them under the 1996 Director Restricted Stock Award Plan of Reading &
Bates Corporation, as from time to time amended (the "Plan"). To the
extent that any provision of this Agreement conflicts with the express
terms of the Plan, it is hereby acknowledged and agreed that the terms of
the Plan shall control and, if necessary, the applicable provisions of
this Agreement shall be hereby deemed amended so as to carry out the
purpose and intent of the Plan.
1. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, and subject
to shareholder approval of the Plan, the Company hereby awards to the
Participant as of December 3, 1996 (the "Date of Grant"), a total of
9,000 shares of Common Stock, pursuant to the Plan, subject to the
conditions and restrictions set forth below and in the Plan (the
"Restricted Stock").
2. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 2
or as otherwise provided in Paragraph 6 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 33- % of the total
number of shares of Restricted Stock awarded hereunder on each of January
1, 1998, January 1, 1999 and January 1, 2000; provided, however, that
the Participant shall not be vested in shares of Restricted Stock which
would be vested as of a given date if the Participant has not remained
continuously a member of the Board of Directors of the Company from the
date of this Agreement through such date (other than by reason of
Participant's death, disability, retirement after the age of 65 or Change
of Control of the Company, as defined in Paragraph 15 hereof), in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 6 below.
3. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
4. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
5. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 7 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
6. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's service due to
death or disability, or retirement at age 65 or older;
the Restricted Period set forth in Paragraph 2 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's service with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability or
retirement described in Paragraph (a)(ii) above, then all Restricted
Stock awarded to the Participant that has not previously vested in
accordance with Paragraph 2 above shall be forfeited whereupon the
Corporate Secretary shall deliver to the Company the certificates
representing such shares and the stock power previously deposited with
the Corporate Secretary pursuant to Paragraph 5 above.
7. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 8 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
8. Beneficiary Designations. The Participant shall file with
the Corporate Secretary of the Company a designation of one or more
beneficiaries (each a "Beneficiary") to whom shares otherwise due the
Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
9. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee; or
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate.
10. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
11. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
12. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
13. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
14. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
15. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean any "Person", as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than (i) the Executive, (ii) the
Company or any of its subsidiaries or Affiliates (as that term is defined
in the Exchange Act), (iii) any Person subject, as of the date of this
Agreement or at any prior time, to the reporting or filing requirements
of Section 13(d) of the Exchange Act with respect to the securities of
the Company or any Affiliate, (iv) any trustee or other fiduciary holding
or owning securities under an employee benefit plan of the Company, (v)
any underwriter temporarily holding or owning securities of the Company,
or (vi) any corporation owned directly or indirectly by the current
stockholders of the Company in substantially the same proportion as their
then ownership of stock of the Company) becomes, after the date of this
Agreement, the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the combined voting power of
the Company's then outstanding securities.
This Agreement is executed and delivered, in duplicate, pursuant to the
Plan, the provisions of which are incorporated herein by reference.
Dated: , 1997
ATTEST: READING & BATES CORPORATION
___________________________ By:
__________________________________
Secretary
Its: Chairman and Chief Executive
Officer
___________________________
(Signature, Robert L. Sandmeyer)
Exhibit 10.52
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and Paul B. Loyd, Jr. (the "Participant"). Except as
defined herein, capitalized terms shall have the same meaning ascribed to
them under the 1995 Long Term Incentive Plan of Reading & Bates
Corporation, as from time to time amended, a copy of which is attached
hereto and made a part hereof for all purposes (the "Plan"). To the
extent that any provision of this Agreement conflicts with the express
terms of the Plan, it is hereby acknowledged and agreed that the terms of
the Plan shall control and, if necessary, the applicable provisions of
this Agreement shall be hereby deemed amended so as to carry out the
purpose and intent of the Plan.
1. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
(a) "Cause" means Cause as defined in the Employment Agreement.
(b) "Change of Control" means a Change of Control as defined in
the Employment Agreement.
(c) "Disability" means Disability as defined in the Employment
Agreement.
(d) "Employment Agreement" means that certain Employment
Agreement dated as of January 1, 1992 between the Participant and the
Company, as amended from time to time.
2. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, the Company
hereby awards to the Participant as of December 3, 1996 (the "Date of
Grant"), a total of 75,000 shares of Common Stock, pursuant to the Plan,
subject to the conditions and restrictions set forth below and in the
Plan (the "Restricted Stock").
3. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 3
or as otherwise provided in Paragraph 7 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 100% of the
Restricted Stock on December 3, 1999; provided, however, that the
Participant shall not be vested in shares of Restricted Stock which would
be vested as of a given date if the Participant has not been continuously
employed by the Company and its Affiliates from the date of this
Agreement through such date, in which event all of the Participant's
rights to such Restricted Stock shall terminate without any payment of
consideration by the Company, and such Restricted Stock shall be returned
to the Company and cancelled. The Restricted Period shall be subject to
an earlier termination with respect to all or a portion of the Restricted
Stock in accordance with the provisions of Paragraph 7 below.
4. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
5. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
6. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 8 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
7. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of Grant;
or
(ii) the termination of the Participant's employment due to
(A) death or Disability, or (B) involuntary termination
by the Company and all Affiliates for any reason other
than Cause, or (C) voluntary resignation by the Partici-
pant upon the continued failure by the Company and all
Affiliates to comply with the provisions of the Employ-
ment Agreement pertaining to the Participant's compens-
ation or his position, duties or authority;
the Restricted Period set forth in Paragraph 3 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's employment with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability,
involuntary termination or resignation described in Paragraph (a)(ii)
above, then all Restricted Stock awarded to the Participant that has not
previously vested in accordance with Paragraph 3 above shall be forfeited
whereupon the Corporate Secretary shall deliver to the Company the
certificates representing such shares and the stock power previously
deposited with the Corporate Secretary pursuant to Paragraph 6 above.
8. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 9 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
9. Beneficiary Designations. The Participant shall file with
the Corporate Secretary of the Company a designation of one or more
beneficiaries (each a "Beneficiary") to whom shares otherwise due the
Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
10. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate;
or
(c) confer upon the Participant the right to continue in the
employment or service of the Company or any Affiliate, or affect the
right of the Company or any Affiliate to terminate the employment or
service of the Participant at any time or for any reason.
11. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
12. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
13. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
14. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
15. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
This Agreement is executed and delivered, in duplicate, pursuant to
the Plan, the provisions of which are incorporated herein by reference.
Dated: , 1997
ATTEST: READING & BATES CORPORATION
By:
Secretary
Its:
___________________________
__________________________________
Paul B. Loyd, Jr.
Exhibit 10.53
READING & BATES CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") between Reading &
Bates Corporation, a Delaware corporation ("Company") and Tim W. Nagle
("Optionee"),
WITNESSETH:
WHEREAS, the Compensation Committee which administers the
Reading & Bates Corporation 1995 Long-Term Incentive Plan ("Plan") has
selected the Optionee, who is the Executive Vice President, Finance and
Administration 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 3, 2006 ("Option Period") to purchase
from the Company 150,000 shares ("Option Shares") of the Company's Common
Stock, at a price equal to $28.00 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 by the Company for "Cause" [(as
defined in that certain Employment Agreement between the Company and
Optionee dated as of November 1, 1991, as amended, (the "Employment
Agreement")] or by the Executive for any reason other than (i) death or
disability or (ii) "Good Reason" or during a "Window Period" (in each
case as "Good Reason" and "Window Period" are defined in the Employment
Agreement) whether during or after the Employment Period (as defined in
the Employment Agreement), then (a) the options herein granted to him
that are not exercisable on the date of his termination of employment
shall thereupon terminate, and (b) 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 day
of , 199 , effective as of the 3rd day of December, 1996.
READING & BATES CORPORATION
By:_______________________________
OPTIONEE
___________________________________
Tim W. Nagle
Exhibit 10.54
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and Charles R. Ofner (the "Participant"). Except as
defined herein, capitalized terms shall have the same meaning ascribed to
them under the 1995 Long Term Incentive Plan of Reading & Bates
Corporation, as from time to time amended (the "Plan"). To the extent
that any provision of this Agreement conflicts with the express terms of
the Plan, it is hereby acknowledged and agreed that the terms of the Plan
shall control and, if necessary, the applicable provisions of this
Agreement shall be hereby deemed amended so as to carry out the purpose
and intent of the Plan.
1. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
(a) "Cause" means Cause as defined in the Employment Agreement.
(b) "Change of Control" means a Change of Control as defined in
the Employment Agreement.
(c) "Disability" means Disability as defined in the Employment
Agreement.
(d) "Employment Agreement" means that certain Employment
Agreement dated as of November 1, 1991 between the Participant and the
Company, as amended from time to time.
2. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, the Company
hereby awards to the Participant as of December 3, 1996 (the "Date of
Grant"), a total of 9000 shares of Common Stock, pursuant to the Plan,
subject to the conditions and restrictions set forth below and in the
Plan (the "Restricted Stock").
3. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 3
or as otherwise provided in Paragraph 7 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 100% of the total
number of shares of Restricted Stock awarded hereunder on December 3,
1999; provided, however, that the Participant shall not be vested in
shares of Restricted Stock which would be vested as of a given date if
the Participant has not been continuously employed by the Company and its
Affiliates from the date of this Agreement through such date, in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 7 below.
4. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
5. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
6. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 8 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
7. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's employment due to
(A) death or Disability, or (B) involuntary termination
by the Company and all Affiliates for any reason other
than Cause, (C) retirement at age 60 or over or (D)
voluntary resignation by the Participant upon the
continued failure by the Company and all Affiliates to
comply with the provisions of the Employment Agreement
pertaining to the Participant's compensation or his
position, duties or authority;
the Restricted Period set forth in Paragraph 3 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's employment with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability,
involuntary termination or resignation described in Paragraph (a)(ii)
above, then all Restricted Stock awarded to the Participant that has not
previously vested in accordance with Paragraph 3 above shall be forfeited
whereupon the Corporate Secretary shall deliver to the Company the
certificates representing such shares and the stock power previously
deposited with the Corporate Secretary pursuant to Paragraph 6 above.
8. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 9 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
9. Beneficiary Designations. The Participant shall file with
the Corporate Secretary of the Company a designation of one or more
beneficiaries (each a "Beneficiary") to whom shares otherwise due the
Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
10. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate;
or
(c) confer upon the Participant the right to continue in the
employment or service of the Company or any Affiliate, or affect the
right of the Company or any Affiliate to terminate the employment or
service of the Participant at any time or for any reason.
11. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
12. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
13. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
14. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
15. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
This Agreement is executed and delivered, in duplicate, pursuant to
the Plan, the provisions of which are incorporated herein by reference.
Dated: , 1996
ATTEST: READING & BATES CORPORATION
By:
_____________________________
Secretary
Its: Vice President, Human
Resources
_______________________________
(Signature, Charles R. Ofner)
Exhibit 10.55
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and Don L. McIntire (the "Participant"). Except as
defined herein, capitalized terms shall have the same meaning ascribed to
them under the 1995 Long Term Incentive Plan of Reading & Bates
Corporation, as from time to time amended (the "Plan"). To the extent
that any provision of this Agreement conflicts with the express terms of
the Plan, it is hereby acknowledged and agreed that the terms of the Plan
shall control and, if necessary, the applicable provisions of this
Agreement shall be hereby deemed amended so as to carry out the purpose
and intent of the Plan.
1. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
(a) "Cause" means Cause as defined in the Employment Agreement.
(b) "Change of Control" means a Change of Control as defined in
the Employment Agreement.
(c) "Disability" means Disability as defined in the Employment
Agreement.
(d) "Employment Agreement" means that certain Employment
Agreement dated as of November 1, 1991 between the Participant and the
Company, as amended from time to time.
2. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, the Company
hereby awards to the Participant as of December 3, 1996 (the "Date of
Grant"), a total of 5200 shares of Common Stock, pursuant to the Plan,
subject to the conditions and restrictions set forth below and in the
Plan (the "Restricted Stock").
3. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 3
or as otherwise provided in Paragraph 7 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 100% of the total
number of shares of Restricted Stock awarded hereunder on December 3,
1999; provided, however, that the Participant shall not be vested in
shares of Restricted Stock which would be vested as of a given date if
the Participant has not been continuously employed by the Company and its
Affiliates from the date of this Agreement through such date, in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 7 below.
4. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
5. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
6. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 8 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
7. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's employment due to
(A) death or Disability, or (B) involuntary termination
by the Company and all Affiliates for any reason other
than Cause, (C) retirement at age 60 or over or (D)
voluntary resignation by the Participant upon the
continued failure by the Company and all Affiliates to
comply with the provisions of the Employment Agreement
pertaining to the Participant's compensation or his
position, duties or authority;
the Restricted Period set forth in Paragraph 3 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's employment with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability,
involuntary termination or resignation described in Paragraph (a)(ii)
above, then all Restricted Stock awarded to the Participant that has not
previously vested in accordance with Paragraph 3 above shall be forfeited
whereupon the Corporate Secretary shall deliver to the Company the
certificates representing such shares and the stock power previously
deposited with the Corporate Secretary pursuant to Paragraph 6 above.
8. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 9 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
9. Beneficiary Designations. The Participant shall file with
the Corporate Secretary of the Company a designation of one or more
beneficiaries (each a "Beneficiary") to whom shares otherwise due the
Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
10. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate;
or
(c) confer upon the Participant the right to continue in the
employment or service of the Company or any Affiliate, or affect the
right of the Company or any Affiliate to terminate the employment or
service of the Participant at any time or for any reason.
11. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
12. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
13. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
14. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
15. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
This Agreement is executed and delivered, in duplicate, pursuant to
the Plan, the provisions of which are incorporated herein by reference.
Dated: , 1996
ATTEST: READING & BATES CORPORATION
By:
_____________________________
Secretary
Its: Exec. V.P., Finance &
Administration
_______________________________
(Signature, Don L. McIntire)
Exhibit 10.56
READING & BATES CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is made as of the date set forth on the signature
page hereof, between Reading & Bates Corporation, a Delaware corporation
(the "Company"), and Wayne K. Hillin (the "Participant"). Except as
defined herein, capitalized terms shall have the same meaning ascribed to
them under the 1995 Long Term Incentive Plan of Reading & Bates
Corporation, as from time to time amended (the "Plan"). To the extent
that any provision of this Agreement conflicts with the express terms of
the Plan, it is hereby acknowledged and agreed that the terms of the Plan
shall control and, if necessary, the applicable provisions of this
Agreement shall be hereby deemed amended so as to carry out the purpose
and intent of the Plan.
1. Definitions. As used herein, the terms set forth below shall
have the following respective meanings:
(a) "Cause" means Cause as defined in the Employment Agreement.
(b) "Change of Control" means a Change of Control as defined in
the Employment Agreement.
(c) "Disability" means Disability as defined in the Employment
Agreement.
(d) "Employment Agreement" means that certain Employment
Agreement dated as of November 1, 1991 between the Participant and the
Company, as amended from time to time.
2. Award. In order to encourage the Participant's contribution
to the successful performance of the Company, in consideration of the
covenants and promises of the Participant herein contained, the Company
hereby awards to the Participant as of December 3, 1996 (the "Date of
Grant"), a total of 9000 shares of Common Stock, pursuant to the Plan,
subject to the conditions and restrictions set forth below and in the
Plan (the "Restricted Stock").
3. Restrictions on Transfer. The shares of Restricted Stock
granted hereunder to the Participant may not be sold, assigned,
transferred, pledged or otherwise encumbered from the Date of Grant until
said shares shall have become vested in the Participant (and restrictions
terminated thereon) in accordance with the provisions of this Paragraph 3
or as otherwise provided in Paragraph 7 below. (The period of time
between the Date of Grant and the vesting of shares of Restricted Stock
shall be referred to herein as the "Restricted Period" as to those shares
of stock.) The Participant shall become vested as to 100% of the total
number of shares of Restricted Stock awarded hereunder on December 3,
1999; provided, however, that the Participant shall not be vested in
shares of Restricted Stock which would be vested as of a given date if
the Participant has not been continuously employed by the Company and its
Affiliates from the date of this Agreement through such date, in which
event all of the Participant's rights to such Restricted Stock shall
terminate without any payment of consideration by the Company, and such
Restricted Stock shall be returned to the Company and cancelled. The
Restricted Period shall be subject to an earlier termination with respect
to all or a portion of the Restricted Stock in accordance with the
provisions of Paragraph 7 below.
4. No Code Section 83(b) Election. The Participant shall not
make an election, under Code Section 83(b), to include an amount in
income in respect of this Award of Restricted Stock.
5. Sale of Restricted Stock. The Participant shall not sell
Restricted Stock except pursuant to an effective registration statement
under the Securities Act of 1933 or pursuant to an exemption from
registration under such act.
6. Escrow of Certificates. The certificates representing shares
of Restricted Stock shall be registered in the name of the Participant on
the Date of Grant and deposited, together with a stock power endorsed by
the Participant in blank, with the Corporate Secretary of the Company
during the Restricted Period. Each such certificate shall bear a legend
as provided by the Company, conspicuously referring to the terms,
conditions and restrictions described in the Plan and in this Agreement.
Subject to the provisions of Paragraph 8 below, upon termination of the
Restricted Period with respect to shares of Restricted Stock, a
certificate representing such shares shall be delivered to the
Participant as promptly as practicable following such termination.
7. Accelerated Vesting of Restricted Stock.
(a) Upon the first to occur of:
(i) a Change of Control that occurs after the Date of
Grant; or
(ii) the termination of the Participant's employment due to
(A) death or Disability, or (B) involuntary termination
by the Company and all Affiliates for any reason other
than Cause, (C) retirement at age 60 or over or (D)
voluntary resignation by the Participant upon the
continued failure by the Company and all Affiliates to
comply with the provisions of the Employment Agreement
pertaining to the Participant's compensation or his
position, duties or authority;
the Restricted Period set forth in Paragraph 3 above shall terminate and
the Participant's right to such Restricted Stock shall become vested and
nonforfeitable and all restrictions thereon will terminate.
(b) If the Participant's employment with the Company and all
Affiliates terminate prior to the occurrence of a date set forth in
Paragraph (a)(i) above for any reason other than death, disability,
involuntary termination or resignation described in Paragraph (a)(ii)
above, then all Restricted Stock awarded to the Participant that has not
previously vested in accordance with Paragraph 3 above shall be forfeited
whereupon the Corporate Secretary shall deliver to the Company the
certificates representing such shares and the stock power previously
deposited with the Corporate Secretary pursuant to Paragraph 6 above.
8. Withholding of Taxes. No certificates representing the
shares of Restricted Stock shall be delivered to the Participant by the
Company upon the expiration of the Restricted Period unless the
Participant (or Beneficiary, as defined in Paragraph 9 below) remits to
the Company the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares or unless provisions to so pay such withholding
requirements have been made to the satisfaction of the Committee.
Subject to Committee approval, the Participant (or Beneficiary) may
elect, at least thirty (30) days (or such other period as the Committee
may prescribe) prior to the vesting of such Restricted Stock, to satisfy
such withholding requirements by having the Company withhold shares
otherwise deliverable hereunder to the Participant (or Beneficiary)
having a Fair Market Value on the date such shares became vested equal to
the amount necessary to satisfy such withholding tax requirements. Any
election to have shares withheld to satisfy the withholding tax
requirements shall be made at such time and in such manner as the
Committee shall prescribe. Appropriate withholding may also be deducted
from the payment of any cash dividends with respect to such shares of
Restricted Stock during the Restricted Period, to the extent necessary to
satisfy any withholding tax requirements applicable thereto.
9. Beneficiary Designations. The Participant shall file with
the Corporate Secretary of the Company a designation of one or more
beneficiaries (each a "Beneficiary") to whom shares otherwise due the
Participant shall be distributed in the event of the death of the
Participant while in the employ of the Company or an Affiliate. The
Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporate Secretary
of the Company. If any designated Beneficiary survives the Participant
but dies before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased Beneficiary's
estate. If there is no effective Beneficiary designation on file at the
time of the Participant's death, or if the designated Beneficiary or
Beneficiaries have all predeceased such Participant, the payment of any
remaining benefits shall be made to the Participant's estate.
10. Limitation of Rights. Nothing in this Agreement or the Plan
shall be construed to:
(a) give the Participant any right to be awarded any further
restricted stock other than in the sole discretion of the Committee;
(b) give the Participant or any other person any interest in any
fund or in any specified asset or assets of the Company or any Affiliate;
or
(c) confer upon the Participant the right to continue in the
employment or service of the Company or any Affiliate, or affect the
right of the Company or any Affiliate to terminate the employment or
service of the Participant at any time or for any reason.
11. Prerequisites to Benefits. Neither the Participant, nor any
person claiming through the Participant, shall have any right or interest
in the Restricted Stock awarded hereunder, unless and until all the
terms, conditions and provisions of this Agreement and the Plan which
affect the Participant or such other person shall have been complied with
as specified herein.
12. Rights as a Stockholder. Subject to the limitations and
restrictions contained herein, the Participant (or Beneficiary) shall
have all rights as a stockholder with respect to the shares of Restricted
Stock once such shares have been registered in his name hereunder.
13. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Participant, the Company and
their respective successors and assigns (including personal
representatives, heirs and legatees).
14. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Delaware.
15. Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
This Agreement is executed and delivered, in duplicate, pursuant to
the Plan, the provisions of which are incorporated herein by reference.
Dated: , 1996
ATTEST: READING & BATES CORPORATION
By:
_____________________________
Asst. Secretary
Its: Vice President, Human
Resources
_______________________________
(Signature, Wayne K. Hillin)
EXHIBIT 10.60
SECOND AMENDMENT AGREEMENT
relating to a
$90,000,000 Facility Agreement
between
ARCADE DRILLING AS
as Borrower
CHASE INVESTMENT BANK LIMITED
as Arranger
CHASE MANHATTAN INTERNATIONAL LIMITED
as Agent
and
OTHERS
==============================================================================
Clifford Chance
London
THIS SECOND AMENDMENT AGREEMENT is made on
1996
BETWEEN
(1)ARCADE DRILLING AS (the "Borrower");
(2)CHASE INVESTMENT BANK LIMITED (the "Arranger");
(3)CHASE MANHATTAN INTERNATIONAL LIMITED (the "Agent"); and
(4)THE FINANCIAL INSTITUTIONS named in the First Schedule (the "Banks").
WHEREAS
(A)Pursuant to an agreement (the "Facility Agreement") dated 21 February 1991
between the parties hereto a $90,000,000 loan facility was made available to
the Borrower;
(B)The Borrower has requested the amendment of the Loan Agreement in certain
respects.
(C)The total principal amount outstanding under the Facility Agreement is
currently $32,500,000.
IT IS AGREED
==============================================================================
1.Interpretation
1.1Terms defined in the Facility Agreement bear the same meaning herein.
1.2 In this Agreement "BP' means BP Exploration Operating Company
Limited and "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;
(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 Facility Agreement shall (unless the
context otherwise requires) be construed as a reference to the
Facility Agreement as amended pursuant hereto or from time to
time.
3.2 Save as expressly provided 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
Facility Agreement (other than in sub-clauses 16.2(viii) and
Ox) and other than sub-clause 16.2(vii), in so far as it
relates to the Loan Agreement prior to its amendment
pursuant hereto) 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 1995; and
(ii) each of the representations set out in Clause 16.1 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 successors 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
6.1 The provisions of Clauses 26, 27 and 34 to 38 inclusive of
the Facility Agreement shall be deemed incorporated herein
mutates mutandis but as if references therein to the
Facility Agreement or the Finance Documents were references
to this Agreement.
6.2 The Borrower undertakes to deliver to the Agent, by no later
than 15 November 1996, a copy of the executed contract
between it and BP for the employment of the Paul B. Loyd Jr.
from 1 November 1996 on terms satisfactory to the Agent.
7. Counterparts
This Agreement may be ex=ted 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.
8. Changes to the Banks
The Banks and their respective shares of the Advance as at the
date hereof are as set out in the First Schedule.
9. Status of this Agreement
It is agreed that this Agreement is a Finance Document as defined
in the Facility Agreement.
IN WITNESS whereof this Agreement has been executed by the parties hereto the
day and year first before written.
THE FIRST SCHEDULE
Bank Share of the Advance
Christiania Bank OG Kreditkasse $1,805,557
The Chase Manhattan Bank $30,694,443
$32,500,000
THE SECOND SCHEDULE
Condition Precedent Documents
1. A copy certified as a true copy by a duly authorized officer of the
Borrower, of a board resolution of the Borrower approving the execution,
delivery and performance of this Agreement.
2. A copy certified a true copy by a duly authorized officer of the
Borrower of any power of attorney issued pursuant to such Board
Resolutions.
3. A legal opinion of the Agent's English and Norwegian counsel and written
confirmation from the Bank's Panamanian counsel that the security
constituted by the Mortgages is not adversely affected by the amendments
effected hereby.
4. A copy of the executed contract between the Borrower and BP Exploration
Operating Company limited ("BP") for the employment of the Henry
Goodrich from 1 October 1996 (on terms satisfactory to the Agent);
5. Evidence that any condition to the effectiveness of the contract
referred to in paragraph 4 above have been met.
THE THIRD SCHEDULE
1. Reference in this Schedule to Clauses or Schedules shall, unless the
context otherwise requires, be construed as references to clauses of the
Facility Agreement.
2. The Facility Agreement shall be amended as follows:
(A) New Definition
A new definition of "BP Contracts" shall be inserted as follows:
"BP Contracts" means:
(i) the contract between the Borrower and BP Exploration
Operating Company Limited ("BP") for the employment of
the Henry Goodrich from 1 October 1996; and
(ii) the contract between the Borrower and BP for the
employment of the Paul B. Loyd Jr. from 1 November
1996.
(B) Margin
The Applicable Margin shall reduce to 0.45 per cent. p.a.;
(C) The Repayment Schedule in the Sixth Schedule is reconfirmed as
follows:
"Repayment Date Repayment
($)
28 February 1997 5,000,000
29 August 1997 6,500,000
27 February 1998 6,500,000
31 August 1998 6,500,000
26 February 1999 4,000,000
31 August 1999 4,000,000
Total US$ 32,500,000
(D) Financial Information
(i) Clause 17.1(ii)(a) shall be amended by deleting sub-
paragraphs (2), (3), (4) and (5) thereof.
(ii) Clause 17.1(ii)(b) shall be deleted.
(E) Financial Condition
(i) Clauses 18.1(i), 18.2, 18.3 and 18.4 shall be deleted.
(ii) The existing Clause 18.1(ii) shall be deleted and replaced
with the following:
"in respect of the Arcade Group Liquid Assets shall
not be less than $10,000,000 Provided Always that if
an Instructing 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 Liquid
Assets may (notwithstanding the foregoing) be less
than $10,000,000 but shall not in any event be less
than $1,500,000 Provided Further that it is
acknowledged that the foregoing proviso shall be
deemed to be satisfied if and for so long as at least
one of the Rigs is employed pursuant to a BP Contract
and no notice of cancellation has been received by the
Borrower thereunder".
(iii) Clause 18.5 shall be deleted save for the definition of
"Reporting Date" in Clause 18.5(i).
(iv) Clause 18.6 shall be deleted save for the definition of
"Liquid Assets" in Clause 18.6(v).
(F) Covenants
(i) Clause 19.3(iii) shall be amended by adding the following
proviso:
"Provided always that this Clause shall not apply if
and for so long as (a) at least one of the Rigs is
employed pursuant to a BP Contract and no notice of
cancellation has been received by the Borrower
thereunder and (b) Liquid Assets are at least
$1,500,000".
(ii) Without prejudice to Clause 20.1(xv) of the Facility
Agreement the Agent and the Banks hereby consent to the
management of the "Henry Goodrich" by Reading and Bates.
The Borrower
ARCADE DRILLING A/S
By: /s/ A. Bakonyi
Address: Radhusg 5B
0151 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 Banks
THE CHASE MANHATTAN BANK
as Bank
By:
Address: Woolgate House
Coleman Street
London EC2P 2HD
Attention:
Telex: 8954681 CMBG (tel: 0171 726 5574)
CHRISTIANIA BANK OG KREDITKASSE
as Bank
By:
Address: PO. Box Sentrum
0107 Oslo 1
Norway
The Agent
CHASE MANHATTAN INTERNATIONAL LIMITED
By:
Address: 1 Chaseside
Bournemouth
Dorset BH7 7DB
Attention:
Telex: 8954681 CMB G
Exhibit 10.85
CREDIT AGREEMENT
among
READING AND BATES CORPORATION,
READING & BATES DRILLING CO.,
VARIOUS LENDING INSTITUTIONS,
CREDIT LYONNAIS NEW YORK BRANCH,
AS CO-AGENT
and
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as AGENT
____________________________________
Dated as of April 30, 1996
____________________________________
==============================================================================
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . 1
1.01 Commitment . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Minimum Borrowing Amounts, etc. . . . . . . . . . . . . . . . 1
1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . 2
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . 2
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.06 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . 3
1.07 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.08 Interest Periods . . . . . . . . . . . . . . . . . . . . . . 4
1.09 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . 5
1.10 Compensation . . . . . . . . . . . . . . . . . . . . . . . . 8
1.11 Change of Lending Office; Limitation
on Indemnities . . . . . . . . . . . . . . . . . . . . . . 8
1.12 Replacement of Banks . . . . . . . . . . . . . . . . . . . . 8
SECTION 2. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 9
2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 9
2.02 Letter of Credit Requests; Request for
Issuance of Letter of Credit . . . . . . . . . . . . . . . 10
2.03 Agreement to Repay Letter of Credit Payments . . . . . . . . 11
2.04 Letter of Credit Participations . . . . . . . . . . . . . . . 11
2.05 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . 13
2.06 Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3. Fees; Commitments . . . . . . . . . . . . . . . . . . . . . . 15
3.01 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.02 Voluntary Reduction of Commitments . . . . . . . . . . . . . 15
3.03 Mandatory Adjustments of Commitments, etc. . . . . . . . . . 16
SECTION 4. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . 17
4.02 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . 18
4.03 Method and Place of Payment . . . . . . . . . . . . . . . . . 19
4.04 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5. Conditions Precedent . . . . . . . . . . . . . . . . . . . . 22
5.01 Execution of Agreement . . . . . . . . . . . . . . . . . . . 22
5.02 No Default; Representations and Warranties;
No Collateral Disposition of Jack Bates . . . . . . . . . 22
5.03 Officer's Certificate . . . . . . . . . . . . . . . . . . . . 22
5.04 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . 22
5.05 Corporate Proceedings . . . . . . . . . . . . . . . . . . . . 22
5.06 Existing Indebtedness Agreements . . . . . . . . . . . . . . 23
5.07 Adverse Change, etc. . . . . . . . . . . . . . . . . . . . . 23
5.08 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.09 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.10 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.11 Security Agreement . . . . . . . . . . . . . . . . . . . . . 24
5.12 Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . 24
5.13 Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.14 Evidence of Lien, etc. . . . . . . . . . . . . . . . . . . . 25
5.15 Vessel Trust Indenture . . . . . . . . . . . . . . . . . . . 26
5.16 Rig Reports; Drilling Contracts . . . . . . . . . . . . . . . 26
5.17 Insurance Report . . . . . . . . . . . . . . . . . . . . . . 26
5.18 Collateral Assignments of Insurances . . . . . . . . . . . . 27
5.19 Earnings Concentration Account . . . . . . . . . . . . . . . 27
5.20 Refinancing; Existing Credit Agreement . . . . . . . . . . . 28
5.21 Compliance Certificate . . . . . . . . . . . . . . . . . . . 29
SECTION 6. Representations, Warranties and Agreements . . . . . . . . . 29
6.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . 29
6.02 Corporate Power and Authority . . . . . . . . . . . . . . . . 29
6.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . 30
6.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.05 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . 30
6.06 Governmental Approvals . . . . . . . . . . . . . . . . . . . 31
6.07 Investment Company Act . . . . . . . . . . . . . . . . . . . 31
6.08 Public Utility Holding Company Act . . . . . . . . . . . . . 31
6.09 True and Complete Disclosure . . . . . . . . . . . . . . . . 31
6.10 Financial Condition; Financial Statements;
Projections . . . . . . . . . . . . . . . . . . . . . . . 32
6.11 Security Interests . . . . . . . . . . . . . . . . . . . . . 33
6.12 Tax Returns and Payments . . . . . . . . . . . . . . . . . . 33
6.13 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . 33
6.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 34
6.15 Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . . 34
6.16 Pollution and Other Regulations . . . . . . . . . . . . . . . 34
6.17 Properties . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.18 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . 35
6.19 Existing Indebtedness . . . . . . . . . . . . . . . . . . . . 36
6.20 Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.21 Rig Classification . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . 36
7.01 Information Covenants . . . . . . . . . . . . . . . . . . . . 36
7.02 Books, Records and Inspections . . . . . . . . . . . . . . . 39
7.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.04 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . 39
7.05 Consolidated Corporate Franchises . . . . . . . . . . . . . . 39
7.06 Compliance with Statutes, etc. . . . . . . . . . . . . . . . 40
7.07 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.08 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . 40
7.09 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 40
7.10 Additional Rig Valuations . . . . . . . . . . . . . . . . . . 40
7.11 Further Assurances . . . . . . . . . . . . . . . . . . . . . 41
7.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8. Negative Covenants . . . . . . . . . . . . . . . . . . . . . 42
8.01 Changes in Business . . . . . . . . . . . . . . . . . . . . . 42
8.02 Consolidation, Merger or Sale of Assets, etc. . . . . . . . . 42
8.03 Liens on Collateral . . . . . . . . . . . . . . . . . . . . . 43
8.04 Dividends; Restrictions on Subsidiaries, etc. . . . . . . . . 44
8.05 Transactions with Affiliates . . . . . . . . . . . . . . . . 46
8.06 Vessel Management; Registry . . . . . . . . . . . . . . . . . 46
8.07 Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 47
8.08 Working Capital . . . . . . . . . . . . . . . . . . . . . . . 47
8.09 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 47
8.10 Collateral Maintenance . . . . . . . . . . . . . . . . . . . 47
SECTION 9. Events of Default . . . . . . . . . . . . . . . . . . . . . . 47
9.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.02 Representations, etc. . . . . . . . . . . . . . . . . . . . . 47
9.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.04 Default Under Other Agreements . . . . . . . . . . . . . . . 48
9.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . 48
9.06 Security Documents . . . . . . . . . . . . . . . . . . . . . 48
9.07 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.08 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.09 Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 49
9.11 Change of Control . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 10. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 11. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . 68
11.02 Nature of Duties . . . . . . . . . . . . . . . . . . . . . . 68
11.03 Lack of Reliance on the Agent . . . . . . . . . . . . . . . 68
11.04 Certain Rights of the Agent . . . . . . . . . . . . . . . . 69
11.05 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.06 Indemnification . . . . . . . . . . . . . . . . . . . . . . 69
11.07 The Agent in Its Individual Capacity . . . . . . . . . . . . 70
11.08 Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.09 Resignation by the Agent . . . . . . . . . . . . . . . . . . 70
SECTION 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 71
12.01 Payment of Expenses, etc. . . . . . . . . . . . . . . . . . 71
12.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . 72
12.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . 73
12.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . 74
12.06 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . 75
12.07 Calculations; Computations . . . . . . . . . . . . . . . . . 75
12.08 GOVERNING LAW; SUBMISSION TO
JURISDICTION; VENUE; WAIVER OF JURY TRIAL . . . . . . . 76
12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 77
12.10 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . 77
12.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . 77
12.12 Amendment or Waiver . . . . . . . . . . . . . . . . . . . . 77
12.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 78
12.14 Domicile of Loans . . . . . . . . . . . . . . . . . . . . . 78
12.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 78
12.16 Registry . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 13. Holdings Guaranty . . . . . . . . . . . . . . . . . . . . . 79
13.1 The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . 79
13.2 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . 80
13.3 Nature of Liability . . . . . . . . . . . . . . . . . . . . . 80
13.4 Independent Obligation . . . . . . . . . . . . . . . . . . . 80
13.5 Waiver of Notice, etc. . . . . . . . . . . . . . . . . . . . 80
13.6 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 81
13.7 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . 82
13.8 Subordination . . . . . . . . . . . . . . . . . . . . . . . . 82
13.9 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ANNEX I -- Commitments
ANNEX II -- Bank Addresses
ANNEX III -- Existing Letters of Credit
ANNEX IV -- Commitment Reduction Schedule
ANNEX V -- Subsidiaries
ANNEX VI -- Rigs and Vessels
ANNEX VII -- Existing Indebtedness
ANNEX VIII -- Existing Liens
ANNEX IX -- Approved Shipbrokers
EXHIBIT A -- Form of Notice of Borrowing
EXHIBIT B -- Form of Note
EXHIBIT C -- Form of Letter of Credit Request
EXHIBIT D -- Form of Section 4.04(b)(ii) Certificate
EXHIBIT E-1 -- Form of Opinion of Wayne Hillin, Esq.
EXHIBIT E-2 -- Form of Opinion of White & Case
EXHIBIT F -- Form of Officers' Certificate
EXHIBIT G -- Form of Security Agreement
EXHIBIT H -- Form of Subsidiary Guaranty
EXHIBIT I-1 -- Form of US Mortgage
EXHIBIT I-2 -- Form of Panamanian Mortgage
EXHIBIT I-3 -- Form of Australian Mortgage
EXHIBIT I-4 -- Form of Bahamian Mortgage
EXHIBIT J -- Form of Vessel Trust Indenture
EXHIBIT K -- Form of Collateral Assignment of Insurance
EXHIBIT L -- Form of Compliance Certificate
EXHIBIT M -- Form of Assignment and Assumption Agreement
==============================================================================
CREDIT AGREEMENT, dated as of April 30, 1996, among READING &
BATES CORPORATION ("Holdings"), a Delaware corporation, READING & BATES
DRILLING CO. (the "Borrower"), an Oklahoma corporation, the lending
institutions listed from time to time on Annex I hereto (each a "Bank" and,
collectively, the "Banks"), CREDIT LYONNAIS NEW YORK BRANCH, as co-agent (the
"Co-Agent") and CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, as agent
(the "Agent"). Unless otherwise defined herein, all capitalized terms used
herein and defined in Section 10 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set forth
herein, the Banks are willing to make available to the Borrower the credit
facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitment. Subject to and upon the terms and conditions
herein set forth, each Bank severally agrees to make a loan or loans (each a
"Loan" and, collectively, the "Loans") under the Facility to the Borrower,
which Loans (i) shall be made at any time and from time to time on and after
the Initial Borrowing Date and prior to the Maturity Date, (ii) may be repaid
and reborrowed in accordance with the provisions hereof, (iii) shall not
exceed in the aggregate for all Banks at any time outstanding, the Total
Commitment and (iv) shall not exceed for any Bank at any time outstanding that
aggregate principal amount which, when combined with the aggregate outstanding
principal amount of all other Loans of such Bank and with such Bank's Adjusted
Percentage of the Letter of Credit Outstandings (exclusive of Unpaid Drawings
which are repaid with the proceeds of, and simultaneously with the incurrence
of, the respective incurrence of Loans) at such time, equals (1) if such Bank
is a Non-Defaulting Bank, the Adjusted Commitment of such Bank at such time
and (2) if such Bank is a Defaulting Bank, the Commitment of such Bank at such
time.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal
amount of each Borrowing shall not be less than the Minimum Borrowing Amount.
More than one Borrowing may be incurred on any day, provided that at no time
shall there be outstanding more than eight Borrowings.
1.03 Notice of Borrowing. Whenever the Borrower desires to incur
Loans under the Facility, it shall give the Agent at its Notice Office, prior
to 12:00 Noon (New York time), at least three Business Days' prior written
notice (or telephonic notice promptly confirmed in writing) of each Borrowing
to be made hereunder. Each such notice (each a "Notice of Borrowing") shall
be in the form of Exhibit A and shall be irrevocable and shall specify (i) the
aggregate principal amount of the Loans to be made pursuant to such Borrowing,
(ii) the date of Borrowing (which shall be a Business Day), (iii) the Interest
Period to be initially applicable thereto and (iv) disbursement instructions.
The Agent shall promptly give each Bank written notice (or telephonic notice
promptly confirmed in writing) of each proposed Borrowing, of such Bank's pro-
portionate share thereof and of the other matters covered by the Notice of
Borrowing.
1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New
York time) on the date specified in each Notice of Borrowing, each Bank will
make available its pro rata share of each Borrowing requested to be made on
such date in the manner provided below. All such amounts shall be made avail-
able to the Agent in U.S. Dollars and immediately available funds at the
Payment Office and the Agent promptly will make available to the Borrower by
depositing to its account at the Payment Office (or in accordance with any
other disbursement instructions given by the Borrower) the aggregate of the
amounts so made available in U.S. Dollars and immediately available funds.
Unless the Agent shall have been notified by any Bank prior to the date of
Borrowing that such Bank does not intend to make available to the Agent its
portion of the Borrowing or Borrowings to be made on such date, the Agent may
assume that such Bank has made such amount available to the Agent on such date
of Borrowing, and the Agent, in reliance upon such assumption, may (in its
sole discretion and without any obligation to do so) make available to the
Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Agent by such Bank and the Agent has made available same
to the Borrower, the Agent shall be entitled to recover such corresponding
amount from such Bank. If such Bank does not pay such corresponding amount
forthwith upon the Agent's demand therefor, the Agent shall promptly (and in
any event within two Business Days from the date the Agent made such funds
available to the Borrower) notify the Borrower, and the Borrower shall (within
two Business Days of receiving such demand) pay such corresponding amount to
the Agent. The Agent shall also be entitled to recover on demand from such
Bank or the Borrower, as the case may be, interest on such corresponding
amount in respect of each day from the date such corresponding amount was made
available by the Agent to the Borrower to the date such corresponding amount
is recovered by the Agent, at a rate per annum equal to (x) if paid by such
Bank, the overnight Federal Funds Effective Rate or (y) if paid by the Bor-
rower, the then applicable rate of interest, calculated in accordance with
Section 1.07, for the respective Loans.
(b) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its commitments hereunder or to prejudice any rights
which the Borrower may have against any Bank as a result of any default by
such Bank hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal
of, and interest on, the Loans made to it by each Bank shall be evidenced by a
promissory note substantially in the form of Exhibit B with blanks
appropriately completed in conformity herewith (each a "Note" and,
collectively, the "Notes").
(b) The Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the Commitment
of such Bank on such date and be payable in the principal amount of the Loans
evidenced thereby, (iv) mature on the Maturity Date, (v) bear interest as pro-
vided in Section 1.07 in respect of the Loans evidenced thereby, (vi) be
subject to mandatory repayment as provided in Section 4.02 and (vii) be
entitled to the benefits of and subject to this Agreement and the other Credit
Documents.
(c) Each Bank will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will, prior to
any transfer of any of its Notes, endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation shall not affect the Borrower's obligations in respect of such
Loans.
1.06 Pro Rata Borrowings. All Loans under this Agreement shall
be made by the Banks pro rata on the basis of their Commitments. It is under-
stood that no Bank shall be responsible for any default by any other Bank in
its obligation to make Loans hereunder and that each Bank shall be obligated
to make the Loans provided to be made by it hereunder, regardless of the
failure of any other Bank to fulfill its commitments hereunder.
1.07 Interest. (a) The unpaid principal amount of each Loan
shall bear interest from the date of the Borrowing thereof until maturity
(whether by acceleration or otherwise) at a rate per annum which shall at all
times be the Applicable Margin plus the relevant Eurodollar Rate.
(b) All overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall bear interest at a rate per annum equal to the Eurodollar Rate
in effect from time to time plus the sum of (i) 2% and (ii) the Applicable
Margin, provided that no Loan shall bear interest after maturity (whether by
acceleration or otherwise) at a rate per annum less than 2% plus the rate of
interest applicable thereto at maturity.
(c) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) on the last day of each Interest Period applicable thereto and, in
the case of an Interest Period in excess of three months, on the date occur-
ring three months after the first day of such Interest Period and (ii) on any
prepayment (on the amount prepaid), at maturity (whether by acceleration or
otherwise) and, after such maturity, on demand.
(d) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(e) The Agent, upon determining the interest rate for any
Borrowing of Loans for any Interest Period, shall promptly notify the Borrower
and the Banks thereof.
1.08 Interest Periods. (a) At the time the Borrower gives a
Notice of Borrowing in respect of a Borrowing (in the case of the initial
Interest Period applicable thereto) or prior to 12:00 Noon (New York time) on
the third Business Day prior to the expiration of an Interest Period
applicable to a Borrowing, it shall have the right to elect by giving the
Agent written notice (or telephonic notice promptly confirmed in writing) of
the Interest Period applicable to such Borrowing, which Interest Period shall,
at the option of the Borrower, be a one, three or six month period, provided
that:
(i) the initial Interest Period for any Borrowing shall commence
on the date of such Borrowing and each Interest Period occurring
thereafter in respect of such Borrowing shall commence on the day on
which the next preceding Interest Period expires;
(ii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day
of such calendar month;
(iii) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) no Interest Period shall extend beyond the Maturity Date;
(v) no Interest Period with respect to any Borrowing of Loans
under the Facility may be elected that would extend beyond any date upon
which a Scheduled Commitment Reduction is required to be made in respect
of the Facility if, after giving effect to the selection of such
Interest Period, the aggregate principal amount of Loans under the
Facility with Interest Periods ending after such date would exceed the
aggregate principal amount of Loans of the Facility permitted to be
outstanding after such Scheduled Commitment Reduction;
(vi) no Interest Period in excess of one month may be elected at
any time when a Default or Event of Default is then in existence if the
Agent or the Required Banks have determined that such an election at
such time would be disadvantageous to the Banks; and
(vii) except as required by clause (vi) above, no more than six
Interest Periods of one month may be selected by the Borrower in any
calendar year.
(b) If upon the expiration of any Interest Period, the Borrower
has failed to elect a new Interest Period to be applicable to the respective
Borrowing as provided above, the Borrower shall be deemed to have elected a
one month Interest Period.
1.09 Increased Costs, Illegality, etc. (a) In the event that
any Bank shall have determined (which determination shall, absent manifest
error, be final and conclusive and binding upon all parties hereto) at any
time, that such Bank shall incur increased costs or reductions in the amounts
received or receivable hereunder with respect to any Loans (other than any
increased cost or reduction in the amount received or receivable resulting
from the imposition of or a change in the rate or basis of taxes or similar
charges) because of (x) any change since the date of this Agreement in any
applicable law, governmental rule, regulation, guideline or order (or in the
interpretation or administration thereof and including the introduction of any
new law or governmental rule, regulation, guideline or order) (such as, for
example, but not limited to, a change in official reserve requirements, but,
in all events, excluding reserves required under Regulation D to the extent
included in the computation of the Eurodollar Rate) and/or (y) other
circumstances occurring after the date of this Agreement and affecting the
interbank Eurodollar market, then, and in any such event, such Bank shall (x)
on such date and (y) within ten Business Days of the date on which such event
no longer exists, give notice (by telephone confirmed in writing) to the
Borrower and to the Agent of such determination (which notice the Agent shall
promptly transmit to each of the other Banks). Thereafter the Borrower shall,
subject to Section 1.11(b) (to the extent applicable), pay to such Bank, upon
written demand therefor, such additional amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Bank in its sole discretion shall determine) as shall be required to compen-
sate such Bank for such increased costs or reductions in amounts receivable
hereunder (a written notice as to the additional amounts owed to such Bank,
showing the basis for the calculation thereof, submitted to the Borrower by
such Bank shall, absent manifest error, be final and conclusive and binding
upon all parties hereto). At any time that any Loan is affected by the
circumstances described in this Section 1.09(a), the Borrower may either (i)
if the affected Loan is then being made pursuant to a Borrowing, cancel said
Borrowing by giving the Agent telephonic notice (confirmed promptly in
writing) thereof no later than the next Business Day after the Borrower was
notified by a Bank pursuant to this Section 1.09(a), or (ii) if the affected
Loan is then outstanding, upon at least three Business Days' notice to the
Agent, and with the consent of the Agent and the other Banks prepay such Loans
and cancel the Commitment of such Bank, provided that if more than one Bank is
affected at such time, then all affected Banks must be treated the same
pursuant to this Section 1.09(a).
(b) If prior to the first day of any Interest Period, the Agent
shall have determined that, by reason of any changes arising after the date of
this Agreement affecting the interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the applicable interest rate on the bases
provided within the definition of Eurodollar Rate, the Agent shall forthwith
give notice thereof to the Borrower and the Banks, whereupon, until the Agent
notifies the Borrower that the circumstances giving rise to such notice no
longer exist, (i) the Total Unutilized Commitment shall not be available to be
borrowed hereunder and (ii) the rate of interest applicable to any affected
Loans then outstanding shall be determined in accordance with the following
provisions of this Section 1.09(b). During the 30 days following the date of
any notice given to the Borrower pursuant to the preceding sentence the Agent,
the Banks and the Borrower shall negotiate in good faith in order to arrive at
a mutually acceptable alternative basis for determining the interest rate from
time to time applicable to the affected Loans (the "Substitute Basis"). If
within the 30 days following the date of any such notice to the Borrower, the
Agent, the Banks and the Borrower shall agree upon a Substitute Basis, such
Substitute Basis shall be retroactive to and effective from the first day of
the then current Interest Period until and including the last day of such
Interest Period. If after 30 days from the date of such notice, the Banks and
the Borrower shall have failed to agree upon a Substitute Basis, then each
Bank shall certify in writing to the Borrower through the Agent (such
certification to be conclusive and binding on all of the parties hereto absent
manifest error) the interest rate at which such Bank is prepared to make or
maintain its affected Loan for such Interest Period, it being understood that
such Bank's interest rate shall be at a rate per annum equal to the sum of the
Applicable Margin plus a rate which adequately and fairly reflects the cost to
such Bank of obtaining the funds necessary to maintain its affected Loan for
such Interest Period, such interest rate to be retroactive to and effective
from the first day of such Interest Period. If no Substitute Basis is
established, upon receipt of notice of the interest rates at which the Banks
are prepared to make or maintain their respective affected Loans, the Borrower
shall have the right (i) exercisable upon ten Business Days' prior notice to
any Bank through the Agent (A) to continue to borrow Loans at the interest
rates so advised by the respective Banks (as such rates may be modified, from
time to time, at the outset of each subsequent Interest Period) or (B) to
prepay in full the affected Loans of any Bank (at which time the Commitment of
such Bank shall be permanently reduced by the amount of such payment),
together with accrued interest thereon at the interest rate certified in
writing by such Bank as provided above, whereupon such affected Loans shall
become due and payable on the date specified by the Borrower in such notice or
(ii) to substitute any Bank pursuant to the provisions of, and subject to the
conditions contained in, Section 1.12.
(c) If, after the date of this Agreement, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its applicable lending
office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it
unlawful or impossible for any Bank to make, maintain or fund any Loan and/or
fulfill its Commitment and such Bank shall so notify the Agent and the
Borrower, the Agent shall forthwith give notice thereof to the other Banks.
Upon the giving of any such notice to the Agent and the Borrower, (i) the
Commitment of such Bank shall be permanently reduced by an amount equal to the
aggregate principal amount of such Bank's affected Loans, or terminated if all
of such Bank's Loans are so affected, and (ii) the Borrower shall prepay in
full the affected Loans of such Bank, together with accrued interest thereon
and, in the event of a termination of such Bank's Commitment, any other
amounts which may be due to such Bank under this Agreement, on either (i) the
last day of the then current Interest Period applicable to each such affected
Loans if such Bank may lawfully continue to maintain and fund such Loans to
such day or (ii) immediately if such Bank may not lawfully continue to
maintain and fund such Loans to such day.
(d) If any Bank shall have determined that after the date of this
Agreement, the adoption or effectiveness of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank with any request or direc-
tive regarding capital adequacy (whether or not having the force of law but
with which such Bank customarily complies even though the failure to comply
therewith would not be unlawful) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Bank's capital or assets as a consequence of its commitments or obli-
gations hereunder to a level below that which such Bank could have achieved
but for such adoption, effectiveness, change or compliance (taking into
consideration such Bank's policies with respect to capital adequacy), then
from time to time, within 15 days after demand by such Bank (with a copy to
the Agent), the Borrower shall, subject to Section 1.11(b) (to the extent
applicable), pay to such Bank such additional amount or amounts as will
compensate such Bank for such reduction. Each Bank, upon determining in good
faith that any additional amounts will be payable pursuant to this Section
1.09(c), will give prompt written notice thereof to the Borrower, which notice
shall set forth the basis of the calculation of such additional amounts,
although the failure to give any such notice shall not release or diminish any
of the Borrower's obligations to pay additional amounts pursuant to this
Section 1.09(c) upon the subsequent receipt of such notice.
0.1 Compensation. The Borrower shall compensate each Bank, 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 Bank to fund its Loans but excluding in any event the loss of
anticipated profits) which such Bank may sustain: (i) if for any reason
(other than a default by such Bank or the Agent) a Borrowing does not occur on
a date specified therefor in a Notice of Borrowing (whether or not withdrawn
by the Borrower or deemed withdrawn pursuant to Section 1.09(a)); (ii) if any
prepayment or repayment of any of its Loans (including as a result of Section
1.09 or the last paragraph of Section 9) occurs on a date which is not the
last day of an Interest Period applicable thereto; (iii) if any prepayment of
any of its Loans is not made on any date specified in a notice of prepayment
given by the Borrower; or (iv) as a consequence of any other default by the
Borrower to repay its Loans when required by the terms of this Agreement.
0.2 Change of Lending Office; Limitation on Indemnities. (a)
Each Bank agrees that, upon the occurrence of any event giving rise to the
operation of Section 1.09, 2.05 or 4.04 with respect to such Bank, it will, if
requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Bank) to designate another lending office for any Loan,
Letters of Credit or Commitments affected by such event, provided that such
designation is made on such terms that such Bank and its lending office suffer
no economic, legal or regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of any such Section.
Nothing in this Section 1.11 shall affect or postpone any of the obligations
of the Borrower or the right of any Bank provided in Section 1.09, 2.05 or
4.04.
(b) Notwithstanding anything in this Agreement to the contrary,
to the extent any notice required by Section 1.09, 2.05 or 4.04 is given by
any Bank more than 90 days after such Bank obtained, or reasonably should have
obtained, knowledge of the occurrence of the event giving rise to the
additional costs of the type described in such Section, such Bank shall not be
entitled to compensation under Section 1.09, 2.05 or 4.04 for any amounts
incurred or accruing prior to the giving of such notice to the Borrower.
0.3 Replacement of Banks. (x) Upon the occurrence of any event
giving rise to the operation of Section 1.09, 2.05 or 4.04 with respect to any
Bank which results in such Bank charging to the Borrower increased costs in
excess of those being generally charged by the other Banks or such Bank
becoming incapable of making or maintaining Loans, (y) if a Bank becomes a
Defaulting Bank and/or (z) as provided in Section 12.12(b), in the case of a
refusal by a Bank to consent to a proposed change, waiver, discharge or
termination with respect to this Agreement which has been approved by the
Required Banks, the Borrower shall have the right, if no Default or Event of
Default then exists, to replace such Bank (the "Replaced Bank") with one or
more other Eligible Transferee or Transferees reasonably acceptable to the
Agent, none of which Transferees shall constitute a Defaulting Bank at the
time of such replacement (collectively, the "Replacement Bank"), provided that
(i) at the time of any replacement pursuant to this Section 1.12, the
Replacement Bank shall enter into one or more Assignment and Assumption
Agreements pursuant to Section 12.04(b) (and with all fees payable pursuant to
said Section 12.04(b) to be paid by the Replacement Bank) pursuant to which
the Replacement Bank shall acquire all of the Commitments and outstanding
Loans of, and participations in Letters of Credit by, the Replaced Bank and,
in connection therewith, shall pay to (x) the Replaced Bank in respect thereof
an amount equal to the sum of (A) an amount equal to the principal of, and all
accrued interest on, all outstanding Loans of the Replaced Bank, (B) an amount
equal to all Unpaid Drawings that have been funded by (and not reimbursed to)
such Replaced Bank, together with all then unpaid interest with respect
thereto at such time and (C) an amount equal to all accrued, but theretofore
unpaid, Fees owing to the Replaced Bank pursuant to Section 3.01, and (y) the
Letter of Credit Issuer an amount equal to such Replaced Bank's Percentage of
any Unpaid Drawing (which at such time remains an Unpaid Drawing) to the
extent such amount was not theretofore funded by such Replaced Bank, and (ii)
all obligations of the Borrower owing to the Replaced Bank (other than those
specifically described in clause (i) above in respect of which the assignment
purchase price has been, or is concurrently being, paid) shall be paid in full
to such Replaced Bank concurrently with such replacement. Upon the execution
of the respective Assignment and Assumption Agreements, the payment of amounts
referred to in clauses (i) and (ii) above and, if so requested by the
Replacement Bank, delivery to the Replacement Bank of a Note executed by the
Borrower, the Replacement Bank shall become a Bank hereunder and the Replaced
Bank shall cease to constitute a Bank hereunder, except with respect to
indemnification provisions applicable to the Replaced Bank under this
Agreement, which shall survive as to such Replaced Bank as described herein.
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request that the Letter of
Credit Issuer at any time and from time to time on or after the Initial
Borrowing Date and prior to the Business Day immediately preceding the
Maturity Date issue, for the account of the Borrower and in support of L/C
Supportable Obligations, and subject to and upon the terms and conditions
herein set forth, the Letter of Credit Issuer agrees to issue from time to
time, irrevocable standby letters of credit denominated in U.S. Dollars or any
other currency acceptable to the Letter of Credit Issuer (subject to the
provisions of Section 2.01(b)) and in such form as may be approved by the
Letter of Credit Issuer (each such standby letter of credit, a "Letter of
Credit" and collectively, the "Letters of Credit"). Schedule III contains a
description of all letters of credit issued under the Existing Credit
Agreement prior to the Effective Date and which will remain outstanding on the
Effective Date. Each such letter of credit, including any extension thereof
(each an "Existing Letter of Credit") shall constitute a "Letter of Credit"
for all purposes of this Agreement and shall be deemed issued for purposes of
Sections 2.04 and 3.01 on the Effective Date.
(b) Whenever the Letter of Credit Issuer issues a Letter of
Credit in a currency other than U.S. Dollars, the Letter of Credit
Outstandings relating to such Letter of Credit at such time shall be
calculated on the basis of the U.S. Dollar Equivalent of the Stated Amount of
such Letter of Credit. Any U.S. Dollar Equivalent established according to
the preceding sentence shall remain in effect until such date as the
calculation of the U.S. Dollar Equivalent determined as above, if made on such
date, would yield a U.S. Dollar Equivalent which varies by greater than 10.0%
from the U.S. Dollar Equivalent then in effect, at which time the Letter of
Credit Outstandings shall be adjusted to reflect the current U.S. Dollar
Equivalent of the Stated Amount of such Letter of Credit. Subsequent
adjustments shall then be made on any date on which the current calculation of
the U.S. Dollar Equivalent would yield a result which varies by greater than
10.0% from the U.S. Dollar Equivalent then in effect.
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall
be issued, the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of,
and prior to the issuance of, the respective Letter of Credit) at such time,
would exceed either (x) $20,000,000 or (y) when added to the aggregate
principal amount of all Loans made by Non-Defaulting Banks then outstanding,
the Adjusted Total Commitment at such time; and (ii) each Letter of Credit
shall have an expiry date occurring not later than the Business Day
immediately preceding the Maturity Date.
2.02 Letter of Credit Requests; Request for Issuance of Letter of
Credit. (a) Whenever it desires that a Letter of Credit be issued, the
Borrower shall give the Letter of Credit Issuer written notice (including by
way of telecopier) in the form of Exhibit C 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 any documents that the Letter of Credit Issuer
customarily requires in connection therewith. The Letter of Credit Issuer
shall promptly notify each Bank of each Letter of Credit Request.
(b) The Letter of Credit Issuer shall, on the date of each
issuance of a Letter of Credit by it, give each Bank and the Borrower written
notice of the issuance of such Letter of Credit.
2.03 Agreement to Repay Letter of Credit Payments. (a) The
Borrower hereby agrees to reimburse the Letter of Credit Issuer, by making
payment at the Payment Office, for any payment or disbursement made by the
Letter of Credit Issuer under any Letter of Credit (each such amount so paid
or disbursed until reimbursed, an "Unpaid Drawing") immediately after, and in
any event on the date on which the Borrower is 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 the Applicable Margin plus the Eurodollar Rate
as in effect on the date of such notice of payment or disbursements (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.
(b) The Borrower's obligation under this Section 2.03 to
reimburse the Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Borrower may have or have had
against the Letter of Credit Issuer or any Bank, including, without
limitation, any defense based upon the failure of any drawing under a Letter
of Credit to conform to the terms of the Letter of Credit (other than the
failure of the Letter of Credit Issuer to determine that any documents
required to be delivered under such Letter of Credit have been delivered and
that they substantially comply on their face with the requirements of such
Letter of Credit) or any non-application or misapplication by the beneficiary
of the proceeds of such drawing; provided, however, that the Borrower shall
not be obligated to reimburse the Letter of Credit Issuer for any wrongful
payment made by the Letter of Credit Issuer under a Letter of Credit as a
result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer.
2.04 Letter of Credit Participations. (a) Immediately upon the
issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of
Credit Issuer shall be deemed to have sold and transferred to each other Bank,
and each such Bank (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,
to the extent of such Bank's Adjusted Percentage, in such Letter of Credit,
each substitute letter of credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto
(although the Letter of Credit Fee shall be payable directly to the Agent for
the account of the Banks as provided in Section 3.01(b) and the Participants
shall have no right to receive any portion of any Facing Fees) and any
security therefor or guaranty pertaining thereto. Upon any change in the
Commitments or Adjusted Percentages of the Banks pursuant to Section 12.04(b)
or upon a Bank Default, it is hereby agreed that, with respect to all out-
standing Letters of Credit and Unpaid Drawings, there shall be an automatic
adjustment to the participations pursuant to this Section 2.04 to reflect the
new Adjusted Percentages of the assigning and assignee Bank or of all Banks,
as the case may be.
(b) In determining whether to pay under any 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 Letter of Credit have been delivered and that they
substantially comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by the Letter of Credit
Issuer under or in connection with any 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 to the Participants.
(c) In the event that the Letter of Credit Issuer makes any pay-
ment under any Letter of Credit and the Borrower shall not have reimbursed
such amount in full to the Letter of Credit Issuer pursuant to Section
2.03(a), the Letter of Credit Issuer shall promptly notify each Participant of
such failure, and each Participant shall promptly and unconditionally pay to
the Letter of Credit Issuer, the amount of such Participant's Adjusted
Percentage of such payment in U.S. Dollars and in same day funds; provided,
however, that no Participant shall be obligated to pay to the Letter of Credit
Issuer its Adjusted Percentage of such unreimbursed amount for any wrongful
payment made by the Letter of Credit Issuer under a Letter of Credit as a
result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer. If the Agent so
notifies any Participant required to fund an Unpaid Drawing under a Letter of
Credit prior to 12:00 Noon (New York time) on any Business Day, such
Participant shall make available to 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 Letter of Credit Issuer, such Participant agrees to pay to
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 Letter of Credit Issuer at the overnight Federal Funds Effective
Rate. The failure of any Participant to make available to the Letter of
Credit Issuer its Adjusted Percentage of any Unpaid Drawing under any Letter
of Credit shall not relieve any other Participant of its obligation hereunder
to make available to the Letter of Credit Issuer its Adjusted Percentage of
any payment under any 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 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 a
reimbursement obligation 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 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 interest thereon accruing at the overnight
Federal Funds Effective Rate after the purchase of the respective
participations.
(e) The obligations of the Participants to make payments to the
Letter of Credit Issuer with respect to 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 Letter of Credit Issuer's gross
negligence or willful misconduct) 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 Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against a beneficiary named in a
Letter of Credit, any transferee of any Letter of Credit (or any Person
for whom any such transferee may be acting), the Agent, any Bank or
other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transaction between the Borrower
and the beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or other document presented under the
Letter of Credit proving to be forged, fraudulent, or invalid 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 Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Increased Costs. If at any time after the date of the
Agreement, the adoption or effectiveness of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by the Letter of Credit Issuer or any Bank with any request or
directive (whether or not having the force of law but with which such Bank
customarily complies even though the failure to comply therewith would not be
unlawful) by any such authority, central bank or comparable agency shall
either (i) impose, modify or make applicable any reserve, deposit, capital
adequacy or similar requirement against Letters of Credit issued by the Letter
of Credit Issuer or such Bank's participation therein, or (ii) shall impose on
the Letter of Credit Issuer or any Bank any other conditions affecting this
Agreement, any Letter of Credit or such Bank's participation therein; and the
result of any of the foregoing is to increase the cost to the Letter of Credit
Issuer or such Bank of issuing, maintaining or participating in any Letter of
Credit, or to reduce the amount of any sum received or receivable by the
Letter of Credit Issuer or such Bank hereunder (other than any increased cost
or reduction in the amount received or receivable resulting from the imposi-
tion of or a change in the rate or basis of taxes or similar charges), then,
upon demand to the Borrower by the Letter of Credit Issuer or such Bank (a
copy of which notice shall be sent by the Letter of Credit Issuer or such Bank
to the Agent), the Borrower shall, subject to Section 1.11(b) (to the extent
applicable), pay to the Letter of Credit Issuer or such Bank such additional
amount or amounts as will compensate the Letter of Credit Issuer or such Bank
for such increased cost or reduction. A certificate submitted to the Borrower
by the Letter of Credit Issuer or such Bank, as the case may be (a copy of
which certificate shall be sent by the Letter of Credit Issuer or such Bank to
the Agent), setting forth the basis for the determination of such additional
amount or amounts necessary to compensate the Letter of Credit Issuer or such
Bank as aforesaid shall be conclusive and binding on the Borrower absent
manifest error, although the failure to deliver any such certificate shall not
release or diminish any of the Borrower's obligations to pay additional
amounts pursuant to this Section 2.05 upon the subsequent receipt thereof.
2.06 Indemnities. The Borrower hereby agrees 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 respective duties in any way relating to or arising out of its
issuance of Letters of Credit; provided that the Borrower shall not be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Letter of Credit Issuer's gross negligence or willful misconduct. To the
extent the Letter of Credit Issuer is not indemnified by the Borrower, the
Participants will reimburse and indemnify the Letter of Credit Issuer, in
proportion to their respective "percentages" of the Total Commitment, 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 respective duties in
any way relating to or arising out of its issuance of Letters of Credit;
provided that no Participants shall be liable for any portion of such liabili-
ties, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Letter of Credit Issuer's
gross negligence or willful misconduct.
SECTION 3. Fees; Commitments.
3.01 Fees. (a) The Borrower agrees to pay to the Agent a
commitment commission ("Commitment Commission") pro rata for the account of
each Non-Defaulting Bank for the period from and including the Effective Date
to, but not including, the date the Total Commitment has been terminated,
which Commitment Commission shall be equal to of 1% per annum, computed at
such rate for each day, on the daily amount of such Bank's Unutilized
Commitment. Such Commitment Commission shall be due and payable in arrears on
the first day of each January, April, July and October and on the date upon
which the Total Commitment is terminated.
(b) The Borrower agrees to pay to the Agent for the account of
each Non-Defaulting Bank pro rata on the basis of their respective Adjusted
Percentages, a fee in respect of each Letter of Credit (the "Letter of Credit
Fee") computed at a rate per annum equal to 1% of the daily Stated Amount of
such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable
quarterly in arrears on the first day of each January, April, July and October
of each year and on the date after the Total Commitment is terminated and no
Letters of Credit remain outstanding.
(c) The Borrower agrees to pay to the Letter of Credit Issuer a
fee in respect of each Letter of Credit issued by it (the "Facing Fee")
computed at the rate of 1/4 of 1% per annum on the daily Stated Amount of such
Letter of Credit. Accrued Facing Fees shall be due and payable quarterly in
arrears on the first day of each January, April, July and October of each year
and on the date after the Total Commitment is terminated and no Letters of
Credit remain outstanding.
(d) The Borrower agrees to pay directly to the Letter of Credit
Issuer upon request the amount of any charges or expenses incurred by the
Letter of Credit Issuer in connection with any confirmation of Letters of
Credit by local banks requested by the Borrower or any beneficiary of any
Letter of Credit.
(e) The Borrower shall pay to the Agent (x) on the Initial
Borrowing Date for its own account and/or for distribution to the Banks such
Fees as heretofore agreed in writing by the Borrower and the Agent and (y) for
its own account such other fees as agreed to in writing between the Borrower
and the Agent, when and as due.
(f) All computations of Fees shall be made in accordance with
Section 12.07(b).
3.02 Voluntary Reduction of Commitments. Upon at least thirty
Days' prior written notice (or telephonic notice confirmed in writing) to the
Agent at its Notice Office (which notice the Agent shall promptly transmit to
each of the Banks), the Borrower shall have the right, without premium or
penalty, to terminate or partially reduce the Total Unutilized Commitment,
provided that (w) any such termination shall apply to proportionately and
permanently reduce the Commitment of each Bank, (x) no such reduction shall
reduce any Non-Defaulting Bank's Commitment to an amount that is less than the
sum of (A) the outstanding Loans of such Bank plus (B) such Bank's Adjusted
Percentage of Letter of Credit Outstandings, (y) any partial reduction pur-
suant to this Section 3.02 shall be in the amount of at least $5,000,000 and
(z) any such reduction shall reduce the remaining Scheduled Commitment
Reductions pro rata based on the then remaining amounts of Scheduled
Commitment Reductions.
3.03 Mandatory Adjustments of Commitments, etc. (a) The Total
Commitment shall terminate on the earlier of (i) the Maturity Date, (ii) May
30, 1996, unless the Effective Date has occurred on or before such date and
(iii) unless the Required Banks otherwise consent, the date on which any
Change of Control occurs.
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date set forth below, the Total
Commitment shall be permanently reduced by the amount set forth opposite such
date (each such reduction, as same may be further reduced in accordance with
Sections 3.02 and 3.03(d), a "Scheduled Commitment Reduction"):
Date Amount
May 1, 1997 $8,500,000
November 1, 1997 $8,500,000
May 1, 1998 $8,500,000
November 1, 1998 $8,500,000
May 1, 1999 $8,500,000
November 1, 1999 $8,500,000
May 1, 2000 $8,500,000
November 1, 2000 $8,500,000
Maturity Date Remaining amount
of Total
Commitment
(c) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on the Business Day following the date of
receipt thereof by the Borrower and/or any of its Subsidiaries of the Cash
Proceeds from any Collateral Disposition, the amount of Total Commitment then
in effect shall be permanently reduced by an amount equal to the Total
Commitment then in effect multiplied by the percentage set forth on Annex IV
hereto adjacent to the name of the Mortgaged Rig which is the subject of such
Collateral Disposition under the heading "Percentage Reduction". Any
reduction to the Total Commitment pursuant to this Section 3.03(c) shall
reduce the remaining Scheduled Commitment Reductions pro rata based on the
then remaining amounts of Scheduled Commitment Reductions.
(d) In the case of any Collateral Disposition involving the Jack
Bates, the Total Commitment shall terminate on the date which is ten days
thereafter and all Loans and other obligations hereunder outstanding shall
become due and payable on such date and the Borrower shall pay to the
Collateral Agent at the Payment Office an amount of cash equal to the Stated
Amount of all Letters of Credit outstanding to be held as security for the
Borrower's obligations in respect thereof.
(e) Each reduction of the Total Commitment pursuant to this
Section 3.03 shall apply proportionately to the Commitment of each Bank.
SECTION 4. Payments.
4.01 Voluntary Prepayments. The Borrower shall have the right to
prepay Loans in whole or in part, without premium or penalty, from time to
time on the following terms and conditions: (i) the Borrower shall give the
Agent at the Payment Office written notice (or telephonic notice promptly
confirmed in writing) of its intent to prepay the Loans, the amount of such
prepayment and the specific Borrowing or Borrowings pursuant to which made,
which notice shall be given by the Borrower at least five Business Days prior
to the date of such prepayment of Loans, which notice shall promptly be
transmitted by the Agent to each of the Banks; (ii) each partial prepayment of
any Borrowing shall be in an aggregate principal amount of at least $1,000,000
and, if greater in an integral multiple of $100,000, provided that no partial
prepayment of Loans made pursuant to a Borrowing shall reduce the aggregate
principal amount of the Loans outstanding pursuant to such Borrowing to an
amount less than the Minimum Borrowing Amount; (iii) Loans prepaid pursuant to
this Section 4.01 on any date other than the last day of the Interest Period
applicable thereto shall be subject to Section 1.10; and (iv) each prepayment
in respect of any Loans made pursuant to a Borrowing shall be applied pro rata
among the Banks which made such Loans, provided that at the Borrower's
election in connection with any prepayment of Loans pursuant to this Section
4.01, such prepayment shall not be applied to any Loans of a Defaulting Bank.
4.02 Mandatory Prepayments.
(A) Requirements:
(a) (i) If on any date the sum of the aggregate outstanding
principal amount of Loans made by Non-Defaulting Banks and the Letter of
Credit Outstandings exceeds the Adjusted Total Commitment as then in effect,
the Borrower shall repay on such date the principal of Loans of Non-Defaulting
Banks, in an aggregate amount equal to such excess. If, after giving effect
to the repayment of all outstanding Loans of Non-Defaulting Banks, the
aggregate amount of Letter of Credit Outstandings exceeds the Adjusted Total
Commitment then in effect, the Borrower shall pay to the Agent an amount in
cash and/or Cash Equivalents equal to such excess (up to the aggregate amount
of the Letter of Credit Outstandings at such time) and the Agent shall hold
such payment as security for the obligations of the Borrower hereunder
pursuant to a cash collateral agreement to be entered into in form and sub-
stance reasonably satisfactory to the Agent (which shall permit certain
investments in Cash Equivalents satisfactory to the Agent, until the proceeds
are applied to the secured obligations).
(ii) If on any date the aggregate outstanding principal amount of
the Loans made by a Defaulting Bank exceeds the Commitment of such Defaulting
Bank, the Borrower shall repay the principal of Loans of such Defaulting Bank
in an amount equal to such excess.
(b) Notwithstanding anything to the contrary contained elsewhere
in this Agreement, all then outstanding Loans shall be repaid in full on the
Maturity Date.
(c) On the date on which any Change of Control occurs, unless
otherwise agreed by the Required Banks, the outstanding principal amount of
the Loans, if any, shall become due and payable in full.
(d) On the date which is ten days after any Collateral
Disposition involving the Jack Bates, the outstanding principal amount of the
Loans shall become due and payable in full.
(B) Application:
With respect to each prepayment of Loans required by Section 4.02,
the Borrower may designate the specific Borrowing or Borrowings pursuant to
which made, provided that each prepayment of any Loans made by Non-Defaulting
Banks pursuant to a Borrowing shall be applied pro rata among the Non-
Defaulting Banks which made such Loans. In the absence of a designation by
the Borrower as described in the preceding sentence, the Agent shall, subject
to the above, make such designation in its sole discretion with a view, but no
obligation, to minimize breakage costs owing under Section 1.10. Notwith-
standing the foregoing provisions of this Section 4.02(B), if at any time the
mandatory prepayment of Loans pursuant to Section 4.02(A) above would result,
after giving effect to the procedures set forth above, in the Borrower
incurring breakage costs under Section 1.10 as a result of Loans being prepaid
other than on the last day of an Interest Period applicable thereto (the
"Affected Loans"), then the Borrower may in its sole discretion initially
deposit a portion (up to 100%) of the amounts that otherwise would have been
paid in respect of the Affected Loans with the Agent (which deposit must be
equal in amount to the amount of the Affected Loans not immediately prepaid)
to be held as security for the obligations of the Borrower hereunder pursuant
to a cash collateral agreement to be entered into in form and substance
reasonably satisfactory to the Agent and shall provide for investments
satisfactory to the Agent and the Borrower, with such cash collateral to be
directly applied upon the first occurrence (or occurrences) thereafter of the
last day of an Interest Period applicable to the relevant Loans (or such
earlier date or dates as shall be requested by the Borrower), to repay an
aggregate principal amount of such Loans equal to the Affected Loans not
initially prepaid pursuant to this sentence. Notwithstanding anything to the
contrary contained in the immediately preceding sentence, all amounts
deposited as cash collateral pursuant to the immediately preceding sentence
shall be held for the sole benefit of the Banks whose Loans would otherwise
have been immediately prepaid with the amounts deposited and upon the taking
of any action by the Agent or the Banks pursuant to the remedial provisions of
Section 9, any amounts held as cash collateral pursuant to this Section
4.02(B) shall, subject to the requirements of applicable law, be immediately
applied to the Loans.
1.01 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made
to the Agent for the ratable (based on its pro rata share) account of the
Banks entitled thereto, not later than 1:00 P.M. (New York time) on the date
when due and shall be made in immediately available funds and in lawful money
of the United States of America at the Payment Office, it being understood
that written notice by the Borrower to the Agent to make a payment from the
funds in the Borrower's account at the Payment Office shall constitute the
making of such payment to the extent of such funds held in such account. Any
payments under this Agreement which are made later than 1:00 P.M. (New York
time) shall be deemed to have been made on the next succeeding Business Day.
Whenever any payment to be made hereunder shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in
effect immediately prior to such extension.
1.02 Net Payments. (a) All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense. Except as provided in Section 4.04(b), all such payments will be
made free and clear of, and without deduction or withholding for, any present
or future taxes, levies, imposts, duties, fees, assessments or other charges
of whatever nature now or hereafter imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein with respect to
such payments (but excluding, except as provided in the second succeeding
sentence, any tax imposed on or measured by the net income or net profits of a
Bank pursuant to the laws of the jurisdiction in which it is organized or
managed and controlled or the jurisdiction in which the principal office or
applicable lending office of such Bank is located or any subdivision thereof
or therein) and all interest, penalties or similar liabilities with respect
thereto (all such non-excluded taxes, levies, imposts, duties, fees,
assessments or other charges being referred to collectively as "Taxes"). If
any Taxes are so levied or imposed, the Borrower agrees to pay the full amount
of such Taxes, and such additional amounts, if any, as may be necessary so
that every payment of all amounts due under this Agreement or under any Note,
after withholding or deduction for or on account of any Taxes, will not be
less than the amount provided for herein or in such Note. If any amounts are
payable by the Borrower in respect of Taxes pursuant to the preceding
sentence, the Borrower agrees to reimburse each Bank, upon the written request
of such Bank, for taxes imposed on or measured by the net income or net
profits of such Bank pursuant to the laws of the jurisdiction in which the
principal office or applicable lending office of such Bank is located or under
the laws of any political subdivision or taxing authority of any such
jurisdiction in which the principal office or applicable lending office of
such Bank is located and for any withholding of taxes as such Bank shall
determine are payable by, or withheld from, such Bank in respect of such
amounts so paid to or on behalf of such Bank pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Bank
pursuant to this sentence. The Borrower will furnish to the Agent within 45
days after the date the payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by the Borrower. The
Borrower agrees to indemnify and hold harmless each Bank, and reimburse such
Bank upon its written request, for the amount of any Taxes so levied or
imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower
and the Agent on or prior to the date of this Agreement, or in the case of a
Bank that is an assignee or transferee of an interest under this Agreement
pursuant to Section 1.12 or 12.04 (unless the respective Bank was already a
Bank hereunder immediately prior to such assignment or transfer), on the date
of such assignment or transfer to such Bank, (i) two accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001 (or suc-
cessor forms) certifying to such Bank's entitlement to a complete exemption
from United States withholding tax with respect to payments to be made under
this Agreement and under any Note, or (ii) if the Bank is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either
Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a
certificate substantially in the form of Exhibit D (any such certificate, a
"Section 4.04(b)(ii) Certificate") and (y) two accurate and complete original
signed copies of Internal Revenue Service Form W-8 (or successor form)
certifying to such Bank's entitlement to a complete exemption from United
States withholding tax with respect to payments of interest to be made under
this Agreement and under any Note. In addition, each Bank agrees that from
time to time after the date of this Agreement, when a lapse in time or change
in circumstances renders the previous certification obsolete or inaccurate in
any material respect, it will deliver to the Borrower and the Agent two new
accurate and complete original signed copies of Internal Revenue Service Form
4224 or 1001, or Form W-8 and a Section 4.04(b)(ii) Certificate, as the case
may be, and such other forms as may be required in order to confirm or
establish the entitlement of such Bank to a continued exemption from or
reduction in United States withholding tax with respect to payments under this
Agreement and any Note, or it shall immediately notify the Borrower and the
Agent of its inability to deliver any such Form or Certificate.
Notwithstanding anything to the contrary contained in Section 4.04(a), but
subject to Section 12.04(b) and the immediately succeeding sentence, (x) the
Borrower shall be entitled, to the extent it is required to do so by law, to
deduct or withhold income or similar taxes imposed by the United States (or
any political subdivision or taxing authority thereof or therein) from inter-
est, fees or other amounts payable hereunder for the account of any Bank which
is not a United States person (as such term is defined in Section 7701(a)(30)
of the Code) for U.S. Federal income tax purposes to the extent that such Bank
has not provided to the Borrower U.S. Internal Revenue Service Forms that
establish a complete exemption from such deduction or withholding and (y) the
Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross-up
payments to be made to a Bank in respect of income or similar taxes imposed by
the United States if (I) such Bank has not provided to the Borrower the
Internal Revenue Service Forms required to be provided to the Borrower
pursuant to this Section 4.04(b) or (II) in the case of a payment, other than
interest, to a Bank described in clause (ii) above, to the extent that such
Forms do not establish a complete exemption from withholding of such taxes.
Notwithstanding anything to the contrary contained in the preceding sentence
or elsewhere in this Section 4.04 and except as set forth in Section 12.04(b),
the Borrower agrees to pay additional amounts and to indemnify each Bank in
the manner set forth in Section 4.04(a) (without regard to the identity of the
jurisdiction requiring the deduction or withholding) in respect of any amounts
deducted or withheld by it as described in the immediately preceding sentence
as a result of any changes after the date of this Agreement in any applicable
law, treaty, governmental rule, regulation, guideline or order, or in the
interpretation thereof, relating to the deducting or withholding of income or
similar Taxes, provided such Bank shall provide to the Borrower and the Agent
any reasonably available applicable IRS tax form (reasonably similar in its
simplicity and lack of detail to IRS Form 1001) necessary or appropriate for
the exemption or reduction in the rate of such U.S. federal withholding tax.
(c) The provisions of this Section 4.04 shall be subject to
Section 1.11(b) (to the extent applicable).
SECTION 5. Conditions Precedent. The obligation of the Banks to
make each Loan hereunder, and the obligation of the Letter of Credit Issuer to
issue Letters of Credit hereunder, is subject, at the time of each such Credit
Event (except as otherwise hereinafter indicated), to the satisfaction of each
of the following conditions:
5.01 Execution of Agreement. On or prior to the Initial
Borrowing Date, (i) the Effective Date shall have occurred as provided in
Section 12.10 and (ii) there shall have been delivered to the Agent for the
account of each Bank the appropriate Note executed by the Borrower, and in the
amount, maturity and as otherwise provided herein.
5.02 No Default; Representations and Warranties; No Collateral
Disposition of Jack Bates. At the time of each Credit Event and also after
giving effect thereto, (i) there shall exist no Default or Event of Default,
(ii) all representations and warranties contained herein or in the other
Credit Documents in effect at such time shall be 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 of such Credit Event (except to
the extent that such representations and warranties expressly relate to an
earlier date, in which case they shall be true and correct in all material
respects as of such earlier date) and (iii) there shall not have occurred any
Collateral Disposition with respect to the US Rig Jack Bates.
5.03 Officer's Certificate. On the Initial Borrowing Date, the
Agent shall have received a certificate dated such date signed by the
President or any Vice President of the Borrower stating that there has been no
Material Adverse Change in the financial condition of the Borrower or of
Holdings and its Subsidiaries taken as a whole since the date of the last
audited financial statements provided by Holdings or the Borrower to the Agent
and that all of the applicable conditions set forth in Sections 5.02, 5.08(a)
and 5.20 exist as of such date.
5.04 Opinions of Counsel. On the Initial Borrowing Date, the
Agent shall have received opinions, addressed to the Agent and each of the
Banks and dated the Initial Borrowing Date, from (i) Wayne Hillin, Esq.,
General Counsel to the Credit Parties, which opinion shall cover the matters
contained in Exhibit E-1, (ii) White & Case, special counsel to the Agent,
which opinion shall cover the matters contained in Exhibit E-2 and (iii) from
local counsel satisfactory to the Agent as the Agent may request, which opin-
ions shall cover the perfection of the security interests granted pursuant to
the Security Documents and such other matters incident to the transactions
contemplated herein as the Agent may reasonably request and shall be in form
and substance satisfactory to the Agent.
5.05 Corporate Proceedings. (a) On the Initial Borrowing Date,
the Agent shall have received from each Credit Party a certificate, dated the
Initial Borrowing Date, signed by the President or any Vice-President or other
appropriate representative of such Credit Party in the form of Exhibit F with
appropriate insertions and deletions, together with copies of the certificate
of formation, the by-laws, or other organizational documents of such Credit
Party and the resolutions, or such other administrative approval, of such
Credit Party referred to in such certificate and all of the foregoing
(including each such certificate of formation, certificate of incorporation
and by-laws) shall be reasonably satisfactory to the Agent.
(b) On the Initial Borrowing Date, all corporate and legal pro-
ceedings and all instruments and agreements in connection with the trans-
actions contemplated by this Agreement and the other Credit Documents shall be
reasonably satisfactory in form and substance to the Agent, and the Agent
shall have received all information and copies of all certificates, documents
and papers, including good standing certificates and any other records of
corporate proceedings and governmental approvals, if any, which the Agent may
have reasonably requested in connection therewith, such documents and papers,
where appropriate, to be certified by proper corporate or governmental
authorities.
5.06 Existing Indebtedness Agreements. On or prior to the
Initial Borrowing Date, there shall have been delivered to the Banks copies,
certified as true and correct by an appropriate officer of the Borrower or
Holdings, as the case may be, of all agreements evidencing or relating to
Existing Indebtedness (the "Existing Indebtedness Agreements"), all of which
shall be in form and substance satisfactory to the Agent.
5.07 Adverse Change, etc. From December 31, 1995 to the Initial
Borrowing Date, nothing shall have occurred (and neither the Banks nor the
Agent shall have become aware of any facts or conditions not previously known)
which the Agent or the Required Banks shall determine (a) has, or is reason-
ably likely to have, a material adverse effect on the rights or remedies of
the Banks or the Agent, or on the ability of Holdings, the Borrower or any
Subsidiary Guarantor to perform their respective obligations to them, or (b)
has, or is reasonably likely to have, a Material Adverse Effect.
5.08 Litigation. On the Initial Borrowing Date, there shall be
no actions, suits or proceedings pending or threatened (a) with respect to
this Agreement or any other Credit Document or the transactions contemplated
hereby or thereby or (b) which the Agent or the Required Banks shall determine
is reasonably likely to (i) have a Material Adverse Effect or (ii) have a
material adverse effect on the rights or remedies of the Banks hereunder or
under any other Credit Document or on the ability of Holdings, the Borrower or
or any Subsidiary Guarantor to perform their respective obligations to the
Banks hereunder or under any other Credit Document.
5.09 Approvals. On the Initial Borrowing Date, all material
necessary governmental and third party approvals in connection with the
transactions contemplated by the Credit Documents and otherwise referred to
herein or therein shall have been obtained and remain in effect, and all
applicable waiting periods shall have expired without any action being taken
by any competent authority which restrains or prevents such transactions or
imposes, in the reasonable judgment of the Required Banks or the Agent,
materially adverse conditions upon the consummation of such transactions.
5.10 Fees. On the Initial Borrowing Date, the Borrower shall
have paid to the Agent and the Banks all Fees and expenses agreed upon by such
parties to be paid on or prior to such date.
5.11 Security Agreement. On the Initial Borrowing Date each
Credit Party shall have duly authorized, executed and delivered a Security
Agreement in the form of Exhibit G, together with such changes (or with such
other documents) as may be requested by the Collateral Agent in connection
with local law (as modified, amended or supplemented from time to time in
accordance with the terms thereof and hereof, the "Security Agreement")
covering all of the Security Agreement Collateral, together with:
(i) executed copies of Financing Statements (Form UCC-1 and/or
UCC-3) or appropriate local equivalent in appropriate form for filing
under the UCC or appropriate local equivalent of each jurisdiction as
may be necessary to perfect the security interests purported to be
created by the Security Agreement;
(ii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, each of a recent date listing all
effective financing statements that name such Credit Party or a division
or operating unit of any such Person, as debtor and that are filed in
the jurisdictions referred to in clause (i) above, together with copies
of such financing statements (none of which shall cover the Collateral
except (x) those with respect to which appropriate termination
statements executed by the secured lender thereunder have been delivered
to the Collateral Agent and (y) to the extent evidencing Permitted
Liens); and
(iii) evidence that all other recordings and filings of, or with
respect to, the Security Agreement, and all other actions, as may be
necessary or, in the opinion of the Collateral Agent, desirable to
perfect the security interests intended to be created by the Security
Agreement have been completed (it being understood and agreed that UCC
financing statements and termination statements shall be filed in the
appropriate governmental office within three Business Days after the
Initial Borrowing Date);
and the Security Agreement and such other documents shall be in full force and
effect.
5.12 Subsidiary Guaranty. On the Initial Borrowing Date, each
Subsidiary of the Borrower which owns a Mortgaged Rig (each a "Subsidiary
Guarantor") shall have duly authorized, executed and delivered a Subsidiary
Guaranty in the form of Exhibit H (as modified, amended or supplemented from
time to time in accordance with the terms hereof and thereof, the "Subsidiary
Guaranty"), and the Subsidiary Guaranty shall be in full force and effect.
5.13 Mortgages. (a) On the Initial Borrowing Date, each
Mortgagor shall have duly authorized, executed and delivered the following
document or documents to which it is a party (as modified, amended or
supplemented from time to time in accordance with the terms thereof and
hereof, the "Mortgages"):
(i) with respect to the US Rigs, substantially in the form of
Exhibit I-1 (as amended, modified or supplemented from time to time in
accordance with the terms hereof and thereof, the "US Mortgage");
(ii) with respect to the Panamanian Rig, substantially in the form
of Exhibit I-2 (as amended, modified or supplemented from time to time
in accordance with the terms hereof and thereof, the "Panamanian
Mortgage");
(iii) with respect to the Australian Rig, substantially in the form
of Exhibit I-3 (as amended, modified or supplemented from time to time
in accordance with the terms hereof and thereof, the "Australian
Mortgage"); and
(iv) with respect to the Bahamian Rig, substantially in the form
of Exhibit I-3 (as amended, modified or supplemented from time to time
in accordance with the terms hereof and thereof, the "Bahamian
Mortgage").
(b) On the Initial Borrowing Date, all actions necessary,
desirable or otherwise reasonably requested by the Collateral Agent to provide
the Collateral Agent with a perfected first priority security interest in all
Collateral purported to be covered by the Mortgages shall have been taken.
5.14 Evidence of Lien, etc. On the Initial Borrowing Date, the
Agent shall have received (i) United States Coast Guard certificates of
ownership showing (or confirmation updating previously reviewed certificates
and indicating) that the US Rig Jack Bates is registered in the ownership of
the Borrower, the US Rig W.D. Kent is registered in the ownership of Reading &
Bates Exploration Co. and the US Rig D.R. Stewart is registered in the
ownership of Reading & Bates Exploration Co., each subject to the Lien of the
US Mortgage and free of all other Liens of record, (ii) a certificate of the
Director General of the Public Registry of Panama showing (or confirmation
updating previously reviewed certificates and indicating) that the Panamanian
Rig Charley Graves is registered in the ownership of Reading and Bates Borneo
Drilling Co., Ltd., and subject to the Lien of the Panamanian Mortgage and
free of all other Liens of record, (iii) a certificate of the Shipping
Registration Office of Australia showing (or confirmation updating previously
reviewed certificates indicating) that the Australian Rig Ron Tappmeyer is
registered in the ownership of Reading & Bates (A) Pty. Ltd., and subject to
the Lien of the Australian Mortgage and free of all other Liens of record and
(iv) a certificate of the Bahamas Maritime Authority of The Bahamas showing
(or confirmation updating previously reviewed certificates indicating) that
the Bahamian Rig J.W. McLean is registered in the ownership of the Borrower,
and subject to the Lien of the Bahamian Mortgage and free of all other Liens
of record.
5.15 Vessel Trust Indenture. (a) On the Initial Borrowing Date,
each Mortgagor which owns a US Rig shall have acknowledged and agreed to the
terms of a trust indenture substantially in the form set forth as Exhibit J
(as amended, modified or supplemented from time to time in accordance with the
terms hereof and thereof, the "Vessel Trust Indenture").
(b) On the Initial Borrowing Date, the Trustee shall have
delivered to the Agent a declaration of United States citizenship (form 899)
satisfactory to the Agent.
5.16 Rig Reports; Drilling Contracts. (a) On or prior to the
Initial Borrowing Date, the Agent shall have received:
(i) evidence satisfactory to the Collateral Agent that each
Mortgaged Rig is classified in the highest class available for rigs of
its age and type with the American Bureau of Shipping, Inc. or another
internationally recognized classification society reasonably acceptable
to the Collateral Agent, free of any material outstanding requirements
or recommendations; and
(ii) reports from Approved Shipbrokers setting forth the Market
Value of each Mortgaged Rig, which combined value of all Mortgaged Rigs
shall not be less than $200 million.
(b) On the Initial Borrowing Date, the Agent shall have received
true and correct copies of all current and pending drilling contracts relating
to the Mortgaged Rigs.
5.17 Insurance Report. On or prior to the Initial Borrowing
Date, the Agent shall have received a detailed report from Soriero & Company,
Inc., or another firm of independent marine insurance brokers acceptable to
the Agent and the Required Banks with respect to the insurance maintained by
the Mortgagors in connection with the Mortgaged Rigs, together with a
certificate from such broker certifying that such insurances (i) are placed
with such insurance companies and/or underwriters and/or clubs, in such
amounts, against such risks, and in such form, as are normally insured against
by similarly situated insureds and as are necessary or advisable for the
protection of the Trustee or the Agent, as the case may be, as mortgagee and
(ii) conform with the requirements of the Mortgages.
5.18 Collateral Assignments of Insurances. On the Initial
Borrowing Date, each Mortgagor shall have executed and delivered a collateral
assignment of insurance substantially in the form set forth as Exhibit K (as
amended, modified or supplemented from time to time in accordance with the
terms hereof and thereof, the "Collateral Assignment of Insurance") with
respect to the insurance maintained by such Mortgagor on the Collateral,
together with:
(i) executed copies of Financing Statements (Form UCC-1 and/or
UCC-3) or appropriate local equivalent in appropriate form for filing
under the UCC or appropriate local equivalent of each jurisdiction as
may be necessary to perfect the assignments purported to be created by
each Collateral Assignment of Insurance;
(ii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, each of a recent date listing all
effective financing statements that name any Mortgagor or a division or
operating unit of such Person, as debtor and that are filed in the
jurisdictions referred to in clause (i) above, together with copies of
such financing statements (none of which shall cover the Collateral
except (x) those with respect to which appropriate termination
statements executed by the secured lender thereunder have been delivered
to the Collateral Agent and (y) to the extent evidencing Permitted
Liens);
(iii) evidence that all other recordings and filings of, or with
respect to, each Collateral Assignment of Insurance, and all other
actions, as may be necessary or, in the opinion of the Collateral Agent,
desirable to perfect the assignments intended to be created by each
Collateral Assignment of Insurance have been completed (it being
understood and agreed that UCC financing statements and termination
statements shall be filed in the appropriate governmental office within
three Business Days after the Initial Borrowing Date);
and each Collateral Assignment of Insurance shall be in full force and effect.
5.19 Earnings Concentration Account. On or before the Initial
Borrowing Date, the Borrower shall have established with Christiania Bank og
Kreditkasse, Grand Cayman Branch, on terms reasonably satisfactory to the
Agent, an account (the "Concentration Account") into which the Earnings of the
Borrower and the Subsidiary Guarantors arising from the operation of the
Mortgaged Rigs shall be deposited and maintained as cash collateral in
accordance with the Security Agreement. Funds in the Concentration Account
shall be released from time to time to the Borrower upon the Borrower's
request (which request shall be implied by any withdrawal by the Borrower of
funds from the Concentration Account), unless and until such time as the
Agent, following the occurrence of an Event of Default, requires that said
monies be held as security or applied by the Agent, for the benefit of itself
and the Banks, or as it may direct, whereafter the Borrower shall procure and
ensure that such monies are held as security or applied in accordance with the
directions of the Agent.
5.20 Refinancing; Existing Credit Agreement. (a) On or prior to
the Initial Borrowing Date or concurrently with the Credit Events then
occurring, the total commitments under the Existing Credit Agreement shall
have been terminated, and all loans and notes issued thereunder shall have
been repaid in full, together with interest thereon, all letters of credit
issued thereunder shall have been terminated or assumed hereunder and all
other amounts owing thereunder shall have been repaid in full and the Existing
Credit Agreement shall have been terminated and be of no further force or
effect except for continuing indemnification obligations and reimbursement
obligations under letters of credit assumed hereunder. The Borrower shall be
entitled to utilize this Facility to terminate the commitments, repay the
loans and terminate any letters of credit (not otherwise assumed hereunder)
under the Existing Credit Facility. The Agent shall have received evidence in
form, scope and substance reasonably satisfactory to it that the matters set
forth in this Section 5.20(a) have been satisfied on such date.
(b) On or prior to the Initial Borrowing Date or concurrently
with the Credit Events then occurring, the creditors under the Existing Credit
Agreement shall have terminated and released all security interests and Liens
on the assets owned by, Holdings, the Borrower or any of its Subsidiaries
granted in connection with the Existing Credit Agreement. The Agent shall
have received such releases of security interests in and Liens on the assets
owned by Holdings, the Borrower and its Subsidiaries as may have been reason-
ably requested by the Agent, which releases shall be in form and substance
reasonably satisfactory to the Agent. Without limiting the foregoing, there
shall have been delivered (i) proper termination statements (Form UCC-3 or the
appropriate equivalent) for filing under the UCC of each jurisdiction where a
financing statement (Form UCC-1 or the appropriate equivalent) was filed with
respect to Holdings, the Borrower or any of its Subsidiaries in connection
with the security interests created with respect to the Existing Credit
Agreement and the documentation related thereto, (ii) terminations or
assignments of any security interest in, or Lien on, any patents, trademarks,
copyrights, or similar interests of Holdings, the Borrower or any of its
Subsidiaries on which filings have been made and (iii) terminations of all
mortgages, leasehold mortgages and deeds of trust created with respect to
property of Holdings, the Borrower or any of its Subsidiaries, in each case to
secure the obligations under the Existing Credit Agreement, all of which shall
be in form and substance reasonably satisfactory to the Agent.
5.21 Compliance Certificate. On the Initial Borrowing Date, the
Borrower shall have delivered to the Agent a compliance certificate in the
form of Exhibit D to the Existing Credit Agreement indicating that the
Borrower is current with respect to its obligations under the Existing Credit
Agreement and is otherwise in compliance with all the terms and conditions
thereof.
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by Holding and the Borrower to the
Agent and each of the Banks that all of the conditions specified above which
are applicable in accordance with their express terms at the time of such
acceptance exist as of that time. All of the certificates, legal opinions and
other documents and papers referred to in this Section 5, unless otherwise
specified, shall be delivered to the Agent at its Notice Office for the
account of each of the Banks and, except for the Notes, in sufficient
counterparts or copies for each of the Banks and shall be satisfactory in form
and substance to the Agent.
SECTION 6. Representations, Warranties and Agreements. In order
to induce the Banks to enter into this Agreement and to make the Loans and
issue and/or participate in Letters of Credit provided for herein, each of
Holdings and the Borrower makes the following representations and warranties
to, and agreements with, the Banks, all of which shall survive the execution
and delivery of this Agreement and the making of the Loans (with the making of
each Credit Event thereafter being deemed to constitute a representation and
warranty that the matters specified in this Section 6 are true and correct in
all material respects on and as of the date of each such Credit Event unless
such representation and warranty expressly indicates that it is being made as
of any specific date, in which case such representations and warranties shall
be true and correct in all material respects as of such date):
6.01 Corporate Status. Each Credit Party (i) is a duly organized
and validly existing corporation in good standing under the laws of the juris-
diction of its organization and has the corporate power and authority to own
its property and assets and to transact the business in which it is engaged,
except in such case where the failure to be so duly organized and validly
existing in good standing and to have such corporate power and authority (x)
is not reasonably likely to have a Material Adverse Effect and (y) is not
reasonably likely to have a material adverse effect on the rights or remedies
of the Banks or on the ability of Holdings, the Borrower or any Subsidiary
Guarantor to perform its obligations to them hereunder and under the other
Credit Documents to which it is a party, and (ii) has duly qualified and is
authorized to do business and is in good standing in all jurisdictions where
it is required to be so qualified and where the failure to be so qualified
would have a Material Adverse Effect.
6.02 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. Each Credit Party
has duly executed and delivered each Credit Document to which it is a party
and each such Credit Document constitutes the legal, valid and binding
obligation of such Credit Party enforceable against such Person in accordance
with its terms, except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
6.03 No Violation. Neither the execution, delivery and
performance by any Credit Party of the Credit Documents to which it is a party
nor compliance with the terms and provisions thereof, nor the consummation of
the transactions contemplated therein (i) will contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality of the United States or
any State thereof, the Republic of Panama, Australia, or the Bahamas (ii) will
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or (other than pursuant to the Security
Documents) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of Holdings, the
Borrower or any of their respective Subsidiaries pursuant to the terms of, any
material indenture, mortgage, deed of trust, agreement or other instrument to
which Holdings, the Borrower or any of their respective Subsidiaries is a
party or by which it or any of its property or assets are bound or to which it
is subject or (iii) will violate any provision of the Certificate of
Incorporation or By-Laws of Holdings, the Borrower or any of their respective
Subsidiaries.
6.04 Litigation. There are no actions, suits or proceedings
pending or, to the best of Holding's or the Borrower's knowledge threatened
with respect to Holdings, the Borrower or any of their respective Subsidiaries
(i) that are likely to have a Material Adverse Effect or (ii) that are
reasonably likely to have a material adverse effect on the rights or remedies
of the Banks or on the ability of any Credit Party to perform its obligations
to them hereunder and under the other Credit Documents to which it is a party.
6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of
all Loans shall be utilized to provide for the general corporate purposes of
Holdings, the Borrower and their respective Subsidiaries.
(b) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System and no part of the proceeds of any Loan will be used to purchase or
carry any Margin Stock in violation of Regulation U or to extend credit for
the purpose of purchasing or carrying any Margin Stock.
6.06 Governmental Approvals. Except for the orders, consents,
approvals, licenses, authorizations, validations, recordings, registrations
and exemptions that have already been duly made or obtained and remain in full
force and effect, no order, consent, approval, license, authorization, or
validation of, or filing (other than the filing of Form UCC-1 Financing
Statements or the appropriate equivalents, which such filing, if this repre-
sentation is being made more than ten days after the Initial Borrowing Date,
has been made), recording or registration with, or exemption by, any foreign
or domestic governmental or public body or authority, or any subdivision
thereof, is required to authorize or is required in connection with (i) the
execution, delivery and performance of any Credit Document or (ii) the
legality, validity, binding effect or enforceability of any Credit Document.
6.07 Investment Company Act. None of Holdings, the Borrower or
any of their respective Subsidiaries is an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
6.08 Public Utility Holding Company Act. None of Holdings, the
Borrower or any of their respective Subsidiaries is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the mean-
ing of the Public Utility Holding Company Act of 1935, as amended.
6.09 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf
of Holdings, the Borrower or any of their respective Subsidiaries in writing
to the Agent or any Bank for purposes of or in connection with this Agreement
or any transaction contemplated herein is, and all other such factual informa-
tion (taken as a whole) hereafter furnished by or on behalf of any such Person
in writing to any Bank will be, true and accurate in all material respects on
the date as of which such information is dated or certified and not incomplete
by omitting to state any material fact necessary to make such information
(taken as a whole) not misleading at such time in light of the circumstances
under which such information was provided. The Projections and pro forma
financial information contained in such materials are based on good faith
estimates and assumptions believed by such Persons to be reasonable at the
time made, it being recognized by the Banks that such Projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such Projections may differ from the projected
results. There is no fact known to Holdings or the Borrower which is
reasonably likely to have a Material Adverse Effect, which has not been
disclosed herein or in such other documents, certificates and statements
furnished to the Banks for use in connection with the transactions
contemplated hereby.
6.10 Financial Condition; Financial Statements; Projections. (a)
On and as of the Initial Borrowing Date, on a pro forma basis after giving
effect to all Indebtedness incurred, and to be incurred, and Liens created,
and to be created, by Holdings and its Subsidiaries in connection therewith,
(x) the sum of the assets, at a fair valuation, of Holdings and its
Subsidiaries taken as a whole will exceed its debts, (y) Holdings and its
Subsidiaries taken as a whole will not have incurred or intended to, or
believe that they will, incur debts beyond their ability to pay such debts as
such debts mature and (z) Holdings and its Subsidiaries taken as a whole will
not have unreasonably small capital with which to conduct its business.
(b) (i) The consolidated balance sheet of Holdings and its
Subsidiaries at December 31, 1995 and the related consolidated statements of
operations and cash flows of Holdings and its Subsidiaries for the fiscal
year, as the case may be, ended as of said date, which have been examined by
Arthur Andersen LLP, independent certified public accountants, who delivered
an unqualified opinion in respect therewith, and (ii) the pro forma
consolidated balance sheet of Holdings and its Subsidiaries as of [March 31,
1996], copies of which have heretofore been furnished to each Bank, present
fairly the financial position of such entities at the dates of said statements
and the results for the period covered thereby in accordance with GAAP (or, in
the case of the pro forma balance sheet, presents a good faith estimate of the
consolidated pro forma financial condition of Holdings and its Subsidiaries at
the date thereof), except to the extent provided in the notes to said
financial statements and, in the case of the March 31, 1996 statements, sub-
ject to normal and recurring year-end audit adjustment. All such financial
statements (other than the aforesaid pro forma balance sheet) have been
prepared in accordance with generally accepted accounting principles and
practices consistently applied except to the extent provided in the notes to
said financial statements. Nothing has occurred since December 31, 1995 that
has had or is reasonably likely to have a Material Adverse Effect.
(c) Except as reflected in the financial statements and the notes
thereto described in Section 6.10(b), there were as of the Initial Borrowing
Date no liabilities or obligations with respect to Holdings, the Borrower or
any of their respective Subsidiaries of a nature (whether absolute, accrued,
contingent or otherwise and whether or not due) which, either individually or
in aggregate, would be material to Holdings and its Subsidiaries taken as a
whole, except as incurred subsequent to December 31, 1995 in the ordinary
course of business consistent with past practices.
(d) On and as of the Initial Borrowing Date, the financial
projections dated as of March 8, 1996, together with adjustments thereto,
previously delivered to the Agent and the Banks (the "Projections") have been
prepared on a basis consistent with the financial statements referred to in
Section 6.10(a) (other than as set forth or presented in such Projections),
and there are no statements or conclusions in any of the Projections which are
based upon or include information known to Holdings or the Borrower to be mis-
leading in any material respect or which fail to take into account material
information not otherwise disclosed in writing to the Agents and the Banks
regarding the matters reported therein. On the Initial Borrowing Date,
Holdings and the Borrower believed that the Projections were reasonable and
attainable.
6.11 Security Interests. On and after the Initial Borrowing
Date, each of the Security Documents creates, as security for the Obligations
purported to be secured thereby, a valid and enforceable perfected security
interest in and Lien on all of the Collateral subject thereto, to the extent
perfection of a security interest or Lien is governed by Article 8 or Article
9 of the UCC (as defined in the applicable Security Documents), the Ship
Mortgage Act (as defined in the Mortgages), or comparable provisions under the
laws of the Republic of Panama, Australia, and The Bahamas, and subject to no
other Liens (except that the Collateral may be subject to Permitted Liens), in
favor of the Collateral Agent or the Trustee, as the case may be, for the
benefit of the Banks. No filings or recordings are required in order to
perfect the security interests created under any Security Document except for
filings or recordings required in connection with any such Security Document
which shall have been made upon or prior to (or are the subject of
arrangements, satisfactory to the Agent, for filing on or promptly after the
date of) the execution and delivery thereof.
6.12 Tax Returns and Payments. Each of Holdings, the Borrower
and each of their respective Subsidiaries has filed all federal income tax
returns and all other material tax returns, domestic and foreign, required to
be filed by it and has paid all material taxes and assessments payable by it
which have become due, other than those not yet delinquent and except for
those contested in good faith. Holdings, the Borrower and each of their
respective Subsidiaries has paid, or has provided adequate reserves with
respect thereto, in accordance with GAAP, for the payment of, all federal,
state and foreign income taxes applicable for all prior fiscal years and for
the current fiscal year to the date hereof.
6.13 Compliance with ERISA. (a) Each Plan is in substantial
compliance with ERISA and the Code; no Reportable Event has occurred with
respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an
accumulated or waived funding deficiency or has applied for an extension of
any amortization period within the meaning of Section 412 of the Code; all
contributions required to be made with respect to a Plan and a Foreign Pension
Plan have been timely made; neither Holdings nor the Borrower nor any
Subsidiary of the Borrower nor any ERISA Affiliate has incurred any material
liability to or on account of a Plan pursuant to Section 409, 502(i), 502(l),
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29),
4971, 4975 or 4980 of the Code or expects to incur any liability (including
any indirect, contingent, or secondary liability) under any of the foregoing
Sections with respect to any Plan; no proceedings have been instituted to
terminate or appoint a trustee to administer any Plan; no condition exists
which presents a material risk to Holdings, the Borrower or any Subsidiary of
the Borrower or any ERISA Affiliate of incurring a liability to or on account
of a Plan pursuant to the foregoing provisions of ERISA and the Code; or
except as would reasonably be expected to have a Material Adverse Effect, no
lien imposed under the Code or ERISA on the assets of the Borrower or any
Subsidiary of the Borrower or any ERISA Affiliate exists or is reasonably
likely to arise on account of any Plan; and Holdings, the Borrower and their
respective Subsidiaries do not maintain or contribute to any employee welfare
benefit plan (as defined in Section 3(1) of ERISA) which provides benefits to
retired employees or other former employees (other than as required by Section
601 of ERISA) or any employee pension benefit plan (as defined in Section 3(2)
of ERISA) the obligations with respect to which are not properly recognized or
disclosed in such entity's consolidated financial statements and notes related
thereto.
(b) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. None of
Holdings, the Borrower or any of their respective Subsidiaries has incurred
any obligation in connection with the termination of or withdrawal from any
Foreign Pension Plan.
6.14 Subsidiaries. Annex V lists each Subsidiary of Holdings
(and the direct and indirect ownership interest of Holdings therein), in each
case existing on the Effective Date.
6.15 Patents, etc. Holdings and each of its Subsidiaries has
obtained all material patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their businesses taken as a whole as
presently conducted.
6.16 Pollution and Other Regulations. (a) Each of Holdings and
its Subsidiaries is in substantial compliance with all applicable
Environmental Laws governing its business for which failure to comply is
reasonably likely to have a Material Adverse Effect, and neither Holdings nor
any of its Subsidiaries is liable for any material penalties, fines or
forfeitures for failure to comply with any of the foregoing. All licenses,
permits, registrations or approvals required for the business of Holdings and
each of its Subsidiaries, as conducted as of the Initial Borrowing Date, under
any Environmental Law have been secured and Holdings and each of its
Subsidiaries is in substantial compliance therewith, except such licenses,
permits, registrations or approvals the failure to secure or to comply there-
with is not likely to have a Material Adverse Effect. Neither Holdings nor
any of its Subsidiaries is in any respect in noncompliance with, breach of or
default under any applicable writ, order, judgment, injunction, or decree to
which Holdings or such Subsidiary is a party or which would affect the ability
of Holdings or such Subsidiary to operate any Real Property, offshore drilling
rig or other facility and no event has occurred and is continuing which, with
the passage of time or the giving of notice or both, would constitute noncom-
pliance, breach of or default thereunder, except in each such case, such
noncompliance, breaches or defaults as are not likely to, in the aggregate,
have a Material Adverse Effect. There are as of the Initial Borrowing Date no
Environmental Claims pending or, to the best knowledge of Holdings and the
Borrower, threatened, against Holdings or any of its Subsidiaries wherein an
unfavorable decision, ruling or finding would be reasonably likely to have a
Material Adverse Effect. There are no facts, circumstances, conditions or
occurrences on any Real Property, offshore drilling rig or other facility
owned or operated by Holdings or any of its Subsidiaries that is reasonably
likely (i) to form the basis of an Environmental Claim against Holdings, any
of its Subsidiaries or any Real Property, offshore drilling rig or other
facility owned by Holdings or any of its Subsidiaries, or (ii) to cause such
Real Property, offshore drilling rig or other facility to be subject to any
restrictions on its ownership, occupancy, use or transferability under any
Environmental Law, except in each such case, such Environmental Claims or
restrictions that individually or in the aggregate are not reasonably likely
to have a Material Adverse Effect.
(b) Hazardous Materials have not at any time been (i) generated,
used, treated or stored on, or transported to or from, any Real Property,
offshore drilling rig or other facility at any time owned or operated by
Holdings or any of its Subsidiaries, or (ii) released on or from any such Real
Property, offshore drilling rig or other facility, in each case where, to the
best of Holdings' or the Borrower's knowledge, such occurrence or event
individually or in the aggregate is reasonably likely to have a Material
Adverse Effect.
6.17 Properties. (a) Holdings and each of its Subsidiaries has
title to all material properties owned by them including all property
reflected in the consolidated balance sheet of Holdings and its Subsidiaries
as referred to in Section 6.10(b), free and clear of all Liens, other than (i)
as referred to in the consolidated balance sheet or in the notes thereto or
(ii) Permitted Liens.
(b) Annex VI sets forth all the offshore drilling rigs and other
vessels owned or chartered by Holdings and each of its Subsidiaries on the
Effective Date, and identifies the registered owner, flag, official or patent
number, as the case may be, the home port, class, location and operating
status on the Effective Date, and, if chartered-in by Holdings or any of its
Subsidiaries, the name and address of the owner of such chartered-in vessel.
6.18 Labor Relations. Neither Holdings nor its Subsidiaries is
engaged in any unfair labor practice that is reasonably likely to have a
Material Adverse Effect. There is (i) no unfair labor practice complaint
pending against Holdings or any of its Subsidiaries or threatened against any
of them, before the National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against Holdings or any of its Subsidiaries or, to the
best of Holdings' or the Borrower's knowledge, threatened against any of them,
(ii) no strike, labor dispute, slowdown or stoppage pending against Holdings
or any of its Subsidiaries or, to the best of Holdings' or the Borrower's
knowledge, threatened against Holdings or any of its Subsidiaries and (iii) no
union representation petition existing with respect to the employees of
Holdings or any of its Subsidiaries and no union organizing activities are
taking place, except with respect to any matter specified in clause (i), (ii)
or (iii) above, either individually or in the aggregate, such as is not
reasonably likely to have a Material Adverse Effect.
6.19 Existing Indebtedness. Annex VII sets forth a true and
complete list of all Indebtedness of Holdings and each of its Subsidiaries on
the Effective Date and which is to remain outstanding after the Initial
Borrowing Date (excluding the Loans and the Letters of Credit, the "Existing
Indebtedness"), in each case showing the aggregate principal amount thereof
and the name of the respective borrower (or issuer) and any other entity which
directly or indirectly guaranteed such debt.
6.20 Citizenship. The Mortgagors are qualified to own and
operate the Mortgaged Rigs under the laws of the United States, the Republic
of Panama, Australia and The Bahamas, as may be applicable.
6.21 Rig Classification. Each offshore drilling rig owned or
leased by Holdings and its Subsidiaries is classified in the highest class
available for rigs of its age and type with the American Bureau of Shipping,
Inc. or another internationally recognized classification society reasonably
acceptable to the Collateral Agent, free of any material outstanding
requirements or recommendations, other than (i) with respect to any Mortgaged
Rig, as permitted under the Mortgage relating thereto and (ii) with respect to
any other rigs, such requirements or recommendations which if not cured by the
owner thereof would not materially diminish such rig's value.
SECTION 7. Affirmative Covenants. Holdings and the Borrower
covenant and agree that on the Initial Borrowing Date and thereafter for so
long as this Agreement is in effect (and until the Commitments have
terminated, no Letters of Credit or Notes are outstanding and the Loans and
Unpaid Drawings, together with interest, Fees and all other Obligations
incurred hereunder, are paid in full):
7.01 Information Covenants. Holdings and/or the Borrower will
furnish to each Bank:
(a) Annual Financial Statements. Within 90 days after the close
of each fiscal year of Holdings, the consolidated balance sheet of
Holdings and its Subsidiaries, as at the end of such fiscal year and the
related consolidated statements of operations and of cash flows for such
fiscal year, including the amount of Consolidated Capital Expenditures
made during such fiscal year, in each case setting forth comparative
consolidated figures for the preceding fiscal year, and examined by
independent certified public accountants of recognized national standing
whose opinion shall not be qualified as to the scope of audit and as to
the status of Holdings and its Subsidiaries as a going concern, together
with a certificate of such accounting firm stating that in the course of
its regular audit of the business of Holdings and the Borrower, which
audit was conducted in accordance with generally accepted auditing
standards, such accounting firm has obtained no knowledge of any Default
or Event of Default which has occurred and is continuing or, if in the
opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof.
(b) Quarterly Financial Statements. As soon as available and in
any event within 45 days after the close of each of the first three
quarterly accounting periods in each fiscal year, the consolidated
balance sheet of Holdings and its Subsidiaries, as at the end of such
quarterly period and the related consolidated statements of operations
and of cash flows for such quarterly period and for the elapsed portion
of the fiscal year ended with the last day of such quarterly period,
including the amount of Consolidated Capital Expenditures made during
such period, and in each case setting forth comparative consolidated
figures for the related period in the prior fiscal year, all of which
shall be unaudited, but certified by the chief financial officer or
controller of Holdings, subject to changes resulting from audit and
normal year-end audit adjustments.
(c) Rig Status Report. As soon as available and in any event
within 60 days after the end of the first three fiscal quarters of
Holdings and within 90 days after the end of the fourth fiscal quarter,
a report (in form satisfactory to the Agent) detailing (i)(A) the then
current location of each of the offshore drilling rigs owned or leased
by Holdings and its Subsidiaries, (B) the then current term of and
parties to any contract of any such offshore drilling rig, and (C) the
then current day rate with respect to any such contract and (ii) for the
previous fiscal quarter, the average day rates and utilization for each
such offshore drilling rig.
(d) Forecast; etc. Not more than 60 days after the commencement
of each fiscal year of Holdings, a forecast which includes an income
statement, balance sheet and cash flow statement of Holdings and its
Subsidiaries for each of the four fiscal quarters of such fiscal year,
including a breakdown of revenues, operating expenses, utilizations and
Consolidated Capital Expenditure assumptions for each offshore drilling
rig owned or leased by Holdings and its Subsidiaries.
(e) Compliance Certificate. At the time of the delivery of the
financial statements provided for in Sections 7.01(a) and (b), a
certificate of Holdings and/or the Borrower signed by its chief finan-
cial officer, controller or other Authorized Officer in the form of
Exhibit L to the effect that no Default or Event of Default exists or,
if any Default or Event of Default does exist, specifying the nature and
extent thereof, which certificate shall set forth the calculations re-
quired to establish whether Holdings and its Subsidiaries were in
compliance with the provisions of Section 8 as at the end of such fiscal
period or year, as the case may be.
(f) Notice of Default or Litigation. Promptly, and in any event
within (x) three Business Days after Holdings or the Borrower obtains
knowledge thereof, notice of the occurrence of any event which
constitutes a Default or Event of Default which notice shall specify the
nature thereof, the period of existence thereof and what action Holdings
or the Borrower proposes to take with respect thereto and (y) ten
Business Days after the Borrower obtains knowledge thereof, notice of
the commencement of or any significant development in any litigation or
governmental proceeding pending against Holdings or the Borrower or any
of their respective Subsidiaries which is likely to have a Material
Adverse Effect or is likely to have a material adverse effect on the
ability of Holdings, the Borrower or any Subsidiary Guarantor to perform
its obligations hereunder or under any other Credit Document.
(g) Auditors' Reports. Promptly upon receipt thereof and
following such time as management shall have had reasonable time to
respond thereto, a copy of each formal report or "management letter"
submitted to Holdings or the Borrower by its independent accountants in
connection with any annual, interim or special audit made by it of the
books of Holdings or the Borrower.
(h) Insurance Report. On or before each anniversary of the
Initial Borrowing Date, a report from Holdings and/or the Borrower's
independent maritime insurance broker as required by the Mortgages.
(i) Annual Rig Valuation Report. At the time of the delivery of
the financial statements provided for in Section 7.01(a), an updated rig
valuation report from an Approved Shipbroker setting forth the current
Market Value of each Mortgaged Rig.
(j) SEC Reports. Promptly upon transmission thereof, copies of
any material filings and registration with, and reports to, the SEC by
Holdings or any of its Subsidiaries and copies of all financial
statements, proxy statements, notices and reports as Holdings or any of
its Subsidiaries shall generally send to analysts or all holders of
their capital stock in their capacity as such holders (in each case to
the extent not theretofore delivered to the Banks pursuant to this
Agreement).
(k) Other Information. From time to time, such other information
or documents (financial or otherwise) as the Agent on its own behalf or
on behalf of the Required Banks may reasonably request.
7.02 Books, Records and Inspections. Holdings will, and will
cause each of its Subsidiaries to, permit, upon reasonable notice to the chief
financial officer, controller or any other Authorized Officer of Holdings or
the Borrower, officers and designated representatives of the Agent or the
Required Banks, to the extent necessary, to examine the books of account of
Holdings and any of its Subsidiaries and discuss the affairs, finances and
accounts of Holdings and of any of its Subsidiaries with, and be advised as to
the same by, its and their officers and independent accountants, all at such
reasonable times and intervals and to such reasonable extent as the Agent or
the Required Banks may desire.
7.03 Insurance. In addition to any requirements set forth in the
Mortgages, Holdings will, and will cause each of its Subsidiaries to, at all
times maintain in full force and effect insurance in such amounts with
carriers of such insurance industry ratings, covering such risks and liabil-
ities and with such deductibles or self-insured retentions as are in
accordance with normal industry practice for similarly situated insureds.
Holdings will, and will cause each of its Subsidiaries to, furnish on the
Initial Borrowing Date and annually thereafter to the Agent a summary of the
insurance carried together with certificates of insurance and other evidence
of such insurance.
7.04 Payment of Taxes. Holdings will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become
a Lien or charge upon any properties of Holdings or any of its Subsidiaries,
provided that neither Holdings nor any Subsidiary shall be required to pay any
such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with GAAP.
7.05 Consolidated Corporate Franchises. Holdings will do, and
will cause each of its Subsidiaries to do, or cause to be done, all things
necessary to preserve and keep in full force and effect its existence,
material rights and authority, unless the failure to do so is not reasonably
likely to have a Material Adverse Effect, provided that any transaction
permitted by Section 8.02 will not constitute a breach of this Section 7.05.
7.06 Compliance with Statutes, etc. Holdings will, and will
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property other than those the non-
compliance with which would not have a Material Adverse Effect or would not
have a material adverse effect on the ability of any Credit Party to perform
its obligations under any Credit Document to which it is party.
7.07 Good Repair. Except for offshore drilling rigs currently
under or scheduled to be repaired or which have been damaged or have suffered
a casualty as to which (within a reasonable period of time) Holdings and/or
the Borrower have not made a determination whether to replace or repair, or if
the determination to replace or repair has been made, as to which such
replacement or repairs are being undertaken, subject to availability of
equipment, materials and/or repair facilities, Holdings will, and will cause
each of its Subsidiaries to, keep its properties and equipment used or useful
in its business, in whomsoever's possession they may be, in good repair,
working order and condition, normal wear and tear excepted, and, subject to
Section 8.02, see that from time to time there are made in such properties and
equipment all necessary and proper repairs, renewals, replacements,
extensions, additions, betterments and improvements thereto to the extent and
in the manner useful or customary for companies in similar businesses.
7.08 End of Fiscal Years; Fiscal Quarters. Holdings will, for
financial reporting purposes, cause (i) each of its fiscal years to end on
December 31 of each year and (ii) each of its fiscal quarters to end on March
31, June 30, September 30 and December 31 of each year.
7.09 Use of Proceeds. All proceeds of the Loans shall be used as
provided in Section 6.05.
7.10 Additional Rig Valuations. At any time as may be requested
by the Agent at the request of the Required Banks (but in no event less than
annually and not more than three times in any fiscal year of Holdings) and at
the expense of the Borrower (without taking into account the right of Holdings
or the Borrower to retain a second Approved Shipbroker in accordance with the
immediately succeeding sentence), Holdings or the Borrower shall retain the
Approved Shipbroker requested by the Agent to supply a written report setting
forth the Market Value of each Mortgaged Rig at such time. Holdings or the
Borrower may retain a second Approved Shipbroker of its own choosing at such
time and at its own expense to supply a second written report setting forth
the Market Value of such Mortgaged Rigs. Promptly upon receipt thereof
Holdings and/or the Borrower shall deliver copies of each such report to the
Banks.
7.11 Further Assurances. (a) Holdings and the Borrower will,
and will cause each of their respective Subsidiaries to, at the expense of the
Borrower, make, execute, endorse, acknowledge, file and/or deliver to the
Collateral Agent or the Trustee, as the case may be, from time to time such
vouchers, invoices, schedules, confirmatory assignments, conveyances,
financing statements, transfer endorsements, powers of attorney, certificates,
real property surveys, reports and other assurances or instruments and take
such further steps relating to the Collateral as the Collateral Agent or the
Trustee, as the case may be, may reasonably require.
(b) Holdings and the Borrower agree that each action required
above by this Section 7.11 shall be completed as soon as possible, but in no
event later than 60 days after such action is requested to be taken by the
Agent or the Required Banks, provided that in no event shall Holdings or the
Borrower be required to take any action, other than using its reasonable com-
mercial efforts without any material expenditure, to obtain consents or other
actions from third parties with respect to its compliance with this Section
7.11.
7.12 ERISA. As soon as possible and, in any event, within 10
days after Holdings, the Borrower or any of their respective Subsidiaries or
any ERISA Affiliate knows or has reason to know of the occurrence of any of
the following, Holdings or the Borrower will deliver to each of the Banks a
certificate of the Chief Financial Officer of Holdings or the Borrower setting
forth details as to such occurrence and the action, if any, that Holdings, the
Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to
take, together with any notices required or proposed to be given to or filed
with or by Holdings, the Borrower, such Subsidiary, the ERISA Affiliate, the
PBGC, or a Plan participant or the Plan administrator with respect thereto:
that a Reportable Event has occurred; that an accumulated funding deficiency
has been incurred or an application may be or has been made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code or Section 302 of ERISA with
respect to a Plan; that a contribution required to be made to a Plan or
Foreign Pension Plan has not been timely made; that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that a Plan has an Unfunded Current Liability giving rise to a lien
under ERISA or the Code; that proceedings may be or have been instituted to
terminate or appoint a trustee to administer a Plan, that a proceeding has
been instituted pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan; that Holdings, the Borrower, any of their respective
Subsidiaries or any ERISA Affiliate will or may incur any liability (including
any indirect contingent or secondary liability) to or on account of the
termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069,
4201, 4204 or 4212 of ERISA or with respect to a Plan under Section
401(a)(29), 4971 or 4975 of the Code or Section 409 or 502(i) or 502(l) of
ERISA; or that Holdings, the Borrower or any Subsidiary may incur any material
unrecognized liability pursuant to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) that provides benefits to retired employees
or other former employees (other than as required by Section 601 of ERISA) or
any employee pension benefit plan (as defined in Section 3(2) of ERISA). Upon
request, Holdings or the Borrower will deliver to each of the Banks a complete
copy of the annual report (Form 5500) of each Plan (including to the extent
required, the related financial and actuarial statements and opinions and
other supporting statements, certifications, schedules and information)
required to be filed with the Internal Revenue Service. In addition to any
certificates or notices delivered to the Banks pursuant to the first sentence
hereof, copies of annual reports, and any material notices received by
Holdings, the Borrower or any of their respective Subsidiaries or any ERISA
Affiliate from any governmental agency with respect to any Plan shall be
delivered to the Banks no later than 10 days after the date such report has
been filed with the Internal Revenue Service or such notice has been received
by Holdings, the Borrower, the Subsidiary or the ERISA Affiliate, as
applicable.
SECTION 8. Negative Covenants. Holdings and the Borrower hereby
covenant and agree that as of the Initial Borrowing Date and thereafter for so
long as this Agreement is in effect and until the Commitments have terminated,
no Letters of Credit or Notes are outstanding and the Loans and Unpaid
Drawings, together with interest, Fees and all other Obligations incurred
hereunder, are paid in full:
8.01 Changes in Business. Holdings and the Borrower will not,
and will not permit any of their respective Subsidiaries to, materially alter
the character of the business of Holdings and its Subsidiaries taken as a
whole from that conducted at the Initial Borrowing Date (including any
material expansion outside of the offshore contract drilling and production
business), provided that this Section 8.01 shall not restrict the engaging in
business ancillary to the offshore contract drilling and production business.
8.02 Consolidation, Merger or Sale of Assets, etc. Holdings and
the Borrower will not, and will not permit any of the Subsidiary Guarantors
to, wind up, liquidate or dissolve its affairs, or enter into any transaction
of merger or consolidation, sell or otherwise dispose of all or substantially
all of its property or assets or of any Collateral or agree to do any of the
foregoing at any future time, except that the following shall be permitted:
(a) (i) any Subsidiary of Holdings (other than the Borrower) may
be merged or consolidated with or into, or be liquidated into, the
Borrower (so long as the Borrower is the surviving corporation) or any
Guarantor (so long as such Guarantor is the surviving corporation) and
(ii) all or any part of the business, properties and assets of Holdings
or any of its Subsidiaries (other than the Borrower) may be conveyed,
leased, sold or transferred to the Borrower or any Guarantor or any
Subsidiary of the Borrower or any Guarantors, provided that if any
Collateral is transferred pursuant to this Section 8.02(a), Holdings
and/or the Borrower shall provide the Agent with ten Business Days'
notice prior to such transfer, and the Borrower or such Subsidiary, as
the case may be, owning the Collateral after such transfer shall take
all action reasonably requested by the Collateral Agent and/or the
Trustee in respect of the continued priority and perfection of such
Collateral;
(b) Holdings may liquidate or dissolve or consolidate or merge
into another entity, provided (i) Holdings is the successor or survivor
in respect of such merger, and after giving effect thereto Holdings will
be in full compliance with the terms of this Agreement and (ii) Standard
& Poor's shall have affirmed in writing that such transaction will not
impair Holdings' implied senior debt rating as such debt rating is in
effect immediately prior to the announcement or consummation of such
liquidation, dissolution, consolidation or merger;
(c) other sales or dispositions of assets provided that (x) the
Total Commitment shall be reduced as required by Section 3.03(c) in the
case of the sale or disposition of assets constituting Collateral and
(y) each such sale or disposition shall be in an amount at least equal
to the fair market value thereof (as determined by the Board of
Directors of the Borrower in the case of sales in excess of $20,000,000)
and for proceeds consisting solely of not less than 100% cash in the
case of assets constituting Collateral and (z) no such sale or
disposition shall constitute the sale or disposition of all or
substantially all of the combined assets of Holdings and its
Subsidiaries taken together; and
(d) other sales or dispositions of assets in each case to the
extent the Required Banks have consented in writing thereto and subject
to such conditions as may be set forth in such consent.
To the extent any Collateral is sold or otherwise disposed of (to
any Person other than Holdings and its Subsidiaries) as permitted by this
Section 8.02, such Collateral shall be sold or otherwise disposed of free and
clear of the Liens created by the Security Documents, and the Agent, the
Collateral Agent and the Trustee shall be authorized to take any actions
deemed appropriate in order to effect the foregoing.
8.03 Liens on Collateral. Holdings and the Borrowers will not,
and will not permit any of their respective Subsidiaries to, create, incur,
assume or suffer to exist any Lien upon or with respect to any Collateral,
whether now owned or hereafter acquired, or sell any such Collateral subject
to an understanding or agreement, contingent or otherwise, to repurchase such
Collateral (including sales of accounts receivable or notes with recourse to
Holdings or any of its Subsidiaries) or assign any right to receive income, or
file or permit the filing of any financing statement under the UCC or any
other similar notice of Lien on any Collateral under any similar recording or
notice statute, except:
(a) Liens for taxes not yet due or Liens for taxes being
contested in good faith and by appropriate proceedings for which
adequate reserves with respect thereto, in accordance with GAAP, have
been established;
(b) Liens imposed by law which were incurred in the ordinary
course of business, such as carriers', warehousemen's and mechanics'
Liens, statutory landlord's Liens, maritime Liens and other similar
Liens arising in the ordinary course of business, and (x) which do not
in the aggregate materially detract from the value of such Collateral or
materially impair the use thereof in the operation of the business of
Holdings, the Borrower or any of their respective Subsidiaries or (y)
which are being contested in good faith by appropriate proceedings
(including the providing of bail), which proceedings have the effect of
preventing the forfeiture or sale of the Collateral subject to such Lien
or procuring the release of the Collateral subject to such Lien from
arrest or detention;
(c) Liens created by or pursuant to this Agreement or the other
Credit Documents;
(d) Liens permitted under the express terms of the Mortgages or
other Security Documents.
(e) Liens existing on the Initial Borrowing Date and listed on
Annex VIII, without giving effect to any subsequent extensions or
renewals thereof;
(f) Liens arising from judgments, decrees or attachments (or
securing of appeal bonds with respect thereto) to the extent not covered
by insurance, so long as the obligations in connection therewith do not
exceed $5,000,000 and otherwise in circumstances not constituting an
Event of Default under Section 9.08;
(g) any interest or title of a lessor or charterer under any
lease or charter (i) in existence on the Initial Borrowing Date, (ii)
among Holdings and/or any of its Subsidiaries or (iii) otherwise
permitted by this Agreement;
(h) immaterial Liens on any Real Property of Holdings or any of
its Subsidiaries.
8.04 Dividends; Restrictions on Subsidiaries, etc. (a) Holdings
will not, and will not permit any of its Subsidiaries to, declare or pay any
dividends (other than dividends (i) payable solely in capital stock of
Holdings or rights in respect thereof or (ii) constituting spin-offs of
divisions or direct or indirect operating subsidiaries of Holdings) or return
any capital to, the stockholders of Holdings or authorize or make any other
distribution, payment or delivery of property or cash to the stockholders of
Holdings as such, or redeem, retire, purchase or otherwise acquire, directly
or indirectly, for a consideration, any shares of any class of the capital
stock of Holdings now or hereafter outstanding (or any warrants for or options
or stock appreciation rights in respect of any of such shares), or set aside
any funds for any of the foregoing purposes, or permit any of its Subsidiaries
to purchase or otherwise acquire for consideration any shares of any class of
the capital stock of Holdings, now or hereafter outstanding (or any options or
warrants or stock appreciation rights issued by Holdings with respect to its
capital stock) (all of the foregoing "Dividends"), except that:
(i) Holdings may redeem or repurchase common stock of Holdings
(or options to purchase such common stock) from (1) present or former
officers, employees and directors of Holdings, the Borrower, or any of
their Subsidiaries (or their estates) upon the death, permanent disabil-
ity, retirement or termination of employment of any such Person or
otherwise in accordance with any stock option plan or any employee stock
ownership plan, or (2) stockholders of Holdings so long as the purpose
of such purchase is to acquire common stock of Holdings for reissuance
to new officers, employees and directors (or their estates) of Holdings,
the Borrower or any of their respective Subsidiaries to the extent so
reissued within 12 months of any such purchase, provided that in all
such cases (x) no Default or Event of Default is then in existence or
would arise therefrom, (y) the aggregate amount of all cash paid in
respect of all such shares so redeemed or repurchased in any calendar
year does not exceed $15,000,000 plus proceeds of key man life insurance
used for the purpose of repurchasing such common stock owned by such
Person and, provided further, that in the event that Holdings sub-
sequently resells to any member of its, or any Subsidiary's management,
any shares redeemed or repurchased pursuant to this clause (ii), the
amount of repurchases Holdings may make from officers, employees and
directors pursuant to this clause (ii) shall be increased by an amount
equal to any cash received by Holdings upon the resale of such shares;
(ii) Holdings may pay or make Dividends on (i) existing Class A
common stock and (ii) any issue of preferred stock whether now existing
or hereafter issued; and
(iii) so long as no Default or Event of Default exists or would
result therefrom, Holdings shall be permitted to pay or make Dividends
in an amount not to exceed, in the aggregate, 50% of Consolidated Net
Income on a cumulative basis beginning January 1, 1996.
(b) Holdings and the Borrower will not, and will not permit
any of the Subsidiary Guarantors to, create or otherwise cause or suffer to
exist any encumbrance or restriction which prohibits or otherwise restricts
(A) the ability of any Subsidiary Guarantor to (a) pay dividends or make other
distributions or pay any Indebtedness owed to the Borrower or any Subsidiary
Guarantor, (b) make loans or advances to the Borrower or any Subsidiary
Guarantor, (c) transfer any of its properties or assets to the Borrower or any
Subsidiary Guarantor or (B) the ability of the Borrower or any other
Subsidiary Guarantor of the Borrower to create, incur, assume or suffer to
exist any Lien upon its property or assets to secure the Obligations, other
than prohibitions or restrictions existing under or by reason of:
(i) this Agreement and the other Credit Documents;
(ii) applicable law;
(iii) customary non-assignment provisions entered into in the
ordinary course of business and consistent with past practices;
(iv) any restriction or encumbrance with respect to a Subsidiary
Guarantor imposed pursuant to an agreement which has been entered into
for the sale or disposition of all or substantially all of the capital
stock or assets of such Subsidiary Guarantor, so long as such sale or
disposition is permitted under this Agreement; and
(v) Permitted Liens and any documents or instruments governing the
terms of any Indebtedness or other obligations secured by any such
Liens, provided that such prohibitions or restrictions apply only to the
assets subject to such Liens.
8.05 Transactions with Affiliates. Holdings and the Borrower
will not, and will not permit any of their respective Subsidiaries to, enter
into any transaction or series of transactions after the Initial Borrowing
Date whether or not in the ordinary course of business, with any Affiliate
other than on terms and conditions substantially as favorable to Holdings or
such Subsidiary as would be obtainable by Holdings or such Subsidiary at the
time in a comparable arm's-length transaction with a Person other than an
Affiliate, provided that the foregoing restrictions shall not apply to (i)
employment arrangements entered into in the ordinary course of business with
officers of Holdings and its Subsidiaries, (ii) customary fees paid to members
of the Board of Directors of Holdings and of its Subsidiaries, (iii) capital
contributions made by Holdings to the Borrower, (iv) all transactions between
or among Holdings and its Subsidiaries, (v) all immaterial transactions with
the officers or members of the Board of Directors of Holdings or its
Subsidiaries and (vi) all immaterial transactions with Affiliates.
8.06 Vessel Management; Registry. Holdings and the Borrower will
not, and will not permit any of their Subsidiaries to, (i) change the overall
management of any of the Mortgaged Rigs from Holdings or any of its
Subsidiaries or (ii) change the national registry of any Mortgaged Rig.
8.07 Coverage Ratio. Holdings will not permit the ratio of (i)
Consolidated EBITDAR to (ii) the sum of Consolidated Interest Expense plus
Consolidated Rent Expense for any period of four consecutive fiscal quarters
of Holdings (taken as one accounting period) to be less than 2.00:1.00.
8.08 Working Capital. Holdings will not permit Working Capital
on the last day of any two consecutive fiscal quarters of Holdings to be less
than $0.
8.09 Leverage Ratio. Holdings will not permit the Leverage Ratio
(i) at the end of any fiscal quarter ending prior to the date which is two
years after the date of this Agreement to be greater than 0.50:1.00 and (ii)
at the end of any fiscal quarter ending thereafter to be greater than
0.40:1.00.
8.10 Collateral Maintenance. Holdings shall not permit the
Market Value of the Mortgaged Rigs at any time to be less than 1.6 times the
Total Commitment.
SECTION 9. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment
when due of any principal of the Loans and such default shall continue for two
or more Business Days or (ii) default, and such default shall continue for
three or more Business Days after notice by the Agent or the Required Banks,
in the payment when due of any Unpaid Drawing, any interest on the Loans or
any Fees or any other amounts owing hereunder or under any other Credit
Document; or
9.02 Representations, etc. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or
in any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or
9.03 Covenants. Holdings or the Borrower shall (a) default in
the due performance or observance by it of any term, covenant or agreement
contained in Section 7.08 or Section 8 or (b) default in the due performance
or observance by it of any term, covenant or agreement (other than those
referred to in Section 9.01, 9.02 or clause (a) of this Section 9.03) con-
tained in this Agreement and such default shall continue unremedied for a
period of at least 30 days after notice to the Borrower by the Agent or the
Required Banks; or
9.04 Default Under Other Agreements. (a) Holdings, the Borrower
or any of their respective Subsidiaries shall (i) default in any payment with
respect to any Indebtedness (other than the Obligations) beyond the period of
grace, if any, applicable thereto or (ii) default in the observance or per-
formance of any agreement or condition relating to any such Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition results in acceleration or the
renegotiation of the material payment terms of any such Indebtedness to become
due prior to its stated maturity; or (b) any such Indebtedness of Holdings or
any of its Subsidiaries shall be declared to be due and payable, or required
to be prepaid other than by a regularly scheduled required prepayment, prior
to the stated maturity thereof, provided that it shall not constitute an Event
of Default pursuant to this Section 9.04 unless the aggregate principal amount
of such Indebtedness in default exceeds $1,000,000 at any one time; or
9.05 Bankruptcy, etc. Holdings, the Borrower or any of their
respective Subsidiaries shall commence a voluntary case concerning itself
under Title 11 of the United States Code entitled "Bankruptcy", as now or
hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an
involuntary case is commenced against Holdings, the Borrower or any of their
respective Subsidiaries and the petition is not controverted within 10 days,
or is not dismissed within 60 days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of Holdings, the Borrower
or any of their respective Subsidiaries; or Holdings, the Borrower or any of
their respective Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dis-
solution, insolvency or liquidation or similar law of any jurisdiction whether
now or hereafter in effect relating to Holdings, the Borrower or any of their
respective Subsidiaries; or there is commenced against Holdings, the Borrower
or any of their respective Subsidiaries any such case or proceeding which
remains undismissed for a period of 60 days; or Holdings, the Borrower or any
of their respective Subsidiaries is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is
entered; Holdings, the Borrower or any of their respective Subsidiaries
suffers any appointment of any custodian or the like for it or any substantial
part of its property to continue undischarged or unstayed for a period of 60
days; or Holdings, the Borrower or any of their respective Subsidiaries makes
a general assignment for the benefit of creditors; or any corporate action is
taken by Holdings, the Borrower or any of their respective Subsidiaries for
the purpose of effecting any of the foregoing; or
9.06 Security Documents. (i) Any Security Document shall, after
the execution and delivery thereof, cease to be in full force and effect, or
shall cease to give the Collateral Agent or the Trustee, as the case may be,
the Liens, rights, powers and privileges purported to be created thereby in
favor of the Collateral Agent or the Trustee, as the case may be, or (ii) any
Credit Party shall default in any respect in the due performance or observance
of any term, covenant or agreement on its part to be performed or observed
pursuant to any such Security Document and such default (unless such default
creates an Event of Default under clause (i) above) shall continue unremedied
for a period of at least 30 days after notice to the Borrower by the Agent or
the Required Banks; or
9.07 Guaranty. Any Guaranty or any provision thereof shall cease
to be in full force and effect, or any Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm all or any portion of such
Guarantor's obligation thereunder, or any Guarantor shall default in the
observance of any term, covenant or agreement on its part to be performed or
observed pursuant thereto and such default (other than any default arising
from a failure to make any payment thereunder) shall continue unremedied for a
period of at least 30 days after notice to the Borrower by the Agent or the
Required Banks; or
9.08 Judgments. One or more judgments or decrees shall be
entered against Holdings, the Borrower or any other Credit Party involving a
liability of $1,000,000 or more in the case of any one such judgment or decree
and $5,000,000 or more in the aggregate for all such judgments and decrees for
Holdings, the Borrower and the other Credit Parties (not paid or to the extent
not covered by insurance) and any such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within 60 days
from the entry thereof; or
9.09 Citizenship. Any Mortgagor shall cease to be qualified to
own and operate the Mortgaged Rigs under the laws of the United States, the
Republic of Panama, Australia and the Bahamas, as may be applicable; or
9.10 Employee Benefit Plans. (a)(i) A contribution required to be
made with respect to any (x) employee pension benefit plan (as defined in
Section 3(2) of ERISA) maintained or contributed to by (or to which there is
an obligation to contribute of) Holdings or a Subsidiary or an ERISA Affiliate
or (y) Foreign Pension Plan has not been timely made or (ii) Holdings or any
Subsidiary has incurred or is likely to incur liabilities pursuant to one or
more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that
provide benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or employee pension benefit plans (as
defined in Section 3(2) of ERISA); (b) there shall result from any such event
or events the imposition of a lien, the granting of a security interest, or a
liability or a material risk of incurring a liability; (c) which lien,
security interest or liability, individually, and/or in the aggregate, in the
opinion of the Required Banks, will have a Material Adverse Effect;
9.11 Change of Control. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Agent shall, upon the written request of
the Required Banks, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent or any Bank to
enforce its claims against any Credit Party, except as otherwise specifically
provided for in this Agreement (provided that, if an Event of Default speci-
fied in Section 9.05 shall occur with respect to the Borrower, the result
which would occur upon the giving of written notice by the Agent as specified
in clauses (i) and (ii) below shall occur automatically without the giving of
any such notice): (i) declare the Total Commitment terminated, whereupon the
Commitment of each Bank shall forthwith terminate immediately and any
Commitment Commission or any other Fees shall forthwith become due and payable
without any other notice of any kind; (ii) declare the principal of and any
accrued interest in respect of all Loans and all obligations owing hereunder
(including Unpaid Drawings) and thereunder to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by each Credit Party;
(iii) enforce, as Collateral Agent (or direct the Collateral Agent to
enforce), any or all of the Liens and security interests created pursuant to
the Security Documents; (iv) terminate any Letter of Credit which may be
terminated in accordance with its terms; (v) direct the Borrower to pay (and
the Borrower hereby agrees upon receipt of such notice, or upon the occurrence
of any Event of Default specified in Section 9.05 in respect of the Borrower,
it will pay) to the Collateral Agent at the Payment Office such additional
amounts of cash, to be held as security for the Borrower's reimbursement obli-
gations in respect of Letters of Credit then outstanding equal to the aggre-
gate Stated Amount of all Letters of Credit then outstanding; and (vi) apply
any amounts held as cash collateral pursuant to Section 4.02 or this Section 9
to repay Obligations.
SECTION 10. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise
requires. Defined terms in this Agreement shall include in the singular
number the plural and in the plural the singular:
"Adjusted Commitment" for each Non-Defaulting Bank shall mean at
any time the product of such Bank's Adjusted Percentage and the Adjusted Total
Commitment.
"Adjusted Percentage" shall mean (x) at a time when no Bank
Default exists, for each Bank such Bank's Percentage and (y) at a time when a
Bank Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii)
for each Bank that is a Non-Defaulting Bank, the percentage determined by
dividing such Bank's Commitment at such time by the Adjusted Total Commitment
at such time, it being understood that all references herein to Commitments
and the Adjusted Total Commitment at a time when the Total Commitment has been
terminated shall be references to the Commitments or Adjusted Total
Commitment, as the case may be, in effect immediately prior to such termin-
ation, provided that (A) no Bank's Adjusted Percentage shall change upon the
occurrence of a Bank Default from that in effect immediately prior to such
Bank Default if, after giving effect to such Bank Default and any repayment of
Loans at such time pursuant to Section 4.02(A)(a) or otherwise, the sum of (i)
the aggregate outstanding principal amount of Loans of all Non-Defaulting
Banks plus (ii) the Letter of Credit Outstandings, exceeds the Adjusted Total
Commitment; (B) the changes to the Adjusted Percentage that would have become
effective upon the occurrence of a Bank Default but that did not become
effective as a result of the preceding clause (A) shall become effective on
the first date after the occurrence of the relevant Bank Default on which the
sum of (i) the aggregate outstanding principal amount of the Loans of all Non-
Defaulting Banks plus (ii) the Letter of Credit Outstandings is equal to or
less than the Adjusted Total Commitment; and (C) if (i) a Non-Defaulting
Bank's Adjusted Percentage is changed pursuant to the preceding clause (B) and
(ii) any repayment of such Bank's Loans, or of Unpaid Drawings with respect to
Letters of Credit, that were made during the period commencing after the date
of the relevant Bank Default and ending on the date of such change to its
Adjusted Percentage must be returned to the Borrower as a preferential or
similar payment in any bankruptcy or similar proceeding of the Borrower, then
the change to such Non-Defaulting Bank's Adjusted Percentage effected pursuant
to said clause (B) shall be reduced to that positive change, if any, as would
have been made to its Adjusted Percentage if (x) such repayments had not been
made and (y) the maximum change to its Adjusted Percentage would have resulted
in the sum of the outstanding principal of Loans made by such Bank plus such
Bank's new Adjusted Percentage of the outstanding principal amount of Letter
of Credit Outstandings equalling such Bank's Commitment at such time.
"Adjusted Total Commitment" shall mean at any time the Total
Commitment less the aggregate Commitments of all Defaulting Banks.
"Affected Loan" shall have the meaning provided in Section
4.02(B).
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control
a corporation if such Person possesses, directly or indirectly, the power (i)
to vote 10% or more of the securities having ordinary voting power for the
election of directors of such corporation or (ii) to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"Agent" shall have the meaning provided in the first paragraph of
this Agreement and shall include any successor to the Agent appointed pursuant
to Section 11.09.
"Agreement" shall mean this Credit Agreement, as the same may be
from time to time modified, amended and/or supplemented.
"Applicable Margin" shall mean 1 % per annum.
"Approved Bank" shall have the meaning provided in the definition
of "Cash Equivalents."
"Approved Company" shall have the meaning provided in the
definition of "Cash Equivalents."
"Approved Shipbroker" shall mean each of the first-class,
international, independent, sale-and-purchase Shipbrokers of offshore drilling
units listed on Annex IX, as such Annex may be revised from time to time at
the request of the Required Banks with the consent of the Borrower, which
consent shall not be unreasonably withheld.
"Assignment and Assumption Agreement" shall mean the Assignment
and Assumption Agreement substantially in the form of Exhibit M (appropriately
completed).
"Assignor" shall mean Reading & Bates Drilling Co.
"Australian Rig" shall mean the offshore drilling rig Ron
Tappmeyer.
"Authorized Officer" shall mean any officer of Holdings or the
Borrower designated as such in writing to the Agent by Holdings or the
Borrower.
"Bahamian Rig" shall mean the offshore drilling rig J.W. McLean.
"Bank" shall have the meaning provided in the first paragraph of
this Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Loans or to fund its
portion of any unreimbursed payment under Section 2.04(c) or (ii) a Bank
having notified the Agent and/or the Borrower that it does not intend to
comply with the obligations under Section 1.01 or under Section 2.04(c), in
the case of either (i) or (ii) as a result of the appointment of a receiver or
conservator with respect to such Bank at the direction or request of any regu-
latory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Borrower" shall have the meaning provided in the first paragraph
of this Agreement.
"Borrowing" shall mean the incurrence of Loans pursuant to the
Facility by the Borrower from all of the Banks with respect to such Facility
on a pro rata basis on a given date, and having the same Interest Period.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in the Cities of New York and/or London a legal holiday or a
day on which banking institutions are authorized by law or other governmental
actions to close and (ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Loans, any day
which is a Business Day described in clause (i) and which is also a day for
trading by and between banks in U.S. dollar deposits in the interbank
Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with
GAAP, including all such expenditures with respect to fixed or capital assets
(including, without limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with generally accepted accounting princi-
ples) and the amount of Capitalized Lease Obligations incurred by such Person.
"Capital Lease" as applied to any Person shall mean any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in conformity with GAAP, is accounted for as a capital lease on the balance
sheet of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of Holdings or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly
and fully guaranteed or insured by the United States of America or any agency
or instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof) having maturities of
not more than six months from the date of acquisition, (ii) U.S. dollar
denominated time deposits, certificates of deposit and bankers' acceptances of
(x) any Bank, (y) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000 or (z) any bank (or the parent
company of such bank) whose short-term commercial paper rating from Standard &
Poor's Corporation ("S&P") is at least A-1 or the equivalent thereof or from
Moody's Investors Service, Inc. ("Moody's") is at least P-1 or the equivalent
thereof (any such bank, an "Approved Bank"), in each case with maturities of
not more than six months from the date of acquisition, (iii) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clause (i) above entered into with any bank meeting
the qualifications specified in clause (ii) above, (iv) commercial paper
issued by any Bank or Approved Bank or by the parent company of any Bank or
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's (any such company, an "Approved Company"), or guaranteed by any
industrial company with a long term unsecured debt rating of at least A or A2,
or the equivalent of each thereof, from S&P or Moody's, as the case may be,
and in each case maturing within six months after the date of acquisition and
(v) investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (i) through (iv)
above.
"Cash Proceeds" shall mean, with respect to any Collateral
Disposition, the aggregate cash payments (including any cash received by way
of deferred payment pursuant to a note receivable issued in connection with
such Collateral Disposition, other than the portion of such deferred payment
constituting interest, but only as and when so received) received by Holdings
and/or any Subsidiary from such Collateral Disposition.
"CBK" shall mean Christiania Bank og Kreditkasse, New York Branch.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. 9601 et seq.
"Change of Control" shall mean (a) Holdings shall at any time
cease to own 100% of the capital stock of the Borrower or, directly or
indirectly, any Subsidiary Guarantor, (b) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the total voting power of the Voting Stock
of Holdings or (c) during any period of two consecutive years individuals who
at the beginning of such period constituted the Board of Directors of Holdings
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of Holdings was approved by
a vote of a majority of the directors of Holdings then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of Holdings then in office.
"Claims" shall have the meaning provided in the definition of
"Environmental Claims."
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time and the regulations promulgated and the rulings issued
thereunder. Section references to the Code are to the Code, as in effect at
the Effective Date and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Security Agreement Collateral,
the Collateral Assignment of Insurance Collateral, the "Rig" as defined in
each of the Mortgages and any cash collateral delivered to the Collateral
Agent pursuant to this Agreement.
"Collateral Agent" shall mean the Agent acting as collateral agent
for the Banks.
"Collateral Assignment of Insurance" shall have the meaning
provided in Section 5.18.
"Collateral Assignment of Insurance Collateral" shall mean all
"Collateral" as defined in the Collateral Assignments of Insurance.
"Collateral Disposition" shall mean (i) the sale, transfer or
other voluntary disposition by the Borrower or any Guarantor to any Person
other than the Borrower or any Guarantor of any asset of the Borrower or such
Guarantor constituting Collateral or (ii) any Total Loss of any Mortgaged Rig.
"Commitment" shall mean, with respect to each Bank, the amount set
forth opposite such Bank's name in Annex I directly below the column entitled
"Commitment," as the same may be (x) reduced from time to time pursuant to
Sections 3.02, 3.03 and/or 9 or (y) adjusted from time to time as a result of
assignments to or from such Bank pursuant to Section 12.04.
"Commitment Commission" shall have the meaning provided in
Section 3.01(a).
"Concentration Account" shall have the meaning provided in Section
5.19.
"Consolidated Capital Expenditures" shall mean, for any period,
the aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including in all events all amounts expended or capitalized
under Capital Leases) by Holdings and its Subsidiaries during that period
that, in conformity with GAAP, are or are required to be included in the
property, plant or equipment reflected in the consolidated balance sheet of
Holdings and its Subsidiaries, provided that Consolidated Capital Expenditures
shall in any event include the purchase price paid in connection with the
acquisition of any Person (including through the purchase of all of the
capital stock or other ownership interests of such Person or through merger or
consolidation) to the extent allocable to "drilling and other property and
equipment" provided, further, that Consolidated Capital Expenditures shall
only include the amount thereof actually paid in cash during such period.
"Consolidated Current Assets" shall mean, the current assets of
Holdings and its Subsidiaries determined on a consolidated basis in accordance
with GAAP, including cash and Cash Equivalents.
"Consolidated Current Liabilities" shall mean, the current
liabilities of Holdings and its Subsidiaries determined on a consolidated
basis in accordance with GAAP, but excluding the current portion of and the
accrued but unpaid interest on any Indebtedness under this Agreement or under
the Holdings Convertible Debentures.
"Consolidated EBIT" shall mean, for any period, (A) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) provisions for
taxes based on income, (iii) Consolidated Interest Expense, (iv) amortization
or write-off of deferred financing costs to the extent deducted in determining
Consolidated Net Income and (v) losses on sales of assets (excluding sales in
the ordinary course of business) and other extraordinary losses less (B) the
amount for such period of gains on sales of assets (excluding sales in the
ordinary course of business) and other extraordinary gains, all as determined
on a consolidated basis in accordance with GAAP.
"Consolidated EBITDAR" shall mean, for any period, the sum of the
amounts for such period of (i) Consolidated EBIT, (ii) depreciation expense,
(iii) amortization expense and (iv) Consolidated Rent Expense, all as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Indebtedness" shall mean, all Indebtedness of
Holdings and its Subsidiaries calculated on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to Capital Leases) of Holdings
and its Subsidiaries in accordance with GAAP on a consolidated basis with
respect to all outstanding Indebtedness of Holdings and its Subsidiaries,
including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing.
"Consolidated Net Income" shall mean for any period, the net
income (or loss) of Holdings and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in conformity with
GAAP.
"Consolidated Net Worth" shall mean, at any time, shareholders
equity (excluding treasury stock) of Holdings and its Subsidiaries on a
consolidated basis determined in accordance with GAAP.
"Consolidated Rent Expense" shall mean for any period, the rent
expense of Holdings and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in accordance with GAAP.
"Contingent Obligations" shall mean as to any Person any
obligation of such Person guaranteeing or intending to guarantee any
Indebtedness ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment
of such primary obligation or (d) otherwise to assure or hold harmless the
owner of such primary obligation against loss in respect thereof, provided
however, that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of
which such Contingent Obligation is made or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in good
faith.
"Credit Documents" shall mean this Agreement, the Notes, the
Security Documents and each Guaranty and any documents executed in connection
therewith.
"Credit Event" shall mean and include the making of a Loan or the
issuance of a Letter of Credit.
"Credit Party" shall mean Holdings, the Borrower and each
Subsidiary Guarantor.
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Dividends" shall have the meaning provided in Section 8.04.
"Earnings" shall have the definition provided in the Security
Agreement.
"Effective Date" shall have the meaning provided in Section 12.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined by Regulation
D of the Securities Act of 1933).
"Employee Benefit Plan" shall have the meaning provided in Section
5.06(i).
"Employment Agreements" shall have the meaning provided in Section
5.06(vi).
"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than internal
reports prepared by Holdings or any of its Subsidiaries solely in the ordinary
course of such Person's business and not in response to any third party action
or request of any kind) or proceedings relating in any way to any
Environmental Law or any permit issued, or any approval given, under any such
Environmental Law (hereafter, "Claims"), including, without limitation,
(a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all Claims by
any third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Law" means any applicable Federal, state, foreign
or local statute, law, rule, regulation, ordinance, code, guide, policy and
rule of common law now or hereafter in effect and in each case as amended, and
any judicial or administrative interpretation thereof, including any judicial
or administrative order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including, without limita-
tion, CERCLA; RCRA; the Federal Water Pollution Control Act, as amended, 33
U.S.C. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. 7401 et
seq.; the Clean Air Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water
Act, 42 U.S.C. 3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701
et seq. and any applicable state and local or foreign counterparts or equiv-
alents.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the Effective Date and any subsequent provisions of ERISA, amend-
atory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section
3(9) of ERISA) which together with Holdings or any Subsidiary would be deemed
to be a "single employer" (i) within the meaning of Sections 414(b), (c), (m)
and (o) of the Code or (ii) as a result of Holdings or any Subsidiary being or
having been a general partner of such person.
"Eurodollar Rate" shall mean with respect to each Interest Period
for a Loan, the offered rate (rounded upward to the nearest 1/16 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, the Eurodollar Rate 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 the Eurodollar Rate 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.
"Event of Default" shall have the meaning provided in Section 9.
"Existing Credit Agreement" shall mean the Credit Facility
Agreement, dated as of November 16, 1995, by and among Reading & Bates
Drilling Co. and Reading & Bates Exploration Co. as Borrowers, Reading & Bates
Corporation as Guarantor, the Lenders party thereto and Christiania Bank og
Kreditkasse, as Agent.
"Existing Indebtedness" shall have the meaning provided in Section
6.19.
"Existing Indebtedness Agreements" shall have the meaning provided
in Section 5.06.
"Existing Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Facility" shall mean the credit facility established under this
Agreement, evidenced by the Total Commitment.
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Effective Rate" shall mean 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 Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the Agent from
three Federal Funds brokers of recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to
in, Section 3.01.
"Foreign Pension Plan" means any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by Holdings or any one or more
of its Subsidiaries primarily for the benefit of employees of Holdings or such
Subsidiaries residing outside the United States of America, which plan, fund
or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect on the date of this Agreement; it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section 8, including defined terms as used therein, are subject (to the
extent provided therein) to Section 12.07(a).
"Guaranteed Obligations" shall mean all obligations of the
Borrower to each Bank for the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of the principal and interest
on each Note issued by the Borrower to such Bank, and Loans made, under the
Credit Agreement and all reimbursement obligations and Unpaid Drawings with
respect to Letters of Credit, together with all the other obligations and lia-
bilities (including, without limitation, indemnities, fees and interest
thereon) of the Borrower to such Bank now existing or hereafter incurred
under, arising out of or in connection with the Credit Agreement or any other
Credit Document and the due performance and compliance with all the terms,
conditions and agreements contained in the Credit Documents by the Borrower.
"Guarantor" shall mean each Subsidiary Guarantor and Holdings.
"Guaranty" shall mean the guaranty of Holdings pursuant to Section
13 hereof and the Subsidiaries Guaranty.
"Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment
that contained, electric fluid containing levels of polychlorinated biphenyls,
and radon gas; (b) any chemicals, materials or substances defined as or
included in the definition of "hazardous substances," "hazardous waste,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," "toxic substances," "toxic pollutants," "contaminants," or
"pollutants," or words of similar import, under any applicable Environmental
Law; and (c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority.
"Holdings" shall have the meaning provided in the first paragraph
of this Agreement.
"Holdings Convertible Debentures" shall mean Holdings' 8% Senior
Subordinated Convertible Debentures due December 1998.
"Indebtedness" of any Person shall mean without duplication (i)
all indebtedness of such Person for borrowed money, (ii) the deferred purchase
price of assets or services which in accordance with GAAP would be shown on
the liability side of the balance sheet of such Person, (iii) the face amount
of all letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed, (v) all Capitalized Lease
Obligations of such Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vii) all net obligations
of such Person under Interest Rate Agreements and (viii) all Contingent
Obligations of such Person (other than Contingent Obligations arising from the
guaranty by such Person of the obligations of Holdings, the Borrower and/or
their respective Subsidiaries to the extent such guaranteed obligations are
permitted under this Agreement); provided that Indebtedness shall not include
trade payables and accrued expenses, in each case arising in the ordinary
course of business.
"Initial Borrowing Date" shall mean the date upon which the
initial Borrowing of Loans occurs.
"Interest Period" with respect to any Loan shall mean the interest
period applicable thereto, as determined pursuant to Section 1.08.
"Interest Rate Agreement" shall mean any interest rate swap
agreement, any interest rate cap agreement, any interest rate collar agreement
or other similar agreement or arrangement designed to protect any Credit Party
against interest rate risk.
"Leasehold" of any Person means all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"L/C Supportable Obligations" shall mean such obligations of the
Borrower, the Guarantors or their Subsidiaries (other than obligations in
respect of Indebtedness) as are not inconsistent with the policies of the
Letter of Credit Issuer.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Issuer" shall mean Christiania Bank og
Kreditkasse, New York Branch.
"Letter of Credit Outstandings" shall mean, at any time, the sum
of, without duplication, (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in
respect of all Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in
Section 2.02(a).
"Leverage Ratio" shall mean, at any date of determination, the
ratio of Consolidated Indebtedness on such date to Total Capitalization on
such date.
"Lien" shall mean any mortgage, pledge, security interest,
security title, encumbrance, lien or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement or any lease in the nature thereof) other than arising
from an event constituting a Total Loss.
"Loan" shall have the meaning provided in Section 1.01.
"Margin Stock" shall have the meaning provided in Regulation U.
"Market Value" shall mean as of any date of calculation the value
as of such date of any offshore drilling rig or other vessel provided in the
most recent valuation report delivered in connection with Section 5.16(ii) and
Section 7.10, or in the case two reports have been supplied as of such date,
the arithmetic mean of the values provided in such reports.
"Material Adverse Effect" shall mean a material adverse effect on
the business, property, assets, liabilities, operations, condition (financial
or otherwise) or prospects of the Borrower or Holdings and its Subsidiaries
taken as a whole.
"Maturity Date" shall mean the date that is the fifth anniversary
of the Effective Date.
"Minimum Borrowing Amount" shall mean $1,000,000.
"Mortgage" shall have the meaning provided in Section 5.13(a).
"Mortgaged Rigs" shall mean and include the US Rigs, the
Panamanian Rig, the Australian Rig and the Bahamian Rig.
"Mortgagor" shall mean each Credit Party party to a Mortgage.
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.
"Note" shall have the meaning provided in Section 1.05(a).
"Notice of Borrowing" shall have the meaning provided in Section
1.03.
"Notice Office" shall mean the office of the Agent at 11 West 42nd
Street, 7th Floor, New York, New York 10036 or such other office as the Agent
may designate to the Borrower from time to time.
"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time
existing, owing to the Agent, the Collateral Agent or any Bank pursuant to the
terms of this Agreement or any other Credit Document.
"Panamanian Mortgage" shall have the meaning provided in Section
5.13(a).
"Panamanian Rig" shall mean the offshore drilling rig Charley
Graves.
"Participant" shall have the meaning provided in Section 2.04(a).
"Payment Office" shall mean the office of the Agent at 11 West
42nd Street, 7th Floor, New York, New York 10036 or such other office as the
Agent may designate to the Borrower from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" shall mean for each Bank the percentage obtained by
dividing such Bank's Commitment by the Total Commitment, provided that if the
Total Commitment has been terminated, the Percentage of each Bank shall be
determined by dividing such Bank's Commitment immediately prior to such
termination by the Total Commitment immediately prior to such termination.
"Permitted Liens" shall mean Liens described in Section 8.03(a)
through (g).
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of) Holdings or a Subsidiary of
Holdings or an ERISA Affiliate.
"Projections" shall have the meaning set forth in Section 6.10(d).
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. 6901 et seq.
"Real Property" of any Person shall mean all of the right, title
and interest of such Person in and to land, improvements and fixtures,
including Leaseholds.
"Register" shall have the meaning provided in Section 12.16.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing margin requirements.
"Replaced Bank" shall have the meaning provided in Section 1.12.
"Replacement Bank" shall have the meaning provided in Section
1.12.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan other than those events as to which
the 30-day notice period is waived under subsection .13, .14, .16, .18, .19 or
.20 of PBGC Regulation Section 2615.
"Required Banks" shall mean Non-Defaulting Banks whose outstanding
Commitments (or, if after the Total Commitment has been terminated, out-
standing Loans and Adjusted Percentage of Letter of Credit Outstandings) con-
stitute greater than 50% of the Adjusted Total Commitment (or, if after the
Total Commitment has been terminated, the total outstanding Loans of Non-
Defaulting Banks and the aggregate Adjusted Percentages of all Non-Defaulting
Banks of the total Letter of Credit Outstandings at such time).
"Scheduled Commitment Reduction" shall have the meaning provided
in Section 3.03(b).
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided
in Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning set forth in the
Security Documents.
"Security Agreement" shall have the meaning provided in Section
5.11.
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.
"Security Documents" shall mean and include the Security
Agreement, the Collateral Assignments of Insurance, each Mortgage and the
Vessel Trust Indenture.
"Stated Amount" of each Letter of Credit shall mean the maximum
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Subsidiary Guaranty" shall have the meaning provided in Section
5.12.
"Subsidiary" of any Person shall mean and include (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 or not 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 through Subsidiaries and (ii) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries, has more than a 50% equity interest at the
time. Unless otherwise expressly provided, all references herein to
"Subsidiary" shall mean a Subsidiary of Holdings.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
which owns a Mortgaged Rig and executes the Subsidiary Guaranty.
"Substitute Basis" shall have the meaning provided in Section
1.09(b).
"Supermajority Banks" at any time shall mean Non-Defaulting Banks
whose outstanding Commitments (or, if the Total Commitment has been
terminated, outstanding Loans and Adjusted Percentage of Letter of Credit
Outstandings) constitute greater than 80% of the Adjusted Total Commitment
(or, if after the Total Commitment has been terminated, the total outstanding
Loans of Non-Defaulting Banks and the aggregate Adjusted Percentages of all
Non-Defaulting Banks of the total Letter of Credit Outstandings at such time).
"Taxes" shall have the meaning provided in Section 4.04(a).
"Total Capitalization" shall mean, at any time, the sum of
Consolidated Indebtedness and Consolidated Net Worth at such time.
"Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Banks.
"Total Loss" shall mean any "Total Loss" as defined in any
Mortgage.
"Total Unutilized Commitment" shall mean, at any time, (i) the
Total Commitment at such time less (ii) the sum of the aggregate principal
amount of all Loans at such time plus the Letter of Credit Outstandings at
such time.
"Trustee" shall mean Wilmington Trust Company, as trustee for the
Banks pursuant to the Vessel Trust Indenture, and any successor trustee
appointed in accordance with the terms thereof.
"UCC" shall mean the Uniform Commercial Code.
"Unfunded Current Liability" of any Plan means the amount, if any,
by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"Unpaid Drawing" shall have the meaning provided in Section
2.03(a).
"Unutilized Commitment" for each Bank, shall mean the excess of
(i) the Commitment of such Bank over (ii) the sum of (x) the aggregate out-
standing principal amount of Loans made by such Bank plus (y) an amount equal
to such Bank's Adjusted Percentage of the Letter of Credit Outstandings at
such time.
"US Mortgage" shall have the meaning provided in Section 5.13(a).
"US Rigs" shall mean the offshore drilling rigs Jack Bates, D.R.
Stewart and W.D. Kent.
"U.S. Dollar Equivalent" shall mean, at any time for the
determination thereof, the amount of U.S. Dollars necessary to purchase the
amount of the relevant currency at the spot exchange rate therefor as quoted
by the Agent as of 11:00 a.m. (London time) on the date two Business Days
prior to the date of any determination thereof for purchase on such date.
"U.S. Dollars" shall mean freely transferable lawful money of the
United States.
"Vessel Trust Indenture" shall have the meaning provided in
Section 5.15.
"Voting Stock" shall mean, with respect to any corporation, the
outstanding stock of all classes (or equivalent interests) which ordinarily,
in the absence of contingencies, entitles holders thereof to vote for the
election of directors (or Persons performing similar functions) of such
corporation, even though the right so to vote has been suspended by the
happening of such a contingency.
"Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary
of such Person to the extent all of the capital stock or other ownership
interests in such Subsidiary, other than directors' qualifying shares or
shares held by a nominee or in trust for such Person, is owned directly or
indirectly by such Person.
"Working Capital" shall mean the excess of Consolidated Current
Assets over Consolidated Current Liabilities exclusive of the Holdings
Convertible Debentures.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex or facsimile transmission.
SECTION 11. The Agent.
11.01 Appointment. The Banks hereby designate Christiania Bank og
Kreditkasse, New York Branch as Agent (for purposes of this Section 11, the
term "Agent" shall include CBK in its capacity as Collateral Agent pursuant to
this Agreement and the Security Documents) to act as specified herein and in
the other Credit Documents. Each Bank hereby irrevocably authorizes, and each
holder of any Note by the acceptance of such Note shall be deemed irrevocably
to authorize, the Agent to take such action on its behalf under the provisions
of this Agreement, the other Credit Documents and any other instruments and
agreements referred to herein or therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to
or required of the Agent by the terms hereof and thereof and such other powers
as are reasonably incidental thereto. The Agent may perform any of its duties
hereunder by or through its respective officers, directors, agents, employees
or Affiliates.
11.02 Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement and the
other Credit Documents. Neither the Agent nor any of its respective officers,
directors, agents, employees or Affiliates shall be liable for any action
taken or omitted by it or them hereunder or under any other Credit Document or
in connection herewith or therewith, unless caused by its or their gross
negligence or willful misconduct. The duties of the Agent shall be mechanical
and administrative in nature; the Agent shall not have by reason of this
Agreement or any other Credit Document a fiduciary relationship in respect of
any Bank or the holder of any Note; and nothing in this Agreement or any other
Credit Document, expressed or implied, is intended to or shall be so construed
as to impose upon the Agent any obligations in respect of this Agreement or
any other Credit Document except as expressly set forth herein or therein.
11.03 Lack of Reliance on the Agent. Independently and without
reliance upon the Agent, each Bank and the holder of each Note, to the extent
it deems appropriate, has made and shall continue to make (i) its own inde-
pendent investigation of the financial condition and affairs of Holdings and
its Subsidiaries in connection with the making and the continuance of the
Loans and issuance and/or participation in Letters of Credit and the taking or
not taking of any action in connection herewith and (ii) its own appraisal of
the creditworthiness of Holdings and its Subsidiaries and, except as expressly
provided in this Agreement, the Agent shall not have any duty or responsibil-
ity, either initially or on a continuing basis, to provide any Bank or the
holder of any Note with any credit or other information with respect thereto,
whether coming into its possession before the making of the Loans or at any
time or times thereafter. The Agent shall not be responsible to any Bank or
the holder of any Note for any recitals, statements, information, represen-
tations or warranties herein or in any document, certificate or other writing
delivered in connection herewith or for the execution, effectiveness, genuine-
ness, validity, enforceability, perfection, collectibility, priority or
sufficiency of this Agreement or any other Credit Document or the financial
condition of Holdings and its Subsidiaries or be required to make any inquiry
concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement or any other Credit Document, or
the financial condition of Holdings and its Subsidiaries or the existence or
possible existence of any Default or Event of Default.
11.04 Certain Rights of the Agent. If the Agent shall request
instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other
Credit Document, the Agent shall be entitled to refrain from such act or tak-
ing such action unless and until the Agent shall have received instructions
from the Required Banks; and the Agent shall not incur liability to any Person
by reason of so refraining. Without limiting the foregoing, neither any Bank
nor the holder of any Note shall have any right of action whatsoever against
the Agent as a result of the Agent acting or refraining from acting hereunder
or under any other Credit Document in accordance with the instructions of the
Required Banks.
11.05 Reliance. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made
by any Person that the Agent believed to be the proper Person, and, with
respect to all legal matters pertaining to this Agreement and any other Credit
Document and its duties hereunder and thereunder, upon advice of counsel
selected by the Agent (which may be counsel for Holdings and/or the Borrower).
11.06 Indemnification. To the extent the Agent is not reimbursed
and indemnified by the Borrower, the Banks will reimburse and indemnify the
Agent, in proportion to their respective "percentages" as used in determining
the Required Banks, 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 Agent in performing its respective duties
hereunder or under any other Credit Document, in any way relating to or
arising out of this Agreement or any other Credit Document; provided that no
Bank shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or willful mis-
conduct.
11.07 The Agent in Its Individual Capacity. With respect to its
obligation to make Loans under this Agreement, the Agent shall have the rights
and powers specified herein for a "Bank" and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
term "Banks," "Required Banks," "holders of Notes" or any similar terms shall,
unless the context clearly otherwise indicates, include the Agent in its indi-
vidual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with Holdings
or its Subsidiaries or any Affiliate thereof as if it were not performing the
duties specified herein, and may accept fees and other consideration from
Holdings or any of its Subsidiaries for services in connection with this
Agreement and otherwise without having to account for the same to the Banks.
11.08 Holders. The Agent may deem and treat the payee of any Note
as the owner thereof for all purposes hereof unless and until a written notice
of the assignment, transfer or endorsement thereof, as the case may be, shall
have been filed with the Agent. Any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or indorsee, as the case may be, of
such Note or of any Note or Notes issued in exchange therefor.
11.09 Resignation by the Agent. (a) The Agent may resign from
the performance of all its functions and duties hereunder and/or under the
other Credit Documents at any time by giving 15 Business Days' prior written
notice to the Borrower and the Banks. Such resignation shall take effect upon
the appointment of a successor Agent pursuant to clauses (b) and (c) below or
as otherwise provided below.
(b) Upon any such notice of resignation, the Required Banks shall
appoint a successor Agent hereunder or thereunder who shall be a commercial
bank or trust company reasonably acceptable to the Borrower.
(c) If a successor Agent shall not have been so appointed within
such 15 Business Day period, the Agent, with the consent of the Borrower,
shall then appoint a successor Agent who shall serve as Agent hereunder or
thereunder until such time, if any, as the Required Banks appoint a successor
Agent as provided above.
(d) If no successor Agent has been appointed pursuant to clause
(b) or (c) above by the 20th Business Day after the date such notice of
resignation was given by the Agent, the Agent's resignation shall become
effective and the Required Banks shall thereafter perform all the duties of
the Agent hereunder and/or under any other Credit Document until such time, if
any, as the Required Banks appoint a successor Agent as provided above.
SECTION 12. Miscellaneous.
12.01 Payment of Expenses, etc. The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Agent and the Co-Agent in
connection with the negotiation, preparation, execution and delivery of the
Credit Documents and the documents and instruments referred to therein and any
amendment, waiver or consent relating thereto (including, without limitation,
the reasonable fees and disbursements of White & Case and special maritime
counsel Watson, Farley & Williams) and of the Agent and the Collateral Agent
and, after the occurrence and during the continuance of an Event of Default,
each of the Banks in connection with the enforcement of the Credit Documents
and the documents and instruments referred to therein (including, without
limitation, the actual reasonable fees and disbursements of counsel for the
Agent and, after the occurrence and during the continuance of an Event of
Default for each of the Banks); (ii) pay and hold each of the Banks harmless
from and against any and all present and future stamp and other similar taxes
with respect to the foregoing matters and save each of the Banks harmless from
and against any and all liabilities with respect to or resulting from any
delay or omission (other than to the extent attributable to such Bank) to pay
such taxes; and (iii) indemnify each Bank (including in its capacity as the
Agent or Letter of Credit Issuer), its officers, directors, employees,
representatives and agents from and hold each of them harmless 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 any of them as
a result of, or arising out of, or in any way related to, or by reason of, (a)
any investigation, litigation or other proceeding (whether or not any Bank is
a party thereto) related to the entering into and/or performance of any Credit
Document or the use of the proceeds of any Loans hereunder or the consummation
of any transactions contemplated in any Credit Document, whether initiated by
the Borrower or any other Person, including, without limitation, the actual
reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding (but excluding any such
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified) or (b) the actual or alleged presence of Hazardous Materials in
the air, surface water, groundwater, surface or subsurface of any Real
Property, offshore drilling rig, facility or location at any time owned or
operated by Holdings or any of its Subsidiaries, the generation, storage,
transportation or disposal of Hazardous Materials at any Real Property,
offshore drilling rig, facility or location at any time owned or operated by
Holdings or any of its Subsidiaries, the non-compliance of any Real Property,
offshore drilling rig, facility or location at any time owned or operated by
Holdings or any of its Subsidiaries with federal, state and local laws,
regulations, and ordinances (including applicable permits thereunder) applic-
able to any such Real Property, offshore drilling rig, facility or location,
or any Environmental Claim asserted against Holdings, any of its Subsidiaries,
or any Real Property, offshore drilling rig, facility or location at any time
owned or operated by Holdings or any of its Subsidiaries, including, in each
case, without limitation, the actual reasonable fees and disbursements of
counsel and other consultants incurred in connection with any such
investigation, litigation or other proceeding (but excluding any losses, lia-
bilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified). To
the extent that the undertaking to indemnify, pay or hold harmless the Agent
or any Bank set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, the Borrower shall make the
maximum contribution to the payment and satisfaction of each of the
indemnified liabilities which is permissible under applicable law.
12.02 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, if an Event of Default then exists, each Bank is hereby autho-
rized at any time or from time to time, without presentment, demand, protest
or other notice of any kind to the Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and apply
any and all deposits (general or special) and any other Indebtedness at any
time held or owing by such Bank (including without limitation by branches and
agencies of such Bank wherever located) to or for the credit or the account of
the Borrower against and on account of the Obligations and liabilities of the
Borrower to such Bank under this Agreement or under any of the other Credit
Documents, including, without limitation, all interests in Obligations of the
Borrower purchased by such Bank pursuant to Section 12.06(b), and all other
claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether or not such
Bank shall have made any demand hereunder and although said Obligations, lia-
bilities or claims, or any of them, shall be contingent or unmatured.
12.03 Notices. (a) Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be
in writing (including telex or telecopier communication) and mailed, telexed,
telecopied or delivered, if to Holdings or its Subsidiaries, at the address
specified opposite its signature below or in the other relevant Credit
Documents, as the case may be; if to any Bank, at its address specified for
such Bank on Annex II; or, at such other address as shall be designated by any
party in a written notice to the other parties hereto. All such notices and
communications shall be effective when received.
(b) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Agent may, prior to receipt of written confirmation, act without liability
upon the basis of such telephonic notice believed by the Agent in good faith
to be from an Authorized Officer of the Borrower. In each such case, the
Borrower hereby waives the right to dispute the Agent's record of the terms of
such telephonic notice.
12.04 Benefit of Agreement. (a) This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that the Borrower may
not assign or transfer any of its rights or obligations hereunder without the
prior written consent of the Banks. Each Bank may at any time grant
participations in any of its rights hereunder or under any of the Notes to
another financial institution, provided that in the case of any such
participation, the participant shall not have any rights under this Agreement
or any of the other Credit Documents (the participant's rights against such
Bank in respect of such participation to be those set forth in the agreement
executed by such Bank in favor of the participant relating thereto) and all
amounts payable by the Borrower hereunder shall be determined as if such Bank
had not sold such participation, except that the participant shall be entitled
to the benefits of Sections 1.09 and 4.04 of this Agreement to the extent that
such Bank would be entitled to such benefits if the participation had not been
entered into or sold, and, provided further, that no Bank shall transfer,
grant or assign any participation under which the participant shall have
rights to approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (i) extend
the final scheduled maturity of any Loan or Note in which such participant is
participating (it being understood that any waiver of the application of any
prepayment or the method of any application of any prepayment to, the
Scheduled Commitment Reductions shall not constitute an extension of the final
maturity date), or reduce the rate or extend the time of payment of interest
or Fees thereon (except in connection with a waiver of the applicability of
any post-default increase in interest rates), or reduce the principal amount
thereof, or increase such participant's participating interest in any
Commitment over the amount thereof then in effect (it being understood that a
waiver of any condition, covenant, Default or Event of Default or of a manda-
tory reduction in the Total Commitment, or a mandatory prepayment, shall not
constitute a change in the terms of any Commitment), (ii) release all or sub-
stantially all of the Collateral or (iii) consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement.
(b) Notwithstanding the foregoing, (x) any Bank may assign all or
a portion of its outstanding Commitment and its rights and obligations here-
under to its Affiliate or to another Bank, and (y) with the consent of the
Agent and the Borrower (which consent shall not be unreasonably withheld), any
Bank may assign all or a portion of its outstanding Commitment and its rights
and obligations hereunder to one or more Eligible Transferees. No assignment
pursuant to the immediately preceding sentence shall to the extent such
assignment represents an assignment to an institution other than one or more
Banks hereunder, be in an aggregate amount less than $5,000,000 unless the
entire Commitment of the assigning Bank is so assigned. If any Bank so sells
or assigns all or a part of its rights hereunder or under the Notes, any
reference in this Agreement or the Notes to such assigning Bank shall there-
after refer to such Bank and to the respective assignee to the extent of their
respective interests and the respective assignee shall have, to the extent of
such assignment (unless otherwise provided therein), the same rights and
benefits as it would if it were such assigning Bank. Each assignment pursuant
to this Section 12.04(b) shall be effected by the assigning Bank and the
assignee Bank executing an Assignment and Assumption Agreement. In the event
of any such assignment (x) to a commercial bank or other financial institution
not previously a Bank hereunder, either the assigning or the assignee Bank
shall pay to the Agent a nonrefundable assignment fee of $3,500 and (y) to a
Bank, either the assigning or assignee Bank shall pay to the Agent a non-
refundable assignment fee of $1,500, and at the time of any assignment
pursuant to this Section 12.04(b), (i) Annex I shall be deemed to be amended
to reflect the Commitment of the respective assignee (which shall result in a
direct reduction to the Commitment of the assigning Bank) and of the other
Banks, and (ii) if any such assignment occurs after the Initial Borrowing
Date, if requested by the assigning Bank and the assignee Bank, the Borrower
will issue new Notes to the respective assignee and to the assigning Bank in
conformity with the requirements of Section 1.05. Each Bank and the Borrower
agree to execute such documents (including without limitation amendments to
this Agreement and the other Credit Documents) as shall be necessary to effect
the foregoing. Nothing in this clause (b) shall prevent or prohibit any Bank
from pledging its Notes or Loans to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.
(c) Notwithstanding any other provisions of this Section 12.04,
no transfer or assignment of the interests or obligations of any Bank
hereunder or any grant of participation therein shall be permitted if such
transfer, assignment or grant would require Holdings or the Borrower to file a
registration statement with the SEC or to qualify the Loans under the "Blue
Sky" laws of any State.
(d) Each Bank initially party to this Agreement hereby
represents, and each Person that became a Bank pursuant to an assignment
permitted by this Section 12 will, upon its becoming party to this Agreement,
represent that it is a commercial lender, other financial institution or other
"accredited" investor (as defined in SEC Regulation D) which makes loans in
the ordinary course of its business and that it will make or acquire Loans for
its own account in the ordinary course of such business, provided that subject
to the preceding clauses (a) and (b), the disposition of any promissory notes
or other evidences of or interests in Indebtedness held by such Bank shall at
all times be within its exclusive control.
12.05 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Agent or any Bank in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
Holdings or any of its Subsidiaries and the Agent or any Bank shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder or under any other Credit Document preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies which the
Agent or any Bank would otherwise have. No notice to or demand on Holdings or
any of its Subsidiaries in any case shall entitle Holdings or any of its
Subsidiaries to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agent or the Banks
to any other or further action in any circumstances without notice or demand.
12.06 Payments Pro Rata. (a) The Agent agrees that promptly
after its receipt of each payment from or on behalf of any Credit Party in
respect of any Obligations of the Borrower or any other Credit Party
hereunder, it shall distribute such payment to the Banks (other than any Bank
that has expressly waived its right to receive its pro rata share thereof) pro
rata based upon their respective shares, if any, of the Obligations with
respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security,
by the exercise of the right of setoff or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than
the total of such Obligation then owed and due to such Bank bears to the total
of such Obligation then owed and due to all of the Banks immediately prior to
such receipt, then such Bank receiving such excess payment shall purchase for
cash without recourse or warranty from the other Banks an interest in the
Obligations of the Borrower or any other Credit Party, respectively, to such
Banks in such amount as shall result in a proportional participation by all of
the Banks in such amount, provided that if all or any portion of such excess
amount is thereafter recovered from such Bank, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
(c) Notwithstanding anything to the contrary contained herein,
the provisions of the preceding Sections 12.06(a) and (b) shall be subject to
the express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.
12.07 Calculations; Computations. (a) The financial statements
to be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by Holdings or the Borrower to the Banks), provided that (x) except as
otherwise specifically provided herein, all computations determining compli-
ance with Section 8, including definitions used therein, shall utilize
accounting principles and policies in effect at the time of the preparation
of, and in conformity with those used to prepare, the December 31, 1995
historical financial statements of Holdings delivered to the Banks pursuant to
Section 6.10(b) and (y) that if at any time the computations determining
compliance with Section 8 utilize accounting principles different from those
utilized in the financial statements furnished to the Banks, such financial
statements shall be accompanied by reconciliation work-sheets.
(b) All computations of interest and Fees hereunder shall be made
on the actual number of days elapsed over a year of 360 days.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY
ACCEPT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. HOLDINGS AND THE
BORROWER FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
BORROWER LOCATED OUTSIDE NEW YORK CITY AND BY HAND DELIVERY TO THE BORROWER
LOCATED WITHIN NEW YORK CITY, AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION
12.03, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, ANY BANK OR THE HOLDER OF ANY NOTE
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST HOLDINGS OR THE BORROWER IN ANY OTHER
JURISDICTION.
(b) HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVE ANY
OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO
IN CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVE AND AGREE NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
12.09 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.
12.10 Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which Holdings, the Borrower and each of the
Banks shall have signed a copy hereof (whether the same or different copies)
and shall have delivered the same to the Agent at the Payment Office of the
Agent or, in the case of the Banks, shall have given to the Agent telephonic
(confirmed in writing), written telex or facsimile transmission notice (actu-
ally received) at such office that the same has been signed and mailed to it.
12.11 Headings Descriptive. The headings of the several sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
12.12 Amendment or Waiver. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination
is in writing signed by the Borrower and the Required Banks, provided that no
such change, waiver, discharge or termination shall, without the consent of
each Bank (other than a Defaulting Bank) affected thereby, (i) extend the
Maturity Date (it being understood that any waiver of the application of any
prepayment of the Loans or the method of application of any prepayment to the
Scheduled Commitment Reductions, shall not constitute any such extension), or
reduce the rate or extend the time of payment of interest (other than as a
result of waiving the applicability of any post-default increase in interest
rates) or Fees thereon, or reduce the principal amount thereof, (ii) increase
the Commitment of any Bank over the amount thereof then in effect (it being
understood that a waiver of any condition, covenant, Default or Event of
Default or of a mandatory reduction in the Total Commitment shall not
constitute a change in the terms of any Commitment of any Bank), (iii) release
or permit the release of (x) any Mortgaged Rig from the Lien of the respective
Security Documents or (y) the Guaranty of Holdings pursuant to Section 13 or
the Guaranty of any Subsidiary Guarantor so long as such Subsidiary Guarantor
continues to own any Mortgaged Rig (except, in the case of both (x) and (y)
above, as expressly provided in the Credit Documents), (iv) amend, modify or
waive any provision of this Section (subject to the following proviso), (v)
reduce the percentage specified in the definition of Required Banks (it being
understood and agreed that, with the consent of the Required Banks, additional
extensions of credit pursuant to this Agreement may be included in the
determination of Required Banks on substantially the same basis as the
Commitments (and related extensions of credit) are included on the Effective
Date) or (vi) consent to the assignment or transfer by the Borrower of any of
its rights and obligations under this Agreement; provided further, that no
such change, waiver, discharge or termination shall, without the consent of
the Supermajority Banks, (1) waive, change the timing or amount of, or extend
any Scheduled Commitment Reduction, (2) amend, modify or waive any provision
contained in the definition of Supermajority Banks or (3) amend, modify or
waive any provision contained in this proviso. No provision of Sections 2 or
11, or any other provisions relating to the Letter of Credit Issuer or the
Agent may be modified without the consent of the Agent.
(b) If, in connection with any proposed change, waiver, discharge
or termination to any of the provisions of this Agreement as contemplated by
clauses (i) through (vi), inclusive, of the proviso to Section 12.12(a), the
consent of the Required Banks is obtained but the consent of one or more of
such other Banks whose consent is required is not obtained, then the Borrower
shall have the right to replace each such non-consenting Bank or Banks (so
long as all non-consenting Banks are so replaced) with one or more Replacement
Banks pursuant to Section 1.12 so long as at the time of such replacement,
each such Replacement Bank consents to the proposed change, waiver, discharge
or termination; provided that the Borrower shall not have the right to replace
a Bank solely as a result of the exercise of such Bank's rights (and the
withholding of any required consent by such Bank) pursuant to Section
12.12(a)(ii).
12.13 Survival. All indemnities set forth herein including,
without limitation, in Section 1.09, 1.10, 2.05, 4.04, 11.06 or 12.01 shall
survive the execution and delivery of this Agreement and the making and
repayment of the Loans.
12.14 Domicile of Loans. Each Bank may transfer and carry its
Loans at, to or for the account of any branch office, subsidiary or Affiliate
of such Bank, provided that the Borrower shall not be responsible for costs
arising under Section 1.09 or 4.04 resulting from any such transfer (other
than a transfer pursuant to Section 1.11(a)) to the extent not otherwise
applicable to such Bank prior to such transfer.
12.15 Confidentiality. Subject to Section 12.04, the Banks shall
hold all non-public information obtained pursuant to the requirements of this
Agreement in accordance with its customary procedure for handling confidential
information of this nature and in accordance with safe and sound banking prac-
tices and in any event may make disclosure reasonably required by any bona
fide transferee or participant in connection with the contemplated transfer of
any Loans or participation therein (so long as such transferee or participant
agrees to be bound by the provisions of this Section 12.15) or as required or
requested by any governmental agency or representative thereof or pursuant to
legal process, provided that, unless specifically prohibited by applicable law
or court order, each Bank shall notify the Borrower of any request by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Bank by such
governmental agency) for disclosure of any such non-public information prior
to disclosure of such information, and provided further that in no event shall
any Bank be obligated or required to return any materials furnished by
Holdings or any Subsidiary.
12.16 Registry. The Borrower hereby designates the Agent to serve
as the Borrower's agent, solely for purposes of this Section 12.16, to
maintain a register (the "Register") on which it will record the Commitments
from time to time of each of the Banks, the Loans made by each of the Banks
and each repayment in respect of the principal amount of the Loans of each
Bank. Failure to make any such recordation, or any error in such recordation
shall not affect the Borrower's obligations in respect of such Loans. With
respect to any Bank, the transfer of the Commitments of such Bank and the
rights to the principal of, and interest on, any Loan made pursuant to such
Commitments shall not be effective until such transfer is recorded on the
Register maintained by the Agent with respect to ownership of such Commitments
and Loans and prior to such recordation all amounts owing to the transferor
with respect to such Commitments and Loans shall remain owing to the
transferor. The registration of assignment or transfer of all or part of any
Commitments and Loans shall be recorded by the Agent on the Register only upon
the acceptance by the Agent of a properly executed and delivered Assignment
and Assumption Agreement pursuant to Section 12.04(b). Coincident with the
delivery of such an Assignment and Assumption Agreement to the Agent for
acceptance and registration of assignment or transfer of all or part of a
Loan, or as soon thereafter as practicable, the assigning or transferor Bank
shall surrender the Note evidencing such Loan, and thereupon one or more new
Notes in the same aggregate principal amount shall be issued to the assigning
or transferor Bank and/or the new Bank.
SECTION 13. Holdings Guaranty.
13.1 The Guaranty. In order to induce the Banks to enter into
this Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by Holdings from the proceeds of the Loans and the
issuance of the Letters of Credit, Holdings hereby agrees with the Banks as
follows: Holdings hereby unconditionally and irrevocably guarantees as prim-
ary obligor and not merely as surety the full and prompt payment when due,
whether upon maturity, by acceleration or otherwise, of any and all of the
Guaranteed Obligations of the Borrower to the Secured Creditors. If any or
all of the Guaranteed Obligations of the Borrower to the Secured Creditors
becomes due and payable hereunder, Holdings unconditionally promises to pay
such indebtedness to the Secured Creditors, on order, or demand, together with
any and all reasonable expenses which may be incurred by the Agent or the
Secured Creditors in collecting any of the Guaranteed Obligations.
13.2 Bankruptcy. Additionally, Holdings unconditionally and
irrevocably guarantees the payment of any and all of the Guaranteed
Obligations of the Borrower to the Secured Creditors whether or not then due
or payable by the Borrower upon the occurrence in respect of the Borrower of
any of the events specified in Section 9.05, and unconditionally and irrevoc-
ably promises to pay such Guaranteed Obligations to the Secured Creditors, on
order, or demand, in lawful money of the United States. Holdings' guaranty of
the payment of any and all of the Guaranteed Obligations hereunder shall
constitute a guaranty of payment, and not of collection.
13.3 Nature of Liability. The liability of Holdings hereunder is
exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of the Borrower whether executed by Holdings, any other
guarantor or by any other party, and the liability of Holdings hereunder shall
not be affected or impaired by (a) any direction as to application of payment
by the Borrower or by any other party, or (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other
party as to the Guaranteed Obligations of the Borrower, or (c) any payment on
or in reduction of any such other guaranty or undertaking, or (d) any dissol-
ution, termination or increase, decrease or change in personnel by the Bor-
rower, or (e) any payment made to the Agent or the Secured Creditors on the
indebtedness which the Agent or such Secured Creditors repay the Borrower pur-
suant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and Holdings waives any right to
the deferral or modification of its obligations hereunder by reason of any
such proceeding.
13.4 Independent Obligation. The obligations of Holdings
hereunder are independent of the obligations of any other guarantor or the
Borrower, and a separate action or actions may be brought and prosecuted
against Holdings whether or not action is brought against any other guarantor
or the Borrower and whether or not any other guarantor or the Borrower be
joined in any such action or actions. Holdings waives, to the fullest extent
permitted by law, the benefit of any statute of limitations affecting its
liability hereunder or the enforcement thereof. Any payment by the Borrower
or other circumstance which operates to toll any statute of limitations as to
the Borrower shall operate to toll the statute of limitations as to Holdings.
13.5 Waiver of Notice, etc. Holdings hereby waives notice of
acceptance of this Guaranty and notice of any liability to which it may apply,
and waives promptness, diligence, presentment, demand of payment, protest,
notice of dishonor or nonpayment of any such liabilities, suit or taking of
other action by the Agent, any Bank, the Letter of Credit Issuer, the
Collateral Agent or the Trustee against, and any other notice to, any party
liable thereon (including Holdings, any other guarantor or the Borrower).
13.6 Authorization. Holdings authorizes the Agent and the Secured
Creditors without notice or demand (except as shall be required by applicable
statute and cannot be waived), and without affecting or impairing its
liability hereunder, from time to time to:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, increase, accelerate or
alter, any of the Guaranteed Obligations (including any increase or
decrease in the rate of interest thereon), any security therefor, or any
liability incurred directly or indirectly in respect thereof, and the
Guaranty herein made shall apply to the Guaranteed Obligations as so
changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors,
the Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to its creditors other
than the Banks;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Secured Creditors
regardless of what liability or liabilities of Holdings or the Borrower
remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements
referred to herein, or otherwise amend, modify or supplement this
Agreement or any of such other instruments or agreements; and/or
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
Holdings from its liabilities under this Section 13.
13.7 Reliance. It is not necessary for the Agent or the Secured
Creditors to inquire into the capacity or powers of the Borrower or its
Subsidiaries or the officers, directors, partners or agents acting or
purporting to act on its behalf, and any Guaranteed Obligations made or
created in reliance upon the professed exercise of such powers shall be guar-
anteed hereunder.
13.8 Subordination. Any of the indebtedness of the Borrower
relating to the Guaranteed Obligations now or hereafter owing to Holdings is
hereby subordinated to the Guaranteed Obligations of the Borrower owing to the
Agent and the Secured Creditors; and if the Agent so requests at a time when
an Event of Default exists, all such indebtedness relating to the Guaranteed
Obligations of the Borrower to Holdings shall be collected, enforced and re-
ceived by Holdings for the benefit of the Secured Creditors and be paid over
to the Agent on behalf of the Secured Creditors on account of the Guaranteed
Obligations of the Borrower to the Secured Creditors, but without affecting or
impairing in any manner the liability of Holdings under the other provisions
of this Guaranty. Prior to the transfer by Holdings of any note or negotiable
instrument evidencing any of the indebtedness relating to the Guaranteed
Obligations of the Borrower to Holdings, Holdings shall mark such note or
negotiable instrument with a legend that the same is subject to this
subordination.
13.9 Waiver. (a) Holdings waives any right (except as shall be
required by applicable statute and cannot be waived) to require the Agent or
the Secured Creditors to (i) proceed against the Borrower, any other guarantor
or any other party, (ii) proceed against or exhaust any security held from the
Borrower, any other guarantor or any other party or (iii) pursue any other
remedy in the Agent's or the Secured Creditors' power whatsoever. Holdings
waives any defense based on or arising out of any defense of the Borrower, any
other guarantor or any other party, other than payment in full of the
Guaranteed Obligations, based on or arising out of the disability of the
Borrower, any other guarantor or any other party, or the unenforceability of
the Guaranteed Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of the Borrower other than payment
in full of the Guaranteed Obligations. The Agent and the Secured Creditors
may, at their election, foreclose on any security held by the Agent, the Col-
lateral Agent or the Secured Creditors by one or more judicial or nonjudicial
sales, whether or not every aspect of any such sale is commercially reasonable
(to the extent such sale is permitted by applicable law), or exercise any
other right or remedy the Agent and the Secured Creditors may have against the
Borrower or any other party, or any security, without affecting or impairing
in any way the liability of Holdings hereunder except to the extent the
Guaranteed Obligations have been paid. Holdings waives any defense arising
out of any such election by the Agent and the Secured Creditors, even though
such election operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of Holdings against the Borrower or any
other party or any security.
(b) Holdings waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this
Guaranty, and notices of the existence, creation or incurring of new or
additional Guaranteed Obligations. Holdings assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks which
Holdings assumes and incurs hereunder, and agrees that the Agent and the
Secured Creditors shall have no duty to advise Holdings of information known
to them regarding such circumstances or risks.
* * *
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
Address: READING & BATES CORPORATION
901 Threadneedle
Suite 200 By
Houston, Texas 77079 Name:
Attn: General Counsel Title:
Telephone: (713) 496-5000
Facsimile: (713) 496-0285
READING & BATES DRILLING CO.
By
Name:
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH,
Individually and as Agent
By
Name:
Title:
By
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
Individually and as Co-Agent
By
Name:
Title:
BANQUE INDOSUEZ
By
Name:
Title:
BANK AUSTRIA AKTIENGESELLSCHAFT
By
Name:
Title:
THE FUJI BANK, LIMITED
By
Name:
Title:
ANNEX I
COMMITMENTS
Bank Commitment
Christiania Bank og Kreditkasse, New $ 45,000,000
York Branch
Credit Lyonnais New York Branch $ 25,000,000
Banque Indosuez $ 11,000,000
Bank Austria Aktiengesellschaft $ 11,000,000
The Fuji Bank, Limited $ 8,000,000
Total $100,000,000
ANNEX II
BANK ADDRESSES
Christiania Bank og Kreditkasse, 11 West 42nd Street
New York Branch 7th Floor
New York, NY 10036
Attn: Loan Administration
Tel. No.: (212) 827-4800
Fax No.: (212) 827-4888
Credit Lyonnais 1301 Avenue of the Americas
New York Branch New York, NY 10019
Attn: Susan Kopech, Esq.
Tel. No.: (212) 261-7052
Fax No.: (212) 459-3187
with a copy to:
1000 Louisiana
Suite 5360
Houston, Texas 77002
Attn: Diane Scott
Tel. No.: (713) 751-0500
Fax No.: (713) 751-0307
Banque Indosuez 9 Rue Louis Murat
75371 Paris Cedex 08
France
Attn: Francine Struxiano-Auffray
Tel. No.: 011 33 1 4420 2377
Fax No.: 011 33 1 4420 1934
Bank Austria Aktiengesellschaft 565 Fifth Avenue
New York, NY 10017
Attn: Lynn Perri-Petrini
Tel. No.: (212) 880-1171
Fax No.: (212) 880-1180
The Fuji Bank, Limited One Houston Center
Suite 4100
1221 McKinney Street
Houston, Texas 77010
Attn: Mark Polasek
Tel. No.: (713) 650-7863
Fax No.: (713) 759-0048
Exhibit 10.86
SECURITY AGREEMENT
SECURITY AGREEMENT (as amended, modified or supplemented from time
to time, this "Agreement"), dated as of April 30, 1996, between Reading &
Bates Drilling Co. (the "Borrower"), Reading & Bates Exploration Co., Reading
& Bates (A) Pty. Ltd. and Reading and Bates Borneo Drilling Co. Ltd.
(collectively the Subsidiary Guarantors and, together with the Borrower, the
"Assignors"), and Christiania Bank og Kreditkasse, New York Branch, as
Collateral Agent (the "Collateral Agent"), for the benefit of the Banks, the
Letter of Credit Issuer, the Agent and the Trustee under, and as defined in,
the Credit Agreement hereinafter referred to (such Banks, Letter of Credit
Issuer, Agent and Trustee are hereinafter called the "Secured Creditors").
Except as otherwise defined herein, capitalized terms used herein and defined
in the Credit Agreement shall be used herein as so defined.
W I T N E S S E T H :
WHEREAS, Reading & Bates Corporation, the Borrower, the Banks,
Credit Lyonnais New York Branch, as Co-Agent and Christiania Bank og
Kreditkasse, New York Branch, as Agent (the "Agent"), have entered into a
Credit Agreement, dated as of April 30, 1996 (as modified, supplemented or
amended from time to time, the "Credit Agreement"), providing for the making
of Loans and the issuance of, and participation in, Letters of Credit as
contemplated therein;
WHEREAS, the Subsidiary Guarantors have executed the Subsidiary
Guaranty and thereby guaranteed the obligations of the Borrower under the
Credit Agreement and the other Credit Documents;
WHEREAS, the Borrower desires to incur Loans and to have Letters
of Credit issued for its account under the Credit Agreement;
WHEREAS, it is a condition precedent to the making of Loans and
the issuance of Letters of Credit under the Credit Agreement and to the
occurrence of the Effective Date that the Assignors shall have executed and
delivered to the Collateral Agent this Agreement;
WHEREAS, the Assignors desire to execute this Agreement to satisfy
the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to the
Assignors, the receipt and sufficiency of which are hereby acknowledged, the
Assignors hereby make the following representations and warranties to the
Collateral Agent and hereby covenant and agree with the Collateral Agent as
follows:
SECTION 1. PLEDGE AND GRANT OF SECURITY INTEREST.
1.01 Obligations Secured. The Agreement is made for the benefit
of the Secured Creditors to secure (i) the full and prompt payment when due of
(x) the principal of and interest on the Notes issued, and Loans made, under
the Credit Agreement, and all reimbursement obligations and Unpaid Drawings
with respect to the Letters of Credit issued under the Credit Agreement and
(y) all other obligations and indebtedness (including, without limitation,
indemnities, Fees and interest thereon) of the Borrower to the Secured
Creditors, whether now existing or hereafter incurred under, arising out of or
in connection with the Credit Agreement and the other Credit Documents and the
due performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the other
Credit Documents; (ii) any and all sums advanced by the Collateral Agent in
order to preserve the Collateral (as hereinafter defined) or preserve its
security interest in the Collateral; (iii) in the event of any proceeding for
the collection or enforcement of any indebtedness, obligations, or liabilities
of the Borrower referred to in clause (i) above, after an Event of Default
shall have occurred and be continuing, the reasonable expenses of the
Collateral Agent of re-taking, holding, preparing for sale or lease, selling
or otherwise disposing of or realizing on the Collateral, or of any exercise
by the Collateral Agent of its rights hereunder, together with reasonable
attorneys' fees of counsel to the Collateral Agent and court costs; and (iv)
all amounts paid by any Indemnitee as to which such Indemnitee has the right
to reimbursement under Section 11 of this Agreement (all such obligations,
liabilities, sums and expenses referred to in clauses (i) through (iv) above
being collectively referred to as the "Obligations"). It is acknowledged and
agreed that the "Obligations" shall include extensions of credit of the types
described above, whether outstanding on the date of this Agreement or extended
from time to time after the date of this Agreement.
1.02 Pledge and Grant of Security Interest. As collateral
security for the Obligations, the Assignors hereby pledge and assign to the
Collateral Agent, for the benefit of the Secured Creditors, a continuing
possessory lien and security interest in all of the Assignors' right, title
and interest in and to the Concentration Account (as hereinafter defined)
together with all deposits made from time to time therein and all investments
from time to time therein and/or made with the funds therein and all cash and
non-cash proceeds of any of the foregoing, from the date this Agreement until
the termination thereof pursuant to the terms hereof (the "Collateral").
SECTION 2. ESTABLISHMENT OF COLLATERAL ACCOUNT; ETC.
2.01 Establishment. The Assignors currently maintain with
Christiania Bank og Kreditkasse, Grand Cayman Branch ("CBKGC", with CBKGC
acting as agent for the Agent with respect to such account) an account (No.
4062660601) for purposes of this Agreement (the "Concentration Account").
Only Collateral will be deposited and shall remain in the Concentration
Account until such Collateral is released from the Concentration Account in
accordance with this Agreement. Subject to the provisions of this Agreement
(including the automatic release provision of Section 2.02(b)), the
Concentration Account shall be under the sole dominion and control of the
Collateral Agent, with the Collateral Agent having the right to make
withdrawals from the balance of the Concentration Account from time to time
therein in accordance with the terms of this Agreement. All Collateral
delivered to or held by or on behalf of the Collateral Agent pursuant hereto
shall be held in the Concentration Account in accordance with the provisions
hereof.
2.02 Deposits to Concentration Account; etc. (a) The Assignors
shall deposit or direct their Subsidiaries to deposit in the Concentration
Account on a daily basis all collected (i) earnings of the Collateral Rigs
from any source; (ii) all moneys or other compensation paid by reason of
requisition of title or for hire or other compulsory acquisition of any
Collateral Rig; and (iii) proceeds of the foregoing maintained with such
institutions to the Concentration Account. As used herein, "earnings" in (i)
means:
(x) all rent, charterhire and other moneys and rights and claims
to moneys, other than the local currency portion necessary to cover
expenses relating to the relevant contract (the "Local Currency
Portion");
(y) all the Assignors' right, title and interest to and in any
moneys other than the Local Currency Portion payable to the Assignors
under any bareboat or time charter, drilling contract, or other contract
for the use or employment of the Collateral Rigs, and all other rights
and benefits whatsoever accruing to the Assignors 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, drilling contract, or other contract
for the use or employment of the Collateral Rigs; and
(z) all freights (if any), passage moneys (if any), hire moneys
(if any), compensation (if any) payable to the Assignors in the event of
the requisition of the Collateral Rigs 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
Assignors.
(b) Subject to the provisions of Section 2.02(c) of this
Agreement, the Collateral Agent's security interest in the funds maintained in
the Concentration Account shall automatically be and be deemed released,
without the need for any action on the part of the Collateral Agent, from time
to time as requested or directed by the Borrower.
(c) Upon the occurrence of an Event of Default pursuant to
Section 9.05 of the Credit Agreement (a "Bankruptcy Default") and without any
further act or notice, or upon the giving by the Collateral Agent of a written
notice (a "Release Termination Notice") to the Assignors after the occurrence
and during the continuance of an Event of Default other than a Bankruptcy
Default, the automatic release set forth in Section 2.02(b) of this Agreement
shall terminate.
(d) Upon the occurrence of an Event of Default, the Assignors
shall continue to deposit, or cause to be deposited, all payments of earnings
of the Collateral Rigs directly into the Concentration Account.
It is hereby expressly agreed that, anything contained herein to
the contrary notwithstanding, the Assignors shall remain liable under all
charters and contracts pertaining to the Collateral Rigs to perform the
obligations assumed by them thereunder, and the Collateral Agent shall have no
obligation or liability of any nature whatsoever under any such charter or
contract by reason of, or arising out of, this Agreement, nor shall the
Collateral Agent be required to assume or be obligated in any manner to
perform or fulfill any obligation of the Assignors 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 Collateral Agent, 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.
2.03 Investment of Funds Deposited in the Concentration Account.
Until the date on which the Total Commitment under the Credit Agreement is
terminated and no Letter of Credit remains outstanding and all Obligations
have been paid in full, and so long as no Event of Default is in existence,
the Collateral Agent will from time to time, at the request of the Assignors,
invest funds on deposit in the Concentration Account in Cash Equivalents which
are substantially similar to those investments being requested by the
Assignors on or about the date hereof or such other investments as may be
requested by the Assignors and acceptable to the Collateral Agent in its sole
discretion (investments permitted under this Section 2.03 are herein called
"Permitted Investments"). All investments made pursuant to this Section 2.03
(and any instruments evidencing same), and all proceeds thereof, shall be held
in the Concentration Account as part of the Collateral. All such investments
shall be made in the name of the Collateral Agent. All risk of loss in
respect of investments made pursuant to this Section 2.03 shall be on the
Assignors.
SECTION 3. FURTHER ASSURANCES.
The Assignors will, at any time and from time to time, at its own
expense, promptly execute and deliver all further agreements, instruments and
other documents and take all further action that may be necessary or that the
Collateral Agent may reasonably request in order to perfect and protect the
security interest purported to be created hereby or otherwise to enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder.
SECTION 4. TRANSFERS AND OTHER LIENS.
The Assignors will not, without the written consent of the
Collateral Agent, (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of any interest in the Collateral or (ii) create or suffer
to exist any Lien, security interest or other charge or encumbrance upon or
with respect to any Collateral except for the security interest purported to
be created hereby.
SECTION 5. ATTORNEY-IN-FACT.
The Assignors hereby appoint the Collateral Agent the Assignors'
attorney-in-fact, with full authority only after the occurrence of and during
the continuance of an Event of Default, in the place and stead of the
Assignors and in the name of the Assignors or otherwise, from time to time in
the Collateral Agent's discretion to execute any instrument and to take any
other action which the Collateral Agent may in good faith reasonably deem
necessary or advisable to accomplish the purposes of this Agreement or to
facilitate the assignment or other transfer by the Collateral Agent of any or
all of its rights hereunder, including, without limitation, (i) to receive,
endorse and collect all instruments made payable to the Assignors and
representing any interest payment or other distribution in respect of the
Collateral and to give full discharge for the same and (ii) to execute and
deliver any and all instruments and other documents that the Collateral Agent
may request in connection with the exercise by the Collateral Agent of any or
all of its rights hereunder. Such appointment of the Collateral Agent as
attorney-in-fact is irrevocable and coupled with an interest.
SECTION 6. PERFORMANCE BY THE COLLATERAL AGENT.
If the Assignors fail to perform any agreement or obligation
contained herein, the Collateral Agent itself may perform or cause performance
of such agreement or obligation, and the reasonable expenses of the Collateral
Agent incurred in connection therewith shall be payable to the Collateral
Agent by the Assignors.
SECTION 7. RESPONSIBILITY OF THE COLLATERAL AGENT.
Other than the exercise of reasonable care to assure the safe
custody of the Collateral while held hereunder, the Collateral Agent shall
have no duty or liability to preserve rights pertaining thereto and shall be
relieved of all responsibility for the Collateral upon surrendering it or
tendering surrender of it to the Assignors. The Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Collateral Agent accords its own
property. Without limiting the generality of the foregoing, neither the
Collateral Agent nor any of its directors, officers, agents or employees shall
be liable (i) for any failure to invest or reinvest any cash in the
Concentration Account in accordance herewith in the absence of its or their
own gross negligence or willful misconduct or for any losses incurred by
reason of investments made by the Collateral Agent pursuant to Section 2.03 or
(ii) for any action taken or omitted to be taken by the Collateral Agent (x)
in good faith in accordance with the advice of counsel with respect to any
question as to the construction of any provision hereof or any action to be
taken by the Collateral Agent hereunder or (y) in accordance with any
instructions or other notice which the Collateral Agent believes in good faith
to be properly given by the Assignors hereunder. This Section 7 shall have no
application to CBK except in its capacity as Collateral Agent.
SECTION 8. REMEDIES UPON DEFAULT.
If any Event of Default shall occur and be continuing:
(a) The Collateral Agent may (i) exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party
on default under the Uniform Commercial Code then in effect in the State of
New York, (ii) withdraw any funds, if any, from the Concentration Account, and
(iii) without notice except as specified below, sell any or all of the
Collateral in one or more parcels at any public or private sale, at any
exchange, broker's board or at any of the Collateral Agent's offices or
elsewhere, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as the Collateral Agent may deem commercially
reasonable. The Assignors agree that, to the extent notice of sale shall be
required by law, at least 10 Business Days' notice to the Assignors of the
time and place of any public sale or the time after which any private sale or
other disposition is to be made shall constitute reasonable notification. The
Collateral Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Collateral Agent may
adjourn any public or private sale from time to time (by announcement, in the
case of any public sale, at the time and place fixed therefor), and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.
(b) All cash proceeds received by the Collateral Agent in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral shall be applied in accordance with the Credit Agreement and
the Mortgages (as defined in the Credit Agreement) relating to the Collateral
Rigs.
(c) Notwithstanding the foregoing provisions of this Section 8,
the Collateral Agent may elect, by notice to the Assignors, to retain any and
all of the Collateral, to collect or cause the collection of the proceeds
thereof and to hold any and all of such Collateral as continuing collateral
for, and to apply at such times and in such manner as the Collateral Agent may
elect any and all of such Collateral to pay, the Obligations; provided that
the Collateral is valued at fair market value for purposes of determining the
amount by which the Obligations shall be reduced in consideration of the
retention of such Collateral. The Assignors hereby waive, to the fullest
extent permitted by law, any and all rights they may have to require the
Collateral Agent to sell or otherwise dispose of any or all of the Collateral.
SECTION 9. APPLICATION OF PROCEEDS.
(a) All moneys collected by the Collateral Agent upon any sale or
other disposition of any Collateral, together with all other moneys received
by the Collateral Agent hereunder or under any of the other Security
Documents, shall be applied as follows:
(i) first, to the payment of all amounts owing the Collateral Agent of
the type described in clauses (ii) and (iii) of Section 1.01;
(ii) second, to the extent moneys remain after the application pursuant
to the preceding clause (i), an amount equal to the outstanding
Obligations shall be paid to the Secured Creditors as provided in
Section 9(c), with each Secured Creditor receiving an amount equal to
such Obligations held by it or, if the proceeds are insufficient to pay
in full all such Obligations, its Pro Rata Share (as defined below) of
the amount remaining to be distributed; and
(iii) third, to the extent moneys remain after the application pursuant
to the preceding clauses (i) and (ii), and following the termination of
this Agreement pursuant to Section 12, any surplus then remaining shall
be paid to the Assignors, subject, however, to the rights of the holder
of any then existing Lien of which the Collateral Agent has actual
notice (without investigation).
(b) For purposes of this Agreement "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount in
respect of any Obligations, the amount (expressed as a percentage) equal to a
fraction the numerator of which is the then unpaid amount of such Obligations
owing to or held by such Secured Creditor and the denominator of which is the
then outstanding amount of all such Obligations. For purposes of determining
the amount payable to each Secured Creditor, the Collateral Agent shall be
entitled to request each Secured Creditor to furnish it with written notice of
the amount of Obligations then owed to it and shall be entitled to rely upon
the amounts stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors
hereunder shall be made to the Agent under the Credit Agreement for the
account of the Secured Creditors.
(d) For purposes of applying payments received in accordance
with this Section 9, the Collateral Agent shall be entitled to rely upon (i)
the Agent under the Credit Agreement and (ii) the Secured Creditors for a
determination (which the Agent and each Secured Creditor, by their acceptance
of the benefits of this Agreement shall be obligated to provide upon request
of the Collateral Agent) of the outstanding Obligations owed to the Secured
Creditors. Unless it has actual knowledge (including by way of written notice
from a Secured Creditor) to the contrary, the Agent under the Credit
Agreement, in furnishing information pursuant to the preceding sentence, and
the Collateral Agent, in acting hereunder, shall be entitled to assume that
(x) no obligations other than principal, interest and regularly accruing fees
are owing to any Secured Creditor.
SECTION 10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
ASSIGNORS.
The Assignors represent and warrant that on the date of the
deposit by the Assignors of any Collateral in the Concentration Account, it
will be the legal, record and beneficial owner of, and will have good and
marketable title to, the Collateral, subject to no pledge, lien, mortgage,
hypothecation, security interest, charge, option or other interests other than
the lien created by this Agreement. The Assignors covenant and agree that
they will defend the Collateral Agent's right, title and security interest in
and to the Collateral and the proceeds thereof against the claims and demands
of all Persons whomsoever; and the Assignors covenant and agree that they will
have like title to and right to pledge any other property at any time
hereafter pledged to the Collateral Agent as Collateral hereunder and will
likewise defend the right thereto and security interest therein of the
Collateral Agent.
SECTION 11. INDEMNITY.
11.1 Indemnity. (a) The Assignors agree to indemnify,
reimburse and hold the Collateral Agent, each Secured Creditor and their
respective successors, assigns, employees, agents and servants (hereinafter in
this Section 11.1 referred to individually as "Indemnitee," and collectively
as "Indemnitees") harmless from any and all liabilities, obligations, damages,
injuries, penalties, claims, demands, actions, suits, judgments and any and
all costs and expenses (including reasonable attorneys' fees and expenses)
(for the purposes of this Section 11.1 the foregoing are collectively called
"expenses") of whatsoever kind and nature imposed on, asserted against or
incurred by any of the Indemnitees in any way relating to or arising out of
this Agreement, the Credit Agreement, any other Credit Document or the
documents executed in connection herewith and therewith or in any other way
connected with the administration of the transactions contemplated hereby and
thereby or the enforcement of any of the terms of, or the preservation of any
rights under any such Credit Document or other document, or in any way
relating to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral
(including, without limitation, latent or other defects, whether or not
discoverable), the violation of the laws of any country, state or other
governmental body or unit, any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on
account of injury to or the death of any Person (including any Indemnitee), or
property damage), or contract claim; provided that no Indemnitee shall be
indemnified pursuant to this Section 11.1(a) for losses, damages or
liabilities to the extent caused by the gross negligence or wilful misconduct
of such Indemnitee. The Assignors agree that upon written notice by any
Indemnitee of the assertion of such a liability, obligation, damage, injury,
penalty, claim, demand, action, judgment or suit, the Assignors shall assume
full responsibility for the defense thereof. Each Indemnitee agrees to use
its best efforts to promptly notify the Assignors of any such assertion of
which such Indemnitee has knowledge.
(b) Without limiting the application of Section 11.1(a), the
Assignors agree to pay, or reimburse the Collateral Agent for any and all
fees, costs and expenses of whatever kind or nature incurred in connection
with the creation, preservation or protection of the Collateral Agent's Liens
on, and security interest in, the Collateral, including, without limitation,
all fees and taxes in connection with the recording or filing of instruments
and documents in public offices, payment or discharge of any taxes or Liens
upon or in respect of the Collateral, premiums for insurance with respect to
the Collateral and all other fees, costs and expenses in connection with
protecting, maintaining or preserving the Collateral and the Collateral
Agent's interest therein, whether through judicial proceedings or otherwise,
or in defending or prosecuting any actions, suits or proceedings arising out
of or relating to the Collateral.
(c) Without limiting the application of Section 11.1(a) or (b),
the Assignors agree to pay, indemnify and hold each Indemnitee harmless from
and against any loss, costs, damages and expenses which such Indemnitee may
suffer, expend or incur in consequence of or growing out of any
misrepresentation by the Assignors in this Agreement, the Credit Agreement or
any other Credit Document or in any statement or writing contemplated by or
made or delivered pursuant to or in connection with this Agreement, the Credit
Agreement or any other Credit Document.
(d) If and to the extent that the obligations of the Assignors
under this Section 11.1 are unenforceable for any reason, the Assignors hereby
agree to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
11.2 Indemnity Obligations Secured by Collateral; Survival. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of the Assignors contained in this Section 11 shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement and all of the other Obligations and
notwithstanding the discharge thereof.
SECTION 12. TERMINATION; RELEASE; PARTIAL RELEASE.
(a) On the date on which the Credit Agreement and all Letters of
Credit shall have been terminated, when no Note remains outstanding and all
Obligations shall have been irrevocably paid in full, this Agreement shall
terminate, and the Collateral Agent, at the request and expense of the
Assignors, will execute and deliver to the Assignors a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement,
and will duly assign, transfer and deliver to the Assignors (without recourse
and without any representation or warranty) such of the Collateral as may
remain in the possession of the Collateral Agent together with any moneys at
the time held by the Collateral Agent hereunder.
(b) Subject to Section 2.02 hereof and so long as no Event of
Default shall be in existence, upon instructions of the Assignors, Collateral
shall be released from the Concentration Account to the Assignors or as
directed by the Assignors.
SECTION 13. NOTICES, ETC.
Except as otherwise expressly provided herein, all notices and
other communications provided for hereunder shall be delivered and become
effective in accordance with Section 12.03 of the Credit Agreement.
SECTION 14. MISCELLANEOUS.
This Agreement shall be binding upon the Assignors and their
successors and assigns (although the Assignors may not assign their rights or
obligations under this Agreement) and shall inure to the benefit of and be
enforceable by the Collateral Agent and its successors and assigns. The
headings in this Agreement are for purposes of reference only and shall not
limit or define the meaning hereof. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
be governed by the law of the State of New York. This Agreement may be
executed in any number of counterparts, each of which shall be an original,
but all of which shall constitute one instrument. This Agreement shall become
effective on the date on which each of the parties shall have executed and
delivered a copy hereof. In the event that any provision of this Agreement
shall prove to be invalid or unenforceable, such provision shall be deemed to
be severable from the other provisions of this Agreement which shall remain
binding on all parties hereto.
SECTION 15. WAIVER; AMENDMENT.
None of the terms and conditions of this Agreement may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Assignors and the Collateral Agent.
SECTION 16. SECURED CREDITOR ACKNOWLEDGMENT.
By accepting the benefits of this Agreement, each Secured Creditor
acknowledges and agrees that the rights and obligations of the Collateral
Agent shall be as set forth in Section 12 of the Credit Agreement.
IN WITNESS WHEREOF, the Assignors and the Collateral Agent have
caused this Agreement to be executed by their duly elected officers duly
authorized as of the date first above written.
ADDRESS:
901 Threadneedle READING & BATES DRILLING CO.
Suite 200
Houston, Texas 77079 By________________________________
Attention: General Counsel Title:
Tel: (713) 496-5000
Fax: (713) 496-0285 READING & BATES EXPLORATION CO.
By_______________________________
Title:
READING & BATES (A) PTY. LTD.
By_______________________________
Title:
READING AND BATES BORNEO DRILLING
CO. LTD.
By_______________________________
Title:
11 West 42nd Street CHRISTIANIA BANK og KREDITKASSE,
New York, New York 10036 NEW YORK BRANCH
Attention: Hans Chr. Kjelsrud
Tel: (212) 827-4814 By________________________________
Fax: (212) 827-4888 Title:
By________________________________
Title:
Exhibit 10.87
SUBSIDIARY GUARANTY
SUBSIDIARY GUARANTY, dated as of April 30, 1996 made by the
undersigned (each a "Guarantor" and collectively, the "Guarantors"). Except
as otherwise defined herein, terms used herein and defined in the Credit
Agreement (as hereinafter defined) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Reading & Bates Corporation, Reading & Bates Drilling Co.
(the "Borrower"), various financial institutions from time to time party
thereto (the "Banks"), Credit Lyonnais New York Branch, as Co-Agent and
Christiania Bank og Kreditkasse, New York Branch, as Agent (the "Agent") have
entered into a Credit Agreement, dated as of April 30, 1996 (as amended,
modified or supplemented from time to time, the "Credit Agreement"), providing
for the making of Loans and the issuance of, and participation in, Letters of
Credit as contemplated therein (the Banks, the Agent, the Letter of Credit
Issuer, the Collateral Agent and the Trustee are herein collectively called
the "Creditors");
WHEREAS, the Borrower owns, directly or indirectly, 100% of the
capital stock of each Guarantor;
WHEREAS, it is a condition to the making of Loans and the issuance
of, and participation in, Letters of Credit under the Credit Agreement that
each Guarantor shall have executed and delivered this Guaranty; and
WHEREAS, each Guarantor will obtain benefits from the incurrence
of Loans by the Borrower and the issuance of Letters of Credit under the
Credit Agreement and, accordingly, desires to execute this Guaranty in order
to satisfy the conditions described in the preceding paragraph and to induce
the Banks to make Loans to the Borrower and the Letter of Credit Issuer to
issue Letters of Credit;
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to each Guarantor, the receipt and sufficiency of which are
hereby acknowledged, each Guarantor hereby makes the following representations
and warranties to the Creditors and hereby covenants and agrees with each
Creditor as follows:
1. Each Guarantor, jointly and severally, irrevocably and
unconditionally, guarantees, as primary obligor and not merely as surety, to
the Creditors the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of (x) the principal of and interest
on the Notes issued by, and the Loans made to, the Borrower under the Credit
Agreement, and all reimbursement obligations and Unpaid Drawings with respect
to the Letters of Credit issued under the Credit Agreement and (y) all other
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing
by the Borrower to the Creditors under the Credit Agreement (including, with-
out limitation, indemnities, Fees and interest thereon) now existing or
hereafter incurred under, arising out of or in connection with the Credit
Agreement or any other Credit Document and the due performance and compliance
with the terms of the Credit Documents by the Borrower (all such principal,
interest, liabilities and obligations being herein collectively called the
"Guaranteed Obligations"). Each Guarantor understands, agrees and confirms
that the Creditors may enforce this Guaranty up to the full amount of the
Guaranteed Obligations against each Guarantor without proceeding against any
other Guarantor or the Borrower, against any security for the Guaranteed
Obligations, or under any other guaranty covering all or a portion of the
Guaranteed Obligations. All payments by each Guarantor under this Guaranty
shall be made on the same basis as payments by the Borrower under Sections
4.03 and 4.04 of the Credit Agreement.
2. Additionally, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations of the Borrower to the Creditors whether or not due or
payable by the Borrower upon the occurrence in respect of the Borrower of any
of the events specified in Section 9.05 of the Credit Agreement, and
unconditionally and irrevocably, jointly and severally, promises to pay such
Guaranteed Obligations to the Creditors, or order, on demand, in lawful money
of the United States. This Guaranty shall constitute a guaranty of payment,
and not of collection.
3. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the indebtedness of the
Borrower whether executed by such Guarantor, any other Guarantor, any other
guarantor or by any other party, and the liability of each Guarantor hereunder
shall not be affected or impaired by (a) any direction as to application of
payment by the Borrower or by any other party, (b) any other continuing or
other guaranty, undertaking or maximum liability of a guarantor or of any
other party as to the indebtedness of the Borrower, (c) any payment on or in
reduction of any such other guaranty or undertaking, (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower, (e)
any payment made to any Creditor on the indebtedness which any Creditor repays
the Borrower pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and each Guarantor
waives any right to the deferral or modification of its obligations hereunder
by reason of any such proceeding, (f) any action or inaction by the Creditors
as contemplated in Section 6 hereof, or (g) any invalidity, irregularity or
unenforceability of all or part of the Guaranteed Obligations or of any
security therefor.
4. The obligations of each Guarantor hereunder are independent of
the obligations of any other Guarantor, any other guarantor or the Borrower,
and a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor or the Borrower and whether or not any other Guarantor, any
other guarantor or the Borrower be joined in any such action or actions. Any
payment by the Borrower or other circumstance which operates to toll any
statute of limitations as to the Borrower shall operate to toll the statute of
limitations as to each Guarantor.
5. Each Guarantor hereby waives notice of acceptance of this
Guaranty and notice of any liability to which it may apply, and waives
promptness, diligence, presentment, demand of payment, protest, notice of
dishonor or nonpayment of any such liabilities, suit or taking of other action
by the Agent or any other Creditor against, and any other notice to, any party
liable thereon (including such Guarantor, any other guarantor or the
Borrower).
6. Any Creditor may at any time and from time to time without the
consent of, or notice to, any Guarantor, without incurring responsibility to
such Guarantor, without impairing or releasing the obligations of such
Guarantor hereunder, upon or without any terms or conditions and in whole or
in part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter, any of the
Guaranteed Obligations, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the guaranty herein made
shall apply to the Guaranteed Obligations as so changed, extended,
renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to creditors of the
Borrower;
(e) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Creditors regardless
of what liabilities of the Borrower remain unpaid;
(f) release or substitute any one or more endorsers, guarantors,
any Credit Party or other obligors;
(g) consent to or waive any breach of, or any act, omission or
default under, any of the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or supplement
any of the Credit Documents or any of such other instruments or agree-
ments; and/or
(h) act or fail to act in any manner referred to in this
Guaranty which may deprive such Guarantor of its right to subrogation
against the Borrower to recover full indemnity for any payments made
pursuant to this Guaranty.
7. No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might constitute a legal or
equitable discharge of a surety or guarantor except payment in full of the
Guaranteed Obligations.
8. This Guaranty is a continuing one and all liabilities to which
it applies or may apply under the terms hereof shall be conclusively presumed
to have been created in reliance hereon. No failure or delay on the part of
any Creditor in exercising 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. The rights
and remedies herein expressly specified are cumulative and not exclusive of
any rights or remedies which any Creditor would otherwise have. No notice to
or demand on any Guarantor in any case shall entitle such Guarantor to any
other further notice or demand in similar or other circumstances or constitute
a waiver of the rights of any Creditor to any other or further action in any
circumstances without notice or demand. It is not necessary for any Creditor
to inquire into the capacity or powers of the Borrower or any of its
Subsidiaries or the officers, directors, partners or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
9. Any indebtedness of the Borrower now or hereafter held by any
Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Creditors; and such indebtedness of the Borrower to any Guarantor, if the
Agent, after an Event of Default has occurred, so requests, shall be
collected, enforced and received by such Guarantor as trustee for the
Creditors and be paid over to the Creditors on account of the indebtedness of
the Borrower to the Creditors, but without affecting or impairing in any
manner the liability of such Guarantor under the other provisions of this
Guaranty. Prior to the transfer by any Guarantor of any note or negotiable
instrument evidencing any indebtedness of the Borrower to such Guarantor, such
Guarantor shall mark such note or negotiable instrument with a legend that the
same is subject to this subordination. Without limiting the generality of the
foregoing, each Guarantor hereby agrees with the Creditors that it will not
exercise any right of subrogation which it may at any time otherwise have as a
result of this Guaranty (whether contractual, under Section 509 of the
Bankruptcy Code or otherwise) until all Guaranteed Obligations have been
irrevocably paid in full in cash.
10. (a) Each Guarantor waives any right (except as shall be
required by applicable law and cannot be waived) to require the Creditors to
(A) proceed against the Borrower, any other Guarantor, any other guarantor or
any other party, (B) proceed against or exhaust any security held from the
Borrower, any other Guarantor, any other guarantor or any other party or (C)
pursue any other remedy in the Creditors' power whatsoever. Each Guarantor
waives any defense based on or arising out of any defense of the Borrower, any
other Guarantor, any other guarantor or any other party other than payment in
full of the Guaranteed Obligations, including without limitation any defense
based on or arising out of the disability of the Borrower, any other
Guarantor, any other guarantor or any other party, or the unenforceability of
the Guaranteed Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of the Borrower other than payment
in full of the Guaranteed Obligations. The Creditors may, at their election,
foreclose on any security held by the Agent or the other Creditors by one or
more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Creditors may have
against the Borrower or any other party, or any security, without affecting or
impairing in any way the liability of any Guarantor hereunder except to the
extent the Guaranteed Obligations have been paid in full. Each Guarantor
waives any defense arising out of any such election by the Creditors, even
though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrower or any other party or any security.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guaranty, and notices of the existence, creation or incurring of new
or additional indebtedness. Each Guarantor assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks which
such Guarantor assumes and incurs hereunder, and agrees that the Creditors
shall have no duty to advise any Guarantor of information known to them
regarding such circumstances or risks.
11. The Creditors agree that this Guaranty may be enforced only
by the action of the Agent or the Collateral Agent, in each case acting upon
the instructions of the Required Banks and that no Creditor shall have any
right individually to seek to enforce or to enforce this Guaranty, it being
understood and agreed that such rights and remedies may be exercised by the
Agent or the Collateral Agent for the benefit of the Creditors upon the terms
of this Guaranty. The Creditors further agree that this Guaranty may not be
enforced against any director, officer, employee or stockholder of any
Guarantor (except to the extent such stockholder is also a Guarantor
hereunder).
12. Each Guarantor covenants and agrees that on and after the
date hereof and until the termination of the Total Commitment and when no
Letter of Credit or Note remains outstanding and all Guaranteed Obligations
have been paid in full, such Guarantor shall take, or will refrain from
taking, as the case may be, all actions that are necessary to be taken or not
taken so that no violation of any provision, covenant or agreement contained
in Section 7 or 8 of the Credit Agreement, and so that no Event of Default, is
caused by the actions of such Guarantor or any of its Subsidiaries.
13. The Guarantors hereby jointly and severally agree to pay all
reasonable out-of-pocket costs and expenses (x), after an Event of Default
shall have occurred and be continuing, of each Creditor in connection with the
enforcement of this Guaranty and the protection of such Creditor's rights
hereunder (including, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel) employed by any of the
Creditors) and (y) of the Agent in connection with any amendment, waiver or
consent relating hereto (including, without limitation, the reasonable fees
and disbursements of counsel (including in-house counsel) employed by the
Agent.
14. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and
their successors and assigns.
15. Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated except with the written consent of
the Required Banks (or to the extent required by Section 12.12 of the Credit
Agreement, with the written consent of each Bank) and each Guarantor affected
thereby (it being understood that the addition or release of any Guarantor
hereunder shall not constitute a change, waiver, discharge or termination
affecting any Guarantor other than the Guarantor so added or released).
16. Each Guarantor acknowledges that an executed (or conformed)
copy of each of the Credit Documents has been made available to its principal
executive officers and such officers are familiar with the contents thereof.
17. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of an Event of Default (such term to
mean and include any "Event of Default" as defined in the Credit Agreement
continuing after any applicable grace period), each Creditor is hereby
authorized at any time or from time to time, without notice to any Guarantor
or to any other Person, any such notice being expressly waived, to set off and
to appropriate and apply any and all deposits (general or special) and any
other indebtedness at any time held or owing by such Creditor to or for the
credit or the account of such Guarantor, against and on account of the
obligations and liabilities of such Guarantor to such Creditor under this
Guaranty, irrespective of whether or not such Creditor shall have made any
demand hereunder and although said obligations, liabilities, deposits or
claims, or any of them, shall be contingent or unmatured.
18. All notices, requests, demands or other communications
pursuant hereto shall be deemed to have been duly given or made when delivered
to the Person to which such notice, request, demand or other communication is
required or permitted to be given or made under this Guaranty, addressed to
such party at (i) in the case of any Creditor, as provided in the Credit
Agreement and (ii) in the case of any Guarantor, at its address set forth
opposite its signature below; or in any case at such other address as any of
the Persons listed above may hereafter notify the others in writing.
19. If claim is ever made upon any Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part
of said amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (b) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the Borrower), then and in such event each
Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon such Guarantor, notwithstanding any revoca-
tion hereof or of any other instrument evidencing any liability of the
Borrower, and such Guarantor shall be and remain liable to the aforesaid
payees hereunder for the amount so repaid or recovered to the same extent as
if such amount had never originally been received by any such payee.
20. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or
proceeding with respect to this Guaranty or any other Credit Document may be
brought in the courts of the State of New York or of the United States of
America for the Southern District of New York, and, by execution and delivery
of this Guaranty, each Guarantor hereby accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts and hereby irrevocably waives any right it may have to object to the
laying of venue of any such action or proceeding in the aforesaid courts and
hereby further irrevocably waives and agrees not to plead or claim that any
such action or proceeding has been brought in an inconvenient forum. Each
Guarantor hereby irrevocably designates, appoints and empowers the Borrower,
with offices on the date hereof at 901 Threadneedle, Suite 200, Houston, Texas
77079 as its designee, appointee and agent to receive, accept and acknowledge
for any on its behalf, and in respect of its property, service or any and all
legal process, summons, notices and documents which may be served in any such
action or proceeding. If for any reason such designee, appointee and agent
shall cease to be available to act as such, each Guarantor agrees to designate
a new designee, appointee and agent in New York City on the terms and for the
purposes of this provision satisfactory to the Agent for the Banks under this
Guaranty. Each Guarantor further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to each Guarantor at its address set forth opposite its
signature below. Nothing herein shall affect the right of any of the
Creditors to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against each Guarantor in any other
jurisdiction.
(b) Each Guarantor hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Guaranty or
any other credit document brought in the courts referred to in clause (a)
above and hereby further irrevocably waives and agrees not to plead or claim
in any such court that such action or proceeding brought in any such court has
been brought in an inconvenient forum.
21. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of or liquidated in compliance with
the requirements of Section 8.02 of the Credit Agreement (or such sale or
other disposition has been approved in writing by the Required Banks (or all
Banks if required by Section 12.12 of the Credit Agreement)) and the proceeds
of such sale, disposition or liquidation are applied in accordance with the
provisions of the Credit Agreement, to the extent applicable, such Guarantor
shall be released from this Guaranty and this Guaranty shall, as to each such
Guarantor or Guarantors, terminate, and have no further force or effect (it
being understood and agreed that the sale of any Person that owns, directly or
indirectly, the capital stock of any Guarantor shall be deemed to be a sale of
such Guarantor for the purposes of this Section 21).
22. At any time a payment in respect of the Guaranteed Obli-
gations is made under this Guaranty, the right of contribution, if any, of
each Guarantor against any other Guarantor required to make any payment to
such Guarantor pursuant to this Section 22 (a "Contributor") shall be
determined as provided in the immediately following sentence, with the right
of contribution of each Guarantor to be revised and restated as of each date
on which a payment (a "Relevant Payment") is made on the Guaranteed
Obligations under this Guaranty. At any time that a Relevant Payment is made
by a Guarantor that results in the aggregate payments made by such Guarantor
in respect of the Guaranteed Obligations to and including the date of the
Relevant Payment exceeding such Guarantor's Contribution Percentage (as
hereinafter defined) of the aggregate payments made by all Guarantors in
respect of the Guaranteed Obligations to and including the date of the
Relevant Payment (such excess, the "Aggregate Excess Amount"), each such
Guarantor shall have a right of contribution against each Contributor who has
made payments in respect of the Guaranteed Obligations to and including the
date of the Relevant Payment in an aggregate amount less than such
Contributor's Contribution Percentage of the aggregate payments made to and
including the date of the Relevant Payment by all Guarantors in respect of the
Guaranteed Obligations (the aggregate amount of such deficit, the "Aggregate
Deficit Amount") in an amount equal to (x) a fraction the numerator of which
is the Aggregate Excess Amount of such Guarantor and the denominator of which
is the Aggregate Excess Amount of all Guarantors multiplied by (y) the
Aggregate Deficit Amount of such Contributor. A Guarantor's right of
contribution, if any, pursuant to the preceding sentences shall arise at the
time of each computation, subject to adjustment to the time of any subsequent
computation; provided, that no Guarantor may take any action to enforce such
right until the Guaranteed Obligations have been paid in full, all Letters of
Credit have terminated and the Total Commitment has been terminated, it being
expressly recognized and agreed by all parties hereto that any Guarantor's
right of contribution arising pursuant to this Section 22 against any
Contributor shall be expressly junior and subordinate to such Contributor's
obligations and liabilities in respect of the Guaranteed Obligations and any
other obligations owing under this Guaranty. As used in this Agreement, (i)
each Contributor's "Contribution Percentage" shall mean the percentage
obtained by dividing (x) the Adjusted Net Worth of such Contributor by (y) the
aggregate Adjusted Net Worth of all Guarantors; (ii) the "Adjusted Net Worth"
of each Guarantor shall mean the greater of (x) the Net Worth of such
Guarantor or (y) zero; and (iii) the "Net Worth" of each Guarantor shall mean
the amount by which the fair salable value of such Guarantor's assets on the
Initial Borrowing Date exceeds its existing debts and other liabilities
(including contingent liabilities, but without giving effect to any Guaranteed
Obligations arising under this Guaranty), in each case after giving effect to
all transactions occurring on the Initial Borrowing Date.
23. Each Guarantor recognizes and agrees that, except for any
right of contribution arising pursuant to Section 22, until the Guaranteed
Obligations have been paid in full, each Guarantor who makes any payment in
respect of the Guaranteed Obligations shall have no right of contribution or
subrogation against any other Guarantor in respect of such payment, any such
right of contribution or subrogation arising under law or otherwise being
expressly waived by all Guarantors until the Guaranteed Obligations have been
paid in full.
24. Each Guarantor recognizes and acknowledges that the rights to
contribution arising hereunder shall constitute an asset in favor of the party
entitled to such contribution. In this connection, each Guarantor has the
right to waive its contribution right against any other Guarantor to the
extent that after giving effect to such waiver such Guarantor would remain
solvent, in the determination of the Required Banks.
25. This Guaranty may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Guarantors and the
Agent.
26. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
27. It is understood and agreed that any Subsidiary of the
Borrower that is required to execute a counterpart of this Guaranty pursuant
to the Credit Agreement shall automatically become a Guarantor hereunder by
executing a counterpart hereof and delivering the same to the Agent.
28. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense.
* * * *
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
Address for each Guarantor
c/o Reading & Bates Drilling Co. READING & BATES EXPLORATION CO.
901 Threadneedle
Suite 200
Houston, Texas 77079 By_______________________________
Attention: General Counsel Title:
Tel: (713) 496-5000
Fax: (713) 496-0285
READING & BATES (A) PTY. LTD.
By_______________________________
Title:
READING AND BATES BORNEO DRILLING
CO., LTD.
By______________________________
Title:
Accepted and Agreed to:
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Agent
By____________________________
Title:
By____________________________
Title:
Exhibit 10.88
FIRST PREFERRED MORTGAGE
Dated April 30, 1996
READING & BATES EXPLORATION CO.
- in favor of -
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Trustee
D.R. STEWART
==============================================================================
INDEX
CLAUSE SUBJECT MATTER PAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . . 9
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 13
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 17
9 ENFORCEABILITY AND TRUSTEE'S POWERS . . . . . . . . . . . . . 18
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 19
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 20
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 21
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 21
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 23
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 24
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 24
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 24
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
EXHIBIT 2 FORM OF SUBSIDIARY GUARANTY
==============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 30th day of
April, 1996
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 Banks (as hereinafter defined) and as
mortgagee (the "Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the offshore drilling unit
D.R. STEWART documented under the laws and flag of the United States
of America with Official Number 626904 of 6,494 gross registered tons
and 5,834 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of April 30, 1996 (as in effect from
time to time, the "Credit Agreement") among Reading & Bates
Corporation, a Delaware corporation ("Holdings"), Reading & Bates
Drilling Co., an Oklahoma corporation (the "Borrower"), the Banks
party thereto, Credit Lyonnais, New York Branch, as co-agent, and
Christiania Bank og Kreditkasse, New York Branch, as agent (the
"Agent") (the form of which Credit Agreement together with Exhibit B
thereto but without the remaining attachments is attached hereto as
Exhibit 1), it was agreed among other things that the Banks would make
available to the Borrower upon the terms and conditions therein
described a reducing revolving credit facility (the "Facility") in an
aggregate amount at any time outstanding of One Hundred Million
United States Dollars (US$100,000,000), providing for the making of
Loans and the issuance of, and participation in, Letters of Credit as
contemplated therein.
(C) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Borrower payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(D) The Owner, for good and valuable consideration has authorized,
executed and delivered a Subsidiary Guaranty (the "Subsidiary
Guaranty"), the form of which Subsidiary Guaranty is attached hereto
as Exhibit 2, in favor of the Agent guaranteeing the performance by
the Borrower of its obligations under the Credit Agreement and the
other Credit Documents.
(E) This Mortgage is made for the benefit of the Trustee to secure the
guaranty by the Owner of (i) the full and prompt payment when due of
(x) the principal of interest on the Notes issued, and Loans made,
under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued under the
Credit Agreement and (y) all other obligations and indebtedness
(including, without limitation, indemnities, Fees and interest
thereon) of the Borrower to the Secured Creditors (as hereinafter
defined), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and the other Credit
Documents including, without limitation, this Mortgage and the due
performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents including, without limitation, this Mortgage;
(ii) any and all sums advanced by the Trustee in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest
in the Collateral; (iii) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or
liabilities of the Borrower referred to in clause (i) above, after an
Event of Default shall have occurred and be continuing, the reasonable
expenses of the Trustee of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Trustee of its rights hereunder,
together with reasonable attorneys' fees of counsel to the Trustee and
court costs; and (iv) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Clause 13 of this
Mortgage (all such obligations, liabilities, sums and expenses
referred to in clauses (i) through (iv) above being collectively
referred to as the "Obligations"). It is acknowledged and agreed that
the "Obligations" shall include extensions of credit of the types
described above, whether outstanding on the date of this Mortgage or
extended from time to time after the date of this Mortgage.
(F) This First Preferred Mortgage is entered into by the Owner in
consideration of the Banks agreeing to make the Facility available to
the Borrower and as a condition thereto and for other good and
valuable consideration provided by the Banks (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:-
"Agent" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Bank" means any lender listed from time to time on Annex 1 to the
Credit Agreement (collectively, the "Banks");
"Collateral Assignment of Insurance" means the Collateral Assignment
of Insurance in respect of the Rig executed or to be executed by the
Owner in favor of the Agent;
"Credit Agreement" means the Credit Agreement, dated as of April 30,
1996, among Holdings, the Borrower, the Banks, Credit Lyonnais New
York Branch, as co-agent, and the Agent first referred to in Recital
(B) hereto;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings together with interest, fees and all other obligations are
paid in full;
"Credit Party" shall have the same meaning for such term as set forth
in the Credit Agreement;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.07(b) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act of
1976 (42 U.S.C. 6901 et seq.), the Clean Air Act (42 U.S.C. 7401
et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et
seq.) and the Toxic Substances Control Act (15 U.S.C. 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);
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Section 1.08 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01 of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Borrower referred to in
Recital (C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (E) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
offshore drilling rig JACK BATES owned by the Borrower documented
under the laws and flag of the United States with Official Number
906283 of 19,928 gross registered tons and 14,948 net registered
tons; (ii) the offshore drilling rig W. D. KENT owned by the Owner
documented under the laws and flag of the United States with Official
Number 583169 of 5,383 gross registered tons and 4,185 net registered
tons; (iii) the offshore drilling rig CHARLEY GRAVES owned by Reading
and Bates Borneo Drilling Co., Ltd. documented under the laws and flag
of the Republic of Panama with Patente Number 6618-76-CH of 5,829
gross registered tons and 1,748 net registered tons; (iv) the offshore
drilling rig RON TAPPMEYER owned by Reading & Bates (A) Pty Ltd.
documented under the laws and flag of Australia with Official
Number 855213 of 11,455 gross registered tons and 3436 net registered
tons; and (v) the offshore drilling rig J.W. McLEAN owned by the
Borrower documented under the laws and flag of the Bahamas with
Official Number 715954 of 9199.01 gross registered tons and 7267.22
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 written request of the Agent,
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 written request of the Agent,
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 Banks; and provided that Permitted Liens shall not
include any liens described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Agent under and as defined in the Credit
Agreement;
"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;
"Subsidiary Guaranty" means the agreement dated as of April 23, 1996
made by the Owner in favor of the Agent as first referred to in
Recital (D) hereto;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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) the Owner is in compliance with all applicable Environmental
Laws relating to the Rig, its operation and management;
(k) the Owner has obtained all Environmental Approvals and is in
compliance with all requests thereof;
(l) no Environmental Claim has been made or threatened against the
Owner, the Approved Manager or otherwise in connection with the
Rig; and
(m) 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 Loan and at the time of the
issuance of each 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 Obligations the Owner has granted, conveyed and
mortgaged and does by these presents grant, convey and mortgage unto
the Trustee, its successors and assigns, the whole of the Rig TO HAVE
AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty and
this Mortgage and shall observe and comply with the covenants, terms
and conditions contained in the Subsidiary Guaranty 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 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 any
Secured Creditor for payment by the Owner of the relevant
expense, claim, liability, loss, cost, duty, fee, charge or
other money incurred by a Secured Creditor 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 a Secured Creditor under this Mortgage and the
Subsidiary Guaranty 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
Trustee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Trustee shall not have to wait for the Agent 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 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 Trustee
may deem expedient; and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Secured Creditors or any other person:-
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents (other than this Mortgage) or any other
document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Credit Parties or any other person
under the Credit Agreement, any of the other Security Documents
(other than this Mortgage) or any other document or security.
6. INSURANCE
6.01 The Owner covenants with the Trustee throughout the Credit Facility
Period that:-
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains 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 Rigs,
such aggregate amount shall be at least 110% of the Total
Commitment. 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 American, British and
Scandinavian 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 in respect of the
Other Rigs, shall be in an amount equal to at least 110% of the
aggregate amount of the Total Commitment (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 any Obligations remain
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 Banks 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 Trustee shall
be named as co-assureds on all such policies and insurance
contracts, but without liability of the Agent or the 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 Secured Creditors 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 provided in Clause 10.
(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 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 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 Self-Elevating Drilling Unit) 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
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
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 Trustee and the Agent copies of all survey reports
issued in respect thereof;
(g) permit the representatives of the Agent or independent surveyors
representing the 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 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 request of the Trustee in writing, copies
of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(k) notify both the 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 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 Trustee; and
(vi) any intended deactivation or lay-up of the Rig (other
than for normal periods of inactivity between contracts
for the Rig during which periods the Rig remains manned)
and obtain the prior written consent of the Trustee;
(l) keep proper books of account in respect of the Rig and as and
when the Trustee or the Agent may so reasonably require make
such books available for inspection on behalf of the 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) observe the obligations contained in Sections 7 and 8 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;
(n) not without the previous consent in writing of the 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 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 Trustee from time to time
such proof as the 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 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
Trustee for the Banks 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 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
Trustee advised, in writing on such regular basis and in
such detail as the Trustee shall require, of the Owner's
response to such Environmental Claim or Environmental
Incident;
(s) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Trustee having first been obtained, and any such written consent
to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Trustee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of 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 Trustee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit 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 Credit 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 Secured Creditors 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 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 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 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 Required Banks having
served on the Owner any such notice as is referred to in Section 9 of
the Credit Agreement) the security constituted by this Mortgage shall
become immediately enforceable and the 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 Trustee
without legal process and without liability of the 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
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 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 Obligations;
(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 Trustee in its absolute discretion
deems expedient and for the purposes aforesaid the 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 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 Trustee in or about the
exercise of the power vested in the 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 Trustee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The 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 Trustee by this Mortgage or to which the Trustee may
at any time be entitled hereunder.
9.03 Neither the Secured Creditors, 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 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 Trustee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Trustee has arisen in the manner provided in this Mortgage
and the sale shall be deemed to be within the power of the Trustee and
the receipt of the 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 Trustee (or any other Secured Creditor, as
the case may be) in respect of sale of the Rig or any part thereof, in
respect of recovery under the Insurances or in respect of Requisition
Compensation, shall be applied in the following manner:-
(i) first, to the payment of all amounts owing the Trustee of the
type described in clauses (ii) and (iii) of Recital E;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to the
outstanding Obligations shall be paid to the Secured Creditors
as provided in Clause 10.01(c), with each Secured Creditor
receiving an amount equal to such Obligations held by it or, if
the proceeds are insufficient to pay in full all such
Obligations, its Pro Rata Share (as defined below) of the amount
remaining to be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and following
the termination of this Mortgage pursuant to Clause 3.01, any
surplus then remaining shall be paid to the Owner, subject,
however, to the rights of the holder of any then existing Lien
of which the Trustee has actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Trustee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Agent under the Credit Agreement for the
account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Trustee shall be entitled to reply upon
(i) the Agent under the Credit Agreement and (ii) the Secured
Creditors for a determination (which the Agent and each Secured
Creditor, by their acceptance of the benefits of this Mortgage
shall be obligated to provide upon request of the Trustee) of
the outstanding Obligations owed to the Secured Creditors.
Unless it has actual knowledge (including by way of written
notice from a Secured Creditor) to the contrary, the Agent under
the Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Trustee, in acting hereunder, shall
be entitled to assume that (x) no obligations other than
principal, interest and regularly accruing fees are owing to any
Secured Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the 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 Trustee and
the other Secured Creditors 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 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
Trustee under this Mortgage,
in any such case, forthwith upon demand by the 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 Obligations, hereby irrevocably appoints the
Trustee as its attorney until the Total Commitment is terminated and
none of the Obligations remain outstanding 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 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 Trustee shall not put any person dealing with the
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 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 each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the Trustee
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and each of the Secured Creditors 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 such Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 the Subsidiary Guaranty or 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 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 Trustee against the amount of such shortfall. For
the purposes of this Clause 13.03, "rate of exchange" means the rate
at which the Trustee is able on the date of such payment (or, if it is
not practicable for the 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 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 any Secured Creditor on demand all costs, fees
and expenses, including, but not limited to, legal fees and expenses
and valuation fees and Taxes thereon incurred by any Secured Creditor
or for which any Secured Creditor may become liable in connection
with:-
(a) the negotiation, preparation and execution of the Credit
Agreement, the Subsidiary Guaranty and the Credit 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, the
Subsidiary Guaranty or the Credit Documents (or any of them).
14.02 The Owner shall pay to the 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 any Secured Creditor in
connection with:-
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement, the Subsidiary Guaranty or the
Credit Documents (or any of them) requested by the Owner,
necessary or advisable under applicable law or relating to the
syndication of the Facility, or initiated during the occurrence
and continuation of an Event of Default; and/or
(b) any consent or waiver required from the Trustee in relation to
the Credit Agreement, the Subsidiary Guaranty and the Credit
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, the Subsidiary
Guaranty and the Credit Documents (or any of them) may be subject or
give rise and shall indemnify the 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 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 provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit of
the Owner, the Secured Creditors 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 Section 12.16 of the Credit Agreement, each Bank 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 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 One Hundred Million U.S. Dollars
(US$100,000,000) 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 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 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 Trustee may think fit. The 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 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 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the 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 Trustee may bring before the courts of such jurisdiction or
other judicial authority and for the purpose of any action which the
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 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 30th day of April, 1996 before me personally appeared ____________ to
me known who being by me duly sworn did dispose 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
Exhibit 10.89
FIRST PREFERRED MORTGAGE
Dated April 30, 1996
READING & BATES DRILLING CO.
- in favor of -
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Trustee
JACK BATES
==============================================================================
INDEX
CLAUSE SUBJECT MATTER PAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . 9
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 17
9 ENFORCEABILITY AND INDENTURE TRUSTEE'S POWERS . . . . . . . . 18
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 21
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 21
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 22
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 23
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 24
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 24
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 25
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
==============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 30th day of
April, 1996
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 Banks (as hereinafter defined) and as
mortgagee (the "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 906283 of 19,928 gross
registered tons and 14,948 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of April 30, 1996 (as in effect from
time to time, the "Credit Agreement") among Reading & Bates
Corporation, a Delaware corporation, ("Holdings"), the Owner, the
Banks party thereto, Credit Lyonnais, New York Branch, as co-agent,
and Christiania Bank og Kreditkasse, New York Branch, as agent (the
"Agent") (the form of which Credit Agreement together with Exhibit B
thereto but without the remaining attachments is attached hereto as
Exhibit 1), it was agreed among other things that the Banks would make
available to the Owner upon the terms and conditions therein described
a reducing revolving credit facility (the "Facility") in an aggregate
amount at any time outstanding of One Hundred Million United States
Dollars (US$100,000,000), providing for the making of Loans and the
issuance of, and participation in, Letters of Credit as contemplated
therein.
(C) The obligations of the Owner with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Owner payable to the order of
the respective Banks (each a "Note" and collectively the "Notes") (the
form of which is attached as Exhibit B to the Credit Agreement).
(D) This Mortgage and this Deed of Covenants is made for the benefit of
the Mortgagee to secure the guaranty by the Owner of (i) the full and
prompt payment when due of (x) the principal of and interest on the
Notes issued, and Loans made, under the Credit Agreement, and all
reimbursement obligations and Unpaid Drawings with respect to the
Letters of Credit issued under the Credit Agreement and (y) all other
obligations and indebtedness (including without limitation,
indemnities, Fees and interest thereon) of the Borrower to the Secured
Creditors (as hereinafter defined), whether now existing or hereafter
incurred under, arising out of or in connection with the Credit
Agreement and the other Credit Documents including, without
limitation, this Mortgage and the due performance and compliance by
the Borrower with all of the terms, conditions and agreements
contained in the Credit Agreement and the other Credit Documents
including, without limitation, this Mortgage; (ii) any and all sums
advanced by the Trustee in order to preserve the Collateral (as
hereinafter defined) or preserve its security interest in the
Collateral; (iii) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities of the
Borrower referred to in clause (i) above, after an Event of Default
shall have occurred and be continuing, the reasonable expenses of the
Trustee of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, or of any
exercise by the Trustee of its rights hereunder, together with
reasonable attorneys' fees of counsel to the Trustee and court costs;
and (iv) all amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement under Clause 13 of this
Mortgage (all such obligations, liabilities, sums and expenses
referred to in clauses (i) through (iv) above being collectively
referred to as the "Obligations"). It is acknowledged and agreed that
the "Obligations" shall include extensions of credit of the types
described above, whether outstanding on the date of this Mortgage or
extended from time to time after the date of this Mortgage.
(E) This Mortgage is entered into by the Owner in consideration of the
Banks agreeing, at the request of the Owner, to make the Facility
available to the Owner under the terms of the Credit Agreement and as
a condition thereto and for other good and valuable consideration
provided by the Banks (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:-
"Agent" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral Assignment of Insurance" means the Collateral Assignment
of Insurance 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 April 30, 1996,
among Holdings, the Owner, the Banks, Credit Lyonnais, New York
Branch, as co-agent, and the Agent first referred to in Recital (B)
hereto;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings, together with interest, fees and all other obligations are
paid in full;
"Credit Party" shall have the meaning for such term as set forth in
the Credit Agreement;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.07(b) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claim" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment.
"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. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act of
1976 (42 U.S.C. 6901 et seq.), the Clean Air Act (42 U.S.C. 7401
et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et
seq.) and the Toxic Substances Control Act (15 U.S.C. 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);
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning provided in Section 13.01;
"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 Section 1.08 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01 of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Owner referred to in Recital
(C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (D) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
offshore drilling rig D. R. STEWART owned by Reading & Bates
Exploration Co. ("R&B Exploration") documented under the laws and flag
of the United States with Official Number 626904 of 6494 gross
registered tons and 5834 net registered tons; (ii) the offshore
drilling rig W. D. KENT owned by R&B Exploration documented under the
laws and flag of the United States with Official Number 583169 of
5,383 gross registered tons and 4,185 net registered tons; (iii) the
offshore drilling rig CHARLEY GRAVES owned by Reading and Bates Borneo
Drilling Co., Ltd. documented under the laws and flag of the Republic
of Panama with Patente Number 6618-76-CH of 5,829 gross registered
tons and 1,748 net registered tons; (iv) the offshore drilling rig RON
TAPPMEYER owned by Reading & Bates (A) Pty Ltd. documented under the
laws and flag of Australia with Official Number 855213 of 11,455 gross
registered tons and 3436 net registered tons; and (v) the offshore
drilling rig J.W. McLEAN owned by the Owner documented under the laws
and flag of the Bahamas with Official Number 715954 of 9199.01 gross
registered tons and 7267.22 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 written request of the Agent,
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 written request of the Agent,
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 Banks; and provided that Permitted Liens shall not
include any liens described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Agent under and as defined in the Credit
Agreement;
"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;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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 Loan and at the time of the
issuance of each 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 Obligations, the Owner has granted, conveyed
and mortgaged and does by these presents grant, convey and mortgage
unto the Trustee, its successors and assigns, the whole of the Rig TO
HAVE AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty and
this Mortgage and shall observe and comply with the covenants, terms
and conditions contained in the Subsidiary Guaranty 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 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors 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 any
Secured Creditors 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 any Secured Creditor 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 any Secured Creditor under this Mortgage and the other
Credit 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
Trustee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Trustee shall not have to wait for the Agent, the Banks or
the Letter of Credit Issuer 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 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 Trustee
may deem expedient; and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Credit Parties, the Secured Creditors or any other
person:-
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents (other than this Mortgage) or any other
document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Credit Parties or any other person
under the Credit Agreement, any of the other Credit Documents
(other than this Mortgage) or any other document or security.
5.04 Until the Obligations have been satisfied in full to the satisfaction
of the Trustee, the Owner shall not by virtue of any payment made
hereunder on account of the Obligations or by virtue of any
enforcement by the 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 Holdings (whether
such relationship or transaction shall constitute the Owner a creditor
of Holdings, a guarantor of the obligations of Holdings or a party
subrogated to the rights of others against Holdings 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 Secured
Creditors 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 guaranty, security or agreement; or
(c) exercise any right of set-off or counterclaim against Holdings
or any such co-surety; or
(d) receive, claim or have the benefit of any payment, distribution,
security or indemnity from Holdings or any such co-surety; or
(e) unless so directed by the Trustee (when the Owner will prove in
accordance with such directions), claim as a creditor of
Holdings or any such co-surety in competition with the Trustee.
The Owner shall hold in trust for the Trustee and forthwith pay or
transfer (as appropriate) to the 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 guaranty (whether
by reason of legal limitation, illegality, disability or incapacity on
or of Holdings 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, Holdings, the Trustee or any other person),
then the Owner will, as a separate and independent stipulation and as
a primary obligor, pay to the 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
Trustee against any loss or liability suffered or incurred by the
Secured Creditors or any of them as a result of such irrecoverability.
6. INSURANCE
6.01 The Owner covenants with the Trustee throughout the Credit Facility
Period that:-
(a) The Owner shall, at its own expense, when and so long as any
Obligations remain 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 Rigs,
such aggregate amount shall be at least 110% of the Total
Commitment. 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 American, British and
Scandinavian 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 in respect of the
Other Rigs, shall be in an amount equal to at least 110% of the
Total Commitment (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 any Obligations remain
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 Banks 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 Trustee shall
be named as co-assureds on all such policies and insurance
contracts, but without liability of the Agent or the 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 Secured Creditors 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 provided in Clause 10.
(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 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 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 Column Stabilized Drilling Unit with Ice Strengthening Class
1C) 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 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
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 Trustee and the Agent copies of all survey reports
issued in respect thereof;
(g) permit the representatives of the Agent or independent surveyors
representing the 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 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 Trustee's request in writing, copies of
all charters and other contracts for her employment or otherwise
howsoever concerning her;
(k) notify both the 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 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 Trustee; and
(vi) any intended deactivation or lay-up of the Rig (other
than for normal periods of inactivity between contracts
for the Rig during which periods the Rig remains manned)
and obtain the Trustee's prior written consent;
(l) keep proper books of account in respect of the Rig and as and
when the Trustee or the Agent may so reasonably require make
such books available for inspection on behalf of the 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) observe the obligations contained in Sections 7 and 8 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;
(n) not without the previous consent in writing of the 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 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 Trustee from time to time
such proof as the 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 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
Trustee for the Banks 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 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
Trustee advised, in writing on such regular basis and in
such detail as the Trustee shall require, of the Owner's
response to such Environmental Claim or Environmental
Incident;
(s) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Trustee having first been obtained, and any such written consent
to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Trustee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of 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 Trustee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit 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 Credit 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 Secured Creditors 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 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 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 Required Banks having
served on the Owner any such notice as is referred to in Section 9 of
the Credit Agreement) the security constituted by this Mortgage shall
become immediately enforceable and the 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 Trustee
without legal process and without liability of the 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
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 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 Obligations;
(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 Trustee in its absolute discretion
deems expedient and for the purposes aforesaid the 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 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 Trustee in or about the
exercise of the power vested in the 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 Trustee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The 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 Trustee by this Mortgage or to which the Trustee may
at any time be entitled hereunder.
9.03 Neither the Secured Creditors 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 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 Trustee the
purchaser shall not be bound to see or enquire whether the 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 Trustee and the
receipt of the 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 (a) All moneys received by the Trustee (or any Secured Creditor, as
the case may be) in respect of sale of the Rig or any part
thereof; in respect of recovery under the Insurances; or in
respect of Requisition Compensation,
shall be applied in the following manner:-
(i) first, to the payment of all amounts owing the Trustee of
the type described in clauses (ii) and (iii) of Recital
D;
(ii) second, to the extent moneys remain after the
application pursuant to the preceding clause (i),
an amount equal to the outstanding Obligations
shall be paid to the Secured Creditors as
provided in Clause 10.01(c), with each Secured
Creditor receiving an amount equal to such
Obligations held by it or, if the proceeds are
insufficient to pay in full all such Obligations,
its Pro Rata Share (as defined below) of the
amount remaining to be distributed; and
(iii) third, to the extent moneys remain after the
application pursuant to the preceding clauses (i)
and (ii), and following the termination of this
Mortgage pursuant to Clause 3.01, any surplus
then remaining shall be paid to the Owner,
subject, however, to the rights of the holder of
any then existing Lien of which the Trustee has
actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Trustee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Agent under the Credit Agreement for the
account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Trustee shall be entitled to reply upon
(i) the Agent under the Credit Agreement and (ii) the Secured
Creditors for a determination (which the Agent and each Secured
Creditor, by their acceptance of the benefits of this Mortgage
shall be obligated to provide upon request of the Trustee) of
the outstanding Obligations owed to the Secured Creditors.
Unless it has actual knowledge (including by way of written
notice from a Secured Creditor) to the contrary, the Agent under
the Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Trustee, in acting hereunder, shall
be entitled to assume that (x) no obligations other than
principal, interest and regularly accruing fees are owing to any
Secured Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the 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 Trustee, the
Agent, the Banks, and the Letter of Credit Issuer 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 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
Trustee under this Mortgage,
in any such case, forthwith upon demand by the 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 Obligations, hereby irrevocably appoints the
Trustee as its attorney until the Total Commitment is terminated and
none of the Obligations remain outstanding 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 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 Trustee shall not put any person dealing with the
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 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 Secured Creditors and
each agent or attorney appointed under or pursuant to this Mortgage
(each an "Indemnitee") from and against any and all expenses, claims,
liabilities, losses, taxes, costs, duties, fees and charges suffered,
incurred or made by such Secured Creditors 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 Trustee's rights under
this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and the Secured Creditors 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 such Secured Creditor 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 Secured Creditors 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 Hazardous Materials 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 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 Trustee against the amount of such shortfall. For the purposes of
this Clause 13.03, "rate of exchange" means the rate at which the
Trustee is able on the date of such payment (or, if it is not
practicable for the 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 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 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 any Secured
Creditor may become liable in connection with:-
(a) the negotiation, preparation and execution of the Credit
Agreement and the Credit 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
Credit Documents (or any of them).
14.02 The Owner shall pay to the 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 any Secured Creditor in
connection with:-
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement and the Credit Documents (or any
of them) requested by the Owner, necessary or advisable under
applicable law or relating to the syndication of the Facility,
or initiated during the occurrence and continuation of an Event
of Default; and/or
(b) any consent or waiver required from the Trustee in relation to
the Credit Agreement and the Credit 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 Credit
Documents (or any of them) may be subject or give rise and shall
indemnify the 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 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 Section
12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit of
the Owner, the Secured Creditors 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 Section 12.16 of the Credit Agreement, each Bank 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 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 One Hundred Million U.S. Dollars
(US$100,000,000) 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 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 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 Trustee may think fit. The 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 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 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 enforce the Obligations and for the purpose
of any proceedings for such enforcement the Owner hereby submits to
the jurisdiction of the courts of any country of the choice of the
Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the 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 Trustee may bring before the courts of such jurisdiction or
other judicial authority and for the purpose of any action which the
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 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 30th day of April, 1996 before me personally appeared
________________________ to me known who being by me duly sworn did dispose
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
Exhibit 10.90
FIRST PREFERRED MORTGAGE
Dated April 30, 1996
READING & BATES EXPLORATION CO.
- in favor of -
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Trustee
W.D.KENT
==============================================================================
INDEX
CLAUSE SUBJECT MATTER PAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . . 9
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 13
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 17
9 ENFORCEABILITY AND TRUSTEE'S POWERS . . . . . . . . . . . . . 17
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 19
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 20
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 21
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 21
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 23
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 23
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 24
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 24
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 24
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
EXHIBIT 2 FORM OF SUBSIDIARY GUARANTY
==============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 30th day of
April, 1996
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 Banks (as hereinafter defined) and as
mortgagee (the "Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the offshore drilling unit
W.D. KENT documented under the laws and flag of the United States of
America with Official Number 583169 of 5,383 gross registered tons and
4,185 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of April 30, 1996 (as in effect from
time to time, the "Credit Agreement") among Reading & Bates
Corporation, a Delaware corporation ("Holdings"), Reading & Bates
Drilling Co., an Oklahoma corporation (the "Borrower"), the Banks
party thereto, Credit Lyonnais, New York Branch, as co-agent, and
Christiania Bank og Kreditkasse, New York Branch, as agent (the
"Agent") (the form of which Credit Agreement together with Exhibit B
thereto but without the remaining attachments is attached hereto as
Exhibit 1), it was agreed among other things that the Banks would make
available to the Borrower upon the terms and conditions therein
described a reducing revolving credit facility (the "Facility") in an
aggregate amount at any time outstanding of One Hundred Million
United States Dollars (US$100,000,000), providing for the making of
Loans and the issuance of, and participation in, Letters of Credit as
contemplated therein.
(C) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Borrower payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(D) The Owner, for good and valuable consideration has authorized,
executed and delivered a Subsidiary Guaranty (the "Subsidiary
Guaranty"), the form of which Subsidiary Guaranty is attached hereto
as Exhibit 2, in favor of the Agent guaranteeing the performance by
the Borrower of its obligations under the Credit Agreement and the
other Credit Documents.
(E) This Mortgage is made for the benefit of the Trustee to secure the
guaranty by the Owner of (i) the full and prompt payment when due of
(x) the principal of interest on the Notes issued, and Loans made,
under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued under the
Credit Agreement and (y) all other obligations and indebtedness
(including, without limitation, indemnities, Fees and interest
thereon) of the Borrower to the Secured Creditors (as hereinafter
defined), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and the other Credit
Documents including, without limitation, this Mortgage and the due
performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents including, without limitation, this Mortgage;
(ii) any and all sums advanced by the Trustee in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest
in the Collateral; (iii) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or
liabilities of the Borrower referred to in clause (i) above, after an
Event of Default shall have occurred and be continuing, the reasonable
expenses of the Trustee of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Trustee of its rights hereunder,
together with reasonable attorneys' fees of counsel to the Trustee and
court costs; and (iv) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Clause 13 of this
Mortgage (all such obligations, liabilities, sums and expenses
referred to in clauses (i) through (iv) above being collectively
referred to as the "Obligations"). It is acknowledged and agreed that
the "Obligations" shall include extensions of credit of the types
described above, whether outstanding on the date of this Mortgage or
extended from time to time after the date of this Mortgage.
(F) This First Preferred Mortgage is entered into by the Owner in
consideration of the Banks agreeing to make the Facility available to
the Borrower and as a condition thereto and for other good and
valuable consideration provided by the Banks (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:-
"Agent" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Bank" means any lender listed from time to time on Annex 1 to the
Credit Agreement (collectively, the "Banks");
"Collateral Assignment of Insurance" means the Collateral Assignment
of Insurance in respect of the Rig executed or to be executed by the
Owner in favor of the Agent;
"Credit Agreement" means the Credit Agreement, dated as of April 30,
1996, among Holdings, the Borrower, the Banks, Credit Lyonnais, New
York Branch, as co-agent, and the Agent first referred to in Recital
(B) hereto;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings together with interest, fees and all other obligations are
paid in full;
"Credit Party" shall have the same meaning for such term as set forth
in the Credit Agreement;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.07(b) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act of
1976 (42 U.S.C. 6901 et seq.), the Clean Air Act (42 U.S.C. 7401
et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et
seq.) and the Toxic Substances Control Act (15 U.S.C. 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);
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Section 1.08 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01 of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Borrower referred to in
Recital (C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (E) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
offshore drilling rig JACK BATES owned by the Borrower documented
under the laws and flag of the United States with Official Number
906283 of 19,928 gross registered tons and 14,948 net registered
tons; (ii) the offshore drilling rig D.R. STEWART owned by the Owner
documented under the laws and flag of the United States with Official
Number 626904 of 6,494 gross registered tons and 5,834 net registered
tons; (iii) the offshore drilling rig CHARLEY GRAVES owned by Reading
and Bates Borneo Drilling Co., Ltd. documented under the laws and flag
of the Republic of Panama with Patente Number 6618-76-CH of 5,829
gross registered tons and 1,748 net registered tons; (iv) the offshore
drilling rig RON TAPPMEYER owned by Reading & Bates (A) Pty Ltd.
documented under the laws and flag of Australia with Official
Number 855213 of 11,455 gross registered tons and 3,436 net registered
tons; and (v) the offshore drilling rig J.W. McLEAN owned by the
Borrower documented under the laws and flag of the Bahamas with
Official Number 715954 of 9199.01 gross registered tons and 7267.22
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 written request of the Agent,
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 written request of the Agent,
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 Banks; and provided that Permitted Liens shall not
include any liens described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Agent under and as defined in the Credit
Agreement;
"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;
"Subsidiary Guaranty" means the agreement dated as of April 23, 1996
made by the Owner in favor of the Agent as first referred to in
Recital (D) hereto;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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) the Owner is in compliance with all applicable Environmental
Laws relating to the Rig, its operation and management;
(k) the Owner has obtained all Environmental Approvals and is in
compliance with all requests thereof;
(l) no Environmental Claim has been made or threatened against the
Owner, the Approved Manager or otherwise in connection with the
Rig; and
(m) 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 Loan and at the time of the
issuance of each 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 Obligations the Owner has granted, conveyed and
mortgaged and does by these presents grant, convey and mortgage unto
the Trustee, its successors and assigns, the whole of the Rig TO HAVE
AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty and
this Mortgage and shall observe and comply with the covenants, terms
and conditions contained in the Subsidiary Guaranty 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 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 any
Secured Creditor for payment by the Owner of the relevant
expense, claim, liability, loss, cost, duty, fee, charge or
other money incurred by a Secured Creditor 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 a Secured Creditor under this Mortgage and the
Subsidiary Guaranty 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
Trustee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Trustee shall not have to wait for the Agent 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 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 Trustee
may deem expedient; and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Secured Creditors or any other person:-
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents (other than this Mortgage) or any other
document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Credit Parties or any other person
under the Credit Agreement, any of the other Security Documents
(other than this Mortgage) or any other document or security.
6. INSURANCE
6.01 The Owner covenants with the Trustee throughout the Credit Facility
Period that:-
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains 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 Rigs,
such aggregate amount shall be at least 110% of the Total
Commitment. 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 American, British and
Scandinavian 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 in respect of the
Other Rigs, shall be in an amount equal to at least 110% of the
aggregate amount of the Total Commitment (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 any Obligations remain
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 Banks 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 Trustee shall
be named as co-assureds on all such policies and insurance
contracts, but without liability of the Agent or the 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 Secured Creditors 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 provided in Clause 10.
(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 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 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 Barge) 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 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
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 Trustee and the Agent copies of all survey reports
issued in respect thereof;
(g) permit the representatives of the Agent or independent surveyors
representing the 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 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 request of the Trustee in writing, copies
of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(k) notify both the 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 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
Trustee; and
(vi) any intended deactivation or lay-up of the Rig (other
than for normal periods of inactivity between contracts
for the Rig during which periods the Rig remains manned)
and obtain the prior written consent of the Trustee;
(l) keep proper books of account in respect of the Rig and as and
when the Trustee or the Agent may so reasonably require make
such books available for inspection on behalf of the 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) observe the obligations contained in Sections 7 and 8 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;
(n) not without the previous consent in writing of the 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 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 Trustee from time to time
such proof as the 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 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
Trustee for the Banks 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 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 Trustee
advised, in writing on such regular basis and in such detail
as the Trustee shall require, of the Owner's response to
such Environmental Claim or Environmental Incident;
(s) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Trustee having first been obtained, and any such written consent
to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Trustee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of 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 Trustee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit 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 Credit 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 Secured Creditors 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 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 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 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 Required Banks having
served on the Owner any such notice as is referred to in Section 9 of
the Credit Agreement) the security constituted by this Mortgage shall
become immediately enforceable and the 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 Trustee
without legal process and without liability of the 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
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 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 Obligations;
(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 Trustee in its absolute discretion
deems expedient and for the purposes aforesaid the 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 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 Trustee in or about the
exercise of the power vested in the 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 Trustee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The 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 Trustee by this Mortgage or to which the Trustee may
at any time be entitled hereunder.
9.03 Neither the Secured Creditors, 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 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 Trustee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Trustee has arisen in the manner provided in this Mortgage
and the sale shall be deemed to be within the power of the Trustee and
the receipt of the 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 Trustee (or any other Secured Creditor, as
the case may be) in respect of sale of the Rig or any part thereof, in
respect of recovery under the Insurances or in respect of Requisition
Compensation, shall be applied in the following manner:-
(i) first, to the payment of all amounts owing the Trustee of the
type described in clauses (ii) and (iii) of Recital E;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to the
outstanding Obligations shall be paid to the Secured Creditors
as provided in Clause 10.01(c), with each Secured Creditor
receiving an amount equal to such Obligations held by it or, if
the proceeds are insufficient to pay in full all such
Obligations, its Pro Rata Share (as defined below) of the amount
remaining to be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and following
the termination of this Mortgage pursuant to Clause 3.01, any
surplus then remaining shall be paid to the Owner, subject,
however, to the rights of the holder of any then existing Lien
of which the Trustee has actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Trustee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Agent under the Credit Agreement for the
account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Trustee shall be entitled to reply upon
(i) the Agent under the Credit Agreement and (ii) the Secured
Creditors for a determination (which the Agent and each Secured
Creditor, by their acceptance of the benefits of this Mortgage
shall be obligated to provide upon request of the Trustee) of
the outstanding Obligations owed to the Secured Creditors.
Unless it has actual knowledge (including by way of written
notice from a Secured Creditor) to the contrary, the Agent under
the Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Trustee, in acting hereunder, shall
be entitled to assume that (x) no obligations other than
principal, interest and regularly accruing fees are owing to any
Secured Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the 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 Trustee and
the other Secured Creditors 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 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
Trustee under this Mortgage,
in any such case, forthwith upon demand by the 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 Obligations, hereby irrevocably appoints the
Trustee as its attorney until the Total Commitment is terminated and
none of the Obligations remain outstanding 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 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 Trustee shall not put any person dealing with the
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 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 each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the Trustee
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and each of the Secured Creditors 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 such Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 the Subsidiary Guaranty or 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 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 Trustee against the amount of such shortfall. For
the purposes of this Clause 13.03, "rate of exchange" means the rate
at which the Trustee is able on the date of such payment (or, if it is
not practicable for the 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 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 any Secured Creditor on demand all costs, fees
and expenses, including, but not limited to, legal fees and expenses
and valuation fees and Taxes thereon incurred by any Secured Creditor
or for which any Secured Creditor may become liable in connection
with:-
(a) the negotiation, preparation and execution of the Credit
Agreement, the Subsidiary Guaranty and the Credit 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, the
Subsidiary Guaranty or the Credit Documents (or any of them).
14.02 The Owner shall pay to the 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 any Secured Creditor in
connection with:-
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement, the Subsidiary Guaranty or the
Credit Documents (or any of them) requested by the Owner,
necessary or advisable under applicable law or relating to the
syndication of the Facility, or initiated during the occurrence
and continuation of an Event of Default; and/or
(b) any consent or waiver required from the Trustee in relation to
the Credit Agreement, the Subsidiary Guaranty and the Credit
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, the Subsidiary
Guaranty and the Credit Documents (or any of them) may be subject or
give rise and shall indemnify the 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 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 provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit of
the Owner, the Secured Creditors 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 Section 12.16 of the Credit Agreement, each Bank 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 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 One Hundred Million U.S. Dollars
(US$100,000,000) 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 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 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 Trustee may think fit. The 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 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 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the 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 Trustee may bring before the courts of such jurisdiction or
other judicial authority and for the purpose of any action which the
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 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 30th day of April, 1996 before me personally appeared ____________ to
me known who being by me duly sworn did dispose 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
Exhibit 10.91
INDENTURE OF FIRST NAVAL MORTGAGE
READING AND BATES BORNEO DRILLING CO., LTD.
- and -
CHRISTIANIA BANK OG KREDITKASSE, agent
as Mortgagee
CHARLEY GRAVES
Dated April 30, 1996
==============================================================================
INDEX
CLAUSE SUBJECT MATTER PAGE
1 REPRESENTATIONS AND COVENANTS . . . . . . . . . . . . . . . . . 2
2 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 4
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . 10
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 18
9 ENFORCEABILITY AND MORTGAGEE'S POWERS . . . . . . . . . . . . 18
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 21
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 22
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 22
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 25
18 WAIVER; AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 25
19 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 25
20 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 25
EXHIBIT 1 FORM OF CREDIT AGREEMENT
EXHIBIT 2 FORM OF SUBSIDIARY GUARANTY
==============================================================================
THIS INDENTURE OF FIRST NAVAL MORTGAGE made and entered into this 30th
day of April, 1996, between READING AND BATES BORNEO DRILLING CO., LTD., an
Oklahoma company duly constituted and existing in conformity with the laws of
the State of Oklahoma with its principal office at 901 Threadneedle, Suite
200, Houston, Texas 77079 (hereinafter called the "Owner") and CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH having offices at 11 West 42nd Street,
New York, NY 10036, as agent for the Banks (as hereinafter defined)
(hereinafter called the "Mortgagee"), on the Panamanian offshore drilling rig
CHARLEY GRAVES of 5,829 gross tons, 1,748 net tons and with a length of
87.78m, a breadth of 21.34m and a depth of 6.55m and Permanent Patent of
Navigation No. 6618-76-CH (hereinafter called the "Rig"), duly registered
under the laws and flag of the Republic of Panama, the detailed description of
which is hereinafter more particularly set forth.
W I T N E S S E T H :
WHEREAS
(A) The Owner is the sole owner of the whole of the offshore drilling rig
CHARLEY GRAVES documented under the laws and flag of the Republic of
Panama.
(B) By a Credit Agreement dated as of April 30, 1996 (as in effect from
time to time, the "Credit Agreement") among Reading & Bates
Corporation, a Delaware corporation, as guarantor ("Holdings"),
Reading & Bates Drilling Co., an Oklahoma corporation (the
"Borrower"), the Banks party thereto, Credit Lyonnais New York Branch,
as co-agent and the Mortgagee, as agent (the form of which Credit
Agreement together with the form of promissory note of the Borrower
attached as Exhibit B thereto but without the remaining exhibits is
attached hereto as Exhibit 1), it was agreed amongst other things that
the Banks would make available to the Borrower a reducing revolving
credit facility (the "Facility") in the maximum aggregate principal
amount at any one time outstanding of One Hundred Million United
States Dollars (U.S.$100,000,000), providing for the making of Loans
and the issuance of and participations in Letters of Credit as
contemplated therein. As required by Article 1515 Section 3 of the
Commercial Code of Panama, the dates on which payments of principal in
respect of the Loans are due may be determined from the provisions of
the Credit Agreement including Section 3.03.
(C) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Borrower payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(D) The Owner, for good and valuable consideration has authorized,
executed and delivered a Subsidiary Guaranty (the "Subsidiary
Guaranty"), the form of which Subsidiary Guaranty is attached hereto
as Exhibit 2, in favor of the Agent guaranteeing the performance by
the Borrower of its obligations under the Credit Agreement and the
other Credit Documents.
(E) This Mortgage is made for the benefit of the Mortgagee to secure the
guaranty by the Owner of (i) the full and prompt payment when due of
(x) the principal of interest on the Notes issued, and Loans made,
under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued under the
Credit Agreement and (y) all other obligations and indebtedness
(including, without limitation, indemnities, Fees and interest
thereon) of the Borrower to the Secured Creditors (as hereinafter
defined), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and the other Credit
Documents including, without limitation, this Mortgage and the due
performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents including, without limitation, this Mortgage;
(ii) any and all sums advanced by the Mortgagee in order to preserve
the Collateral (as hereinafter defined) or preserve its security
interest in the Collateral; (iii) in the event of any proceeding for
the collection or enforcement of any indebtedness, obligations, or
liabilities of the Borrower referred to in clause (i) above, after an
Event of Default shall have occurred and be continuing, the reasonable
expenses of the Mortgagee of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Mortgagee of its rights
hereunder, together with reasonable attorneys' fees of counsel to the
Mortgagee and court costs; and (iv) all amounts paid by any Indemnitee
as to which such Indemnitee has the right to reimbursement under
Clause 13 of this Mortgage (all such obligations, liabilities, sums
and expenses referred to in clauses (i) through (iv) above being
collectively referred to as the "Obligations"). It is acknowledged
and agreed that the "Obligations" shall include extensions of credit
of the types described above, whether outstanding on the date of this
Mortgage or extended from time to time after the date of this
Mortgage.
(F) This Indenture of First Naval Mortgage, which is entered into by the
Owner in consideration of the Banks agreeing to make the Facility
available to the Borrower and as a condition thereto and for other
good and valuable consideration provided by the Banks (the sufficiency
of which the Owner hereby acknowledges).
NOW, THEREFORE, the appearing parties, each in the name and on behalf of his
respective principal, state that they hereby execute this Indenture of First
Naval Mortgage pursuant to the following representations:
1. REPRESENTATIONS AND COVENANTS
1.01 The Owner represents and covenants to the Mortgagee that:
a. The Rig is permanently registered in the name of the Owner in
the Public Registry of the City of Panama, Republic of Panama in
the Microfilm Section (Mercantile), Microjacket N-12808, Roll
34425, Frame 95;
b. The Owner, as sole legal and beneficial owner of the Rig, has
received and presently possesses a Permanent Patent of
Navigation for the Rig, duly issued by the Republic of Panama
under No. 6618-76-CH;
c. Neither the whole nor any share in the Rig is subject to any
Security Interest (as defined herein) (except for Permitted
Liens (as defined herein) and the lien of this Mortgage);
d. the Owner has not sold or transferred, or agreed to sell or
transfer, title to the Rig or any share therein;
e. the Owner is a corporation duly organized and validly existing
and in good standing under the laws of the State of Oklahoma;
f. the Owner has full power and authority (i) to execute and
deliver this Mortgage, (ii) to mortgage the Rig as security for
the Obligations and (iii) to comply with the provisions of, and
perform all its obligations under, this Mortgage;
g. the Owner has complied with all statutory and other material
requirements relative to the ownership, registration and
operation of the Rig;
h. 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 preliminarily recorded with the
Public Registry in Panama through the Panamanian Consulate in
New York, New York will create a legal, valid and enforceable
first preferred mortgage lien on the Rig subject only to the
permanent filing of this Mortgage in the Public Registry in
Panama within six months of the date of the preliminary recorded
filing;
i. the entry into and performance by the Owner of this Mortgage
does not and will not during the Credit Facility Period (as
defined herein) 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;
j. 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 during the
Credit Facility Period;
k. 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;
l. the Owner is in compliance with all applicable Environmental
Laws (as defined herein) relating to the Rig, its operation and
management;
m. the Owner has obtained all Environmental Approvals (as defined
herein) and is in compliance with all requests thereof;
n. no Environmental Claim (as defined herein) has been made or
threatened against the Owner or otherwise in connection with the
Rig;
o. no Environmental Incident (as defined herein) which has
resulted, or which could reasonably be expected to result, in an
Environmental Claim in excess of US$200,000 has occurred; and
p. The Owner hereby affirms as its representations all of the
statements contained in the "WHEREAS" clauses of this Mortgage.
1.02 The representations and warranties of the Owner set out in Clause 1.01
shall survive the execution of this Mortgage and shall be deemed to be
repeated at the time of the making of each Loan (as defined herein)
and at the time of the issuance of each Letter of Credit, with respect
to the facts and circumstances existing at each such time, as if made
at each such time.
1.03 The Mortgagee represents that the Banks have made the Facility
available to the Borrower, as evidenced by, inter alia, the Credit
Agreement, the Notes and the Security Documents (as defined herein),
and accepts the Mortgage constituted by this instrument upon the Rig
as security for the due and prompt payment and performance of the
obligations of the Owner under the Subsidiary Guaranty.
1.04 Each of the contracting parties declares that it is satisfied with the
representations and covenants made by the other and accepts them as
true; and the parties mutually acknowledge their respective legal
status as well as the authority of the persons representing them
respectively in this instrument to sign the same on behalf of their
respective principals.
2. DEFINITIONS AND INTERPRETATION
2.01 In this Mortgage unless the context otherwise requires, the following
expressions shall have the following meanings:-
"Agent" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Bank" means any lender listed from time to time on Annex 1 to the
Credit Agreement (collectively, the "Banks");
"Collateral Assignment of Insurances" means the Collateral Assignment
of Insurances in respect of the Rig executed or to be executed by the
Owner in favor of the Agent;
"Commitment" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of April 30,
1996, among Holdings, the Borrower, the Banks, Credit Lyonnais New
York Branch, as co-agent, and the Agent first referred to in Recital
(B) hereto;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Unpaid Drawings
together with interest, fees and all other obligations are paid in
full;
"Credit Party" shall have the same meaning for such term as set forth
in the Credit Agreement;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.07(b) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act of
1976 (42 U.S.C. 6901 et seq.), the Clean Air Act (42 U.S.C. 7401
et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et
seq.) and the Toxic Substances Control Act (15 U.S.C. 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);
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Section 1.08 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01 of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Borrower referred to in
Recital (C) hereto and in Section 1.05(c) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (C) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
offshore rig JACK BATES documented under the laws and flag of the
United States of America with Official Number 906283 of 19,928 gross
registered tons and 14,948 net registered tons; (ii) the offshore rig
D. R. STEWART owned by Reading & Bates Exploration Co. ("R&B
Exploration") documented under the laws and flag of the United States
with Official Number 626904 of 6,494 gross registered tons and 5,834
net registered tons; (iii) the offshore drilling rig W. D. KENT owned
by R&B Exploration documented under the laws and flag of the
United States with Official Number 583169 of 5,383 gross registered
tons and 4,185 net registered tons; (iv) the offshore drilling rig RON
TAPPMEYER owned by Reading & Bates (A) Pty Ltd. documented under the
laws and flag of Australia with Official Number 855213 of 11,455 gross
registered tons and 3,436 net registered tons; and (v) the offshore
drilling J.W. McLEAN owned by the Borrower documented under the laws
and flag of the Bahamas with Official Number 715954 of 9199.01 gross
registered tons and 7267.22 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 written request of the Agent,
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 written request of the Agent,
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 Banks; and provided that Permitted Liens shall not
include any liens described in subclauses (1) through (7) 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);
"Required Banks" shall have the meaning for such term as set forth in
the Credit Agreement;
"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 Creditors" shall mean the Banks, the Letter of Credit Issuer
and the Agent under and as defined in the Credit Agreement;
"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;
"Subsidiary Guaranty" means the agreement dated as of April 23, 1996
made by the Owner in favor of the Agent as first referred to in
Recital (D) hereto;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised total loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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.
2.02 Except where otherwise expressly provided or unless the context
otherwise requires, words and expressions defined in the Credit
Agreement shall bear the same meanings when used in this Mortgage.
2.03 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.
3. MORTGAGE
3.01 In order to secure the Obligations the Owner has granted, conveyed and
mortgaged and does by these presents grant, convey and mortgage unto
the Mortgagee, its successors and assigns, in accordance with the
provisions of Chapter V, Title IV of Book Second of the Code of
Commerce and pertinent provisions of the Civil Code and other
legislation of the Republic of Panama, the whole of the Rig, the
detailed description of which is as follows:
offshore drilling rig CHARLEY GRAVES; gross tonnage
approximately 5,829; net tonnage approximately 1,748; length
overall 87.78 meters, breadth 21.34 meters; depth 6.55 meters;
built in 1975 by Far East Livingston Shipbuilding Ltd.; radio
call letters HP-3275;
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 Obligations.
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 to
the Secured Creditors and their respective successors or assigns the
Obligations as and when the same shall become due and payable in
accordance with the terms of the Subsidiary Guaranty and this Mortgage
and shall observe and comply with the covenants terms and conditions
contained in the Subsidiary Guaranty 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, then these presents and
the rights hereunder shall cease, determine and be void and, in such
event, the Mortgagee agrees to furnish, execute and record, at the
expense of the Owner, all such documents as the Owner may reasonably
require to discharge this Mortgage, otherwise to be and remain in full
force and effect.
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 none of the Secured Creditors 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.
3.03 This Mortgage, when it shall have been duly executed and signed on
behalf of the parties, shall be provisionally recorded through the
Panamanian Consulate at New York, New York and thereafter within three
months permanently recorded in the Public Registry in Panama.
4. PAYMENT COVENANTS
4.01 The Owner hereby covenants with the Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 the relevant expense,
claim, liability, loss, cost, duty, fee, charge or other money
is paid by any Secured Creditor (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 any Secured Creditor, as the case may be, under this
Mortgage and the Subsidiary Guaranty 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
Mortgagee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Mortgagee shall not have to wait for the Agent to enforce
any of the other Security Documents before enforcing the
security created by this Mortgage;
(d) no failure or delay on the part of the Mortgagee in exercising
any right, power, privilege or remedy hereunder and no course of
dealing between Owner and Mortgagee or the Agent shall operate
as a waiver thereof; nor shall any single or partial exercise of
any right, power, privilege or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of
any rights or remedies which the Mortgagee or the Agent would
otherwise have. No notice to or demand on the Owner in any case
shall entitle the Owner to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the
rights of the Mortgagee or the Agent to any other or further
action in any circumstances without notice or demand; and
(e) any waiver by the Mortgagee of any terms of this Mortgage or any
consent given by the Mortgagee 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 Mortgagee
and the Owner shall be conditional upon no security or payment to the
Secured Parties or any of them by the Credit Parties 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 Mortgagee 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 Secured Creditors 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 Credit Parties, the Secured Creditors or any other
person:-
(a) any waiver granted to or composition with the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents or any other document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of the Credit Party or any other person under the
Credit Agreement, any of the other Credit Documents or any other
document or security.
6. INSURANCE
6.01 The Owner covenants with the Mortgagee throughout the Credit Facility
Period that:-
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains 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 agreed
value of the Rig, and when such amount is aggregated with the
total amount of such insurance coverage on the Other Rigs, such
aggregate amount shall be at least 110% of the Total Commitment.
Such insurance shall cover marine and war risk perils, on hull
and machinery, with per occurrence 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 American, British and Scandinavian insurance
markets or in such other major international markets acceptable
to the Mortgagee. The Owner shall maintain protection and
indemnity 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 at least equal
from time to time to the limitation of liability amount
applicable to the Rig under the Oil Pollution Act 1990 or other
Environmental Laws), through underwriters or associations
acceptable to the Mortgagee. 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 in
respect of the Other Rigs, shall be in an amount equal to at
least 110% of the Total Commitment (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 satisfying
the conditions of the relevant policies evidence of which shall
be furnished to the Mortgagee.
(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 the Mortgagee shall be the
loss payee for distribution by it to itself, the Banks and the
Owner as their interests may appear, and shall provide for at
least ten days' prior notice to be given to the Mortgagee 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 Mortgagee and the Banks shall be named as co-
assureds on all such policies and insurance contracts, but
without liability of the Mortgagee, or the Banks for premiums or
calls. Complete certified copies of all such policies, binders
and other interim insurance contracts shall be delivered to the
Mortgagee. Originals shall also be provided upon the request of
the Mortgagee. The Owner shall furnish to the Mortgagee
annually a detailed report signed by a firm of marine insurance
brokers satisfactory to the Mortgagee 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 Mortgagee, by notice to the
underwriters, although the following insurance is payable to the
Mortgagee, (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 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$1,000,000.00 (One Million U.S.
Dollars), the underwriters shall not make such payment without
first obtaining the written consent thereto of the Mortgagee
(which consent shall not be unreasonably withheld). Any loss
covered by this paragraph which is paid to the Mortgagee 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 Mortgagee to, or as directed by, the Owner and all other
payments to the Mortgagee of losses covered by this paragraph
shall be applied by the Mortgagee in accordance with Clause
10.01.
In the event of a Total Loss, all insurance payments therefor
shall be paid to the Mortgagee. The Owner shall not declare or
agree with the underwriters that the Rig is a Total Loss without
the prior written consent of the Mortgagee.
(c) In the event of a Total Loss of the Rig, the Mortgagee 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
Secured Creditors under the Security Documents, whether or not
the same shall be then due and payable, together with accrued
interest and the cost, if any, of collecting the insurance, and
pay the balance as provided in Clause 10.
(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 in which the Rig from time to time is engaged.
(e) The Owner shall renew all such insurances as they expire and so
as to insure that there is no gap in coverage, keep the
Mortgagee advised of the progress of such renewals, and shall
provide evidence of such renewal in writing to the Mortgagee 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 Mortgagee.
(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 to such employment of the insurers
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 Mortgagee that throughout the Credit
Facility Period the Owner will:-
(a) keep the Rig documented in its name as a Panamanian flag vessel
and do or allow to be done nothing whereby such documentation
may be forfeited or imperilled;
(b) not without the previous consent in writing of the Mortgagee
except as otherwise contemplated by the Credit Agreement, change
the name of the Rig or make any modification to the Rig which
would materially alter the structure, type or performance
characteristics of the Rig and which would materially reduce the
value of the Rig;
(c) keep the Rig in a good and efficient state of repair consistent
with first-class ship-ownership and management practice employed
by owners of drilling rigs of similar size and type and so as to
maintain her present class (namely +A1 Barge) at American Bureau
of Shipping free of recommendations and qualifications and
change of class, save those approved in writing by the Mortgagee
and so as to comply with all applicable laws, treaties and
conventions of the Republic of Panama and other applicable
jurisdictions, and rules and regulations issued thereunder, and
have on board as and when required thereby valid certificates
showing compliance therewith;
(d) procure that all repairs to or replacement of any damaged, worn
or lost parts or equipment in such manner (both as regards
workmanship and quality of materials) as to not materially
diminish the value of the Rig and not to remove any material
part of, or item of equipment owned by the Owner installed on,
the Rig unless (i) 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 Mortgagee and becomes on
installation on the Rig the property of the Owner and subject to
the security constituted by this Mortgage or (ii) the removal
will not materially diminish the value of the Rig;
(e) submit the Rig to such periodical or other surveys as may be
required for classification purposes and if so required to
supply to the Mortgagee copies of all survey reports issued in
respect thereof;
(f) permit the Mortgagee by independent surveyors 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,
provided that unless an Event of Default shall have occurred and
be continuing, the cost of any such inspection shall be for the
account of the Mortgagee;
(g) 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;
(h) 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 can reasonably be expected to 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 Mortgagee may reasonably
require;
(i) promptly furnish to the Mortgagee 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 Mortgagee's request in writing, copies of
all charters and other contracts for her employment or otherwise
howsoever concerning her;
(j) notify the Mortgagee forthwith by 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 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 Mortgagee 30 days prior notice, provided,
that in the event of any emergency dry docking of the Rig,
the Owner shall immediately notify the Mortgagee; and
(vi) any intended deactivation or lay-up of the Rig (other
than for normal periods of inactivity between contracts
for the Rig during which periods the Rig remains manned)
and obtain the Mortgagee's prior written consent;
(k) keep proper books of account in respect of the Rig and as and
when the Mortgagee may so reasonably require make such books
available for inspection on behalf of the Mortgagee 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;
(l) observe the obligations contained in Sections 7 and 8 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;
(m) not without the previous consent in writing of the Mortgagee
(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 United States Dollars (US$2,500,000.00) (or the
equivalent in any other currency) unless (i) such person shall
first have given to the Mortgagee and in terms satisfactory to
it a written undertaking not to exercise any lien on the Rig for
the cost of such work or otherwise or (ii) the cost of such work
shall be fully covered by applicable insurance;
(n) comply with and satisfy all the provisions of applicable laws
and regulations of the Republic of Panama, as at any time
amended, in order to establish and maintain this Mortgage as a
first priority naval mortgage thereunder upon the Rig and upon
all renewals, improvements and replacements made in or to the
same, and promptly to furnish to the Mortgagee from time to time
such proofs as the Mortgagee may request for its satisfaction
with respect to the compliance by the Owner with the provisions
of this sub-clause, including, appropriate certificates of the
Public Registry showing that this Mortgage has been duly
registered and filed and is a first and absolute lien on the
Rig;
(o) 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 and
salvage and to any representative of the Mortgagee 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 subject to an Indenture of First Naval Mortgage
in favor of CHRISTIANIA BANK OG KREDITKASSE, as Agent for the
Banks defined in said Mortgage, in conformity with the
provisions of Chapter V, Title IV of Book Second of the Code of
Commerce, and the pertinent provisions of the Civil Code and
other legislation of the Republic of Panama. Under the terms of
said Mortgage neither the owner, any charterer, the Master of
the Rig nor any other person shall have the right, power or
authority to create, incur or permit to be placed upon the Rig
any other lien whatsoever other than for current crew's wages
and salvage and Permitted Liens (as that term is defined in said
Mortgage)."
(p) 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;
(q) notify the Mortgagee 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
Mortgagee advised, in writing on such regular basis and
in such detail as the Mortgagee shall require, of the
Owner's response to such Environmental Claim or
Environmental Incident.
(r) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Mortgagee having first been obtained, and any such written
consent to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Mortgagee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of the Rig;
(s) shall not cause or permit the Rig to be operated in any manner
contrary to law (except where the failure to operate in
compliance with any law would not have a material adverse effect
on the Owner, the Rig or the lien of this Mortgage), shall not
abandon the Rig in a foreign port and shall not engage in any
unlawful trade or violate any law or carry any cargo that shall
expose the Rig to forfeiture or capture.
8. PROTECTION OF SECURITY
8.01 The Mortgagee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit Documents be entitled (but
not bound) at any time and as often as may be necessary (but unless an
Event of Default shall have occurred and be continuing with prior
written notice to the Owner) 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 Credit 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, reasonable legal
fees) so incurred by the Secured Creditors 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 in any material respect with the
provisions of Clause 6 or any of them the Mortgagee shall be
entitled (but not bound) to effect or to replace and renew and
thereafter to maintain the Insurances in such manner it, in its
discretion, 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 Mortgagee
may nominate and, upon the direction of the Mortgagee 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 Mortgagee 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;
(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 Mortgagee 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 Mortgagee 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 MORTGAGEE'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 Mortgagee or the
Required Banks having served on the Owner any such notice as is
referred to in Section 9 of the Credit Agreement) the security
constituted by this Mortgage shall become immediately enforceable and
the Mortgagee 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 the laws of the Republic of
Panama or other applicable laws;
(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 Mortgagee
without legal process and without liability of the Mortgagee 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 Mortgagee;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Mortgagee 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) all such proceedings in connection with the Rig, the
Insurances, or any Requisition Compensation as the Mortgagee 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 Mortgagee
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
Obligations, subject to notice of sale being given by the
Mortgagee to the Owner and other mortgagees of record, if any,
by airmail, postage pre-paid and by publication once in a
newspaper of general circulation in the City of Panama, Republic
of Panama, not less than twenty (20) calendar days in advance of
the sale, to satisfy the requirement of notice of sale contained
in Article 1527 of the Panama Code of Commerce. Such notice
shall be necessary only in respect of the initial date of sale;
(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 Mortgagee in its absolute discretion
deems expedient and for the purposes aforesaid the Mortgagee
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 Mortgagee 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 Mortgagee in or about the
exercise of the power vested in the Mortgagee under
Clause 9.01(g);
(i) generally, to recover from the Owner on demand each and every
expense, liability or loss incurred by the Mortgagee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The Mortgagee 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 Mortgagee by this Mortgage or to which
the Mortgagee may at any time be entitled hereunder.
9.03 Neither the Secured Creditors 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 Mortgagee 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 Mortgagee the
purchaser shall not be bound to see or enquire whether the Mortgagee'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 Mortgagee and
the receipt of the Mortgagee for the purchase money shall effectively
discharge the purchaser who shall not be concerned with the manner of
application of the proceeds of sale or be in any way answerable
therefor.
10. APPLICATION OF MONEYS
10.01 (a) All moneys received by the Mortgagee or any Secured Creditor,
including, without limitation, in respect of sale of the Rig or
any part thereof, in respect of recovery under the Insurances,
or in respect of Requisition Compensation, shall be applied in
the following manner:-
(i) first, to the payment of all amounts owing the Mortgagee of
the type described in clauses (ii) and (iii) of Recital E;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to
the outstanding Obligations shall be paid to the Secured
Creditors as provided in Clause 10.01(c), with each
Secured Creditor receiving an amount equal to such
Obligations held by it or, if the proceeds are
insufficient to pay in full all such Obligations, its Pro
Rata Share (as defined below) of the amount remaining to
be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and
following the termination of this Mortgage pursuant to
Clause 3.01, any surplus then remaining shall be paid to
the Owner, subject, however, to the rights of the holder
of any then existing Lien of which the Mortgagee has
actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Mortgagee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Agent under the Credit Agreement for the
account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Mortgagee shall be entitled to reply upon
(i) the Agent under the Credit Agreement and (ii) the Secured
Creditors for a determination (which the Agent and each Secured
Creditor, by their acceptance of the benefits of this Mortgage
shall be obligated to provide upon request of the Mortgagee) of
the outstanding Obligations owed to the Secured Creditors.
Unless it has actual knowledge (including by way of written
notice from a Secured Creditor) to the contrary, the Agent under
the Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Mortgagee, in acting hereunder,
shall be entitled to assume that (x) no obligations other than
principal, interest and regularly accruing fees are owing to any
Secured Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the Mortgagee 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 Mortgagee and
the Agent 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
inure to the benefit of any transferee, successor or assignee of
the Mortgagee; 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
Mortgagee under this Mortgage,
in any such case, forthwith upon demand by the Mortgagee and at the
expense of the Owner.
12. POWER OF ATTORNEY
12.01 The Owner, by way of security and in order to more fully secure the
performance of the Obligations under this Mortgage, hereby irrevocably
appoints the Mortgagee 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 Mortgagee 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 Mortgagee shall not put any person dealing with the
Mortgagee 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 Mortgagee of such
power shall be conclusive evidence as against third parties of its
right to exercise the same.
13. INDEMNITIES
13.01 The Owner will indemnify and save harmless the Secured Creditors and
each agent or attorney appointed under or pursuant to this Mortgage
(each an "Indemnitee") from and against any and all expenses, claims,
liabilities, losses, taxes, costs, duties, fees and charges suffered,
incurred or made by such Secured Creditors 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 Mortgagee's rights
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and the Secured Creditors 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 a Secured Creditor 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 Secured Creditors 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 Hazardous Materials 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 the Subsidiary Guaranty or 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 Mortgagee,
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 Mortgagee against the amount of such
shortfall. For the purposes of this Clause 13.03, "rate of exchange"
means the rate at which the Mortgagee is able on the date of such
payment (or, if it is not practicable for the Mortgagee 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 Mortgagee 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 Mortgagee on demand all costs, fees and
expenses, including, but not limited to, legal fees and expenses and
valuation fees and Taxes thereon incurred by any Secured Creditor or
for which any Secured Creditor may become liable in connection with:-
(a) the negotiation, preparation and execution of the Credit
Agreement, the Subsidiary Guaranty and the other Credit
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, the
Subsidiary Guaranty or the other Credit Documents (or any of
them).
14.02 The Owner shall pay to the Mortgagee on demand all costs, fees and
expenses (including, but not limited to, legal fees and expenses) and
Taxes thereon incurred by any Secured Creditor in connection with:-
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement, the Subsidiary Guaranty or the
other Credit 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 Mortgagee in relation to
the Credit Agreement, the Subsidiary Guaranty and the other
Credit 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, the Subsidiary
Guaranty and the other Credit Documents (or any of them) may be
subject or give rise and shall indemnify the Mortgagee 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 required to be given to the Mortgagee shall be made to the
following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Attention: Loan Administration
Telephone: (212) 827-4800
Telefax: (212) 827-4888
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall inure to the benefit of
the Secured Creditors 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 Section 12.16 of the Credit Agreement, each Bank 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 Mortgagee 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 One Hundred Million US Dollars
(US$100,000,000) of principal plus interest, fees, commissions and
performance of mortgage covenants. The discharge amount is the same
as the total amount.
18. WAIVER; AMENDMENT
18.01 None of the terms and conditions of this Mortgage may be changed,
waived, modified or varied in any manner whatsoever unless in writing
duly signed by the Owner and the Mortgagee (with the consent of either
the Required Banks or, to the extent required by Section 12.12 of the
Credit Agreement, all of the Banks). No amendment to the Subsidiary
Guaranty which affects the rights and obligations of the Mortgagee
hereunder shall be effective without the consent of the Mortgagee
thereto.
19. MISCELLANEOUS
19.01 This Mortgage shall be governed by the laws of the Republic of Panama.
19.02 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.
19.03 The Mortgagee, 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 Mortgagee under this Mortgage in
relation to the Rig. Any such delegation may be made upon such terms
and subject to such regulations as the Mortgagee may think fit. The
Mortgagee 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.
19.04 The appearing parties hereby confer a special power of attorney on
Benedetti & Benedetti, lawyers of Panama, Republic of Panama and/or
any partners in the firm authorizing such firm or any such partner to
take all necessary steps to record this Indenture of First Naval
Mortgage in the appropriate registries of the City of Panama, and to
substitute this Power of Attorney herein granted.
19.05 A certification or determination by the Mortgagee as to any matter
provided for in this Mortgage shall, in the absence of manifest error,
be conclusive and binding on the Owner.
19.06 The Mortgagee declares that it accepts the naval mortgage hereby
created under the terms above set forth.
20. JURISDICTION
20.01 The Owner agrees that the Mortgagee 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Mortgagee.
20.02 Without prejudice to the generality of Clause 20.01, the Mortgagee
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 Mortgagee may bring before the courts of such
jurisdiction or other judicial authority and for the purpose of any
action which the Mortgagee 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.
20.03 The Owner agrees that should the Mortgagee 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 and the Mortgagee have duly executed these
presents the day and year first before written.
READING AND BATES BORNEO DRILLING CO., LTD.
By: _____________________________________
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH
By: _____________________________________
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this ____ day of April, 1996, before me personally
appeared ____________________ to me known and who resides at
; and who submitted evidence to me that he is a
___________ of READING AND BATES BORNEO DRILLING CO., LTD., the
___________________ company described in and which executed the foregoing
mortgage; and that he signed his name thereto pursuant to authority granted to
him by the Board of Directors of said corporation.
___________________
Notary Public
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this ____ day of April, 1996, before me personally
appeared ______________ to me known and who resides at
__________________________; and who submitted evidence to me that he/she is
__________ of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, the
corporation described in and which executed the foregoing mortgage; and that
he/she signed his/her name thereto pursuant to authority granted to him/her by
the Board of Directors of said corporation.
_______________________
Notary Public
Exhibit 10.92
READING & BATES (A) PTY. LTD.
- to -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH
__________________________
FIRST PRIORITY MORTGAGE
Dated April 30, 1996
_________________________
RON TAPPMEYER
==============================================================================
THIS FIRST PRIORITY MORTGAGE is made the 30th day of April, 1996 by READING
& BATES (A) PTY. LTD., ACN 064 532 252, a company organized and existing
under the laws of the State of Western Australia and the Commonwealth of
Australia and having its registered office 66 Kings Park Road, West Perth,
West Australia, (the "Owner") to CHRISTIANIA BANK OG KREDITKASSE acting
through its New York Branch having its office at 11 West 42nd Street, 7th
Floor, New York, NY 10036 (the "Mortgagee", which expression shall include
its successors and assigns),
WHEREAS:
(1) The Owner is the sole, absolute and unencumbered owner of sixty-four
sixty-fourth shares of the Rig described in the Schedule 1 hereto.
(2) By a Credit Agreement dated as of April 30, 1996 (as in effect from
time to time the "Credit Agreement") among Reading & Bates
Corporation, a Delaware corporation, ("Holdings"), the Banks party
thereto Credit Lyonnais, New York Branch, as co-agent, and the
Mortgagee, as agent for the Banks (in this capacity, the "Agent")
(the form of which Credit Agreement together with Exhibit B thereto
but without the remaining attachments is attached hereto as Exhibit
1), it was agreed among other things that the Banks would make
available to the Borrower upon the terms and conditions therein
described a reducing revolving credit facility in an aggregate amount
at any one time outstanding of One Hundred Million United States
Dollars (US$100,000,000) providing for the making of Loans and the
issuance of and participations in, Letters of Credit as contemplated
therein.
(3) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents, and
including the promissory notes of the Borrower payable to the order
of the respective Banks (each a "Note" and, collectively, the
"Notes") (the form of which is attached as Exhibit B to the Credit
Agreement).
(4) The Owner, for good and valuable consideration, has authorized,
executed and delivered a Subsidiary Guaranty (the "Subsidiary
Guaranty"), the form of which Subsidiary Guaranty is attached hereto
as Exhibit 2, in favor of the Agent guaranteeing the performance by
the Borrower of its obligations under the Credit Agreement including
the payment, when due, of all Obligations.
(5) This Mortgage is made for the benefit of the Mortgagee to secure the
guaranty by the Owner of (i) the full and prompt payment when due (x)
the principal of and interest on the Notes issued, and Loans made,
under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued under
the Credit Agreement and (y) all other obligations and indebtedness
(including, without limitation, indemnities, Fees and interest
thereon) of the Borrower to the Secured Creditors as hereinafter
defined), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and the other
Credit Documents including, without limitation, this Mortgage and the
due performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents including, without limitation, this Mortgage;
(ii) any and all sums advanced by the Mortgagee in order to preserve
the Rig or preserve its security interest in the Rig; (iii) in the
event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of the Borrower referred to
in clause (i) above, after an Event of Default shall have occurred
and be continuing, the reasonable expenses of the Mortgagee or re-
taking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Rig, or of any exercise by the
Mortgagee of its rights hereunder, together with reasonable
attorneys' fees of counsel to the Mortgagee and court costs; and (iv)
all amounts paid by any Indemnitee as to which such Indemnitee has
the right to reimbursement under Clause 13 of this Mortgage (all such
obligations, liabilities, sums and expenses referred to in clauses
(i) through (iv) above being collectively referred to as the
"Obligations"). It is acknowledged and agreed that the "Obligations"
shall include extensions of credit of the types described above,
whether outstanding on the date of this Mortgage or extended from
time to time after the date of this Mortgage.
(6) This First Priority Mortgage, which is entered into by the Owner in
consideration of the Banks agreeing to make the Facility available to
the Borrower and as a condition thereto and for other good and
valuable consideration provided by the Banks (the sufficiency of
which the Owner hereby acknowledges).
NOW THIS MORTGAGE WITNESSETH AND IT IS HEREBY AGREED as follows:
1. (A) In this Mortgage unless the context otherwise requires:
"Agent" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Bank" means any lender listed from time to time on Annex 1 to the
Credit Agreement (collectively, the "Banks");
"Collateral Assignment of Insurances" means the Collateral Assignment
of Insurance in respect of the Rig executed or to be executed by the
Owner in favor of the Agent;
"Credit Agreement" means the Credit Agreement, dated as of April 30,
1996, among Holdings, the Borrower, the Banks, Credit Lyonnais New
York Branch, as co-agent, and the Agent first referred to in Recital
(2) hereto;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings, together with interest, fees and all other obligations are
paid in full;
"Credit Party" shall have the same meaning for such term as set forth
in the Credit Agreement;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.07(b) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any
permit issued, or any approval given, under any such Environmental
Law (hereafter, "Claims"), including, without limitation, (a) any and
all Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment.
"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. 9601 et seq.), the Hazardous Materials Transportation Act
(49 U.S.C. 1801 et seq.), the Resource Conservation and Recovery
Act of 1976 (42 U.S.C. 6901 et seq.), the Clean Air Act (42 U.S.C.
7401 et seq.), the Federal Water Pollution Control Act (33 U.S.C.
1251 et seq.) and the Toxic Substances Control Act (15 U.S.C. 2601
et seq.) (all of the foregoing as amended), and any comparable laws
of the individual States of the United States of America the
Commonwealth of Australia, the individual states or territories of
Australia or any other state or nation);
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals,
materials or substances defined as or included in the definition of
"hazardous substances," "hazardous waste," "hazardous materials,"
"extremely hazardous waste," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or
words of similar import, under any applicable Environmental Law; and
(c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning provided in Section 13(A);
"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 Section 1.08 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01 of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Borrower referred to in
Recital (3) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (5) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
offshore drilling rig JACK BATES owned by the Borrower documented
under the laws and flag of the United States with Official Number
906283 of 19,928 gross registered tons and 14,948 net registered
tons; (ii) the offshore drilling rig W. D. KENT owned by Reading &
Bates Exploration ("R&B Exploration") documented under the laws and
flag of the United States with Official Number 583169 of 5,383 gross
registered tons and 4,185 net registered tons; (iii) the offshore
drilling rig CHARLEY GRAVES owned by Reading and Bates Borneo
Drilling Co., Ltd. documented under the laws and flag of the Republic
of Panama with Patente Number 6618-76-CH of 5,829 gross registered
tons and 1,748 net registered tons; (iv) the offshore drilling rig
D.R. STEWART owned by R&B Exploration documented under the laws and
flag of United States with Official Number 626904 of 6,494 gross
registered tons and 5,834 net registered tons; and (v) the offshore
drilling rig J.W. McLEAN owned by the Borrower documented under the
laws and flag of the Bahamas with Official Number 715954 of 9199.01
gross registered tons and 7267.22 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 written request of the
Agent, 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 written
request of the Agent, 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 Banks; and
provided that Permitted Liens shall not include any liens described
in subclauses (1) through (7) 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 referred to in Recital (1) hereto and more
fully described in Schedule 1 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 Creditors" shall mean the Banks, the Letter of Credit Issuer
and the Agent under and as defined in the Credit Agreement;
"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;
"Subsidiary Guaranty" means the agreement dated as of April 23, 1996
made by the Owner in favor of the Agent as first referred to in
Recital (4) hereto;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within
ninety (90) days after the occurrence thereof;
"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;
(B) In Clause 5(A) hereof:
(i) "Excess risks" means the proportion of claims for general
average and salvage charges and under the ordinary
running-down clause not recoverable in consequence of the
value at which a vessel is assessed for the purpose of
such claim exceeding her insured value;
(ii) "Protection and indemnity risks" means the usual risks
covered by a protection and indemnity association
including the proportion not recoverable in case of
collision under the ordinary running-down clause;
(iii) "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.
(C) This Mortgage shall be read together with the Credit Agreement,
the Notes, the Subsidiary Guaranty and the other Credit
Security Documents.
(D) The Owner hereby represents and warrants to the Mortgagee that:
(i) 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 the lien of this Mortgage);
(ii) the Owner has not sold or transferred, or agreed to sell
or transfer, title to the Rig or any share therein;
(iii) the Owner is a corporation duly organized and validly
existing and in good standing under the laws of the State
of Western Australia and the Commonwealth of Australia;
(iv) the Owner has full power and authority (i) to register
the Rig in its name under Australian flag, (ii) to
execute and deliver this Mortgage, (iii) to mortgage the
Rig as security for the Obligations and (iv) to comply
with the provisions of, and perform all its obligations
under, this Mortgage;
(v) the Owner has complied with all statutory and other
material requirements relating to the ownership,
registration and operation of the Rig;
(vi) 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 Registrar of Ships at
the Australian Shipping Registration Office and the
Australian Securities Commission will create a legal,
valid and enforceable first preferred mortgage lien on
the Rig;
(vii) 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 its Memorandum and Articles of Association, 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;
(viii) 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 during the Credit Facility Period;
(ix) 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;
(x) the Owner is in compliance with all applicable
Environmental Laws relating to the Rig, its operation and
management;
(xi) the Owner has obtained all Environmental Approvals and is
in compliance with all requests thereof;
(xii) no Environmental Claim has been made or threatened
against the Owner, the Approved Manager or otherwise in
connection with the Rig; and
(xiii) 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. In order to induce Banks to enter into the Credit Agreement and to
make the Facility available thereunder and in consideration of other
valuable consideration (receipt whereof is hereby acknowledged by the
Owner) the Owner hereby covenants with the Mortgagee as follows:
(A) The Owner shall pay the full amount of all moneys comprising
the Obligations as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty
and the other Credit Documents.
(B) The Owner will pay to or indemnify the Mortgagee for such
additional amounts as may be necessary in order that all
payments under this Mortgage after deduction of, for, or on
account of every present or future tax, assessment and
governmental charge imposed by any competent authority in the
State of Western Australia or Commonwealth of Australia (or in
such other jurisdictions to the revenue laws of which the Owner
may for the time being be subject) shall be no less than such
payments would have been had there been no such tax, assessment
or charge.
3. By way of security for the performance of the Obligations THE OWNER
as BENEFICIAL OWNER HEREBY MORTGAGES AND CHARGES to and in favor of
the Mortgagee all the Owner's interest in the Rig, including, without
limitation, all 64 shares in the Rig, the Earnings and the Insurances
(all of which the Owner hereby warrants to be free at the date hereof
from any other charge or incumbrance whatsoever, other than Permitted
Liens, if any) and Requisition Compensation and without prejudice to
the generality of the foregoing THE OWNER HEREBY ASSIGNS AND AGREES
to assign to the Mortgagee (or to procure to assign to the Mortgagee
as the case may be) the Earnings and the Insurances and Requisition
Compensation as defined herein PROVIDED HOWEVER that any sums
receivable in respect of the Insurances shall be payable as follows:
(A) There shall be paid to the Mortgagee any and every sum
receivable in respect of a Total Loss.
(B) Unless and until Underwriters have been otherwise instructed by
notice in writing from the Mortgagee, (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, (ii) in the case of any loss
(other than a Total Loss or a loss covered by (i) above) under
any insurance with respect to the Rig involving any damage to
the Rig, the Underwriters may pay directly for the repair,
salvage, liability or other charges involved or, if the Owners
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 Owners as
reimbursement therefor, provided, however, that if such damage
involves a loss in excess of U.S. $1,000,000 or its equivalent
the Underwriters shall not make such payment without first
obtaining the written consent thereto of the Mortgagee.
4. It is declared and agreed that the security created by this Mortgage
shall be held by the Mortgagee as a continuing security for the
performance of all Obligations under the Credit Documents and the
performance and observance of and compliance with all of the
covenants, terms and conditions therein and herein contained and that
the security so created shall not be satisfied by any intermediate
payment or satisfaction of any part of the amount hereby and thereby
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 Mortgagee for all or any
part of the moneys hereby and thereby secured and that every power
and remedy given to the Mortgagee hereunder shall be in addition to,
and not a limitation of, any and every other power or remedy vested
in the Mortgagee under the Subsidiary Guaranty and the other Credit
Documents or any other document or instrument entered into pursuant
to the Credit Agreement or at law and that all the powers so vested
in the Mortgagee may be exercised from time to time and as often as
the Mortgagee may deem expedient.
5. The Owner further covenants with the Mortgagee and undertakes that:
(A)(i) The Owner shall, at its own expense, when and so long as
the Obligations remain 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 Mortgagee. 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 Rigs, such
aggregate amount shall be at least 110% of the aggregate
amount of the Total Commitment. 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
American, British and Scandinavian insurance markets or
in such other major international markets reasonably
acceptable to the Mortgagee. 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
Mortgagee. In addition, the Owner shall, at its own
expense, furnish to the Mortgagee a mortgagee's single
interest policy providing coverage which, when aggregated
with the mortgagee's interest insurance furnished to the
Mortgagee in respect of the Other Rigs, shall be in an
amount equal to at least 110% of the aggregate amount of
the Total Commitment (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
Mortgagee). Such mortgagee's interest insurance and any
additional insurance policies for the benefit of the
Mortgagee shall be maintained in the broadest form
available in the American, British and Scandinavian
markets or other major international markets acceptable
to the Mortgagee through underwriters acceptable to the
Mortgagee. 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 Mortgagee.
(ii) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the
Mortgagee, shall contain conditions, terms, stipulations
and insuring covenants satisfactory to the Mortgagee, and
shall be kept in full force and effect by the Owner so
long as the Obligations 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 Mortgagee for distribution by it to
itself, the Banks and the Owner as their interests may
appear, and shall provide for at least ten days' prior
notice to be given to the Mortgagee 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. Certified copies of all such
policies, binders and other interim insurance contracts
shall be deposited with the Mortgagee. Originals shall
also be provided upon the request of the Mortgagee. The
Owner shall furnish to the Mortgagee annually a detailed
report signed by a firm of marine insurance brokers
satisfactory to the Mortgagee 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 5(A).
Unless otherwise required by the Mortgagee by notice to
the underwriters, although the following insurance is
payable to the Mortgagee, (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 5(A)(ii) 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 Mortgagee
(which consent shall not be unreasonably withheld). Any
loss covered by this paragraph which is paid to the
Mortgagee 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 Mortgagee to, or as
directed by, the Owner and all other payments to the
Mortgagee of losses covered by this paragraph shall be
applied by the Mortgagee 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 Mortgagee. 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 Mortgagee.
(iii) In the event of an actual or constructive Total Loss of
the Rig, the Mortgagee 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 Secured Creditors
under the Credit 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 provided in Clause 9.
(iv) The Owner shall comply with and satisfy all of the
provisions of any applicable law, regulation, pro-
clamation 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.
(v) The Owner shall renew all insurances as they expire and
so as to insure that there is no gap in coverage, keep
the Mortgagee advised of the progress of such renewals,
and procure that the insurers shall promptly confirm in
writing to the Mortgagee as and when each such renewal is
effected.
(vi) 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 Mortgagee.
(vii) 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.
(viii) 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.
(B) maintain its existence as a corporation in good standing duly
organized under the laws of the State of Western Australia and
Commonwealth of Australia;
(C) Not to change the name of the Rig without the Mortgagee's prior
approval and to keep the Rig registered as an Australian Rig
and not do or suffer to be done anything, or omit to do
anything the doing or omission of which could or might result
in such registration being forfeited or imperilled or which
could or might result in the Rig being required to be
registered otherwise than as an Australian Rig and not to
register the Rig or permit its registration under any other
flag or at any other port without the prior written consent of
the Mortgagee.
(D) not without the previous consent in writing of the Mortgagee
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;
(E) To 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 Rig Class +A1 Self-Elevating Drilling
Rig) and so as to comply with the provisions of the Shipping
Registration Act 1981 (Commonwealth of Australia) and all other
laws, regulations and requirements (statutory or otherwise)
from time to time applicable to vessels registered in Australia
and to 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 not to diminish the value of the Rig;
(F) 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 Mortgagee and becomes on installation on
the Rig the property of the Owner and subject to the security
constituted by this Mortgage;
(G) submit the Rig to such periodical or other surveys as may be
required for classification purposes and if so required to
supply to the Mortgagee copies of all survey reports issued in
respect thereof;
(H) permit the representatives of the Mortgagee or independent
surveyors representing the Mortgagee 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;
(I) 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;
(J) 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 Mortgagee may require;
(K) Promptly to furnish to the Mortgagee 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 copies of all charters and other
contracts for her employment or otherwise howsoever concerning
her.
(L) To notify the Mortgagee forthwith by cable or telex confirmed
by letter of:
(i) Any accident to the Rig involving repairs the cost
whereof will or is likely to be a Major Casualty;
(ii) Any occurrence in consequence whereof the Rig has become
or is likely to become a Total Loss;
(iii) Any requirement or recommendation made by any insurer or
classification society or by any competent authority
which is not immediately complied with;
(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;
(v) any intended dry docking of the Rig, as to which the
Owner shall give the Mortgagee ten (10) days prior
notice, provided, that in the event of any emergency dry
docking of the Rig, the Owner shall immediately notify
the Mortgagee; and
(vi) any intended deactivation or lay-up of the Rig (other
than for normal periods of inactivity between contracts
for the Rig during which periods the Rig remains manned)
and obtain the Mortgagee's prior written consent;
(M) keep proper books of account in respect of the Rig and as and
when the Mortgagee may so reasonably require make such books
available for inspection on behalf of the Mortgagee 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;
(N) observe the obligations contained in Sections 7 and 8 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;
(O) not without the previous consent in writing of the Mortgagee
(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 Mortgagee 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;
(P) Reimburse the Mortgagee promptly, with interest at the Default
Rate, for any and all expenditures which the Mortgagee may
from time to time make, lay out or expend in providing such
protection in respect of insurance, discharge of liens, taxes,
dues, assessments, governmental charges, fines and penalties
lawfully imposed, repairs, attorneys' fees and other matters as
the Shipowner is obligated herein to provide, but fails to
provide. Such obligation of the Owner to reimburse the
Mortgagee shall be an additional indebtedness due from the
Owner, secured by this Mortgage, and shall be payable by the
Owner on demand. The Mortgagee, though privileged so to do,
shall be under no obligation to the Owner to make any such
expenditures, nor shall the making thereof relieve the Owner
of any default in that respect.
(Q) To pay on demand to the Mortgagee (or as it may direct) the
amount of all investigation and legal expenses of any kind
whatsoever, stamp duties (if any), registration fees and any
other charges incurred reasonably and in good faith by the
Mortgagee in connection with the preparation, completion,
enforcement and registration of the Security Documents or
otherwise in connection with the Obligations and the security
therefor.
(R) 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;
(S) notify the Mortgagee 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
Mortgagee advised, in writing on such regular basis and
in such detail as the Mortgagee shall require, of the
Owner's response to such Environmental Claim or
Environmental Incident;
(T) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Mortgagee having first been obtained, and any such written
consent to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban waters or enter any Cuban port for any purpose
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; if such transaction or violation would (i) expose the
Mortgagee to any penalty, sanction or investigation or (ii)
jeopardize the lien created by this Mortgage or (iii) have a
material adverse effect on the Owner or the operation of the
Rig;
(U) 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
Australia and will at all times keep the Rig duly documented
thereunder.
6. (A) The Mortgagee shall without prejudice to its other rights and
powers hereunder be entitled (but not bound) at any time and as
often as may be necessary to take any such action as it may in
its discretion think fit for the purpose of protecting the
security created by the Credit Agreement, the Subsidiary
Guaranty and other Credit Documents and each and every expense
or liability so incurred by the Secured Creditors in or about
the protection of the security shall be repayable to it by the
Owner on demand together with interest thereon at the Default
Rate from the date whereon such expense or liability was
incurred by the Mortgagee until the date of actual receipt (as
well after as before any judgment).
(B) Without prejudice to the generality of the foregoing:
(i) In every case that the provisions of Clause 5(A) hereof
or any of them shall not be complied with, the Mortgagee
shall be at liberty to effect and thereafter to maintain
all such insurances upon the Rig as in its discretion it
may think fit;
(ii) In the event that the provisions of Clause 5(C) or 5(D)
hereof or any of them shall not be complied with, the
Mortgagee shall be at liberty to arrange for the carrying
out of such repairs and surveys as it may deem expedient
or necessary;
(iii) In the event that the provisions of Clause 5(F) hereof or
any of them shall not be complied with, the Mortgagee
shall be at liberty to pay and discharge all such debts,
damages and liabilities as are therein mentioned and to
take any such measures as it may deem expedient or
necessary for the purpose of securing the release of the
Rig.
Each and every expense or liability so incurred by the
Mortgagee shall be recoverable, together with interest at the
Default Rate, from the Owner as provided herein.
7. Upon the happening of any of the following events (the "Events of
Default") the security created by this Mortgage shall become
immediately enforceable:
(A) The owner does not pay to the Mortgagee forthwith any sum of
money payable under the Subsidiary Guaranty or the other Credit
Documents.
(B) If the Owner is in breach of the covenants contained in Clauses
5A, 5B, 5C, 5F, 5G, 5H, 5I, 5K, 5L, 5M, 5N or 5O.
(C) If the Owner is in breach of any of the other covenants, terms
and conditions hereof and such breach is not remediable or if
it is capable of being remedied, the same is not remedied
within 10 days of receipt of notice from the Mortgagee
requesting remedial action.
(D) It becomes impossible or unlawful for the Owner to fulfill any
of the covenants and obligations contained in the Subsidiary
Guaranty or the other Credit Documents or for the Mortgagee to
exercise the rights or any of them vested in it under the
Credit Documents or otherwise.
(E) Anything is done or suffered or omitted to be done by the Owner
which in the reasonable opinion of the Mortgagee may imperil
the security created by the Subsidiary Guaranty or the other
Security Documents.
(F) An Event of Default under the Credit Agreement shall have
occurred and be continuing.
8. Upon the security created by this Mortgage becoming immediately
enforceable pursuant to Clause 7 hereof the Mortgagee may by notice
of default given to the Owner declare the Obligations to be forthwith
due and payable and the Mortgagee shall become forthwith entitled as
and when it may see fit to put into force and exercise all the powers
possessed by it as mortgagee of the Rig and chargee of the Rig, the
insurances and the Earnings and in particular:
(A) To exercise all of the rights and remedies given to mortgagees
by the laws of the Commonwealth of Australia and the States and
Territories of Australia or other applicable laws, including
the right to cause the Rig to be arrested and sold by judicial
authority.
(B) To take possession of the Rig.
(C) To require that all policies, contracts and other records
relating to the Insurances or any of them (including details of
and correspondence concerning outstanding claims) be forthwith
delivered to such adjusters and/or brokers and/or other
insurers as the Mortgagee may nominate.
(D) To collect, recover, compromise and give a good discharge for
all claims then outstanding or thereafter arising under the
Insurances and to take over or institute (if necessary using
the name of the Owner) all such proceedings in connection
therewith as the Mortgagee in its absolute discretion thinks
fit and to permit any brokers through whom collection or
recovery is effected to charge the usual brokerage fees
therefor.
(E) 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 by public auction or private contract at
home or abroad and upon such terms as the Mortgagee in its
absolute discretion may determine with power to postpone any
such sale and without being answerable for any loss occasioned
by such sale or resulting from postponement thereof and itself
to purchase the Rig at any such public auction and to set off
the purchase price against all or any part of the Obligations.
(G) Pending sale of the Rig to manage, insure, maintain and repair
the Rig and to employ or lay up the Rig in such manner and for
such period as the Mortgagee in its absolute discretion deems
expedient and for the purposes aforesaid the Mortgagee shall be
entitled to do all acts and things incidental or conducive
thereto and in particular to enter into such arrangements
respecting the Rig, her insurance, management, maintenance,
repair, classification and employment in all respects as if the
Mortgagee were the owner of the Rig and without being
responsible for any loss thereby incurred.
(H) To recover from the Owner on demand any such losses as may be
incurred by the Mortgagee in or about the exercise of the power
vested in the Mortgagee under sub-clause (G) above with
interest thereon at the Default Rate from the date when such
losses were incurred by the Mortgagee until the date of actual
receipt (as well after as before any judgment).
(I) To recover from the Owner on demand all expenses, payments and
disbursements incurred by the Mortgagee in or about or
incidental to the exercise by it of any of the powers aforesaid
together with interest thereon at the Default Rate from the
date when such expenses, payments or disbursements were
incurred by the Mortgagee until the date of actual receipt (as
well after as before any judgment).
PROVIDED ALWAYS that upon any sale of the Rig or any share therein by the
Mortgagee pursuant to sub-clause (F) above the purchaser shall not be bound
to see or inquire whether the Mortgagee's power of sale has arisen in the
manner herein provided and the sale of the Rig shall be deemed to be within
the power of the Mortgagee and the receipt of the Mortgagee for the
purchase money shall effectively discharge the purchaser thereof who shall
not be concerned with the manner of application of the proceeds of sale or
be in any way answerable therefor.
9. Upon the security created by this Mortgage becoming immediately
enforceable pursuant to clause 7 hereof, the Mortgagee shall be
entitled to appoint a receiver or manager or receiver and manager
(the "Receiver") of the Rig and the freights, hire, insurances,
revenues, income and profits due or to become due and arising from
the operation of the Rig. Any Receiver so appointed shall be the
agent of the Owner unless at any time otherwise specified by the
Mortgagee. The Owner shall be solely responsible for the
remuneration, costs and expenses of the Receiver. The Mortgagee may
at any time terminate the appointment of the Receiver. In addition
to all the rights and powers conferred on the Receiver at law and in
equity, a Receiver shall be entitled to exercise all of the powers
and rights conferred upon the Mortgagee under this Mortgage or any
other Credit Document.
10. (a) All moneys received by the Mortgagee in respect of any sale by
it of the Rig or any share therein or otherwise pursuant to the
provisions of this Mortgage shall be place to pay or retain all
such payments, disbursements, expenses and losses whatsoever
(together with interest thereon as provided herein) as may have
been incurred by the Mortgagee in or about or incidental to the
exercise by the Mortgagee of the powers applied in the
following manner:
(i) first, to the payment of all amounts owing the Mortgagee
of the type described in clauses (ii) and (iii) of Recital 5;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to the
outstanding Obligations shall be paid to the Secured Creditors
as provided in Clause 10.01(c), with each Secured Creditor
receiving an amount equal to such Obligations held by it or, if
the proceeds are insufficient to pay in full all such
Obligations, its Pro Rata Share (as defined below) of the
amount remaining to be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and following
the termination of this Mortgage pursuant to Clause 3.01, any
surplus then remaining shall be paid to the Owner, subject,
however, to the rights of the holder of any then existing Lien
of which the Mortgagee has actual notice (without
investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as
a percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Mortgagee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations
then owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Agent under the Credit Agreement for the
account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Mortgagee shall be entitled to reply
upon (i) the Agent under the Credit Agreement and (ii) the
Secured Creditors for a determination (which the Agent and each
Secured Creditor, by their acceptance of the benefits of this
Mortgage shall be obligated to provide upon request of the
Mortgagee) of the outstanding Obligations owed to the Secured
Creditors. Unless it has actual knowledge (including by way of
written notice from a Secured Creditor) to the contrary, the
Agent under the Credit Agreement, in furnishing information
pursuant to the preceding sentence, and the Mortgagee, in
acting hereunder, shall be entitled to assume that (x) no
obligations other than principal, interest and regularly
accruing fees are owing to any Secured Creditor.
11. No delay or omission of the Mortgagee to exercise any right or power
vested in it under the Subsidiary Guaranty or the other Credit
Documents shall impair such right or power or be construed as a
waiver of or an acquiescence in any default by the Owner and in event
of the Mortgagee at any time agreeing to waive any such right or
power such waiver shall be revocable by the Mortgagee at any time and
the right or power shall thenceforth be again exercisable as though
there had been no such waiver.
12. The Mortgagee shall be entitled at any time and as often as may be
expedient to delegate all or any of the powers and discretions vested
in it by the Subsidiary Guaranty or the other Credit Documents
(including the power vested in it by virtue of Clause 14 hereof) in
such manner upon such terms and to such persons as the Mortgagee in
its absolute discretion may think fit.
13. (A) The Owner will indemnify and save harmless the Secured
Creditors and each agent or attorney appointed under or
pursuant to this Mortgage (each an "Indemnitee") from and
against any and all expenses, claims, liabilities, losses,
taxes, costs, duties, fees and charges suffered, incurred or
made by such Secured Creditors 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 rights under
this Mortgage of the Mortgagee; or
(c) on the release of the Rig from the security created by
this Mortgage,
and the Secured Creditors 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 such Secured Creditor or such agent or attorney shall be
recoverable on a full indemnity basis.
(B) Without limiting the foregoing Clause 13A, the Owner hereby
further indemnifies and holds harmless each of the Secured
Creditors 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 governmental authorities relating to Hazardous Materials at,
or discharged from the Rig.
(C) 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 Mortgagee, 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 Mortgagee against the amount of such shortfall.
For the purposes of this Clause C, "rate of exchange" means the
rate at which the Mortgagee is able on the date of such payment
(or, if it is not practicable for the Mortgagee) 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 Mortgagee 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. (A) The Owner hereby irrevocably appoints the Mortgagee as its
attorney-in-fact for the duration of the Credit Facility Period
for the purpose of doing in its name all acts which the Owner
itself could do in relation to the Rig, the Requisition
Compensation and the Insurances and the Earnings PROVIDED
HOWEVER that such power shall not be exercisable by or on
behalf of the Mortgagee unless an Event of Default shall have
occurred.
(B) The exercise of such power by or on behalf of the Mortgagee
shall not put any person dealing with the Mortgagee upon any
inquiry as to whether an Event of Default has occurred nor
shall such person be in any way affected by notice that an
Event of Default has not occurred and the exercise by the
Mortgagee of such power shall be conclusive evidence of its
right to exercise the same.
15. The Owner hereby further undertakes at its own expense to execute,
sign, perfect, do and (if required) register every such further
assurance, document, act or thing as in the opinion of the Mortgagee
may be necessary or desirable for the purpose of more effectually
mortgaging and charging the Rig or perfecting the security
constituted by the Subsidiary Guaranty and the other Security
Documents.
16. The Owner covenants with the Mortgagee that it will indemnify the
Mortgagee and hold it harmless against any loss or damage or expenses
which consequent upon a judgment being obtained or enforced in
respect of the non-payment by the Owner of any amount due under the
Subsidiary Guaranty and the other Credit Documents arises or results
from any variation in rates of exchange between U.S. Dollars and the
currency in which such judgment was obtained between the date of the
said amounts becoming due (or the date of the said judgment being
obtained as the case may be) and the date of actual payment thereof
and this indemnity shall not be affected by any time or indulgence
granted to the Owner from time to time and shall continue in full
force and effect notwithstanding any judgment in favor of the
Mortgagee.
17. (A) This Mortgage shall be construed and enforceable according to
the laws of the Australian Capital Territory, Australia.
(B) The Owner agrees that the Mortgagee shall have liberty but
shall not be obliged to take any proceedings in the Courts of
any country to protect or enforce the security hereby
constituted or to enforce any provisions of the Subsidiary
Guaranty and the other Credit Documents or to recover payment
of the Obligations and for the purpose of any proceedings for
the enforcement of the Subsidiary Guaranty or the other Credit
Documents the Owner hereby submits to the jurisdiction of the
Courts of any country of the choice of the Mortgagee.
18. All communications provided for or permitted hereunder shall be in
writing or by telex or telefax confirmed in writing and shall be
delivered, air mailed, telexed or telefaxed to the addresses given in
Section 12.03 of the Credit Agreement:
19. In accordance with section 282 of the Corporation Law (as set out in
section 82 of the Corporation Act 1989 (Western Australia)), the
maximum prospective liability secured by this Mortgage will be (U.S.
$150,000,000) One Hundred Fifty Million United States Dollars, but
this clause shall not limit the amount secured by or recoverable
under this Mortgage or any other Credit Document.
IN WITNESS WHEREOF Reading & Bates (A) Pty. Ltd. has caused this
Mortgage to be executed by on the day and year first above written.
THE COMMON SEAL OF )
READING & BATES (A) )
PTY LTD (ACN )
064 532 252) was )
affixed by the authority of )
the Board of Directors in the )
presence of: )
_______________________ _______________________
Signature of Secretary/Director Signature of Director
_______________________ _______________________
Name of Secretary/Director Name of Director
Accepted and Agreed:
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH
By: ____________________________________
Title:
SCHEDULE I hereinbefore referred to
-----------------------------------
The offshore drilling rig "RON TAPPMEYER" of the following dimensions
and tonnages:
Tons Gross approx. 11,455
Tons Net approx. 3,436
having Official Number 855213 at the Registry of Ships in Canberra,
Australia.
SCHEDULE II
AUSTRALIAN SHIPPING REGISTRATION ACT 1981
Particulars under section 38(2)
1. Name and Official Number:
"RON TAPPMEYER", Australian Official No. 855213.
2. The number of shares affected - 64
3. Name and address of the mortgagor
Reading & Bates (A) Pty. Ltd., a company organized and existing
under the laws of the State of Western Australia and the
Commonwealth of Australia and having its registered office at
66 Kings Park Road, West Perth, Western Australia.
4. Name and address of the mortgagee:
Christiania Bank og Kreditkasse, New York Branch, 11 West 42nd
Street, 7th Floor, New York, NY 10036
Signed by READING & BATES (A) PTY. LTD. by__________________________________
Its: Attorney-in-Fact
ACKNOWLEDGMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the ___ day of April, 1996, before me personally came
________________, to me known, who being by me duly sworn did depose and
say that he resides at ___________________________; that he is an
__________________ for READING & BATES (A) PTY. LTD., the corporation
described in and which executed the above First Priority Mortgage; and that
he signed his name thereto pursuant to authority granted to him by the
Board of Directors of said corporation.
_________________________________
Notary Public
ACKNOWLEDGMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the ___ day of April, 1996, before me personally came
_________________, to me known, who being by me duly sworn did depose and
say that she resides at __________________________________; that she is an
________________ for CHRISTIANIA BANK OG KREDITKASSE, the corporation
described in and which executed the above First Priority Mortgage; and that
she signed her name thereto pursuant to authority granted to her by the
Board of Directors of said corporation.
_________________________________
Notary Public
Exhibit 10.93
Dated April 30, 1996
READING & BATES DRILLING CO.,
as Owner
-and-
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Mortgagee
J.W. McLEAN
-----------------------
DEED OF COVENANT
-----------------------
==============================================================================
INDEX
CLAUSE PAGE
1 DEFINITIONS AND INTERPRETATION 2
2 REPRESENTATIONS AND WARRANTIES 7
3 PAYMENT COVENANTS 8
4 MORTGAGE 9
5 PRESERVATION OF SECURITY 9
6 INSURANCE 12
7 RIG COVENANTS 14
8 PROTECTION OF SECURITY 18
9 ENFORCEABILITY AND MORTGAGEE'S POWERS 18
10 APPLICATION OF MONEYS 20
11 FURTHER ASSURANCES 21
12 POWER OF ATTORNEY 22
13 INDEMNITIES 22
14 EXPENSES 23
15 COMMUNICATIONS 24
16 ASSIGNMENTS 24
17 MISCELLANEOUS 24
18 LAW AND JURISDICTION 24
EXECUTION
EXHIBIT 1 FORM OF CREDIT AGREEMENT
==============================================================================
THIS DEED OF COVENANT is made on the 30th day of April, 1996
BETWEEN:
(1) READING & BATES DRILLING CO., a corporation incorporated in the State
of Oklahoma having its principal office at 901 Threadneedle, Suite 200,
Houston, Texas 77079 (the "Owner"), and
(2) CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH having offices at 11
West 42nd Street, New York, NY 10036, as agent for the Banks (as
hereinafter defined) (the "Mortgagee")
WHEREAS
(A) By a Credit Agreement dated as of April 30, 1996 (as in effect from
time to time the "Credit Agreement") among Reading & Bates Corporation, a
Delaware corporation ("Holdings"), the Owner, the Banks party thereto, Credit
Lyonnais, New York Branch, as co-agent, and Christiania Bank og Kreditkasse,
New York Branch, (the "Agent") (the form of which Credit Agreement together
with Exhibit B thereto but without the remaining attachments is attached
hereto as Exhibit 1), it was agreed among other things that the Banks would
make available to the Owner upon the terms and conditions therein described a
reducing revolving credit facility (the "Facility") in an aggregate amount at
any one time outstanding of One Hundred Million United States Dollars
(US$100,000,000) providing for the making of Loans and the issuance of and
participations in Letters of Credit as contemplated therein.
(B) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents including the
promissory notes of the Borrower payable to the order of the respective Banks
(each a "Note" and, collectively, the "Notes") (the form of which is attached
as Exhibit B to the Credit Agreement).
(C) It is a condition precedent to the Banks advancing amounts under the
Credit Facility to the Owner that the Owner shall execute, deliver and
register a statutory mortgage in favor of the Mortgagee over sixty four sixty-
fourth shares in the Rig (as hereinafter defined) and shall enter into a Deed
of Covenant supplemental thereto in the form of this Deed.
(D) The Owner has executed in favor of the Mortgagee a statutory mortgage
in account current form bearing the same date as this Deed and constituting a
first mortgage of sixty four sixty-fourth shares in the said Rig and the said
statutory mortgage and this Deed are each entered into by the Owner in
consideration of the Banks agreeing, at the request of the Owner, to make
Loans to the Owner and issue Letters of Credit for the account of the Owner
under the Credit Facility and as a condition thereto and for other good and
valuable consideration provided by the Banks (the sufficiency and receipt of
which the Owner hereby acknowledges). The Mortgage and this Deed of Covenants
is made for the benefit of the Mortgagee and the other Secured Creditors (as
hereinafter defined) to secure (i) the full and prompt payment when due of (x)
the principal of and interest on the Notes issued, and Loans made, under the
Credit Agreement, and all reimbursement obligations and Unpaid Drawings with
respect to the Letters of Credit issued under the Credit Agreement and (y) all
other obligations and indebtedness (including without limitation, indemnities,
Fees and interest thereon) of the Borrower to the Secured Creditors, whether
now existing or hereafter incurred under, arising out of or in connection with
the Credit Agreement and the other Credit Documents (including, without
limitation, the Mortgage and this Deed of Covenants) and the due performance
and compliance by the Borrower with all of the terms, conditions and
agreements contained in the Credit Agreement and the other Credit Documents
(including, without limitation, the Mortgage and this Deed of Covenants); (ii)
any and all sums advanced by the Secured Creditors in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest in the
Collateral; (iii) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities of the Borrower
referred to in clause (i) above, after an Event of Default shall have occurred
and be continuing, the reasonable expenses of the Mortgagee of re-taking,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Collateral, or of any exercise by the Mortgagee of its rights
hereunder, together with reasonable attorneys' fees of counsel to the
Mortgagee and court costs; and (iv) all amounts paid by any Indemnitee as to
which such Indemnitee has the right to reimbursement under Clause 13 of this
Deed of Covenants (all such obligations, liabilities, sums and expenses
referred to in clauses (i) through (iv) above being collectively referred to
as the "Obligations"). It is acknowledged and agreed that the "Obligations"
shall include extensions of credit of the types described above, whether
outstanding on the date of this Deed or extended from time to time after the
date of this Deed.
(E) This Deed is supplemental to the said statutory mortgage and to the
security thereby created.
NOW THIS DEED WITNESSETH AND IT IS HEREBY AGREED
1 DEFINITIONS AND INTERPRETATION
1.1 In this Deed unless the context otherwise requires, the following
expressions shall have the following meanings:
"Agent" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Bank" means any lender listed from time to time Annex 1 to the Credit
Agreement (collectively, the "Banks");
"Business Day" shall have the same meaning for such term as set forth
in the Credit Agreement;
"Collateral Assignment of Insurances" means the Collateral Assignment
of Insurance in respect of the Rig executed or to be executed by the
Owner in favor of the Agent;
"Commitment" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of April 30,
1996, among Holdings, the Owner, the Banks, Credit Lyonnais New York
Branch, as co-agent, and the Agent first referred to in Recital (A)
hereto;
"Credit Documents" shall have the meaning for such term as set forth in
the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated, no
Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings together with interest, fees and all other obligations are
paid in full;
"Credit Party" shall have the meaning for such term as set forth in the
Credit Agreement;
"Default Rate" shall mean the rate of interest calculated in accordance
with Section 1.07(b) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries solely
in the ordinary course of such Person's business and not in response to
any third party action or request of any kind) or proceedings relating
in any way to any Environmental Law or any permit issued, or any
approval given, under any such Environmental Law (hereafter, "Claims"),
including, without limitation, (a) any and all Claims by governmental
or regulatory authorities for enforcement, cleanup, removal, response,
remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials
arising from alleged injury or threat of injury to health, safety or
the environment.
"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. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act of
1976 (42 U.S.C. 6901 et seq.), the Clean Air Act (42 U.S.C. 7401 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et
seq.) and the Toxic Substances Control Act (15 U.S.C. 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);
"Fees" shall have the same meaning for such terms as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.1;
"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 Section 1.08 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01 of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in the
Credit Agreement;
"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;
"Mortgage" means the statutory mortgage on the Rig bearing the same
date as this Deed first referred to in Recital (D) hereto;
"Note" means each promissory note of the Owner referred to in Recital
(B) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (D) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
offshore drilling rig D. R. STEWART owned by Reading & Bates
Exploration Co. ("R&B Exploration") documented under the laws and flag
of the United States with Official Number 626904 of 6494 gross
registered tons and 5834 net registered tons; (ii) the offshore
drilling rig W. D. KENT owned by R&B Exploration documented under the
laws and flag of the United States with Official Number 583169 of 5,383
gross registered tons and 4,185 net registered tons; (iii) the offshore
drilling rig CHARLEY GRAVES owned by Reading and Bates Borneo Drilling
Co., Ltd. documented under the laws and flag of the Republic of Panama
with Patente Number 6618-76-CH of 5,829 gross registered tons and 1,748
net registered tons; (iv) the offshore drilling rig RON TAPPMEYER owned
by Reading & Bates (A) Pty Ltd. documented under the laws and flag of
Australia with Official Number 855213 of 11,455 gross registered tons
and 3,436 net registered tons; and (v) the offshore drilling rig JACK
BATES owned by the Owner documented under the laws and flag of the
United States with Official Number 906283 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 written request of the Agent,
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 written request of the Agent,
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
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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 whole of the offshore drilling J.W. McLEAN documented
under the laws and flag of the Bahamas with Official Number 715954 of
9199.01 gross registered tons and 7267.22 net registered tons 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 Creditors" shall mean the Banks, the Letter of Credit Issuer
and the Agent under and as defined in the Credit Agreement;
"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;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than by
requisition for hire; (c) the capture, seizure, arrest, detention or
confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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.
1.2 In Clause 6.1:
"excess risks" means the proportion of claims for general average,
salvage and salvage charges not recoverable under the hull and
machinery policies in respect of the Rig in consequence of her insured
value being less than the value at which the Rig is assessed for the
purpose of such claims;
"protection and indemnity risks" means the usual risks covered by a
protection and indemnity association managed in London including the
proportion (if any) of any sums payable to any other person or persons
in case of collision which are not recoverable under the hull and
machinery policies by reason of the incorporation therein of Clause 1
of the Institute Time Clauses (Hulls) (1/10/83) or the Institute
Amended Running Down Clause (1/10/71) or any equivalent provision;
1.3 Except where otherwise expressly provided or unless the context
otherwise requires, words and expressions defined in the Credit Agreement
shall bear the same meanings when used in this Deed.
1.4 This Deed shall be read together with the other Security Documents.
1.5 Notwithstanding that this Deed is supplemental to the Mortgage it shall
continue in full force and effect after any discharge of the Mortgage.
1.6 In this Deed:
(a) Clause headings are inserted for convenience only and shall not
affect the construction of this Deed and, unless otherwise
specified, all references to Clauses are to clauses of this Deed;
(b) unless the context otherwise requires, words denoting the singular
number shall include the plural and vice versa;
(c) references to persons include references to bodies corporate and
unincorporate;
(d) references to assets include property, rights and assets by 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 shall include re-enactments,
amendments and extensions thereof.
2 REPRESENTATIONS AND WARRANTIES
2.1 The Owner hereby represents and warrants to the Mortgagee that:
(a) the Owner is the sole legal and beneficial owner of sixty four
sixty-fourths shares of and in the Rig and none of the said shares
is subject to any Security Interest (save as constituted by the
Permitted Liens, the Mortgage and this Deed);
(b) the Owner has not sold or transferred, or agreed to sell or
transfer, the Rig or any share therein;
(c) the Owner has full power and authority to mortgage sixty four
sixty-fourth shares of and in the Rig as security for the
Obligations;
(d) the Owner is a corporation duly organized and validly existing and
in good standing under the laws of the State of Oklahoma;
(e) the Owner has complied with all statutory and other material
requirements relating to the ownership, registration and operation
of the Rig;
(f) the Owner has taken all necessary action to authorize the
execution and delivery of the Mortgage and this Deed, and this
Deed 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). The Mortgage when filed with the Bahamian Registrar
of Ships will create a legal, valid and enforceable first priority
mortgage lien on the Rig;
(g) the entry into and performance by the Owner of this Deed 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 Deed and the transactions contemplated
hereby and thereby have been obtained and are in full force and
effect and will be so maintained during the Credit Facility
Period;
(i) save for such registrations and filings as are referred to in this
Deed, it is not necessary for the legality, validity,
enforceability or admissibility in evidence of this Deed 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 Deed; and
(j) the Owner is fully familiar with and agrees to all the provisions
of all agreements relating to the Obligations.
2.2 The Owner hereby further represents and warrants to the Mortgagee that:
(a) 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 complied with; and
(b) no Environmental Claim has been made or threatened against the
Owner or the Approved Manager or otherwise in connection with the
Rig; and
(c) 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.
2.3 The representations and warranties of the Owner set out in Clause 2.1
and Clause 2.2 shall survive the execution of this Deed and shall be deemed to
be repeated throughout the Credit Facility Period at the time of the making of
each Loan and the issuance of each Letter of Credit with respect to the facts
and circumstances existing at each such time, as if made at each such time.
3 PAYMENT COVENANTS
3.1 The Owner hereby covenants with the Secured Creditors:
(a) to pay all such expenses, claims, liabilities, losses, costs,
duties, fees, charges or other moneys as are stated in the Credit
Agreement and/or this Deed to be payable by the Owner to or
recoverable from the Owner by the Secured Creditors or any of them
(or in respect of which the Owner agrees in the Credit Agreement
and/or this Deed to indemnify any of the Secured Creditors) at the
times and in the manner specified in the Credit Agreement and/or
this Deed; and
(b) to pay interest on any amount payable by the Owner under the
Credit Agreement and on any such expenses, claims, liabilities,
losses, costs, duties, fees, charges or other moneys referred to
in Clause 3.1(a) from the date on which the relevant amount
becomes payable under the Credit Agreement or such expense, claim,
liability, loss, cost, duty, fee, charge or other money is paid or
incurred by any Secured Creditor until the date of payment
reimbursement thereof to such Secured Creditor (as well after as
before judgment) at the Default Rate; and
(c) to pay each and every other sum of money which may be or become
owing to the any Secured Creditor under this Deed and the other
Credit Documents to which the Owner is or is to be a party at the
times and in the manner specified herein or therein.
4 MORTGAGE
4.1 By way of security for the Obligations the Owner with full title
guarantee hereby mortgages and charges and agrees to mortgage and charge to
and in favor of the Mortgagee all its rights, title and interest, present and
future, to and in the Rig.
4.2 The Owner covenants with the Mortgagee that it will not at any time
during the Credit Facility Period without the previous consent in writing of
the Mortgagee (and then only subject to such terms as the Mortgagee may
impose):
(a) create or suffer the creation of any Security Interest on or in
respect of the Rig or any share therein in favor of any person
other than the Mortgagee or unless the same is being contested in
good faith by proceedings diligently conducted in relation to
which the Owner has established an adequate reserve; or
(b) sell, agree to sell or otherwise dispose of the Rig or any share
therein.
4.3 The Owner shall remain liable to perform all the obligations assumed by
it in relation to the Rig and the Mortgagee shall be under no 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.
4.4 On the date on which the Credit Agreement and all Letters of Credit
shall have been terminated, when no Note remains outstanding and all
Obligations shall have been irrevocably paid in full, the Mortgage and this
Deed of Covenants shall terminate, and the Mortgagee at the request and
expense of the Owner, will execute and deliver to the Owner a proper
instrument or instruments acknowledging the satisfaction and termination of
the Mortgage and this Deed of Covenants, and will duly assign, transfer and
deliver to the Owner (without recourse and without any representation or
warranty) such of the Rig as may remain in the possession of the Mortgagee
together with any moneys at the time held by the Mortgagee hereunder.
5 PRESERVATION OF SECURITY
5.1 It is declared and agreed that:
(a) the security created by the Mortgage and this Deed (or either of
them) shall be held by the Mortgagee as a continuing security for
the performance of the Obligations and that the security so
created shall not be satisfied by any intermediate payment or
satisfaction of any part of the Obligations;
(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 Mortgagee shall not be bound to enforce any of the other
Security Documents before enforcing the security created by the
Mortgage and this Deed (or either of them);
(d) no delay or omission on the part of the Mortgagee in exercising
any right, power or remedy under the Mortgage and this Deed (or
either of them) 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 Deed 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 Mortgagee may deem expedient; and
(e) any waiver by the Mortgagee of any terms of this Deed or any
consent given by the Mortgagee under this Deed shall only be
effective if given in writing and then only for the purpose and
upon the terms for which it is given.
5.2 Any settlement or discharge under the Mortgage and this Deed (or either
of them) between the Mortgagee and the Owner shall be conditional upon no
security or payment to the Secured Creditors by any 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
Mortgagee 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.
5.3 The rights of the Secured Creditors under the Mortgage and this Deed
and the security thereby and 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
any person:
(a) any time or waiver granted to or composition with any 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 person; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to any person; or
(d) any amendment or supplement to any of the Credit Documents or any
other document or security; or
(e) the dissolution, amalgamation, reconstruction or reorganisation of
any person; or
(f) the unenforceability, invalidity or frustration of any obligations
of any person under any of the Credit Documents or any other
document or security.
5.4 Until the Obligations have been satisfied unconditionally and
irrevocably paid and discharged in full to the satisfaction of the Mortgagee,
the Owner shall not by virtue of any payment made hereunder on account of the
Obligations or by virtue of any enforcement by the Mortgagee of its rights
under, or the security constituted by, the Mortgage and this Deed or by virtue
of any relationship between or transaction involving any person in any way
whatsoever and whether or not such relation or transaction shall be related
to, or in connection with, the subject matter of the Credit Agreement, the
Mortgage and/or this Deed):
(a) exercise any rights of subrogation in relation to any rights,
security or moneys held or received or receivable by the Secured
Creditors or any other person; or
(b) exercise any right of contribution from any co-surety liable in
respect of such moneys and liabilities under any other guaranty,
security or agreement; or
(c) exercise any right of set-off or counterclaim against any person
or any co-surety; or
(d) receive, claim or have the benefit of any payment, distribution,
security or indemnity from any person or any co-surety; or
(e) unless so directed by the Mortgagee (when the Owner will prove in
accordance with such directions), claim as a creditor of any
person or any co-surety in competition with the Secured Creditors.
The Owner shall hold in trust for the Mortgagee and forthwith pay or
transfer (as appropriate) to the Mortgagee 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.
5.5 Until the Obligations have been unconditionally and irrevocably
performed in full to the satisfaction of the Mortgagee, the Mortgagee may at
any time keep in a separate account for as long as it may think fit, any
moneys received, recovered or realised under the Mortgage and this Deed (or
either of them) or under any other guarantee, security or agreement relating
in whole or in part to the Secured Indebtedness without being under any
intermediate obligation to apply the same or any part thereof in or towards
the discharge of such amount.
5.6 The Owner unconditionally and irrevocably agrees that if any sums
hereby secured are not recoverable on the basis of a guaranty (whether by
reason of legal limitation, illegality, disability or incapacity on or of any
person or by reason of any other fact or circumstance, and whether or not
known to or discoverable by any person), then the Owner will, as a separate
and independent stipulation and as a primary obligor, pay to the Secured
Creditors 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 Mortgagee against any loss or liability suffered or
incurred by the Secured Creditors as a result of such irrecoverability.
6 INSURANCE
6.1 The Owner covenants with the Mortgagee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as the any
Obligations remain 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
Mortgagee. 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 Rigs, such aggregate amount shall be at
least 110% of the Total Commitment. 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 American,
British and Scandinavian insurance markets or in such other major
international markets reasonably acceptable to the Mortgagee. 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
Mortgagee. In addition, the Owner shall, at its own expense,
furnish to the Mortgagee a mortgagee's single interest policy
providing coverage which, when aggregated with the mortgagee's
interest insurance furnished to the Mortgagee in respect of the
Other Rigs, shall be in an amount equal to at least 110% of the
Total Commitment (or in lieu of such mortgagee's interest
insurance the Owner shall cause the hull and machinery/increased
value insurance to be endorsed to afford breach of warranty
coverage for the benefit of the Mortgagee). Such mortgagee's
interest insurance and any additional insurance policies for the
benefit of the Mortgagee shall be maintained in the broadest form
available in the American, British and Scandinavian markets or
other major international markets acceptable to the Mortgagee
through underwriters acceptable to the Mortgagee. 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 Mortgagee.
(b) The policy or policies of insurance shall be issued by responsible
underwriters reasonably acceptable to the Mortgagee, shall contain
conditions, terms, stipulations and insuring covenants
satisfactory to the Mortgagee, and shall be kept in full force and
effect by the Owner so long as any Obligations remain 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
Mortgagee for distribution by it to itself, the Banks and the
Owner as their interests may appear, and shall provide for at
least ten days' prior notice to be given to the Mortgagee 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. Certified copies of all such policies, binders and
other interim insurance contracts shall be deposited with the
Mortgagee. Originals shall also be provided upon the request of
the Mortgagee. The Owner shall furnish to the Mortgagee annually
a detailed report signed by a firm of marine insurance brokers
satisfactory to the Mortgagee 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 Mortgagee by notice to the
underwriters, although the following insurance is payable to the
Mortgagee, (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 Mortgagee
(which consent shall not be unreasonably withheld). Any loss
covered by this paragraph which is paid to the Mortgagee 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
Mortgagee to, or as directed by, the Owner and all other payments
to the Mortgagee of losses covered by this paragraph shall be
applied by the Mortgagee 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 Mortgagee. 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
Mortgagee.
(c) In the event of an actual or constructive Total Loss of the Rig,
the Mortgagee 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 Secured Creditors 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 provided in Clause 10.
(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 Mortgagee
advised of the progress of such renewals, and procure that the
insurers shall promptly confirm in writing to the Mortgagee 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 Mortgagee.
(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
7.1 The Owner further covenants with the Mortgagee that throughout the
Credit Facility Period the Owner will:
(a) keep the Rig registered in its name as a Bahamian flag vessel at
the Port of Nassau and to do or allow to be done nothing whereby
such registration may be forfeited or imperilled and, if the Rig
shall be provisionally as opposed to permanently registered as a
Bahamas vessel as at the date of this Deed, procure that the Rig
be duly permanently registered within three months of the date of
this Deed and promptly furnish to the Mortgagee from time to time
such proofs as the Mortgagee may request for its satisfaction with
respect to the Owner's compliance with this sub-clause;
(b) not without the previous consent in writing of the Mortgagee
change the name or port of registry of the Rig or make any
modification to the Rig which would or might materially alter the
structure, type or performance characteristics of the Rig or
materially reduce the value of the Rig;
(c) keep the Rig in a good and efficient state of repair consistent
with first-class ship ownership and management practice and so as
to maintain the highest classification available from her
classification society, namely +A1 Column Stabilized Drilling
Unit, free of recommendations and qualifications save those
notified to and approved in writing by the Mortgagee or which have
been complied with in accordance with their terms and so as to
comply with the provisions of the Merchant ping Acts and all other
regulations and requirements of any government, government agency
or other regulatory authority (statutory or otherwise) from time
to time applicable to vessels registered at ports in the
Commonwealth of the Bahamas and applicable to vessels of the same
type as the Rig trading to any jurisdiction to which the Rig may,
subject to the provisions of this Deed, trade from time to time;
(d) 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 not to 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 Mortgagee and becomes
on installation on the Rig the property of the Owner and subject
to the security constituted by the Mortgage and this Deed;
(e) submit the Rig regularly to such periodical or other surveys as
may be required for classification purposes and if so required to
supply to the Mortgagee copies of all survey reports issued in
respect thereof;
(f) permit the Mortgagee by surveyors or other persons appointed by it
for that purpose to board the Rig at all reasonable times 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;
(g) 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;
(h) 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 Mortgagee
may require;
(i) promptly furnish to the Mortgagee 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 Mortgagee's request in writing, copies of all
charters and other contracts for her employment or otherwise
howsoever concerning her;
(j) notify the Mortgagee 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 Mortgagee ten (10) days prior notice,
provided, that in the event of any emergency dry docking of
the Rig, the Owner shall immediately notify the Mortgagee;
and
(vi) any intended deactivation or lay-up of the Rig (other than
for normal periods of inactivity between contracts for the
Rig during which periods the Rig remains manned) and obtain
the Mortgagee's prior written consent;
(k) keep proper books of account in respect of the Rig and as and when
the Mortgagee may so reasonably require make such books available
for inspection on behalf of the Mortgagee 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;
(l) observe the obligations contained in Sections 7 and 8 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 and this Deed mutatis mutandis;
(m) not without the previous consent in writing of the Mortgagee (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 Mortgagee 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;
(n) keep the Mortgage registered against the Rig as a valid first
priority mortgage, to carry on board the Rig a certified copy of
the Mortgage and this Deed and to place and maintain in a
conspicuous place in the navigation room and the Master's cabin of
the Rig a framed printed notice stating that the Rig is mortgaged
by the Owner to the Mortgagee.
7.2 The Owner further covenants with the Mortgagee that throughout the
Security Period the Owner will:
(a) 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;
(b) notify the Mortgagee forthwith upon:
(i) any Environmental Claim being made against the Owner which
could reasonably be expected to result in damages in excess
of US$200,000 or otherwise in connection with the Rig; or
(ii) any Environmental Incident occurring,
and keep the Mortgagee advised, in writing on such regular basis
and in such detail as the Mortgagee shall require, of the Owner's
response to such Environmental Claim or Environmental Incident.
(c) not sell, mortgage or transfer the Rig (other than as permitted by
the Credit Agreement) without the written consent of the Mortgagee
having first been obtained, and any such written consent to any
one such sale, mortgage or transfer shall not be construed to be a
waiver of this provision with respect to any subsequent proposed
sale, mortgage or transfer. Any such sale, mortgage or transfer
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 sail
in Cuban waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Mortgagee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of the Rig;
(d) 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
8.1 The Mortgagee shall without prejudice to its other rights and powers
under the Mortgage and this Deed and the other Credit 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 its discretion think fit for the purpose of protecting or
maintaining the security created by the Mortgage and this Deed (including,
without limitation, such action as is referred to in Clause 8.2) and each and
every expense, liability, or loss (including, without limitation, legal fees)
so incurred by the Mortgagee in or about the protection or maintenance of the
said security together with interest payable thereon under Clause 3.1(c) shall
be repayable to it by the Owner on demand.
8.2 Without prejudice to the generality of Clause 8.1:
(a) if the Owner does not comply with the provisions of Clause 6.1 or
any of them the Mortgagee shall be entitled (but not bound) to
effect or to replace and renew and thereafter to maintain
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 and
correspondence concerning outstanding claims) be forthwith
delivered to such brokers as the Mortgagee 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 Mortgagee 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 7.1(c)
and/or 7.1(e) or any of them the Mortgagee 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 7.1(g)
or any of them the Mortgagee 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 MORTGAGEE'S POWERS
9.1 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 Mortgagee having served on the Owner any such
notice is referred in Section 9 of the Credit Agreement) the security
constituted by the Mortgage and this Deed shall become immediately enforceable
and the power of sale and other powers conferred by law shall be immediately
exercisable and the Mortgagee shall be entitled, as and when it may see fit,
to put into force and to exercise all the powers possessed by it as mortgagee
and chargee of the Rig and in particular:
(a) 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 Mortgagee
without legal process and without liability of the Mortgagee for
any losses or damages incurred thereby and without having to
render accounts to the Owner in connection therewith;
(b) to require that all policies, contracts, certificate 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 Mortgagee;
(c) to collect, recover, compromise and give a good discharge for any
and all moneys or claims for moneys then outstanding or thereafter
arising under the Insurances and to permit any brokers through
whom collection or recovery is effected to charge the usual
brokerage therefor;
(d) to take over or institute (if necessary using the name of the
Owner) all such proceedings in connection with the Mortgaged
Premises as the Mortgagee 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;
(e) to sell the Rig or any share therein with or without prior notice
to the Owner, 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 Mortgagee 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 Obligations;
(f) 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 Mortgagee in its absolute discretion deems
expedient and for the purposes aforesaid the Mortgagee 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 Mortgagee were the owner of the Rig and without
being responsible for any loss thereby incurred;
(g) to recover from the Owner on demand any expenses, liabilities or
losses as may be incurred by the Mortgagee in or about the
exercise of the power vested in the Mortgagee under Clause 9.1(f);
(h) generally, to recover from the Owner on demand each and every
expense, liability or loss incurred by the Mortgagee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.2 The Mortgagee shall not be obliged to make any enquiry as to the nature
or sufficiency of any payment received by it under the Mortgage and this Deed
(or either of them) or to make any claim under this Deed or to enforce any
rights and benefits assigned to the Mortgagee by this Deed or to which the
Mortgagee may at any time be entitled hereunder.
9.3 Neither the Secured Creditors 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 the Mortgage and this Deed (or either of them) in the absence of gross
negligence or wilful misconduct.
9.4 The Mortgagee 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 realisation or for any default or
omission for which a mortgagee-in-possession might be liable.
9.5 Upon any sale of the Rig or any share therein by the Mortgagee, the
purchaser shall not be bound to see or enquire whether the Mortgagee's power
of sale has become exercisable in the manner provided in this Deed and the
sale shall be deemed to be within the power of the Mortgagee and the receipt
of the Mortgagee for the purchase money shall effectively discharge the
purchaser who shall not be concerned with the manner of application of the
proceeds of sale or be in any way answerable therefor.
10 APPLICATION OF MONEYS
10.1 (a) All moneys received by the Mortgagee in respect of sale of the Rig
or any share therein; in respect of recovery under the Insurances;
or in respect of Requisition Compensation;
(i) first, to the payment of all amounts owing the Mortgagee of
the type described in clauses (ii) and (iii) of Recital D;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to the
outstanding Obligations shall be paid to the Secured Creditors as
provided in Clause 10.01(c), with each Secured Creditor receiving
an amount equal to such Obligations held by it or, if the proceeds
are insufficient to pay in full all such Obligations, its Pro Rata
Share (as defined below) of the amount remaining to be
distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and following the
termination of Mortgage and this Deed of Covenants pursuant to
Clause 4.4, any surplus then remaining shall be paid to the Owner,
subject, however, to the rights of the holder of any then existing
Lien of which the Mortgagee has actual notice (without
investigation).
(b) For purposes of this Deed of Covenants "Pro Rata Share" shall
mean, when calculating a Secured Creditor's portion of any
distribution or amount in respect of any Obligations, the amount
(expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Obligations owing to or
held by such Secured Creditor and the denominator of which is the
then outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Mortgagee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts stated
therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Agent under the Credit Agreement for the
account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with this
Clause 10.01, the Mortgagee shall be entitled to reply upon (i)
the Agent under the Credit Agreement and (ii) the Secured
Creditors for a determination (which the Agent and each Secured
Creditor, by their acceptance of the benefits of this Deed shall
be obligated to provide upon request of the Mortgagee) of the
outstanding Obligations owed to the Secured Creditors. Unless it
has actual knowledge (including by way of written notice from a
Secured Creditor) to the contrary, the Agent under the Credit
Agreement, in furnishing information pursuant to the preceding
sentence, and the Mortgagee, in acting hereunder, shall be
entitled to assume that (x) no obligations other than principal,
interest and regularly accruing fees are owing to any Secured
Creditor.
11 FURTHER ASSURANCES
11.1 The Owner shall execute and do all such assurances, acts and things as
the Mortgagee in its absolute discretion may require for:
(a) perfecting or protecting the security created (or intended to be
created) by the Mortgage and this Deed; or
(b) preserving or protecting any of the rights of the Mortgagee under
the Mortgage and this Deed (or either of them); or
(c) ensuring that the security constituted by the Mortgage and this
Deed and the covenants and obligations of the Owner under this
Deed shall enure to the benefit of any such assignee of the
Mortgagee as is referred to in Clause 16.3; or
(d) enforcing the security constituted by the Mortgage and this Deed
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
Mortgagee under the Mortgage and this Deed (or either of them),
in any such case, forthwith upon demand by the Mortgagee and at the expense of
the Owner.
12 POWER OF ATTORNEY
12.1 The Owner, by way of security and in order more fully to secure the
performance of the Obligations, hereby irrevocably appoints the Mortgagee 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
(including without limitation, transferring title to the to a
third party) Provided however that such power shall not be
exercisable by or on behalf of the Mortgagee until the Mortgage
and this Deed shall have become immediately enforceable pursuant
to Clause 9.1; 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.
12.2 The exercise of such power as is referred to in Clause 12.1(a) by or on
behalf of the Mortgagee shall not put any person dealing with the Mortgagee
upon any enquiry as to whether the Mortgage and this Deed have become
enforceable nor shall such person be in any way affected by notice that the
Mortgage and this Deed have not become enforceable and, in relation to both
Clauses 12.1(a) and 12.1(b), the exercise by the Mortgagee of such power shall
be conclusive evidence of its right to exercise the same.
13 INDEMNITIES
13.1 The Owner will indemnify and save harmless the Secured Creditors and
each agent or attorney appointed under or pursuant to this Deed (each, an
"Indemnitee") from and against any and all expenses, claims, liabilities,
losses, taxes, costs, duties, fees and charges suffered, incurred or made by
such Secured Creditor or such agent or attorney:
(a) in the exercise or purported exercise of any rights, powers or
discretions vested in them pursuant to the Mortgage and this Deed
(or either of them); or
(b) in the preservation or enforcement of the Mortgagee's rights under
the Mortgage and this Deed (or either of them); or
(c) on the release of the Rig or any share therein from the security
created by the Mortgage and this Deed (or either of them),
and the Secured Creditors 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 the Mortgage and this Deed (or either of them). All such amounts
recoverable by such Secured Creditor or such agent or attorney shall be
recoverable on a full indemnity basis.
13.2 Without limiting the foregoing Clause 13.01, the Owner hereby further
indemnifies and holds harmless each of the Secured Creditors 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
Hazardous Materials at, or discharged from the Rig.
13.3 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 the
Mortgage and this Deed (or either of them) is made or falls to be satisfied in
a currency (the "payment currency") other than the currency in which such
payment is due under or in connection with the Mortgage and this Deed (the
"contractual currency"), then to the extent that the amount of such payment
actually received by the Mortgagee, when converted into the contractual
currency at the rate of exchange, falls short of the amount due under or in
connection with the Mortgage and this Deed, the Owner, as a separate and
independent obligation, shall indemnify and hold harmless the Mortgagee
against the amount of such shortfall. For the purposes of this Clause 13.3,
"rate of exchange" means the rate at which the Mortgagee is able on the date
of such payment (or, if it is not practicable for the Mortgagee to purchase
the contractual currency with the payment currency on the date of such
payment, at the rate of exchange as soon afterwards as it practicable for the
Mortgagee 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
14.1 The Owner shall pay to the Mortgagee on demand all costs, fees and
expenses (including, but not limited to, legal, surveyor's and shipbroker's
fees and expenses) and Taxes thereon incurred by any Secured Creditor or for
which any Secured Creditor may become liable in connection with:
(a) the negotiation, preparation and execution of the Credit Agreement
and the Credit Documents; and/or
(b) the preserving or enforcing of, or attempting to preserve or
enforce, any of its rights under the Credit Agreement and the
Credit Documents (or any of them).
14.2 The Owner shall pay to the Mortgagee on demand all costs, fees and
expenses (including, but not limited to, legal fees and expenses) and Taxes
thereon incurred by any Secured Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the terms
of the Credit Agreement and the Credit Documents (or any of them);
and/or
(b) any consent or waiver required from the Mortgagee in relation to
the Credit Agreement and the Credit 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.
14.3 The Owner shall pay promptly all stamp, documentary and other like
duties and Taxes to which the Credit Agreement and the Credit Documents (or
any of them) may be subject or give rise and shall indemnify the Mortgagee 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
15.1 The provisions of Clause 12.03 of the Credit Agreement shall apply in
relation to any notice, demand or other communication under this Deed.
16 ASSIGNMENTS
16.1 The Mortgage and this Deed shall be binding upon and shall enure to the
benefit of the Owner and the Secured Creditors and their respective successors
and permitted assigns and references in the Mortgage and this Deed to either
of them shall be construed accordingly.
16.2 The Owner may not assign or transfer all or any part of its rights
and/or obligations under the Mortgage and this Deed (or either of them).
16.3 The Mortgagee may assign or transfer all or any part of its rights or
obligations under the Mortgage and this Deed to any permitted assignee or
transferee of all or any such part of its rights and/or obligations under the
Credit Agreement on the terms therein provided. The Mortgagee shall notify
the Owner promptly following any such assignment, transfer or change.
17 MISCELLANEOUS
17.1 If at any time any one or more of the provisions in this Deed 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 Deed shall not be in any way affected or impaired thereby.
17.2 The Mortgagee, 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 Mortgagee under the Mortgage and this Deed (or either of them) in
relation to the Mortgaged Premises or any part thereof. Any such delegation
may be made upon such terms and subject to such regulations as the Mortgagee
may think fit. The Mortgagee 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.
17.3 This Deed may be executed in several counterparts, each of which shall
be an original, but which together shall constitute but one and the same
document.
18 LAW AND JURISDICTION
18.1 This Deed shall be governed by, and construed in accordance with
Bahamian Law.
18.2 The Owner agrees that the Mortgagee shall have the liberty, but shall
not be obligated, to take any proceedings in the courts of any jurisdiction to
protect and enforce the security hereby constituted or to enforce any
provision of the Security Documents or to enforce the Obligations. For the
purpose of any proceedings for the enforcement of this Deed and the other
Security Documents, the Owner hereby submits to the jurisdiction of the courts
of the Bahamas, the state and federal courts located in New York, New York and
the courts of any jurisdiction where the Rig may be found, and the Owner
agrees to accept service in respect of any such proceeding by registered or
certified mail addressed in accordance with the Credit Agreement.
18.3 Without prejudice to the generality of Clause 18.2 the Mortgagee 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 Mortgagee
may bring before the Courts of such jurisdiction or other judicial authority
and for the purpose of any action which the Mortgagee 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.
IN WITNESS whereof the parties hereto have caused this Deed to be duly
executed the day and year first before written.
OWNER
SIGNED SEALED and DELIVERED )
on behalf of READING & BATES )
DRILLING CO. )
by )
its duly authorised attorney-in-fact )
in the presence of: )
Witness:
MORTGAGEE
SIGNED SEALED and DELIVERED )
on behalf of CHRISTIANIA BANK OG )
KREDITKASSE, NEW YORK BRANCH )
by )
its duly authorised attorney-in-fact )
in the presence of: )
Witness:
Exhibit 10.94
INDENTURE OF TRUST
Dated as of April 30, 1996
READING & BATES DRILLING CO., as Borrower
- and -
READING & BATES EXPLORATION CO., as Subsidiary Guarantor
- and -
WILMINGTON TRUST COMPANY,
as Trustee
==============================================================================
TABLE OF CONTENTS
Page
INDENTURE OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 -
RECITALS OF THE BORROWER AND THE SUBSIDIARY GUARANTOR . . . . . . . . . - 1 -
GRANTING CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 -
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . - 2 -
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . - 2 -
Section 1.02. Notices . . . . . . . . . . . . . . . . . . . . . . . - 4 -
Section 1.03. Waiver of Notice . . . . . . . . . . . . . . . . . . - 5 -
Section 1.04. Effect of Headings; Table of Contents . . . . . . . . - 5 -
Section 1.05. Severability Clause; Further Assurances . . . . . . . - 5 -
Section 1.06. Governing Law; Jurisdiction . . . . . . . . . . . . . - 6 -
Section 1.07. Appointment of Process Agent . . . . . . . . . . . . - 6 -
Section 1.08. Counterparts . . . . . . . . . . . . . . . . . . . . - 6 -
Section 1.09. Survival . . . . . . . . . . . . . . . . . . . . . . - 6 -
Section 1.10. No Transfer in Violation of Shipping Act . . . . . . - 7 -
Section 1.11. Monies of Trustee Received by the Borrower . . . . . - 7 -
Section 1.12. Binding Effect . . . . . . . . . . . . . . . . . . . - 7 -
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . - 7 -
Section 2.01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7 -
(a) Organization and Existence . . . . . . . . . . . . . . . . . . . - 7 -
(b) Power and Authority . . . . . . . . . . . . . . . . . . . . . . . - 7 -
(c) Due Authorization, Execution and Enforceability . . . . . . . . . - 7 -
(d) No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . - 8 -
(e) Liens and Security Interests . . . . . . . . . . . . . . . . . . - 8 -
(f) Notices of Defaults . . . . . . . . . . . . . . . . . . . . . . . - 8 -
Section 2.02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 8 -
(a) Organization Existence . . . . . . . . . . . . . . . . . . . . . - 8 -
(b) Power and Authority . . . . . . . . . . . . . . . . . . . . . . . - 8 -
(c) Due Authorization, Execution and Enforceability . . . . . . . . . - 8 -
(d) No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . - 8 -
ARTICLE 3
REMEDIES UPON AN EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . - 9 -
Section 3.01. Remedies . . . . . . . . . . . . . . . . . . . . . . - 9 -
Section 3.02. Suits for Enforcement by Trustee . . . . . . . . . . - 9 -
Section 3.03. Enforcement of Claims . . . . . . . . . . . . . . . . - 9 -
Section 3.04. Application of Monies Collected After Default . . . . - 9 -
Section 3.05. Rights and Remedies Cumulative . . . . . . . . . . . - 10 -
Section 3.06. Delay or Omission Not Waiver . . . . . . . . . . . . - 10 -
Section 3.07. Discontinuance of Enforcement Proceedings . . . . . . - 10 -
Section 3.08. Control by the Required Banks . . . . . . . . . . . . - 11 -
Section 3.09. Undertaking for Costs . . . . . . . . . . . . . . . . - 11 -
Section 3.10. Waiver of Demand, etc . . . . . . . . . . . . . . . . - 11 -
ARTICLE 4
THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 11 -
Section 4.01. Certain Duties and Liabilities . . . . . . . . . . . - 11 -
Section 4.02. Certain Rights of Trustee . . . . . . . . . . . . . . - 12 -
Section 4.03. Not Responsible for Recitals . . . . . . . . . . . . - 13 -
Section 4.04. Money Held in Trust . . . . . . . . . . . . . . . . . - 13 -
Section 4.05. Compensation, Reimbursement and Indemnification . . . - 13 -
Section 4.06. Corporate Trustee Required; Eligibility . . . . . . . - 14 -
Section 4.07. Disqualification, Removal or Resignation of the Trustee;
Successor Trustees . . . . . . . . . . . . . . . - 14 -
Section 4.08. Co-trustees and Separate Trustees . . . . . . . . . . - 16 -
ARTICLE 5
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . - 17 -
Section 5.01. General . . . . . . . . . . . . . . . . . . . . . . . - 17 -
Section 5.02. Survival of Certain Obligations . . . . . . . . . . . - 18 -
ARTICLE 6
SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . - 18 -
Section 6.01. Waivers and Supplemental Indentures
With Consent of Banks . . . . . . . . . . . . . . - 18 -
Section 6.02. Execution of Supplemental Indentures . . . . . . . . - 18 -
Section 6.03. Effect of Supplemental Indentures . . . . . . . . . . - 18 -
ARTICLE 7
INSTRUCTIONS OF THE AGENT OR REQUIRED BANKS . . . . . . . . . . . . . . - 18 -
Section 7.01. Instructions of the Agent or Required Banks. . . . . - 18 -
ARTICLE 8
LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . - 19 -
Section 8.01. Limitation of Liability of Wilmington Trust Company. - 19 -
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INDENTURE OF TRUST
THIS INDENTURE OF TRUST (this "Indenture") dated as of April 30, 1996,
among (i) READING & BATES DRILLING CO., as borrower (the "Borrower"); (ii)
READING & BATES EXPLORATION CO., as subsidiary guarantor (the "Subsidiary
Guarantor"), each an Oklahoma corporation and (iii) WILMINGTON TRUST COMPANY,
a Delaware banking corporation, not in its individual capacity but solely as
indenture trustee (the "Trustee").
RECITALS OF THE BORROWER AND THE SUBSIDIARY GUARANTOR
A. By a Credit Agreement dated as of April 30, 1996 ( as in effect
from time to time, the "Credit Agreement") among Reading & Bates Corporation,
a Delaware corporation ("Holdings"), the Borrower, the banks party thereto
(the "Banks"), Credit Lyonnais New York Branch, as co-agent, and Christiania
Bank og Kreditkasse, New York branch, as agent (the "Agent") it was agreed
among other things that the Banks would make available to the Borrower upon
the terms and conditions therein described a reducing revolving credit
facility (the "Facility") in an aggregate amount at any time outstanding of
One Hundred Million United States Dollars (US$100,000,000) providing for the
making of Loans and the issuance of, and participation in, Letters of Credit
as contemplated therein.
B. The Subsidiary Guarantor for good and valuable consideration has
authorized, executed and delivered a Subsidiary Guaranty (the "Subsidiary
Guaranty") in favor of the Agent guaranteeing the performance by the Borrower
of its obligations under the Credit Agreement and the other Credit Documents
as defined in the Credit Agreement.
C. Pursuant to the Credit Agreement and to secure the obligations of
the Borrower thereunder, (i) the Borrower is required to execute and deliver a
first preferred mortgage on the U.S. documented semi-submersible drilling unit
JACK BATES; and (ii) the Subsidiary Guarantor is required to execute and
deliver first preferred mortgages (together with the first preferred mortgage
on the JACK BATES the "Mortgages") on each of (1) the U.S. documented jack-up
drilling unit, D.R. STEWART and (2) the U.S. documented offshore drilling unit
W.D. KENT (together with the JACK BATES, the "Vessels"). As certain of the
Banks 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, the Banks have requested the Indenture
Trustee to hold, pursuant to the terms of this Indenture, the Mortgages.
D. To secure their respective obligations under (i) the Credit
Agreement and the Note and (ii) the Subsidiary Guaranty, the Borrower and the
Subsidiary Guarantor have duly authorized the execution and delivery of this
Indenture.
E. All things have been done which are necessary to constitute this
Indenture a valid security agreement and contract for the security of the
respective obligations of the Borrower and the Subsidiary Guarantor under (i)
the Credit Agreement and the Note and (ii) the Subsidiary Guaranty,
respectively, in accordance with the terms of the Credit Agreement, the Note,
the Subsidiary Guaranty and this Indenture.
GRANTING CLAUSE
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that,
To secure the payment of the Loans (as defined in the Credit Agreement),
the Unpaid Drawings (as defined in the Credit Agreement), and interest thereon
and all other Obligations (as defined below) and the performance of the
covenants therein and herein contained, and in consideration of the premises
and of the Banks' making the Facility available to the Borrower, and other
good and valuable consideration, the Borrower and the Subsidiary Guarantor by
these presents do grant, sell, convey, assign, transfer, pledge, set over and
confirm unto the Trustee for the benefit of the Banks, 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
Obligations:
1. The U.S. documented vessel JACK BATES, as granted by a first
preferred mortgage on the JACK BATES by the Borrower;
2. The U.S. documented vessel D.R. STEWART, as granted by a first
preferred mortgage on the D.R. STEWART by the Subsidiary
Guarantor;
3. The U.S. documented vessel W.D. KENT, as granted by a first
preferred mortgage on the W.D. KENT by the Subsidiary Guarantor;
and
4. Proceeds of the foregoing.
The Trustee shall hold the Mortgages as collateral security for the
Obligations, 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 Trustee, subject to the
further covenants, conditions and trusts herein set forth, and the Borrower
and the Subsidiary Guarantor do hereby covenant and agree to and with the
Trustee, for the benefit of the Banks as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. 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 4.01(h).
"Business Day" shall have the meaning ascribed thereto in the Credit
Agreement.
"Collateral" means the mortgages listed in the granting clause of this
Indenture and proceeds thereof.
"Dollars", "dollars" or "$" means lawful and freely transferable
currency of the United States.
"Default Rate" shall have the rate of interest calculated in accordance
with Section 1.07(b) of the Credit Agreement.
"Event of Default" has the meaning ascribed thereto in the Credit
Agreement.
"Instructions" has the meaning set forth in Section 7.01.
"Letters of Credit" has the meaning ascribed thereto in the Credit
Agreement.
"MARAD" means the United States Department of Transportation, Maritime
Administration.
"Obligations" shall means the obligations of the Borrower and the
Subsidiary Guarantor with respect to (i) the full and prompt payment
when due of (x) the principal of interest on the Loans made under the
Credit Agreement, and all reimbursement obligations and Unpaid Drawings
with respect to the Letters of Credit issued under the Credit Agreement
and (y) all other obligations and indebtedness (including, without
limitation, indemnities, Fees and interest thereon) of the Borrower to
the Secured Creditors, whether now existing or hereafter incurred under,
arising out of or in connection with the Credit Agreement and the other
Credit Documents and the due performance and compliance by the Borrower
with all of the terms, conditions and agreements contained in the Credit
Agreement and the other Credit Documents; (ii) any and all sums advanced
by the Trustee in order to preserve the Collateral (as hereinafter
defined) or preserve its security interest in the Collateral; (iii) in
the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of the Borrower or the
Subsidiary Guarantor referred to in clause (i) above, after an Event of
Default shall have occurred and be continuing, the reasonable expenses
of the Trustee of re-taking, holding, preparing for sale or lease,
selling or otherwise disposing of or realizing on the Collateral, or of
any exercise by the Trustee of its rights hereunder, together with
reasonable attorneys' fees of counsel to the Trustee and court costs;
and (iv) all amounts paid by any Indemnitee as to which such Indemnitee
has the right to reimbursement (all such obligations, liabilities, sums
and expenses referred to in clauses (i) through (iv) above being
collectively referred to as the "Obligations"). It is acknowledged and
agreed that the "Obligations" shall include extensions of credit of the
types described above, whether outstanding on the date of this Indenture
or extended from time to time after the date of this Indenture.
"Officer's Certificate" means (i) when used with respect to the Borrower
or the Subsidiary Guarantor, 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 the
Borrower or the Subsidiary Guarantor and (ii) when used with respect to
the Trustee, a certificate signed by a Responsible Officer of the
Trustee.
"Person" means any individual, corporation, partnership, joint venture,
joint-stock company, trust, unincorporated organization or government or
any agency or political subdivision thereof.
"Required Banks" has the meaning ascribed thereto in the Credit
Agreement.
"Responsible Officer", when used with respect to the 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 the Borrower or the Subsidiary
Guarantor, means the president, any vice president, the secretary, any
assistant secretary, the treasurer or any assistant treasurer of the
Borrower or the Subsidiary Guarantor or any other officer or assistant
officer of the Borrower or the Subsidiary Guarantor customarily
performing functions similar to those performed by any of the
above-designated officers.
"Secured Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Agent under and as defined in the Credit
Agreement.
"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.
"Unpaid Drawings" has the meaning ascribed thereto in the Credit
Agreement.
(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 1.02. Notices.
(a) All notices or other communications required or permitted to be
made hereunder to the Borrowers, the Subsidiary Guarantor, the Trustee, the
Agent or the Banks 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 Trustee, with a copy to the Agent):
Borrower/Subsidiary READING & BATES CORPORATION
Guarantor: 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 Banks shall be addressed as provided in Annex II to the Credit
Agreement.
Section 1.03. 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 1.04. 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 1.05. 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 Trustee shall
be deemed by the Trustee in the reasonable exercise of its duties to be
insufficient for any reason to implement the rights and powers granted to the
Trustee herein or any other Security Document, then, from time to time on
demand of the Trustee, the Borrower and the Subsidiary Guarantor 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 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 security interest of the Trustee therein, or otherwise to obtain
or maintain the full benefits of this Indenture and the Mortgages.
Section 1.06. 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 Borrower and the Subsidiary Guarantor 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 Borrower and the Subsidiary
Guarantor 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 1.07. Appointment of Process Agent.
Each of the Borrower and the Subsidiary Guarantor 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 each of the Borrower and the Subsidiary Guarantor
had been personally served in the State of New York.
Section 1.08. 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 1.09. 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 Borrower, the Subsidiary Guarantor and the
Trustee.
Section 1.10. 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 any 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 1.11. Monies of Trustee Received by the Borrower and the
Subsidiary Guarantor.
Any monies which may from time to time be received by the Borrower or
the Subsidiary Guarantor which should have been paid to the Trustee hereunder
shall be so received in trust for the Trustee, shall not be commingled with
other funds of the Borrower or the Subsidiary Guarantor, as the case may be,
and shall promptly be remitted to the Trustee.
Section 1.12. Binding Effect.
All the covenants, promises, stipulations and agreements of each of the
Borrower and the Subsidiary Guarantor in this Indenture shall bind each of the
Borrower and the Subsidiary Guarantor and their respective successors and
assigns, and shall inure to the benefit of the Trustee and its successors and
assigns, whether so expressed or not. This Indenture is for the sole benefit
of the Borrower, the Subsidiary Guarantor, the Trustee and the Banks and their
respective successors and assigns, and no other party shall have any right
hereunder.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Each of the Borrower and the Subsidiary Guarantor represents
and warrants to the Trustee as of the date hereof and covenants with the
Trustee that:
(a) Organization and Existence. Each of the Borrower and the
Subsidiary Guarantor 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
Borrower and the Subsidiary Guarantor shall maintain such existence so long as
this Indenture remains in effect.
(b) Power and Authority. Each of the Borrower and the Subsidiary
Guarantor 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 Borrower and the Subsidiary Guarantor, has been duly executed and
delivered by each of the Borrower and the Subsidiary Guarantor and
constitutes, in accordance with its terms, the legal, valid and binding
agreements enforceable against each of the Borrower and the Subsidiary
Guarantor, 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 Borrower and the Subsidiary Guarantor 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
Borrower or the Subsidiary Guarantor, 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 Borrower or the Subsidiary Guarantor, or by which
either of them or any of their respective properties is bound, or any order of
any court or administrative agency entered in any proceedings to which either
of the Borrower or the Subsidiary Guarantor 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 nor the Subsidiary Guarantor 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,
the Vessels or any rights assigned by the Indenture or the Mortgages.
(f) Notices of Defaults. Upon the occurrence of any Event of Default,
the Borrower and the Subsidiary Guarantor shall promptly notify the Trustee,
the Agent and the Banks by telecopy, confirmed by letter, unless such Event of
Default shall have been cured.
Section 2.02. The Trustee represents and warrants that:
(a) Organization Existence. The Trustee was duly organized and is now
validly existing as a banking corporation under laws of the State of Delaware.
(b) Power and Authority. The Trustee 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 the
Trustee, has been duly executed and delivered by the Trustee and, assuming
this Indenture constitutes the legal, valid and binding obligation of the
other parties hereto, enforceable against such parties in accordance with its
terms, constitutes, in accordance with its terms, the legal, valid and binding
agreement of the Trustee enforceable against the Trustee, 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 the Trustee with all of the terms and provisions of,
this Indenture do not and will not violate any provisions of the Articles of
Incorporation or By-Laws of the Trustee and will not result in a breach of the
terms and provisions of, or constitute a default under, any agreement or
undertaking of the Trustee or by which it or any of its property is bound, or
any order of any court or administrative agency entered in any proceedings to
which the Trustee is or has been a party or violate any applicable statute,
rule or regulation.
ARTICLE 3
REMEDIES UPON AN EVENT OF DEFAULT
Section 3.01. Remedies.
If an Event of Default shall have occurred and be continuing, the
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 3.02. Suits for Enforcement by Trustee.
Subject to the provisions of Section 3.08, if an Event of Default shall
occur and be continuing and the Trustee has Actual Knowledge thereof, the
Trustee may in its discretion proceed to protect its rights and the rights of
the Banks by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect any such rights, or to protect any other proper
right, power or remedy then available to the Trustee under the Mortgages,
provided that the Trustee shall immediately thereafter notify the Agent and
the Banks 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 Required Banks or either thereof.
Section 3.03. Enforcement of Claims by the Trustee.
All rights of action and claims under this Indenture may be prosecuted
and enforced by the 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 Trustee, its agents or counsel, be for the benefit of the
Banks.
Section 3.04. Application of Monies Collected After Default.
Any monies collected by the Trustee pursuant to any enforcement of any
of its rights hereunder or under any other Credit Document on account of the
occurrence of an Event of Default shall be applied as follows:
(i) to the payment or reimbursement of all amounts owing to the
Trustee of the type described in clauses (ii) and (iii) of
the definition of Obligations;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to the
outstanding Obligations shall be paid to the Agent for
distribution to the Secured Creditors, with each Secured
Creditor receiving an amount equal to such Obligations held
by it or, if the proceeds are insufficient to pay in full
all such Obligations, its Pro Rata Share (as defined below)
of the amount remaining to be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and
following the termination of this Indenture pursuant to
Article 5, any surplus then remaining shall be paid to the
Borrower or the Subsidiary Guarantor, subject, however, to
the rights of the holder of any then existing lien of which
the Trustee has actual notice (without investigation).
For purposes of this Indenture "Pro Rata Share" shall mean, when
calculating a Secured Creditors portion of any distribution or amount in
respect of any Obligations, the amount (expressed as a percentage) equal to a
fraction the numerator of which is the then unpaid amount of such Obligations
owning to or held by such Secured Creditor and the denominator of which is the
then outstanding amount of all such Obligations. For purposes of determining
the amount payable to each Secured Creditor, the Trustee shall be entitled to
request each Secured Creditor to furnish it with written notice of the amount
of Obligations then owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
Section 3.05. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee, the
Agent or any of the Banks 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 3.06. Delay or Omission Not Waiver.
No delay or omission of the Indenture Trustee, the Agent or of any of
the Banks to exercise any right or remedy accruing upon any Event of Default
nor any course of dealings among the Indenture Trustee, the Agent, the Banks
and the Borrower and the Subsidiary Guarantor 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,
the Agent or any of the Banks 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 Banks 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 Banks, as the case may be.
Section 3.07. Discontinuance of Enforcement Proceedings.
In case the Indenture Trustee shall have proceeded to enforce any right,
power or remedy under this Indenture or under any 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 Borrower, the Subsidiary Guarantor 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 3.08. Control by the Required Banks.
Subject to (i) the provisions of Section 3.09 and (ii) the requirements
of Sections 9 and 37 of the Shipping Act, 1916, as amended, the Agent or the
Required Banks shall have the right by written Instructions to the Trustee, to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee under this Indenture or any Mortgage or exercising
any trust or power conferred on the Trustee herein or therein, and upon
receipt of such written Instructions, the 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 or expose the Indenture Trustee to personal liability.
Section 3.09. Undertaking for Costs.
The parties to this Indenture agree, and the Banks by making the
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 Trustee for any action taken
or omitted by it as 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
Trustee, or to any suit instituted by the Banks, unless otherwise required by
law.
Section 3.10. Waiver of Demand, etc.
Each of the Borrower and the Subsidiary Guarantor 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, the Subsidiary Guaranty or the Credit Agreement at
any time in connection herewith and therewith.
ARTICLE 4
THE TRUSTEE
Section 4.01. Certain Duties and Liabilities.
(a) The Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(b) Without limiting the provisions of paragraph (a) of this Section
4.01 or the provisions of Section 3.08, in any case where the terms of this
Indenture or any Mortgage vest in the Trustee non-mandatory, discretionary
authority to take any action or give any consent or approval upon the request
of either of the Borrower, the Subsidiary Guarantor, the Agent, any of the
Banks or otherwise, the 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 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 Trustee shall (except as otherwise provided in Section 3.08) 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
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 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 Required Banks relating to
the exercise of any trust, right, remedy or power conferred upon the Trustee
under this Indenture or any Mortgage, or exercisable by it hereunder or
thereunder.
(f) None of the provisions of this Indenture shall require the 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 Required
Banks.
(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 Trustee shall be subject to the provisions of this
Section.
(h) The Trustee shall not be deemed to have knowledge ("Actual
Knowledge") of the existence of an Event of Default unless the Trustee shall
have received telecopied or other written notice of such Event of Default from
the Agent or Required Banks, or a Responsible Officer in the Corporate Trust
Office of the Trustee shall have actual knowledge of such Event of Default.
(i) The Trustee shall promptly, upon receiving Actual Knowledge of an
Event of Default, inform the Agent and the Banks by telex or telecopy of such
Event of Default.
(j) None of the provisions of this Indenture shall require the 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.
(k) The Trustee agrees that it will in its individual capacity and at
its own cost and expense promptly take such action as may be necessary duly to
discharge and satisfy in full all liens on the Mortgages and other collateral
security held by the Trustee attributable to it in its individual capacity.
Section 4.02. Certain Rights of Trustee.
Except as otherwise provided in Section 4.01:
(a) The 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 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 Trustee;
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
the Agent or the Required Banks pursuant to this Indenture, unless the Agent
or the Required Banks shall have offered to the 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 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 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 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 Trustee receive written Instructions from the Agent or
the Required Banks which the Trustee, in its sole opinion, believes to be
conflicting Instructions, the 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 4.03. Not Responsible for Recitals.
The recitals contained herein shall be taken as the statements of each
of the Borrower and the Subsidiary Guarantor, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or any Mortgage.
Section 4.04. Money Held in Trust.
Any money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except
as otherwise agreed with the Borrower and the Subsidiary Guarantor. Any
payments made by the Trustee under this Indenture shall be made only from
monies held by it in trust hereunder.
Section 4.05. Compensation, Reimbursement and Indemnification.
The Borrower and the Subsidiary Guarantor jointly and severally agree,
subject to the provisions of Article 5:
(a) To pay to the 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 Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the 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 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 Borrower and the Subsidiary
Guarantor under this Section 4.05, the Trustee shall have a lien prior to the
rights of the Banks on all money or property held or collected by the Trustee
pursuant to this Indenture.
Section 4.06. Corporate Trustee Required; Eligibility.
There shall at all times be a 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 Trustee hereby represents and warrants that on the date
hereof it complies with the requirements of the foregoing sentence. If at any
time the 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 4.07. Disqualification, Removal or Resignation of the Trustee;
Successor Trustees.
(a) If the Trustee ceases at any time to be a 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
Trustee at any time, without cause, by causing a written notice of such
removal to be delivered to the Trustee, the Borrower, the Subsidiary Guarantor
and the Banks 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 Banks 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 Trustee shall execute all documents
and take such other actions as necessary or desirable to the Agent or the
Required Banks to transfer the Trustee's function of trustee to the successor
trustee. The compensation of the Trustee 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 Trustee shall, within
thirty days, furnish the Agent, the Banks, the successor trustee and the
Borrower and the Subsidiary Guarantor 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 Borrower and the Subsidiary
Guarantor.
(b) (i) The 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 Banks and to the Borrower and the Subsidiary Guarantor, 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 4.06. If the Agent shall not have
appointed such a qualified successor trustee within sixty days after such
notice, the 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 Trustee for all purposes hereof, and
each reference herein to the 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 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 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 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 4.07(b), be the
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 Trustee shall provide the Agent a statement and accounting as though it
had been removed in accordance with Section 4.07(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 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 Trustee as herein provided.
The 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 Trustee or any
predecessor trustee, as the case may be. Should any act or further instrument
from the Trustee, any predecessor trustee, or the Banks 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 Banks, 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 Trustee shall cooperate with the Agent and the Banks
in the following:
(i) First, petition MARAD for approval of a presently
unqualified bank or trust company satisfactory to the Agent or the Required
Banks and willing to act as trustee;
(ii) If MARAD approval cannot be obtained for such available
unqualified trustee then the Agent or the Required Banks and the Trustee shall
petition the United States District Court for the Southern District of New
York for instructions to the Trustee in order that the trust estate may be
preserved and to prevent the Agent, the Banks or the 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 Borrower and the Subsidiary Guarantor. The Trustee 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 Banks, as beneficiaries,
under the terms hereof as well as preserving the adequacy and enforceability
of any interest held in the trust estate.
Section 4.08. Co-trustees and Separate 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
Borrower, the Subsidiary Guarantor and the Trustee shall have power to
appoint, and upon the written request of the Trustee, the Agent or of the
Required Banks, the Borrower and the Subsidiary Guarantor shall for such
purpose join with the Trustee in execution, delivery and performance of all
instruments and agreements necessary or proper to appoint, one or more persons
approved by the Trustee either to act as co-trustee, jointly with the 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 Borrower and the
Subsidiary Guarantor 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 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 4.06.
Should any written instrument from the Borrower and the Subsidiary
Guarantor 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 Borrower and the Subsidiary
Guarantor.
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 Trustee hereunder, shall be
exercised solely by the Trustee.
(b) The rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by
the Trustee or by the 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 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 Trustee at any time, by an instrument in writing executed by
it, with the concurrence of the Borrower and the Subsidiary Guarantor
evidenced by separate resolutions of the board of directors of each of the
Borrower and the Subsidiary Guarantor, 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 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 Trustee or any other such
trustee hereunder.
(e) Any notice of instruction delivered to the Trustee by the Agent or
the Required Banks shall be deemed to have been delivered to each such
co-trustee and separate trustee.
ARTICLE 5
SATISFACTION AND DISCHARGE
Section 5.01. General.
If the Borrower and the Subsidiary Guarantor shall pay or cause to be
paid all of the Obligations, 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 Trustee, upon written request of the Borrower
and the Subsidiary Guarantor, accompanied by an opinion of counsel acceptable
to the Trustee, and at the cost and expense of the Borrower and the Subsidiary
Guarantor, shall forthwith cause satisfaction and discharge of this Indenture
and shall execute and deliver to the Borrower and the Subsidiary Guarantor
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 Trustee in and to any property held by it under this Indenture
or under any Mortgage shall thereupon cease, determine and become null and
void, and the Trustee shall transfer the same to the Borrower and the
Subsidiary Guarantor.
Section 5.02. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture, (a)
the liabilities and obligations of the Borrower and the Subsidiary Guarantor
to the Trustee under Section 4.05 shall survive, and (b) if the Borrower's or
the Subsidiary Guarantor's trustee in bankruptcy or any Person under any
applicable bankruptcy law shall recover all or part of the Obligations payable
hereunder from the Trustee or from any of the Banks, 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 6.01. Waivers and Supplemental Indentures With Consent of Banks.
This Indenture may not be waived, modified, amended or supplemented
without the prior written consent of the Agent or the Required Banks.
Section 6.02. 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 Trustee shall be entitled to receive, and
(subject to Sections 4.01 and 6.01) shall be fully protected in relying upon,
an opinion of counsel of the Borrower and the Subsidiary Guarantor stating
that the execution of such Supplemental Indenture is authorized or permitted
by this Indenture. The Trustee may, but shall not be obligated to, enter into
any such Supplemental Indenture which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
Section 6.03. 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 REQUIRED BANKS
Section 7.01. Instructions of the Agent or Required Banks.
(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 Required Banks (sometimes referred to herein as
"Instructions") shall be given in accordance with Section 1.02. The Trustee,
the Borrower and the Subsidiary Guarantor 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, the
Subsidiary Guaranty or any of the Security Documents, as defined in the Credit
Agreement) or in violation of any applicable laws.
(b) Unless and until the Trustee shall have received conflicting
Instructions from the Agent or the Required Banks, any request, demand,
authorization, direction, notice, consent, waiver or other action by the Agent
or the Required Banks shall bind the other Banks in respect of anything done
or suffered to be done by the Indenture Trustee, the Borrower or the
Subsidiary Guarantor in reliance thereon.
ARTICLE 8
LIMITATION OF LIABILITY
Section 8.01. 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, except as provided in
Section 4.01, 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 Trustee
By: ______________________________
Title:
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this ______ day of April, 1996 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 April, 1996 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 April, 1996 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 10.95
COLLATERAL ASSIGNMENT OF INSURANCE
READING & BATES DRILLING CO., an Oklahoma corporation (hereinafter
called the "Assignor"), the owner of the United States registered offshore
drilling rig 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 Wilmington Trust Company, not in its individual
capacity but as Trustee for the Banks (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 full and prompt
payment when due (whether at the stated maturity, by acceleration or
otherwise) of all obligations and liabilities of the Assignor, now existing or
hereafter incurred, under, arising out of or in connection with any Credit
Document (as that term is defined in the Credit Agreement, as defined below)
to which it is a party and the due performance and compliance by the Assignor
with the terms of each such Credit Document, all right, title and interest of
the Assignor under, in and to the following (all of the following,
collectively, the "Insurance Collateral"): (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 Agreement, dated April
30, 1996 (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement"), by and among Reading & Bates Corporation,
Reading & Bates Drilling Co., the Banks (as defined therein) and Christiania
Bank og Kreditkasse, New York Branch, as Agent.
The Assignor hereby constitutes the Assignee and 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; provided, however, that the
Assignee shall not take any action pursuant to the power granted by this
paragraph unless an Event of Default under the Credit Agreement shall have
occurred and be continuing. 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 I 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, such consent 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 additional named assured or loss
payees set forth in Annex I 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 and the Banks as additional
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 to the
Assignee hereunder shall be made by airmail postage prepaid letter, telefax or
by telex, confirmed by letter to:
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
Attn: Corporate Trust Division
Fax No.: (302) 651-8882
With copies to:
Christiania Bank og Kreditkasse,
New York Branch
11 West 42nd Street
New York, New York 10036
Attn: Hans Kjelsrud
Tel No.: (212) 827-4814
Fax No.: (212) 827-4888
Jennifer L. Janss, Esq.
Richard Layton & Finger
P.O. Box 551
Wilmington, Delaware 19899
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 Vessel Trust Indenture, the Mortgages, the
Credit Agreement and the other Credit Documents.
THIS ASSIGNMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. THE ASSIGNOR
HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS ASSIGNMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
None of the terms and conditions of this Assignment may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Assignor and the Assignee (with the consent of either the
Required Banks (as defined in the Credit Agreement) or, to the extent required
by Section 12.12 of the Credit Agreement, all of the Banks).
In the event that the Insurance Collateral or any portion thereof is
sold in connection with a sale permitted by Section 8.02 of the Credit
Agreement or is otherwise released at the direction of the Required Banks (or
all the Banks, to the extent required by Section 12.12 of the Credit
Agreement), the Assignee, at the request and expense of the Assignor, will
duly assign, transfer and deliver to the Assignor (without recourse and with-
out any representation or warranty) such of the Insurance Collateral (and
releases therefor) as is then being (or has been) so sold or released and as
may be in the possession of the Assignee and has not theretofore been released
pursuant to this Assignment. At any time the Assignor desires that the
Insurance Collateral or a portion thereof be released as provided in this
paragraph, the Assignor shall deliver to the Assignee a certificate signed by
an Authorized Officer (as defined in the Credit Agreement) stating that the
release of the Insurance Collateral or portion thereof is permitted pursuant
to this paragraph.
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 30th day of April, 1996.
READING & BATES DRILLING CO.
By: ________________________
Title:
ANNEX I
to
Assignment of Insurances
NOTICE OF ASSIGNMENT
Reading & Bates Drilling Co. (the "Owner"), the owner of the United
States flag offshore drilling rig Jack Bates (the "Rig"), HEREBY GIVES NOTICE
that by a Collateral Assignment of Insurance dated April 30, 1996 and made
between the Owner and Wilmington Trust Company, as Trustee (the "Assignee")
for itself and certain other Banks (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 indorsed on all policies and certificates of entry evidencing such
insurance.
READING & BATES DRILLING CO.
By
Title:
LOSS PAYABLE CLAUSES
Hull and War Risks
Loss, if any, payable to Wilmington Trust Company, as Trustee for the
Banks, for distribution by it to said Banks 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 Trustee, 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 repaired the damage and paid the cost thereof, or discharged the
liability or paid the salvage or other charges, then the Underwriters may pay
the Owner as reimbursement to the extent the Owner has paid the covered loss.
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 Trustee, 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 Wilmington Trust Company, as Trustee for the
Banks for distribution by it to the Banks 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 Trustee, 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 in respect of any claim in excess of
$1,000,000, the Underwriters shall have first received evidence that the
liability insured against has been discharged.
Exhibit 10.96
COLLATERAL ASSIGNMENT OF INSURANCE
READING & BATES EXPLORATION CO., an Oklahoma corporation (hereinafter
called the "Assignor"), the owner of the United States registered offshore
drilling rig 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 Wilmington Trust Company, not in its individual
capacity but as Trustee for the Banks (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 full and prompt
payment when due (whether at the stated maturity, by acceleration or
otherwise) of all obligations and liabilities of the Assignor, now existing or
hereafter incurred, under, arising out of or in connection with any Credit
Document (as that term is defined in the Credit Agreement, as defined below)
to which it is a party and the due performance and compliance by the Assignor
with the terms of each such Credit Document, all right, title and interest of
the Assignor under, in and to the following (all of the following,
collectively, the "Insurance Collateral"): (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 Agreement, dated April
30, 1996 (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement"), by and among Reading & Bates Corporation,
Reading & Bates Drilling Co., the Banks (as defined therein) and Christiania
Bank og Kreditkasse, New York Branch, as Agent.
The Assignor hereby constitutes the Assignee and 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; provided, however, that the
Assignee shall not take any action pursuant to the power granted by this
paragraph unless an Event of Default under the Credit Agreement shall have
occurred and be continuing. 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 I 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, such consent 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 additional named assured or loss
payees set forth in Annex I 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 and the Banks as additional
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 to the
Assignee hereunder shall be made by airmail postage prepaid letter, telefax or
by telex, confirmed by letter to:
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
Attn: Corporate Trust Division
Fax No.: (302) 651-8882
With copies to:
Christiania Bank og Kreditkasse,
New York Branch
11 West 42nd Street
New York, New York 10036
Attn: Hans Kjelsrud
Tel No.: (212) 827-4814
Fax No.: (212) 827-4888
Jennifer L. Janss, Esq.
Richard Layton & Finger
P.O. Box 551
Wilmington, Delaware 19899
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 Vessel Trust Indenture, the Mortgages, the
Credit Agreement and the other Credit Documents.
THIS ASSIGNMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. THE ASSIGNOR
HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS ASSIGNMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
None of the terms and conditions of this Assignment may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Assignor and the Assignee (with the consent of either the
Required Banks (as defined in the Credit Agreement) or, to the extent required
by Section 12.12 of the Credit Agreement, all of the Banks).
In the event that the Insurance Collateral or any portion thereof is
sold in connection with a sale permitted by Section 8.02 of the Credit
Agreement or is otherwise released at the direction of the Required Banks (or
all the Banks, to the extent required by Section 12.12 of the Credit
Agreement), the Assignee, at the request and expense of the Assignor, will
duly assign, transfer and deliver to the Assignor (without recourse and with-
out any representation or warranty) such of the Insurance Collateral (and
releases therefor) as is then being (or has been) so sold or released and as
may be in the possession of the Assignee and has not theretofore been released
pursuant to this Assignment. At any time the Assignor desires that the
Insurance Collateral or a portion thereof be released as provided in this
paragraph, the Assignor shall deliver to the Assignee a certificate signed by
an Authorized Officer (as defined in the Credit Agreement) stating that the
release of the Insurance Collateral or portion thereof is permitted pursuant
to this paragraph.
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 30th day of April, 1996.
READING & BATES EXPLORATION CO.
By: ________________________
Title:
ANNEX I
to
Assignment of Insurances
NOTICE OF ASSIGNMENT
Reading & Bates Exploration Co. (the "Owner"), the owner of the United
States flag offshore drilling rig D.R. Stewart (the "Rig"), HEREBY GIVES
NOTICE that by a Collateral Assignment of Insurance dated April 30, 1996 and
made between the Owner and Wilmington Trust Company, as Trustee (the
"Assignee") for itself and certain other Banks (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 indorsed on all policies and certificates of entry
evidencing such insurance.
READING & BATES EXPLORATION CO.
By________________________
Title:
LOSS PAYABLE CLAUSES
Hull and War Risks
Loss, if any, payable to Wilmington Trust Company, as Trustee for the
Banks, for distribution by it to said Banks 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 Trustee, 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 repaired the damage and paid the cost thereof, or discharged the
liability or paid the salvage or other charges, then the Underwriters may pay
the Owner as reimbursement to the extent the Owner has paid the covered loss.
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 Trustee, 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 Wilmington Trust Company, as Trustee for the
Banks for distribution by it to the Banks 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 Trustee, 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 in respect of any claim in excess of
$1,000,000, the Underwriters shall have first received evidence that the
liability insured against has been discharged.
Exhibit 10.97
COLLATERAL ASSIGNMENT OF INSURANCE
READING & BATES EXPLORATION CO., an Oklahoma corporation (hereinafter
called the "Assignor"), the owner of the United States registered offshore
drilling rig W.D. KENT (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 Wilmington Trust Company, not in its individual
capacity but as Trustee for the Banks (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 full and prompt
payment when due (whether at the stated maturity, by acceleration or
otherwise) of all obligations and liabilities of the Assignor, now existing or
hereafter incurred, under, arising out of or in connection with any Credit
Document (as that term is defined in the Credit Agreement, as defined below)
to which it is a party and the due performance and compliance by the Assignor
with the terms of each such Credit Document, all right, title and interest of
the Assignor under, in and to the following (all of the following,
collectively, the "Insurance Collateral"): (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 Agreement, dated April
30, 1996 (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement"), by and among Reading & Bates Corporation,
Reading & Bates Drilling Co., the Banks (as defined therein) and Christiania
Bank og Kreditkasse, New York Branch, as Agent.
The Assignor hereby constitutes the Assignee and 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; provided, however, that the
Assignee shall not take any action pursuant to the power granted by this
paragraph unless an Event of Default under the Credit Agreement shall have
occurred and be continuing. 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 I 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, such consent 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 additional named assured or loss
payees set forth in Annex I 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 and the Banks as additional
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 to the
Assignee hereunder shall be made by airmail postage prepaid letter, telefax or
by telex, confirmed by letter to:
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
Attn: Corporate Trust Division
Fax No.: (302) 651-8882
With copies to:
Christiania Bank og Kreditkasse,
New York Branch
11 West 42nd Street
New York, New York 10036
Attn: Hans Kjelsrud
Tel No.: (212) 827-4814
Fax No.: (212) 827-4888
Jennifer L. Janss, Esq.
Richard Layton & Finger
P.O. Box 551
Wilmington, Delaware 19899
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 Vessel Trust Indenture, the Mortgages, the
Credit Agreement and the other Credit Documents.
THIS ASSIGNMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. THE ASSIGNOR
HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS ASSIGNMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
None of the terms and conditions of this Assignment may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Assignor and the Assignee (with the consent of either the
Required Banks (as defined in the Credit Agreement) or, to the extent required
by Section 12.12 of the Credit Agreement, all of the Banks).
In the event that the Insurance Collateral or any portion thereof is
sold in connection with a sale permitted by Section 8.02 of the Credit
Agreement or is otherwise released at the direction of the Required Banks (or
all the Banks, to the extent required by Section 12.12 of the Credit
Agreement), the Assignee, at the request and expense of the Assignor, will
duly assign, transfer and deliver to the Assignor (without recourse and with-
out any representation or warranty) such of the Insurance Collateral (and
releases therefor) as is then being (or has been) so sold or released and as
may be in the possession of the Assignee and has not theretofore been released
pursuant to this Assignment. At any time the Assignor desires that the
Insurance Collateral or a portion thereof be released as provided in this
paragraph, the Assignor shall deliver to the Assignee a certificate signed by
an Authorized Officer (as defined in the Credit Agreement) stating that the
release of the Insurance Collateral or portion thereof is permitted pursuant
to this paragraph.
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 30th day of April, 1996.
READING & BATES EXPLORATION CO.
By: ________________________
Title:
ANNEX I
to
Assignment of Insurances
NOTICE OF ASSIGNMENT
Reading & Bates Exploration Co. (the "Owner"), the owner of the United
States flag offshore drilling rig W.D. Kent (the "Rig"), HEREBY GIVES NOTICE
that by a Collateral Assignment of Insurance dated April 30, 1996 and made
between the Owner and Wilmington Trust Company, as Trustee (the "Assignee")
for itself and certain other Banks (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 indorsed on all policies and certificates of entry evidencing such
insurance.
READING & BATES EXPLORATION CO.
By____________________
Title:
LOSS PAYABLE CLAUSES
Hull and War Risks
Loss, if any, payable to Wilmington Trust Company, as Trustee for the
Banks, for distribution by it to said Banks 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 Trustee, 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 repaired the damage and paid the cost thereof, or discharged the
liability or paid the salvage or other charges, then the Underwriters may pay
the Owner as reimbursement to the extent the Owner has paid the covered loss.
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 Trustee, 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 Wilmington Trust Company, as Trustee for the
Banks for distribution by it to the Banks 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 Trustee, 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 in respect of any claim in excess of
$1,000,000, the Underwriters shall have first received evidence that the
liability insured against has been discharged.
Exhibit 10.98
COLLATERAL ASSIGNMENT OF INSURANCE
READING & BATES BORNEO DRILLING CO., LTD., an Oklahoma corporation
(hereinafter called the "Assignor"), the owner of the Panamanian registered
offshore drilling rig CHARLEY GRAVES (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, New
York Branch, not in its individual capacity but as Agent for the Banks (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 full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities of
the Assignor, now existing or hereafter incurred, under, arising out of or in
connection with any Credit Document (as that term is defined in the Credit
Agreement, as defined below) to which it is a party and the due performance
and compliance by the Assignor with the terms of each such Credit Document,
all right, title and interest of the Assignor under, in and to the following
(all of the following, collectively, the "Insurance Collateral"): (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 Agreement, dated April
30, 1996 (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement"), by and among Reading & Bates Corporation,
Reading & Bates Drilling Co., the Banks (as defined therein) and Christiania
Bank og Kreditkasse, New York Branch, as Agent.
The Assignor hereby constitutes the Assignee and 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; provided, however, that the
Assignee shall not take any action pursuant to the power granted by this
paragraph unless an Event of Default under the Credit Agreement shall have
occurred and be continuing. 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 I 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, such consent 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 additional named assured or loss
payees set forth in Annex I 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 and the Banks as additional
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 to the
Assignee hereunder shall be made by airmail postage prepaid letter, telefax or
by telex, confirmed by letter to:
Christiania Bank og Kreditkasse,
New York Branch
11 West 42nd Street
New York, New York 10036
Attn: Hans Kjelsrud
Tel No.: (212) 827-4814
Fax No.: (212) 827-4888
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 Mortgages, the Credit Agreement and the
other Credit Documents.
THIS ASSIGNMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. THE ASSIGNOR
HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS ASSIGNMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
None of the terms and conditions of this Assignment may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Assignor and the Assignee (with the consent of either the
Required Banks (as defined in the Credit Agreement) or, to the extent required
by Section 12.12 of the Credit Agreement, all of the Banks).
In the event that the Insurance Collateral or any portion thereof is
sold in connection with a sale permitted by Section 8.02 of the Credit
Agreement or is otherwise released at the direction of the Required Banks (or
all the Banks, to the extent required by Section 12.12 of the Credit
Agreement), the Assignee, at the request and expense of the Assignor, will
duly assign, transfer and deliver to the Assignor (without recourse and with-
out any representation or warranty) such of the Insurance Collateral (and
releases therefor) as is then being (or has been) so sold or released and as
may be in the possession of the Assignee and has not theretofore been released
pursuant to this Assignment. At any time the Assignor desires that the
Insurance Collateral or a portion thereof be released as provided in this
paragraph, the Assignor shall deliver to the Assignee a certificate signed by
an Authorized Officer (as defined in the Credit Agreement) stating that the
release of the Insurance Collateral or portion thereof is permitted pursuant
to this paragraph.
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 30th day of April, 1996.
READING & BATES BORNEO DRILLING CO., LTD.
By: ________________________
Title:
ANNEX I
to
Assignment of Insurances
NOTICE OF ASSIGNMENT
Reading & Bates Borneo Drilling Co. Ltd. (the "Owner"), the owner of the
Panamanian flag offshore drilling rig Charley Graves (the "Rig"), HEREBY GIVES
NOTICE that by a Collateral Assignment of Insurance dated April 30, 1996 and
made between the Owner and Christiania Bank og Kreditkasse, New York Branch,
as Agent (the "Assignee") for itself and certain other Banks (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 indorsed on all policies and
certificates of entry evidencing such insurance.
READING & BATES BORNEO DRILLING CO., LTD.
By
Title:
LOSS PAYABLE CLAUSES
Hull and War Risks
Loss, if any, payable to Christiania Bank og Kreditkasse, New York
Branch, as Agent for the Banks, for distribution by it to said Banks and to
Reading & Bates Borneo Drilling Co. Ltd., 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 repaired the damage and paid the cost
thereof, or discharged the liability or paid the salvage or other charges,
then the Underwriters may pay the Owner as reimbursement to the extent the
Owner has paid the covered loss.
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 Panamanian mortgage relating to the Rig.
PROTECTION AND INDEMNITY
Loss, if any, payable to Christiania Bank og Kreditkasse, New York
Branch, as Agent for the Banks for distribution by it to the Banks and to
Reading & Bates Borneo Drilling Co., Ltd., 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 Agenty, 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 in respect of any claim in excess of $1,000,000, the
Underwriters shall have first received evidence that the liability insured
against has been discharged.
Exhibit 10.99
COLLATERAL ASSIGNMENT OF INSURANCE
READING & BATES (A) PTY. LTD., a Western Australia corporation
(hereinafter called the "Assignor"), the owner of the Australian registered
offshore drilling rig RON TAPPMEYER (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,
New York Branch, not in its individual capacity but as Agent for the Banks
(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 full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations and liabilities of the Assignor, now existing or hereafter
incurred, under, arising out of or in connection with any Credit Document
(as that term is defined in the Credit Agreement, as defined below) to
which it is a party and the due performance and compliance by the Assignor
with the terms of each such Credit Document, all right, title and interest
of the Assignor under, in and to the following (all of the following,
collectively, the "Insurance Collateral"): (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 Agreement, dated April
30, 1996 (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement"), by and among Reading & Bates Corporation,
Reading & Bates Drilling Co., the Banks (as defined therein) and
Christiania Bank og Kreditkasse, New York Branch, as Agent.
The Assignor hereby constitutes the Assignee and 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;
provided, however, that the Assignee shall not take any action pursuant to
the power granted by this paragraph unless an Event of Default under the
Credit Agreement shall have occurred and be continuing. 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 I 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, such consent 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
additional named assured or loss payees set forth in Annex I 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 and the Banks as additional 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 to
the Assignee hereunder shall be made by airmail postage prepaid letter,
telefax or by telex, confirmed by letter to:
Christiania Bank og Kreditkasse,
New York Branch
11 West 42nd Street
New York, New York 10036
Attn: Hans Kjelsrud
Tel No.: (212) 827-4814
Fax No.: (212) 827-4888
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 Mortgages, the Credit Agreement and the
other Credit Documents.
THIS ASSIGNMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. THE
ASSIGNOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
ASSIGNMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
None of the terms and conditions of this Assignment may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Assignor and the Assignee (with the consent of either the
Required Banks (as defined in the Credit Agreement) or, to the extent
required by Section 12.12 of the Credit Agreement, all of the Banks).
In the event that the Insurance Collateral or any portion thereof is
sold in connection with a sale permitted by Section 8.02 of the Credit
Agreement or is otherwise released at the direction of the Required Banks
(or all the Banks, to the extent required by Section 12.12 of the Credit
Agreement), the Assignee, at the request and expense of the Assignor, will
duly assign, transfer and deliver to the Assignor (without recourse and
without any representation or warranty) such of the Insurance Collateral
(and releases therefor) as is then being (or has been) so sold or released
and as may be in the possession of the Assignee and has not theretofore
been released pursuant to this Assignment. At any time the Assignor
desires that the Insurance Collateral or a portion thereof be released as
provided in this paragraph, the Assignor shall deliver to the Assignee a
certificate signed by an Authorized Officer (as defined in the Credit
Agreement) stating that the release of the Insurance Collateral or portion
thereof is permitted pursuant to this paragraph.
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 30th day of April, 1996.
READING & BATES (A) PTY. LTD.
By: ________________________
Title:
ANNEX I
to
Assignment of Insurances
NOTICE OF ASSIGNMENT
Reading & Bates (A) Pty. Ltd. (the "Owner"), the owner of the
Australian flag offshore drilling rig Ron Tappmeyer (the "Rig"), HEREBY
GIVES NOTICE that by a Collateral Assignment of Insurance dated April 30,
1996 and made between the Owner and Christiania Bank og Kreditkasse, New
York Branch, as Agent (the "Assignee") for itself and certain other Banks
(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
indorsed on all policies and certificates of entry evidencing such
insurance.
READING & BATES (A) PTY. LTD.
By _____________________
Title:
LOSS PAYABLE CLAUSES
Hull and War Risks
Loss, if any, payable to Christiania Bank og Kreditkasse, New York
Branch, as Agent for the Banks, for distribution by it to said Banks and to
Reading & Bates (A) Pty. Ltd., 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 repaired the damage and
paid the cost thereof, or discharged the liability or paid the salvage or
other charges, then the Underwriters may pay the Owner as reimbursement to
the extent the Owner has paid the covered loss.
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 Australian mortgage relating to the
Rig.
PROTECTION AND INDEMNITY
Loss, if any, payable to Christiania Bank og Kreditkasse, New York
Branch, as Agent for the Banks for distribution by it to the Banks and to
Reading & Bates (A) Pty. Ltd., 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 Agenty, 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 in respect of any claim in excess of $1,000,000, the Underwriters
shall have first received evidence that the liability insured against has
been discharged.
Exhibit 10.100
COLLATERAL ASSIGNMENT OF INSURANCE
READING & BATES DRILLING CO., an Oklahoma corporation (hereinafter
called the "Assignor"), the owner of the Bahamian registered offshore drilling
rig J.W. McLEAN (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, New York Branch, not in its individual
capacity but as Agent for the Banks (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 full and prompt
payment when due (whether at the stated maturity, by acceleration or
otherwise) of all obligations and liabilities of the Assignor, now existing or
hereafter incurred, under, arising out of or in connection with any Credit
Document (as that term is defined in the Credit Agreement, as defined below)
to which it is a party and the due performance and compliance by the Assignor
with the terms of each such Credit Document, all right, title and interest of
the Assignor under, in and to the following (all of the following,
collectively, the "Insurance Collateral"): (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 Agreement, dated April
30, 1996 (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement"), by and among Reading & Bates Corporation,
Reading & Bates Drilling Co., the Banks (as defined therein) and Christiania
Bank og Kreditkasse, New York Branch, as Agent.
The Assignor hereby constitutes the Assignee and 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; provided, however, that the
Assignee shall not take any action pursuant to the power granted by this
paragraph unless an Event of Default under the Credit Agreement shall have
occurred and be continuing. 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 I 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, such consent 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 additional named assured or loss
payees set forth in Annex I 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 and the Banks as additional
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 to the
Assignee hereunder shall be made by airmail postage prepaid letter, telefax or
by telex, confirmed by letter to:
Christiania Bank og Kreditkasse,
New York Branch
11 West 42nd Street
New York, New York 10036
Attn: Hans Kjelsrud
Tel No.: (212) 827-4814
Fax No.: (212) 827-4888
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 Mortgages, the Credit Agreement and the
other Credit Documents.
THIS ASSIGNMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. THE ASSIGNOR
HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS ASSIGNMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
None of the terms and conditions of this Assignment may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Assignor and the Assignee (with the consent of either the
Required Banks (as defined in the Credit Agreement) or, to the extent required
by Section 12.12 of the Credit Agreement, all of the Banks).
In the event that the Insurance Collateral or any portion thereof is
sold in connection with a sale permitted by Section 8.02 of the Credit
Agreement or is otherwise released at the direction of the Required Banks (or
all the Banks, to the extent required by Section 12.12 of the Credit
Agreement), the Assignee, at the request and expense of the Assignor, will
duly assign, transfer and deliver to the Assignor (without recourse and with-
out any representation or warranty) such of the Insurance Collateral (and
releases therefor) as is then being (or has been) so sold or released and as
may be in the possession of the Assignee and has not theretofore been released
pursuant to this Assignment. At any time the Assignor desires that the
Insurance Collateral or a portion thereof be released as provided in this
paragraph, the Assignor shall deliver to the Assignee a certificate signed by
an Authorized Officer (as defined in the Credit Agreement) stating that the
release of the Insurance Collateral or portion thereof is permitted pursuant
to this paragraph.
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 30th day of April, 1996.
READING & BATES DRILLING CO.
By: ________________________
Title:
ANNEX I
to
Assignment of Insurances
NOTICE OF ASSIGNMENT
Reading & Bates Drilling Co. (the "Owner"), the owner of the Bahamian
flag offshore drilling rig J.W. McLean (the "Rig"), HEREBY GIVES NOTICE that
by a Collateral Assignment of Insurance dated April 30, 1996 and made between
the Owner and Christiania Bank og Kreditkasse, New York Branch, as Agent (the
"Assignee") for itself and certain other Banks (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 indorsed on all policies and certificates of entry
evidencing such insurance.
READING & BATES DRILLING CO.
By
Title:
LOSS PAYABLE CLAUSES
Hull and War Risks
Loss, if any, payable to Christiania Bank og Kreditkasse, New York
Branch, as Agent for the Banks, for distribution by it to said Banks 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 repaired the damage and paid the cost thereof, or discharged
the liability or paid the salvage or other charges, then the Underwriters may
pay the Owner as reimbursement to the extent the Owner has paid the covered
loss.
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 Bahamian mortgage relating to the Rig.
PROTECTION AND INDEMNITY
Loss, if any, payable to Christiania Bank og Kreditkasse, New York
Branch, as Agent for the Banks for distribution by it to the Banks 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 Agenty, 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 in
respect of any claim in excess of $1,000,000, the Underwriters shall have
first received evidence that the liability insured against has been
discharged.
Exhibit 10.101
FIRST AMENDMENT TO CREDIT AGREEMENT
FIRST AMENDMENT (the "Amendment"), dated as of July 9, 1996, among
READING & BATES CORPORATION ("Holdings"), READING & BATES DRILLING CO. (the
"Borrower"), the financial institutions party to the Credit Agreement referred
to below (the "Banks"), Credit Lyonnais New York Branch, as Co-Agent (the "Co-
Agent") and Christiania Bank og Kreditkasse, New York Branch, as Agent (the
"Agent"). All capitalized terms used herein and not otherwise defined shall
have the respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Banks, the Co-Agent and the
Agent are parties to a Credit Agreement, dated as of April 30, 1996 (as
amended, modified or supplemented, the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend certain provisions of
the Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
1. On and after the First Amendment Effective Date (as hereinafter
defined), the Total Commitment under the Credit Agreement shall (and the
parties hereto agree that it shall) be increased from $100,000,000 to
$140,000,000 and the Commitment of each Bank shall on such date be equal to
the respective amounts shown on Annex I hereto, which on the First Amendment
Effective Date shall replace existing Annex I to the Credit Agreement.
2. Section 2.01(c) of the Credit Agreement is hereby amended by
inserting the following proviso immediately prior to the semi-colon in clause
(i)(y) thereof:
", provided that on and after the First Amendment Effective Date, until
such time as the conditions set forth in Section 7.13 are fully complied
with, for purposes of this clause (y) the Adjusted Total Commitment
shall be calculated on the basis of a Total Commitment of $120,000,000.
3. Section 3.03(b) of the Credit Agreement is hereby amended by
deleting the commitment reduction schedule contained therein and inserting in
lieu thereof the following new commitment reduction schedule:
Date Amount
May 1, 1997 $11,900,000
November 1, 1997 $11,900,000
May 1, 1998 $11,900,000
November 1, 1998 $11,900,000
May 1, 1999 $11,900,000
November 1, 1999 $11,900,000
May 1, 2000 $11,900,000
November 1, 2000 $11,900,000
Maturity Date Remaining amount
of Total Commitment
4. Conditions Precedent to the First Amendment Effective Date. The
occurrence of the First Amendment Effective Date and the obligation of the
Banks to increase their Commitments hereunder are subject (except as otherwise
hereinafter indicated), to the satisfaction of each of the following
conditions:
(a) Execution of Amendment; Notes. (i) The Amendment shall have
been executed and (ii) there shall have been delivered to the Agent for
the account of each Bank which has a changed Commitment as a result of
this Amendment a new Revolving Note in the appropriate amount to reflect
such new Commitment and as otherwise provided in the Credit Agreement.
(b) Opinions of Counsel. The Agent shall have received
opinions, addressed to the Agent and each of the Banks and dated the
First Amendment Effective Date, from (i) Wayne Hillin, Esq., General
Counsel to the Credit Parties, which opinion shall cover matters, and
shall be in form and substance, satisfactory to the Agent and (ii) from
local counsel satisfactory to the Agent as the Agent may request, which
opinions shall cover the perfection of the security interests
(including, without limitation, opinions as to the enforceability and
effect of the Mortgage Amendments (as herein defined)) granted pursuant
to this Amendment and such other matters incident to the transactions
contemplated herein as the Agent may reasonably request and shall be in
form and substance satisfactory to the Agent.
(c) Corporate Proceedings. (1) The Agent shall have received
from each of RB Drilling Co. and HRB Rig Corporation (each an
"Additional Mortgagor" and together the "Additional Mortgagors") a
certificate, dated the First Amendment Effective Date, signed by the
President or any Vice-President or other appropriate representative of
such Additional Mortgagor in the form of Exhibit F with appropriate
insertions and deletions, together with copies of the certificate of
formation, the by-laws, or other organizational documents of such
Additional Mortgagor and the resolutions, or such other administrative
approval, of such Additional Mortgagor referred to in such certificate
and all of the foregoing (including each such certificate of formation,
certificate of incorporation and by-laws) shall be reasonably
satisfactory to the Agent.
(2) All corporate and legal proceedings and all instruments and
agreements in connection with the transactions contemplated by this
Amendment shall be reasonably satisfactory in form and substance to the
Agent, and the Agent shall have received all information and copies of
all certificates, documents and papers, including good standing certi-
ficates and any other records of corporate proceedings and governmental
approvals, if any, which the Agent may have reasonably requested in con-
nection therewith, such documents and papers, where appropriate, to be
certified by proper corporate or governmental authorities.
(d) Fees. The Borrower shall have paid to the Agent and the
Banks all Fees and expenses agreed upon by such parties to be paid on or
prior to such date.
(e) Repayment; Notice of Borrowing. The Borrower shall repay to
the Agent and the Banks all amounts outstanding under the Credit
Facility (including accrued interest thereon and any breakage fees
incurred by the Agent and the Banks as a result of such repayment),
whereupon the Borrower may reborrow such amounts (which reborrowing may
occur simultaneously with the repayment described above), pursuant to a
Notice of Borrowing in the form of Exhibit A to the Credit Agreement,
pro rata based upon the commitments as in effect immediately following
the effectiveness of this Amendment.
(f) Security Agreement. Each Additional Mortgagor shall have
duly authorized, executed and delivered a counterpart to the Security
Agreement, together with:
(1) executed copies of Financing Statements (Form UCC-1
and/or UCC-3) or appropriate local equivalent in appropriate form
for filing under the UCC or appropriate local equivalent of each
jurisdiction as may be necessary to perfect the security interests
purported to be created by the Security Agreement;
(2) certified copies of Requests for Information or Copies
(Form UCC-11), or equivalent reports, each of a recent date
listing all effective financing statements that name any
Additional Mortgagor or a division or operating unit of any such
Person, as debtor and that are filed in the jurisdictions referred
to in immediately preceding clause (1), together with copies of
such financing statements (none of which shall cover the
Collateral except (x) those with respect to which appropriate
termination statements executed by the secured lender thereunder
have been delivered to the Collateral Agent and (y) to the extent
evidencing Permitted Liens);
(3) evidence that all other recordings and filings of, or
with respect to, the Security Agreement, and all other actions, as
may be necessary or, in the opinion of the Collateral Agent,
desirable to perfect the security interests intended to be created
by the Security Agreement have been completed (it being understood
and agreed that UCC financing statements and termination
statements shall be filed in the appropriate governmental office
within three Business Days after the First Amendment Effective
Date);
and the Security Agreement and such other documents shall be in full
force and effect.
(g) Subsidiary Guaranty. Each Additional Mortgagor (each a
"Subsidiary Guarantor") shall have duly authorized, executed and
delivered a counterpart of the Subsidiary Guaranty, and the Subsidiary
Guaranty shall be in full force and effect with respect to such
Additional Mortgagors.
(h) Change of Registry. The national registry of the drilling
rig "J.W. McLean" shall be changed from the Bahamas to Panama with the
Bahamian Mortgage to be replaced by a Panamanian Mortgage pursuant to
clause (i)(2) below.
(i) Mortgages. (i) Each Additional Mortgagor shall have duly
authorized, executed and delivered the following document or documents
to which it is a party (as modified, amended or supplemented from time
to time, the "Additional Mortgages"):
(1) with respect to the drilling rig "Harvey H. Ward," a
US Mortgage substantially in the form of Exhibit A-1 hereto; and
(2) with respect to each of the drilling rigs "Rig 41" and
"J.W. McLean," a Panamanian Mortgage, substantially in the form of
Exhibit A-2 hereto.
All actions necessary, desirable or otherwise reasonably requested by
the Collateral Agent to provide the Collateral Agent with a perfected
first priority security interest in all Collateral purported to be
covered by the Additional Mortgages shall have been taken.
(ii) The respective Mortgagors of the drilling rigs "Jack Bates,"
"W.D. Kent" and "D.R. Stewart" shall have duly authorized, executed and
delivered amendments to the Mortgages securing such vessels,
substantially in the form of Exhibit B-1 hereto, and the Mortgagor of
the drilling rig "Charley Graves" shall have duly authorized, executed
and delivered an amendment to the Mortgage securing such vessel,
substantially in the form of Exhibit B-2 hereto.
(j) Evidence of Lien, etc. The Agent shall have received (i)
United States Coast Guard certificates of ownership showing (or con-
firmation updating previously reviewed certificates and indicating) that
the US Rig Harvey H. Ward is registered in the ownership of HRB Rig
Corporation, and subject to the Lien of the US Mortgage and free of all
other Liens of record, (ii) a certificate of the Director General of the
Public Registry of Panama showing (or confirmation updating previously
reviewed certificates and indicating) that the Panamanian Rig 41 is
registered in the ownership of RB Drilling Co., and the Panamanian Rig
J.W. McLean is registered in the ownership of the Borrower, each subject
to the Lien of the applicable Panamanian Mortgage and free of all other
Liens of record.
(k) Vessel Trust Indenture. HRB Rig Corporation shall have
acknowledged and agreed to the terms of the Amended and Restated Vessel
Trust Indenture.
(l) Rig Reports; Drilling Contracts. (i) The Agent shall have
received:
(1) reports from Approved Shipbrokers setting forth the
Market Value of each of the Harvey H. Ward, Rig 41, and the
offshore production vessel Seillean (each an "Additional
Collateral Rig" and collectively, the "Additional Collateral
Rigs");
(2) evidence satisfactory to the Collateral Agent that
each of the drilling rigs Harvey H. Ward and Rig 41 are classified
in the highest class available for rigs or vessels of its age and
type with the American Bureau of Shipping, Inc. or another
internationally recognized classification society reasonably
acceptable to the Collateral Agent, free of any material
outstanding requirements or recommendations; and
(ii) The Agent shall have received true and correct copies of all
current and pending drilling contracts relating to the Harvey H. Ward
and Rig 41.
(m) Insurance Report. On or prior to the First Amendment
Effective Date, the Agent shall have received a detailed report from
Soriero & Company, Inc., or another firm of independent marine insurance
brokers acceptable to the Agent and the Required Banks with respect to
the insurance maintained by the Additional Mortgagors in connection with
the Harvey H. Ward and Rig 41, together with a certificate from such
broker certifying that such insurances (i) are placed with such
insurance companies and/or underwriters and/or clubs, in such amounts,
against such risks, and in such form, as are normally insured against by
similarly situated insureds and as are necessary or advisable for the
protection of the Trustee or the Agent, as the case may be, as Mortgagee
and (ii) conform with the requirements of the Additional Mortgages.
(n) Collateral Assignments of Insurance. Each Additional
Mortgagor shall have executed and delivered to the Collateral Agent a
Collateral Assignment of Insurance with respect to the insurance main-
tained by such Additional Mortgagor on the Harvey H. Ward and Rig 41,
together with:
(1) executed copies of Financing Statements (Form UCC-1
and/or UCC-3) or appropriate local equivalent in appropriate form
for filing under the UCC or appropriate local equivalent of each
jurisdiction as may be necessary to perfect the assignments
purported to be created by each Collateral Assignment of
Insurance;
(2) certified copies of Requests for Information or Copies
(Form UCC-11), or equivalent reports, each of a recent date
listing all effective financing statements that name any
Additional Mortgagor or a division or operating unit of such
Person, as debtor and that are filed in the jurisdictions referred
to in immediately preceding clause (1), together with copies of
such financing statements (none of which shall cover the
Collateral except (x) those with respect to which appropriate
termination statements executed by the secured lender thereunder
have been delivered to the Collateral Agent and (y) to the extent
evidencing Permitted Liens);
(3) evidence that all other recordings and filings of, or
with respect to, each Collateral Assignment of Insurance, and all
other actions, as may be necessary or, in the opinion of the
Collateral Agent, desirable to perfect the assignments intended to
be created by each Collateral Assignment of Insurance have been
completed (it being understood and agreed that UCC financing
statements and termination statements shall be filed in the
appropriate governmental office within three Business Days after
the First Amendment Effective Date);
and each such Collateral Assignment of Insurance shall be in full force
and effect.
5. Section 7 of the Credit Agreement is hereby amended by inserting
at the end thereof the following Section 7.13:
7.13 Availability Covenants. Notwithstanding anything to
the contrary contained in this Agreement, the sum of (x) the outstanding
principal amount of Loans pursuant to this Agreement and (y) the Letter
of Credit Outstandings pursuant to this Agreement shall in no event
exceed $120,000,000 until such time, if any, as the following conditions
are satisfied (as determined in good faith by the Agent):
(a) Rig Acquisition. RB Drilling Co. shall have completed
the purchase of the offshore production vessel Seillean from
Britoil (Beta) Limited, pursuant to acquisition documents
reasonably acceptable in form and substance to the Agent and the
Required Banks.
(b) Mortgages. RB Drilling Co. shall have duly
authorized, executed and delivered a Panamanian Mortgage with
respect to the Seillean (the "Seillean Mortgage"), substantially
in the form of Exhibit A-2 hereto and all actions necessary,
desirable or otherwise reasonably requested by the Collateral
Agent to provide the Collateral Agent with a perfected first
priority security interest in the Seillean shall have been taken.
(c) Evidence of Lien, etc. The Agent shall have received
a certificate of the Director General of the Public Registry of
Panama showing (or confirmation updating previously reviewed
certificates and indicating) that the Panamanian Rig Seillean is
registered in the ownership of RB Drilling Co., and subject to the
Lien of the Panamanian Mortgage and free of all other Liens of
record.
(d) Report; Contracts. The Agent shall have received:
(1) evidence satisfactory to the Collateral Agent
that the offshore production vessel Seillean is classified
in the highest class available for rigs or vessels of its
age and type with the American Bureau of Shipping, Inc. or
another internationally recognized classification society
reasonably acceptable to the Collateral Agent, free of any
material outstanding requirements or recommendations; and
(2) true and correct copies of all current and
pending operation and/or charter contracts relating to the
Seillean.
(e) Insurance Report. On or prior to the First Amendment
Effective Date, the Agent shall have received a detailed report
from Soriero & Company, Inc., or another firm of independent
marine insurance brokers acceptable to the Agent and the Required
Banks evidencing, to the satisfaction of the Agent, the inclusion
of the Seillean under all appropriate insurances maintained by RB
Drilling Co..
(f) Collateral Assignment of Insurance. RB Drilling Co.
shall have executed and delivered a Collateral Assignment of
Insurance with respect to the insurance maintained on the
Seillean, together with:
(1) executed copies of Financing Statements (Form UCC-1
and/or UCC-3) or appropriate local equivalent in appropriate form
for filing under the UCC or appropriate local equivalent of each
jurisdiction as may be necessary to perfect the assignments
purported to be created by each Collateral Assignment of
Insurance;
(2) evidence that all other recordings and filings of, or
with respect to, such Collateral Assignment of Insurance, and all
other actions, as may be necessary or, in the opinion of the
Collateral Agent, desirable to perfect the assignment intended to
be created by such Collateral Assignment of Insurance have been
completed (it being understood and agreed that UCC financing
statements and termination statements shall be filed in the
appropriate governmental office within three Business Days after
the First Amendment Effective Date);
and such Collateral Assignment of Insurance shall be in full force
and effect.
(g) Updated Annexes. The Agent shall have received (i) an
updated schedule of Rigs and Vessels to replace Annex VI to the
Credit Agreement, which schedule shall include the information
with respect to the Seillean and (ii) an updated schedule of
Existing Liens (if necessary) to replace Annex VIII, with all
Liens required to be listed thereon constituting Permitted Liens.
6. Section 10 of the Credit Agreement is hereby amended by inserting
in appropriate alphabetical order the following new definitions:
"First Amendment Effective Date" shall mean the First Amendment
Effective Date as defined in the First Amendment, dated July 9, 1996, to
this Agreement.
"First Amendment" shall mean the First Amendment, dated July 9,
1996, to this Agreement.
7. The definition of "Bahamian Rig" appearing in Section 10 of the
Credit Agreement is hereby amended by adding a reference to ", prior to the
First Amendment Effective Date" immediately following the reference to "shall
mean."
8. The definition of "Mortgage" appearing in Section 10 of the Credit
Agreement is hereby amended by deleting the current definition in its entirety
and inserting in lieu thereof the following new definition:
"Mortgage" shall mean (i) prior to the First Amendment Effective
Date, each of the Mortgages as defined in Section 5.13(a), (ii) on and
after the First Amendment Effective Date, but prior to the effectiveness
of the Seillean Mortgage as defined in paragraph 5(b) of the First
Amendment, each of the Mortgages as defined in Section 5.13(a) (except
the Bahamian Mortgage) and each of the Additional Mortgages as defined
in paragraph 4(i) of the First Amendment and (iii) subsequent to the
effectiveness of the Seillean Mortgage, each of the Mortgages as defined
in Section 5.13(a) (except the Bahamian Mortgage), each of the
Additional Mortgages and the Seillean Mortgage.
9. The definition of "Panamanian Rig" contained in Section 10 of the
Credit Agreement is hereby amended by deleting the current definition in its
entirety and inserting in lieu thereof the following new definition:
"Panamanian Rig" shall mean (i) prior to the First Amendment
Effective Date, the offshore drilling rig Charley Graves, (ii) on and
after the First Amendment Effective Date, but prior to the effectiveness
of the Seillean Mortgage as defined in paragraph 5(b) of the First
Amendment, the offshore drilling rigs Charley Graves, J.W. McLean and
Rig 41, and (iii) subsequent to the effectiveness of the Seillean
Mortgage, the offshore drilling rigs Charley Graves, J.W. McLean, Rig
41, and the offshore production vessel Seillean.
10. The definition of "U.S. Rigs" contained in Section 10 of the
Credit Agreement is hereby amended by deleting the current definition in its
entirety and inserting in lieu thereof the following new definition:
"U.S. Rigs" shall mean (i) prior to the First Amendment Effective
Date, the offshore drilling rigs Jack Bates, D.R. Stewart and W.D. Kent
and (ii) on and after the First Amendment Effective Date, the offshore
drilling rigs Jack Bates, D.R. Stewart, W.D. Kent and Harvey H. Ward.
11. On the First Amendment Effective Date, existing Annex IV shall be
replaced with Annex IV hereto.
12. In order to induce the Banks to enter into this Amendment, each of
Holdings and the Borrower hereby represents and warrants that (i) the repre-
sentations, warranties and agreements contained in Section 7 of the Credit
Agreement are true and correct in all material respects on and as of the First
Amendment Effective Date (except with respect to any representations and
warranties limited by their terms to a specific date, which shall be true and
correct in all material respects as of such date) and (ii) there exists no
Default or Event of Default on the First Amendment Effective Date (as defined
herein) in each case both before and after giving effect to this Amendment.
13. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
14. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with each of Holdings, the Borrower and the
Agent.
15. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
16. This Amendment shall become effective on the date (the "First
Amendment Effective Date") when (i) each of Holdings, the Borrower, and the
Banks shall have signed a copy hereof (whether the same or different copies)
and shall have delivered (including by way of facsimile) the same to the Agent
at the Notice Office and (ii) each of the conditions set forth in paragraph 4
hereof shall have been satisfied.
17. From and after the First Amendment Effective Date, all references
in the Credit Agreement and the other Credit Documents to the Credit Agreement
shall be deemed to be references to such Credit Agreement as modified hereby.
IN WITNESSES WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
READING & BATES CORPORATION
By:
Title:
READING & BATES DRILLING CO.
By:
Title:
CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH,
Individually, and as Agent
By:
Title:
By:
Title:
CREDIT LYONNAIS NEW YORK
BRANCH
By:
Title:
BANQUE INDOSUEZ
By:
Title:
By:
Title:
BANK AUSTRIA AKTIENGESELLSCHAFT
By:
Title:
By:
Title:
THE FUJI BANK, LIMITED
By:
Title:
ANNEX I
COMMITMENTS
Bank Commitment
Christiania Bank og Kreditkasse, $55,000,000
New York Branch
Credit Lyonnais New York Branch $32,500,000
Banque Indosuez $18,500,000
Bank Austria Aktiengesellschaft $18,500,000
The Fuji Bank, Limited $15,500,000
Total $140,000,000
Exhibit 10.102
SUBSIDIARY ASSUMPTION AGREEMENT
SUBSIDIARY ASSUMPTION AGREEMENT (this "Agreement"), dated as of
July 9, 1996, made by RB DRILLING CO., an Oklahoma corporation and HRB Rig
CORPORATION, an Oklahoma corporation (each a "New Subsidiary" and together the
"New Subsidiaries"). Unless otherwise defined herein, capitalized terms used
herein and defined in the Credit Agreement referred to below are used herein
as so defined.
W I T N E S S E T H :
WHEREAS, READING & BATES CORPORATION, a Delaware corporation (the
"Holdings"), READING & BATES DRILLING CO., an Oklahoma corporation (the
"Borrower"), the financial institutions party to the Credit Agreement referred
to below (each, a "Bank" and, collectively, the "Banks"), CREDIT LYONNAIS NEW
YORK BRANCH, as Co-Agent (the "Co-Agent"), and CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH, as Agent for the Banks (in such capacity, the
"Agent") are parties to a Credit Agreement, dated as of April 30, 1996 (as
amended, modified or supplemented from time to time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, various
Subsidiaries of the Borrower have entered into a Subsidiary Guaranty, dated as
of April 30, 1996 and (as in effect on the date hereof, the "Subsidiary
Guaranty");
WHEREAS, in connection with the Credit Agreement, the Borrower and
various of its Subsidiaries have entered into an Amended and Restated Security
Agreement, dated as of April 30, 1996 (as in effect on the date hereof, the
"Security Agreement" and, together with the Subsidiary Guaranty, the
"Documents"); and
WHEREAS, each New Subsidiary desires to execute and deliver this
Agreement in order to become a party to each of the Documents;
NOW, THEREFORE, IT IS AGREED:
1. Subsidiary Guaranty. By executing and delivering this
Agreement, the each New Subsidiary hereby becomes a party to the Subsidiary
Guaranty as a "Guarantor" thereunder, and hereby expressly and jointly and
severally assumes all obligations and liabilities of a "Guarantor" thereunder,
subject to the limitations set forth therein.
2. Security Agreement. By executing and delivering this
Agreement, the each New Subsidiary hereby (i) becomes a party to the Security
Agreement as an "Assignor" thereunder, (ii) expressly assumes all obligations
and liabilities of an "Assignor" thereunder and (iii) pledges and grants to
the Collateral Agent, for the benefit of Secured Creditors, as collateral
security for the prompt payment in full when due (whether at stated maturity,
by acceleration or otherwise) of the Obligations (as defined in the Security
Agreement), a security interest in, to and for the benefit of the Secured
Creditors all of its right, title and interest in, to and under the Collateral
(as defined in the Security Agreement). Each New Subsidiary hereby makes each
of the representations and warranties contained in the Security Agreement on
the date hereof, after giving effect to this Agreement.
3. Financing Statements. By executing and delivering this
Agreement, the each New Subsidiary hereby agrees to execute and deliver to the
Collateral Agent such financing statements, in form acceptable to the
Collateral Agent, as the Collateral Agent may request or as are necessary or
desirable in the opinion of the Collateral Agent to establish and maintain a
valid, enforceable, first priority perfected security interest in the
Collateral (as defined in the Security Agreement) owned by each New
Subsidiary.
4. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to
be duly executed and delivered as of the date first above written.
RB DRILLING CO.
By______________________________
Title:
HRB RIG CORPORATION
By_____________________________
Title:
Exhibit 10.103
INDENTURE OF FIRST NAVAL MORTGAGE
READING & BATES DRILLING CO.
- and -
CHRISTIANIA BANK OG KREDITKASSE, agent
as Mortgagee
J.W. McLEAN
Dated July 9, 1996
==============================================================================
INDEX
CLAUSE SUBJECT MATTER PAGE
1 REPRESENTATIONS AND COVENANTS . . . . . . . . . . . . . . . . . 2
2 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 4
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . 10
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . 10
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 18
9 ENFORCEABILITY AND MORTGAGEE'S POWERS . . . . . . . . . . . . 19
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 21
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 22
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 22
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 25
18 WAIVER; AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 25
19 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 25
20 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT 1 FORM OF CREDIT AGREEMENT
EXHIBIT 2 FORM OF AMENDMENT
=============================================================================
THIS INDENTURE OF FIRST NAVAL MORTGAGE made and entered into this 9th
day of July, 1996, between READING & BATES DRILLING CO., an Oklahoma company
duly constituted and existing in conformity with the laws of the State of
Oklahoma with its principal office at 901 Threadneedle, Suite 200, Houston,
Texas 77079 (hereinafter called the "Owner") and CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH having offices at 11 West 42nd Street, New York,
NY 10036, as agent for the Banks (as hereinafter defined) (hereinafter called
the "Mortgagee"), on the Panamanian offshore drilling rig J.W. McLEAN of
15,453 gross registered tons, 4,636 net registered tons and with a length of
111.86m, a breadth of 64.01m and a depth of 42.67m and Provisional Patent of
Navigation No. 25384-PEXT (hereinafter called the "Rig"), duly registered
under the laws and flag of the Republic of Panama, the detailed description of
which is hereinafter more particularly set forth.
W I T N E S S E T H :
WHEREAS
(A) The Owner is the sole owner of the whole of the offshore drilling rig
J.W. McLEAN documented under the laws and flag of the Republic of
Panama.
(B) By a Credit Agreement dated as of April 30, 1996 (as amended, restated
or supplemented from time to time, the "Credit Agreement") among
Reading & Bates Corporation, a Delaware corporation, as guarantor
("Holdings"), the Owner, as borrower, the banks party thereto, Credit
Lyonnais New York Branch, as co-agent (the "Co-Agent") and the
Mortgagee, as agent, (the form of which Credit Agreement together with
the form of promissory note of the Borrower attached as Exhibit B
thereto but without the remaining exhibits is attached hereto as
Exhibit 1); it was agreed among other things that the Banks would make
available to the Borrower a reducing revolving credit facility (the
"Facility") in the maximum aggregate principal amount at any one time
outstanding of One Hundred Million United States Dollars
(U.S.$100,000,000), providing for the making of Loans and the issuance
of and participations in Letters of Credit as contemplated therein.
(C) By an Amendment to the Credit Agreement dated as of July 9, 1996 (the
"Amendment"), the form of which Amendment without attachments is
attached hereto as Exhibit 2, among Holdings, the Owner, the banks
party thereto (collectively the "Banks"), the Co-Agent and the Agent,
it was agreed among other things that the Banks would increase the
amount available to the Owner under the Facility to an aggregate
amount at any time outstanding of One Hundred Forty Million United
States Dollars (US$140,000,000). As required by Article 1515 Section
3 of the Commercial Code of Panama, the dates on which payments of
principal in respect of the Loans are due may be determined from the
provisions of the Credit Agreement including Section 3.03.
(D) The obligations of the Owner with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Owner payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(E) This Mortgage is made for the benefit of the Mortgagee to secure (i)
the full and prompt payment when due of (x) the principal of and
interest on the Notes issued, and Loans made, under the Credit
Agreement, and all reimbursement obligations and Unpaid Drawings with
respect to the Letters of Credit issued under the Credit Agreement and
(y) all other obligations and indebtedness (including, without
limitation, indemnities, Fees and interest thereon) of the Owner to
the Secured Creditors (as hereinafter defined), whether now existing
or hereafter incurred under, arising out of or in connection with the
Credit Agreement and the other Credit Documents including, without
limitation, this Mortgage and the due performance and compliance by
the Owner with all of the terms, conditions and agreements contained
in the Credit Agreement and the other Credit Documents including,
without limitation, this Mortgage; (ii) any and all sums advanced by
the Mortgagee in order to preserve the Collateral (as hereinafter
defined) or preserve its security interest in the Collateral; (iii) in
the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of the Owner referred to in
clause (i) above, after an Event of Default shall have occurred and be
continuing, the reasonable expenses of the Mortgagee of re-taking,
holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Mortgagee
of its rights hereunder, together with reasonable attorneys' fees of
counsel to the Mortgagee and court costs; and (iv) all amounts paid by
any Indemnitee as to which such Indemnitee has the right to
reimbursement under Clause 13 of this Mortgage (all such obligations,
liabilities, sums and expenses referred to in clauses (i) through (iv)
above being collectively referred to as the "Obligations"). It is
acknowledged and agreed that the "Obligations" shall include
extensions of credit of the types described above, whether outstanding
on the date of this Mortgage or extended from time to time after the
date of this Mortgage.
(F) This Indenture of First Naval Mortgage, which is entered into by the
Owner in consideration of the Banks entering into the Amendment and
agreeing to make the Facility available to the Owner and as a
condition thereto and for other good and valuable consideration
provided by the Banks (the sufficiency of which the Owner hereby
acknowledges).
NOW, THEREFORE, the appearing parties, each in the name and on behalf of his
respective principal, state that they hereby execute this Indenture of First
Naval Mortgage pursuant to the following representations:
1. REPRESENTATIONS AND COVENANTS
1.01 The Owner represents and covenants to the Mortgagee that:
a. The Owner is the sole and absolute owner of the Rig under the
laws and flag of the Republic of Panama;
b. The Owner, as sole legal and beneficial owner of the Rig, has
received and presently possesses a Provisional Patent of
Navigation for the Rig, duly issued by the Republic of Panama
under No. 25384-PEXT;
c. Neither the whole nor any share in the Rig is subject to any
Security Interest (as defined herein) (except for Permitted
Liens (as defined herein) and the lien of this Mortgage);
d. the Owner has not sold or transferred, or agreed to sell or
transfer, title to the Rig or any share therein;
e. the Owner is a corporation duly organized and validly existing
and in good standing under the laws of the State of Oklahoma;
f. the Owner has full power and authority (i) to execute and
deliver this Mortgage, (ii) to mortgage the Rig as security for
the Obligations and (iii) to comply with the provisions of, and
perform all its obligations under, this Mortgage;
g. the Owner has complied with all statutory and other material
requirements relative to the ownership, registration and
operation of the Rig;
h. 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 preliminarily recorded with the
Public Registry in Panama through the Panamanian Consulate in
New York, New York will create a legal, valid and enforceable
first preferred mortgage lien on the Rig subject only to the
permanent filing of this Mortgage in the Public Registry in
Panama within six months of the date of the preliminary recorded
filing;
i. the entry into and performance by the Owner of this Mortgage
does not and will not during the Credit Facility Period (as
defined herein) 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;
j. 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 during the
Credit Facility Period;
k. 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;
l. the Owner is in compliance with all applicable Environmental
Laws (as defined herein) relating to the Rig, its operation and
management;
m. the Owner has obtained all Environmental Approvals (as defined
herein) and is in compliance with all requests thereof;
n. no Environmental Claim (as defined herein) has been made or
threatened against the Owner or otherwise in connection with the
Rig;
o. no Environmental Incident (as defined herein) which has
resulted, or which could reasonably be expected to result, in an
Environmental Claim in excess of US$200,000 has occurred; and
p. The Owner hereby affirms as its representations all of the
statements contained in the "WHEREAS" clauses of this Mortgage.
1.02 The representations and warranties of the Owner set out in Clause 1.01
shall survive the execution of this Mortgage and shall be deemed to be
repeated at the time of the making of each Loan (as defined herein)
and at the time of the issuance of each Letter of Credit, with respect
to the facts and circumstances existing at each such time, as if made
at each such time.
1.03 The Mortgagee represents that the Banks have made the Facility
available to the Owner, as evidenced by, inter alia, the Credit
Agreement, the Notes and the Security Documents (as defined herein),
and accepts the Mortgage constituted by this instrument upon the Rig
as security for the due and prompt payment and performance of the
obligations of the Owner under the Credit Agreement and the other
Credit Documents.
1.04 Each of the contracting parties declares that it is satisfied with the
representations and covenants made by the other and accepts them as
true; and the parties mutually acknowledge their respective legal
status as well as the authority of the persons representing them
respectively in this instrument to sign the same on behalf of their
respective principals.
2. DEFINITIONS AND INTERPRETATION
2.01 In this Mortgage unless the context otherwise requires, the following
expressions shall have the following meanings:
"Agent" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Amendment" means the Amendment dated as of July 9, 1996 among
Holdings, the Owner, the Banks, the Co-Agent and the Agent first
referred to in Recital (C) hereto;
"Bank" means any lender listed from time to time on Annex 1 to the
Credit Agreement (collectively, the "Banks");
"Collateral Assignment of Insurances" means the Collateral Assignment
of Insurances in respect of the Rig executed or to be executed by the
Owner in favor of the Agent;
"Commitment" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of April 30,
1996, among Holdings, the Owner, the Banks, the Co-Agent, and the
Agent, as amended by the Amendment, first referred to in Recital (B)
hereto, and as further amended, restated or supplemented from time to
time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Unpaid Drawings
together with interest, fees and all other obligations are paid in
full;
"Credit Party" shall have the same meaning for such term as set forth
in the Credit Agreement;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.07(b) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of business of such entity and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act of
1976 (42 U.S.C. 6901 et seq.), the Clean Air Act (42 U.S.C. 7401
et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et
seq.) and the Toxic Substances Control Act (15 U.S.C. 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);
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Section 1.08 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01 of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Owner referred to in Recital
(D) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (E) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
semi-submersible drilling rig JACK BATES owned by the Owner documented
under the laws and flag of the United States of America with Official
Number 906283 of 19,928 gross registered tons and 14,948 net
registered tons; (ii) the jack-up drilling rig D. R. STEWART owned by
Reading & Bates Exploration Co. ("R&B Exploration") documented under
the laws and flag of the United States of America with Official Number
626904 of 6,494 gross registered tons and 5,834 net registered tons;
(iii) the drilling tender W.D. KENT owned by R&B Exploration
documented under the laws and flag of the United States of America
with Official Number 583169 of 5,383 gross registered tons and 4,185
net registered tons; (iv) the jack-up drilling rig RON TAPPMEYER owned
by Reading & Bates (A) Pty Ltd. documented under the laws and flag of
Australia with Official Number 855213 of 11,455 gross registered tons
and 3,436 net registered tons; (v) the semi-submersible drilling rig
RIG 41 owned by RB Drilling Co. ("RB") documented under the laws and
flag of the Republic of Panama with Patente Number 22365-95 of 10,078
gross registered tons and 3,024 net registered tons; (vi) the drilling
tender CHARLEY GRAVES owned by Reading and Bates Borneo Drilling Co.,
Ltd. documented under the laws and flag of the Republic of Panama with
Patente Number 6618-76 CH of 5,829 gross registered tons and 1,748 net
registered tons; (vii) the offshore drilling rig HARVEY H. WARD owned
by HRB Rig Corporation documented under the laws and flag of the
United States of America with Official Number 642693 of 4,121 gross
registered tons and 3,079 net registered tons and (viii) the
Panamanian flag rig SEILLEAN to be acquired by RB as contemplated by
the Amendment;
"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 written request of the Agent,
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 written request of the Agent,
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 Banks; and provided that Permitted Liens shall not
include any liens described in subclauses (1) through (7) 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);
"Required Banks" shall have the meaning for such term as set forth in
the Credit Agreement;
"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 Creditors" shall mean the Banks, the Letter of Credit Issuer
and the Agent under and as defined in the Credit Agreement;
"Security Documents" shall have the same meaning for such term as set
forth in the Restated 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;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised total loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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.
2.02 Except where otherwise expressly provided or unless the context
otherwise requires, words and expressions defined in the Credit
Agreement shall bear the same meanings when used in this Mortgage.
2.03 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.
3. MORTGAGE
3.01 In order to secure the Obligations the Owner has granted, conveyed and
mortgaged and does by these presents grant, convey and mortgage unto
the Mortgagee, its successors and assigns, in accordance with the
provisions of Chapter V, Title IV of Book Second of the Code of
Commerce and pertinent provisions of the Civil Code and other
legislation of the Republic of Panama, the whole of the Rig, the
detailed description of which is as follows:
offshore drilling rig J.W. McLEAN; gross tonnage approximately
15,453; net tonnage approximately 4,636; length overall 111.86
meters, breadth 64.01 meters; depth 42.67 meters; built in 1974
by Bethlehem Steel Corporation in Beaumont, Texas; radio call
letters HP-8713;
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 Obligations.
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 to
the Secured Creditors and their respective successors or assigns the
Obligations as and when the same shall become due and payable in
accordance with the terms of the Credit Agreement and this Mortgage
and the Owner and its successors and assigns shall observe and comply
with the covenants, terms and conditions contained in the Credit
Agreement 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, then these presents and the rights hereunder
shall cease, determine and be void and, in such event, the Mortgagee
agrees to furnish, execute and record, at the expense of the Owner,
all such documents as the Owner may reasonably require to discharge
this Mortgage, otherwise to be and remain in full force and effect.
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 none of the Secured Creditors 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.
3.03 This Mortgage, when it shall have been duly executed and signed on
behalf of the parties, shall be provisionally recorded through the
Panamanian Consulate at New York, New York and thereafter within three
months permanently recorded in the Public Registry in Panama.
4. PAYMENT COVENANTS
4.01 The Owner hereby covenants with the Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 the relevant expense,
claim, liability, loss, cost, duty, fee, charge or other money
is paid by any Secured Creditor (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 any Secured Creditor, as the case may be, under this
Mortgage and the Credit Agreement 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
Mortgagee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Mortgagee shall not have to wait for the Agent to enforce
any of the other Security Documents before enforcing the
security created by this Mortgage;
(d) no failure or delay on the part of the Mortgagee in exercising
any right, power, privilege or remedy hereunder and no course of
dealing between Owner and Mortgagee or the Agent shall operate
as a waiver thereof; nor shall any single or partial exercise of
any right, power, privilege or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of
any rights or remedies which the Mortgagee or the Agent would
otherwise have. No notice to or demand on the Owner in any case
shall entitle the Owner to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the
rights of the Mortgagee or the Agent to any other or further
action in any circumstances without notice or demand; and
(e) any waiver by the Mortgagee of any terms of this Mortgage or any
consent given by the Mortgagee 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 Mortgagee
and the Owner shall be conditional upon no security or payment to the
Secured Parties or any of them by the Credit Parties 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 Mortgagee 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 Secured Creditors 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 Credit Parties, the Secured Creditors or any other
person:
(a) any waiver granted to or composition with the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents or any other document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of the Credit Party or any other person under the
Credit Agreement, any of the other Credit Documents or any other
document or security.
6. INSURANCE
6.01 The Owner covenants with the Mortgagee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains 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 agreed
value of the Rig, and when such amount is aggregated with the
total amount of such insurance coverage on the Other Rigs, such
aggregate amount shall be at least 110% of the Total Commitment.
Such insurance shall cover marine and war risk perils, on hull
and machinery, with per occurrence 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 American, British and Scandinavian insurance
markets or in such other major international markets acceptable
to the Mortgagee. The Owner shall maintain protection and
indemnity 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 at least equal
from time to time to the limitation of liability amount
applicable to the Rig under the Oil Pollution Act 1990 or other
Environmental Laws), through underwriters or associations
acceptable to the Mortgagee. 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 in
respect of the Other Rigs, shall be in an amount equal to at
least 110% of the Total Commitment (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 satisfying
the conditions of the relevant policies evidence of which shall
be furnished to the Mortgagee.
(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 the Mortgagee shall be the
loss payee for distribution by it to itself, the Banks and the
Owner as their interests may appear, and shall provide for at
least ten days' prior notice to be given to the Mortgagee 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 Mortgagee and the Banks shall be named as co-
assureds on all such policies and insurance contracts, but
without liability of the Mortgagee, or the Banks for premiums or
calls. Complete certified copies of all such policies, binders
and other interim insurance contracts shall be delivered to the
Mortgagee. Originals shall also be provided upon the request of
the Mortgagee. The Owner shall furnish to the Mortgagee
annually a detailed report signed by a firm of marine insurance
brokers satisfactory to the Mortgagee 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 Mortgagee, by notice to the
underwriters, although the following insurance is payable to the
Mortgagee, (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 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$1,000,000.00 (One Million U.S.
Dollars), the underwriters shall not make such payment without
first obtaining the written consent thereto of the Mortgagee
(which consent shall not be unreasonably withheld). Any loss
covered by this paragraph which is paid to the Mortgagee 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 Mortgagee to, or as directed by, the Owner and all other
payments to the Mortgagee of losses covered by this paragraph
shall be applied by the Mortgagee in accordance with Clause
10.01.
In the event of a Total Loss, all insurance payments therefor
shall be paid to the Mortgagee. The Owner shall not declare or
agree with the underwriters that the Rig is a Total Loss without
the prior written consent of the Mortgagee.
(c) In the event of a Total Loss of the Rig, the Mortgagee 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
Secured Creditors under the Security Documents, whether or not
the same shall be then due and payable, together with accrued
interest and the cost, if any, of collecting the insurance, and
pay the balance as provided in Clause 10.
(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 in which the Rig from time to time is engaged.
(e) The Owner shall renew all such insurances as they expire and so
as to insure that there is no gap in coverage, keep the
Mortgagee advised of the progress of such renewals, and shall
provide evidence of such renewal in writing to the Mortgagee 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 Mortgagee.
(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 to such employment of the insurers
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 Mortgagee that throughout the Credit
Facility Period the Owner will:
(a) keep the Rig documented in its name as a Panamanian flag vessel
and do or allow to be done nothing whereby such documentation
may be forfeited or imperilled;
(b) not without the previous consent in writing of the Mortgagee
except as otherwise contemplated by the Credit Agreement, change
the name of the Rig or make any modification to the Rig which
would materially alter the structure, type or performance
characteristics of the Rig and which would materially reduce the
value of the Rig;
(c) keep the Rig in a good and efficient state of repair consistent
with first-class ship-ownership and management practice employed
by owners of drilling rigs of similar size and type and so as to
maintain her present class (namely +A1 Column Stabilized
Drilling Unit) at Det Norske Veritas free of recommendations and
qualifications and change of class, save those approved in
writing by the Mortgagee and so as to comply with all applicable
laws, treaties and conventions of the Republic of Panama and
other applicable jurisdictions, and rules and regulations issued
thereunder, and have on board as and when required thereby valid
certificates showing compliance therewith;
(d) procure that all repairs to or replacement of any damaged, worn
or lost parts or equipment in such manner (both as regards
workmanship and quality of materials) as to not materially
diminish the value of the Rig and not to remove any material
part of, or item of equipment owned by the Owner installed on,
the Rig unless (i) 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 Mortgagee and becomes on
installation on the Rig the property of the Owner and subject to
the security constituted by this Mortgage or (ii) the removal
will not materially diminish the value of the Rig;
(e) submit the Rig to such periodical or other surveys as may be
required for classification purposes and if so required to
supply to the Mortgagee copies of all survey reports issued in
respect thereof;
(f) permit the Mortgagee by independent surveyors 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,
provided that unless an Event of Default shall have occurred and
be continuing, the cost of any such inspection shall be for the
account of the Mortgagee;
(g) 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 expenses
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;
(h) 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 can reasonably be expected to 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 Mortgagee may reasonably
require;
(i) promptly furnish to the Mortgagee 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 Mortgagee's request in writing, copies of
all charters and other contracts for her employment or otherwise
howsoever concerning her;
(j) notify the Mortgagee forthwith by 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 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 Mortgagee 30 days prior notice,
provided, that in the event of any emergency dry docking
of the Rig, the Owner shall immediately notify the
Mortgagee; and
(vi) any intended deactivation or lay-up of the Rig (other
than for normal periods of inactivity between contracts
for the Rig during which periods the Rid remains manned)
and obtain the Mortgagee's prior written consent;
(k) keep proper books of account in respect of the Rig and as and
when the Mortgagee may so reasonably require make such books
available for inspection on behalf of the Mortgagee 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;
(l) observe the obligations contained in Sections 7 and 8 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;
(m) not without the previous consent in writing of the Mortgagee
(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 United States Dollars (US$2,500,000.00) (or the
equivalent in any other currency) unless (i) such person shall
first have given to the Mortgagee and in terms satisfactory to
it a written undertaking not to exercise any lien on the Rig for
the cost of such work or otherwise or (ii) the cost of such work
shall be fully covered by applicable insurance;
(n) comply with and satisfy all the provisions of applicable laws
and regulations of the Republic of Panama, as at any time
amended, in order to establish and maintain this Mortgage as a
first priority naval mortgage thereunder upon the Rig and upon
all renewals, improvements and replacements made in or to the
same, and promptly to furnish to the Mortgagee from time to time
such proofs as the Mortgagee may request for its satisfaction
with respect to the compliance by the Owner with the provisions
of this sub-clause, including, appropriate certificates of the
Public Registry showing that this Mortgage has been duly
registered and filed and is a first and absolute lien on the
Rig;
(o) 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 and
salvage and to any representative of the Mortgagee 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 subject to an Indenture of First Naval Mortgage
in favor of CHRISTIANIA BANK OG KREDITKASSE, as Agent for the
Banks defined in said Mortgage, in conformity with the
provisions of Chapter V, Title IV of Book Second of the Code of
Commerce, and the pertinent provisions of the Civil Code and
other legislation of the Republic of Panama. Under the terms of
said Mortgage neither the owner, any charterer, the Master of
the Rig nor any other person shall have the right, power or
authority to create, incur or permit to be placed upon the Rig
any other lien whatsoever other than for current crew's wages
and salvage and Permitted Liens (as that term is defined in said
Mortgage)."
(p) 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;
(q) notify the Mortgagee 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
Mortgagee advised, in writing on such regular basis and
in such detail as the Mortgagee shall require, of the
Owner's response to such Environmental Claim or
Environmental Incident.
(r) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Mortgagee having first been obtained, and any such written
consent to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Mortgagee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of the Rig;
(s) shall not cause or permit the Rig to be operated in any manner
contrary to law (except where the failure to operate in
compliance with any law would not have a material adverse effect
on the Owner, the Rig or the lien of this Mortgage), shall not
abandon the Rig in a foreign port and shall not engage in any
unlawful trade or violate any law or carry any cargo that shall
expose the Rig to forfeiture or capture.
8. PROTECTION OF SECURITY
8.01 The Mortgagee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit Documents be entitled (but
not bound) at any time and as often as may be necessary (but unless an
Event of Default shall have occurred and be continuing with prior
written notice to the Owner) 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 Credit 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, reasonable legal
fees) so incurred by the Secured Creditors 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 in any material respect with the
provisions of Clause 6 or any of them the Mortgagee shall be
entitled (but not bound) to effect or to replace and renew and
thereafter to maintain the Insurances in such manner it, in its
discretion, 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 Mortgagee
may nominate and, upon the direction of the Mortgagee 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 Mortgagee 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;
(b) if the Owner does not comply with the provisions of Clause
7.01(d) or 7.01(f) the Mortgagee shall be entitled (but not
bound) to arrange for the carrying out of such repairs to 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) the Mortgagee 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 MORTGAGEE'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 Mortgagee or the Banks
having served on the Owner any such notice as is referred to in
Section 9 of the Credit Agreement) the security constituted by this
Mortgage shall become immediately enforceable and the Mortgagee 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 the laws of the Republic of
Panama or other applicable laws;
(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 Mortgagee
without legal process and without liability of the Mortgagee 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 Mortgagee;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Mortgagee 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) all such proceedings in connection with the Rig, the
Insurances, or any Requisition Compensation as the Mortgagee 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 Mortgagee
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
Obligations, subject to notice of sale being given by the
Mortgagee to the Owner and other mortgagees of record, if any,
by airmail, postage pre-paid and by publication once in a
newspaper of general circulation in the City of Panama, Republic
of Panama, not less than twenty (20) calendar days in advance of
the sale, to satisfy the requirement of notice of sale contained
in Article 1527 of the Panama Code of Commerce. Such notice
shall be necessary only in respect of the initial date of sale;
(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 Mortgagee in its absolute discretion
deems expedient and for the purposes aforesaid the Mortgagee
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 Mortgagee 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 Mortgagee in or about the
exercise of the power vested in the Mortgagee under
Clause 9.01(g);
(i) generally, to recover from the Owner on demand each and every
expense, liability or loss incurred by the Mortgagee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The Mortgagee 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 Mortgagee by this Mortgage or to which
the Mortgagee may at any time be entitled hereunder.
9.03 Neither the Secured Creditors 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 Mortgagee 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 Mortgagee the
purchaser shall not be bound to see or enquire whether the Mortgagee'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 Mortgagee and
the receipt of the Mortgagee for the purchase money shall effectively
discharge the purchaser who shall not be concerned with the manner of
application of the proceeds of sale or be in any way answerable
therefor.
10. APPLICATION OF MONEYS
10.01 (a) All moneys received by the Mortgagee or any Secured Creditor,
including, without limitation, in respect of sale of the Rig or
any part thereof, in respect of recovery under the Insurances,
or in respect of Requisition Compensation, shall be applied in
the following manner:
(i) first, to the payment of all amounts owing the Mortgagee of
the type described in clauses (ii) and (iii) of Recital (E);
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to
the outstanding Obligations shall be paid to the Secured
Creditors as provided in Clause 10.01(c), with each
Secured Creditor receiving an amount equal to such
Obligations held by it or, if the proceeds are
insufficient to pay in full all such Obligations, its Pro
Rata Share (as defined below) of the amount remaining to
be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and
following the termination of this Mortgage pursuant to
Clause 3.01, any surplus then remaining shall be paid to
the Owner, subject, however, to the rights of the holder
of any then existing Lien of which the Mortgagee has
actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Mortgagee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Agent under the Credit Agreement for the
account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Mortgagee shall be entitled to reply upon
(i) the Agent under the Credit Agreement and (ii) the Secured
Creditors for a determination (which the Agent and each Secured
Creditor, by their acceptance of the benefits of this Mortgage
shall be obligated to provide upon request of the Mortgagee) of
the outstanding Obligations owed to the Secured Creditors.
Unless it has actual knowledge (including by way of written
notice from a Secured Creditor) to the contrary, the Agent under
the Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Mortgagee, in acting hereunder,
shall be entitled to assume that (x) no obligations other than
principal, interest and regularly accruing fees are owing to any
Secured Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the Mortgagee 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 Mortgagee and
the Agent 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
inure to the benefit of any transferee, successor or assignee of
the Mortgagee; 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
Mortgagee under this Mortgage,
in any such case, forthwith upon demand by the Mortgagee and at the
expense of the Owner.
12. POWER OF ATTORNEY
12.01 The Owner, by way of security and in order to more fully secure the
performance of the Obligations under this Mortgage, hereby irrevocably
appoints the Mortgagee 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 Mortgagee 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 Mortgagee shall not put any person dealing with the
Mortgagee 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 Mortgagee of such
power shall be conclusive evidence as against third parties of its
right to exercise the same.
13. INDEMNITIES
13.01 The Owner will indemnify and save harmless the Secured Creditors and
each agent or attorney appointed under or pursuant to this Mortgage
(each an "Indemnitee") from and against any and all expenses, claims,
liabilities, losses, taxes, costs, duties, fees and charges suffered,
incurred or made by such Secured Creditors 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 Mortgagee's rights
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and the Secured Creditors 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 a Secured Creditor 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 Secured Creditors 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 Hazardous Materials 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 the Credit Agreement or 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 Mortgagee, 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 Mortgagee against the amount of such shortfall. For
the purposes of this Clause 13.03, "rate of exchange" means the rate
at which the Mortgagee is able on the date of such payment (or, if it
is not practicable for the Mortgagee 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
Mortgagee 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 Mortgagee on demand all costs, fees and
expenses, including, but not limited to, legal fees and expenses and
valuation fees and Taxes thereon incurred by any Secured Creditor or
for which any Secured Creditor may become liable in connection with:
(a) the negotiation, preparation and execution of the Credit
Agreement and the other Credit 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 or the
other Credit Documents (or any of them).
14.02 The Owner shall pay to the Mortgagee on demand all costs, fees and
expenses (including, but not limited to, legal fees and expenses) and
Taxes thereon incurred by any Secured Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement or the other Credit 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 Mortgagee in relation to
the Credit Agreement and the other Credit 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 other Credit
Documents (or any of them) may be subject or give rise and shall
indemnify the Mortgagee 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 required to be given to the Mortgagee shall be made to the
following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Attention: Loan Administration
Telephone: (212) 827-4800
Telefax: (212) 827-4888
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall inure to the benefit of
the Secured Creditors 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 Section 12.16 of the Credit Agreement, each Bank 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 Mortgagee 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 One Hundred Forty Million US
Dollars (US$140,000,000) of principal plus interest, fees, commissions
and performance of mortgage covenants. The discharge amount is the
same as the total amount.
18. WAIVER; AMENDMENT
18.01 None of the terms and conditions of this Mortgage may be changed,
waived, modified or varied in any manner whatsoever unless in writing
duly signed by the Owner and the Mortgagee (with the consent of either
the Required Banks or, to the extent required by Section 12.12 of the
Credit Agreement, all of the Banks). No amendment to the Credit
Agreement affects the rights and obligations of the Mortgagee
hereunder shall be effective without the consent of the Mortgagee
thereto.
19. MISCELLANEOUS
19.01 This Mortgage shall be governed by the laws of the Republic of Panama.
19.02 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.
19.03 The Mortgagee, 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 Mortgagee under this Mortgage in
relation to the Rig. Any such delegation may be made upon such terms
and subject to such regulations as the Mortgagee may think fit. The
Mortgagee 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.
19.04 The appearing parties hereby confer a special power of attorney on
Benedetti & Benedetti, lawyers of Panama, Republic of Panama and/or
any partners in the firm authorizing such firm or any such partner to
take all necessary steps to record this Indenture of First Naval
Mortgage in the appropriate registries of the City of Panama, and to
substitute this Power of Attorney herein granted.
19.05 A certification or determination by the Mortgagee as to any matter
provided for in this Mortgage shall, in the absence of manifest error,
be conclusive and binding on the Owner.
19.06 The Mortgagee declares that it accepts the naval mortgage hereby
created under the terms above set forth.
20. JURISDICTION
20.01 The Owner agrees that the Mortgagee 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Mortgagee.
20.02 Without prejudice to the generality of Clause 20.01, the Mortgagee
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 Mortgagee may bring before the courts of such
jurisdiction or other judicial authority and for the purpose of any
action which the Mortgagee 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.
20.03 The Owner agrees that should the Mortgagee 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 and the Mortgagee have duly executed these
presents the day and year first before written.
READING & BATES DRILLING CO.
By: _____________________________________
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH
By: _____________________________________
By: _____________________________________
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 9th day of July, 1996, before me personally
appeared ____________________ to me known and who resides at
; and who submitted evidence to me that he is a
___________ of READING & BATES DRILLING CO., the ___________________ company
described in and which executed the foregoing mortgage; and that he signed his
name thereto pursuant to authority granted to him by the Board of Directors of
said corporation.
____________________________________
Notary Public
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 9th day of July, 1996, before me personally
appeared ______________ to me known and who resides at
__________________________; and who submitted evidence to me that he/she is
__________ of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, the
corporation described in and which executed the foregoing mortgage; and that
he/she signed his/her name thereto pursuant to authority granted to him/her by
the Board of Directors of said corporation.
____________________________________
Notary Public
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 9th day of July, 1996, before me personally
appeared ______________ to me known and who resides at
__________________________; and who submitted evidence to me that he/she is
__________ of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, the
corporation described in and which executed the foregoing mortgage; and that
he/she signed his/her name thereto pursuant to authority granted to him/her by
the Board of Directors of said corporation.
____________________________________
Notary Public
Exhibit 10.104
FIRST PREFERRED MORTGAGE
Dated July 9, 1996
HRB RIG CORPORATION
- in favor of -
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Trustee
HARVEY H. WARD
==============================================================================
INDEX
CLAUSE SUBJECT MATTERPAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . 10
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . 13
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . 17
9 ENFORCEABILITY AND TRUSTEE'S POWERS . . . . . . . . . . . 18
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . 21
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . 21
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . 22
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . 23
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . 23
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . 24
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . 24
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 24
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . 25
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
EXHIBIT 2 FORM OF AMENDMENT
EXHIBIT 3 FORM OF SUBSIDIARY GUARANTY
==============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 9th day of
July, 1996
BY
(1) HRB RIG CORPORATION, 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 Banks (as hereinafter defined) and as
mortgagee (the "Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the jack-up drilling unit
HARVEY H. WARD documented under the laws and flag of the United States
of America with Official Number 642693 of 4,121 gross registered tons
and 3,079 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of April 30, 1996 (as amended, restated
or supplemented from time to time, the "Credit Agreement") among
Reading & Bates Corporation, a Delaware corporation ("Holdings"),
Reading & Bates Drilling Co., an Oklahoma corporation (the
"Borrower"), the banks party thereto, Credit Lyonnais New York Branch,
as co-agent (the "Co-Agent"), and Christiania Bank og Kreditkasse, New
York Branch, as agent (the "Agent"), (the form of which Original
Credit Agreement together with Exhibit B thereto but without the
remaining attachments is attached hereto as Exhibit 1), it was agreed
among other things that the Banks, would make available to the
Borrower upon the terms and conditions therein described a reducing
revolving credit facility (the "Facility") in an aggregate amount at
any time outstanding of One Hundred Million United States Dollars
(US$100,000,000), providing for the making of Loans and the issuance
of, and participation in, Letters of Credit as contemplated therein.
(C) By an Amendment to the Original Credit Agreement dated as of July 9,
1996 (the "Amendment") the form of which Amendment without attachments
is attached hereto as Exhibit 2, among Holdings, the Borrower, the
banks party thereto (collectively the "Banks"), the Co-Agent and the
Agent, it was agreed among other things that the Banks would increase
the amount available to the Borrower under the Facility to an
aggregate amount at any time outstanding of One Hundred Forty Million
United States Dollars (US$140,000,000) subject to semi-annual
reductions as set forth therein.
(D) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Borrower payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(E) The Owner, for good and valuable consideration has authorized,
executed and delivered a Subsidiary Guaranty (as amended, restated or
supplemented from time to time, the "Subsidiary Guaranty"), the form
of which Subsidiary Guaranty is attached hereto as Exhibit 3 in favor
of the Agent guaranteeing the performance by the Borrower of its
obligations under the Credit Agreement and the other Credit Documents.
(F) This Mortgage is made for the benefit of the Trustee to secure the
guaranty by the Owner of (i) the full and prompt payment when due of
(x) the principal and interest on the Notes issued, and Loans made,
under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued under the
Credit Agreement and (y) all other obligations and indebtedness
(including, without limitation, indemnities, Fees and interest
thereon) of the Borrower to the Secured Creditors (as hereinafter
defined), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and the other Credit
Documents including, without limitation, this Mortgage and the due
performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents including, without limitation, this Mortgage;
(ii) any and all sums advanced by the Trustee in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest
in the Collateral; (iii) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or
liabilities of the Borrower referred to in clause (i) above, after an
Event of Default shall have occurred and be continuing, the reasonable
expenses of the Trustee of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Trustee of its rights hereunder,
together with reasonable attorneys' fees of counsel to the Trustee and
court costs; and (iv) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Clause 13 of this
Mortgage (all such obligations, liabilities, sums and expenses
referred to in clauses (i) through (iv) above being collectively
referred to as the "Obligations"). It is acknowledged and agreed that
the "Obligations" shall include extensions of credit of the types
described above, whether outstanding on the date of this Mortgage or
extended from time to time after the date of this Mortgage.
(G) This First Preferred Mortgage is entered into by the Owner in
consideration of the Banks entering into the Amendment and agreeing to
make the Facility available to the Borrower and as a condition thereto
and for other good and valuable consideration provided by the Banks
(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:
"Agent" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Amendment" means the Amendment dated as of July 9, 1996 among
Holdings, the Borrower, the Banks, the Co-Agent, the Agent first
referred to in Recital (C) hereto;
"Bank" means any lender listed from time to time on Annex 1 to the
Credit Agreement (collectively, the "Banks");
"Collateral Assignment of Insurance" means the Collateral Assignment
of Insurance in respect of the Rig executed or to be executed by the
Owner in favor of the Agent;
"Commitment" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of April 30,
1996, among Holdings, the Borrower, the Banks, the Co-Agent, and the
Agent as amended by the Amendment first referred to in Recital (B)
hereto and as further amended, restated or supplemented from time to
time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings together with interest, fees and all other obligations are
paid in full;
"Credit Party" shall have the same meaning for such term as set forth
in the Credit Agreement;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.07(b) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of business of such entity and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act of
1976 (42 U.S.C. 6901 et seq.), the Clean Air Act (42 U.S.C. 7401
et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et
seq.) and the Toxic Substances Control Act (15 U.S.C. 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);
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Section 1.08 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01 of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Borrower referred to in
Recital (D) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (F) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
semi-submersible drilling rig JACK BATES owned by the Borrower
documented under the laws and flag of the United States of America
with Official Number 906283 of 19,928 gross registered tons and
14,948 net registered tons; (ii) the jack-up drilling rig D.R. STEWART
owned by Reading & Bates Exploration Co. ("R&B Exploration")
documented under the laws and flag of the United States of America
with Official Number 626904 of 6,494 gross registered tons and 5,834
net registered tons; (iii) the drilling tender W.D. KENT owned by R&B
Exploration documented under the laws and flag of the United States of
America with Official Number 583169 of 5,383 gross registered tons and
4,185 net registered tons; (iv) the drilling tender CHARLEY GRAVES
owned by Reading and Bates Borneo Drilling Co., Ltd. documented under
the laws and flag of the Republic of Panama with Patente Number 6618-
76-CH of 5,829 gross registered tons and 1,748 net registered tons;
(v) the jack-up drilling rig RON TAPPMEYER owned by Reading & Bates
(A) Pty Ltd. documented under the laws and flag of Australia with
Official Number 855213 of 11,455 gross registered tons and 3,436 net
registered tons; (vi) the semi-submersible drilling rig J.W. McLEAN
owned by the Borrower documented under the laws and flag of the
Republic of Panama with Patente Number 25384-PEXT of 15,453 gross
registered tons and 4,636 net registered tons, (vii) the semi-
submersible drilling rig RIG 41 owned by RB Drilling Co. ("RB")
documented under the laws and flag of the Republic of Panama with
Patente Number 22365-95 of 10,078 gross registered tons and 3,024 net
registered tons; and (viii) the Panamanian flag rig SEILLEAN to be
acquired by RB as contemplated by the Amendment;
"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 written request of the Agent,
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 written request of the Agent,
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 Banks; and provided that Permitted Liens shall not
include any liens described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Agent under and as defined in the Credit
Agreement;
"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;
"Subsidiary Guaranty" means the Guaranty in favor of the Agent and the
Banks, dated as of April 30, 1996, as amended, restated or
supplemented from time to time, to which the Owner has become a
signatory as first referred to in Recital (E) hereto;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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) the Owner is in compliance with all applicable Environmental
Laws relating to the Rig, its operation and management;
(k) the Owner has obtained all Environmental Approvals and is in
compliance with all requests thereof;
(l) no Environmental Claim has been made or threatened against the
Owner, the Approved Manager or otherwise in connection with the
Rig; and
(m) 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 Loan and at the time of the
issuance of each 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 Obligations the Owner has granted, conveyed and
mortgaged and does by these presents grant, convey and mortgage unto
the Trustee, its successors and assigns, the whole of the Rig TO HAVE
AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Credit Agreement, the
Subsidiary Guaranty and this Mortgage and the Owner and its successors
and assigns shall observe and comply with the covenants, terms and
conditions contained in the Subsidiary Guaranty and this Mortgage
expressed or implied to be performed, 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
Trustee agrees 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 any
Secured Creditor for payment by the Owner of the relevant
expense, claim, liability, loss, cost, duty, fee, charge or
other money incurred by a Secured Creditor 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 a Secured Creditor under this Mortgage and the
Subsidiary Guaranty 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
Trustee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Trustee shall not have to wait for the Agent 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 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 Trustee
may deem expedient; and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Secured Creditors or any other person:
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, the
Subsidiary Guaranty, any of the other Credit Documents (other
than this Mortgage) or any other document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Credit Parties or any other person
under the Credit Agreement, the Subsidiary Guaranty, any of the
other Security Documents (other than this Mortgage) or any other
document or security.
6. INSURANCE
6.01 The Owner covenants with the Trustee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains 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 Rigs,
such aggregate amount shall be at least 110% of the Total
Commitment. 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 American, British and
Scandinavian 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 in respect of the
Other Rigs, shall be in an amount equal to at least 110% of the
aggregate amount of the Total Commitment (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 any Obligations remain
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 Banks 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 Trustee shall
be named as co-assureds on all such policies and insurance
contracts, but without liability of the Agent or the 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 Secured Creditors 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 provided in Clause 10.
(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 in which the Rig from time to time is engaged.
(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 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 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 Self-Elevating Drilling Unit) 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
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
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 Trustee and the Agent copies of all survey reports
issued in respect thereof;
(g) permit the representatives of the Agent or independent surveyors
representing the 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 expenses
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 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 request of the Trustee in writing, copies
of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(k) notify both the 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 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
Trustee; and
(vi) any intended deactivation or lay-up of the Rig (other
than for normal periods of inactivity between contracts
for the Rig during which periods the Rig remains manned)
and obtain the prior written consent of the Trustee;
(l) keep proper books of account in respect of the Rig and as and
when the Trustee or the Agent may so reasonably require make
such books available for inspection on behalf of the 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) observe the obligations contained in Sections 7 and 8 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;
(n) not without the previous consent in writing of the 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 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 Trustee from time to time
such proof as the 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 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
Trustee for the Banks 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 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
Trustee advised, in writing on such regular basis and in
such detail as the Trustee shall require, of the Owner's
response to such Environmental Claim or Environmental
Incident;
(s) not sell, mortgage or transfer the Rig (other than as permitted
by the Restated Credit Agreement) without the written consent of
the Trustee having first been obtained, and any such written
consent to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Trustee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of 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 Trustee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit 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 Credit 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 Secured Creditors 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) or 7.01(f) or the Trustee shall be entitled (but not
bound) to arrange for the carrying out of such repairs to 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) the 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 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 Banks having served on
the Owner any such notice as is referred to in Section 9 of the Credit
Agreement) the security constituted by this Mortgage shall become
immediately enforceable and the 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 Trustee
without legal process and without liability of the 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
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 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 Obligations;
(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 Trustee in its absolute discretion
deems expedient and for the purposes aforesaid the 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 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 Trustee in or about the
exercise of the power vested in the 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 Trustee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The 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 Trustee by this Mortgage or to which the Trustee may
at any time be entitled hereunder.
9.03 Neither the Secured Creditors, 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 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 Trustee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Trustee has arisen in the manner provided in this Mortgage
and the sale shall be deemed to be within the power of the Trustee and
the receipt of the 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 (a) All moneys received by the Trustee (or any other Secured
Creditor, as the case may be) in respect of sale of the Rig or
any part thereof, in respect of recovery under the Insurances or
in respect of Requisition Compensation, shall be applied in the
following manner:
(i) first, to the payment of all amounts owing the Trustee of
the type described in clauses (ii) and (iii) of Recital
(F);
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to
the outstanding Obligations shall be paid to the Secured
Creditors as provided in Clause 10.01(c), with each
Secured Creditor receiving an amount equal to such
Obligations held by it or, if the proceeds are
insufficient to pay in full all such Obligations, its Pro
Rata Share (as defined below) of the amount remaining to
be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and
following the termination of this Mortgage pursuant to
Clause 3.01, any surplus then remaining shall be paid to
the Owner, subject, however, to the rights of the holder
of any then existing Lien of which the Trustee has actual
notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Trustee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Agent under the Credit Agreement for the
account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Trustee shall be entitled to reply upon
(i) the Agent under the Credit Agreement and (ii) the Secured
Creditors for a determination (which the Agent and each Secured
Creditor, by their acceptance of the benefits of this Mortgage
shall be obligated to provide upon request of the Trustee) of
the outstanding Obligations owed to the Secured Creditors.
Unless it has actual knowledge (including by way of written
notice from a Secured Creditor) to the contrary, the Agent under
the Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Trustee, in acting hereunder, shall
be entitled to assume that (x) no obligations other than
principal, interest and regularly accruing fees are owing to any
Secured Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the 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 Trustee and
the other Secured Creditors 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 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
Trustee under this Mortgage,
in any such case, forthwith upon demand by the 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 Obligations, hereby irrevocably appoints the
Trustee as its attorney until the Total Commitment is terminated and
none of the Obligations remain outstanding 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 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 Trustee shall not put any person dealing with the
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 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 each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the Trustee
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and each of the Secured Creditors 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 such Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 the Subsidiary Guaranty or 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 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 Trustee against the amount of such shortfall. For
the purposes of this Clause 13.03, "rate of exchange" means the rate
at which the Trustee is able on the date of such payment (or, if it is
not practicable for the 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 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 any Secured Creditor on demand all costs, fees
and expenses, including, but not limited to, legal fees and expenses
and valuation fees and Taxes thereon incurred by any Secured Creditor
or for which any Secured Creditor may become liable in connection
with:
(a) the negotiation, preparation and execution of the Credit
Agreement, the Subsidiary Guaranty and the Credit 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, the
Subsidiary Guaranty or the Credit Documents (or any of them).
14.02 The Owner shall pay to the 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 any Secured Creditor in
connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement, the Subsidiary Guaranty or the
Credit Documents (or any of them) requested by the Owner,
necessary or advisable under applicable law or relating to the
syndication of the Facility, or initiated during the occurrence
and continuation of an Event of Default; and/or
(b) any consent or waiver required from the Trustee in relation to
the Credit Agreement, the Subsidiary Guaranty and the Credit
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, the Subsidiary
Guaranty and the Credit Documents (or any of them) may be subject or
give rise and shall indemnify the 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 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 provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit of
the Owner, the Secured Creditors 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 Section 12.16 of the Credit Agreement, each Bank 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 Trustee shall notify the Owner promptly following any such
assignment, transfer or change.
17. TOTAL AMOUNT, ETC.
17.01 The total amount of the direct or contingent obligations secured by
this Mortgage is One Hundred Forty Million U.S. Dollars
(US$140,000,000) of principal plus interest, fees, commissions and
performance of mortgage covenants. The interest of the Owner in the
Rig is 100%. The interest of the Trustee in the Rig is 100%. The
date of maturity is April 30, 2001, and the discharge amount is the
same as the total amount plus such other sums as shall be payable by
the Owner to the Banks under the Credit Agreement or the Subsidiary
Guaranty.
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 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 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 Trustee may think fit. The 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 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 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the 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 Trustee may bring before the courts of such jurisdiction or
other judicial authority and for the purpose of any action which the
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 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.
HRB RIG CORPORATION
By_____________________________________
Its:
ACKNOWLEDGEMENT OF MORTGAGE
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 9th day of July, 1996 before me personally appeared ____________ to me
known who being by me duly sworn did dispose and say that he resides at
________________________________, that he is ____________________________ for
HRB RIG CORPORATION, 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 HRB RIG CORPORATION.
________________________
Notary Public
Exhibit 10.105
AMENDMENT NO. 1
TO
INDENTURE OF FIRST NAVAL MORTGAGE
READING AND BATES BORNEO DRILLING CO. LTD.
and
CHRISTIANIA BANK OG KREDITKASSE, agent
as Mortgagee
CHARLEY GRAVES
Dated July 9, 1996
==============================================================================
AMENDMENT NO. 1 TO INDENTURE OF FIRST NAVAL MORTGAGE
THIS AMENDMENT NO. 1 TO INDENTURE OF FIRST NAVAL MORTGAGE ("Amendment
No. 1") is made on July 9, 1996, between READING AND BATES BORNEO DRILLING
CO., LTD., an Oklahoma corporation with its principal office at 901
Threadneedle, Suite 200, Houston, Texas 77079 (the "Owner"), and CHRISTIANIA
BANK OG KREDITKASSE NEW YORK BRANCH having an office at 11 West 42nd Street,
New York, New York 10036 as agent for the Banks (the "Mortgagee").
WHEREAS:
(A) The Shipowner is the sole owner of the whole of offshore drilling rig
CHARLEY GRAVES Patente No. 6618-76-CH, registered in the name of the
Shipowner under the laws and flag of the Republic of Panama (the "Rig");
(B) By a Credit Agreement dated as of April 30, 1996 (as amended, restated
or supplemented from time to time, the "Credit Agreement") among Reading
& Bates Corporation, a Delaware corporation ("Holdings"), Reading &
Bates Drilling Co., an Oklahoma corporation (the "Borrower"), the banks
party thereto (the "Banks"), Credit Lyonnais New York Branch, as co-
agent (the "Co-Agent"), and Christiania Bank og Kreditkasse, New York
Branch, as agent (the "Agent"), it was agreed, among other things, that
the Banks would make available to the Borrower upon the terms and
conditions therein described a reducing revolving credit facility (the
"Facility") in an aggregate amount at any time outstanding of One
Hundred Million United States Dollars (US$100,000,000), providing for
the making of Loans and the issuance of, and participation in, Letters
of Credit as contemplated therein.
(C) To secure the obligations of the Borrower with respect to the Facility
and its obligations under the Credit Agreement, the Owner has
authorized, executed and delivered a Subsidiary Guaranty (as amended,
restated or supplemented from time to time, the "Subsidiary Guaranty")
dated April 30, 1996 in favor of the Agent and the Banks and to secure
the obligations of the Owner under the Subsidiary Guaranty, the Owner
has executed and delivered to the Mortgagee an indenture of first naval
mortgage dated April 30, 1996 with respect to the Rig (the "Mortgage").
The form of the Credit Agreement and the form of the Subsidiary Guaranty
are attached to the Mortgage as Exhibits 1 and 2, respectively. The
mortgage was protocolized by Public Deed No. 3124, dated May 6, 1996 of
the First Notary Public of the Circuit of Panama, duly recorded in the
Public Registry of Panama at the Microfilm Section (Mercantile)
Microjacket N-12808, Roll 50020, Frame 0002 as of June 11, 1996.
(D) By an Amendment to the Credit Agreement dated as of July 9, 1996 (the
"Amendment") (the form of which Amendment without attachments is
attached hereto as Exhibit 1) among Holdings, the Borrower, the Banks,
the Co-Agent and the Agent, it was agreed among other things that the
Banks would increase the amount available to the Borrower under the
Facility to an aggregate amount at any time outstanding of One Hundred
Forty Million United States Dollars (US$140,000,000) subject to semi-
annual reductions as set forth therein.
(E) In order to secure its obligations with respect to the Secured
Indebtedness under the Subsidiary Guaranty and the performance and
observance of and compliance with all of the covenants, terms and
conditions contained in the Mortgage, as amended hereby, and to induce
the Banks to enter into the Amendment and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged by the Owner, the Owner has duly authorized the execution
and delivery of this Amendment to the Indenture of First Naval Mortgage
under and in accordance with the provisions of Chapter V, Title IV of
Book Second of the Code of Commerce and pertinent provisions of the
Civil Code and other legislations of the Republic of Panama.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt whereof is hereby acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS AND INTERPRETATION
1.01 Terms defined in the Mortgage shall have the same meaning as used
herein.
1.02 The terms "Credit Agreement" and "Subsidiary Guaranty" as defined
in Clause 2.01 of the Mortgage and as used in the Mortgage shall be deemed to
refer to the Credit Agreement as amended by the Amendment and as further
amended, restated or supplemented from time to time, and the Subsidiary
Guaranty as amended, restated or supplemented from time to time.
1.03 The term "Other Rigs" shall be amended to refer to the J.W. McLEAN
as registered under the laws of the Republic of Panama of 15,453 gross
registered tons and 4,636 net registered tons, and shall also include (i) the
offshore drilling rig HARVEY H. WARD owned by HRB Rig Corporation documented
under the laws and flag of the United States of America with Official Number
642693 of 4,121 gross tons and 3,079 net registered tons, (ii) the offshore
drilling rig Rig 41 owned by the RB Drilling Co. documented under the laws of
the Republic of Panama with Patente Number 22365-95 of 10,078 gross tons and
3,024 net registered tons and (iii) the offshore drilling rig SEILLEAN to be
acquired by RB as contemplated by the Amendment.
1.04 Each reference in the Mortgage to "this Mortgage", "hereunder",
"hereof", "herein" or words of like import shall mean and refer to the
Mortgage as amended hereby.
2. Power of Attorney.
2.01 The appearing parties each confer a special power of attorney on
Benedetti & Benedetti, lawyers of Panama, Republic of Panama and any partners
in the firm authorizing such firm or any such partner to take all necessary
steps to record this Amendment No. 1 in the appropriate registries of the City
of Panama and to appoint any substitute under this Power of Attorney.
3. Continuing Effect.
3.01 Except as expressly amended by this Amendment No. 1, the Mortgage
shall be and remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be
duly executed on the day and year first above written.
READING AND BATES BORNEO DRILLING CO. LTD.
By_____________________________
Name:
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH
By_____________________________
Name:
Title:
By_____________________________
Name:
Title:
NOTARIAL CERTIFICATE
I, the undersigned, NOTARY PUBLIC, duly authorized, admitted and sworn,
residing and practicing in the State of New York, DO HEREBY CERTIFY that:
1. _______________ as Attorney-in-Fact of READING AND BATES BORNEO DRILLING
CO. LTD., INC. did sign the attached Amendment No. 1 to the Indenture of
First Naval Mortgage in my presence and the signature appearing at the
foot of said Amendment No.1 to the Indenture of First Naval Mortgage is
his/her authentic signature.
2. Sufficient proof has been presented to me that he/she has the right and
power to execute said Amendment No. 1 to the Indenture of First Naval
Mortgage on behalf of the above-mentioned corporation, as "Shipowner".
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my seal
of office this ____ day of July, 1996.
__________________________________
Notary Public
NOTARIAL CERTIFICATE
I, the undersigned, NOTARY PUBLIC, duly authorized, admitted and sworn,
residing and practicing in the State of New York, DO HEREBY CERTIFY that:
1. ____________________ as Vice President of CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH did sign the attached Amendment No. 1 to
the Indenture of First Naval Mortgage in my presence and the signature
appearing at the foot of said Amendment No. 1 to the Indenture of First
Naval Mortgage is his/her authentic signature.
2. Sufficient proof has been presented to me that he/she has the right and
power to execute said Amendment No. 1 to the Indenture of First Naval
Mortgage on behalf of the above-mentioned corporation, as "Mortgagee".
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my seal
of office this ____ day of July, 1996.
__________________________________
Notary Public
NOTARIAL CERTIFICATE
I, the undersigned, NOTARY PUBLIC, duly authorized, admitted and sworn,
residing and practicing in the State of New York, DO HEREBY CERTIFY that:
1. ____________________ as Vice President of CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH did sign the attached Amendment No. 1 to
the Indenture of First Naval Mortgage in my presence and the signature
appearing at the foot of said Amendment No. 1 to the Indenture of First
Naval Mortgage is his/her authentic signature.
2. Sufficient proof has been presented to me that he/she has the right and
power to execute said Amendment No. 1 to the Indenture of First Naval
Mortgage on behalf of the above-mentioned corporation, as "Mortgagee".
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my seal
of office this ____ day of July, 1996.
__________________________________
Notary Public
Exhibit 10.106
AMENDMENT
TO
FIRST PREFERRED MORTGAGE
Dated July 9, 1996
READING & BATES DRILLING CO.
in favor of
WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee
JACK BATES
AMENDMENT to FIRST PREFERRED MORTGAGE made and given this 9th day of
July, 1996 between READING & BATES DRILLING CO. (herein called the "Owner"),
an Oklahoma corporation with offices at 901 Threadneedle, Suite 200, Houston,
Texas 77079, and WILMINGTON TRUST COMPANY, a Delaware banking corporation, not
in its individual capacity but solely as indenture trustee for the Banks and
as mortgagee (the "Trustee") with offices at Rodney Square North, Wilmington,
Delaware 19890-0001.
WHEREAS:
(A) The Owner is the sole owner of the whole of the offshore drilling unit
JACK BATES documented under the laws and flag of the United States of
America with Official Number 906283 of 19,928 gross registered tons and
14,948 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of April 30, 1996 (as amended, restated
or supplemented from time to time, the "Credit Agreement") among Reading
& Bates Corporation, a Delaware corporation ("Holdings"), the Owner as
borrower, the banks party thereto (the "Banks"), Credit Lyonnais New
York Branch, as co-agent (the "Co-Agent"), and Christiania Bank og
Kreditkasse, New York Branch, as agent (the "Agent"), it was agreed,
among other things, that the Banks would make available to the Owner
upon the terms and conditions therein described a reducing revolving
credit facility (the "Facility") in an aggregate amount at any time
outstanding of One Hundred Million United States Dollars
(US$100,000,000), providing for the making of Loans and the issuance of,
and participation in, Letters of Credit as contemplated therein.
(C) To secure the obligations of the Owner with respect to the Facility and
its obligations under the Credit Agreement, the Owner has executed and
delivered to the Trustee a first preferred mortgage dated April 30, 1996
with respect to the Rig (the "Mortgage") which was recorded at the
National Vessel Documentation Center on April 30, 1996 in Book 96-21 at
Page 91. The form of the Credit Agreement is attached to the Mortgage
as Exhibit 1.
(D) By an Amendment to the Credit Agreement dated as of July 9, 1996 (the
"Amendment"), the form of which Amendment without attachments is
attached hereto as Exhibit 1 among Holdings, the Owner, the Banks, the
Co-Agent and the Agent, it was agreed among other things that the Banks
would increase the amount available to the Owner under the Facility to
an aggregate amount at any time outstanding of One Hundred Forty Million
United States Dollars (US$140,000,000) subject to semi-annual reductions
as set forth therein.
(E) In order to secure its obligations with respect to the Secured
Indebtedness under the Credit Agreement and the performance and
observance of and compliance with all of the covenants, terms and
conditions contained in the Mortgage, as amended hereby, and to induce
the Banks to enter into the Amendment and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged by the Owner, the Owner has duly authorized the execution
and delivery of this Amendment to the Mortgage under and pursuant to the
United States Ship Mortgage Act, 1920, as amended, recodified at 46
U.S.C. 31301 et seq.
NOW THIS AMENDMENT WITNESSETH AND IT IS HEREBY AGREED:
1. DEFINITIONS AND INTERPRETATION
1.01 Terms defined in the Mortgage shall have the same meaning as used
herein.
1.02 The terms "Credit Agreement" as defined in Clause 1.01 of the
Mortgage and as used in the Mortgage shall be deemed to refer to the Credit
Agreement as amended by the Amendment and as further amended, restated or
supplemented from time to time.
1.03 The term "Other Rigs" shall be amended to refer to the J.W. McLEAN
as registered under the laws of the Republic of Panama of 15,453 gross
registered tons and 4,636 net registered tons, and shall also include (i) the
jack-up drilling rig HARVEY H. WARD owned by HRB Rig Corporation documented
under the laws and flag of the United States of America with Official Number
642693 of 4,121 gross tons and 3,079 net registered tons, (ii) the offshore
drilling rig Rig 41 owned by the RB Drilling Co. documented under the laws of
the Republic of Panama with Patente Number 22365-95 of 10,078 gross tons and
3,024 net registered tons and (iii) the offshore drilling rig SEILLEAN to be
acquired by the RB as contemplated by the Amendment.
2. CONFIRMATION OF MORTGAGE
2.01 To secure the obligations of the Owner under the Credit Agreement,
the Owner confirms and ratifies the granting of a mortgage on and a security
interest in the Rig pursuant to the Clause 3.01 of the Mortgage.
3. RECORDING
3.01 For the purpose of recording this Amendment, the total amount of
the Mortgage is increased to U.S.$140,000,000 (One Hundred Forty Million U.S.
Dollars) of principal, plus interest, fees, commission and performance of
mortgage covenants. The interest of the Owner in the Rig is 100%. The
interest of the Trustee in the Rig is 100%. The discharge amount remains the
same as the total amount plus such other sums as shall be payable by the Owner
to the Banks under the Credit Agreement.
4. RATIFICATION
4.01 Except as expressly amended hereby, the Mortgage remains in full
force and effect.
IN WITNESS WHEREOF, the Owner and the Mortgagee have executed this
Amendment on the date written below, to be effective as of the date first
written above.
READING & BATES DRILLING CO.
By:_______________________
Date:_______________
WILMINGTON TRUST COMPANY, as Indenture Trustee
By:________________________
Date:_______________
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 9th day of July, 1996 before me personally appeared
_________________ to me known who being by me duly sworn did dispose 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 said corporation.
___________________________
Notary Public
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 9th day of July, 1996 before me personally appeared
_________________ to me known who being by me duly sworn did dispose and say
that he resides at ____________________________, that he is __________ of
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 said corporation.
___________________________
Notary Public
Exhibit 10.107
AMENDMENT
TO
FIRST PREFERRED MORTGAGE
Dated July 9, 1996
READING & BATES EXPLORATION CO.
in favor of
WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee
D. R. STEWART
AMENDMENT to FIRST PREFERRED MORTGAGE made and given this 9th day of
July, 1996 between READING & BATES EXPLORATION CO. (herein called the
"Owner"), with offices at 901 Threadneedle, Suite 200, Houston, Texas 77079,
and WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its
individual capacity but solely as indenture trustee for the Banks and as
mortgagee (the "Trustee") with offices at Rodney Square North, Wilmington,
Delaware 19890-0001.
WHEREAS:
(A) The Owner is the sole owner of the whole of the offshore drilling unit
D.R. STEWART documented under the laws and flag of the United States of
America with Official Number 626904 of 6,494 gross registered tons and
5,834 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of April 30, 1996 (as amended, restated
or supplemented from time to time, the "Credit Agreement") among Reading
& Bates Corporation, a Delaware corporation ("Holdings"), Reading &
Bates Drilling Co., an Oklahoma corporation (the "Borrower"), the banks
party thereto (the "Banks"), Credit Lyonnais New York Branch, as co-
agent (the "Co-Agent"), and Christiania Bank og Kreditkasse, New York
Branch, as agent (the "Agent"), it was agreed, among other things, that
the Banks would make available to the Borrower upon the terms and
conditions therein described a reducing revolving credit facility (the
"Facility") in an aggregate amount at any time outstanding of One
Hundred Million United States Dollars (US$100,000,000), providing for
the making of Loans and the issuance of, and participation in, Letters
of Credit as contemplated therein.
(C) To secure the obligations of the Borrower with respect to the Facility
and its obligations under the Credit Agreement, the Owner has
authorized, executed and delivered a Subsidiary Guaranty (as amended,
restated or supplemented from time to time, the "Subsidiary Guaranty")
dated April 30, 1996 in favor of the Agent and the Banks and to secure
the obligations of the Owner under the Subsidiary Guaranty, the Owner
has executed and delivered to the Trustee a first preferred mortgage
dated April 30, 1996 with respect to the Rig (the "Mortgage") which was
recorded at the National Vessel Documentation Center on April 30, 1996
in Book 96-21 at Page 89. The form of the Credit Agreement and the form
of the Subsidiary Guaranty are attached to the Mortgage as Exhibits 1
and 2, respectively.
(D) By an Amendment to the Credit Agreement dated as of July 9, 1996 (the
"Amendment"), the form of which Amendment without attachments is
attached hereto as Exhibit 1 among Holdings, the Borrower, the Banks,
the Co-Agent and the Agent, it was agreed among other things that the
Banks would increase the amount available to the Borrower under the
Facility to an aggregate amount at any time outstanding of One Hundred
Forty Million United States Dollars (US$140,000,000) subject to semi-
annual reductions as set forth therein.
(E) In order to secure its obligations with respect to the Secured
Indebtedness under the Subsidiary Guaranty and the performance and
observance of and compliance with all of the covenants, terms and
conditions contained in the Mortgage, as amended hereby, and to induce
the Banks to enter into the Amendment and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged by the Owner, the Owner has duly authorized the execution
and delivery of this Amendment to the Mortgage under and pursuant to the
United States Ship Mortgage Act, 1920, as amended, recodified at 46
U.S.C. 31301 et seq.
NOW THIS AMENDMENT WITNESSETH AND IT IS HEREBY AGREED:
1. DEFINITIONS AND INTERPRETATION
1.01 Terms defined in the Mortgage shall have the same meaning as used
herein.
1.02 The terms "Credit Agreement" and "Subsidiary Guaranty" as defined
in Clause 1.01 of the Mortgage and as used in the Mortgage shall be deemed to
refer to the Credit Agreement as amended by the Amendment and as further
amended, restated or supplemented from time to time, and the Subsidiary
Guaranty as amended, restated or supplemented from time to time.
1.03 The term "Other Rigs" shall be amended to refer to the J.W. McLEAN
as registered under the laws of the Republic of Panama of 15,453 gross
registered tons and 4,636 net registered tons, and shall also include (i) the
jack-up drilling rig HARVEY H. WARD owned by HRB Rig Corporation documented
under the laws and flag of the United States of America with Official Number
642693 of 4,121 gross tons and 3,079 net registered tons, (ii) the offshore
drilling rig Rig 41 owned by the RB Drilling Co. documented under the laws of
the Republic of Panama with Patente Number 22365-95 of 10,078 gross tons and
3,024 net registered tons and (iii) the offshore drilling rig SEILLEAN to be
acquired by the RB as contemplated by the Amendment.
2. CONFIRMATION OF MORTGAGE
2.01 To secure the obligations of the Owner under the Subsidiary
Guaranty, the Owner confirms and ratifies the granting of a mortgage on and a
security interest in the Rig pursuant to the Clause 3.01 of the Mortgage.
3. RECORDING
3.01 For the purpose of recording this Amendment, the total amount of
the Mortgage is increased to U.S.$140,000,000 (One Hundred Forty Million U.S.
Dollars) of principal, plus interest, fees, commission and performance of
mortgage covenants. The interest of the Owner in the Rig is 100%. The
interest of the Trustee in the Rig is 100%. The discharge amount remains the
same as the total amount plus such other sums as shall be payable by the Owner
to the Banks under the Credit Agreement or the Subsidiary Guaranty.
4. RATIFICATION
4.01 Except as expressly amended hereby, the Mortgage remains in full
force and effect.
IN WITNESS WHEREOF, the Owner and the Mortgagee have executed this
Amendment on the date written below, to be effective as of the date first
written above.
READING & BATES EXPLORATION CO.
By:_______________________
Date:_______________
WILMINGTON TRUST COMPANY, as Indenture Trustee
By:________________________
Date:_______________
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 9th day of July, 1996 before me personally appeared
_________________ to me known who being by me duly sworn did dispose 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 said corporation.
___________________________
Notary Public
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 9th day of July, 1996 before me personally appeared
_________________ to me known who being by me duly sworn did dispose and say
that he resides at ____________________________, that he is __________ of
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 said corporation.
___________________________
Notary Public
Exhibit 10.108
AMENDMENT
TO
FIRST PREFERRED MORTGAGE
Dated July 9, 1996
READING & BATES EXPLORATION CO.
in favor of
WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee
W. D. KENT
AMENDMENT to FIRST PREFERRED MORTGAGE made and given this 9th day of
July, 1996 between READING & BATES EXPLORATION CO. (herein called the
"Owner"), with offices at 901 Threadneedle, Suite 200, Houston, Texas 77079,
and WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its
individual capacity but solely as indenture trustee for the Banks and as
mortgagee (the "Trustee") with offices at Rodney Square North, Wilmington,
Delaware 19890-0001.
WHEREAS:
(A) The Owner is the sole owner of the whole of the offshore drilling unit
W. D. KENT documented under the laws and flag of the United States of
America with Official Number 583169 of 5,383 gross registered tons and
4,185 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of April 30, 1996 (as amended, restated
or supplemented from time to time, the "Credit Agreement") among Reading
& Bates Corporation, a Delaware corporation ("Holdings"), Reading &
Bates Drilling Co., an Oklahoma corporation (the "Borrower"), the banks
party thereto (the "Banks"), Credit Lyonnais New York Branch, as co-
agent (the "Co-Agent"), and Christiania Bank og Kreditkasse, New York
Branch, as agent (the "Agent"), it was agreed, among other things, that
the Banks would make available to the Borrower upon the terms and
conditions therein described a reducing revolving credit facility (the
"Facility") in an aggregate amount at any time outstanding of One
Hundred Million United States Dollars (US$100,000,000), providing for
the making of Loans and the issuance of, and participation in, Letters
of Credit as contemplated therein.
(C) To secure the obligations of the Borrower with respect to the Facility
and its obligations under the Credit Agreement, the Owner has
authorized, executed and delivered a Subsidiary Guaranty (as amended,
restated or supplemented from time to time, the "Subsidiary Guaranty")
dated April 30, 1996 in favor of the Agent and the Banks and to secure
the obligations of the Owner under the Subsidiary Guaranty, the Owner
has executed and delivered to the Trustee a first preferred mortgage
dated April 30, 1996 with respect to the Rig (the "Mortgage") which was
recorded at the National Vessel Documentation Center on April 30, 1996
in Book 96-21 at Page 87. The form of the Credit Agreement and the form
of the Subsidiary Guaranty are attached to the Mortgage as Exhibits 1
and 2, respectively.
(D) By an Amendment to the Credit Agreement dated as of July 9, 1996 (the
"Amendment"), the form of which Amendment without attachments is
attached hereto as Exhibit 1 among Holdings, the Borrower, the Banks,
the Co-Agent and the Agent, it was agreed among other things that the
Banks would increase the amount available to the Borrower under the
Facility to an aggregate amount at any time outstanding of One Hundred
Forty Million United States Dollars (US$140,000,000) subject to semi-
annual reductions as set forth therein.
(E) In order to secure its obligations with respect to the Secured
Indebtedness under the Subsidiary Guaranty and the performance and
observance of and compliance with all of the covenants, terms and
conditions contained in the Mortgage, as amended hereby, and to induce
the Banks to enter into the Amendment and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged by the Owner, the Owner has duly authorized the execution
and delivery of this Amendment to the Mortgage under and pursuant to the
United States Ship Mortgage Act, 1920, as amended, recodified at 46
U.S.C. 31301 et seq.
NOW THIS AMENDMENT WITNESSETH AND IT IS HEREBY AGREED:
1. DEFINITIONS AND INTERPRETATION
1.01 Terms defined in the Mortgage shall have the same meaning as used
herein.
1.02 The terms "Credit Agreement" and "Subsidiary Guaranty" as defined
in Clause 1.01 of the Mortgage and as used in the Mortgage shall be deemed to
refer to the Credit Agreement as amended by the Amendment and as further
amended, restated or supplemented from time to time, and the Subsidiary
Guaranty as amended, restated or supplemented from time to time.
1.03 The term "Other Rigs" shall be amended to refer to the J.W. McLEAN
as registered under the laws of the Republic of Panama of 15,453 gross
registered tons and 4,636 net registered tons, and shall also include (i) the
jack-up drilling rig HARVEY H. WARD owned by HRB Rig Corporation documented
under the laws and flag of the United States of America with Official Number
642693 of 4,121 gross tons and 3,079 net registered tons, (ii) the offshore
drilling rig Rig 41 owned by the RB Drilling Co. documented under the laws of
the Republic of Panama with Patente Number 22365-95 of 10,078 gross tons and
3,024 net registered tons and (iii) the offshore drilling rig SEILLEAN to be
acquired by the RB as contemplated by the Amendment.
2. CONFIRMATION OF MORTGAGE
2.01 To secure the obligations of the Owner under the Subsidiary
Guaranty, the Owner confirms and ratifies the granting of a mortgage on and a
security interest in the Rig pursuant to the Clause 3.01 of the Mortgage.
3. RECORDING
3.01 For the purpose of recording this Amendment, the total amount of
the Mortgage is increased to U.S.$140,000,000 (One Hundred Forty Million U.S.
Dollars) of principal, plus interest, fees, commission and performance of
mortgage covenants. The interest of the Owner in the Rig is 100%. The
interest of the Trustee in the Rig is 100%. The discharge amount remains the
same as the total amount plus such other sums as shall be payable by the Owner
to the Banks under the Credit Agreement or the Subsidiary Guaranty.
4. RATIFICATION
4.01 Except as expressly amended hereby, the Mortgage remains in full
force and effect.
IN WITNESS WHEREOF, the Owner and the Mortgagee have executed this
Amendment on the date written below, to be effective as of the date first
written above.
READING & BATES EXPLORATION CO.
By:_______________________
Date:_______________
WILMINGTON TRUST COMPANY, as Indenture Trustee
By:________________________
Date:_______________
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 9th day of July, 1996 before me personally appeared
_________________ to me known who being by me duly sworn did dispose 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 said corporation.
___________________________
Notary Public
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 9th day of July, 1996 before me personally appeared
_________________ to me known who being by me duly sworn did dispose and say
that he resides at ____________________________, that he is __________ of
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 said corporation.
___________________________
Notary Public
Exhibit 10.109
COLLATERAL ASSIGNMENT OF INSURANCE
HRB RIG CORPORATION, an Oklahoma corporation (hereinafter called the
"Assignor"), the owner of the United States registered offshore drilling rig
HARVEY H. WARD (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
Wilmington Trust Company, not in its individual capacity but as Trustee for
the Banks (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 full and prompt payment when due (whether at
the stated maturity, by acceleration or otherwise) of all obligations and
liabilities of the Assignor, now existing or hereafter incurred, under,
arising out of or in connection with any Credit Document (as that term is
defined in the Credit Agreement, as defined below) to which it is a party and
the due performance and compliance by the Assignor with the terms of each such
Credit Document, all right, title and interest of the Assignor under, in and
to the following (all of the following, collectively, the "Insurance
Collateral"): (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 First Amendment, dated July 9,
1996, to the Credit Agreement, dated April 30, 1996 (as the same may be
amended, modified or supplemented from time to time, the "Credit Agreement"),
by and among Reading & Bates Corporation, Reading & Bates Drilling Co., the
Banks (as defined therein) and Christiania Bank og Kreditkasse, New York
Branch, as Agent.
The Assignor hereby constitutes the Assignee and 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; provided, however, that the
Assignee shall not take any action pursuant to the power granted by this
paragraph unless an Event of Default under the Credit Agreement shall have
occurred and be continuing. 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 I 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, such consent 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 additional named assured or loss
payees set forth in Annex I 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 and the Banks as additional
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 to the
Assignee hereunder shall be made by airmail postage prepaid letter, telefax or
by telex, confirmed by letter to:
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
Attn: Corporate Trust Division
Fax No.: (302) 651-8882
With copies to:
Christiania Bank og Kreditkasse,
New York Branch
11 West 42nd Street
New York, New York 10036
Attn: Hans Kjelsrud
Tel No.: (212) 827-4814
Fax No.: (212) 827-4888
Jennifer L. Janss, Esq.
Richard Layton & Finger
P.O. Box 551
Wilmington, Delaware 19899
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 Vessel Trust Indenture, the Mortgages, the
Credit Agreement and the other Credit Documents.
THIS ASSIGNMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. THE ASSIGNOR
HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS ASSIGNMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
None of the terms and conditions of this Assignment may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Assignor and the Assignee (with the consent of either the
Required Banks (as defined in the Credit Agreement) or, to the extent required
by Section 12.12 of the Credit Agreement, all of the Banks).
In the event that the Insurance Collateral or any portion thereof is
sold in connection with a sale permitted by Section 8.02 of the Credit
Agreement or is otherwise released at the direction of the Required Banks (or
all the Banks, to the extent required by Section 12.12 of the Credit
Agreement), the Assignee, at the request and expense of the Assignor, will
duly assign, transfer and deliver to the Assignor (without recourse and with-
out any representation or warranty) such of the Insurance Collateral (and
releases therefor) as is then being (or has been) so sold or released and as
may be in the possession of the Assignee and has not theretofore been released
pursuant to this Assignment. At any time the Assignor desires that the
Insurance Collateral or a portion thereof be released as provided in this
paragraph, the Assignor shall deliver to the Assignee a certificate signed by
an Authorized Officer (as defined in the Credit Agreement) stating that the
release of the Insurance Collateral or portion thereof is permitted pursuant
to this paragraph.
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 9th day of July, 1996.
HRB RIG CORPORATION
By: ________________________
Title:
ANNEX I
to
Assignment of Insurances
NOTICE OF ASSIGNMENT
HRB Rig Corporation (the "Owner"), the owner of the United
States flag offshore drilling rig Harvey H. Ward (the "Rig"), HEREBY
GIVES NOTICE that by a Collateral Assignment of Insurance dated July
9, 1996 and made between the Owner and Wilmington Trust Company, as
Trustee (the "Assignee") for itself and certain other Banks (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 indorsed on all policies and certificates of entry evidencing
such insurance.
HRB RIG CORPORATION
By
Title:
LOSS PAYABLE CLAUSES
Hull and War Risks
Loss, if any, payable to Wilmington Trust Company, as Trustee
for the Banks, for distribution by it to said Banks and to HRB Rig
Corporation, Owner, as their respective interests may appear, or
order, except that, unless Underwriters have been otherwise instructed
by notice in writing from the Trustee, 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 repaired
the damage and paid the cost thereof, or discharged the liability or
paid the salvage or other charges, then the Underwriters may pay the
Owner as reimbursement to the extent the Owner has paid the covered
loss.
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 Trustee, 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 Wilmington Trust Company, as Trustee
for the Banks for distribution by it to the Banks and to HRB Rig
Corporation, 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 Trustee, 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 in respect of any claim in excess of $1,000,000, the
Underwriters shall have first received evidence that the liability
insured against has been discharged.
Exhibit 10.110
COLLATERAL ASSIGNMENT OF INSURANCE
RB DRILLING CO., an Oklahoma corporation (hereinafter called the
"Assignor"), the owner of the Panamanian registered offshore drilling rig Rig
41 (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, New York Branch, not in its individual capacity but as Agent
for the Banks (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 full and prompt payment when due (whether
at the stated maturity, by acceleration or otherwise) of all obligations and
liabilities of the Assignor, now existing or hereafter incurred, under,
arising out of or in connection with any Credit Document (as that term is
defined in the Credit Agreement, as defined below) to which it is a party and
the due performance and compliance by the Assignor with the terms of each such
Credit Document, all right, title and interest of the Assignor under, in and
to the following (all of the following, collectively, the "Insurance
Collateral"): (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 First Amendment, dated July 9,
1996, to the Credit Agreement, dated April 30, 1996 (as the same may be
amended, modified or supplemented from time to time, the "Credit Agreement"),
by and among Reading & Bates Corporation, Reading & Bates Drilling Co., the
Banks (as defined therein) and Christiania Bank og Kreditkasse, New York
Branch, as Agent.
The Assignor hereby constitutes the Assignee and 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; provided, however, that the
Assignee shall not take any action pursuant to the power granted by this
paragraph unless an Event of Default under the Credit Agreement shall have
occurred and be continuing. 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 I 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, such consent 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 additional named assured or loss
payees set forth in Annex I 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 and the Banks as additional
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 to the
Assignee hereunder shall be made by airmail postage prepaid letter, telefax or
by telex, confirmed by letter to:
Christiania Bank og Kreditkasse,
New York Branch
11 West 42nd Street
New York, New York 10036
Attn: Hans Kjelsrud
Tel No.: (212) 827-4814
Fax No.: (212) 827-4888
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 Mortgages, the Credit Agreement and the
other Credit Documents.
THIS ASSIGNMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. THE ASSIGNOR
HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS ASSIGNMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
None of the terms and conditions of this Assignment may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Assignor and the Assignee (with the consent of either the
Required Banks (as defined in the Credit Agreement) or, to the extent required
by Section 12.12 of the Credit Agreement, all of the Banks).
In the event that the Insurance Collateral or any portion thereof is
sold in connection with a sale permitted by Section 8.02 of the Credit
Agreement or is otherwise released at the direction of the Required Banks (or
all the Banks, to the extent required by Section 12.12 of the Credit
Agreement), the Assignee, at the request and expense of the Assignor, will
duly assign, transfer and deliver to the Assignor (without recourse and with-
out any representation or warranty) such of the Insurance Collateral (and
releases therefor) as is then being (or has been) so sold or released and as
may be in the possession of the Assignee and has not theretofore been released
pursuant to this Assignment. At any time the Assignor desires that the
Insurance Collateral or a portion thereof be released as provided in this
paragraph, the Assignor shall deliver to the Assignee a certificate signed by
an Authorized Officer (as defined in the Credit Agreement) stating that the
release of the Insurance Collateral or portion thereof is permitted pursuant
to this paragraph.
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 9th day of July, 1996.
RB DRILLING CO.
By: ________________________
Its:
ANNEX I
to
Assignment of Insurances
NOTICE OF ASSIGNMENT
RB Drilling Co. (the "Owner"), the owner of the Panamanian flag offshore
drilling rig Rig 41 (the "Rig"), HEREBY GIVES NOTICE that by a Collateral
Assignment of Insurance dated July 9, 1996 and made between the Owner and
Christiania Bank og Kreditkasse, New York Branch, as Agent (the "Assignee")
for itself and certain other Banks (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 indorsed on all policies and certificates of entry evidencing such
insurance.
RB DRILLING CO.
By
Its:
LOSS PAYABLE CLAUSES
Hull and War Risks
Loss, if any, payable to Christiania Bank og Kreditkasse, New York
Branch, as Agent for the Banks, for distribution by it to said Banks and to RB
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 repaired the damage and paid the cost thereof, or discharged the
liability or paid the salvage or other charges, then the Underwriters may pay
the Owner as reimbursement to the extent the Owner has paid the covered loss.
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 Panamanian mortgage relating to the Rig.
PROTECTION AND INDEMNITY
Loss, if any, payable to Christiania Bank og Kreditkasse, New York
Branch, as Agent for the Banks for distribution by it to the Banks and to RB
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 in respect of any claim in
excess of $1,000,000, the Underwriters shall have first received evidence that
the liability insured against has been discharged.
Exhibit 10.111
AMENDED AND RESTATED INDENTURE OF TRUST
Dated as of July 9, 1996
READING & BATES DRILLING CO., as Borrower
- and -
READING & BATES EXPLORATION CO., as Subsidiary Guarantor
- and -
HRB RIG CORPORATION, as Subsidiary Guarantor
- and -
WILMINGTON TRUST COMPANY,
as Trustee
==============================================================================
TABLE OF CONTENTS
Page
INDENTURE OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 -
RECITALS OF THE BORROWER AND THE SUBSIDIARY GUARANTOR . . . . . . . . . - 1 -
GRANTING CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 -
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . - 3 -
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . - 3 -
Section 1.02. Notices . . . . . . . . . . . . . . . . . . . . . . . - 5 -
Section 1.03. Waiver of Notice . . . . . . . . . . . . . . . . . . - 6 -
Section 1.04. Effect of Headings; Table of Contents . . . . . . . . - 6 -
Section 1.05. Severability Clause; Further Assurances . . . . . . . - 6 -
Section 1.06. Governing Law; Jurisdiction . . . . . . . . . . . . . - 6 -
Section 1.07. Appointment of Process Agent . . . . . . . . . . . . - 6 -
Section 1.08. Counterparts . . . . . . . . . . . . . . . . . . . . - 7 -
Section 1.09. Survival . . . . . . . . . . . . . . . . . . . . . . - 7 -
Section 1.10. No Transfer in Violation of Shipping Act . . . . . . - 7 -
Section 1.11. Monies of Trustee Received by the Borrower and the
Subsidiary Guarantors . . . . . . . . . . . . . - 7 -
Section 1.12. Binding Effect . . . . . . . . . . . . . . . . . . . - 7 -
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . - 7 -
Section 2.01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7 -
(a) Organization and Existence . . . . . . . . . . . . . . . . . . . - 8 -
(b) Power and Authority . . . . . . . . . . . . . . . . . . . . . . . - 8 -
(c) Due Authorization, Execution and Enforceability . . . . . . . . . - 8 -
(d) No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . - 8 -
(e) Liens and Security Interests . . . . . . . . . . . . . . . . . . - 8 -
(f) Notices of Defaults . . . . . . . . . . . . . . . . . . . . . . . - 8 -
Section 2.02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 8 -
(a) Organization Existence . . . . . . . . . . . . . . . . . . . . . - 8 -
(b) Power and Authority . . . . . . . . . . . . . . . . . . . . . . . - 9 -
(c) Due Authorization, Execution and Enforceability . . . . . . . . . - 9 -
(d) No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . - 9 -
ARTICLE 3
REMEDIES UPON AN EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . - 9 -
Section 3.01. Remedies . . . . . . . . . . . . . . . . . . . . . . - 9 -
Section 3.02. Suits for Enforcement by Trustee . . . . . . . . . . - 9 -
Section 3.03. Enforcement of Claims by Trustee . . . . . . . . . . - 9 -
Section 3.04. Application of Monies Collected After Default . . . . - 10 -
Section 3.05. Rights and Remedies Cumulative . . . . . . . . . . . - 10 -
Section 3.06. Delay or Omission Not Waiver . . . . . . . . . . . . - 10 -
Section 3.07. Discontinuance of Enforcement Proceedings . . . . . . - 11 -
Section 3.08. Control by the Required Banks . . . . . . . . . . . . - 11 -
Section 3.09. Undertaking for Costs . . . . . . . . . . . . . . . . - 11 -
Section 3.10. Waiver of Demand, etc . . . . . . . . . . . . . . . . - 11 -
ARTICLE 4
THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 12 -
Section 4.01. Certain Duties and Liabilities . . . . . . . . . . . - 12 -
Section 4.02. Certain Rights of Trustee . . . . . . . . . . . . . . - 13 -
Section 4.03. Not Responsible for Recitals . . . . . . . . . . . . - 13 -
Section 4.04. Money Held in Trust . . . . . . . . . . . . . . . . . - 14 -
Section 4.05. Compensation, Reimbursement and Indemnification . . . - 14 -
Section 4.06. Corporate Trustee Required; Eligibility . . . . . . . - 14 -
Section 4.07. Disqualification, Removal or Resignation of the
Trustee; Successor Trustees . . . . . . . . . . - 15 -
Section 4.08. Co-trustees and Separate Trustees . . . . . . . . . . - 17 -
ARTICLE 5
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . - 18 -
Section 5.01. General . . . . . . . . . . . . . . . . . . . . . . . - 18 -
Section 5.02. Survival of Certain Obligations . . . . . . . . . . . - 18 -
ARTICLE 6
SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . - 18 -
Section 6.01. Waivers and Supplemental Indentures with Consent of
Banks . . . . . . . . . . . . . . . . . . . . . - 18 -
Section 6.02. Execution of Supplemental Indentures . . . . . . . . - 18 -
Section 6.03. Effect of Supplemental Indentures . . . . . . . . . . - 19 -
ARTICLE 7
INSTRUCTIONS OF THE AGENT OR REQUIRED BANKS . . . . . . . . . . . . . . - 19 -
Section 7.01. Instructions of the Agent or Required Banks. . . . . - 19 -
ARTICLE 8
LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . - 19 -
Section 8.01. Limitation of Liability of Wilmington Trust Company. - 19 -
==============================================================================
INDENTURE OF TRUST
THIS AMENDED AND RESTATED INDENTURE OF TRUST (this "Indenture") dated as
of July 9, 1996, among (i) READING & BATES DRILLING CO., an Oklahoma
corporation as borrower (the "Borrower"); (ii) READING & BATES EXPLORATION
CO., an Oklahoma corporation as subsidiary guarantor, ("Exploration") and HRB
RIG CORPORATION, an Oklahoma corporation as subsidiary guarantor ("HRB" and
together with Exploration collectively the "Subsidiary Guarantors"); and (iii)
WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its
individual capacity but solely as indenture trustee (the "Trustee").
RECITALS OF THE BORROWER AND THE SUBSIDIARY GUARANTOR
A. By a Credit Agreement dated as of April 30, 1996 ( as amended,
restated or supplemented from time to time, the "Credit Agreement") among
Reading & Bates Corporation, a Delaware corporation, as guarantor
("Holdings"), the Borrower, the banks party thereto (the "Banks"), Credit
Lyonnais New York Branch, as co-agent, and Christiania Bank og Kreditkasse,
New York branch, as agent (the "Agent"), the Banks made available to the
Borrower upon the terms and conditions therein described a reducing revolving
credit facility (the "Facility") in an aggregate amount at any time
outstanding of One Hundred Million United States Dollars (US$100,000,000)
providing for the making of Loans (as defined in the Credit Agreement)
evidenced by a promissory note of the Borrower (the "Note") and the issuance
of, and participation in, Letters of Credit (as defined in the Credit
Agreement) as contemplated therein.
B. Pursuant to the Credit Agreement, Exploration for good and
valuable consideration authorized, executed and delivered a Subsidiary
Guaranty dated April 30, 1996 (the "Exploration Subsidiary Guaranty") in favor
of the Agent guaranteeing the performance by the Borrower of its obligations
under the Credit Agreement and the other Credit Documents (as defined in the
Credit Agreement).
C. Pursuant to the Credit Agreement and to secure the obligations of
the Borrower thereunder, (i) the Borrower executed and delivered a first
preferred mortgage on the U.S. documented semi-submersible drilling unit JACK
BATES; and (ii) Exploration executed and delivered first preferred mortgages
(together with the first preferred mortgage on the JACK BATES, the "Original
Mortgages") on each of (1) the U.S. documented jack-up drilling unit, D.R.
STEWART and (2) the U.S. documented offshore drilling unit W.D. KENT (together
with the JACK BATES, the "Original Vessels").
D. To secure their respective obligations under (i) the Credit
Agreement and the Note and (ii) the Exploration Subsidiary Guaranty, the
Borrower and Exploration have executed and delivered to the Trustee an
Indenture of Trust dated as of April 30, 1996 (the "Original Indenture").
E. By an Amendment dated as of July 9, 1996 to the Credit Agreement
(the "Amendment"), it was agreed among other things that the Banks would
increase the amount available to the Borrower under the Facility (as defined
in the Credit Agreement) to an aggregate amount at any time outstanding of One
Hundred Forty Million United States Dollars ($140,000,000), subject to semi-
annual reductions as set forth therein.
F. Pursuant to the Credit Agreement and to secure the obligations of
the Borrower thereunder, (i) the Borrower is required to execute and deliver
an amendment to first preferred mortgage on the U.S. documented semi-
submersible drilling unit JACK BATES; (ii) Exploration is required to execute
and deliver amendments to the first preferred mortgages on each of (1) the
U.S. documented jack-up drilling unit, D.R. STEWART and (2) the U.S.
documented offshore drilling unit W.D. KENT and (iii) HRB is required to
execute and deliver a subsidiary guaranty (together with the Exploration
Subsidiary Guaranty, the "Subsidiary Guaranties" and a first preferred
mortgage (together with the Original Mortgages, the "Mortgages") on the U.S.
documented jack-up unit HARVEY H. WARD (together with the Original Vessels,
the "Vessels"). As certain of the Banks are not citizens of the United States
of America within the meaning of Section 2 of the Shipping Act, 1916, as
amended, and are ineligible to be mortgagees of the Vessels, the Banks have
requested the Trustee to hold, pursuant to the terms of this Indenture, the
Mortgages.
G. All things have been done which are necessary to constitute this
Indenture a valid security agreement and contract for the security of the
respective obligations of the Borrower and each of the Subsidiary Guarantors
under (i) the Credit Agreement and the Note and (ii) the Subsidiary
Guaranties, respectively, in accordance with the terms of the Credit
Agreement, the Note, the Subsidiary Guaranties and this Indenture.
GRANTING CLAUSE
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that,
To secure the payment of the Loans, the Unpaid Drawings (as defined in
the Credit Agreement) and interest thereon and all other Obligations (as
defined below) and the performance of the covenants therein and herein
contained, and in consideration of the premises and of the Banks' making the
Facility available to the Borrower, and other good and valuable consideration,
the Borrower and the Subsidiary Guarantors by these presents do grant, sell,
convey, assign, transfer, pledge, set over and confirm unto the Trustee for
the benefit of the Banks, 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 Obligations:
1. The U.S. documented vessel JACK BATES, as granted by a first
preferred mortgage, as amended, on the JACK BATES by the Borrower;
2. The U.S. documented vessel D.R. STEWART, as granted by a first
preferred mortgage, as amended, on the D.R. STEWART by
Exploration;
3. The U.S. documented vessel W.D. KENT, as granted by a first
preferred mortgage, as amended, on the W.D. KENT by Exploration;
4. The U.S. documented vessel HARVEY H. WARD, as granted by a first
preferred mortgage on the HARVEY H. WARD by HRB; and
5. Proceeds of the foregoing.
The Trustee shall hold the Mortgages as collateral security for the
Obligations, 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 Trustee, subject to the
further covenants, conditions and trusts herein set forth, and the Borrower
and the Subsidiary Guarantors do hereby covenant and agree to and with the
Trustee, for the benefit of the Banks as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. 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 4.01(h).
"Business Day" shall have the meaning ascribed thereto in the Credit
Agreement.
"Collateral" means the mortgages listed in the granting clause of this
Indenture and proceeds thereof.
"Dollars", "dollars" or "$" means lawful and freely transferable
currency of the United States.
"Default Rate" shall have the rate of interest calculated in accordance
with Section 1.07(b) of the Credit Agreement.
"Event of Default" has the meaning ascribed thereto in the Credit
Agreement.
"Instructions" has the meaning set forth in Section 7.01.
"MARAD" means the United States Department of Transportation, Maritime
Administration.
"Obligations" shall means the obligations of the Borrower and each of
the Subsidiary Guarantors with respect to (i) the full and prompt
payment when due of (x) the principal of interest on the Loans made
under the Credit Agreement, and all reimbursement obligations and Unpaid
Drawings with respect to the Letters of Credit issued under the Credit
Agreement and (y) all other obligations and indebtedness (including,
without limitation, indemnities, Fees (as defined in the Credit
Agreement) and interest thereon) of the Borrower to the Secured
Creditors (as defined herein), whether now existing or hereafter
incurred under, arising out of or in connection with the Credit
Agreement and the other Credit Documents and the due performance and
compliance by the Borrower with all of the terms, conditions and
agreements contained in the Credit Agreement and the other Credit
Documents; (ii) any and all sums advanced by the Trustee in order to
preserve the Collateral (as hereinafter defined) or preserve its
security interest in the Collateral; (iii) in the event of any
proceeding for the collection or enforcement of any indebtedness,
obligations, or liabilities of the Borrower or either of the Subsidiary
Guarantors referred to in clause (i) above, after an Event of Default
shall have occurred and be continuing, the reasonable expenses of the
Trustee of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Collateral, or of any
exercise by the Trustee of its rights hereunder, together with
reasonable attorneys' fees of counsel to the Trustee and court costs;
and (iv) all amounts paid by any Indemnitee (as defined in the
Mortgages) as to which such Indemnitee has the right to reimbursement.
It is acknowledged and agreed that the Obligations shall include
extensions of credit of the types described above, whether outstanding
on the date of this Indenture or extended from time to time after the
date of this Indenture.
"Officer's Certificate" means (i) when used with respect to the Borrower
or either of the Subsidiary Guarantors, 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 the Borrower or the Subsidiary Guarantors and (ii) when
used with respect to the Trustee, a certificate signed by a Responsible
Officer of the Trustee.
"Person" means any individual, corporation, partnership, joint venture,
joint-stock company, trust, unincorporated organization or government or
any agency or political subdivision thereof.
"Required Banks" has the meaning ascribed thereto in the Credit
Agreement.
"Responsible Officer", when used with respect to the 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 the Borrower or either of the
Subsidiary Guarantors, means the president, any vice president, the
secretary, any assistant secretary, the treasurer or any assistant
treasurer of the Borrower or the Subsidiary Guarantors or any other
officer or assistant officer of the Borrower or the Subsidiary
Guarantors customarily performing functions similar to those performed
by any of the above-designated officers.
"Secured Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Agent under and as defined in the Credit
Agreement.
"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.
"Unpaid Drawings" has the meaning ascribed thereto in the Credit
Agreement.
(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 1.02. Notices.
(a) All notices or other communications required or permitted to be
made hereunder to the Borrower, the Subsidiary Guarantors, the Trustee, the
Agent or the Banks 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 Trustee, with a copy to the Agent):
Borrower/Subsidiary READING & BATES CORPORATION
Guarantors: 901 Threadneedle, Suite 200
Houston, TX 77079
Telefax: (713) 496-0285
Attention: Chief Financial Officer
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 Banks shall be addressed as provided in Annex II to the Credit
Agreement.
Section 1.03. 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 1.04. 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 1.05. 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 Trustee shall
be deemed by the Trustee in the reasonable exercise of its duties to be
insufficient for any reason to implement the rights and powers granted to the
Trustee herein or any other Security Document, then, from time to time on
demand of the Trustee, the Borrower and the Subsidiary Guarantors 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 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 security interest of the Trustee therein, or otherwise to obtain
or maintain the full benefits of this Indenture and the Mortgages.
Section 1.06. 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. The Borrower and each of the Subsidiary Guarantors
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, the Borrower and each of the Subsidiary
Guarantors 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 1.07. Appointment of Process Agent.
The Borrower and each of the Subsidiary Guarantors 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 each of the Borrower and each of the Subsidiary
Guarantors had been personally served in the State of New York.
Section 1.08. 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 1.09. 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 Borrower, the Subsidiary Guarantors and the
Trustee.
Section 1.10. 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 any 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 1.11. Monies of Trustee Received by the Borrower and the
Subsidiary Guarantors.
Any monies which may from time to time be received by the Borrower or
either of the Subsidiary Guarantors which should have been paid to the Trustee
hereunder shall be so received in trust for the Trustee, shall not be
commingled with other funds of the Borrower or either of the Subsidiary
Guarantors, as the case may be, and shall promptly be remitted to the Trustee.
Section 1.12. Binding Effect.
All the covenants, promises, stipulations and agreements of each of the
Borrower and each of the Subsidiary Guarantors in this Indenture shall bind
each of the Borrower and each of the Subsidiary Guarantors and their
respective successors and assigns, and shall inure to the benefit of the
Trustee and its successors and assigns, whether so expressed or not. This
Indenture is for the sole benefit of the Borrower, the Subsidiary Guarantors,
the Trustee and the Banks and their respective successors and assigns, and no
other party shall have any right hereunder.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Each of the Borrower and each of the Subsidiary Guarantors
represents and warrants to the Trustee as of the date hereof and covenants
with the Trustee that:
(a) Organization and Existence. Each of the Borrower and each of the
Subsidiary Guarantors 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
Borrower and each of the Subsidiary Guarantors shall maintain such existence
so long as this Indenture remains in effect.
(b) Power and Authority. Each of the Borrower and each of the
Subsidiary Guarantors 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 Borrower and each of the Subsidiary Guarantors, has been duly executed
and delivered by each of the Borrower and each of the Subsidiary Guarantors
and constitutes, in accordance with its terms, the legal, valid and binding
agreements enforceable against each of the Borrower and each of the Subsidiary
Guarantors, 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 Borrower and each of the Subsidiary
Guarantors 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 Borrower or either of the Subsidiary Guarantors, and will not
result in a breach of the terms and provisions of, or constitute a default
under, any agreement or undertaking by the Borrower or the Subsidiary
Guarantors, or by which either of them or any of their respective properties
is bound, or any order of any court or administrative agency entered in any
proceedings to which the Borrower or either of the Subsidiary Guarantors 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 nor either of the Subsidiary Guarantors 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, the Vessels or any rights assigned by this Indenture or the
Mortgages.
(f) Notices of Defaults. Upon the occurrence of any Event of Default,
the Borrower and the Subsidiary Guarantors shall promptly notify the Trustee,
the Agent and the Banks by telecopy, confirmed by letter, unless such Event of
Default shall have been cured.
Section 2.02. The Trustee represents and warrants that:
(a) Organization Existence. The Trustee was duly organized and is now
validly existing as a banking corporation under laws of the State of Delaware.
(b) Power and Authority. The Trustee 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 the
Trustee, has been duly executed and delivered by the Trustee and, assuming
this Indenture constitutes the legal, valid and binding obligation of the
other parties hereto, enforceable against such parties in accordance with its
terms, constitutes, in accordance with its terms, the legal, valid and binding
agreement of the Trustee enforceable against the Trustee, 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 the Trustee with all of the terms and provisions of,
this Indenture do not and will not violate any provisions of the Articles of
Incorporation or By-Laws of the Trustee and will not result in a breach of the
terms and provisions of, or constitute a default under, any agreement or
undertaking of the Trustee or by which it or any of its property is bound, or
any order of any court or administrative agency entered in any proceedings to
which the Trustee is or has been a party or violate any applicable statute,
rule or regulation.
ARTICLE 3
REMEDIES UPON AN EVENT OF DEFAULT
Section 3.01. Remedies.
If an Event of Default shall have occurred and be continuing, the
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 3.02. Suits for Enforcement by Trustee.
Subject to the provisions of Section 3.08, if an Event of Default shall
occur and be continuing and the Trustee has Actual Knowledge thereof, the
Trustee may in its discretion proceed to protect its rights and the rights of
the Banks by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect any such rights, or to protect any other proper
right, power or remedy then available to the Trustee under the Mortgages,
provided that the Trustee shall immediately thereafter notify the Agent and
the Banks 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 Required Banks or either thereof.
Section 3.03. Enforcement of Claims by Trustee.
All rights of action and claims under this Indenture may be prosecuted
and enforced by the 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 Trustee, its agents or counsel, be for the benefit of the
Banks.
Section 3.04. Application of Monies Collected After Default.
Any monies collected by the Trustee pursuant to any enforcement of any
of its rights hereunder or under any other Credit Document on account of the
occurrence of an Event of Default shall be applied as follows:
(i) to the payment or reimbursement of all amounts owing to the
Trustee of the type described in clauses (ii) and (iii) of the
definition of Obligations;
(ii) second, to the extent moneys remain after the application pursuant
to the preceding clause (i), an amount equal to the outstanding
Obligations shall be paid to the Agent for distribution to the
Secured Creditors, with each Secured Creditor receiving an amount
equal to such Obligations held by it or, if the proceeds are
insufficient to pay in full all such Obligations, its Pro Rata
Share (as defined below) of the amount remaining to be
distributed; and
(iii) third, to the extent moneys remain after the application pursuant
to the preceding clauses (i) and (ii), and following the
termination of this Indenture pursuant to Article 5, any surplus
then remaining shall be paid to the Borrower or either of the
Subsidiary Guarantors, subject, however, to the rights of the
holder of any then existing lien of which the Trustee has actual
notice (without investigation).
For purposes of this Indenture "Pro Rata Share" shall mean, when
calculating a Secured Creditors portion of any distribution or amount in
respect of any Obligations, the amount (expressed as a percentage) equal to a
fraction the numerator of which is the then unpaid amount of such Obligations
owning to or held by such Secured Creditor and the denominator of which is the
then outstanding amount of all such Obligations. For purposes of determining
the amount payable to each Secured Creditor, the Trustee shall be entitled to
request each Secured Creditor to furnish it with written notice of the amount
of Obligations then owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
Section 3.05. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee, the
Agent or any of the Banks 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 3.06. Delay or Omission Not Waiver.
No delay or omission of the Trustee, the Agent or of any of the Banks to
exercise any right or remedy accruing upon any Event of Default nor any course
of dealings among the Trustee, the Agent, the Banks and the Borrower or either
of Subsidiary Guarantors 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 Trustee, the Agent or any of the Banks of any
security or any payment of any part of the 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 Trustee, the Agent or any of the Banks may
be exercised from time to time, and as often and in such order as may be
deemed expedient, by the Trustee, the Agent or the Banks, as the case may be.
Section 3.07. Discontinuance of Enforcement Proceedings.
In case the Trustee shall have proceeded to enforce any right, power or
remedy under this Indenture or under any Mortgage and such proceeding shall
have been discontinued or abandoned for any reason or shall have been
adversely determined to the Trustee, then, and in every such case, the
Borrower, the Subsidiary Guarantors and the 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 Trustee shall continue as if no
such proceedings had been taken.
Section 3.08. Control by the Required Banks.
Subject to (i) the provisions of Section 3.09 and (ii) the requirements
of Sections 9 and 37 of the Shipping Act, 1916, as amended, the Agent or the
Required Banks shall have the right by written Instructions to the Trustee, to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee under this Indenture or any Mortgage or exercising
any trust or power conferred on the Trustee herein or therein, and upon
receipt of such written Instructions, the 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 or expose the Indenture Trustee to personal liability.
Section 3.09. Undertaking for Costs.
The parties to this Indenture agree, and the Banks by making the
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 Trustee for any action taken
or omitted by it as 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
Trustee, or to any suit instituted by the Banks, unless otherwise required by
law.
Section 3.10. Waiver of Demand, etc.
The Borrower and each of the Subsidiary Guarantors 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, the Subsidiary Guaranties or the Credit Agreement at
any time in connection herewith and therewith.
ARTICLE 4
THE TRUSTEE
Section 4.01. Certain Duties and Liabilities.
(a) The Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(b) Without limiting the provisions of paragraph (a) of this Section
4.01 or the provisions of Section 3.08, in any case where the terms of this
Indenture or any Mortgage vest in the Trustee non-mandatory, discretionary
authority to take any action or give any consent or approval upon the request
of the Borrower, either of the Subsidiary Guarantors, the Agent or any of the
Banks or otherwise, the 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 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 Trustee shall (except as otherwise provided in Section 3.08) 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
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 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 Required Banks relating to
the exercise of any trust, right, remedy or power conferred upon the Trustee
under this Indenture or any Mortgage, or exercisable by it hereunder or
thereunder.
(f) None of the provisions of this Indenture shall require the 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 Required
Banks.
(g) Whether or not herein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
(h) The Trustee shall not be deemed to have knowledge ("Actual
Knowledge") of the existence of an Event of Default unless the Trustee shall
have received telecopied or other written notice of such Event of Default from
the Agent or Required Banks, or a Responsible Officer in the Corporate Trust
Office of the Trustee shall have actual knowledge of such Event of Default.
(i) The Trustee shall promptly, upon receiving Actual Knowledge of an
Event of Default, inform the Agent and the Banks by telex or telecopy of such
Event of Default.
(j) None of the provisions of this Indenture shall require the 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.
(k) The Trustee agrees that it will in its individual capacity and at
its own cost and expense promptly take such action as may be necessary duly to
discharge and satisfy in full all liens on the Mortgages and other collateral
security held by the Trustee attributable to it in its individual capacity.
Section 4.02. Certain Rights of Trustee.
Except as otherwise provided in Section 4.01:
(a) The 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 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 Trustee;
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
the Agent or the Required Banks pursuant to this Indenture, unless the Agent
or the Required Banks shall have offered to the 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 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 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 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 Trustee receive written Instructions from the Agent or
the Required Banks which the Trustee, in its sole opinion, believes to be
conflicting Instructions, the 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 4.03. Not Responsible for Recitals.
The recitals contained herein shall be taken as the statements of each
of the Borrower and the Subsidiary Guarantors, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or any Mortgage.
Section 4.04. Money Held in Trust.
Any money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except
as otherwise agreed with the Borrower and the Subsidiary Guarantors. Any
payments made by the Trustee under this Indenture shall be made only from
monies held by it in trust hereunder.
Section 4.05. Compensation, Reimbursement and Indemnification.
The Borrower and the Subsidiary Guarantors jointly and severally agree,
subject to the provisions of Article 5:
(a) To pay to the 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 Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the 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;
(c) To indemnify the 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; and
(d) That to secure the obligations of the Borrower and the Subsidiary
Guarantors under this Section 4.05, the Trustee shall have a lien prior to the
rights of the Banks on all money or property held or collected by the Trustee
pursuant to this Indenture.
Section 4.06. Corporate Trustee Required; Eligibility.
There shall at all times be a 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 Trustee hereby represents and warrants that on the date
hereof it complies with the requirements of the foregoing sentence. If at any
time the 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 4.07. Disqualification, Removal or Resignation of the Trustee;
Successor Trustees.
(a) If the Trustee ceases at any time to be a 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 Trustee at any time, without cause, by causing a written notice of such
removal to be delivered to the Trustee, the Borrower, the Subsidiary
Guarantors and the Banks 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 Banks 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 Trustee shall execute all
documents and take such other actions as necessary or desirable to the Agent
or the Required Banks to transfer the Trustee's function of trustee to the
successor trustee. The compensation of the Trustee 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 Trustee shall,
within thirty days, furnish the Agent, the Banks, the successor trustee and
the Borrower and the Subsidiary Guarantors 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 Borrower and the Subsidiary
Guarantors.
(b) (i) The 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 Banks and to the Borrower and the Subsidiary Guarantors, 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 4.06. If the Agent shall not have
appointed such a qualified successor trustee within sixty days after such
notice, the 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 Trustee for all purposes hereof, and
each reference herein to the 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 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 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 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 4.07(b), be the
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 Trustee shall provide the Agent a statement and accounting as though it
had been removed in accordance with Section 4.07(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 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 Trustee as herein provided.
The 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 Trustee or any
predecessor trustee, as the case may be. Should any act or further instrument
from the Trustee, any predecessor trustee, or the Banks 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 Banks, 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 Trustee shall cooperate with the Agent and the Banks
in the following:
(i) First, petition MARAD for approval of a presently
unqualified bank or trust company satisfactory to the Agent or the Required
Banks and willing to act as trustee;
(ii) If MARAD approval cannot be obtained for such available
unqualified trustee then the Agent or the Required Banks and the Trustee shall
petition the United States District Court for the Southern District of New
York for instructions to the Trustee in order that the trust estate may be
preserved and to prevent the Agent, the Banks or the 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 Borrower and the Subsidiary Guarantors. The Trustee 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 Banks, as beneficiaries,
under the terms hereof as well as preserving the adequacy and enforceability
of any interest held in the trust estate.
Section 4.08. Co-trustees and Separate 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
Borrower, the Subsidiary Guarantors and the Trustee shall have power to
appoint, and upon the written request of the Trustee, the Agent or of the
Required Banks, the Borrower and the Subsidiary Guarantors shall for such
purpose join with the Trustee in execution, delivery and performance of all
instruments and agreements necessary or proper to appoint, one or more persons
approved by the Trustee either to act as co-trustee, jointly with the 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 Borrower and the
Subsidiary Guarantors 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 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 4.06.
Should any written instrument from the Borrower and the Subsidiary
Guarantors 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 Borrower and the Subsidiary
Guarantors.
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 Trustee hereunder, shall be
exercised solely by the Trustee.
(b) The rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by
the Trustee or by the 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 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 Trustee at any time, by an instrument in writing executed by
it, with the concurrence of the Borrower and the Subsidiary Guarantors
evidenced by separate resolutions of the board of directors of each of the
Borrower and the Subsidiary Guarantors, 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 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 Trustee or any other such
trustee hereunder.
(e) Any notice of instruction delivered to the Trustee by the Agent or
the Required Banks shall be deemed to have been delivered to each such
co-trustee and separate trustee.
ARTICLE 5
SATISFACTION AND DISCHARGE
Section 5.01. General.
If the Borrower and the Subsidiary Guarantors shall pay or cause to be
paid all of the Obligations, 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 Trustee, upon written request of the Borrower
and the Subsidiary Guarantors, accompanied by an opinion of counsel acceptable
to the Trustee, and at the cost and expense of the Borrower and the Subsidiary
Guarantors, shall forthwith cause satisfaction and discharge of this Indenture
and shall execute and deliver to the Borrower and the Subsidiary Guarantors
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 Trustee in and to any property held by it under this Indenture
or under any Mortgage shall thereupon cease, determine and become null and
void, and the Trustee shall transfer the same to the Borrower and the
Subsidiary Guarantors.
Section 5.02. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture, (a)
the liabilities and obligations of the Borrower and the Subsidiary Guarantors
to the Trustee under Section 4.05 shall survive, and (b) if the Borrower's or
either of the Subsidiary Guarantor's trustee in bankruptcy or any Person under
any applicable bankruptcy law shall recover all or part of the Obligations
payable hereunder from the Trustee or from any of the Banks, 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 6.01. Waivers and Supplemental Indentures with Consent of Banks.
This Indenture may not be waived, modified, amended or supplemented
without the prior written consent of the Agent or the Required Banks.
Section 6.02. 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 Trustee shall be entitled to receive, and
(subject to Sections 4.01 and 6.01) shall be fully protected in relying upon,
an opinion of counsel of the Borrower and the Subsidiary Guarantors stating
that the execution of such Supplemental Indenture is authorized or permitted
by this Indenture. The Trustee may, but shall not be obligated to, enter into
any such Supplemental Indenture which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
Section 6.03. 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 REQUIRED BANKS
Section 7.01. Instructions of the Agent or Required Banks.
(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 Required Banks (sometimes referred to herein as
"Instructions") shall be given in accordance with Section 1.02. The Trustee,
the Borrower and the Subsidiary Guarantors 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, the
Subsidiary Guaranties or any of the Security Documents, as defined in the
Credit Agreement) or in violation of any applicable laws.
(b) Unless and until the Trustee shall have received conflicting
Instructions from the Agent or the Required Banks, any request, demand,
authorization, direction, notice, consent, waiver or other action by the Agent
or the Required Banks shall bind the other Banks in respect of anything done
or suffered to be done by the Indenture Trustee, the Borrower or the
Subsidiary Guarantors in reliance thereon.
ARTICLE 8
LIMITATION OF LIABILITY
Section 8.01. 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, except as provided in
Section 4.01, 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:
HRB RIG CORPORATION
By: _________________________________
Title:
WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as Trustee
By: ______________________________
Title:
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 9th day of July, 1996 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 9th day of July, 1996 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 NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 9th day of July, 1996 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 HRB RIG
CORPORATION, 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 HRB RIG CORPORATION.
__________________________
Notary Public
ACKNOWLEDGEMENT
STATE OF DELAWARE )
) S.S.
COUNTY OF NEW CASTLE )
On this 9th day of July, 1996 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 10.112
SECOND AMENDMENT TO CREDIT AGREEMENT
SECOND AMENDMENT (the "Amendment"), dated as of August 30, 1996,
among READING & BATES CORPORATION ("Holdings"), READING & BATES DRILLING CO.
(the "Borrower"), the financial institutions party to the Credit Agreement
referred to below (the "Banks"), Credit Lyonnais New York Branch, as Co-Agent
(the "Co-Agent") and Christiania Bank og Kreditkasse, New York Branch, as
Agent (the "Agent"). All capitalized terms used herein and not otherwise
defined shall have the respective meanings provided such terms in the Credit
Agreement.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Banks, the Co-Agent and the
Agent are parties to a Credit Agreement, dated as of April 30, 1996 (as
amended, modified or supplemented, the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend certain provisions of
the Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
1. Section 7.13 of the Credit Agreement is hereby amended by deleting
all references to "RB Drilling Co." contained therein and inserting in lieu
thereof references to "Reading & Bates Development Co.".
2. Section 7.13 of the Credit Agreement is hereby further amended by
inserting at the end thereof the following sub-sections:
(h) Opinions of Counsel. The Agent shall have received
opinions, addressed to the Agent and each of the Banks and dated
the Second Amendment Effective Date, from (i) Wayne Hillin, Esq.,
General Counsel to the Credit Parties, which opinion shall cover
matters, and shall be in form and substance, satisfactory to the
Agent and (ii) from local counsel satisfactory to the Agent as the
Agent may request, which opinions shall cover the perfection of
the security interests (including, without limitation, opinions as
to the enforceability and effect of the Seillean Mortgage) granted
pursuant to this Amendment and such other matters incident to the
transactions contemplated herein as the Agent may reasonably
request and shall be in form and substance satisfactory to the
Agent.
(j) Corporate Proceedings. (1) The Agent shall have
received from Reading & Bates Development Co. a certificate, dated
the Second Amendment Effective Date, signed by the President or
any Vice-President or other appropriate representative of Reading
& Bates Development Co. in the form of Exhibit F with appropriate
insertions and deletions, together with copies of the certificate
of formation, the by-laws, or other organizational documents of
Reading & Bates Development Co. and the resolutions, or such other
administrative approval, of Reading & Bates Development Co.
referred to in such certificate and all of the foregoing
(including each such certificate of formation, certificate of
incorporation and by-laws) shall be reasonably satisfactory to the
Agent.
(2) All corporate and legal proceedings and all instru-
ments and agreements in connection with the transactions contem-
plated by this Amendment shall be reasonably satisfactory in form
and substance to the Agent, and the Agent shall have received all
information and copies of all certificates, documents and papers,
including good standing certificates and any other records of
corporate proceedings and governmental approvals, if any, which
the Agent may have reasonably requested in connection therewith,
such documents and papers, where appropriate, to be certified by
proper corporate or governmental authorities.
(k) Fees. The Borrower shall have paid to the Agent and
the Banks all Fees and expenses agreed upon by such parties to be paid
on or prior to such date.
(l) Security Agreement. Reading & Bates Development Co.
shall have duly authorized, executed and delivered a counterpart
to the Security Agreement, together with:
(1) executed copies of Financing Statements (Form
UCC-1 and/or UCC-3) or appropriate local equivalent in
appropriate form for filing under the UCC or appropriate
local equivalent of each jurisdiction as may be necessary to
perfect the security interests purported to be created by
the Security Agreement;
(2) certified copies of Requests for Information or
Copies (Form UCC-11), or equivalent reports, each of a
recent date listing all effective financing statements that
name Reading & Bates Development Co., or a division or
operating unit of Reading & Bates Development Co., as debtor
and that are filed in the jurisdictions referred to in
immediately preceding clause (1), together with copies of
such financing statements (none of which shall cover the
Collateral except (x) those with respect to which appropri-
ate termination statements executed by the secured lender
thereunder have been delivered to the Collateral Agent and
(y) to the extent evidencing Permitted Liens);
(3) evidence that all other recordings and filings
of, or with respect to, the Security Agreement, and all
other actions, as may be necessary or, in the opinion of the
Collateral Agent, desirable to perfect the security
interests intended to be created by the Security Agreement
have been completed (it being understood and agreed that UCC
financing statements and termination statements shall be
filed in the appropriate governmental office within three
Business Days after the Second Amendment Effective Date);
and the Security Agreement and such other documents shall be in
full force and effect.
(m) Subsidiary Guaranty. Reading & Bates Development Co.
(a "Subsidiary Guarantor") shall have duly authorized, executed
and delivered a counterpart of the Subsidiary Guaranty, and the
Subsidiary Guaranty shall be in full force and effect with respect
to Reading & Bates Development Co.
3. Section 10 of the Credit Agreement is hereby amended by inserting
in appropriate alphabetical order the following new definitions:
"Second Amendment" shall mean the Second Amendment, dated as of
August 30, 1996, to this Agreement.
"Second Amendment Effective Date" shall mean the Second Amendment
Effective Date as defined in the Second Amendment, dated as of August
30, 1996, to this Agreement.
4. In order to induce the Banks to enter into this Amendment, each of
Holdings and the Borrower hereby represents and warrants that (i) the repre-
sentations, warranties and agreements contained in Section 7 of the Credit
Agreement are true and correct in all material respects on and as of the
Second Amendment Effective Date (except with respect to any representations
and warranties limited by their terms to a specific date, which shall be true
and correct in all material respects as of such date) and (ii) there exists no
Default or Event of Default on the Second Amendment Effective Date (as defined
herein) in each case both before and after giving effect to this Amendment.
5. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
6. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with each of Holdings, the Borrower and the
Agent.
7. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
8. This Amendment shall become effective on the date (the "Second
Amendment Effective Date") when (i) each of Holdings, the Borrower, and the
Banks shall have signed a copy hereof (whether the same or different copies)
and shall have delivered (including by way of facsimile) the same to the Agent
at the Notice Office and (ii) each of the conditions set forth in paragraph 4
hereof shall have been satisfied.
9. From and after the Second Amendment Effective Date, all
references in the Credit Agreement and the other Credit Documents to the
Credit Agreement shall be deemed to be references to such Credit Agreement as
modified hereby.
IN WITNESSES WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
READING & BATES CORPORATION
By:
Title:
READING & BATES DRILLING CO.
By:
Title:
CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH,
Individually, and as Agent
By:
Title:
By:
Title:
CREDIT LYONNAIS NEW YORK
BRANCH
By:
Title:
BANQUE INDOSUEZ
By:
Title:
By:
Title:
BANK AUSTRIA AKTIENGESELLSCHAFT
By:
Title:
By:
Title:
THE FUJI BANK, LIMITED
By:
Title:
Exhibit 10.113
SUBSIDIARY ASSUMPTION AGREEMENT
SUBSIDIARY ASSUMPTION AGREEMENT (this "Agreement"), dated as of
August 30, 1996, made by READING & BATES DEVELOPMENT CO., a Delaware
corporation (the "New Subsidiary"). Unless otherwise defined herein,
capitalized terms used herein and defined in the Credit Agreement referred to
below are used herein as so defined.
W I T N E S S E T H :
WHEREAS, READING & BATES CORPORATION, a Delaware corporation
("Holdings"), READING & BATES DRILLING CO., an Oklahoma corporation (the
"Borrower"), the financial institutions party to the Credit Agreement referred
to below (each, a "Bank" and, collectively, the "Banks"), CREDIT LYONNAIS NEW
YORK BRANCH, as Co-Agent (the "Co-Agent"), and CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH, as Agent for the Banks (in such capacity, the
"Agent") are parties to a Credit Agreement, dated as of April 30, 1996 (as
amended, modified or supplemented from time to time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, various
Subsidiaries of the Borrower have entered into a Subsidiary Guaranty, dated as
of April 30, 1996 and (as in effect on the date hereof, the "Subsidiary
Guaranty");
WHEREAS, in connection with the Credit Agreement, the Borrower and
various of its Subsidiaries have entered into a Security Agreement, dated as
of April 30, 1996 (as in effect on the date hereof, the "Security Agreement"
and, together with the Subsidiary Guaranty, the "Documents"); and
WHEREAS, the New Subsidiary desires to execute and deliver this
Agreement in order to become a party to each of the Documents;
NOW, THEREFORE, IT IS AGREED:
1. Subsidiary Guaranty. By executing and delivering this
Agreement, the New Subsidiary hereby becomes a party to the Subsidiary
Guaranty as a "Guarantor" thereunder, and hereby expressly and jointly and
severally assumes all obligations and liabilities of a "Guarantor" thereunder,
subject to the limitations set forth therein.
2. Security Agreement. By executing and delivering this
Agreement, the New Subsidiary hereby (i) becomes a party to the Security
Agreement as an "Assignor" thereunder, (ii) expressly assumes all obligations
and liabilities of an "Assignor" thereunder and (iii) pledges and grants to
the Collateral Agent, for the benefit of Secured Creditors, as collateral
security for the prompt payment in full when due (whether at stated maturity,
by acceleration or otherwise) of the Obligations (as defined in the Security
Agreement), a security interest in, to and for the benefit of the Secured
Creditors all of its right, title and interest in, to and under the Collateral
(as defined in the Security Agreement). The New Subsidiary hereby makes each
of the representations and warranties contained in the Security Agreement on
the date hereof, after giving effect to this Agreement.
3. Financing Statements. By executing and delivering this
Agreement, the New Subsidiary hereby agrees to execute and deliver to the
Collateral Agent such financing statements, in form acceptable to the
Collateral Agent, as the Collateral Agent may request or as are necessary or
desirable in the opinion of the Collateral Agent to establish and maintain a
valid, enforceable, first priority perfected security interest in the
Collateral (as defined in the Security Agreement) owned by the New Subsidiary.
4. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to
be duly executed and delivered as of the date first above written.
READING & BATES DEVELOPMENT CO.
By______________________________
Title:
Exhibit 10.114
SUBSIDIARY GUARANTY
SUBSIDIARY GUARANTY, dated as of August 30, 1996 made by the
undersigned (each a "Guarantor" and collectively, the "Guarantors"). Except
as otherwise defined herein, terms used herein and defined in the Credit
Agreement (as hereinafter defined) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Reading & Bates Corporation, Reading & Bates Drilling Co.
(the "Borrower"), various financial institutions from time to time party
thereto (the "Banks"), Credit Lyonnais New York Branch, as Co-Agent and
Christiania Bank og Kreditkasse, New York Branch, as Agent (the "Agent") have
entered into a Credit Agreement, dated as of April 30, 1996 (as amended,
modified or supplemented from time to time, the "Credit Agreement"), providing
for the making of Loans and the issuance of, and participation in, Letters of
Credit as contemplated therein (the Banks, the Agent, the Letter of Credit
Issuer, the Collateral Agent and the Trustee are herein collectively called
the "Creditors");
WHEREAS, the Borrower owns, directly or indirectly, 100% of the
capital stock of each Guarantor;
WHEREAS, it is a condition to the making of Loans and the issuance
of, and participation in, Letters of Credit under the Credit Agreement that
each Guarantor shall have executed and delivered this Guaranty; and
WHEREAS, each Guarantor will obtain benefits from the incurrence
of Loans by the Borrower and the issuance of Letters of Credit under the
Credit Agreement and, accordingly, desires to execute this Guaranty in order
to satisfy the conditions described in the preceding paragraph and to induce
the Banks to make Loans to the Borrower and the Letter of Credit Issuer to
issue Letters of Credit;
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to each Guarantor, the receipt and sufficiency of which are
hereby acknowledged, each Guarantor hereby makes the following representations
and warranties to the Creditors and hereby covenants and agrees with each
Creditor as follows:
1. Each Guarantor, jointly and severally, irrevocably and
unconditionally, guarantees, as primary obligor and not merely as surety, to
the Creditors the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of (x) the principal of and interest
on the Notes issued by, and the Loans made to, the Borrower under the Credit
Agreement, and all reimbursement obligations and Unpaid Drawings with respect
to the Letters of Credit issued under the Credit Agreement and (y) all other
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing
by the Borrower to the Creditors under the Credit Agreement (including, with-
out limitation, indemnities, Fees and interest thereon) now existing or
hereafter incurred under, arising out of or in connection with the Credit
Agreement or any other Credit Document and the due performance and compliance
with the terms of the Credit Documents by the Borrower (all such principal,
interest, liabilities and obligations being herein collectively called the
"Guaranteed Obligations"). Each Guarantor understands, agrees and confirms
that the Creditors may enforce this Guaranty up to the full amount of the
Guaranteed Obligations against each Guarantor without proceeding against any
other Guarantor or the Borrower, against any security for the Guaranteed
Obligations, or under any other guaranty covering all or a portion of the
Guaranteed Obligations. All payments by each Guarantor under this Guaranty
shall be made on the same basis as payments by the Borrower under Sections
4.03 and 4.04 of the Credit Agreement.
2. Additionally, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations of the Borrower to the Creditors whether or not due or
payable by the Borrower upon the occurrence in respect of the Borrower of any
of the events specified in Section 9.05 of the Credit Agreement, and
unconditionally and irrevocably, jointly and severally, promises to pay such
Guaranteed Obligations to the Creditors, or order, on demand, in lawful money
of the United States. This Guaranty shall constitute a guaranty of payment,
and not of collection.
3. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the indebtedness of the
Borrower whether executed by such Guarantor, any other Guarantor, any other
guarantor or by any other party, and the liability of each Guarantor hereunder
shall not be affected or impaired by (a) any direction as to application of
payment by the Borrower or by any other party, (b) any other continuing or
other guaranty, undertaking or maximum liability of a guarantor or of any
other party as to the indebtedness of the Borrower, (c) any payment on or in
reduction of any such other guaranty or undertaking, (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower, (e)
any payment made to any Creditor on the indebtedness which any Creditor repays
the Borrower pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and each Guarantor
waives any right to the deferral or modification of its obligations hereunder
by reason of any such proceeding, (f) any action or inaction by the Creditors
as contemplated in Section 6 hereof, or (g) any invalidity, irregularity or
unenforceability of all or part of the Guaranteed Obligations or of any
security therefor.
4. The obligations of each Guarantor hereunder are independent of
the obligations of any other Guarantor, any other guarantor or the Borrower,
and a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor or the Borrower and whether or not any other Guarantor, any
other guarantor or the Borrower be joined in any such action or actions. Any
payment by the Borrower or other circumstance which operates to toll any
statute of limitations as to the Borrower shall operate to toll the statute of
limitations as to each Guarantor.
5. Each Guarantor hereby waives notice of acceptance of this
Guaranty and notice of any liability to which it may apply, and waives
promptness, diligence, presentment, demand of payment, protest, notice of
dishonor or nonpayment of any such liabilities, suit or taking of other action
by the Agent or any other Creditor against, and any other notice to, any party
liable thereon (including such Guarantor, any other guarantor or the
Borrower).
6. Any Creditor may at any time and from time to time without the
consent of, or notice to, any Guarantor, without incurring responsibility to
such Guarantor, without impairing or releasing the obligations of such
Guarantor hereunder, upon or without any terms or conditions and in whole or
in part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter, any of the
Guaranteed Obligations, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the guaranty herein made
shall apply to the Guaranteed Obligations as so changed, extended,
renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to creditors of the
Borrower;
(e) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Creditors regardless
of what liabilities of the Borrower remain unpaid;
(f) release or substitute any one or more endorsers, guarantors,
any Credit Party or other obligors;
(g) consent to or waive any breach of, or any act, omission or
default under, any of the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or supplement
any of the Credit Documents or any of such other instruments or agree-
ments; and/or
(h) act or fail to act in any manner referred to in this
Guaranty which may deprive such Guarantor of its right to subrogation
against the Borrower to recover full indemnity for any payments made
pursuant to this Guaranty.
7. No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might constitute a legal or
equitable discharge of a surety or guarantor except payment in full of the
Guaranteed Obligations.
8. This Guaranty is a continuing one and all liabilities to which
it applies or may apply under the terms hereof shall be conclusively presumed
to have been created in reliance hereon. No failure or delay on the part of
any Creditor in exercising 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. The rights
and remedies herein expressly specified are cumulative and not exclusive of
any rights or remedies which any Creditor would otherwise have. No notice to
or demand on any Guarantor in any case shall entitle such Guarantor to any
other further notice or demand in similar or other circumstances or constitute
a waiver of the rights of any Creditor to any other or further action in any
circumstances without notice or demand. It is not necessary for any Creditor
to inquire into the capacity or powers of the Borrower or any of its
Subsidiaries or the officers, directors, partners or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
9. Any indebtedness of the Borrower now or hereafter held by any
Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Creditors; and such indebtedness of the Borrower to any Guarantor, if the
Agent, after an Event of Default has occurred, so requests, shall be
collected, enforced and received by such Guarantor as trustee for the
Creditors and be paid over to the Creditors on account of the indebtedness of
the Borrower to the Creditors, but without affecting or impairing in any
manner the liability of such Guarantor under the other provisions of this
Guaranty. Prior to the transfer by any Guarantor of any note or negotiable
instrument evidencing any indebtedness of the Borrower to such Guarantor, such
Guarantor shall mark such note or negotiable instrument with a legend that the
same is subject to this subordination. Without limiting the generality of the
foregoing, each Guarantor hereby agrees with the Creditors that it will not
exercise any right of subrogation which it may at any time otherwise have as a
result of this Guaranty (whether contractual, under Section 509 of the
Bankruptcy Code or otherwise) until all Guaranteed Obligations have been
irrevocably paid in full in cash.
10. (a) Each Guarantor waives any right (except as shall be
required by applicable law and cannot be waived) to require the Creditors to
(A) proceed against the Borrower, any other Guarantor, any other guarantor or
any other party, (B) proceed against or exhaust any security held from the
Borrower, any other Guarantor, any other guarantor or any other party or (C)
pursue any other remedy in the Creditors' power whatsoever. Each Guarantor
waives any defense based on or arising out of any defense of the Borrower, any
other Guarantor, any other guarantor or any other party other than payment in
full of the Guaranteed Obligations, including without limitation any defense
based on or arising out of the disability of the Borrower, any other
Guarantor, any other guarantor or any other party, or the unenforceability of
the Guaranteed Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of the Borrower other than payment
in full of the Guaranteed Obligations. The Creditors may, at their election,
foreclose on any security held by the Agent or the other Creditors by one or
more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Creditors may have
against the Borrower or any other party, or any security, without affecting or
impairing in any way the liability of any Guarantor hereunder except to the
extent the Guaranteed Obligations have been paid in full. Each Guarantor
waives any defense arising out of any such election by the Creditors, even
though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrower or any other party or any security.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guaranty, and notices of the existence, creation or incurring of new
or additional indebtedness. Each Guarantor assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks which
such Guarantor assumes and incurs hereunder, and agrees that the Creditors
shall have no duty to advise any Guarantor of information known to them
regarding such circumstances or risks.
11. The Creditors agree that this Guaranty may be enforced only
by the action of the Agent or the Collateral Agent, in each case acting upon
the instructions of the Required Banks and that no Creditor shall have any
right individually to seek to enforce or to enforce this Guaranty, it being
understood and agreed that such rights and remedies may be exercised by the
Agent or the Collateral Agent for the benefit of the Creditors upon the terms
of this Guaranty. The Creditors further agree that this Guaranty may not be
enforced against any director, officer, employee or stockholder of any
Guarantor (except to the extent such stockholder is also a Guarantor
hereunder).
12. Each Guarantor covenants and agrees that on and after the
date hereof and until the termination of the Total Commitment and when no
Letter of Credit or Note remains outstanding and all Guaranteed Obligations
have been paid in full, such Guarantor shall take, or will refrain from
taking, as the case may be, all actions that are necessary to be taken or not
taken so that no violation of any provision, covenant or agreement contained
in Section 7 or 8 of the Credit Agreement, and so that no Event of Default, is
caused by the actions of such Guarantor or any of its Subsidiaries.
13. The Guarantors hereby jointly and severally agree to pay all
reasonable out-of-pocket costs and expenses (x), after an Event of Default
shall have occurred and be continuing, of each Creditor in connection with the
enforcement of this Guaranty and the protection of such Creditor's rights
hereunder (including, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel) employed by any of the
Creditors) and (y) of the Agent in connection with any amendment, waiver or
consent relating hereto (including, without limitation, the reasonable fees
and disbursements of counsel (including in-house counsel) employed by the
Agent.
14. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and
their successors and assigns.
15. Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated except with the written consent of
the Required Banks (or to the extent required by Section 12.12 of the Credit
Agreement, with the written consent of each Bank) and each Guarantor affected
thereby (it being understood that the addition or release of any Guarantor
hereunder shall not constitute a change, waiver, discharge or termination
affecting any Guarantor other than the Guarantor so added or released).
16. Each Guarantor acknowledges that an executed (or conformed)
copy of each of the Credit Documents has been made available to its principal
executive officers and such officers are familiar with the contents thereof.
17. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of an Event of Default (such term to
mean and include any "Event of Default" as defined in the Credit Agreement
continuing after any applicable grace period), each Creditor is hereby
authorized at any time or from time to time, without notice to any Guarantor
or to any other Person, any such notice being expressly waived, to set off and
to appropriate and apply any and all deposits (general or special) and any
other indebtedness at any time held or owing by such Creditor to or for the
credit or the account of such Guarantor, against and on account of the
obligations and liabilities of such Guarantor to such Creditor under this
Guaranty, irrespective of whether or not such Creditor shall have made any
demand hereunder and although said obligations, liabilities, deposits or
claims, or any of them, shall be contingent or unmatured.
18. All notices, requests, demands or other communications
pursuant hereto shall be deemed to have been duly given or made when delivered
to the Person to which such notice, request, demand or other communication is
required or permitted to be given or made under this Guaranty, addressed to
such party at (i) in the case of any Creditor, as provided in the Credit
Agreement and (ii) in the case of any Guarantor, at its address set forth
opposite its signature below; or in any case at such other address as any of
the Persons listed above may hereafter notify the others in writing.
19. If claim is ever made upon any Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part
of said amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (b) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the Borrower), then and in such event each
Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon such Guarantor, notwithstanding any revoca-
tion hereof or of any other instrument evidencing any liability of the
Borrower, and such Guarantor shall be and remain liable to the aforesaid
payees hereunder for the amount so repaid or recovered to the same extent as
if such amount had never originally been received by any such payee.
20. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or
proceeding with respect to this Guaranty or any other Credit Document may be
brought in the courts of the State of New York or of the United States of
America for the Southern District of New York, and, by execution and delivery
of this Guaranty, each Guarantor hereby accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts and hereby irrevocably waives any right it may have to object to the
laying of venue of any such action or proceeding in the aforesaid courts and
hereby further irrevocably waives and agrees not to plead or claim that any
such action or proceeding has been brought in an inconvenient forum. Each
Guarantor hereby irrevocably designates, appoints and empowers the Borrower,
with offices on the date hereof at 901 Threadneedle, Suite 200, Houston, Texas
77079 as its designee, appointee and agent to receive, accept and acknowledge
for any on its behalf, and in respect of its property, service or any and all
legal process, summons, notices and documents which may be served in any such
action or proceeding. If for any reason such designee, appointee and agent
shall cease to be available to act as such, each Guarantor agrees to designate
a new designee, appointee and agent in New York City on the terms and for the
purposes of this provision satisfactory to the Agent for the Banks under this
Guaranty. Each Guarantor further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to each Guarantor at its address set forth opposite its
signature below. Nothing herein shall affect the right of any of the
Creditors to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against each Guarantor in any other
jurisdiction.
(b) Each Guarantor hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Guaranty or
any other credit document brought in the courts referred to in clause (a)
above and hereby further irrevocably waives and agrees not to plead or claim
in any such court that such action or proceeding brought in any such court has
been brought in an inconvenient forum.
21. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of or liquidated in compliance with
the requirements of Section 8.02 of the Credit Agreement (or such sale or
other disposition has been approved in writing by the Required Banks (or all
Banks if required by Section 12.12 of the Credit Agreement)) and the proceeds
of such sale, disposition or liquidation are applied in accordance with the
provisions of the Credit Agreement, to the extent applicable, such Guarantor
shall be released from this Guaranty and this Guaranty shall, as to each such
Guarantor or Guarantors, terminate, and have no further force or effect (it
being understood and agreed that the sale of any Person that owns, directly or
indirectly, the capital stock of any Guarantor shall be deemed to be a sale of
such Guarantor for the purposes of this Section 21).
22. At any time a payment in respect of the Guaranteed Obli-
gations is made under this Guaranty, the right of contribution, if any, of
each Guarantor against any other Guarantor required to make any payment to
such Guarantor pursuant to this Section 22 (a "Contributor") shall be
determined as provided in the immediately following sentence, with the right
of contribution of each Guarantor to be revised and restated as of each date
on which a payment (a "Relevant Payment") is made on the Guaranteed
Obligations under this Guaranty. At any time that a Relevant Payment is made
by a Guarantor that results in the aggregate payments made by such Guarantor
in respect of the Guaranteed Obligations to and including the date of the
Relevant Payment exceeding such Guarantor's Contribution Percentage (as
hereinafter defined) of the aggregate payments made by all Guarantors in
respect of the Guaranteed Obligations to and including the date of the
Relevant Payment (such excess, the "Aggregate Excess Amount"), each such
Guarantor shall have a right of contribution against each Contributor who has
made payments in respect of the Guaranteed Obligations to and including the
date of the Relevant Payment in an aggregate amount less than such
Contributor's Contribution Percentage of the aggregate payments made to and
including the date of the Relevant Payment by all Guarantors in respect of the
Guaranteed Obligations (the aggregate amount of such deficit, the "Aggregate
Deficit Amount") in an amount equal to (x) a fraction the numerator of which
is the Aggregate Excess Amount of such Guarantor and the denominator of which
is the Aggregate Excess Amount of all Guarantors multiplied by (y) the
Aggregate Deficit Amount of such Contributor. A Guarantor's right of
contribution, if any, pursuant to the preceding sentences shall arise at the
time of each computation, subject to adjustment to the time of any subsequent
computation; provided, that no Guarantor may take any action to enforce such
right until the Guaranteed Obligations have been paid in full, all Letters of
Credit have terminated and the Total Commitment has been terminated, it being
expressly recognized and agreed by all parties hereto that any Guarantor's
right of contribution arising pursuant to this Section 22 against any
Contributor shall be expressly junior and subordinate to such Contributor's
obligations and liabilities in respect of the Guaranteed Obligations and any
other obligations owing under this Guaranty. As used in this Agreement, (i)
each Contributor's "Contribution Percentage" shall mean the percentage
obtained by dividing (x) the Adjusted Net Worth of such Contributor by (y) the
aggregate Adjusted Net Worth of all Guarantors; (ii) the "Adjusted Net Worth"
of each Guarantor shall mean the greater of (x) the Net Worth of such
Guarantor or (y) zero; and (iii) the "Net Worth" of each Guarantor shall mean
the amount by which the fair salable value of such Guarantor's assets on the
Initial Borrowing Date exceeds its existing debts and other liabilities
(including contingent liabilities, but without giving effect to any Guaranteed
Obligations arising under this Guaranty), in each case after giving effect to
all transactions occurring on the Initial Borrowing Date.
23. Each Guarantor recognizes and agrees that, except for any
right of contribution arising pursuant to Section 22, until the Guaranteed
Obligations have been paid in full, each Guarantor who makes any payment in
respect of the Guaranteed Obligations shall have no right of contribution or
subrogation against any other Guarantor in respect of such payment, any such
right of contribution or subrogation arising under law or otherwise being
expressly waived by all Guarantors until the Guaranteed Obligations have been
paid in full.
24. Each Guarantor recognizes and acknowledges that the rights to
contribution arising hereunder shall constitute an asset in favor of the party
entitled to such contribution. In this connection, each Guarantor has the
right to waive its contribution right against any other Guarantor to the
extent that after giving effect to such waiver such Guarantor would remain
solvent, in the determination of the Required Banks.
25. This Guaranty may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Guarantors and the
Agent.
26. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
27. It is understood and agreed that any Subsidiary of the
Borrower that is required to execute a counterpart of this Guaranty pursuant
to the Credit Agreement shall automatically become a Guarantor hereunder by
executing a counterpart hereof and delivering the same to the Agent.
28. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
Address for each Guarantor
c/o Reading & Bates Drilling Co. READING & BATES DEVELOPMENT CO.
901 Threadneedle
Suite 200
Houston, Texas 77079 By_______________________________
Attention: General Counsel Title:
Tel: (713) 496-5000
Fax: (713) 496-0285
Accepted and Agreed to:
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Agent
By____________________________
Title:
By____________________________
Title:
Exhibit 10.115
INDENTURE OF FIRST NAVAL MORTGAGE
RB DEVELOPMENT CO.
- and -
CHRISTIANIA BANK OG KREDITKASSE, agent
as Mortgagee
o.p.v. SEILLEAN
Dated August __, 1996
=============================================================================
INDEX
CLAUSE SUBJECT MATTER PAGE
1 REPRESENTATIONS AND COVENANTS . . . . . . . . . . . . . . . . . . 2
2 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . 4
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 10
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . . . 10
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7 Vessel COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . . . 18
9 ENFORCEABILITY AND MORTGAGEE'S POWERS . . . . . . . . . . . . . . 19
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . . . 21
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . 22
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . 22
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 25
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . . . 25
18 WAIVER; AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . 25
19 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 25
20 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT 1 FORM OF CREDIT AGREEMENT
EXHIBIT 2 FORM OF AMENDMENT
EXHIBIT 3 FORM OF SECOND AMENDMENT
EXHIBIT 4 FORM OF SUBSIDIARY ASSUMPTION AGREEMENT
EXHIBIT 5 FORM OF SUBSIDIARY GUARANTY
==============================================================================
THIS INDENTURE OF FIRST NAVAL MORTGAGE made and entered into this __
day of August 1996, between READING & BATES DEVELOPMENT CO., corporation duly
constituted and existing in conformity with the laws of the State of Delaware
with its principal office at 901 Threadneedle, Suite 200, Houston, Texas
77079 (hereinafter called the "Owner") and CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH having offices at 11 West 42nd Street, New York, NY 10036, as
agent for the Banks (as hereinafter defined) (hereinafter called the
"Mortgagee"), on the Panamanian oil production vessel SEILLEAN of 50,098 gross
registered tons, 15,278 net registered tons and with a length of 236.47 a
breadth of 37.00 and a depth of 19.80 and Provisional Patent of Navigation No.
_________ (hereinafter called the "Vessel"), duly registered under the laws
and flag of the Republic of Panama, the detailed description of which is
hereinafter more particularly set forth.
W I T N E S S E T H :
WHEREAS
(A) The Owner is the sole owner of the whole of the oil production vessel
SEILLEAN documented under the laws and flag of the Republic of Panama.
(B) By a Credit Agreement dated as of April 30, 1996 (as amended, restated
or supplemented from time to time, the "Credit Agreement") among
Reading & Bates Corporation, a Delaware corporation, as guarantor
("Holdings"), Reading & Bates Drilling Co, an Oklahoma corporation, as
borrower (the "Borrower"), the banks party thereto (the "Banks"),
Credit Lyonnais New York Branch, as co-agent (the "Co-Agent") and the
Mortgagee, as agent, (the form of which Credit Agreement together with
the form of promissory note of the Borrower attached as Exhibit B
thereto but without the remaining exhibits is attached hereto as
Exhibit 1), it was agreed among other things that the Banks would make
available to the Borrower a reducing revolving credit facility (the
"Facility") in the maximum aggregate principal amount at any one time
outstanding of One Hundred Million United States Dollars
(U.S.$100,000,000), providing for the making of Loans and the issuance
of and participations in Letters of Credit as contemplated therein.
(C) By an Amendment to the Credit Agreement dated as of July 9, 1996 (the
"Amendment", the form of which Amendment without attachments is
attached hereto as Exhibit 2), among Holdings, the Borrower, the
Banks, the Co-Agent and the Mortgagee, as agent, it was agreed among
other things that the Banks would increase the amount available to the
Borrower under the Facility to an aggregate amount at any time
outstanding of One Hundred Forty Million United States Dollars
(US$140,000,000). As required by Article 1515 Section 3 of the
Commercial Code of Panama, the dates on which payments of principal in
respect of the Loans are due may be determined from the provisions of
the Credit Agreement including Section 3.03.
(D) By an Amendment to the Credit Agreement dated as of August ____, 1996,
entered into by Holdings, the Borrower, the Banks, the Co-Agent and
the Mortgagee, as agent (the "Second Amendment, the form of which
Second Amendment without attachments is attached hereto as Exhibit 3),
it was agreed to amend Section 7.13 of the Credit Agreement by
deleting all references to "RB Drilling Co." contained therein and
inserting in lieu thereof references to "Reading & Bates Development
Co.".
(E) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Borrower payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(F) The Owner, for good and valuable consideration has authorized,
executed and delivered a Subsidiary Assumption Agreement (as amended,
restated or supplemented from time to time, the "Subsidiary Assumption
Agreement", the form of which is attached hereto as Exhibit 4),
pursuant to which the Owner agreed to become a party to a Subsidiary
Guaranty (the "Subsidiary Guaranty", the form of which Subsidiary
Guaranty without attachments is attached hereto as Exhibit 5) in favor
of the Agent guaranteeing the performance by the Borrower of its
obligations under the Credit Agreement and the other Credit Documents.
(G) This Mortgage is made for the benefit of the Mortgagee to secure the
guaranty by the Borrower of (i) the full and prompt payment when due
of (x) the principal and interest on the Notes issued, and Loans made,
under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued under the
Credit Agreement and (y) all other obligations and indebtedness
(including, without limitation, indemnities, Fees and interest
thereon) of the Borrower to the Secured Creditors (as hereinafter
defined), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and the other Credit
Documents including, without limitation, this Mortgage and the due
performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents including, without limitation, this Mortgage;
(ii) any and all sums advanced by the Mortgagee in order to preserve
the Collateral (as hereinafter defined) or preserve its security
interest in the Collateral; (iii) in the event of any proceeding for
the collection or enforcement of any indebtedness, obligations, or
liabilities of the Borrower referred to in clause (i) above, after an
Event of Default shall have occurred and be continuing, the reasonable
expenses of the Mortgagee of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Mortgagee of its rights
hereunder, together with reasonable attorneys' fees of counsel to the
Mortgagee and court costs; and (iv) all amounts paid by any Indemnitee
(as defined herein) as to which such Indemnitee has the right to
reimbursement under Clause 13 of this Mortgage (all such obligations,
liabilities, sums and expenses referred to in clauses (i) through (iv)
above being collectively referred to as the "Obligations"). It is
acknowledged and agreed that the "Obligations" shall include
extensions of credit of the types described above, whether outstanding
on the date of this Mortgage or extended from time to time after the
date of this Mortgage.
(H) This Indenture of First Naval Mortgage, which is entered into by the
Owner in consideration of the Banks entering into the Amendment and
the Second Amendment and agreeing to make the Facility available to
the Borrower and as a condition thereto and for other good and
valuable consideration provided by the Banks (the sufficiency of which
the Owner hereby acknowledges).
NOW, THEREFORE, the appearing parties, each in the name and on behalf of his
respective principal, state that they hereby execute this Indenture of First
Naval Mortgage pursuant to the following representations:
1. REPRESENTATIONS AND COVENANTS
1.01 The Owner represents and covenants to the Mortgagee that:
a. The Owner is the sole and absolute owner of the Vessel under the
laws and flag of the Republic of Panama;
b. The Owner, as sole legal and beneficial owner of the Vessel, has
received and presently possesses a Provisional Patent of
Navigation for the Vessel, duly issued by the Republic of Panama
under No. ________;
c. Neither the whole nor any share in the Vessel is subject to any
Security Interest (as defined herein) (except for Permitted
Liens (as defined herein) and the lien of this Mortgage);
d. the Owner has not sold or transferred, or agreed to sell or
transfer, title to the Vessel or any share therein;
e. the Owner is a corporation duly organized and validly existing
and in good standing under the laws of the State of Delaware;
f. the Owner has full power and authority (i) to execute and
deliver this Mortgage, (ii) to mortgage the Vessel as security
for the Obligations and (iii) to comply with the provisions of,
and perform all its obligations under, this Mortgage;
g. the Owner has complied with all statutory and other material
requirements relative to the ownership, registration and
operation of the Vessel;
h. 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 preliminarily recorded with the
Public Registry in Panama through the Panamanian Consulate in
London, England will create a legal, valid and enforceable first
preferred mortgage lien on the Vessel subject only to the
permanent filing of this Mortgage in the Public Registry in
Panama within six months of the date of the preliminary recorded
filing;
i. the entry into and performance by the Owner of this Mortgage
does not and will not during the Credit Facility Period (as
defined herein) 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;
j. 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 during the
Credit Facility Period;
k. 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;
l. the Owner is in compliance with all applicable Environmental
Laws (as defined herein) relating to the Vessel, its operation
and management;
m. the Owner has obtained all Environmental Approvals (as defined
herein) and is in compliance with all requests thereof;
n. no Environmental Claim (as defined herein) has been made or
threatened against the Owner or otherwise in connection with the
Vessel;
o. no Environmental Incident (as defined herein) which has
resulted, or which could reasonably be expected to result, in an
Environmental Claim in excess of US$200,000 has occurred; and
p. The Owner hereby affirms as its representations all of the
statements contained in the "WHEREAS" clauses of this Mortgage.
1.02 The representations and warranties of the Owner set out in Clause 1.01
shall survive the execution of this Mortgage and shall be deemed to be
repeated at the time of the making of each Loan (as defined herein)
and at the time of the issuance of each Letter of Credit, with respect
to the facts and circumstances existing at each such time, as if made
at each such time.
1.03 The Mortgagee represents that the Banks have made the Facility
available to the Owner, as evidenced by, inter alia, the Credit
Agreement, the Notes and the Security Documents (as defined herein),
and accepts the Mortgage constituted by this instrument upon the
Vessel as security for the due and prompt payment and performance of
the obligations of the Owner under the Credit Agreement and the other
Credit Documents.
1.04 Each of the contracting parties declares that it is satisfied with the
representations and covenants made by the other and accepts them as
true; and the parties mutually acknowledge their respective legal
status as well as the authority of the persons representing them
respectively in this instrument to sign the same on behalf of their
respective principals.
2. DEFINITIONS AND INTERPRETATION
2.01 In this Mortgage unless the context otherwise requires, the following
expressions shall have the following meanings:
"Agent" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Amendment" means the Amendment dated as of July 9, 1996 among
Holdings, the Borrower, the Banks, the Co-Agent and the Mortgagee, as
agent first referred to in Recital (C) hereto;
"Bank" means any lender listed from time to time on Annex 1 to the
Credit Agreement (collectively, the "Banks");
"Collateral Assignment of Insurances" means the Collateral Assignment
of Insurances in respect of the Vessel executed or to be executed by
the Owner in favor of the Agent;
"Commitment" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of April 30,
1996, among Holdings, the Borrower, the Banks, the Co-Agent, and the
Mortgagee, as agent as amended by the Amendment and the Second
Amendment first referred to in Recital (B) hereto, and as further
amended, restated or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Unpaid Drawings
together with interest, fees and all other obligations are paid in
full;
"Credit Party" shall have the same meaning for such term as set forth
in the Credit Agreement;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.07(b) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of business of such entity and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"Environmental Incident" means (i) any release of Environmentally
Sensitive Material from the Vessel, (ii) any incident in which
Environmentally Sensitive Material is released from a vessel other
than the Vessel and which involves collision between the Vessel and
such other vessel or some other incident of navigation or operation,
in either case, where the Vessel 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 Vessel and where the Vessel 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. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act of
1976 (42 U.S.C. 6901 et seq.), the Clean Air Act (42 U.S.C. 7401
et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et
seq.) and the Toxic Substances Control Act (15 U.S.C. 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);
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"Insurances" includes all policies and contracts of insurance (which
expression includes all entries of the Vessel in a protection and
indemnity association) which are from time to time taken out or
entered into in respect of the Vessel 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 Section 1.08 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01 of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Major Casualty" means any casualty to the Vessel 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 each promissory note of the Borrower referred to in
Recital (D) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (F) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
semi-submersible drilling rig JACK BATES owned by the Borrower
documented under the laws and flag of the United States of America
with Official Number 906283 of 19,928 gross registered tons and 14,948
net registered tons; (ii) the jack-up drilling rig D. R. STEWART owned
by Reading & Bates Exploration Co. ("R&B Exploration") documented
under the laws and flag of the United States of America with Official
Number 626904 of 6,494 gross registered tons and 5,834 net registered
tons; (iii) the drilling tender W.D. KENT owned by R&B Exploration
documented under the laws and flag of the United States of America
with Official Number 583169 of 5,383 gross registered tons and 4,185
net registered tons; (iv) the jack-up drilling rig RON TAPPMEYER owned
by Reading & Bates (A) Pty Ltd. documented under the laws and flag of
Australia with Official Number 855213 of 11,455 gross registered tons
and 3,436 net registered tons; (v) the semi-submersible drilling rig
J.W. McLEAN owned by the Borrower documented under the laws and flag
of the Republic of Panama with Patente Number 25384-PEXT of 15,453
gross registered tons and 4,636 net registered tons; (vi) the drilling
tender CHARLEY GRAVES owned by Reading and Bates Borneo Drilling Co.,
Ltd. documented under the laws and flag of the Republic of Panama with
Patente Number 6618-76 CH of 5,829 gross registered tons and 1,748 net
registered tons; and (vii) the jack-up drilling rig HARVEY H. WARD
owned by HRB Rig Corporation documented under the laws and flag of the
United States of America with Official Number 642693 of 4,121 gross
registered tons and 3,079 net registered tons and (viii) semi-
submersible drilling Rig 41 owned by RB Drilling Co. documented under
the laws and flag of the Republic of Panama with Patente Number 22365-
95 of 10,078 gross tons and 3,024 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 written request of the Agent,
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 written request of the Agent,
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 Banks; and provided that Permitted Liens shall not
include any liens described in subclauses (1) through (7) 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 Vessel'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);
"Required Banks" shall have the meaning for such term as set forth in
the Credit Agreement;
"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 Vessel otherwise than by
requisition for hire;
"Second Amendment" means the Second Amendment dated as of August ___,
1996 among Holdings, the Borrower, the Banks, the Co-Agent and the
Mortgagee, as agent first referred to in Recital (D) hereto:
"Secured Creditors" shall mean the Banks, the Letter of Credit Issuer
and the Agent under and as defined in the Credit Agreement;
"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;
"Subsidiary Assumption Agreement" means the agreement pursuant to
which the Owner has agreed to become a party to, inter alia, the
Subsidiary Guaranty.
"Subsidiary Guaranty" means the Guaranty in favor of the Agent and the
Banks dated as of April 30, 1996 as amended, restated or supplemented
from time to time to which the Owner has become a signatory pursuant
to the Subsidiary Assumption Agreement as first referred to in Recital
(F) hereto;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised total loss of the Vessel; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Vessel otherwise
than by requisition for hire; (c) the capture, seizure, arrest,
detention or confiscation of the Vessel by any government or by
persons acting or purporting to act on behalf of any government unless
the Vessel be released from such capture, seizure, arrest or detention
within ninety (90) days after the occurrence thereof;
"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;
"Vessel" means the vessel 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);
"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.
2.02 Except where otherwise expressly provided or unless the context
otherwise requires, words and expressions defined in the Credit
Agreement shall bear the same meanings when used in this Mortgage.
2.03 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.
3. MORTGAGE
3.01 In order to secure the Obligations the Owner has granted, conveyed and
mortgaged and does by these presents grant, convey and mortgage unto
the Mortgagee, its successors and assigns, in accordance with the
provisions of Chapter V, Title IV of Book Second of the Code of
Commerce and pertinent provisions of the Civil Code and other
legislation of the Republic of Panama, the whole of the Vessel, the
detailed description of which is as follows:
oil production vessel SEILLEAN; gross tonnage approximately
50,928; net tonnage approximately 15,278; length overall 236.47
meters, breadth 37.00 meters; depth 19.80 meters; built in 1986
by Harland & Wolff PLC in Belfast, Northern Ireland; radio call
letters _______;
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 Obligations.
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 to
the Secured Creditors and their respective successors or assigns the
Obligations as and when the same shall become due and payable in
accordance with the terms of the Credit Agreement, the Subsidiary
Guaranty and this Mortgage and the Owner and its successors and
assigns shall observe and comply with the covenants, terms and
conditions contained in the Subsidiary Guaranty 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, then these
presents and the rights hereunder shall cease, determine and be void
and, in such event, the Mortgagee agrees to furnish, execute and
record, at the expense of the Owner, all such documents as the Owner
may reasonably require to discharge this Mortgage, otherwise to be
and remain in full force and effect.
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 Vessel and none of the Secured Creditors
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.
3.03 This Mortgage, when it shall have been duly executed and signed on
behalf of the parties, shall be provisionally recorded through the
Panamanian Consulate at London, England and thereafter within three
months permanently recorded in the Public Registry in Panama.
4. PAYMENT COVENANTS
4.01 The Owner hereby covenants with the Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 the relevant expense,
claim, liability, loss, cost, duty, fee, charge or other money
is paid by any Secured Creditor (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 any Secured Creditor, as the case may be, under this
Mortgage and the Subsidiary Guaranty 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
Mortgagee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Mortgagee shall not have to enforce any of the other
Security Documents before enforcing the security created by this
Mortgage;
(d) no failure or delay on the part of the Mortgagee in exercising
any right, power, privilege or remedy hereunder and no course of
dealing between Owner and Mortgagee (in its capacity as
mortgagee or in its capacity as agent) shall operate as a waiver
thereof; nor shall any single or partial exercise of any right,
power, privilege or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right,
power or privilege hereunder. The rights and remedies herein
expressly provided are cumulative and not exclusive of any
rights or remedies which the Mortgagee (in its capacity as
mortgagee or in its capacity as agent) would otherwise have. No
notice to or demand on the Owner in any case shall entitle the
Owner to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the
Mortgagee (in its capacity as mortgagee or in its capacity as
agent) to any other or further action in any circumstances
without notice or demand; and
(e) any waiver by the Mortgagee of any terms of this Mortgage or any
consent given by the Mortgagee 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 Mortgagee
and the Owner shall be conditional upon no security or payment to the
Secured Parties or any of them by the Credit Parties 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 Mortgagee 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 Secured Creditors 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 Credit Parties, the Secured Creditors or any other
person:
(a) any waiver granted to or composition with the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, the
Subsidiary Guaranty, any of the other Credit Documents or any
other document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of the Credit Party or any other person under the
Credit Agreement, the Subsidiary Guaranty, any of the other
Credit Documents or any other document or security.
6. INSURANCE
6.01 The Owner covenants with the Mortgagee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains outstanding, insure the Vessel and keep her
insured, or cause the Vessel 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 Mortgagee. With respect to hull
and machinery/increased value insurance, including war risk, the
Owner shall insure the Vessel and keep her insured, or cause the
Vessel to be insured, for an amount which is at least the agreed
value of the Vessel, and when such amount is aggregated with the
total amount of such insurance coverage on the Other Rigs, such
aggregate amount shall be at least 110% of the Total Commitment.
Such insurance shall cover marine and war risk perils, on hull
and machinery, with per occurrence deductibles not in excess of
US$500,000 (such deductibles not to apply in the case of Total
Loss of the Vessel), and shall be maintained in the broadest
forms available in the American, British and Scandinavian
insurance markets or in such other major international markets
acceptable to the Mortgagee. The Owner shall maintain
protection and indemnity 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 at least equal from time to time to the limitation of
liability amount applicable to the Vessel under the Oil
Pollution Act 1990 or other Environmental Laws), through
underwriters or associations acceptable to the Mortgagee. In
addition, the Owner shall, at its own expense, furnish to the
Mortgagee a mortgagee's single interest policy providing
coverage which, when aggregated with the mortgagee's interest
insurance furnished to the Mortgagee in respect of the Other
Rigs, shall be in an amount equal to at least 110% of the Total
Commitment (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 Mortgagee). Such mortgagee's interest
insurance and any additional insurance policies for the benefit
of the Mortgagee shall be maintained in the broadest form
available in the American, British and Scandinavian markets or
other major international markets acceptable to the Mortgagee
through underwriters acceptable to the Mortgagee. The Vessel
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 satisfying the
conditions of the relevant policies evidence of which shall be
furnished to the Mortgagee.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the Mortgagee,
shall contain conditions, terms, stipulations and insuring
covenants satisfactory to the Mortgagee, 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 the Mortgagee shall
be the loss payee for distribution by it to itself, the Banks
and the Owner as their interests may appear, and shall provide
for at least ten days' prior notice to be given to the Mortgagee
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 Mortgagee and the Banks shall be named as
co-assureds on all such policies and insurance contracts, but
without liability of the Mortgagee, or the Banks for premiums or
calls. Complete certified copies of all such policies, binders
and other interim insurance contracts shall be delivered to the
Mortgagee. Originals shall also be provided upon the request of
the Mortgagee. The Owner shall furnish to the Mortgagee
annually a detailed report signed by a firm of marine insurance
brokers satisfactory to the Mortgagee as to the insurance
maintained in respect of the Vessel, 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 Mortgagee, by notice to the
underwriters, although the following insurance is payable to the
Mortgagee, (i) any loss under any insurance on the Vessel with
respect to Protection and Indemnity Risks may be paid directly
to the Owner to reimburse it for any loss, damage or expense
incurred by it and covered by such insurance or to the person to
whom any liability covered by such insurance has been incurred
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 Vessel
involving any damage to the Vessel, 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 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$1,000,000.00 (One Million
U.S. Dollars), the underwriters shall not make such payment
without first obtaining the written consent thereto of the
Mortgagee (which consent shall not be unreasonably withheld).
Any loss covered by this paragraph which is paid to the
Mortgagee 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 Mortgagee to, or as directed by, the Owner
and all other payments to the Mortgagee of losses covered by
this paragraph shall be applied by the Mortgagee in accordance
with Clause 10.01.
In the event of a Total Loss, all insurance payments therefor
shall be paid to the Mortgagee. The Owner shall not declare or
agree with the underwriters that the Vessel is a Total Loss
without the prior written consent of the Mortgagee.
(c) In the event of a Total Loss of the Vessel, the Mortgagee 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
Secured Creditors under the Security Documents, whether or not
the same shall be then due and payable, together with accrued
interest and the cost, if any, of collecting the insurance, and
pay the balance as provided in Clause 10.
(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 Vessel 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 in which the Vessel from time to
time is engaged.
(e) The Owner shall renew all such insurances as they expire and so
as to insure that there is no gap in coverage, keep the
Mortgagee advised of the progress of such renewals, and shall
provide evidence of such renewal in writing to the Mortgagee 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 Mortgagee.
(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 Vessel or suffer the Vessel to be
employed otherwise than in conformity with the terms of the
instruments of insurance aforesaid relative to the Vessel
(including any warranties, express or implied, therein) without
first obtaining the consent to such employment of the insurers
and complying with such requirements as to extra premium or
otherwise as the insurers may prescribe.
7. Vessel COVENANTS
7.01 The Owner covenants with the Mortgagee that throughout the Credit
Facility Period the Owner will:
(a) keep the Vessel documented in its name as a Panamanian flag
vessel and do or allow to be done nothing whereby such
documentation may be forfeited or imperilled;
(b) not without the previous consent in writing of the Mortgagee
except as otherwise contemplated by the Credit Agreement, change
the name of the Vessel or make any modification to the Vessel
which would materially alter the structure, type or performance
characteristics of the Vessel and which would materially reduce
the value of the Vessel;
(c) keep the Vessel in a good and efficient state of repair
consistent with first-class ship-ownership and management
practice employed by owners of drilling rigs of similar size and
type and so as to maintain her present class (namely 100 A1 Oil
(Processing) Tanker DP (AA) LMC, UMS, 1GS) at Lloyd's Register
free of recommendations and qualifications and change of class,
save those approved in writing by the Mortgagee and so as to
comply with all applicable laws, treaties and conventions of the
Republic of Panama and other applicable jurisdictions, and rules
and regulations issued thereunder, and have on board as and when
required thereby valid certificates showing compliance
therewith;
(d) procure that all repairs to or replacement of any damaged, worn
or lost parts or equipment in such manner (both as regards
workmanship and quality of materials) as to not materially
diminish the value of the Vessel and not to remove any material
part of, or item of equipment owned by the Owner installed on,
the Vessel unless (i) 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 Mortgagee and becomes on
installation on the Vessel the property of the Owner and subject
to the security constituted by this Mortgage or (ii) the removal
will not materially diminish the value of the Vessel;
(e) submit the Vessel to such periodical or other surveys as may be
required for classification purposes and if so required to
supply to the Mortgagee copies of all survey reports issued in
respect thereof;
(f) permit the Mortgagee by independent surveyors to board the
Vessel 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,
provided that unless an Event of Default shall have occurred and
be continuing, the cost of any such inspection shall be for the
account of the Mortgagee;
(g) 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 Vessel and all tolls, dues, taxes,
assessments, governmental charges, fines and penalties lawfully
charged on or in respect of the Vessel and all other expenses
whatsoever in respect of the Vessel and in the event of arrest
of the Vessel 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 Vessel from such
arrest or detention forthwith upon receiving notice thereof by
providing bail or otherwise as the circumstances may require;
(h) not employ the Vessel 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 can reasonably be expected to 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 Vessel 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 Vessel unless there shall have been
effected by the Owner (at its expense) such special, additional
or modified insurance cover as the Mortgagee may reasonably
require;
(i) promptly furnish to the Mortgagee all such information as it may
from time to time require regarding the Vessel, her employment,
position and engagements, particulars of all towages and
salvages and, upon the Mortgagee's request in writing, copies of
all charters and other contracts for her employment or otherwise
howsoever concerning her;
(j) notify the Mortgagee forthwith by telecopy thereafter confirmed
by letter of:
(i) any casualty to the Vessel which is or is likely to be a
Major Casualty; and
(ii) any occurrence in consequence whereof the Vessel 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 complied with; and
(iv) any arrest of the Vessel or the exercise or purported
exercise of any lien on the Vessel or any requisition of
the Vessel for hire; and
(v) any intended dry docking of the Vessel, as to which the
Owner shall give the Mortgagee 30 days prior notice,
provided, that in the event of any emergency dry docking
of the Vessel, the Owner shall immediately notify the
Mortgagee; and
(vi) any intended deactivation or lay-up of the Vessel (other
than for normal periods of inactivity between contracts
for the Vessel during which periods the Vessel remains
manned) and obtain the Mortgagee's prior written consent;
(k) keep proper books of account in respect of the Vessel and as and
when the Mortgagee may so reasonably require make such books
available for inspection on behalf of the Mortgagee 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;
(l) observe the obligations contained in Sections 7 and 8 of the
Credit Agreement which apply to the Vessel and the Owner, and in
pursuance thereof such obligations shall be incorporated in and
deemed to form part of this Mortgage mutatis mutandis;
(m) not without the previous consent in writing of the Mortgagee
(such consent not to be unreasonably withheld), put the Vessel
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 United States Dollars (US$2,500,000.00) (or
the equivalent in any other currency) unless (i) such person
shall first have given to the Mortgagee and in terms
satisfactory to it a written undertaking not to exercise any
lien on the Vessel for the cost of such work or otherwise or
(ii) the cost of such work shall be fully covered by applicable
insurance;
(n) comply with and satisfy all the provisions of applicable laws
and regulations of the Republic of Panama, as at any time
amended, in order to establish and maintain this Mortgage as a
first priority naval mortgage thereunder upon the Vessel and
upon all renewals, improvements and replacements made in or to
the same, and promptly to furnish to the Mortgagee from time to
time such proofs as the Mortgagee may request for its
satisfaction with respect to the compliance by the Owner with
the provisions of this sub-clause, including, appropriate
certificates of the Public Registry showing that this Mortgage
has been duly registered and filed and is a first and absolute
lien on the Vessel;
(o) place, and use due diligence to retain, a properly certified
copy of this Mortgage on board the Vessel with her papers and
cause such certified copy of this Mortgage to be exhibited to
any and all persons having business with the Vessel which might
give rise to any lien thereon other than a lien for crew's wages
and salvage and to any representative of the Mortgagee on demand
and to place and keep prominently displayed in the chart room
and in the master's cabin of the Vessel a framed printed notice
in plain type 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 Vessel is subject to an Indenture of First Naval
Mortgage in favor of CHRISTIANIA BANK OG KREDITKASSE, as Agent
for the Banks defined in said Mortgage, in conformity with the
provisions of Chapter V, Title IV of Book Second of the Code of
Commerce, and the pertinent provisions of the Civil Code and
other legislation of the Republic of Panama. Under the terms of
said Mortgage neither the owner, any charterer, the Master of
the Vessel nor any other person shall have the right, power or
authority to create, incur or permit to be placed upon the
Vessel any other lien whatsoever other than for current crew's
wages and salvage and Permitted Liens (as that term is defined
in said Mortgage)."
(p) comply, or procure compliance with, all Environmental Laws and
Environmental Approvals relating to the Vessel, its operation or
management and the business of the Owner from time to time;
(q) notify the Mortgagee 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 Vessel; or
(ii) any Environmental Incident occurring, and keep the
Mortgagee advised, in writing on such regular basis and
in such detail as the Mortgagee shall require, of the
Owner's response to such Environmental Claim or
Environmental Incident.
(r) not sell, mortgage or transfer the Vessel (other than as
permitted by the Credit Agreement) without the written consent
of the Mortgagee having first been obtained, and any such
written consent to any one such sale, mortgage or transfer shall
not be construed to be a waiver of this provision with respect
to any subsequent proposed sale, mortgage or transfer. Any such
sale, mortgage or transfer shall be subject to the provisions of
this Mortgage and the lien it creates. The Owner shall not
charter the Vessel to, or permit the Vessel 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
sail in Cuban waters or enter any Cuban port for any purpose 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; if such transaction or violation would (i) expose the
Mortgagee to any penalty, sanction or investigation or (ii)
jeopardize the lien created by this Mortgage or (iii) have a
material adverse effect on the Owner or the operation of the
Vessel;
(s) shall not cause or permit the Vessel to be operated in any
manner contrary to law (except where the failure to operate in
compliance with any law would not have a material adverse effect
on the Owner, the Vessel or the lien of this Mortgage), shall
not abandon the Vessel in a foreign port and shall not engage in
any unlawful trade or violate any law or carry any cargo that
shall expose the Vessel to forfeiture or capture.
8. PROTECTION OF SECURITY
8.01 The Mortgagee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit Documents be entitled (but
not bound) at any time and as often as may be necessary (but unless an
Event of Default shall have occurred and be continuing with prior
written notice to the Owner) 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 Credit 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, reasonable legal
fees) so incurred by the Secured Creditors 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 in any material respect with the
provisions of Clause 6 or any of them the Mortgagee shall be
entitled (but not bound) to effect or to replace and renew and
thereafter to maintain the Insurances in such manner it, in its
discretion, 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 Mortgagee
may nominate and, upon the direction of the Mortgagee 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 Mortgagee 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;
(b) if the Owner does not comply with the provisions of Clause
7.01(d) or 7.01(f) the Mortgagee shall be entitled (but not
bound) to arrange for the carrying out of such repairs to and/or
surveys of the Vessel as it deems expedient or necessary; and
(c) if the Owner does not comply with the provisions of Clause
7.01(h) the Mortgagee 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 Vessel.
9. ENFORCEABILITY AND MORTGAGEE'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 Mortgagee or the Banks
having served on the Owner any such notice as is referred to in
Section 9 of the Credit Agreement) the security constituted by this
Mortgage shall become immediately enforceable and the Mortgagee 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
Vessel or otherwise and in particular:
(a) to exercise all the rights and remedies in foreclosure and
otherwise given to mortgagees by the laws of the Republic of
Panama or other applicable laws;
(b) to take possession of the Vessel whether actually or
constructively and/or otherwise to take control of the Vessel
wherever the Vessel may be and cause the Owner or any other
person in possession of the Vessel forthwith upon demand to
surrender the same to the Mortgagee without legal process and
without liability of the Mortgagee 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 Mortgagee;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Mortgagee 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) all such proceedings in connection with the Vessel, the
Insurances, or any Requisition Compensation as the Mortgagee in
its absolute discretion thinks fit and to discharge, compound,
release or compromise claims against the Owner in respect of the
Vessel which have given or may give rise to any charge or lien
on the Vessel or which are or may be enforceable by proceedings
against the Vessel;
(f) to sell the Vessel 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 Mortgagee
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 Vessel at any such public auction and to
set off the purchase price against all or any part of the
Obligations, subject to notice of sale being given by the
Mortgagee to the Owner and other mortgagees of record, if any,
by airmail, postage pre-paid and by publication once in a
newspaper of general circulation in the City of Panama, Republic
of Panama, not less than twenty (20) calendar days in advance of
the sale, to satisfy the requirement of notice of sale contained
in Article 1527 of the Panama Code of Commerce. Such notice
shall be necessary only in respect of the initial date of sale;
(g) to manage, insure, maintain and repair the Vessel and to
charter, employ, sail or lay up the Vessel in such manner, upon
such terms and for such period as the Mortgagee in its absolute
discretion deems expedient and for the purposes aforesaid the
Mortgagee shall be entitled to do all acts and things incidental
or conducive thereto and in particular to enter into such
arrangements respecting the Vessel, and the insurance,
management, maintenance, repair, classification, chartering and
employment of the Vessel, in all respects as if the Mortgagee
were the owner of the Vessel 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 Mortgagee in or about the
exercise of the power vested in the Mortgagee under
Clause 9.01(g);
(i) generally, to recover from the Owner on demand each and every
expense, liability or loss incurred by the Mortgagee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The Mortgagee 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 Mortgagee by this Mortgage or to which
the Mortgagee may at any time be entitled hereunder.
9.03 Neither the Secured Creditors 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 Mortgagee shall not by reason of the taking possession of the
Vessel 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 Vessel or any share therein by the Mortgagee the
purchaser shall not be bound to see or enquire whether the Mortgagee'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 Mortgagee and
the receipt of the Mortgagee for the purchase money shall effectively
discharge the purchaser who shall not be concerned with the manner of
application of the proceeds of sale or be in any way answerable
therefor.
10. APPLICATION OF MONEYS
10.01 (a) All moneys received by the Mortgagee or any Secured Creditor,
including, without limitation, in respect of sale of the Vessel
or any part thereof, in respect of recovery under the
Insurances, or in respect of Requisition Compensation, shall be
applied in the following manner:
(i) first, to the payment of all amounts owing the Mortgagee
of the type described in clauses (ii) and (iii) of
Recital (F);
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to
the outstanding Obligations shall be paid to the Secured
Creditors as provided in Clause 10.01(c), with each
Secured Creditor receiving an amount equal to such
Obligations held by it or, if the proceeds are
insufficient to pay in full all such Obligations, its Pro
Rata Share (as defined below) of the amount remaining to
be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and
following the termination of this Mortgage pursuant to
Clause 3.01, any surplus then remaining shall be paid to
the Owner, subject, however, to the rights of the holder
of any then existing Lien of which the Mortgagee has
actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Mortgagee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Agent under the Credit Agreement for the
account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Mortgagee shall be entitled to reply upon
(i) the Agent under the Credit Agreement and (ii) the Secured
Creditors for a determination (which the Agent and each Secured
Creditor, by their acceptance of the benefits of this Mortgage
shall be obligated to provide upon request of the Mortgagee) of
the outstanding Obligations owed to the Secured Creditors.
Unless it has actual knowledge (including by way of written
notice from a Secured Creditor) to the contrary, the Agent under
the Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Mortgagee, in acting hereunder,
shall be entitled to assume that (x) no obligations other than
principal, interest and regularly accruing fees are owing to any
Secured Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the Mortgagee 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 Mortgagee and
the Agent 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
inure to the benefit of any transferee, successor or assignee of
the Mortgagee; 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
Mortgagee under this Mortgage,
in any such case, forthwith upon demand by the Mortgagee and at the
expense of the Owner.
12. POWER OF ATTORNEY
12.01 The Owner, by way of security and in order to more fully secure the
performance of the Obligations under this Mortgage, hereby irrevocably
appoints the Mortgagee 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
Vessel (including without limitation, transferring title to the
Vessel to a third party), provided, however, that such power
shall not be exercisable by or on behalf of the Mortgagee 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 Mortgagee shall not put any person dealing with the
Mortgagee 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 Mortgagee of such
power shall be conclusive evidence as against third parties of its
right to exercise the same.
13. INDEMNITIES
13.01 The Owner will indemnify and save harmless the Secured Creditors and
each agent or attorney appointed under or pursuant to this Mortgage
(each an "Indemnitee") from and against any and all expenses, claims,
liabilities, losses, taxes, costs, duties, fees and charges suffered,
incurred or made by such Secured Creditors 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 Mortgagee's rights
under this Mortgage; or
(c) on the release of the Vessel from the security created by this
Mortgage,
and the Secured Creditors 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 a Secured Creditor 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 Secured Creditors 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 Hazardous Materials at, or discharged from the Vessel.
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 the Subsidiary Guaranty or 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 Mortgagee,
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 Mortgagee against the amount of such
shortfall. For the purposes of this Clause 13.03, "rate of exchange"
means the rate at which the Mortgagee is able on the date of such
payment (or, if it is not practicable for the Mortgagee 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 Mortgagee 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 Mortgagee on demand all costs, fees and
expenses, including, but not limited to, legal fees and expenses and
valuation fees and Taxes thereon incurred by any Secured Creditor or
for which any Secured Creditor may become liable in connection with:
(a) the negotiation, preparation and execution of the Credit
Agreement, the Subsidiary Guaranty and the other Credit
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, the
Subsidiary Guaranty or the other Credit Documents (or any of
them).
14.02 The Owner shall pay to the Mortgagee on demand all costs, fees and
expenses (including, but not limited to, legal fees and expenses) and
Taxes thereon incurred by any Secured Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement, the Subsidiary Guaranty or the
other Credit 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 Mortgagee in relation to
the Credit Agreement, the Subsidiary Guaranty and the other
Credit 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, the Subsidiary
Guaranty and the other Credit Documents (or any of them) may be
subject or give rise and shall indemnify the Mortgagee 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 required to be given to the Mortgagee shall be made to the
following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Attention: Loan Administration
Telephone: (212) 827-4800
Telefax: (212) 827-4888
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall inure to the benefit of
the Secured Creditors 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 Section 12.16 of the Credit Agreement, each Bank 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 Mortgagee 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 One Hundred Forty Million US
Dollars (US$140,000,000) of principal plus interest, fees, commissions
and performance of mortgage covenants. The discharge amount is the
same as the total amount.
18. WAIVER; AMENDMENT
18.01 None of the terms and conditions of this Mortgage may be changed,
waived, modified or varied in any manner whatsoever unless in writing
duly signed by the Owner and the Mortgagee (with the consent of either
the Required Banks or, to the extent required by Section 12.12 of the
Credit Agreement, all of the Banks). No amendment to the Subsidiary
Guaranty which affects the rights and obligations of the Mortgagee
hereunder shall be effective without the consent of the Mortgagee
thereto.
19. MISCELLANEOUS
19.01 This Mortgage shall be governed by the laws of the Republic of Panama.
19.02 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.
19.03 The Mortgagee, 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 Mortgagee under this Mortgage in
relation to the Vessel. Any such delegation may be made upon such
terms and subject to such regulations as the Mortgagee may think fit.
The Mortgagee 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.
19.04 The appearing parties hereby confer a special power of attorney on
Benedetti & Benedetti, lawyers of Panama, Republic of Panama and/or
any partners in the firm authorizing such firm or any such partner to
take all necessary steps to record this Indenture of First Naval
Mortgage in the appropriate registries of the City of Panama, and to
substitute this Power of Attorney herein granted.
19.05 A certification or determination by the Mortgagee as to any matter
provided for in this Mortgage shall, in the absence of manifest error,
be conclusive and binding on the Owner.
19.06 The Mortgagee declares that it accepts the naval mortgage hereby
created under the terms above set forth.
20. JURISDICTION
20.01 The Owner agrees that the Mortgagee 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Mortgagee.
20.02 Without prejudice to the generality of Clause 20.01, the Mortgagee
shall have the right to arrest and take action against the Vessel at
whatever place the Vessel shall be found lying and for the purpose of
any action which the Mortgagee may bring before the courts of such
jurisdiction or other judicial authority and for the purpose of any
action which the Mortgagee may bring against the Vessel, 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 Vessel (or upon anyone acting as the
master) and such service shall be deemed good service on the Owner for
all purposes.
20.03 The Owner agrees that should the Mortgagee 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 and the Mortgagee have duly executed these
presents the day and year first before written.
READING & BATES DEVELOPMENT CO.
By: _____________________________________
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH
By: _____________________________________
By: _____________________________________
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this __ day of August, 1996, before me personally
appeared ____________________ to me known and who resides at
; and who submitted evidence to me that he is a
___________ of READING & BATES DEVELOPMENT CO., the ___________________
company described in and which executed the foregoing mortgage; and that he
signed his name thereto pursuant to authority granted to him by the Board of
Directors of said corporation.
____________________________________
Notary Public
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this __ day of August, 1996, before me personally
appeared ______________ to me known and who resides at
__________________________; and who submitted evidence to me that he/she is
__________ of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, the
corporation described in and which executed the foregoing mortgage; and that
he/she signed his/her name thereto pursuant to authority granted to him/her by
the Board of Directors of said corporation.
____________________________________
Notary Public
Exhibit 10.116
COLLATERAL ASSIGNMENT OF INSURANCE
READING & BATES DEVELOPMENT CO., a Delaware corporation (hereinafter
called the "Assignor"), the owner of the Panamanian registered oil production
vessel Seillean (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, New York Branch, not in its individual
capacity but as Agent for the Banks (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 full and prompt
payment when due (whether at the stated maturity, by acceleration or
otherwise) of all obligations and liabilities of the Assignor, now existing or
hereafter incurred, under, arising out of or in connection with any Credit
Document (as that term is defined in the Credit Agreement, as defined below)
to which it is a party and the due performance and compliance by the Assignor
with the terms of each such Credit Document, all right, title and interest of
the Assignor under, in and to the following (all of the following,
collectively, the "Insurance Collateral"): (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 Agreement, dated April
30, 1996 (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement"), by and among Reading & Bates Corporation,
Reading & Bates Drilling Co., the Banks (as defined therein) and Christiania
Bank og Kreditkasse, New York Branch, as Agent.
The Assignor hereby constitutes the Assignee and 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; provided, however, that the
Assignee shall not take any action pursuant to the power granted by this
paragraph unless an Event of Default under the Credit Agreement shall have
occurred and be continuing. 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 I 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, such consent 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 additional named assured or loss
payees set forth in Annex I 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 and the Banks as additional
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 to the
Assignee hereunder shall be made by airmail postage prepaid letter, telefax or
by telex, confirmed by letter to:
Christiania Bank og Kreditkasse,
New York Branch
11 West 42nd Street
New York, New York 10036
Attn: Hans Kjelsrud
Tel No.: (212) 827-4814
Fax No.: (212) 827-4888
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 Mortgages, the Credit Agreement and the
other Credit Documents.
THIS ASSIGNMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. THE ASSIGNOR
HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS ASSIGNMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
None of the terms and conditions of this Assignment may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Assignor and the Assignee (with the consent of either the
Required Banks (as defined in the Credit Agreement) or, to the extent required
by Section 12.12 of the Credit Agreement, all of the Banks).
In the event that the Insurance Collateral or any portion thereof is
sold in connection with a sale permitted by Section 8.02 of the Credit
Agreement or is otherwise released at the direction of the Required Banks (or
all the Banks, to the extent required by Section 12.12 of the Credit
Agreement), the Assignee, at the request and expense of the Assignor, will
duly assign, transfer and deliver to the Assignor (without recourse and with-
out any representation or warranty) such of the Insurance Collateral (and
releases therefor) as is then being (or has been) so sold or released and as
may be in the possession of the Assignee and has not theretofore been released
pursuant to this Assignment. At any time the Assignor desires that the
Insurance Collateral or a portion thereof be released as provided in this
paragraph, the Assignor shall deliver to the Assignee a certificate signed by
an Authorized Officer (as defined in the Credit Agreement) stating that the
release of the Insurance Collateral or portion thereof is permitted pursuant
to this paragraph.
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 30th day of August, 1996.
* * *
READING & BATES DEVELOPMENT CO.
By: ________________________
Its:
ANNEX I
to
Assignment of Insurances
NOTICE OF ASSIGNMENT
Reading & Bates Development Co. (the "Owner"), the owner of the
Panamanian flag oil production vessel Seillean (the "Rig"), HEREBY GIVES
NOTICE that by a Collateral Assignment of Insurance dated August 30, 1996 and
made between the Owner and Christiania Bank og Kreditkasse, New York Branch,
as Agent (the "Assignee") for itself and certain other Banks (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 indorsed on all policies and
certificates of entry evidencing such insurance.
READING & BATES DEVELOPMENT CO.
By
Its:
LOSS PAYABLE CLAUSES
Hull and War Risks
Loss, if any, payable to Christiania Bank og Kreditkasse, New York
Branch, as Agent for the Banks, for distribution by it to said Banks and to
Reading & Bates Development 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 repaired the damage and paid the cost
thereof, or discharged the liability or paid the salvage or other charges,
then the Underwriters may pay the Owner as reimbursement to the extent the
Owner has paid the covered loss.
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 Panamanian mortgage relating to the Rig.
PROTECTION AND INDEMNITY
Loss, if any, payable to Christiania Bank og Kreditkasse, New York
Branch, as Agent for the Banks for distribution by it to the Banks and to
Reading & Bates Development 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 in
respect of any claim in excess of $1,000,000, the Underwriters shall have
first received evidence that the liability insured against has been
discharged.
Exhibit 10.117
CREDIT AGREEMENT
among
READING & BATES CORPORATION,
READING & BATES DRILLING CO.,
VARIOUS LENDING INSTITUTIONS,
BANQUE INDOSUEZ,
as DOCUMENTATION AGENT
CREDIT LYONNAIS NEW YORK BRANCH,
as DOCUMENTATION AGENT
and
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as ADMINISTRATIVE AGENT,
ARRANGER
AND SECURITY TRUSTEE
____________________________________
Dated as of November 13, 1996
____________________________________
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . 1
1.01 Commitment . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Minimum Borrowing Amounts, etc. . . . . . . . . . . . . . . . 2
1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . 2
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . 2
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . 4
1.08 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.09 Interest Periods . . . . . . . . . . . . . . . . . . . . . . 5
1.10 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . 6
1.11 Compensation . . . . . . . . . . . . . . . . . . . . . . . . 8
1.12 Change of Lending Office; Limitation on Indemnities . . . . . 9
1.13 Replacement of Banks . . . . . . . . . . . . . . . . . . . . 9
SECTION 2. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 10
2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 10
2.02 Letter of Credit Requests; Request for Issuance of Letter of
Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.03 Agreement to Repay Letter of Credit Payments . . . . . . . . 11
2.04 Letter of Credit Participations . . . . . . . . . . . . . . . 12
2.05 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . 14
2.06 Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3. Fees; Commitments . . . . . . . . . . . . . . . . . . . . . . 15
3.01 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.02 Voluntary Reduction of Commitments . . . . . . . . . . . . . 16
3.03 Mandatory Adjustments of Commitments, etc. . . . . . . . . . 17
SECTION 4. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . 18
4.02 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . 19
4.03 Method and Place of Payment . . . . . . . . . . . . . . . . . 20
4.04 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 5. Conditions Precedent . . . . . . . . . . . . . . . . . . . . 23
5.01 Execution of Agreement . . . . . . . . . . . . . . . . . . . 23
5.02 No Default; Representations and Warranties . . . . . . . . . 23
5.03 Officer's Certificate . . . . . . . . . . . . . . . . . . . . 23
5.04 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . 23
5.05 Corporate Proceedings . . . . . . . . . . . . . . . . . . . . 24
5.06 Existing Indebtedness Agreements . . . . . . . . . . . . . . 24
5.07 Adverse Change, etc. . . . . . . . . . . . . . . . . . . . . 24
5.08 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.09 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.10 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.11 Security Agreement . . . . . . . . . . . . . . . . . . . . . 25
5.12 Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . 26
5.13 Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.14 Evidence of Lien, etc. . . . . . . . . . . . . . . . . . . . 26
5.15 Rig Reports; Drilling Contracts . . . . . . . . . . . . . . . 27
5.16 Insurance Report . . . . . . . . . . . . . . . . . . . . . . 27
5.17 Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . 28
5.18 Refinancing; Existing Credit Agreement . . . . . . . . . . . 28
5.19 Compliance Certificate . . . . . . . . . . . . . . . . . . . 29
SECTION 6. Representations, Warranties and Agreements . . . . . . . . . 29
6.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . 29
6.02 Corporate Power and Authority . . . . . . . . . . . . . . . . 30
6.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . 30
6.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.05 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . 30
6.06 Governmental Approvals . . . . . . . . . . . . . . . . . . . 31
6.07 Investment Company Act . . . . . . . . . . . . . . . . . . . 31
6.08 Public Utility Holding Company Act . . . . . . . . . . . . . 31
6.09 True and Complete Disclosure . . . . . . . . . . . . . . . . 31
6.10 Financial Condition; Financial Statements; Projections . . . 32
6.11 Security Interests . . . . . . . . . . . . . . . . . . . . . 33
6.12 Tax Returns and Payments . . . . . . . . . . . . . . . . . . 33
6.13 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . 33
6.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 34
6.15 Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . . 34
6.16 Pollution and Other Regulations . . . . . . . . . . . . . . . 34
6.17 Properties . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.18 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . 36
6.19 Existing Indebtedness . . . . . . . . . . . . . . . . . . . . 36
6.20 Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.21 Rig Classification . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . 36
7.01 Information Covenants . . . . . . . . . . . . . . . . . . . . 37
7.02 Books, Records and Inspections . . . . . . . . . . . . . . . 39
7.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.04 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . 39
7.05 Consolidated Corporate Franchises . . . . . . . . . . . . . . 40
7.06 Compliance with Statutes, etc. . . . . . . . . . . . . . . . 40
7.07 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.08 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . 40
7.09 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 40
7.10 Earnings Concentration Account . . . . . . . . . . . . . . . 40
7.11 Additional Rig Valuations . . . . . . . . . . . . . . . . . . 41
7.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . 41
7.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8. Negative Covenants . . . . . . . . . . . . . . . . . . . . . 43
8.01 Changes in Business . . . . . . . . . . . . . . . . . . . . . 43
8.02 Consolidation, Merger or Sale of Assets, etc. . . . . . . . . 44
8.03 Liens on Collateral; Arcade Drilling . . . . . . . . . . . . 45
8.04 Indebtedness of Arcade . . . . . . . . . . . . . . . . . . . 46
8.05 Dividends; Restrictions on Subsidiaries, etc. . . . . . . . . 46
8.06 Transactions with Affiliates . . . . . . . . . . . . . . . . 48
8.07 Vessel Management; Registry . . . . . . . . . . . . . . . . . 48
8.08 Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 49
8.09 Working Capital . . . . . . . . . . . . . . . . . . . . . . . 49
8.10 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 49
8.11 Collateral Maintenance . . . . . . . . . . . . . . . . . . . 49
SECTION 9. Events of Default . . . . . . . . . . . . . . . . . . . . . . 49
9.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.02 Representations, etc. . . . . . . . . . . . . . . . . . . . . 49
9.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.04 Default Under Other Agreements . . . . . . . . . . . . . . . 50
9.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . 50
9.06 Security Documents . . . . . . . . . . . . . . . . . . . . . 51
9.07 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.08 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.09 Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 51
9.11 Change of Control . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 11. The Administrative Agent and the Security Trustee . . . . . 71
11.01 Appointment of the Administrative Agent and the Security
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.02 Nature of Duties . . . . . . . . . . . . . . . . . . . . . . 71
11.03 Lack of Reliance on the Administrative Agent . . . . . . . . 72
11.04 Certain Rights of the Administrative Agent . . . . . . . . . 72
11.05 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.06 Indemnification . . . . . . . . . . . . . . . . . . . . . . 73
11.07 The Administrative Agent in Its Individual Capacity . . . . 73
11.08 Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.09 Resignation by the Administrative Agent . . . . . . . . . . 73
SECTION 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 74
12.01 Payment of Expenses, etc. . . . . . . . . . . . . . . . . . 74
12.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . 75
12.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 76
12.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . 76
12.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . 78
12.06 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . 78
12.07 Calculations; Computations . . . . . . . . . . . . . . . . . 79
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . 79
12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 80
12.10 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . 80
12.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . 81
12.12 Amendment or Waiver . . . . . . . . . . . . . . . . . . . . 81
12.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.14 Domicile of Loans . . . . . . . . . . . . . . . . . . . . . 82
12.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 82
12.16 Registry . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 13. Holdings Guaranty . . . . . . . . . . . . . . . . . . . . . 83
13.01 The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . 83
13.02 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . 83
13.03 Nature of Liability . . . . . . . . . . . . . . . . . . . . 83
13.04 Independent Obligation . . . . . . . . . . . . . . . . . . . 84
13.05 Waiver of Notice, etc. . . . . . . . . . . . . . . . . . . . 84
13.06 Authorization . . . . . . . . . . . . . . . . . . . . . . . 84
13.07 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . 85
13.08 Subordination . . . . . . . . . . . . . . . . . . . . . . . 85
13.09 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
ANNEX I -- Commitments
ANNEX II -- Bank Addresses
ANNEX III -- Existing Letters of Credit
ANNEX IV -- Commitment Reduction Schedule
ANNEX V -- Subsidiaries
ANNEX VI -- Rigs and Vessels
ANNEX VII -- Existing Indebtedness
ANNEX VIII -- Existing Liens
ANNEX IX -- Approved Shipbrokers
EXHIBIT A -- Form of Notice of Borrowing
EXHIBIT B -- Form of Note
EXHIBIT C -- Form of Letter of Credit Request
EXHIBIT D -- Form of Section 4.04(b)(ii) Certificate
EXHIBIT E-1 -- Form of Opinion of Wayne Hillin, Esq.
EXHIBIT E-2 -- Form of Opinion of White & Case
EXHIBIT F -- Form of Officers' Certificate
EXHIBIT G -- Form of Security Agreement
EXHIBIT H -- Form of Subsidiary Guaranty
EXHIBIT I-1 -- Form of US Mortgage
EXHIBIT I-2 -- Form of Panamanian Mortgage
EXHIBIT I-3 -- Form of Australian Mortgage
EXHIBIT J -- Form of Pledge Agreement
EXHIBIT K -- Form of Compliance Certificate
EXHIBIT L -- Form of Assignment and Assumption Agreement
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CREDIT AGREEMENT, dated as of November 13, 1996, among READING &
BATES CORPORATION ("Holdings"), a Delaware corporation, READING & BATES
DRILLING CO. (the "Borrower"), an Oklahoma corporation, the lending
institutions listed from time to time on Annex I hereto (each a "Bank" and,
collectively, the "Banks"), BANQUE INDOSUEZ and CREDIT LYONNAIS NEW YORK
BRANCH as documentation agents (the "Documentation Agents") and CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH, as administrative agent, arranger and
security trustee (the "Administrative Agent"). Unless otherwise defined
herein, all capitalized terms used herein and defined in Section 10 are used
herein as so defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set forth
herein, the Banks are willing to make available to the Borrower the credit
facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitment. Subject to and upon the terms and conditions
herein set forth, each Bank severally agrees to make a loan or loans (each a
"Loan" and, collectively, the "Loans") under the Facility to the Borrower,
which Loans (i) shall be made at any time and from time to time on and after
the Initial Borrowing Date and prior to the Maturity Date, (ii) except as
hereinafter provided, may, at the option of the Borrower, be incurred and
maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans,
provided that all Loans made as part of the same Borrowing shall, unless
otherwise specifically provided herein, consist of Loans of the same Type,
(iii) may be repaid and reborrowed in accordance with the provisions hereof,
(iv) shall not exceed in the aggregate for all Banks at any time outstanding,
the Total Commitment and (v) shall not exceed for any Bank at any time
outstanding that aggregate principal amount which, when combined with the
aggregate outstanding principal amount of all other Loans of such Bank and
with such Bank's Adjusted Percentage of the Letter of Credit Outstandings
(exclusive of Unpaid Drawings which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of Loans) at
such time, equals (1) if such Bank is a Non-Defaulting Bank, the Adjusted
Commitment of such Bank at such time and (2) if such Bank is a Defaulting
Bank, the Commitment of such Bank at such time.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal
amount of each Borrowing shall not be less than the Minimum Borrowing Amount
for the Loans constituting such Borrowing. More than one Borrowing may be
incurred on any day, provided that at no time shall there be outstanding more
than eight Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. Whenever the Borrower desires to incur
Loans under the Facility, it shall give the Administrative Agent at its Notice
Office, prior to 12:00 Noon (New York time), at least three Business Days'
prior written notice (or telephonic notice promptly confirmed in writing) of
each Borrowing of Eurodollar Loans and at least one Business Day's prior
written notice (or telephonic notice promptly confirmed in writing) of each
Borrowing of Base Rate Loans to be made hereunder. Each such notice (each a
"Notice of Borrowing") shall be in the form of Exhibit A and shall be
irrevocable and shall specify (i) the aggregate principal amount of the Loans
to be made pursuant to such Borrowing, (ii) the date of Borrowing (which shall
be a Business Day), (iii) whether the respective Borrowing shall consist of
Base Rate Loans or (to the extent permitted) Eurodollar Loans and, if
Eurodollar Loans, the Interest Period to be initially applicable thereto and
(iv) disbursement instructions. The Administrative Agent shall promptly give
each Bank written notice (or telephonic notice promptly confirmed in writing)
of each proposed Borrowing, of such Bank's proportionate share thereof and of
the other matters covered by the Notice of Borrowing.
1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New
York time) on the date specified in each Notice of Borrowing, each Bank will
make available its pro rata share of each Borrowing requested to be made on
such date in the manner provided below. All such amounts shall be made avail-
able to the Administrative Agent in U.S. Dollars and immediately available
funds at the Payment Office and the Administrative Agent promptly will make
available to the Borrower by depositing to its account at the Payment Office
(or in accordance with any other disbursement instructions given by the
Borrower) the aggregate of the amounts so made available in U.S. Dollars and
immediately available funds. Unless the Administrative Agent shall have been
notified by any Bank prior to the date of Borrowing that such Bank does not
intend to make available to the Administrative Agent its portion of the
Borrowing or Borrowings to be made on such date, the Administrative Agent may
assume that such Bank has made such amount available to the Administrative
Agent on such date of Borrowing, and the Administrative Agent, in reliance
upon such assumption, may (in its sole discretion and without any obligation
to do so) make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Administrative Agent
by such Bank and the Administrative Agent has made available same to the Bor-
rower, the Administrative Agent shall be entitled to recover such correspond-
ing amount from such Bank. If such Bank does not pay such corresponding
amount forthwith upon the Administrative Agent's demand therefor, the
Administrative Agent shall promptly (and in any event within two Business Days
from the date the Administrative Agent made such funds available to the
Borrower) notify the Borrower, and the Borrower shall (within two Business
Days of receiving such demand) pay such corresponding amount to the
Administrative Agent. The Administrative Agent shall also be entitled to
recover on demand from such Bank or the Borrower, as the case may be, interest
on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to the
Borrower to the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (x) if paid by such Bank,
the overnight Federal Funds Effective Rate or (y) if paid by the Borrower, the
then applicable rate of interest, calculated in accordance with Section 1.08,
for the respective Loans.
(b) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its commitments hereunder or to prejudice any rights
which the Borrower may have against any Bank as a result of any default by
such Bank hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal
of, and interest on, the Loans made to it by each Bank shall be evidenced by a
promissory note substantially in the form of Exhibit B with blanks
appropriately completed in conformity herewith (each a "Note" and,
collectively, the "Notes").
(b) The Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the Commitment
of such Bank on such date and be payable in the principal amount of the Loans
evidenced thereby, (iv) mature on the Maturity Date, (v) bear interest as pro-
vided in the appropriate clause of Section 1.08 in respect of the Base Rate
Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be
subject to mandatory repayment as provided in Section 4.02 and (vii) be
entitled to the benefits of and subject to this Agreement and the other Credit
Documents.
(c) Each Bank will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will, prior to
any transfer of any of its Notes, endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation shall not affect the Borrower's obligations in respect of such
Loans.
1.06 Conversions. The Borrower shall have the option to convert
on any Business Day all or a portion at least equal to the applicable Minimum
Borrowing Amount of the outstanding principal amount of the Loans owing
pursuant to the Facility into a Borrowing or Borrowings pursuant to the
Facility of another Type of Loan, provided that (i) except as otherwise
provided in Section 1.10(b), Eurodollar Loans may be converted into Base Rate
Loans only on the last day of an Interest Period applicable thereto and no
partial conversion of a Borrowing of Eurodollar Loans shall reduce the
outstanding principal amount of the Eurodollar Loans made pursuant to such
Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii)
no Base Rate Loans may be converted into Eurodollar Loans at any time when a
Default or Event of Default is in existence on the date of the conversion if
the Administrative Agent or the Required Banks have determined that such a
conversion would be disadvantageous to the Banks and (iii) Borrowings of
Eurodollar Loans resulting from this Section 1.06 shall be limited in number
as provided in Section 1.02. Each such conversion shall be effected by the
Borrower giving the Administrative Agent at its Notice Office, prior to 12:00
Noon (New York time), at least three Business Days' (or one Business Day's, in
the case of a conversion into Base Rate Loans) prior written notice (or
telephonic notice promptly confirmed in writing) (each a "Notice of
Conversion") specifying the Loans to be so converted, the Type of Loans to be
converted into and, if to be converted into a Borrowing of Eurodollar Loans,
the Interest Period to be initially applicable thereto. The Administrative
Agent shall give each Bank prompt notice of any such proposed conversion
affecting any of its Loans.
1.07 Pro Rata Borrowings. All Loans under this Agreement shall
be made by the Banks pro rata on the basis of their Commitments. It is under-
stood that no Bank shall be responsible for any default by any other Bank in
its obligation to make Loans hereunder and that each Bank shall be obligated
to make the Loans provided to be made by it hereunder, regardless of the
failure of any other Bank to fulfill its commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base
Rate Loan shall bear interest from the date of the Borrowing thereof until
maturity (whether by acceleration or otherwise) at a rate per annum which
shall at all times be the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall
bear interest from the date of the Borrowing thereof until maturity (whether
by acceleration or otherwise) at a rate per annum which shall at all times be
the Applicable Eurodollar Margin plus the relevant Eurodollar Rate.
(c) All overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall bear interest at a rate per annum equal to the Base Rate in
effect from time to time plus 2%, provided that no Loan shall bear interest
after maturity (whether by acceleration or otherwise) at a rate per annum less
than 2% plus the rate of interest applicable thereto at maturity.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on the
first day of each January, April, July and October, (ii) in respect of each
Eurodollar Loan, on the last day of each Interest Period applicable thereto
and, in the case of an Interest Period in excess of three months, on the date
occurring three months after the first day of such Interest Period and (iii)
in respect of each Loan, on any prepayment or conversion (other than the
prepayment and conversion of Base Rate Loans) (on the amount prepaid or
converted), at maturity (whether by acceleration or otherwise) and, after such
maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(f) The Administrative Agent, upon determining the interest rate
for any Borrowing of Loans for any Interest Period, shall promptly notify the
Borrower and the Banks thereof.
1.09 Interest Periods. (a) At the time the Borrower gives a
Notice of Borrowing or Notice of Conversion in respect of the making of, or
conversion into, a Borrowing of Eurodollar Loans (in the case of the initial
Interest Period applicable thereto) or prior to 12:00 Noon (New York time) on
the third Business Day prior to the expiration of an Interest Period
applicable to a Borrowing of Eurodollar Loans, it shall have the right to
elect by giving the Administrative Agent written notice (or telephonic notice
promptly confirmed in writing) of the Interest Period applicable to such
Borrowing, which Interest Period shall, at the option of the Borrower, be a
one, three or six month period. Notwithstanding anything to the contrary
contained above:
(i) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date
of any conversion from a Borrowing of Base Rate Loans) and each Interest
Period occurring thereafter in respect of such Borrowing shall commence
on the day on which the next preceding Interest Period expires;
(ii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day
of such calendar month;
(iii) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) no Interest Period shall extend beyond the Maturity Date;
(v) no Interest Period with respect to any Borrowing of Loans
under the Facility may be elected that would extend beyond any date upon
which a Scheduled Commitment Reduction is required to be made in respect
of the Facility if, after giving effect to the selection of such
Interest Period, the aggregate principal amount of Loans maintained as
Eurodollar Loans under the Facility with Interest Periods ending after
such date would exceed the aggregate principal amount of Loans of the
Facility permitted to be outstanding after such Scheduled Commitment
Reduction;
(vi) no Interest Period may be elected at any time when a Default
or Event of Default is then in existence if the Administrative Agent or
the Required Banks have determined that such an election at such time
would be disadvantageous to the Banks; and
(vii) no more than six Interest Periods of one month may be selected
by the Borrower in any calendar year.
(b) If upon the expiration of any Interest Period, the Borrower
has failed to (or may not) elect a new Interest Period to be applicable to the
respective Borrowing of Eurodollar Loans as provided above, the Borrower shall
be deemed to have elected a one month Interest Period for such Borrowing,
provided that if the Borrower may not elect an Interest Period, the Borrower
will be deemed to have elected to convert such Borrowing into a Borrowing of
Base Rate Loans effective as of the expiration date of such current Interest
Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that (x)
in the case of clause (i) below, the Administrative Agent or (y) in the case
of clauses (ii) and (iii) below, any Bank shall have determined (which
determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period that, by reason of any changes arising after the date of
this Agreement affecting the interbank Eurodollar market, adequate and
fair means do not exist for ascertaining the applicable interest rate on
the basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect
to any Eurodollar Loans (other than any increased cost or reduction in
the amount received or receivable resulting from the imposition of or a
change in the rate or basis of taxes or similar charges) because of (x)
any change since the date of this Agreement in any appli-cable law,
governmental rule, regulation, guideline or order (or in the
interpretation or administration thereof and including the introduction
of any new law or governmental rule, regulation, guideline or order)
(such as, for example, but not limited to, a change in official reserve
requirements, but, in all events, excluding reserves required under
Regulation D to the extent included in the computation of the Eurodollar
Rate) and/or (y) other circumstances occurring after the date of this
Agreement and affecting the interbank Eurodollar market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has become unlawful by compliance by such Bank in good faith with
any law, governmental rule, regulation, guideline (or would conflict
with any such governmental rule, regulation, guideline or order not
having the force of law but with which such Bank customarily complies
even though the failure to comply therewith would not be unlawful);
then, and in any such event, such Bank (or the Administrative Agent in the
case of clause (i) above) shall (x) on such date and (y) within ten Business
Days of the date on which such event no longer exists, give notice (by
telephone confirmed in writing) to the Borrower and to the Administrative
Agent of such determination (which notice the Administrative Agent shall
promptly transmit to each of the other Banks). Thereafter (x) in the case of
clause (i) above, Eurodollar Loans shall no longer be available until such
time as the Administrative Agent notifies the Borrower and the Banks that the
circumstances giving rise to such notice by the Administrative Agent no longer
exist, and any Notice of Borrowing or Notice of Conversion given by the
Borrower with respect to Eurodollar Loans which have not yet been incurred
shall be deemed rescinded by the Borrower, (y) in the case of clause (ii)
above, the Borrower shall, subject to Section 1.12(b) (to the extent
applicable), pay to such Bank, upon written demand therefor, such additional
amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Bank in its sole discretion shall
determine) as shall be required to compensate such Bank for such increased
costs or reductions in amounts receivable hereunder (a written notice as to
the additional amounts owed to such Bank, showing the basis for the
calculation thereof, submitted to the Borrower by such Bank shall, absent
manifest error, be final and conclusive and binding upon all parties hereto)
and (z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in Section 1.10(b) as promptly as possible and, in any
event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii),
the Borrower shall) either (i) if the affected Eurodollar Loan is then being
made pursuant to a Borrowing, cancel said Borrowing by giving the
Administrative Agent telephonic notice (confirmed promptly in writing) thereof
on the same date that the Borrower was notified by a Bank pursuant to Section
1.10(a)(ii) or (iii), or (ii) if the affected Eurodollar Loan is then
outstanding, upon at least three Business Days' notice to the Administrative
Agent, require the affected Bank to convert each such Eurodollar Loan into a
Base Rate Loan, provided that if more than one Bank is affected at any time,
then all affected Banks must be treated the same pursuant to this Section
1.10(b).
(c) If any Bank shall have determined that after the date of this
Agreement, the adoption or effectiveness of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank with any request or direc-
tive regarding capital adequacy (whether or not having the force of law but
with which such Bank customarily complies even though the failure to comply
therewith would not be unlawful) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Bank's capital or assets as a consequence of its commitments or obli-
gations hereunder to a level below that which such Bank could have achieved
but for such adoption, effectiveness, change or compliance (taking into
consideration such Bank's policies with respect to capital adequacy), then
from time to time, within 15 days after demand by such Bank (with a copy to
the Administrative Agent), the Borrower shall, subject to Section 1.12(b) (to
the extent applicable), pay to such Bank such additional amount or amounts as
will compensate such Bank for such reduction. Each Bank, upon determining in
good faith that any additional amounts will be payable pursuant to this Sec-
tion 1.10(c), will give prompt written notice thereof to the Borrower, which
notice shall set forth the basis of the calculation of such additional
amounts, although the failure to give any such notice shall not release or
diminish any of the Borrower's obligations to pay additional amounts pursuant
to this Section 1.10(c) upon the subsequent receipt of such notice.
1.11 Compensation. The Borrower shall compensate each Bank, 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 Bank to fund its Eurodollar Loans but excluding in any event the loss
of anticipated profits) which such Bank may sustain: (i) if for any reason
(other than a default by such Bank or the Administrative Agent) a Borrowing of
Eurodollar Loans does not occur on a date specified therefor in a Notice of
Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or
deemed withdrawn pursuant to Section 1.10(a)); (ii) if any prepayment,
repayment or conversion of any of its Eurodollar Loans (including as a result
of Section 1.10 or the last paragraph of Section 9) occurs on a date which is
not the last day of an Interest Period applicable thereto; (iii) if any
prepayment of any of its Eurodollar Loans is not made on any date specified in
a notice of prepayment given by the Borrower; or (iv) as a consequence of (x)
any other default by the Borrower to repay its Eurodollar Loans when required
by the terms of this Agreement or (y) an election made pursuant to Section
1.10(b).
1.12 Change of Lending Office; Limitation on Indemnities. (a)
Each Bank agrees that, upon the occurrence of any event giving rise to the
operation of Section 1.10(a)(ii) or (iii), 1.10(c), 2.05 or 4.04 with respect
to such Bank, it will, if requested by the Borrower, use reasonable efforts
(subject to overall policy considerations of such Bank) to designate another
lending office for any Loan, Letters of Credit or Commitments affected by such
event, provided that such designation is made on such terms that such Bank and
its lending office suffer no economic, legal or regulatory disadvantage, with
the object of avoiding the consequence of the event giving rise to the opera-
tion of any such Section. Nothing in this Section 1.12 shall affect or
postpone any of the obligations of the Borrower or the right of any Bank pro-
vided in Section 1.10, 2.05 or 4.04.
(b) Notwithstanding anything in this Agreement to the contrary,
to the extent any notice required by Section 1.10, 2.05 or 4.04 is given by
any Bank more than 90 days after such Bank obtained, or reasonably should have
obtained, knowledge of the occurrence of the event giving rise to the
additional costs of the type described in such Section, such Bank shall not be
entitled to compensation under Section 1.10, 2.05 or 4.04 for any amounts
incurred or accruing prior to the giving of such notice to the Borrower.
1.13 Replacement of Banks. (x) Upon the occurrence of any event
giving rise to the operation of Section 1.10(a)(ii) or (iii), 1.10(c), 2.05 or
4.04 with respect to any Bank which results in such Bank charging to the
Borrower increased costs in excess of those being generally charged by the
other Banks or such Bank becoming incapable of making Eurodollar Loans, (y) if
a Bank becomes a Defaulting Bank and/or (z) as provided in Section 12.12(b),
in the case of a refusal by a Bank to consent to a proposed change, waiver,
discharge or termination with respect to this Agreement which has been
approved by the Required Banks, the Borrower shall have the right, if no
Default or Event of Default then exists, to replace such Bank (the "Replaced
Bank") with one or more other Eligible Transferee or Transferees reasonably
acceptable to the Administrative Agent, none of which Transferees shall
constitute a Defaulting Bank at the time of such replacement (collectively,
the "Replacement Bank"), provided that (i) at the time of any replacement
pursuant to this Section 1.13, the Replacement Bank shall enter into one or
more Assignment and Assumption Agreements pursuant to Section 12.04(b) (and
with all fees payable pursuant to said Section 12.04(b) to be paid by the
Replacement Bank) pursuant to which the Replacement Bank shall acquire all of
the Commitments and outstanding Loans of, and in each case participations in
Letters of Credit by, the Replaced Bank and, in connection therewith, shall
pay to (x) the Replaced Bank in respect thereof an amount equal to the sum of
(A) an amount equal to the principal of, and all accrued interest on, all out-
standing Loans of the Replaced Bank, (B) an amount equal to all Unpaid
Drawings that have been funded by (and not reimbursed to) such Replaced Bank,
together with all then unpaid interest with respect thereto at such time and
(C) an amount equal to all accrued, but theretofore unpaid, Fees owing to the
Replaced Bank pursuant to Section 3.01, and (y) the Letter of Credit Issuer an
amount equal to such Replaced Bank's Percentage of any Unpaid Drawing (which
at such time remains an Unpaid Drawing) to the extent such amount was not
theretofore funded by such Replaced Bank, and (ii) all obligations of the
Borrower owing to the Replaced Bank (other than those specifically described
in clause (i) above in respect of which the assignment purchase price has
been, or is concurrently being, paid) shall be paid in full to such Replaced
Bank concurrently with such replacement. Upon the execution of the respective
Assignment and Assumption Agreements, the payment of amounts referred to in
clauses (i) and (ii) above and, if so requested by the Replacement Bank,
delivery to the Replacement Bank of a Note executed by the Borrower, the
Replacement Bank shall become a Bank hereunder and the Replaced Bank shall
cease to constitute a Bank hereunder, except with respect to indemnification
provisions applicable to the Replaced Bank under this Agreement, which shall
survive as to such Replaced Bank as described herein.
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request that the Letter of
Credit Issuer at any time and from time to time on or after the Initial
Borrowing Date and prior to the Business Day immediately preceding the
Maturity Date issue, for the account of the Borrower and in support of L/C
Supportable Obligations, and subject to and upon the terms and conditions
herein set forth, the Letter of Credit Issuer agrees to issue from time to
time, irrevocable standby letters of credit denominated in U.S. Dollars or any
other currency acceptable to the Letter of Credit Issuer (subject to the
provisions of Section 2.01(b)) and in such form as may be approved by the
Letter of Credit Issuer (each such standby letter of credit, a "Letter of
Credit" and collectively, the "Letters of Credit"). Annex III contains a
description of all letters of credit issued under the Existing Credit
Agreement prior to the Effective Date and which will remain outstanding on the
Effective Date. Each such letter of credit, including any extension thereof
(each an "Existing Letter of Credit") shall constitute a "Letter of Credit"
for all purposes of this Agreement and shall be deemed issued for purposes of
Sections 2.04 and 3.01 on the Effective Date.
(b) Whenever the Letter of Credit Issuer issues a Letter of
Credit in a currency other than U.S. Dollars, the Letter of Credit
Outstandings relating to such Letter of Credit at such time shall be
calculated on the basis of the U.S. Dollar Equivalent of the Stated Amount of
such Letter of Credit. Any U.S. Dollar Equivalent established according to
the preceding sentence shall remain in effect until such date as the
calculation of the U.S. Dollar Equivalent determined as above, if made on such
date, would yield a U.S. Dollar Equivalent which varies by greater than 10.0%
from the U.S. Dollar Equivalent then in effect, at which time the Letter of
Credit Outstandings shall be adjusted to reflect the current U.S. Dollar
Equivalent of the Stated Amount of such Letter of Credit. Subsequent
adjustments shall then be made on any date on which the current calculation of
the U.S. Dollar Equivalent would yield a result which varies by greater than
10.0% from the U.S. Dollar Equivalent then in effect.
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall
be issued, the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of,
and prior to the issuance of, the respective Letter of Credit) at such time,
would exceed either (x) $30,000,000 or (y) when added to the aggregate
principal amount of all Loans made by Non-Defaulting Banks then outstanding,
the Adjusted Total Commitment at such time; and (ii) each Letter of Credit
shall have an expiry date occurring not later than the Business Day
immediately preceding the Maturity Date.
2.02 Letter of Credit Requests; Request for Issuance of Letter of
Credit. (a) Whenever it desires that a Letter of Credit be issued, the
Borrower shall give the Letter of Credit Issuer written notice (including by
way of telecopier) in the form of Exhibit C 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 any documents that the Letter of Credit Issuer
customarily requires in connection therewith. The Letter of Credit Issuer
shall promptly notify each Bank of each Letter of Credit Request.
(b) The Letter of Credit Issuer shall, on the date of each
issuance of a Letter of Credit by it, give each Bank and the Borrower written
notice of the issuance of such Letter of Credit.
2.03 Agreement to Repay Letter of Credit Payments. (a) The
Borrower hereby agrees to reimburse the Letter of Credit Issuer, by making
payment at the Payment Office, for any payment or disbursement made by the
Letter of Credit Issuer under any Letter of Credit (each such amount so paid
or disbursed until reimbursed, an "Unpaid Drawing") immediately after, and in
any event on the date on which the Borrower is 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 the Applicable Base Rate Margin plus the Base
Rate as in effect on the date of such notice of payment or disbursements (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.
(b) The Borrower's obligation under this Section 2.03 to
reimburse the Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Borrower may have or have had
against the Letter of Credit Issuer or any Bank, including, without
limitation, any defense based upon the failure of any drawing under a Letter
of Credit to conform to the terms of the Letter of Credit (other than the
failure of the Letter of Credit Issuer to determine that any documents
required to be delivered under such Letter of Credit have been delivered and
that they substantially comply on their face with the requirements of such
Letter of Credit) or any non-application or misapplication by the beneficiary
of the proceeds of such drawing; provided, however, that the Borrower shall
not be obligated to reimburse the Letter of Credit Issuer for any wrongful
payment made by the Letter of Credit Issuer under a Letter of Credit as a
result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer.
2.04 Letter of Credit Participations. (a) Immediately upon the
issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of
Credit Issuer shall be deemed to have sold and transferred to each other Bank,
and each such Bank (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,
to the extent of such Bank's Adjusted Percentage, in such Letter of Credit,
each substitute letter of credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto
(although the Letter of Credit Fee shall be payable directly to the
Administrative Agent for the account of the Banks as provided in Section
3.01(b) and the Participants shall have no right to receive any portion of any
Facing Fees) and any security therefor or guaranty pertaining thereto. Upon
any change in the Commitments or Adjusted Percentages of the Banks pursuant to
Section 12.04(b) or upon a Bank Default, it is hereby agreed that, with
respect to all outstanding Letters of Credit and Unpaid Drawings, there shall
be an automatic adjustment to the participations pursuant to this Section 2.04
to reflect the new Adjusted Percentages of the assigning and assignee Bank or
of all Banks, as the case may be.
(b) In determining whether to pay under any 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 Letter of Credit have been delivered and that they
substantially comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by the Letter of Credit
Issuer under or in connection with any 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 to the Participants.
(c) In the event that the Letter of Credit Issuer makes any pay-
ment under any Letter of Credit and the Borrower shall not have reimbursed
such amount in full to the Letter of Credit Issuer pursuant to Section
2.03(a), the Letter of Credit Issuer shall promptly notify each Participant of
such failure, and each Participant shall promptly and unconditionally pay to
the Letter of Credit Issuer, the amount of such Participant's Adjusted
Percentage of such payment in U.S. Dollars and in same day funds; provided,
however, that no Participant shall be obligated to pay to the Letter of Credit
Issuer its Adjusted Percentage of such unreimbursed amount for any wrongful
payment made by the Letter of Credit Issuer under a Letter of Credit as a
result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer. If the Administrative
Agent so notifies any Participant required to fund an Unpaid Drawing under a
Letter of Credit prior to 12:00 Noon (New York time) on any Business Day, such
Participant shall make available to 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 Letter of Credit Issuer, such Participant agrees to pay to
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 Letter of Credit Issuer at the overnight Federal Funds Effective
Rate. The failure of any Participant to make available to the Letter of
Credit Issuer its Adjusted Percentage of any Unpaid Drawing under any Letter
of Credit shall not relieve any other Participant of its obligation hereunder
to make available to the Letter of Credit Issuer its Adjusted Percentage of
any payment under any 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 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 a
reimbursement obligation as to which the Administrative 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 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 interest thereon accruing at the overnight
Federal Funds Effective Rate after the purchase of the respective
participations.
(e) The obligations of the Participants to make payments to the
Letter of Credit Issuer with respect to 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 Letter of Credit Issuer's gross
negligence or willful misconduct) 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 Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against a beneficiary named in a
Letter of Credit, any transferee of any Letter of Credit (or any Person
for whom any such transferee may be acting), the Administrative Agent,
any Bank or other Person, whether in connection with this Agreement, any
Letter of Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transaction between the Borrower
and the beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or other document presented under the
Letter of Credit proving to be forged, fraudulent, or invalid 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 Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Increased Costs. If at any time after the date of the
Agreement, the adoption or effectiveness of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by the Letter of Credit Issuer or any Bank with any request or
directive (whether or not having the force of law but with which such Bank
customarily complies even though the failure to comply therewith would not be
unlawful) by any such authority, central bank or comparable agency shall
either (i) impose, modify or make applicable any reserve, deposit, capital
adequacy or similar requirement against Letters of Credit issued by the Letter
of Credit Issuer or such Bank's participation therein, or (ii) shall impose on
the Letter of Credit Issuer or any Bank any other conditions affecting this
Agreement, any Letter of Credit or such Bank's participation therein; and the
result of any of the foregoing is to increase the cost to the Letter of Credit
Issuer or such Bank of issuing, maintaining or participating in any Letter of
Credit, or to reduce the amount of any sum received or receivable by the
Letter of Credit Issuer or such Bank hereunder (other than any increased cost
or reduction in the amount received or receivable resulting from the imposi-
tion of or a change in the rate or basis of taxes or similar charges), then,
upon demand to the Borrower by the Letter of Credit Issuer or such Bank (a
copy of which notice shall be sent by the Letter of Credit Issuer or such Bank
to the Administrative Agent), the Borrower shall, subject to Section 1.11(b)
(to the extent applicable), pay to the Letter of Credit Issuer or such Bank
such additional amount or amounts as will compensate the Letter of Credit
Issuer or such Bank for such increased cost or reduction. A certificate
submitted to the Borrower by the Letter of Credit Issuer or such Bank, as the
case may be (a copy of which certificate shall be sent by the Letter of Credit
Issuer or such Bank to the Administrative Agent), setting forth the basis for
the determination of such additional amount or amounts necessary to compensate
the Letter of Credit Issuer or such Bank as aforesaid shall be conclusive and
binding on the Borrower absent manifest error, although the failure to deliver
any such certificate shall not release or diminish any of the Borrower's
obligations to pay additional amounts pursuant to this Section 2.05 upon the
subsequent receipt thereof.
2.06 Indemnities. The Borrower hereby agrees 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 respective duties in any way relating to or arising out of its
issuance of Letters of Credit; provided that the Borrower shall not be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Letter of Credit Issuer's gross negligence or willful misconduct. To the
extent the Letter of Credit Issuer is not indemnified by the Borrower, the
Participants will reimburse and indemnify the Letter of Credit Issuer, in
proportion to their respective "percentages" of the Total Commitment, 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 respective duties in
any way relating to or arising out of its issuance of Letters of Credit;
provided that no Participants shall be liable for any portion of such liabili-
ties, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Letter of Credit Issuer's
gross negligence or willful misconduct.
SECTION 3. Fees; Commitments.
3.01 Fees. (a) The Borrower agrees to pay to the Administrative
Agent a commitment commission ("Commitment Commission") pro rata for the
account of each Non-Defaulting Bank for the period from and including the
Effective Date to, but not including, the date the Total Commitment has been
terminated, which Commitment Commission shall be equal to the amount set forth
below as determined by Holdings' Leverage Ratio, as calculated for the last
day of the fiscal quarter last ended, computed at such rate for each day, on
the daily amount of such Bank's Unutilized Commitment; provided that, in the
event a change in the Commitment Commission is made, such change shall not
become effective until the date on which the Administrative Agent receives
written notice from the Borrower indicating that such change is warranted:
0.25% per annum If the Leverage Ratio is equal to or less than 0.25 to
1.00
0.35% per annum If the Leverage Ratio is greater than 0.25 to 1.00.
Such Commitment Commission shall be due and payable in arrears on the first
day of each January, April, July and October and on the date upon which the
Total Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative Agent for
the account of each Non-Defaulting Bank pro rata on the basis of their
respective Adjusted Percentages, a fee in respect of each Letter of Credit
(the "Letter of Credit Fee") computed at a rate per annum equal to the
Applicable Eurodollar Margin then in effect or the daily Stated Amount of such
Letter of Credit. Accrued Letter of Credit Fees shall be due and payable
quarterly in arrears on the first day of each January, April, July and October
of each year and on the date after the Total Commitment is terminated and no
Letters of Credit remain outstanding.
(c) The Borrower agrees to pay to the Letter of Credit Issuer a
fee in respect of each Letter of Credit issued by it (the "Facing Fee")
computed at the rate of 1/8 of 1% per annum on the daily Stated Amount of such
Letter of Credit. Accrued Facing Fees shall be due and payable quarterly in
arrears on the first day of each January, April, July and October of each year
and on the date after the Total Commitment is terminated and no Letters of
Credit remain outstanding.
(d) The Borrower agrees to pay directly to the Letter of Credit
Issuer upon request the amount of any charges or expenses incurred by the
Letter of Credit Issuer in connection with any confirmation of Letters of
Credit by local banks requested by the Borrower or any beneficiary of any
Letter of Credit.
(e) The Borrower shall pay to the Administrative Agent (x) on the
Initial Borrowing Date for its own account and/or for distribution to the
Banks such Fees as heretofore agreed in writing by the Borrower and the
Administrative Agent and (y) for its own account such other fees as agreed to
in writing between the Borrower and the Administrative Agent, when and as due.
(f) All computations of Fees shall be made in accordance with
Section 12.07(b).
3.02 Voluntary Reduction of Commitments. Upon at least thirty
Days' prior written notice (or telephonic notice confirmed in writing) to the
Administrative Agent at its Notice Office (which notice the Administrative
Agent shall promptly transmit to each of the Banks), the Borrower shall have
the right, without premium or penalty, to terminate or partially reduce the
Total Unutilized Commitment, provided that (w) any such termination shall
apply to proportionately and permanently reduce the Commitment of each Bank,
(x) no such reduction shall reduce any Non-Defaulting Bank's Commitment to an
amount that is less than the sum of (A) the outstanding Loans of such Bank
plus (B) such Bank's Adjusted Percentage of Letter of Credit Outstandings, (y)
any partial reduction pursuant to this Section 3.02 shall be in the amount of
at least $5,000,000 and (z) any such reduction shall reduce the remaining
Scheduled Commitment Reductions pro rata based on the then remaining amounts
of Scheduled Commitment Reductions.
3.03 Mandatory Adjustments of Commitments, etc. (a) The Total
Commitment shall terminate on the earlier of (i) the Maturity Date, (ii)
November 30, 1996, unless the Effective Date has occurred on or before such
date and (iii) unless the Required Banks otherwise consent, the date on which
any Change of Control occurs.
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date set forth below, the Total
Commitment shall be permanently reduced by the amount set forth opposite such
date (each such reduction, as same may be further reduced in accordance with
Sections 3.02 and 3.03(d), a "Scheduled Commitment Reduction"):
Date Amount
May 13, 1999 $25,000,000
November 13, 1999 $25,000,000
May 13, 2000 $25,000,000
November 13, 2000 $25,000,000
May 13, 2001 $25,000,000
Maturity Date Remaining amount
of Total
Commitment
(c) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on the Business Day following the date of
receipt thereof by the Borrower and/or any of its Subsidiaries of the Cash
Proceeds from any Collateral Disposition, the Total Commitment then in effect
shall be permanently reduced by an amount equal to the Total Commitment as in
effect on the Initial Borrowing Date multiplied by the percentage set forth on
Annex IV hereto adjacent to the name of the Mortgaged Rig (other than the Jack
Bates, the Paul B. Loyd, Jr. and the Henry Goodrich) which is the subject of
such Collateral Disposition under the heading "Percentage Reduction."
(d) Notwithstanding anything to the contrary contained herein,
and in addition to any other mandatory commitment reductions pursuant to this
Section 3.03, in the case of any Collateral Disposition involving the Jack
Bates, the Total Commitment then in effect shall be reduced by the lesser of
the Total Commitment then in effect or $100,000,000.
(e) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, in the case of any sale, disposition or loss by
Arcade Drilling AS ("Arcade") with respect to the Henry Goodrich or the Paul
B. Loyd, Jr. (collectively, the "Arcade Rigs") the Total Commitment then in
effect shall be reduced by the lesser of the Total Commitment then in effect
or $100,000,000 per rig.
(f) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on June 30, 1997 the Total Commitment as then
in effect shall be reduced by $15,000,000 unless the documentation with
respect to the C.E. Thornton required pursuant to Section 7.12(a) has been
provided.
(g) Each reduction of the Total Commitment pursuant to this
Section 3.03 shall apply proportionately to the Commitment of each Bank. Any
reduction to the Total Commitment pursuant to this Section 3.03 shall reduce
the remaining Schedule Commitment Reductions pro rata based on the then
remaining amounts of Scheduled Commitment Reductions.
SECTION 4. Payments.
4.01 Voluntary Prepayments. The Borrower shall have the right to
prepay Loans in whole or in part, without premium or penalty, from time to
time on the following terms and conditions: (i) the Borrower shall give the
Administrative Agent at the Payment Office written notice (or telephonic
notice promptly confirmed in writing) of its intent to prepay the Loans, the
amount of such prepayment and (in the case of Eurodollar Loans) the specific
Borrowing or Borrowings pursuant to which made, which notice shall be given by
the Borrower at least five Business Days prior to the date of such prepayment
of Loans, which notice shall promptly be transmitted by the Administrative
Agent to each of the Banks; (ii) each partial prepayment of any Borrowing
shall be in an aggregate principal amount of at least $1,000,000 and, if
greater, in an integral multiple of $100,000, provided that no partial
prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce the
aggregate principal amount of the Loans outstanding pursuant to such Borrowing
to an amount less than the Minimum Borrowing Amount; (iii) Eurodollar Loans
may only be prepaid pursuant to this Section 4.01 on the last day of the
Interest Period applicable thereto; and (iv) each prepayment in respect of any
Loans made pursuant to a Borrowing shall be applied pro rata among the Banks
which made such Loans, provided that at the Borrower's election in connection
with any prepayment of Loans pursuant to this Section 4.01, such prepayment
shall not be applied to any Loans of a Defaulting Bank.
4.02 Mandatory Prepayments.
(A) Requirements:
(a) (i) If on any date the sum of the aggregate outstanding
principal amount of Loans made by Non-Defaulting Banks and the Letter of
Credit Outstandings exceeds the Adjusted Total Commitment as then in effect,
the Borrower shall repay on such date the principal of Loans of Non-Defaulting
Banks, in an aggregate amount equal to such excess. If, after giving effect
to the repayment of all outstanding Loans of Non-Defaulting Banks, the
aggregate amount of Letter of Credit Outstandings exceeds the Adjusted Total
Commitment then in effect, the Borrower shall pay to the Administrative Agent
an amount in cash and/or Cash Equivalents equal to such excess (up to the
aggregate amount of the Letter of Credit Outstandings at such time) and the
Administrative Agent shall hold such payment as security for the obligations
of the Borrower hereunder pursuant to a cash collateral agreement to be
entered into in form and substance reasonably satisfactory to the
Administrative Agent (which shall permit certain investments in Cash
Equivalents satisfactory to the Administrative Agent, until the proceeds are
applied to the secured obligations).
(ii) If on any date the aggregate outstanding principal amount of
the Loans made by a Defaulting Bank exceeds the Commitment of such Defaulting
Bank, the Borrower shall repay the principal of Loans of such Defaulting Bank
in an amount equal to such excess.
(b) Notwithstanding anything to the contrary contained elsewhere
in this Agreement, all then outstanding Loans shall be repaid in full on the
Maturity Date.
(c) On the date on which any Change of Control occurs, unless
otherwise agreed by the Required Banks, the outstanding principal amount of
the Loans, if any, shall become due and payable in full.
(B) Application:
With respect to each prepayment of Loans required by Section 4.02,
the Borrower may designate the Types of Loans which are to be prepaid and the
specific Borrowing or Borrowings pursuant to which made, provided that (i)
Eurodollar Loans may only be repaid if no Base Rate Loans of Non-Defaulting
Banks remain outstanding; (ii) if any prepayment of Eurodollar Loans made
pursuant to a single Borrowing shall reduce the outstanding Loans made
pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount
for such Borrowing, such Borrowing shall be immediately converted into Base
Rate Loans; and (iii) each prepayment of any Loans made by Non-Defaulting
Banks pursuant to a Borrowing shall be applied pro rata among the Non-
Defaulting Banks which made such Loans. In the absence of a designation by
the Borrower as described in the preceding sentence, the Administrative Agent
shall, subject to the above, make such designation in its sole discretion with
a view, but no obligation, to minimize breakage costs owing under Section
1.11. Notwithstanding the foregoing provisions of this Section 4.02(B), if at
any time the mandatory prepayment of Loans pursuant to Section 4.02(A) above
would result, after giving effect to the procedures set forth above, in the
Borrower incurring breakage costs under Section 1.11 as a result of Eurodollar
Loans being prepaid other than on the last day of an Interest Period
applicable thereto (the "Affected Eurodollar Loans"), then the Borrower may in
its sole discretion initially deposit a portion (up to 100%) of the amounts
that otherwise would have been paid in respect of the Affected Eurodollar
Loans with the Administrative Agent (which deposit must be equal in amount to
the amount of the Affected Eurodollar Loans not immediately prepaid) to be
held as security for the obligations of the Borrower hereunder pursuant to a
cash collateral agreement to be entered into in form and substance reasonably
satisfactory to the Administrative Agent and shall provide for investments
satisfactory to the Administrative Agent and the Borrower, with such cash
collateral to be directly applied upon the first occurrence (or occurrences)
thereafter of the last day of an Interest Period applicable to the relevant
Loans that are Eurodollar Loans (or such earlier date or dates as shall be
requested by the Borrower), to repay an aggregate principal amount of such
Loans equal to the Affected Eurodollar Loans not initially prepaid pursuant to
this sentence. Notwithstanding anything to the contrary contained in the
immediately preceding sentence, all amounts deposited as cash collateral
pursuant to the immediately preceding sentence shall be held for the sole
benefit of the Banks whose Loans would otherwise have been immediately prepaid
with the amounts deposited and upon the taking of any action by the
Administrative Agent or the Banks pursuant to the remedial provisions of
Section 9, any amounts held as cash collateral pursuant to this Section
4.02(B) shall, subject to the requirements of applicable law, be immediately
applied to the Loans.
4.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made
to the Administrative Agent for the ratable (based on its pro rata share)
account of the Banks entitled thereto, not later than 1:00 P.M. (New York
time) on the date when due and shall be made in immediately available funds
and in lawful money of the United States of America at the Payment Office, it
being understood that written notice by the Borrower to the Administrative
Agent to make a payment from the funds in the Borrower's account at the
Payment Office shall constitute the making of such payment to the extent of
such funds held in such account. Any payments under this Agreement which are
made later than 1:00 P.M. (New York time) shall be deemed to have been made on
the next succeeding Business Day. Whenever any payment to be made hereunder
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable during such
extension at the applicable rate in effect immediately prior to such
extension.
4.04 Net Payments. (a) All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense. Except as provided in Section 4.04(b), all such payments will be
made free and clear of, and without deduction or withholding for, any present
or future taxes, levies, imposts, duties, fees, assessments or other charges
of whatever nature now or hereafter imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein with respect to
such payments (but excluding, except as provided in the second succeeding
sentence, any tax imposed on or measured by the net income or net profits of a
Bank pursuant to the laws of the jurisdiction in which it is organized or
managed and controlled or the jurisdiction in which the principal office or
applicable lending office of such Bank is located or any subdivision thereof
or therein) and all interest, penalties or similar liabilities with respect
thereto (all such non-excluded taxes, levies, imposts, duties, fees,
assessments or other charges being referred to collectively as "Taxes"). If
any Taxes are so levied or imposed, the Borrower agrees to pay the full amount
of such Taxes, and such additional amounts, if any, as may be necessary so
that every payment of all amounts due under this Agreement or under any Note,
after withholding or deduction for or on account of any Taxes, will not be
less than the amount provided for herein or in such Note. If any amounts are
payable by the Borrower in respect of Taxes pursuant to the preceding
sentence, the Borrower agrees to reimburse each Bank, upon the written request
of such Bank, for taxes imposed on or measured by the net income or net
profits of such Bank pursuant to the laws of the jurisdiction in which the
principal office or applicable lending office of such Bank is located or under
the laws of any political subdivision or taxing authority of any such
jurisdiction in which the principal office or applicable lending office of
such Bank is located and for any withholding of taxes as such Bank shall
determine are payable by, or withheld from, such Bank in respect of such
amounts so paid to or on behalf of such Bank pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Bank
pursuant to this sentence. The Borrower will furnish to the Administrative
Agent within 45 days after the date the payment of any Taxes is due pursuant
to applicable law certified copies of tax receipts evidencing such payment by
the Borrower. The Borrower agrees to indemnify and hold harmless each Bank,
and reimburse such Bank upon its written request, for the amount of any Taxes
so levied or imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower
and the Administrative Agent on or prior to the date of this Agreement, or in
the case of a Bank that is an assignee or transferee of an interest under this
Agreement pursuant to Section 1.13 or 12.04 (unless the respective Bank was
already a Bank hereunder immediately prior to such assignment or transfer), on
the date of such assignment or transfer to such Bank, (i) two accurate and
complete original signed copies of Internal Revenue Service Form 4224 or 1001
(or successor forms) certifying to such Bank's entitlement to a complete
exemption from United States withholding tax with respect to payments to be
made under this Agreement and under any Note, or (ii) if the Bank is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot
deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause
(i) above, (x) a certificate substantially in the form of Exhibit D (any such
certificate, a "Section 4.04(b)(ii) Certificate") and (y) two accurate and
complete original signed copies of Internal Revenue Service Form W-8 (or
successor form) certifying to such Bank's entitlement to a complete exemption
from United States withholding tax with respect to payments of interest to be
made under this Agreement and under any Note. In addition, each Bank agrees
that from time to time after the date of this Agreement, when a lapse in time
or change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the Borrower and the
Administrative Agent two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section
4.04(b)(ii) Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Bank to a
continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement and any Note, or it shall immediately
notify the Borrower and the Administrative Agent of its inability to deliver
any such Form or Certificate. Notwithstanding anything to the contrary
contained in Section 4.04(a), but subject to Section 12.04(b) and the
immediately succeeding sentence, (x) the Borrower shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder for the account of any Bank which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal
income tax purposes to the extent that such Bank has not provided to the
Borrower U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding and (y) the Borrower shall not be
obligated pursuant to Section 4.04(a) hereof to gross-up payments to be made
to a Bank in respect of income or similar taxes imposed by the United States
if (I) such Bank has not provided to the Borrower the Internal Revenue Service
Forms required to be provided to the Borrower pursuant to this Section 4.04(b)
or (II) in the case of a payment, other than interest, to a Bank described in
clause (ii) above, to the extent that such Forms do not establish a complete
exemption from withholding of such taxes. Notwithstanding anything to the
contrary contained in the preceding sentence or elsewhere in this Section 4.04
and except as set forth in Section 12.04(b), the Borrower agrees to pay
additional amounts and to indemnify each Bank in the manner set forth in Sec-
tion 4.04(a) (without regard to the identity of the jurisdiction requiring the
deduction or withholding) in respect of any amounts deducted or withheld by it
as described in the immediately preceding sentence as a result of any changes
after the date of this Agreement in any applicable law, treaty, governmental
rule, regulation, guideline or order, or in the interpretation thereof, relat-
ing to the deducting or withholding of income or similar Taxes, provided such
Bank shall provide to the Borrower and the Administrative Agent any reasonably
available applicable IRS tax form (reasonably similar in its simplicity and
lack of detail to IRS Form 1001) necessary or appropriate for the exemption or
reduction in the rate of such U.S. federal withholding tax.
(c) The provisions of this Section 4.04 shall be subject to
Section 1.12(b) (to the extent applicable).
SECTION 5. Conditions Precedent. The obligation of the Banks to
make each Loan hereunder, and the obligation of the Letter of Credit Issuer to
issue Letters of Credit hereunder, is subject, at the time of each such Credit
Event (except as otherwise hereinafter indicated), to the satisfaction of each
of the following conditions:
5.01 Execution of Agreement. On or prior to the Initial
Borrowing Date, (i) the Effective Date shall have occurred as provided in
Section 12.10 and (ii) there shall have been delivered to the Administrative
Agent for the account of each Bank the appropriate Note executed by the
Borrower, and in the amount, maturity and as otherwise provided herein.
5.02 No Default; Representations and Warranties. At the time of
each Credit Event and also after giving effect thereto, (i) there shall exist
no Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents in effect at such time shall
be 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 of
such Credit Event (except to the extent that such representations and
warranties expressly relate to an earlier date, in which case they shall be
true and correct in all material respects as of such earlier date).
5.03 Officer's Certificate. On the Initial Borrowing Date, the
Administrative Agent shall have received a certificate dated such date signed
by the President or any Vice President of the Borrower stating that there has
been no Material Adverse Change in the financial condition of the Borrower or
of Holdings and its Subsidiaries taken as a whole since the date of the last
audited financial statements provided by Holdings or the Borrower to the
Administrative Agent and that all of the applicable conditions set forth in
Sections 5.02, 5.08(a) and 5.18 exist as of such date.
5.04 Opinions of Counsel. On the Initial Borrowing Date, the
Administrative Agent shall have received opinions, addressed to the
Administrative Agent and each of the Banks and dated the Initial Borrowing
Date, from (i) Wayne Hillin, Esq., General Counsel to the Credit Parties,
which opinion shall cover the matters contained in Exhibit E-1, (ii) White &
Case, special counsel to the Administrative Agent, which opinion shall cover
the matters contained in Exhibit E-2 and (iii) from local counsel satisfactory
to the Administrative Agent as the Administrative Agent may request, which
opinions shall cover the perfection of the security interests granted pursuant
to the Security Documents and such other matters incident to the transactions
contemplated herein as the Administrative Agent may reasonably request and
shall be in form and substance satisfactory to the Administrative Agent.
5.05 Corporate Proceedings. (a) On the Initial Borrowing Date,
the Administrative Agent shall have received from each Credit Party a
certificate, dated the Initial Borrowing Date, signed by the President or any
Vice-President or other appropriate representative of such Credit Party in the
form of Exhibit F with appropriate insertions and deletions, together with
copies of the certificate of formation, the by-laws, or other organizational
documents of such Credit Party and the resolutions, or such other
administrative approval, of such Credit Party referred to in such certificate
and all of the foregoing (including each such certificate of formation,
certificate of incorporation and by-laws) shall be reasonably satisfactory to
the Administrative Agent.
(b) On the Initial Borrowing Date, all corporate and legal pro-
ceedings and all instruments and agreements in connection with the trans-
actions contemplated by this Agreement and the other Credit Documents shall be
reasonably satisfactory in form and substance to the Administrative Agent, and
the Administrative Agent shall have received all information and copies of all
certificates, documents and papers, including good standing certificates and
any other records of corporate proceedings and governmental approvals, if any,
which the Administrative Agent may have reasonably requested in connection
therewith, such documents and papers, where appropriate, to be certified by
proper corporate or governmental authorities.
5.06 Existing Indebtedness Agreements. On or prior to the
Initial Borrowing Date, there shall have been delivered to the Banks copies,
certified as true and correct by an appropriate officer of the Borrower or
Holdings, as the case may be, of all agreements evidencing or relating to
Existing Indebtedness (the "Existing Indebtedness Agreements"), all of which
shall be in form and substance satisfactory to the Administrative Agent.
5.07 Adverse Change, etc. From December 31, 1995 to the Initial
Borrowing Date, nothing shall have occurred (and neither the Banks nor the
Administrative Agent shall have become aware of any facts or conditions not
previously known) which the Administrative Agent or the Required Banks shall
determine (a) has, or is reasonably likely to have, a material adverse effect
on the rights or remedies of the Banks or the Administrative Agent, or on the
ability of Holdings, the Borrower or any Subsidiary Guarantor to perform their
respective obligations to them, or (b) has, or is reasonably likely to have, a
Material Adverse Effect.
5.08 Litigation. On the Initial Borrowing Date, there shall be
no actions, suits or proceedings pending or threatened (a) with respect to
this Agreement or any other Credit Document or the transactions contemplated
hereby or thereby or (b) which the Administrative Agent or the Required Banks
shall determine is reasonably likely to (i) have a Material Adverse Effect or
(ii) have a material adverse effect on the rights or remedies of the Banks
hereunder or under any other Credit Document or on the ability of Holdings,
the Borrower or any Subsidiary Guarantor to perform their respective
obligations to the Banks hereunder or under any other Credit Document.
5.09 Approvals. On the Initial Borrowing Date, all material
necessary governmental and third party approvals in connection with the
transactions contemplated by the Credit Documents and otherwise referred to
herein or therein shall have been obtained and remain in effect, and all
applicable waiting periods shall have expired without any action being taken
by any competent authority which restrains or prevents such transactions or
imposes, in the reasonable judgment of the Required Banks or the
Administrative Agent, materially adverse conditions upon the consummation of
such transactions.
5.10 Fees. On the Initial Borrowing Date, the Borrower shall
have paid to the Administrative Agent and the Banks all Fees and expenses
agreed upon by such parties to be paid on or prior to such date.
5.11 Security Agreement. On the Initial Borrowing Date each
Mortgagor shall have duly authorized, executed and delivered a Security
Agreement and Assignment of Earnings and Insurances in the form of Exhibit G,
together with such changes (or with such other documents) as may be requested
by the Collateral Agent in connection with local law (as modified, amended or
supplemented from time to time in accordance with the terms thereof and
hereof, the "Security Agreement") covering all of the Security Agreement
Collateral (except Security Agreement Collateral relating to the C.E.
Thornton, which Security Agreement Collateral shall be assigned to the
Collateral Agent in accordance with Section 7.12(a)), together with:
(i) executed copies of Financing Statements (Form UCC-1 and/or
UCC-3) or appropriate local equivalent in appropriate form for filing
under the UCC or appropriate local equivalent of each jurisdiction as
may be necessary to perfect the security interests purported to be
created by the Security Agreement;
(ii) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, each of a recent date listing all
effective financing statements that name Reading & Bates Offshore,
Limited as debtor and that are filed in the jurisdictions referred to in
clause (i) above, together with copies of such financing statements
(none of which shall cover the Collateral except (x) those with respect
to which appropriate termination statements executed by the secured
lender thereunder have been delivered to the Collateral Agent and (y) to
the extent evidencing Permitted Liens); and
(iii) evidence that all other recordings and filings of, or with
respect to, the Security Agreement, and all other actions, as may be
necessary or, in the opinion of the Collateral Agent, desirable to
perfect the security interests intended to be created by the Security
Agreement have been completed (it being understood and agreed that UCC
financing statements and termination statements shall be filed in the
appropriate governmental office within three Business Days after the
Initial Borrowing Date);
and the Security Agreement and such other documents shall be in full force and
effect.
5.12 Subsidiary Guaranty. On the Initial Borrowing Date, each
Subsidiary of the Borrower which owns a Mortgaged Rig (each a "Subsidiary
Guarantor") shall have duly authorized, executed and delivered a Subsidiary
Guaranty in the form of Exhibit H (as modified, amended or supplemented from
time to time in accordance with the terms hereof and thereof, the "Subsidiary
Guaranty"), and the Subsidiary Guaranty shall be in full force and effect.
5.13 Mortgages. (a) On the Initial Borrowing Date, each
Mortgagor shall have duly authorized, executed and delivered the following
document or documents to which it is a party (as modified, amended or
supplemented from time to time in accordance with the terms thereof and
hereof, the "Mortgages"):
(i) with respect to the US Rigs, substantially in the form of
Exhibit I-1 (as amended, modified or supplemented from time to time in
accordance with the terms hereof and thereof, the "US Mortgage");
(ii) with respect to the Panamanian Rigs, substantially in the form
of Exhibit I-2 (as amended, modified or supplemented from time to time
in accordance with the terms hereof and thereof, the "Panamanian
Mortgage");
(iii) with respect to the Australian Rig, substantially in the form
of Exhibit I-3 (as amended, modified or supplemented from time to time
in accordance with the terms hereof and thereof, the "Australian
Mortgage"); and
(b) On the Initial Borrowing Date, all actions necessary,
desirable or otherwise reasonably requested by the Collateral Agent to provide
the Collateral Agent with a perfected first priority security interest in all
Collateral purported to be covered by the Mortgages shall have been taken.
5.14 Evidence of Lien, etc. On the Initial Borrowing Date, the
Administrative Agent shall have received (i) United States Coast Guard
certificates of ownership showing (or confirmation updating previously
reviewed certificates and indicating) that the US Rig Jack Bates is registered
in the ownership of the Borrower, the US Rig W.D. Kent is registered in the
ownership of Reading & Bates Exploration Co., the US Rig D.R. Stewart is
registered in the ownership of Reading & Bates Exploration Co., the US Rig
F.G. McClintock is registered in the ownership of Reading & Bates Offshore,
Limited, the US Rig Randolph Yost is registered in the ownership of the
Borrower, the US Rig J.T. Angel is registered in the ownership of the
Borrower, the US Rig Roger W. Mowell is registered in the ownership of the
Borrower, the US Rig Harvey H. Ward is registered in the ownership of HRB Rig
Corporation, and the US Rig George H. Galloway is registered in the ownership
of Reading & Bates Offshore, Limited, each subject to the Lien of the
respective US Mortgage and free of all other Liens of record, (ii) a
certificate of the Director General of the Public Registry of Panama showing
(or confirmation updating previously reviewed certificates and indicating)
that the Panamanian Rig Charley Graves is registered in the ownership of
Reading and Bates Borneo Drilling Co., Ltd., the Panamanian Rig J.W. McLean is
registered in the ownership of the Borrower, and the Panamanian Rig 41 is
registered in the ownership of the Borrower, each subject to the Lien of the
respective Panamanian Mortgage and free of all other Liens of record and (iii)
a certificate of the Shipping Registration Office of Australia showing (or
confirmation updating previously reviewed certificates indicating) that the
Australian Rig Ron Tappmeyer is registered in the ownership of Reading & Bates
(A) Pty. Ltd., and subject to the Lien of the Australian Mortgage and free of
all other Liens of record.
5.15 Rig Reports; Drilling Contracts. (a) On or prior to the
Initial Borrowing Date, the Administrative Agent shall have received:
(i) evidence satisfactory to the Collateral Agent that each
Mortgaged Rig is classified in the highest class available for rigs of
its age and type with the American Bureau of Shipping, Inc. or another
internationally recognized classification society reasonably acceptable
to the Collateral Agent, free of any material outstanding requirements
or recommendations; and
(ii) reports from Approved Shipbrokers setting forth the Market
Value of each Mortgaged Rig, which combined value of all Mortgaged Rigs
shall not be less than $480 million.
(b) On the Initial Borrowing Date, the Administrative Agent shall
have received true and correct copies of all current and pending drilling
contracts relating to the Mortgaged Rigs and the Arcade Rigs.
5.16 Insurance Report. On or prior to the Initial Borrowing
Date, the Administrative Agent shall have received a detailed report from
Soriero & Company, Inc., or another firm of independent marine insurance
brokers acceptable to the Administrative Agent and the Required Banks with
respect to the insurance maintained by the Mortgagors in connection with the
Mortgaged Rigs and by Arcade with respect to the Arcade Rigs, together with a
certificate from such broker certifying that such insurances (i) are placed
with such insurance companies and/or underwriters and/or clubs, in such
amounts, against such risks, and in such form, as are normally insured against
by similarly situated insureds and as are necessary or advisable for the
protection of the Security Trustee or the Administrative Agent, as the case
may be, as mortgagee and (ii) conform with the requirements of the Mortgages.
5.17 Pledge Agreement. On the Initial Borrowing Date, Holdings
shall have duly authorized, executed and delivered a Pledge Agreement in the
form of Exhibit J (as modified, supplemented or amended from time to time, the
"Pledge Agreement") and shall have delivered to the Collateral Agent, as
Pledgee, all the Pledged Stock referred to therein then owned by Holdings,
together with executed and undated stock powers relating to such Pledged
Stock.
5.18 Refinancing; Existing Credit Agreement. (a) On or prior to
the Initial Borrowing Date or concurrently with the Credit Events then
occurring, the total commitments under the Existing Credit Agreements shall
have been terminated, and all loans and notes issued thereunder shall have
been repaid in full, together with interest thereon, all letters of credit
issued thereunder shall have been terminated or assumed hereunder and all
other amounts owing thereunder shall have been repaid in full and the Existing
Credit Agreements shall have been terminated and be of no further force or
effect except for continuing indemnification obligations and reimbursement
obligations under letters of credit assumed hereunder. The Borrower shall be
entitled to utilize this Facility to terminate the commitments, repay the
loans and terminate any letters of credit (not otherwise assumed hereunder)
under the Existing Credit Agreements. The Administrative Agent shall have
received evidence in form, scope and substance reasonably satisfactory to it
that the matters set forth in this Section 5.18(a) have been satisfied on such
date.
(b) On or prior to the Initial Borrowing Date or concurrently
with the Credit Events then occurring, the creditors under the Existing Credit
Agreements shall have terminated and released all security interests and Liens
on the assets owned by, Holdings, the Borrower or any of its Subsidiaries
granted in connection with the Existing Credit Agreements. The Administrative
Agent shall have received such releases of security interests in and Liens on
the assets owned by Holdings, the Borrower and its Subsidiaries as may have
been reasonably requested by the Administrative Agent, which releases shall be
in form and substance reasonably satisfactory to the Administrative Agent.
Without limiting the foregoing, there shall have been delivered (i) proper
termination statements (Form UCC-3 or the appropriate equivalent) for filing
under the UCC of each jurisdiction where a financing statement (Form UCC-1 or
the appropriate equivalent) was filed with respect to Holdings, the Borrower
or any of its Subsidiaries in connection with the security interests created
with respect to the Existing Credit Agreement and the documentation related
thereto, (ii) terminations or assignments of any security interest in, or Lien
on, any patents, trademarks, copyrights, or similar interests of Holdings, the
Borrower or any of its Subsidiaries on which filings have been made and (iii)
terminations of all mortgages, leasehold mortgages and deeds of trust created
with respect to property of Holdings, the Borrower or any of its Subsidiaries,
in each case to secure the obligations under the Existing Credit Agreements,
all of which shall be in form and substance reasonably satisfactory to the
Administrative Agent.
5.19 Compliance Certificate. On the Initial Borrowing Date, and
subject to Section 5.18 above, the Borrower shall have delivered to the
Administrative Agent a compliance certificate in the form of Exhibit L to the
Existing Credit Agreement indicating that the Borrower is current with respect
to its obligations under the Existing Credit Agreement and is otherwise in
compliance with all the terms and conditions thereof.
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by Holding and the Borrower to the
Administrative Agent and each of the Banks that all of the conditions
specified above which are applicable in accordance with their express terms at
the time of such acceptance exist as of that time. All of the certificates,
legal opinions and other documents and papers referred to in this Section 5,
unless otherwise specified, shall be delivered to the Administrative Agent at
its Notice Office for the account of each of the Banks and, except for the
Notes, in sufficient counterparts or copies for each of the Banks and shall be
satisfactory in form and substance to the Administrative Agent.
SECTION 6. Representations, Warranties and Agreements. In order
to induce the Banks to enter into this Agreement and to make the Loans and
issue and/or participate in Letters of Credit provided for herein, each of
Holdings and the Borrower makes the following representations and warranties
to, and agreements with, the Banks, all of which shall survive the execution
and delivery of this Agreement and the making of the Loans (with the making of
each Credit Event thereafter being deemed to constitute a representation and
warranty that the matters specified in this Section 6 are true and correct in
all material respects on and as of the date of each such Credit Event unless
such representation and warranty expressly indicates that it is being made as
of any specific date, in which case such representations and warranties shall
be true and correct in all material respects as of such date):
6.01 Corporate Status. Each Credit Party (i) is a duly organized
and validly existing corporation in good standing under the laws of the juris-
diction of its organization and has the corporate power and authority to own
its property and assets and to transact the business in which it is engaged,
except in such case where the failure to be so duly organized and validly
existing in good standing and to have such corporate power and authority (x)
is not reasonably likely to have a Material Adverse Effect and (y) is not
reasonably likely to have a material adverse effect on the rights or remedies
of the Banks or on the ability of Holdings, the Borrower or any Subsidiary
Guarantor to perform its obligations to them hereunder and under the other
Credit Documents to which it is a party, and (ii) has duly qualified and is
authorized to do business and is in good standing in all jurisdictions where
it is required to be so qualified and where the failure to be so qualified
would have a Material Adverse Effect.
6.02 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. Each Credit Party
has duly executed and delivered each Credit Document to which it is a party
and each such Credit Document constitutes the legal, valid and binding
obligation of such Credit Party enforceable against such Person in accordance
with its terms, except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
6.03 No Violation. Neither the execution, delivery and
performance by any Credit Party of the Credit Documents to which it is a party
nor compliance with the terms and provisions thereof, nor the consummation of
the transactions contemplated therein (i) will contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality of the United States or
any State thereof, the Republic of Panama or Australia, (ii) will result in
any breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or (other than pursuant to the Security Documents)
result in the creation or imposition of (or the obligation to create or
impose) any Lien upon any of the property or assets of Holdings, the Borrower
or any of their respective Subsidiaries pursuant to the terms of, any material
indenture, mortgage, deed of trust, agreement or other instrument to which
Holdings, the Borrower or any of their respective Subsidiaries is a party or
by which it or any of its property or assets are bound or to which it is
subject or (iii) will violate any provision of the Certificate of
Incorporation or By-Laws of Holdings, the Borrower or any of their respective
Subsidiaries.
6.04 Litigation. There are no actions, suits or proceedings
pending or, to the best of Holding's or the Borrower's knowledge threatened
with respect to Holdings, the Borrower or any of their respective Subsidiaries
(i) that are likely to have a Material Adverse Effect or (ii) that are
reasonably likely to have a material adverse effect on the rights or remedies
of the Banks or on the ability of any Credit Party to perform its obligations
to them hereunder and under the other Credit Documents to which it is a party.
6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of
all Loans shall be utilized to provide for the general corporate purposes of
Holdings, the Borrower and their respective Subsidiaries.
(b) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System and no part of the proceeds of any Loan will be used to purchase or
carry any Margin Stock in violation of Regulation U or to extend credit for
the purpose of purchasing or carrying any Margin Stock.
6.06 Governmental Approvals. Except for the orders, consents,
approvals, licenses, authorizations, validations, recordings, registrations
and exemptions that have already been duly made or obtained and remain in full
force and effect, no order, consent, approval, license, authorization, or
validation of, or filing (other than the filing of Form UCC-1 Financing
Statements or the appropriate equivalents, which such filing, if this repre-
sentation is being made more than ten days after the Initial Borrowing Date,
has been made), recording or registration with, or exemption by, any foreign
or domestic governmental or public body or authority, or any subdivision
thereof, is required to authorize or is required in connection with (i) the
execution, delivery and performance of any Credit Document or (ii) the
legality, validity, binding effect or enforceability of any Credit Document.
6.07 Investment Company Act. None of Holdings, the Borrower or
any of their respective Subsidiaries is an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
6.08 Public Utility Holding Company Act. None of Holdings, the
Borrower or any of their respective Subsidiaries is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the mean-
ing of the Public Utility Holding Company Act of 1935, as amended.
6.09 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf
of Holdings, the Borrower or any of their respective Subsidiaries in writing
to the Administrative Agent or any Bank for purposes of or in connection with
this Agreement or any transaction contemplated herein is, and all other such
factual information (taken as a whole) hereafter furnished by or on behalf of
any such Person in writing to any Bank will be, true and accurate in all mate-
rial respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make
such information (taken as a whole) not misleading at such time in light of
the circumstances under which such information was provided. The Projections
and pro forma financial information contained in such materials are based on
good faith estimates and assumptions believed by such Persons to be reasonable
at the time made, it being recognized by the Banks that such Projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered by any such Projections may differ from the
projected results. There is no fact known to Holdings or the Borrower which
is reasonably likely to have a Material Adverse Effect, which has not been
disclosed herein or in such other documents, certificates and statements
furnished to the Banks for use in connection with the transactions
contemplated hereby.
6.10 Financial Condition; Financial Statements; Projections. (a)
On and as of the Initial Borrowing Date, on a pro forma basis after giving
effect to all Indebtedness incurred, and to be incurred, and Liens created,
and to be created, by Holdings and its Subsidiaries in connection therewith,
(x) the sum of the assets, at a fair valuation, of Holdings and its
Subsidiaries taken as a whole will exceed its debts, (y) Holdings and its
Subsidiaries taken as a whole will not have incurred or intended to, or
believe that they will, incur debts beyond their ability to pay such debts as
such debts mature and (z) Holdings and its Subsidiaries taken as a whole will
not have unreasonably small capital with which to conduct its business.
(b) (i) The consolidated balance sheet of Holdings and its
Subsidiaries at December 31, 1995 and the related consolidated statements of
operations and cash flows of Holdings and its Subsidiaries for the fiscal
year, as the case may be, ended as of said date, which have been examined by
Arthur Andersen LLP, independent certified public accountants, who delivered
an unqualified opinion in respect therewith, and (ii) the consolidated balance
sheet of Holdings and its Subsidiaries as of June 30, 1996, copies of which
have heretofore been furnished to each Bank, present fairly the financial
position of such entities at the dates of said statements and the results for
the period covered thereby in accordance with GAAP (or, in the case of the
balance sheet, presents a good faith estimate of the consolidated financial
condition of Holdings and its Subsidiaries at the date thereof), except to the
extent provided in the notes to said financial statements and, in the case of
the June 30, 1996 statements, subject to normal and recurring year-end audit
adjustment. All such financial statements (other than the aforesaid balance
sheet) have been prepared in accordance with generally accepted accounting
principles and practices consistently applied except to the extent provided in
the notes to said financial statements. Nothing has occurred since December
31, 1995 that has had or is reasonably likely to have a Material Adverse
Effect.
(c) Except as reflected in the financial statements and the notes
thereto described in Section 6.10(b), there were as of the Initial Borrowing
Date no liabilities or obligations with respect to Holdings, the Borrower or
any of their respective Subsidiaries of a nature (whether absolute, accrued,
contingent or otherwise and whether or not due) which, either individually or
in aggregate, would be material to Holdings and its Subsidiaries taken as a
whole, except as incurred subsequent to December 31, 1995 in the ordinary
course of business consistent with past practices.
(d) On and as of the Initial Borrowing Date, the financial
projections, together with adjustments thereto, previously delivered to the
Administrative Agent and the Banks (the "Projections") have been prepared on a
basis consistent with the financial statements referred to in Section 6.10(a)
(other than as set forth or presented in such Projections), and there are no
statements or conclusions in any of the Projections which are based upon or
include information known to Holdings or the Borrower to be misleading in any
material respect or which fail to take into account material information not
otherwise disclosed in writing to the Administrative Agent and the Banks
regarding the matters reported therein. On the Initial Borrowing Date,
Holdings and the Borrower believed that the Projections were reasonable and
attainable.
6.11 Security Interests. On and after the Initial Borrowing
Date, each of the Security Documents creates, as security for the Obligations
purported to be secured thereby, a valid and enforceable perfected security
interest in and Lien on all of the Collateral subject thereto, to the extent
perfection of a security interest or Lien is governed by Article 8 or Article
9 of the UCC (as defined in the applicable Security Documents), the Ship
Mortgage Act (as defined in the U.S. Mortgages), or comparable provisions
under the laws of the Republic of Panama and Australia, and subject to no
other Liens (except that the Collateral may be subject to Permitted Liens), in
favor of the Collateral Agent or the Security Trustee, as the case may be, for
the benefit of the Banks. No filings or recordings are required in order to
perfect the security interests created under any Security Document except for
filings or recordings required in connection with any such Security Document
which shall have been made upon or prior to (or are the subject of
arrangements, satisfactory to the Administrative Agent, for filing on or
promptly after the date of) the execution and delivery thereof.
6.12 Tax Returns and Payments. Each of Holdings, the Borrower
and each of their respective Subsidiaries has filed all federal income tax
returns and all other material tax returns, domestic and foreign, required to
be filed by it and has paid all material taxes and assessments payable by it
which have become due, other than those not yet delinquent and except for
those contested in good faith. Holdings, the Borrower and each of their
respective Subsidiaries has paid, or has provided adequate reserves with
respect thereto, in accordance with GAAP, for the payment of, all federal,
state and foreign income taxes applicable for all prior fiscal years and for
the current fiscal year to the date hereof.
6.13 Compliance with ERISA. (a) Each Plan is in substantial
compliance with ERISA and the Code; no Reportable Event has occurred with
respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an
accumulated or waived funding deficiency or has applied for an extension of
any amortization period within the meaning of Section 412 of the Code; all
contributions required to be made with respect to a Plan and a Foreign Pension
Plan have been timely made; neither Holdings nor the Borrower nor any
Subsidiary of the Borrower nor any ERISA Affiliate has incurred any material
liability to or on account of a Plan pursuant to Section 409, 502(i), 502(l),
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29),
4971, 4975 or 4980 of the Code or expects to incur any liability (including
any indirect, contingent, or secondary liability) under any of the foregoing
Sections with respect to any Plan; no proceedings have been instituted to
terminate or appoint a trustee to administer any Plan; no condition exists
which presents a material risk to Holdings, the Borrower or any Subsidiary of
the Borrower or any ERISA Affiliate of incurring a liability to or on account
of a Plan pursuant to the foregoing provisions of ERISA and the Code; or
except as would reasonably be expected to have a Material Adverse Effect, no
lien imposed under the Code or ERISA on the assets of the Borrower or any
Subsidiary of the Borrower or any ERISA Affiliate exists or is reasonably
likely to arise on account of any Plan; and Holdings, the Borrower and their
respective Subsidiaries do not maintain or contribute to any employee welfare
benefit plan (as defined in Section 3(1) of ERISA) which provides benefits to
retired employees or other former employees (other than as required by Section
601 of ERISA) or any employee pension benefit plan (as defined in Section 3(2)
of ERISA) the obligations with respect to which are not properly recognized or
disclosed in such entity's consolidated financial statements and notes related
thereto.
(b) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. None of
Holdings, the Borrower or any of their respective Subsidiaries has incurred
any obligation in connection with the termination of or withdrawal from any
Foreign Pension Plan.
6.14 Subsidiaries. Annex V lists each Subsidiary of Holdings
(and the direct and indirect ownership interest of Holdings therein), in each
case existing on the Effective Date.
6.15 Patents, etc. Holdings and each of its Subsidiaries has
obtained all material patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their businesses taken as a whole as
presently conducted.
6.16 Pollution and Other Regulations. (a) Each of Holdings and
its Subsidiaries is in substantial compliance with all applicable
Environmental Laws governing its business for which failure to comply is
reasonably likely to have a Material Adverse Effect, and neither Holdings nor
any of its Subsidiaries is liable for any material penalties, fines or
forfeitures for failure to comply with any of the foregoing. All licenses,
permits, registrations or approvals required for the business of Holdings and
each of its Subsidiaries, as conducted as of the Initial Borrowing Date, under
any Environmental Law have been secured and Holdings and each of its
Subsidiaries is in substantial compliance therewith, except such licenses,
permits, registrations or approvals the failure to secure or to comply there-
with is not likely to have a Material Adverse Effect. Neither Holdings nor
any of its Subsidiaries is in any respect in noncompliance with, breach of or
default under any writ, order, judgment, injunction, or decree to which
Holdings or such Subsidiary is a party or which would affect the ability of
Holdings or such Subsidiary to operate any Real Property, offshore drilling
rig or other facility and no event has occurred and is continuing which, with
the passage of time or the giving of notice or both, would constitute noncom-
pliance, breach of or default thereunder, except in each such case, such
noncompliance, breaches or defaults as are not likely to, in the aggregate,
have a Material Adverse Effect. There are as of the Initial Borrowing Date no
Environmental Claims pending or, to the best knowledge of Holdings and the
Borrower, threatened, against Holdings or any of its Subsidiaries wherein an
unfavorable decision, ruling or finding would be reasonably likely to have a
Material Adverse Effect. There are no facts, circumstances, conditions or
occurrences on any Real Property, offshore drilling rig or other facility
owned or operated by Holdings or any of its Subsidiaries that is reasonably
likely (i) to form the basis of an Environmental Claim against Holdings, any
of its Subsidiaries or any Real Property, offshore drilling rig or other
facility owned by Holdings or any of its Subsidiaries, or (ii) to cause such
Real Property, offshore drilling rig or other facility to be subject to any
restrictions on its ownership, occupancy, use or transferability under any
Environmental Law, except in each such case, such Environmental Claims or
restrictions that individually or in the aggregate are not reasonably likely
to have a Material Adverse Effect.
(b) Hazardous Materials have not at any time been (i) generated,
used, treated or stored on, or transported to or from, any Real Property,
offshore drilling rig or other facility at any time owned or operated by
Holdings or any of its Subsidiaries, or (ii) released on or from any such Real
Property, offshore drilling rig or other facility, in each case where, to the
best of Holdings' or the Borrower's knowledge, such occurrence or event
individually or in the aggregate is reasonably likely to have a Material
Adverse Effect.
6.17 Properties. (a) Holdings and each of its Subsidiaries has
title to all material properties owned by them including all property
reflected in the consolidated balance sheet of Holdings and its Subsidiaries
as referred to in Section 6.10(b), free and clear of all Liens, other than (i)
as referred to in the consolidated balance sheet or in the notes thereto or
(ii) Permitted Liens.
(b) Annex VI sets forth all the offshore drilling rigs and other
vessels owned or chartered by Holdings and each of its Subsidiaries on the
Effective Date, and identifies the registered owner, flag, official or patent
number, as the case may be, the home port, class, location and operating
status on the Effective Date, and, if chartered-in by Holdings or any of its
Subsidiaries, the name and address of the owner of such chartered-in vessel.
6.18 Labor Relations. Neither Holdings nor its Subsidiaries is
engaged in any unfair labor practice that is reasonably likely to have a
Material Adverse Effect. There is (i) no unfair labor practice complaint
pending against Holdings or any of its Subsidiaries or threatened against any
of them, before the National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against Holdings or any of its Subsidiaries or, to the
best of Holdings' or the Borrower's knowledge, threatened against any of them,
(ii) no strike, labor dispute, slowdown or stoppage pending against Holdings
or any of its Subsidiaries or, to the best of Holdings' or the Borrower's
knowledge, threatened against Holdings or any of its Subsidiaries and (iii) no
union representation petition existing with respect to the employees of
Holdings or any of its Subsidiaries and no union organizing activities are
taking place, except with respect to any matter specified in clause (i), (ii)
or (iii) above, either individually or in the aggregate, such as is not
reasonably likely to have a Material Adverse Effect.
6.19 Existing Indebtedness. Annex VII sets forth a true and
complete list of all Indebtedness of Holdings and each of its Subsidiaries on
the Effective Date and which is to remain outstanding after the Initial
Borrowing Date (excluding the Loans and the Letters of Credit, the "Existing
Indebtedness"), in each case showing the aggregate principal amount thereof
and the name of the respective borrower (or issuer) and any other entity which
directly or indirectly guaranteed such debt.
6.20 Citizenship. The Mortgagors are qualified to own and
operate the Mortgaged Rigs under the laws of the United States, the Republic
of Panama and Australia, as may be applicable.
6.21 Rig Classification. Each offshore drilling rig owned or
leased by Holdings and its Subsidiaries is classified in the highest class
available for rigs of its age and type with the American Bureau of Shipping,
Inc. or another internationally recognized classification society reasonably
acceptable to the Collateral Agent, free of any material outstanding
requirements or recommendations, other than (i) with respect to any Mortgaged
Rig, as permitted under the Mortgage relating thereto and (ii) with respect to
any other rigs, such requirements or recommendations which if not cured by the
owner thereof would not materially diminish such rig's value.
SECTION 7. Affirmative Covenants. Holdings and the Borrower
covenant and agree that on the Initial Borrowing Date and thereafter for so
long as this Agreement is in effect (and until the Commitments have
terminated, no Letters of Credit or Notes are outstanding and the Loans and
Unpaid Drawings, together with interest, Fees and all other Obligations
incurred hereunder, are paid in full):
7.01 Information Covenants. Holdings and/or the Borrower will
furnish to each Bank:
(a) Annual Financial Statements. Within 90 days after the close
of each fiscal year of Holdings, the consolidated balance sheet of
Holdings and its Subsidiaries, as at the end of such fiscal year and the
related consolidated statements of operations and of cash flows for such
fiscal year, including the amount of Consolidated Capital Expenditures
made during such fiscal year, in each case setting forth comparative
consolidated figures for the preceding fiscal year, and examined by
independent certified public accountants of recognized national standing
whose opinion shall not be qualified as to the scope of audit and as to
the status of Holdings and its Subsidiaries as a going concern, together
with a certificate of such accounting firm stating that in the course of
its regular audit of the business of Holdings and the Borrower, which
audit was conducted in accordance with generally accepted auditing
standards, such accounting firm has obtained no knowledge of any Default
or Event of Default which has occurred and is continuing or, if in the
opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof.
(b) Quarterly Financial Statements. As soon as available and in
any event within 45 days after the close of each of the first three
quarterly accounting periods in each fiscal year, the consolidated
balance sheet of Holdings and its Subsidiaries, as at the end of such
quarterly period and the related consolidated statements of operations
and of cash flows for such quarterly period and for the elapsed portion
of the fiscal year ended with the last day of such quarterly period,
including the amount of Consolidated Capital Expenditures made during
such period, and in each case setting forth comparative consolidated
figures for the related period in the prior fiscal year, all of which
shall be unaudited, but certified by the chief financial officer or
controller of Holdings, subject to changes resulting from audit and
normal year-end audit adjustments.
(c) Rig Status Report. As soon as available and in any event
within 60 days after the end of the first three fiscal quarters of
Holdings and within 90 days after the end of the fourth fiscal quarter,
a report (in form satisfactory to the Administrative Agent) detailing
(i)(A) the then current location of each of the offshore drilling rigs
owned or leased by Holdings and its Subsidiaries, (B) the then current
term of and parties to any contract of any such offshore drilling rig,
and (C) the then current day rate with respect to any such contract and
(ii) for the previous fiscal quarter, the average day rates and utili-
zation for each such offshore drilling rig.
(d) Forecast; etc. Not more than 60 days after the commencement
of each fiscal year of Holdings, a forecast which includes an income
statement, balance sheet and cash flow statement of Holdings and its
Subsidiaries for each of the four fiscal quarters of such fiscal year,
including a breakdown of revenues, operating expenses, utilizations and
Consolidated Capital Expenditure assumptions for each offshore drilling
rig owned or leased by Holdings and its Subsidiaries.
(e) Compliance Certificate. At the time of the delivery of the
financial statements provided for in Sections 7.01(a) and (b), a
certificate of Holdings and/or the Borrower signed by its chief finan-
cial officer, controller or other Authorized Officer in the form of
Exhibit K to the effect that no Default or Event of Default exists or,
if any Default or Event of Default does exist, specifying the nature and
extent thereof, which certificate shall set forth the calculations re-
quired to establish whether Holdings and its Subsidiaries were in
compliance with the provisions of Section 8 as at the end of such fiscal
period or year, as the case may be.
(f) Notice of Default or Litigation. Promptly, and in any event
within (x) three Business Days after Holdings or the Borrower obtains
knowledge thereof, notice of the occurrence of any event which
constitutes a Default or Event of Default which notice shall specify the
nature thereof, the period of existence thereof and what action Holdings
or the Borrower proposes to take with respect thereto and (y) ten
Business Days after the Borrower obtains knowledge thereof, notice of
the commencement of or any significant development in any litigation or
governmental proceeding pending against Holdings or the Borrower or any
of their respective Subsidiaries which is likely to have a Material
Adverse Effect or is likely to have a material adverse effect on the
ability of Holdings, the Borrower or any Subsidiary Guarantor to perform
its obligations hereunder or under any other Credit Document.
(g) Auditors' Reports. Promptly upon receipt thereof and
following such time as management shall have had reasonable time to
respond thereto, a copy of each formal report or "management letter"
submitted to Holdings or the Borrower by its independent accountants in
connection with any annual, interim or special audit made by it of the
books of Holdings or the Borrower.
(h) Insurance Report. On or before each anniversary of the
Initial Borrowing Date, a report from Holdings and/or the Borrower's
independent maritime insurance broker as required by the Mortgages.
(i) Annual Rig Valuation Report. At the time of the delivery of
the financial statements provided for in Section 7.01(a), an updated rig
valuation report from an Approved Shipbroker setting forth the current
Market Value of each Mortgaged Rig.
(j) SEC Reports. Promptly upon transmission thereof, copies of
any material filings and registration with, and reports to, the SEC by
Holdings or any of its Subsidiaries and copies of all financial
statements, proxy statements, notices and reports as Holdings or any of
its Subsidiaries shall generally send to analysts or all holders of
their capital stock in their capacity as such holders (in each case to
the extent not theretofore delivered to the Banks pursuant to this
Agreement).
(k) Other Information. From time to time, such other information
or documents (financial or otherwise) as the Administrative Agent on its
own behalf or on behalf of the Required Banks may reasonably request.
7.02 Books, Records and Inspections. Holdings will, and will
cause each of its Subsidiaries to, permit, upon reasonable notice to the chief
financial officer, controller or any other Authorized Officer of Holdings or
the Borrower, officers and designated representatives of the Administrative
Agent or the Required Banks, to the extent necessary, to examine the books of
account of Holdings and any of its Subsidiaries and discuss the affairs,
finances and accounts of Holdings and of any of its Subsidiaries with, and be
advised as to the same by, its and their officers and independent accountants,
all at such reasonable times and intervals and to such reasonable extent as
the Administrative Agent or the Required Banks may desire.
7.03 Insurance. In addition to any requirements set forth in the
Mortgages, Holdings will, and will cause each of its Subsidiaries to, at all
times maintain in full force and effect insurance in such amounts with
carriers of such insurance industry ratings, covering such risks and liabil-
ities and with such deductibles or self-insured retentions as are in
accordance with normal industry practice for similarly situated insureds.
Holdings will, and will cause each of its Subsidiaries to, furnish on the
Initial Borrowing Date and annually thereafter to the Administrative Agent a
summary of the insurance carried together with certificates of insurance and
other evidence of such insurance.
7.04 Payment of Taxes. Holdings will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become
a Lien or charge upon any properties of Holdings or any of its Subsidiaries,
provided that neither Holdings nor any Subsidiary shall be required to pay any
such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with GAAP.
7.05 Consolidated Corporate Franchises. Holdings will do, and
will cause each of its Subsidiaries to do, or cause to be done, all things
necessary to preserve and keep in full force and effect its existence,
material rights and authority, unless the failure to do so is not reasonably
likely to have a Material Adverse Effect, provided that any transaction
permitted by Section 8.02 will not constitute a breach of this Section 7.05.
7.06 Compliance with Statutes, etc. Holdings will, and will
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property other than those the non-
compliance with which would not have a Material Adverse Effect or would not
have a material adverse effect on the ability of any Credit Party to perform
its obligations under any Credit Document to which it is party.
7.07 Good Repair. Except for offshore drilling rigs currently
under or scheduled to be repaired or which have been damaged or have suffered
a casualty as to which (within a reasonable period of time) Holdings and/or
the Borrower have not made a determination whether to replace or repair, or if
the determination to replace or repair has been made, as to which such
replacement or repairs are being undertaken, subject to availability of
equipment, materials and/or repair facilities, Holdings will, and will cause
each of its Subsidiaries to, keep its properties and equipment used or useful
in its business, in whomsoever's possession they may be, in good repair,
working order and condition, normal wear and tear excepted, and, subject to
Section 8.02, see that from time to time there are made in such properties and
equipment all necessary and proper repairs, renewals, replacements,
extensions, additions, betterments and improvements thereto to the extent and
in the manner useful or customary for companies in similar businesses.
7.08 End of Fiscal Years; Fiscal Quarters. Holdings will, for
financial reporting purposes, cause (i) each of its fiscal years to end on
December 31 of each year and (ii) each of its fiscal quarters to end on March
31, June 30, September 30 and December 31 of each year.
7.09 Use of Proceeds. All proceeds of the Loans shall be used as
provided in Section 6.05.
7.10 Earnings Concentration Account. The Borrower shall maintain
with Christiania Bank og Kreditkasse, Grand Cayman Branch, on terms
substantially similar to those in effect prior to the Initial Borrowing Date,
an account (the "Concentration Account") into which the Earnings of the
Borrower and the Subsidiary Guarantors arising from the operation of the
Mortgaged Rigs shall be deposited and maintained as cash collateral in
accordance with the Security Agreement. Funds in the Concentration Account
shall be released from time to time to the Borrower upon the Borrower's
request (which request shall be implied by any withdrawal by the Borrower of
funds from the Concentration Account), unless and until such time as the
Administrative Agent, following the occurrence of an Event of Default,
requires that said monies be held as security or applied by the Administrative
Agent, for the benefit of itself and the Banks, as it may direct, whereafter
the Borrower shall procure such funds and ensure that such funds are held as
security or applied in accordance with the directions of the Administrative
Agent.
7.11 Additional Rig Valuations. At any time as may be requested
by the Administrative Agent on behalf of the Required Banks (but in no event
in excess of three times in any fiscal year of Holdings (without taking into
account the right of Holdings or the Borrower to retain a second Approved
Shipbroker in accordance with immediately succeeding sentence)) and at the
expense of the Borrower, Holdings or the Borrower shall retain the Approved
Shipbroker requested by the Administrative Agent to supply a written report
setting forth the Market Value of each Mortgaged Rig at such time. Holdings
or the Borrower may retain a second Approved Shipbroker of its own choosing at
such time and at its own expense to supply a second written report setting
forth the Market Value of such Mortgaged Rigs. Promptly upon receipt thereof
Holdings and/or the Borrower shall deliver copies of each such report to the
Banks.
7.12 Further Assurances. (a) The Total Commitment shall be
reduced in accordance with Section 3.03(f) if the following conditions are not
satisfied (as determined in good faith by the Administrative Agent):
(i) Mortgage. HRB Rig Corporation shall have duly authorized,
executed and delivered a US Mortgage with respect to the C.E. Thornton,
substantially in the form of Exhibit I-1 hereto and all actions
necessary, desirable or otherwise reasonably requested by the Collateral
Agent to provide the Security Trustee with a perfected first priority
security interest in the C.E. Thornton shall have been taken.
(ii) Evidence of Lien, etc. The Administrative Agent shall have
received a certificate of the U.S. Coast Guard showing (or confirmation
updating previously reviewed certificates and indicating) that the US
Rig C.E. Thornton is registered in the ownership of HRB Rig Corporation,
and subject to the Lien of the US Mortgage and free of all other Liens
of record.
(iii) Security Agreement. HRB Rig Corporation shall have executed
and delivered a counterpart of the Security Agreement with respect to
the earnings of and insurance maintained on the C.E. Thornton, together
with:
(1) executed copies of Financing Statements (Form UCC-1
and/or UCC-3) or appropriate local equivalent in appropriate form
for filing under the UCC or appropriate local equivalent of each
jurisdiction as may be necessary to perfect the assignments
purported to be created thereby;
(2) evidence that all other recordings and filings of, or
with respect to, such assignment, and all other actions, as may be
necessary or, in the opinion of the Collateral Agent, desirable to
perfect the assignment intended to be created thereby have been
completed (it being understood that UCC financing statements and
termination statements shall be filed in the appropriate
governmental office within three Business Days after such
assignment);
and the Security Agreement shall be in full force and effect with
respect to the Security Agreement Collateral relating to the C.E.
Thornton.
(b) Holdings and the Borrower will, and will cause each of their
respective Subsidiaries to, at the expense of the Borrower, make, execute,
endorse, acknowledge, file and/or deliver to the Collateral Agent or the
Security Trustee, as the case may be, from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing state-
ments, transfer endorsements, powers of attorney, certificates, real property
surveys, reports and other assurances or instruments and take such further
steps relating to the Collateral as the Collateral Agent or the Security
Trustee, as the case may be, may reasonably require.
(c) Holdings and the Borrower agree that each action required
above by this Section 7.12 shall be completed as soon as possible, but in no
event later than 60 days after such action is requested to be taken by the
Administrative Agent or the Required Banks, provided that in no event shall
Holdings or the Borrower be required to take any action, other than using its
reasonable commercial efforts without any material expenditure, to obtain
consents or other actions from third parties with respect to its compliance
with this Section 7.12.
7.13 ERISA. As soon as possible and, in any event, within 10
days after Holdings, the Borrower or any of their respective Subsidiaries or
any ERISA Affiliate knows or has reason to know of the occurrence of any of
the following, Holdings or the Borrower will deliver to each of the Banks a
certificate of the Chief Financial Officer of Holdings or the Borrower setting
forth details as to such occurrence and the action, if any, that Holdings, the
Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to
take, together with any notices required or proposed to be given to or filed
with or by Holdings, the Borrower, such Subsidiary, the ERISA Affiliate, the
PBGC, or a Plan participant or the Plan administrator with respect thereto:
that a Reportable Event has occurred; that an accumulated funding deficiency
has been incurred or an application may be or has been made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code or Section 302 of ERISA with
respect to a Plan; that a contribution required to be made to a Plan or
Foreign Pension Plan has not been timely made; that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that a Plan has an Unfunded Current Liability giving rise to a lien
under ERISA or the Code; that proceedings may be or have been instituted to
terminate or appoint a trustee to administer a Plan, that a proceeding has
been instituted pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan; that Holdings, the Borrower, any of their respective
Subsidiaries or any ERISA Affiliate will or may incur any liability (including
any indirect contingent or secondary liability) to or on account of the
termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069,
4201, 4204 or 4212 of ERISA or with respect to a Plan under Section
401(a)(29), 4971 or 4975 of the Code or Section 409 or 502(i) or 502(l) of
ERISA; or that Holdings, the Borrower or any Subsidiary may incur any material
unrecognized liability pursuant to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) that provides benefits to retired employees
or other former employees (other than as required by Section 601 of ERISA) or
any employee pension benefit plan (as defined in Section 3(2) of ERISA). Upon
request, Holdings or the Borrower will deliver to each of the Banks a complete
copy of the annual report (Form 5500) of each Plan (including to the extent
required, the related financial and actuarial statements and opinions and
other supporting statements, certifications, schedules and information)
required to be filed with the Internal Revenue Service. In addition to any
certificates or notices delivered to the Banks pursuant to the first sentence
hereof, copies of annual reports, and any material notices received by
Holdings, the Borrower or any of their respective Subsidiaries or any ERISA
Affiliate from any governmental agency with respect to any Plan shall be
delivered to the Banks no later than 10 days after the date such report has
been filed with the Internal Revenue Service or such notice has been received
by Holdings, the Borrower, the Subsidiary or the ERISA Affiliate, as
applicable.
SECTION 8. Negative Covenants. Holdings and the Borrower hereby
covenant and agree that as of the Initial Borrowing Date and thereafter for so
long as this Agreement is in effect and until the Commitments have terminated,
no Letters of Credit or Notes are outstanding and the Loans and Unpaid
Drawings, together with interest, Fees and all other Obligations incurred
hereunder, are paid in full:
8.01 Changes in Business. Holdings and the Borrower will not,
and will not permit any of their respective Subsidiaries to, materially alter
the character of the business of Holdings and its Subsidiaries taken as a
whole from that conducted at the Initial Borrowing Date (including any
material expansion outside of the offshore contract drilling and production
business), provided that this Section 8.01 shall not restrict the engaging in
business ancillary to the offshore contract drilling and production business.
8.02 Consolidation, Merger or Sale of Assets, etc. Holdings and
the Borrower will not, and will not permit any of the Subsidiary Guarantors
to, wind up, liquidate or dissolve its affairs, or enter into any transaction
of merger or consolidation, sell or otherwise dispose of all or substantially
all of its property or assets or of any Collateral or agree to do any of the
foregoing at any future time, except that the following shall be permitted:
(a) (i) any Subsidiary of Holdings (other than the Borrower) may
be merged or consolidated with or into, or be liquidated into, the
Borrower (so long as the Borrower is the surviving corporation) or any
Guarantor (so long as such Guarantor is the surviving corporation) and
(ii) all or any part of the business, properties and assets of Holdings
or any of its Subsidiaries (other than the Borrower) may be conveyed,
leased, sold or transferred to the Borrower or any Guarantor or any
Subsidiary of the Borrower or any Guarantors, provided that if any
Collateral is transferred pursuant to this Section 8.02(a), Holdings
and/or the Borrower shall provide the Administrative Agent with ten
Business Days' notice prior to such transfer, and the Borrower or such
Subsidiary, as the case may be, owning the Collateral after such
transfer shall take all action reasonably requested by the Collateral
Agent and/or the Security Trustee in respect of the continued priority
and perfection of such Collateral;
(b) Holdings may liquidate or dissolve or consolidate or merge
into another entity, provided (i) Holdings is the successor or survivor
in respect of such merger, and after giving effect thereto Holdings will
be in full compliance with the terms of this Agreement and (ii) Standard
& Poor's shall have affirmed in writing that such transaction will not
impair Holdings' implied senior debt rating as such debt rating is in
effect immediately prior to the announcement or consummation of such
liquidation, dissolution, consolidation or merger;
(c) other sales or dispositions of assets provided that (x) the
Total Commitment shall be reduced as required by Section 3.03(c) in the
case of the sale or disposition of assets constituting Collateral and
(y) each such sale or disposition shall be in an amount at least equal
to the fair market value thereof (as determined by the Board of
Directors of the Borrower in the case of sales in excess of $20,000,000)
and for proceeds consisting solely of not less than 100% cash in the
case of assets constituting Collateral and (z) no such sale or
disposition shall constitute the sale or disposition of all or
substantially all of the combined assets of Holdings and its
Subsidiaries taken together; and
(d) other sales or dispositions of assets in each case to the
extent the Required Banks have consented in writing thereto and subject
to such conditions as may be set forth in such consent.
To the extent any Collateral is sold or otherwise disposed of (to
any Person other than Holdings and its Subsidiaries) as permitted by this
Section 8.02, such Collateral shall be sold or otherwise disposed of free and
clear of the Liens created by the Security Documents, and the Administrative
Agent, the Collateral Agent and the Security Trustee shall be authorized to
take any actions deemed appropriate in order to effect the foregoing.
8.03 Liens on Collateral; Arcade Drilling. Holdings will not
permit Arcade to create, incur, assume or suffer to exist any Lien or assign
any right to receive income, or file or permit the filing of any UCC Financing
Statement or any other similar notice of Lien under any similar recording or
notice statute, and Holdings and the Borrowers will not, and will not permit
any of their respective Subsidiaries to, create, incur, assume or suffer to
exist any Lien upon or with respect to any Collateral, whether now owned or
hereafter acquired, or sell any such Collateral subject to an understanding or
agreement, contingent or otherwise, to repurchase such Collateral (including
sales of accounts receivable or notes with recourse to Holdings or any of its
Subsidiaries) or assign any right to receive income, or file or permit the
filing of any financing statement under the UCC or any other similar notice of
Lien on any Collateral under any similar recording or notice statute; except
that the following shall be permitted:
(a) Liens for taxes not yet due or Liens for taxes being
contested in good faith and by appropriate proceedings for which
adequate reserves with respect thereto, in accordance with GAAP, have
been established;
(b) Liens imposed by law which were incurred in the ordinary
course of business, such as carriers', warehousemen's and mechanics'
Liens, statutory landlord's Liens, maritime Liens and other similar
Liens arising in the ordinary course of business, and (x) which do not
in the aggregate materially detract from the value of such Collateral or
materially impair the use thereof in the operation of the business of
Holdings, the Borrower or any of their respective Subsidiaries or (y)
which are being contested in good faith by appropriate proceedings
(including the providing of bail), which proceedings have the effect of
preventing the forfeiture or sale of the Collateral subject to such Lien
or procuring the release of the Collateral subject to such Lien from
arrest or detention;
(c) Liens created by or pursuant to this Agreement or the other
Credit Documents;
(d) Liens permitted under the express terms of the Mortgages or
other Security Documents;
(e) Liens existing on the Initial Borrowing Date and listed on
Annex VIII, without giving effect to any subsequent extensions or
renewals thereof;
(f) Liens arising from judgments, decrees or attachments (or
securing of appeal bonds with respect thereto) to the extent not covered
by insurance, so long as the obligations in connection therewith do not
exceed $5,000,000 in the aggregate and otherwise in circumstances not
constituting an Event of Default under Section 9.08;
(g) any interest or title of a lessor or charterer under any
lease or charter (i) in existence on the Initial Borrowing Date, (ii)
among Holdings and/or any of its Subsidiaries or (iii) otherwise
permitted by this Agreement; and
(h) immaterial Liens on any Real Property of Holdings or any of
its Subsidiaries.
8.04 Indebtedness of Arcade. Holdings will not permit Arcade to
contract, create, incur, assume or suffer to exist any Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(ii) Indebtedness of Arcade existing on the Effective Date to the
extent the same is listed on Annex VII, but no refinancings or renewals
thereof;
(iii) Indebtedness evidenced by Capitalized Lease Obligations so
long as the aggregate principal amount of Capitalized Lease Obligations
outstanding at any time pursuant to this Section 8.04 does not exceed
$1,000,000 in the aggregate; and
(iv) Indebtedness subject to Liens permitted under Section 8.03(e).
8.05 Dividends; Restrictions on Subsidiaries, etc. (a) Holdings
will not, and will not permit any of its Subsidiaries to, declare or pay any
dividends (other than dividends (i) payable solely in capital stock of
Holdings or rights in respect thereof or (ii) constituting spin-offs of
divisions or direct or indirect operating subsidiaries of Holdings (other than
Arcade and the Borrower and their direct or indirect Subsidiaries) or return
any capital to, the stockholders of Holdings or authorize or make any other
distribution, payment or delivery of property or cash to the stockholders of
Holdings as such, or redeem, retire, purchase or otherwise acquire, directly
or indirectly, for a consideration, any shares of any class of the capital
stock of Holdings now or hereafter outstanding (or any warrants for or options
or stock appreciation rights in respect of any of such shares), or set aside
any funds for any of the foregoing purposes, or permit any of its Subsidiaries
to purchase or otherwise acquire for consideration any shares of any class of
the capital stock of Holdings, now or hereafter outstanding (or any options or
warrants or stock appreciation rights issued by Holdings with respect to its
capital stock) (all of the foregoing "Dividends"), except that:
(i) Holdings may redeem or repurchase common stock of Holdings (or
options to purchase such common stock) from (1) present or former
officers, employees and directors of Holdings, the Borrower, or any of
their Subsidiaries (or their estates) upon the death, permanent disabil-
ity, retirement or termination of employment of any such Person or
otherwise in accordance with any stock option plan or any employee stock
ownership plan, or (2) stockholders of Holdings so long as the purpose
of such purchase is to acquire common stock of Holdings for reissuance
to new officers, employees and directors (or their estates) of Holdings,
the Borrower or any of their respective Subsidiaries to the extent so
reissued within 12 months of any such purchase, provided that in all
such cases (x) no Default or Event of Default is then in existence or
would arise therefrom, (y) the aggregate amount of all cash paid in
respect of all such shares so redeemed or repurchased in any calendar
year does not exceed $15,000,000 plus proceeds of key man life insurance
used for the purpose of repurchasing such common stock owned by such
Person and, provided further, that in the event that Holdings sub-
sequently resells to any member of its, or any Subsidiary's management,
any shares redeemed or repurchased pursuant to this clause (i), the
amount of repurchases Holdings may make from officers, employees and
directors pursuant to this clause (i) shall be increased by an amount
equal to any cash received by Holdings upon the resale of such shares;
(ii) Holdings may pay or make Dividends on (i) existing Class A
common stock (up to a maximum of $100 per annum) and (ii) any issue of
preferred stock whether now existing or hereafter issued; and
(iii) so long as no Default or Event of Default exists or would
result therefrom, Holdings shall be permitted to pay or make Dividends
in an amount not to exceed 50%, in the aggregate, of Consolidated Net
Income on a cumulative basis beginning October 1, 1996.
(b) Holdings and the Borrower will not, and will not permit any
of the Subsidiary Guarantors to, create or otherwise cause or suffer to exist
any encumbrance or restriction which prohibits or otherwise restricts (A) the
ability of any Subsidiary Guarantor to (a) pay dividends or make other dis-
tributions or pay any Indebtedness owed to the Borrower or any Subsidiary
Guarantor, or (b) make loans or advances to the Borrower or any Subsidiary
Guarantor, (c) transfer any of its properties or assets to the Borrower or any
Subsidiary Guarantor or (B) the ability of the Borrower or any other
Subsidiary Guarantor of the Borrower to create, incur, assume or suffer to
exist any Lien upon its property or assets to secure the Obligations, other
than prohibitions or restrictions existing under or by reason of:
(i) this Agreement and the other Credit Documents;
(ii) applicable law;
(iii) customary non-assignment provisions entered into in the
ordinary course of business and consistent with past practices;
(iv) any restriction or encumbrance with respect to a Subsidiary
Guarantor imposed pursuant to an agreement which has been entered into
for the sale or disposition of all or substantially all of the capital
stock or assets of such Subsidiary Guarantor, so long as such sale or
disposition is permitted under this Agreement; and
(v) Permitted Liens and any documents or instruments governing the
terms of any Indebtedness or other obligations secured by any such
Liens, provided that such prohibitions or restrictions apply only to the
assets subject to such Liens.
8.06 Transactions with Affiliates. Holdings and the Borrower
will not, and will not permit any of their respective Subsidiaries to, enter
into any transaction or series of transactions after the Initial Borrowing
Date whether or not in the ordinary course of business, with any Affiliate
other than on terms and conditions substantially as favorable to Holdings or
such Subsidiary as would be obtainable by Holdings or such Subsidiary at the
time in a comparable arm's-length transaction with a Person other than an
Affiliate, provided that the foregoing restrictions shall not apply to (i)
employment arrangements entered into in the ordinary course of business with
officers of Holdings and its Subsidiaries, (ii) customary fees paid to members
of the Board of Directors of Holdings and of its Subsidiaries, (iii) capital
contributions made by Holdings to the Borrower, (iv) all transactions between
or among Holdings and its Subsidiaries, (v) all immaterial transactions with
the officers or members of the Board of Directors of Holdings or its
Subsidiaries and (vi) all immaterial transactions with Affiliates.
8.07 Vessel Management; Registry. Holdings and the Borrower will
not, and will not permit any of their Subsidiaries to, (i) change the overall
management of any of the Mortgaged Rigs from Holdings or any of its
Subsidiaries or (ii) change the national registry of any Mortgaged Rig.
8.08 Coverage Ratio. Holdings will not permit the ratio of (i)
Consolidated EBITDAR to (ii) the sum of Consolidated Interest Expense plus
Consolidated Rent Expense for any period of four consecutive fiscal quarters
of Holdings (taken as one accounting period) to be less than 2.50:1.00.
8.09 Working Capital. Holdings will not permit Working Capital
on the last day of any fiscal quarter of Holdings to be less than $0 if
Working Capital was less than $0 on the last day of the immediately preceding
fiscal quarter.
8.10 Leverage Ratio. Holdings will not permit the Leverage Ratio
(i) at the end of any fiscal quarter ending prior to the date which is three
years after the date of this Agreement to be greater than 0.50:1.00 and (ii)
at the end of any fiscal quarter ending thereafter to be greater than
0.40:1.00.
8.11 Collateral Maintenance. (a) Holdings shall not permit the
Market Value of the Mortgaged Rigs at any time to be less than 1.6 times the
Total Commitment in effect from time to time.
(b) Holdings will not (i) permit its percentage ownership of the
total capital stock of Arcade at any time to be reduced below 74.4% or (ii)
pledge any Arcade shares now held or hereafter acquired by Holdings or any of
its Subsidiaries to any Person other than the Collateral Agent.
SECTION 9. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment
when due of any principal of the Loans and such default shall continue for two
or more Business Days or (ii) default, and such default shall continue for
three or more Business Days after notice by the Administrative Agent or the
Required Banks, in the payment when due of any Unpaid Drawing, any interest on
the Loans or any Fees or any other amounts owing hereunder or under any other
Credit Document; or
9.02 Representations, etc. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or
in any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or
9.03 Covenants. Holdings or the Borrower shall (a) default in
the due performance or observance by it of any term, covenant or agreement
contained in Section 7.08 or Section 8 or (b) default in the due performance
or observance by it of any term, covenant or agreement (other than those
referred to in Section 9.01, 9.02 or clause (a) of this Section 9.03) con-
tained in this Agreement and such default shall continue unremedied for a
period of at least 30 days after notice to the Borrower by the Administrative
Agent or the Required Banks; or
9.04 Default Under Other Agreements. (a) Holdings, the Borrower
or any of their respective Subsidiaries shall (i) default in any payment with
respect to any Indebtedness (other than the Obligations) beyond the period of
grace, if any, applicable thereto or (ii) default in the observance or per-
formance of any agreement or condition relating to any such Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition results in acceleration or the
renegotiation of the material payment terms of any such Indebtedness to become
due prior to its stated maturity; or (b) any such Indebtedness of Holdings or
any of its Subsidiaries shall be declared to be due and payable, or required
to be prepaid other than by a regularly scheduled required prepayment, prior
to the stated maturity thereof, provided that it shall not constitute an Event
of Default pursuant to this Section 9.04 unless the aggregate principal amount
of such Indebtedness in default exceeds $5,000,000 at any one time; or
9.05 Bankruptcy, etc. Holdings, the Borrower or any of their
respective Subsidiaries shall commence a voluntary case concerning itself
under Title 11 of the United States Code entitled "Bankruptcy," as now or
hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an
involuntary case is commenced against Holdings, the Borrower or any of their
respective Subsidiaries and the petition is not controverted within 10 days,
or is not dismissed within 60 days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of Holdings, the Borrower
or any of their respective Subsidiaries; or Holdings, the Borrower or any of
their respective Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dis-
solution, insolvency or liquidation or similar law of any jurisdiction whether
now or hereafter in effect relating to Holdings, the Borrower or any of their
respective Subsidiaries; or there is commenced against Holdings, the Borrower
or any of their respective Subsidiaries any such case or proceeding which
remains undismissed for a period of 60 days; or Holdings, the Borrower or any
of their respective Subsidiaries is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is
entered; Holdings, the Borrower or any of their respective Subsidiaries
suffers any appointment of any custodian or the like for it or any substantial
part of its property to continue undischarged or unstayed for a period of 60
days; or Holdings, the Borrower or any of their respective Subsidiaries makes
a general assignment for the benefit of creditors; or any corporate action is
taken by Holdings, the Borrower or any of their respective Subsidiaries for
the purpose of effecting any of the foregoing; or
9.06 Security Documents. (i) Any Security Document shall, after
the execution and delivery thereof, cease to be in full force and effect, or
shall cease to give the Collateral Agent or the Security Trustee, as the case
may be, the Liens, rights, powers and privileges purported to be created
thereby in favor of the Collateral Agent or the Security Trustee, as the case
may be, or (ii) any Credit Party shall default in any respect in the due per-
formance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any such Security Document and such default
(unless such default creates an Event of Default under clause (i) above) shall
continue unremedied for a period of at least 30 days after notice to the
Borrower by the Administrative Agent or the Required Banks; or
9.07 Guaranty. Any Guaranty or any provision thereof shall cease
to be in full force and effect, or any Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm all or any portion of such
Guarantor's obligation thereunder, or any Guarantor shall default in the
observance of any term, covenant or agreement on its part to be performed or
observed pursuant thereto and such default (other than any default arising
from a failure to make any payment thereunder) shall continue unremedied for a
period of at least 30 days after notice to the Borrower by the Administrative
Agent or the Required Banks; or
9.08 Judgments. One or more judgments or decrees shall be
entered against Holdings, the Borrower or any other Credit Party involving a
liability of $1,000,000 or more in the case of any one such judgment or decree
and $5,000,000 or more in the aggregate for all such judgments and decrees for
Holdings, the Borrower and the other Credit Parties (not paid or to the extent
not covered by insurance) and any such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within 60 days
from the entry thereof; or
9.09 Citizenship. Any Mortgagor shall cease to be qualified to
own and operate the Mortgaged Rigs under the laws of the United States, the
Republic of Panama or Australia, as may be applicable; or
9.10 Employee Benefit Plans. (a)(i) A contribution required to be
made with respect to any (x) employee pension benefit plan (as defined in
Section 3(2) of ERISA) maintained or contributed to by (or to which there is
an obligation to contribute of) Holdings or a Subsidiary or an ERISA Affiliate
or (y) Foreign Pension Plan has not been timely made or (ii) Holdings or any
Subsidiary has incurred or is likely to incur liabilities pursuant to one or
more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that
provide benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or employee pension benefit plans (as
defined in Section 3(2) of ERISA); (b) there shall result from any such event
or events the imposition of a lien, the granting of a security interest, or a
liability or a material risk of incurring a liability; and (c) which lien,
security interest or liability, individually, and/or in the aggregate, in the
opinion of the Required Banks, will have a Material Adverse Effect; or
9.11 Change of Control. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Administrative Agent shall, upon the
written request of the Required Banks, by written notice to the Borrower, take
any or all of the following actions, without prejudice to the rights of the
Administrative Agent or any Bank to enforce its claims against any Credit
Party, except as otherwise specifically provided for in this Agreement
(provided that, if an Event of Default specified in Section 9.05 shall occur
with respect to the Borrower, the result which would occur upon the giving of
written notice by the Administrative Agent as specified in clauses (i) and
(ii) below shall occur automatically without the giving of any such notice):
(i) declare the Total Commitment terminated, whereupon the Commitment of each
Bank shall forthwith terminate immediately and any Commitment Commission or
any other Fees shall forthwith become due and payable without any other notice
of any kind; (ii) declare the principal of and any accrued interest in respect
of all Loans and all obligations owing hereunder (including Unpaid Drawings)
and thereunder to be, whereupon the same shall become, forthwith due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by each Credit Party; (iii) enforce, as Collateral
Agent (or direct the Collateral Agent to enforce), any or all of the Liens and
security interests created pursuant to the Security Documents; (iv) terminate
any Letter of Credit which may be terminated in accordance with its terms; (v)
direct the Borrower to pay (and the Borrower hereby agrees upon receipt of
such notice, or upon the occurrence of any Event of Default specified in
Section 9.05 in respect of the Borrower, it will pay) to the Collateral Agent
at the Payment Office such additional amounts of cash, to be held as security
for the Borrower's reimbursement obligations in respect of Letters of Credit
then outstanding equal to the aggregate Stated Amount of all Letters of Credit
then outstanding; and (vi) apply any amounts held as cash collateral pursuant
to Section 4.02 or this Section 9 to repay Obligations.
SECTION 10. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise
requires. Defined terms in this Agreement shall include in the singular
number the plural and in the plural the singular:
"Adjusted Commitment" for each Non-Defaulting Bank shall mean at
any time the product of such Bank's Adjusted Percentage and the Adjusted Total
Commitment.
"Adjusted Percentage" shall mean (x) at a time when no Bank
Default exists, for each Bank such Bank's Percentage and (y) at a time when a
Bank Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii)
for each Bank that is a Non-Defaulting Bank, the percentage determined by
dividing such Bank's Commitment at such time by the Adjusted Total Commitment
at such time, it being understood that all references herein to Commitments
and the Adjusted Total Commitment at a time when the Total Commitment or
Adjusted Total Commitment, as the case may be, has been terminated shall be
references to the Commitments or Adjusted Total Commitment, as the case may
be, in effect immediately prior to such termination, provided that (A) no
Bank's Adjusted Percentage shall change upon the occurrence of a Bank Default
from that in effect immediately prior to such Bank Default if, after giving
effect to such Bank Default and any repayment of Loans at such time pursuant
to Section 4.02(A)(a) or otherwise, the sum of (i) the aggregate outstanding
principal amount of Loans of all Non-Defaulting Banks plus (ii) the Letter of
Credit Outstandings, exceeds the Adjusted Total Commitment; (B) the changes to
the Adjusted Percentage that would have become effective upon the occurrence
of a Bank Default but that did not become effective as a result of the pre-
ceding clause (A) shall become effective on the first date after the
occurrence of the relevant Bank Default on which the sum of (i) the aggregate
outstanding principal amount of the Loans of all Non-Defaulting Banks plus
(ii) the Letter of Credit Outstandings is equal to or less than the Adjusted
Total Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted Percentage
is changed pursuant to the preceding clause (B) and (ii) any repayment of such
Bank's Loans, or of Unpaid Drawings with respect to Letters of Credit, that
were made during the period commencing after the date of the relevant Bank
Default and ending on the date of such change to its Adjusted Percentage must
be returned to the Borrower as a preferential or similar payment in any
bankruptcy or similar proceeding of the Borrower, then the change to such Non-
Defaulting Bank's Adjusted Percentage effected pursuant to said clause (B)
shall be reduced to that positive change, if any, as would have been made to
its Adjusted Percentage if (x) such repayments had not been made and (y) the
maximum change to its Adjusted Percentage would have resulted in the sum of
the outstanding principal of Loans made by such Bank plus such Bank's new
Adjusted Percentage of the outstanding principal amount of Letter of Credit
Outstandings equalling such Bank's Commitment at such time.
"Adjusted Total Commitment" shall mean at any time the Total
Commitment less the aggregate Commitments of all Defaulting Banks.
"Administrative Agent" shall have the meaning provided in the
first paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 11.09.
"Affected Eurodollar Loan" shall have the meaning provided in
Section 4.02(B).
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control
a corporation if such Person possesses, directly or indirectly, the power (i)
to vote 10% or more of the securities having ordinary voting power for the
election of directors of such corporation or (ii) to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Credit Agreement, as the same may be
from time to time modified, amended and/or supplemented.
"Applicable Eurodollar Margin" shall be equal to the percentage
per annum set forth below opposite Holdings' applicable Leverage Ratio, as
calculated for the last day of the fiscal quarter last ended; provided that,
in the event a change in the Applicable Eurodollar Margin is to be made, such
change shall not become effective until the date on which the Administrative
Agent receives written notice from the Borrower indicating that such change is
warranted:
Applicable
Leverage Ratio Eurodollar Margin
Equal to or less than
0.25:1.00 0.65% per annum
Greater than 0.25:1:00 0.85% per annum.
"Approved Bank" shall have the meaning provided in the definition
of "Cash Equivalents."
"Approved Company" shall have the meaning provided in the
definition of "Cash Equivalents."
"Approved Shipbroker" shall mean each of the first-class,
international, independent, sale-and-purchase Shipbrokers of offshore drilling
units listed on Annex IX, as such Annex may be revised from time to time at
the request of the Required Banks with the consent of the Borrower, which
consent shall not be unreasonably withheld.
"Arcade" shall mean Arcade Drilling AS, a Norwegian Corporation.
"Arcade Rigs" shall have the meaning provided in Section 3.03(e).
"Assignment and Assumption Agreement" shall mean the Assignment
and Assumption Agreement substantially in the form of Exhibit L (appropriately
completed).
"Australian Rig" shall mean the offshore drilling vessel Ron
Tappmeyer.
"Authorized Officer" shall mean any officer of Holdings or the
Borrower designated as such in writing to the Administrative Agent by Holdings
or the Borrower.
"Bank" shall have the meaning provided in the first paragraph of
this Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Loans or to fund its
portion of any unreimbursed payment under Section 2.04(c) or (ii) a Bank
having notified the Administrative Agent and/or the Borrower that it does not
intend to comply with the obligations under Section 1.01 or under Section
2.04(c), in the case of either (i) or (ii) as a result of the appointment of a
receiver or conservator with respect to such Bank at the direction or request
of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" shall mean the higher of (i) the Administrative
Agent's Prime Rate, and (ii) 0.50% per annum above the Federal Funds Effective
Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the
rates provided in Section 1.08(a).
"Borrower" shall have the meaning provided in the first paragraph
of this Agreement.
"Borrowing" shall mean the incurrence of one Type of Loan pursuant
to the Facility by the Borrower from all of the Banks with respect to such
Facility on a pro rata basis on a given date (or resulting from conversions on
a given date), having in the case of Eurodollar Loans the same Interest
Period; provided that Base Rate Loans incurred pursuant to Section 1.10(b)
shall be considered included in any related Borrowing of Eurodollar Loans.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in the Cities of New York and/or London a legal holiday or a
day on which banking institutions are authorized by law or other governmental
actions to close and (ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Loans, any day
which is a Business Day described in clause (i) and which is also a day for
trading by and between banks in U.S. dollar deposits in the interbank
Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with
GAAP, including all such expenditures with respect to fixed or capital assets
(including, without limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with generally accepted accounting princi-
ples) and the amount of Capitalized Lease Obligations incurred by such Person.
"Capital Lease" as applied to any Person shall mean any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in conformity with GAAP, is accounted for as a capital lease on the balance
sheet of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of Holdings or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly
and fully guaranteed or insured by the United States of America or any agency
or instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof) having maturities of
not more than six months from the date of acquisition, (ii) U.S. dollar
denominated time deposits, certificates of deposit and bankers' acceptances of
(x) any Bank, (y) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000 or (z) any bank (or the parent
company of such bank) whose short-term commercial paper rating from Standard &
Poor's Corporation ("S&P") is at least A-1 or the equivalent thereof or from
Moody's Investors Service, Inc. ("Moody's") is at least P-1 or the equivalent
thereof (any such bank, an "Approved Bank"), in each case with maturities of
not more than six months from the date of acquisition, (iii) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clause (i) above entered into with any bank meeting
the qualifications specified in clause (ii) above, (iv) commercial paper
issued by any Bank or Approved Bank or by the parent company of any Bank or
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's (any such company, an "Approved Company"), or guaranteed by any
industrial company with a long term unsecured debt rating of at least A or A2,
or the equivalent of each thereof, from S&P or Moody's, as the case may be,
and in each case maturing within six months after the date of acquisition and
(v) investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (i) through (iv)
above.
"Cash Proceeds" shall mean, with respect to any Collateral
Disposition, the aggregate cash payments (including any cash received by way
of deferred payment pursuant to a note receivable issued in connection with
such Collateral Disposition, other than the portion of such deferred payment
constituting interest, but only as and when so received) received by Holdings
and/or any Subsidiary from such Collateral Disposition.
"CBK" shall mean Christiania Bank og Kreditkasse, New York Branch.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. 9601 et seq.
"Change of Control" shall mean (a) Holdings shall at any time
cease to own 100% of the capital stock of the Borrower or, directly or
indirectly, any Subsidiary Guarantor, (b) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the total voting power of the Voting Stock
of Holdings or (c) during any period of two consecutive years individuals who
at the beginning of such period constituted the Board of Directors of Holdings
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of Holdings was approved by
a vote of a majority of the directors of Holdings then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of Holdings then in office.
"Claims" shall have the meaning provided in the definition of
"Environmental Claims."
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time and the regulations promulgated and the rulings issued
thereunder. Section references to the Code are to the Code, as in effect at
the Effective Date and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Security Agreement Collateral,
the Pledged Stock as defined in the Pledge Agreement, the "Rig" as defined in
each of the Mortgages and any cash collateral delivered to the Collateral
Agent pursuant to this Agreement.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Banks.
"Collateral Disposition" shall mean (i) the sale, transfer or
other voluntary disposition by the Borrower or any Guarantor to any Person
other than the Borrower or any Guarantor of any asset of the Borrower or such
Guarantor constituting Collateral or (ii) any Total Loss of any Mortgaged Rig.
"Commitment" shall mean, with respect to each Bank, the amount set
forth opposite such Bank's name in Annex I directly below the column entitled
"Commitment," as the same may be (x) reduced from time to time pursuant to
Sections 3.02, 3.03 and/or 9 or (y) adjusted from time to time as a result of
assignments to or from such Bank pursuant to Section 12.04.
"Commitment Commission" shall have the meaning provided in
Section 3.01(a).
"Consolidated Capital Expenditures" shall mean, for any period,
the aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including in all events all amounts expended or capitalized
under Capital Leases) by Holdings and its Subsidiaries during that period
that, in conformity with GAAP, are or are required to be included in the
property, plant or equipment reflected in the consolidated balance sheet of
Holdings and its Subsidiaries, provided that Consolidated Capital Expenditures
shall in any event include the purchase price paid in connection with the
acquisition of any Person (including through the purchase of all of the
capital stock or other ownership interests of such Person or through merger or
consolidation) to the extent allocable to "drilling and other property and
equipment" provided further, that Consolidated Capital Expenditures shall only
include the amount thereof actually paid in cash during such period.
"Consolidated Current Assets" shall mean, the current assets of
Holdings and its Subsidiaries determined on a consolidated basis in accordance
with GAAP, including cash and Cash Equivalents.
"Consolidated Current Liabilities" shall mean, the current
liabilities of Holdings and its Subsidiaries determined on a consolidated
basis in accordance with GAAP, but excluding (i) the current portion under the
Holdings Convertible Debentures and (ii) the current liability associated with
the required repayment of Loans in connection with the Scheduled Commitment
Reduction occurring on the Maturity Date.
"Consolidated EBIT" shall mean, for any period, (A) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) provisions for
taxes based on income, (iii) Consolidated Interest Expense, (iv) amortization
or write-off of deferred financing costs to the extent deducted in determining
Consolidated Net Income and (v) loss-es on sales of assets (excluding sales in
the ordinary course of business) and other extraordinary losses less (B) the
amount for such period of gains on sales of assets (excluding sales in the
ordinary course of business) and other extraordinary gains, all as determined
on a consolidated basis in accordance with GAAP.
"Consolidated EBITDAR" shall mean, for any period, the sum of the
amounts for such period of (i) Consolidated EBIT, (ii) depreciation expense,
(iii) amortization expense and (iv) Consolidated Rent Expense, all as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Funded Indebtedness" shall mean, all Indebtedness of
Holdings and its Subsidiaries calculated on a consolidated basis in accordance
with GAAP; provided that with respect to calculations made pursuant to Section
8.10 only, Funded Debt shall exclude up to $200,000,000 of unsecured
subordinated debt issued by Holdings in one or more public offerings following
the Initial Borrowing Date, which shall (i) mature after the Maturity Date,
(ii) not have any principal payments prior to the Maturity Date, and (iii) be
explicitly subordinated to this Facility.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to Capital Leases) of Holdings
and its Subsidiaries in accordance with GAAP on a consolidated basis with
respect to all outstanding Indebtedness of Holdings and its Subsidiaries,
including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing.
"Consolidated Net Income" shall mean for any period, the net
income (or loss) of Holdings and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in conformity with
GAAP.
"Consolidated Net Worth" shall mean, at any time, shareholders
equity (excluding treasury stock) of Holdings and its Subsidiaries on a
consolidated basis determined in accordance with GAAP.
"Consolidated Rent Expense" shall mean for any period, the rent
expense of Holdings and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in accordance with GAAP.
"Contingent Obligations" shall mean as to any Person any
obligation of such Person guaranteeing or intending to guarantee any
Indebtedness ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment
of such primary obligation or (d) otherwise to assure or hold harmless the
owner of such primary obligation against loss in respect thereof, provided,
however, that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of
which such Contingent Obligation is made or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in good
faith.
"Credit Documents" shall mean this Agreement, the Notes, the
Security Documents and each Guaranty and any documents executed in connection
therewith.
"Credit Event" shall mean and include the making of a Loan or the
issuance of a Letter of Credit.
"Credit Party" shall mean Holdings, the Borrower and each
Subsidiary Guarantor.
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Dividends" shall have the meaning provided in Section 8.05.
"Documentation Agents" shall have the meaning provided in the
first paragraph of this Agreement.
"Earnings" shall have the definition provided in the Security
Agreement.
"Effective Date" shall have the meaning provided in Section 12.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined by Regulation
D of the Securities Act of 1933).
"Employee Benefit Plan" shall have the meaning provided in Section
5.06(i).
"Employment Agreements" shall have the meaning provided in Section
5.06(vi).
"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than internal
reports prepared by Holdings or any of its Subsidiaries solely in the ordinary
course of such Person's business and not in response to any third party action
or request of any kind) or proceedings relating in any way to any
Environmental Law or any permit issued, or any approval given, under any such
Environmental Law (hereafter, "Claims"), including, without limitation,
(a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all Claims by
any third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Law" means any applicable Federal, state, foreign
or local statute, law, rule, regulation, ordinance, code, guide, policy and
rule of common law now or hereafter in effect and in each case as amended, and
any judicial or administrative interpretation thereof, including any judicial
or administrative order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including, without limita-
tion, CERCLA; RCRA; the Federal Water Pollution Control Act, as amended, 33
U.S.C. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. 7401 et
seq.; the Clean Air Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water
Act, 42 U.S.C. 3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701
et seq. and any applicable state and local or foreign counterparts or equiv-
alents.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the Effective Date and any subsequent provisions of ERISA, amend-
atory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section
3(9) of ERISA) which together with Holdings or any Subsidiary would be deemed
to be a "single employer" (i) within the meaning of Sections 414(b), (c), (m)
and (o) of the Code or (ii) as a result of Holdings or any Subsidiary being or
having been a general partner of such person.
"Eurodollar Loans" shall mean each Loan bearing interest at the
rates provided in Section 1.08(b).
"Eurodollar Rate" shall mean with respect to each Interest Period
for a Loan, the offered rate (rounded upward to the nearest 1/16 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, the Eurodollar Rate for such period shall be the rate quoted to the
Administrative Agent as the offered rate for deposits of Dollars in an amount
approximately equal to the amount in relation to which the Eurodollar Rate 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.
"Event of Default" shall have the meaning provided in Section 9.
"Existing Credit Agreements" shall mean the Credit Agreement,
dated as of April 30, 1996, by and among Holdings, the Borrower, various
lending institutions, Credit Lyonnais, New York Branch, as Co-Agent and
Christiania Bank og Kreditkasse, as Agent, and the Loan Agreement, dated as of
May 25, 1995, by and among The CIT Group/Equipment Financing, Inc., Reading &
Bates Offshore, Limited and Holdings.
"Existing Indebtedness" shall have the meaning provided in Section
6.19.
"Existing Indebtedness Agreements" shall have the meaning provided
in Section 5.06.
"Existing Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Facility" shall mean the credit facility established under this
Agreement, evidenced by the Total Commitment.
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Effective Rate" shall mean 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 Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the
Administrative Agent from three Federal Funds brokers of recognized standing
selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to
in, Section 3.01.
"Foreign Pension Plan" means any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by Holdings or any one or more
of its Subsidiaries primarily for the benefit of employees of Holdings or such
Subsidiaries residing outside the United States of America, which plan, fund
or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect on the date of this Agreement; it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section 8, including defined terms as used therein, are subject (to the
extent provided therein) to Section 12.07(a).
"Guaranteed Obligations" shall mean all obligations of the
Borrower to each Bank for the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of the principal and interest
on each Note issued by the Borrower to such Bank, and Loans made, under the
Credit Agreement and all reimbursement obligations and Unpaid Drawings with
respect to Letters of Credit, together with all the other obligations and lia-
bilities (including, without limitation, indemnities, fees and interest
thereon) of the Borrower to such Bank now existing or hereafter incurred
under, arising out of or in connection with the Credit Agreement or any other
Credit Document and the due performance and compliance with all the terms,
conditions and agreements contained in the Credit Documents by the Borrower.
"Guarantor" shall mean each Subsidiary Guarantor and Holdings.
"Guaranty" shall mean the guaranty of Holdings pursuant to Section
13 hereof and the Subsidiaries Guaranty.
"Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment
that contained, electric fluid containing levels of polychlorinated biphenyls,
and radon gas; (b) any chemicals, materials or substances defined as or
included in the definition of "hazardous substances," "hazardous waste,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," "toxic substances," "toxic pollutants," "contaminants," or
"pollutants," or words of similar import, under any applicable Environmental
Law; and (c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority.
"Holdings" shall have the meaning provided in the first paragraph
of this Agreement.
"Holdings Convertible Debentures" shall mean Holdings' 8% Senior
Subordinated Convertible Debentures due December 1998.
"Indebtedness" of any Person shall mean without duplication (i)
all indebtedness of such Person for borrowed money, (ii) the deferred purchase
price of assets or services which in accordance with GAAP would be shown on
the liability side of the balance sheet of such Person, (iii) the face amount
of all letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed, (v) all Capitalized Lease
Obligations of such Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vii) all net obligations
of such Person under Interest Rate Agreements and (viii) all Contingent
Obligations of such Person (other than Contingent Obligations arising from the
guaranty by such Person of the obligations of Holdings, the Borrower and/or
their respective Subsidiaries to the extent such guaranteed obligations are
permitted under this Agreement); provided that Indebtedness shall not include
(x) trade payables and accrued expenses, in each case arising in the ordinary
course of business and (y) Indebtedness of a direct or indirect Subsidiary of
Holdings (the "Relevant Subsidiary"), of which neither Holdings, nor the
Borrower, nor any of their Subsidiaries other than the Relevant Subsidiary is
liable or obligated in any manner.
"Initial Borrowing Date" shall mean the date upon which the
initial Borrowing of Loans occurs.
"Interest Period" with respect to any Loan shall mean the interest
period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Agreement" shall mean any interest rate swap
agreement, any interest rate cap agreement, any interest rate collar agreement
or other similar agreement or arrangement designed to protect any Credit Party
against interest rate risk.
"L/C Supportable Obligations" shall mean such obligations of the
Borrower, the Guarantors or their Subsidiaries (other than obligations in
respect of Indebtedness) as are not inconsistent with the policies of the
Letter of Credit Issuer.
"Leasehold" of any Person means all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Issuer" shall mean Christiania Bank og
Kreditkasse, New York Branch.
"Letter of Credit Outstandings" shall mean, at any time, the sum
of, without duplication, (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in
respect of all Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in
Section 2.02(a).
"Leverage Ratio" shall mean, at any date of determination, the
ratio of Consolidated Funded Indebtedness on such date to Total Capitalization
on such date.
"Lien" shall mean any mortgage, pledge, security interest,
security title, encumbrance, lien or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement or any lease in the nature thereof) other than arising
from an event constituting a Total Loss.
"Loan" shall have the meaning provided in Section 1.01.
"Margin Stock" shall have the meaning provided in Regulation U.
"Market Value" shall mean as of any date of calculation the value
as of such date of any offshore drilling rig or other vessel provided in the
most recent valuation report delivered in connection with Section 5.15(ii) and
Section 7.11, or in the case two reports have been supplied as of such date,
the arithmetic mean of the values provided in such reports.
"Material Adverse Effect" shall mean a material adverse effect on
the business, property, assets, liabilities, operations, condition (financial
or otherwise) or prospects of the Borrower or Holdings and its Subsidiaries
taken as a whole.
"Maturity Date" shall mean the date that is the fifth anniversary
of the Effective Date.
"Minimum Borrowing Amount" shall mean $1,000,000.
"Mortgage" shall have the meaning provided in Section 5.13(b).
"Mortgaged Rigs" shall mean and include the US Rigs, the
Panamanian Rigs and the Australian Rig.
"Mortgagor" shall mean each Credit Party party to a Mortgage.
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.
"Note" shall have the meaning provided in Section 1.05(a).
"Notice of Borrowing" shall have the meaning provided in Section
1.03.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
at 11 West 42nd Street, 7th Floor, New York, New York 10036 or such other
office as the Administrative Agent may designate to the Borrower from time to
time.
"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time
existing, owing to the Administrative Agent, the Collateral Agent or any Bank
pursuant to the terms of this Agreement or any other Credit Document.
"Panamanian Mortgage" shall have the meaning provided in Section
5.13(a).
"Panamanian Rigs" shall mean the offshore drilling vessels Charley
Graves, J.W. McLean, and Rig 41.
"Participant" shall have the meaning provided in Section 2.04(a).
"Payment Office" shall mean the office of the Administrative Agent
at 11 West 42nd Street, 7th Floor, New York, New York 10036 or such other
office as the Administrative Agent may designate to the Borrower from time to
time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" shall mean for each Bank the percentage obtained by
dividing such Bank's Commitment by the Total Commitment, provided that if the
Total Commitment has been terminated, the Percentage of each Bank shall be
determined by dividing such Bank's Commitment immediately prior to such
termination by the Total Commitment immediately prior to such termination.
"Permitted Liens" shall mean Liens described in Section 8.03(a)
through (g).
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of) Holdings or a Subsidiary of
Holdings or an ERISA Affiliate.
"Pledge Agreement" shall have the meaning provided in Section
5.17.
"Prime Rate" shall mean the rate which CBK announces from time to
time as its prime lending rate, the Prime Rate to change when and as such
prime lending rate changes.
"Projections" shall have the meaning set forth in Section 6.10(d).
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. 6901 et seq.
"Real Property" of any Person shall mean all of the right, title
and interest of such Person in and to land, improvements and fixtures,
including Leaseholds.
"Register" shall have the meaning provided in Section 12.16.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing margin requirements.
"Relevant Subsidiary" shall have the meaning provided in the
definition of Indebtedness.
"Replaced Bank" shall have the meaning provided in Section 1.12.
"Replacement Bank" shall have the meaning provided in Section
1.12.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan other than those events as to which
the 30-day notice period is waived under subsection .13, .14, .16, .18, .19 or
.20 of PBGC Regulation Section 2615.
"Required Banks" shall mean Non-Defaulting Banks whose outstanding
Commitments (or, if after the Total Commitment has been terminated, out-
standing Loans and Adjusted Percentage of Letter of Credit Outstandings) con-
stitute greater than 50% of the Adjusted Total Commitment (or, if after the
Total Commitment has been terminated, the total outstanding Loans of Non-
Defaulting Banks and the aggregate Adjusted Percentages of all Non-Defaulting
Banks of the total Letter of Credit Outstandings at such time).
"Scheduled Commitment Reduction" shall have the meaning provided
in Section 3.03(b).
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided
in Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning set forth in the
Security Documents.
"Security Agreement" shall have the meaning provided in Section
5.11.
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.
"Security Documents" shall mean and include the Security
Agreement, the Pledge Agreement and each Mortgage.
"Security Trustee" shall mean Christiania Bank og Kreditkasse, New
York Branch, as trustee for the Banks with respect to the U.S. Mortgages, and
any successor trustee appointed in accordance with the terms hereof.
"Stated Amount" of each Letter of Credit shall mean the maximum
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Subsidiary" of any Person shall mean and include (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 or not 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 through Subsidiaries and (ii) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries, has more than a 50% equity interest at the
time. Unless otherwise expressly provided, all references herein to
"Subsidiary" shall mean a Subsidiary of Holdings.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
which owns a Mortgaged Rig and executes the Subsidiary Guaranty.
"Subsidiary Guaranty" shall have the meaning provided in Section
5.12.
"Substitute Basis" shall have the meaning provided in Section
1.09(b).
"Taxes" shall have the meaning provided in Section 4.04(a).
"Total Capitalization" shall mean, at any time, the sum of
Consolidated Funded Indebtedness and Consolidated Net Worth at such time.
"Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Banks.
"Total Loss" shall mean any "Total Loss" as defined in any
Mortgage.
"Total Unutilized Commitment" shall mean, at any time, (i) the
Total Commitment at such time less (ii) the sum of the aggregate principal
amount of all Loans at such time plus the Letter of Credit Outstandings at
such time.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code.
"Unfunded Current Liability" of any Plan means the amount, if any,
by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"Unpaid Drawing" shall have the meaning provided in Section
2.03(a).
"Unutilized Commitment" for each Bank, shall mean the excess of
(i) the Commitment of such Bank over (ii) the sum of (x) the aggregate out-
standing principal amount of Loans made by such Bank plus (y) an amount equal
to such Bank's Adjusted Percentage of the Letter of Credit Outstandings at
such time.
"U.S. Dollar Equivalent" shall mean, at any time for the
determination thereof, the amount of U.S. Dollars necessary to purchase the
amount of the relevant currency at the spot exchange rate therefor as quoted
by the Administrative Agent as of 11:00 A.M. (London time) on the date two
Business Days prior to the date of any determination thereof for purchase on
such date.
"U.S. Dollars" shall mean freely transferable lawful money of the
United States.
"US Mortgage" shall have the meaning provided in Section 5.13(a).
"US Rigs" shall mean the offshore drilling vessels Jack Bates,
D.R. Stewart, W.D. Kent, F.G. McClintock, Randolph Yost, J.T. Angel, Roger W.
Mowell, Harvey H. Ward, George H. Galloway and C.E. Thornton.
"Voting Stock" shall mean, with respect to any corporation, the
outstanding stock of all classes (or equivalent interests) which ordinarily,
in the absence of contingencies, entitles holders thereof to vote for the
election of directors (or Persons performing similar functions) of such
corporation, even though the right so to vote has been suspended by the
happening of such a contingency.
"Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary
of such Person to the extent all of the capital stock or other ownership
interests in such Subsidiary, other than directors' qualifying shares or
shares held by a nominee or in trust for such Person, is owned directly or
indirectly by such Person.
"Working Capital" shall mean the excess of Consolidated Current
Assets over Consolidated Current Liabilities exclusive of the Holdings
Convertible Debentures.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex or facsimile transmission.
SECTION 11. The Administrative Agent and the Security Trustee.
11.01 Appointment of the Administrative Agent and the Security
Trustee. (a) The Banks hereby designate Christiania Bank og Kreditkasse, New
York Branch as Administrative Agent to act as specified herein and in the
other Credit Documents. Each Bank hereby irrevocably authorizes, and each
holder of any Note by the acceptance of such Note shall be deemed irrevocably
to authorize, the Administrative Agent to take such action on its behalf under
the provisions of this Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Administrative Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The
Administrative Agent may perform any of its duties hereunder by or through its
respective officers, directors, agents, employees or Affiliates.
(b) Each of the Banks irrevocably appoints Christiania Bank og
Kreditkasse, New York Branch as security trustee solely for the purpose of
holding legal title to the Mortgages of each of the U.S. Rigs on behalf of the
Banks with regard to the (i) security, powers, rights, titles, benefits and
interests (both present and future) constituted by and conferred on the Banks
or any of them or for the benefit thereof under or pursuant to the US
Mortgages (including, without limitation, the benefit of all covenants,
undertakings, representations, warranties and obligations given, made or
undertaken to any Bank in the US Mortgages), (ii) all moneys, property and
other assets paid or transferred to or vested in any Bank or any agent of any
Bank or received or recovered by any Bank or any agent of any Bank pursuant
to, or in connection with, the US Mortgages, whether from the Borrower or any
Guarantor or any other person and (iii) all money, investments, property and
other assets at any time representing or deriving from any of the foregoing,
including all interest, income and other sums at any time received or
receivable by any Bank or any agent of any Bank in respect of the same (or any
part thereof). CBK hereby accepts such appointment as security trustee.
(c) For purposes of this Section 11, the term "Administrative
Agent" shall include CBK in its capacity as Collateral Agent, Administrative
Agent and Security Trustee.
11.02 Nature of Duties. The Administrative Agent shall not have
any duties or responsibilities except those expressly set forth in this
Agreement and the other Credit Documents. Neither the Administrative Agent
nor any of its respective officers, directors, agents, employees or Affiliates
shall be liable for any action taken or omitted by it or them hereunder or
under any other Credit Document or in connection herewith or therewith, unless
caused by its or their gross negligence or willful misconduct. The duties of
the Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any other
Credit Document a fiduciary relationship in respect of any Bank or the holder
of any Note; and nothing in this Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose
upon the Administrative Agent any obligations in respect of this Agreement or
any other Credit Document except as expressly set forth herein or therein.
11.03 Lack of Reliance on the Administrative Agent. Independently
and without reliance upon the Administrative Agent, each Bank and the holder
of each Note, to the extent it deems appropriate, has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of Holdings and its Subsidiaries in connection with the making and the
continuance of the Loans and issuance and/or participation in Letters of
Credit and the taking or not taking of any action in connection herewith and
(ii) its own appraisal of the creditworthiness of Holdings and its Subsidi-
aries and, except as expressly provided in this Agreement, the Administrative
Agent shall not have any duty or responsibility, either initially or on a con-
tinuing basis, to provide any Bank or the holder of any Note with any credit
or other information with respect thereto, whether coming into its possession
before the making of the Loans or at any time or times thereafter. The
Administrative Agent shall not be responsible to any Bank or the holder of any
Note for any recitals, statements, information, representations or warranties
herein or in any document, certificate or other writing delivered in connec-
tion herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or any other Credit Document or the financial condition of Holdings
and its Subsidiaries or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of
this Agreement or any other Credit Document, or the financial condition of
Holdings and its Subsidiaries or the existence or possible existence of any
Default or Event of Default.
11.04 Certain Rights of the Administrative Agent. If the
Administrative Agent shall request instructions from the Required Banks with
respect to any act or action (including failure to act) in connection with
this Agreement or any other Credit Document, the Administrative Agent shall be
entitled to refrain from such act or taking such action unless and until the
Administrative Agent shall have received instructions from the Required Banks;
and the Administrative Agent shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, neither any Bank nor the
holder of any Note shall have any right of action whatsoever against the
Administrative Agent as a result of the Administrative Agent acting or re-
fraining from acting hereunder or under any other Credit Document in accor-
dance with the instructions of the Required Banks.
11.05 Reliance. The Administrative Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by any Person that the Administrative Agent believed to
be the proper Person, and, with respect to all legal matters pertaining to
this Agreement and any other Credit Document and its duties hereunder and
thereunder, upon advice of counsel selected by the Administrative Agent (which
may be counsel for Holdings and/or the Borrower).
11.06 Indemnification. To the extent the Administrative Agent is
not reimbursed and indemnified by the Borrower, the Banks will reimburse and
indemnify the Administrative Agent, in proportion to their respective
"percentages" as used in determining the Required Banks, 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
Administrative Agent in performing its respective duties hereunder or under
any other Credit Document, in any way relating to or arising out of this
Agreement or any other Credit Document; provided that no Bank shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, suits, costs, expenses or disbursements resulting
from the Administrative Agent's gross negligence or willful misconduct.
11.07 The Administrative Agent in Its Individual Capacity. With
respect to its obligation to make Loans under this Agreement, the
Administrative Agent shall have the rights and powers specified herein for a
"Bank" and may exercise the same rights and powers as though it were not per-
forming the duties specified herein; and the term "Banks," "Required Banks,"
"holders of Notes" or any similar terms shall, unless the context clearly
otherwise indicates, include the Administrative Agent in its individual
capacity. The Administrative Agent may accept deposits from, lend money to,
and generally engage in any kind of banking, trust or other business with
Holdings or its Subsidiaries or any Affiliate thereof as if it were not
performing the duties specified herein, and may accept fees and other
consideration from Holdings or any of its Subsidiaries for services in connec-
tion with this Agreement and otherwise without having to account for the same
to the Banks.
11.08 Holders. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment, transfer or endorsement thereof, as
the case may be, shall have been filed with the Administrative Agent. Any
request, authority or consent of any Personwho, at the time of making such re-
quest or giving such authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee, assignee or
indorsee, as the case may be, of such Note or of any Note or Notes issued in
exchange therefor.
11.09 Resignation by the Administrative Agent. (a) The
Administrative Agent may resign from the performance of all its functions and
duties hereunder and/or under the other Credit Documents at any time by giving
15 Business Days' prior written notice to the Borrower and the Banks. Such
resignation shall take effect upon the appointment of a successor
Administrative Agent pursuant to clauses (b) and (c) below or as otherwise
provided below.
(b) Upon any such notice of resignation, the Required Banks shall
appoint a successor Administrative Agent hereunder or thereunder who shall be
a commercial bank or trust company reasonably acceptable to the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent, with
the consent of the Borrower, shall then appoint a successor Administrative
Agent who shall serve as Administrative Agent hereunder or thereunder until
such time, if any, as the Required Banks appoint a successor Administrative
Agent as provided above.
(d) If no successor Administrative Agent has been appointed pur-
suant to clause (b) or (c) above by the 20th Business Day after the date such
notice of resignation was given by the Administrative Agent, the
Administrative Agent's resignation shall become effective and the Required
Banks shall thereafter perform all the duties of the Administrative Agent
hereunder and/or under any other Credit Document until such time, if any, as
the Required Banks appoint a successor Administrative Agent as provided above.
SECTION 12. Miscellaneous.
12.01 Payment of Expenses, etc. The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Administrative Agent in
connection with the negotiation, preparation, execution and delivery of the
Credit Documents and the documents and instruments referred to therein and any
amendment, waiver or consent relating thereto (including, without limitation,
the reasonable fees and disbursements of White & Case and special maritime
counsel Watson, Farley & Williams) and of the Administrative Agent and the
Collateral Agent and, after the occurrence and during the continuance of an
Event of Default, each of the Banks in connection with the enforcement of the
Credit Documents and the documents and instruments referred to therein
(including, without limitation, the actual reasonable fees and disbursements
of counsel for the Administrative Agent and, after the occurrence and during
the continuance of an Event of Default for each of the Banks); (ii) pay and
hold each of the Banks harmless from and against any and all present and
future stamp and other similar taxes with respect to the foregoing matters and
save each of the Banks harmless from and against any and all liabilities with
respect to or resulting from any delay or omission (other than to the extent
attributable to such Bank) to pay such taxes; and (iii) indemnify each Bank
(including in its capacity as the Administrative Agent or Letter of Credit
Issuer), its officers, directors, employees, representatives and agents from
and hold each of them harmless 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 any of them as a result of, or arising out of,
or in any way related to, or by reason of, (a) any investigation, litigation
or other proceeding (whether or not any Bank is a party thereto) related to
the entering into and/or performance of any Credit Document or the use of the
proceeds of any Loans hereunder or the consummation of any transactions
contemplated in any Credit Document, whether initiated by the Borrower or any
other Person, including, without limitation, the actual reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified) or (b) the
actual or alleged presence of Hazardous Materials in the air, surface water,
groundwater, surface or subsurface of any Real Property, offshore drilling
rig, facility or location at any time owned or operated by Holdings or any of
its Subsidiaries, the generation, storage, transportation or disposal of
Hazardous Materials at any Real Property, offshore drilling rig, facility or
location at any time owned or operated by Holdings or any of its Subsidiaries,
the non-compliance of any Real Property, offshore drilling rig, facility or
location at any time owned or operated by Holdings or any of its Subsidiaries
with federal, state and local laws, regulations, and ordinances (including
applicable permits thereunder) applicable to any such Real Property, offshore
drilling rig, facility or location, or any Environmental Claim asserted
against Holdings, any of its Subsidiaries, or any Real Property, offshore
drilling rig, facility or location at any time owned or operated by Holdings
or any of its Subsidiaries, including, in each case, without limitation, the
actual reasonable fees and disbursements of counsel and other consultants
incurred in connection with any such investigation, litigation or other pro-
ceeding (but excluding any losses, liabilities, claims, damages or expenses to
the extent incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified). To the extent that the undertaking to indem-
nify, pay or hold harmless the Administrative Agent or any Bank set forth in
the preceding sentence may be unenforceable because it is violative of any law
or public policy, the Borrower shall make the maximum contribution to the
payment and satisfaction of each of the indemnified liabilities which is
permissible under applicable law.
12.02 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, if an Event of Default then exists, each Bank is hereby autho-
rized at any time or from time to time, without presentment, demand, protest
or other notice of any kind to the Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and apply
any and all deposits (general or special) and any other Indebtedness at any
time held or owing by such Bank (including without limitation by branches and
agencies of such Bank wherever located) to or for the credit or the account of
the Borrower against and on account of the Obligations and liabilities of the
Borrower to such Bank under this Agreement or under any of the other Credit
Documents, including, without limitation, all interests in Obligations of the
Borrower purchased by such Bank pursuant to Section 12.06(b), and all other
claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether or not such
Bank shall have made any demand hereunder and although said Obligations, lia-
bilities or claims, or any of them, shall be contingent or unmatured.
12.03 Notices. (a) Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be
in writing (including telex or telecopier communication) and mailed, telexed,
telecopied or delivered, if to Holdings or its Subsidiaries, at the address
specified opposite its signature below or in the other relevant Credit
Documents, as the case may be; if to any Bank, at its address specified for
such Bank on Annex II; or, at such other address as shall be designated by any
party in a written notice to the other parties hereto. All such notices and
communications shall be effective when received.
(b) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent may, prior to receipt of written confirmation, act with-
out liability upon the basis of such telephonic notice believed by the
Administrative Agent in good faith to be from an Authorized Officer of the
Borrower. In each such case, the Borrower hereby waives the right to dispute
the Administrative Agent's record of the terms of such telephonic notice.
12.04 Benefit of Agreement. (a) This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that the Borrower may
not assign or transfer any of its rights or obligations hereunder without the
prior written consent of the Banks. Each Bank may at any time grant
participations in any of its rights hereunder or under any of the Notes to
another financial institution, provided that in the case of any such
participation, the participant shall not have any rights under this Agreement
or any of the other Credit Documents (the participant's rights against such
Bank in respect of such participation to be those set forth in the agreement
executed by such Bank in favor of the participant relating thereto) and all
amounts payable by the Borrower hereunder shall be determined as if such Bank
had not sold such participation, except that the participant shall be entitled
to the benefits of Sections 1.10 and 4.04 of this Agreement to the extent that
such Bank would be entitled to such benefits if the participation had not been
entered into or sold, and, provided further, that no Bank shall transfer,
grant or assign any participation under which the participant shall have
rights to approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (i) extend
the final scheduled maturity of any Loan or Note in which such participant is
participating (it being understood that any waiver of the application of any
prepayment or the method of any application of any prepayment to, the
Scheduled Commitment Reductions shall not constitute an extension of the final
maturity date), or reduce the rate or extend the time of payment of interest
or Fees thereon (except in connection with a waiver of the applicability of
any post-default increase in interest rates), or reduce the principal amount
thereof, or increase such participant's participating interest in any
Commitment over the amount thereof then in effect (it being understood that a
waiver of any condition, covenant, Default or Event of Default or of a manda-
tory reduction in the Total Commitment, or a mandatory prepayment, shall not
constitute a change in the terms of any Commitment), (ii) release all or sub-
stantially all of the Collateral or (iii) consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement.
(b) Notwithstanding the foregoing, (x) any Bank may assign all or
a portion of its outstanding Commitment and its rights and obligations here-
under to its Affiliate or to another Bank, and (y) with the consent of the
Administrative Agent and the Borrower (which consent shall not be unreasonably
withheld), any Bank may assign all or a portion of its outstanding Commitment
and its rights and obligations hereunder to one or more Eligible Transferees.
No assignment pursuant to the immediately preceding sentence shall to the
extent such assignment represents an assignment to an institution other than
one or more Banks hereunder, be in an aggregate amount less than $5,000,000
unless the entire Commitment of the assigning Bank is so assigned. If any
Bank so sells or assigns all or a part of its rights hereunder or under the
Notes, any reference in this Agreement or the Notes to such assigning Bank
shall thereafter refer to such Bank and to the respective assignee to the
extent of their respective interests and the respective assignee shall have,
to the extent of such assignment (unless otherwise provided therein), the same
rights and benefits as it would if it were such assigning Bank. Each
assignment pursuant to this Section 12.04(b) shall be effected by the assign-
ing Bank and the assignee Bank executing an Assignment and Assumption
Agreement. In the event of any such assignment (x) to a commercial bank or
other financial institution not previously a Bank hereunder, either the
assigning or the assignee Bank shall pay to the Administrative Agent a
nonrefundable assignment fee of $3,500 and (y) to a Bank, either the assigning
or assignee Bank shall pay to the Administrative Agent a nonrefundable
assignment fee of $1,500, and at the time of any assignment pursuant to this
Section 12.04(b), (i) Annex I shall be deemed to be amended to reflect the
Commitment of the respective assignee (which shall result in a direct
reduction to the Commitment of the assigning Bank) and of the other Banks, and
(ii) if any such assignment occurs after the Initial Borrowing Date, if
requested by the assigning Bank and the assignee Bank, the Borrower will issue
new Notes to the respective assignee and to the assigning Bank in conformity
with the requirements of Section 1.05. Each Bank and the Borrower agree to
execute such documents (including, without limitation, amendments to this
Agreement and the other Credit Documents) as shall be necessary to effect the
foregoing. Nothing in this clause (b) shall prevent or prohibit any Bank from
pledging its Notes or Loans to a Federal Reserve Bank in support of borrowings
made by such Bank from such Federal Reserve Bank.
(c) Notwithstanding any other provisions of this Section 12.04,
no transfer or assignment of the interests or obligations of any Bank
hereunder or any grant of participation therein shall be permitted if such
transfer, assignment or grant would require Holdings or the Borrower to file a
registration statement with the SEC or to qualify the Loans under the "Blue
Sky" laws of any State.
(d) Each Bank initially party to this Agreement hereby
represents, and each Person that became a Bank pursuant to an assignment
permitted by this Section 12 will, upon its becoming party to this Agreement,
represent that it is a commercial lender, other financial institution or other
"accredited" investor (as defined in SEC Regulation D) which makes loans in
the ordinary course of its business and that it will make or acquire Loans for
its own account in the ordinary course of such business, provided that subject
to the preceding clauses (a) and (b), the disposition of any promissory notes
or other evidences of or interests in Indebtedness held by such Bank shall at
all times be within its exclusive control.
12.05 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Administrative Agent or any Bank in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of
dealing between Holdings or any of its Subsidiaries and the Administrative
Agent or any Bank shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Credit Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The rights
and remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Administrative Agent or any Bank would otherwise
have. No notice to or demand on Holdings or any of its Subsidiaries in any
case shall entitle Holdings or any of its Subsidiaries to any other or further
notice or demand in similar or other circumstances or constitute a waiver of
the rights of the Administrative Agent or the Banks to any other or further
action in any circumstances without notice or demand.
12.06 Payments Pro Rata. (a) The Administrative Agent agrees
that promptly after its receipt of each payment from or on behalf of any
Credit Party in respect of any Obligations of the Borrower or any other Credit
Party hereunder, it shall distribute such payment to the Banks (other than any
Bank that has expressly waived its right to receive its pro rata share
thereof) pro rata based upon their respective shares, if any, of the
Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security,
by the exercise of the right of setoff or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than
the total of such Obligation then owed and due to such Bank bears to the total
of such Obligation then owed and due to all of the Banks immediately prior to
such receipt, then such Bank receiving such excess payment shall purchase for
cash without recourse or warranty from the other Banks an interest in the
Obligations of the Borrower or any other Credit Party, respectively, to such
Banks in such amount as shall result in a proportional participation by all of
the Banks in such amount, provided that if all or any portion of such excess
amount is thereafter recovered from such Bank, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
(c) Notwithstanding anything to the contrary contained herein,
the provisions of the preceding Sections 12.06(a) and (b) shall be subject to
the express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.
12.07 Calculations; Computations. (a) The financial statements
to be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by Holdings or the Borrower to the Banks), provided that (x) except as
otherwise specifically provided herein, all computations determining compli-
ance with Section 8, including definitions used therein, shall utilize
accounting principles and policies in effect at the time of the preparation
of, and in conformity with those used to prepare, the December 31, 1995
historical financial statements of Holdings delivered to the Banks pursuant to
Section 6.10(b) and (y) that if at any time the computations determining
compliance with Section 8 utilize accounting principles different from those
utilized in the financial statements furnished to the Banks, such financial
statements shall be accompanied by reconciliation work-sheets.
(b) All computations of interest and Fees hereunder shall be made
on the actual number of days elapsed over a year of 360 days.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY
ACCEPT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. HOLDINGS AND THE
BORROWER FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
BORROWER LOCATED OUTSIDE NEW YORK CITY AND BY HAND DELIVERY TO THE BORROWER
LOCATED WITHIN NEW YORK CITY, AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION
12.03, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT, ANY BANK OR THE
HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST HOLDINGS OR THE
BORROWER IN ANY OTHER JURISDICTION.
(b) HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVE ANY
OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO
IN CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVE AND AGREE NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
12.09 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Administrative Agent.
12.10 Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which Holdings, the Borrower and each of the
Banks shall have signed a copy hereof (whether the same or different copies)
and shall have delivered the same to the Administrative Agent at the Payment
Office of the Administrative Agent or, in the case of the Banks, shall have
given to the Administrative Agent telephonic (confirmed in writing), written
telex or facsimile transmission notice (actually received) at such office that
the same has been signed and mailed to it.
12.11 Headings Descriptive. The headings of the several sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
12.12 Amendment or Waiver. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination
is in writing signed by the Borrower and the Required Banks, provided that no
such change, waiver, discharge or termination shall, without the consent of
each Bank (other than a Defaulting Bank) affected thereby, (i) extend the
Maturity Date (it being understood that any waiver of the application of any
prepayment of the Loans or the method of application of any prepayment to the
Scheduled Commitment Reductions, shall not constitute any such extension), or
reduce the rate or extend the time of payment of interest (other than as a
result of waiving the applicability of any post-default increase in interest
rates) or Fees thereon, or reduce the principal amount thereof, (ii) increase
the Commitment of any Bank over the amount thereof then in effect (it being
understood that a waiver of any condition, covenant, Default or Event of
Default shall not constitute a change in the terms of any Commitment of any
Bank), (iii) release or permit the release of (x) any Mortgaged Rig from the
Lien of the respective Security Documents or (y) the Guaranty of Holdings
pursuant to Section 13 or the Guaranty of any Subsidiary Guarantor so long as
such Subsidiary Guarantor continues to own any Mortgaged Rig (except, in the
case of both (x) and (y) above, as expressly provided in the Credit
Documents), (iv) amend, modify or waive any provision of this Section 12.12,
(v) reduce the percentage specified in the definition of Required Banks (it
being understood and agreed that, with the consent of the Required Banks,
additional extensions of credit pursuant to this Agreement may be included in
the determination of Required Banks on substantially the same basis as the
Commitments (and related extensions of credit) are included on the Effective
Date), (vi) consent to the assignment or transfer by the Borrower of any of
its rights and obligations under this Agreement or (vii) waive, change the
timing or amount of, or extend any mandatory reduction in the Total Commitment
including, without limitation, a Scheduled Commitment Reduction. No provision
of Sections 2 or 11, or any other provisions relating to the Letter of Credit
Issuer or the Administrative Agent may be modified without the consent of the
Administrative Agent.
(b) If, in connection with any proposed change, waiver, discharge
or termination to any of the provisions of this Agreement as contemplated by
clauses (i) through (vii), inclusive, of the proviso to Section 12.12(a), the
consent of the Required Banks is obtained but the consent of one or more of
such other Banks whose consent is required is not obtained, then the Borrower
shall have the right to replace each such non-consenting Bank or Banks (so
long as all non-consenting Banks are so replaced) with one or more Replacement
Banks pursuant to Section 1.13 so long as at the time of such replacement,
each such Replacement Bank consents to the proposed change, waiver, discharge
or termi-nation; provided that the Borrower shall not have the right to
replace a Bank solely as a result of the exercise of such Bank's rights (and
the withholding of any required consent by such Bank) pursuant to Section
12.12(a)(ii).
12.13 Survival. All indemnities set forth herein including,
without limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.06 or 12.01 shall
survive the execution and delivery of this Agreement and the making and
repayment of the Loans.
12.14 Domicile of Loans. Each Bank may transfer and carry its
Loans at, to or for the account of any branch office, subsidiary or Affiliate
of such Bank, provided that the Borrower shall not be responsible for costs
arising under Section 1.10 or 4.04 resulting from any such transfer (other
than a transfer pursuant to Section 1.12(a)) to the extent not otherwise
applicable to such Bank prior to such transfer.
12.15 Confidentiality. Subject to Section 12.04, the Banks shall
hold all non-public information obtained pursuant to the requirements of this
Agreement in accordance with its customary procedure for handling confidential
information of this nature and in accordance with safe and sound banking prac-
tices and in any event may make disclosure reasonably required by any bona
fide transferee or participant in connection with the contemplated transfer of
any Loans or participation therein (so long as such transferee or participant
agrees to be bound by the provisions of this Section 12.15) or as required or
requested by any governmental agency or representative thereof or pursuant to
legal process, provided that, unless specifically prohibited by applicable law
or court order, each Bank shall notify the Borrower of any request by any
governmental agency or represen-tative thereof (other than any such request in
connection with an examination of the financial condition of such Bank by such
governmental agency) for disclosure of any such non-public information prior
to disclosure of such information, and provided further that in no event shall
any Bank be obligated or required to return any materials furnished by
Holdings or any Subsidiary.
12.16 Registry. The Borrower hereby designates the Administrative
Agent to serve as the Borrower's agent, solely for purposes of this Section
12.16, to maintain a register (the "Register") on which it will record the
Commitments from time to time of each of the Banks, the Loans made by each of
the Banks and each repayment in respect of the principal amount of the Loans
of each Bank. Failure to make any such recordation, or any error in such
recordation shall not affect the Borrower's obligations in respect of such
Loans. With respect to any Bank, the transfer of the Commitments of such Bank
and the rights to the principal of, and interest on, any Loan made pursuant to
such Commitments shall not be effective until such transfer is recorded on the
Register maintained by the Administrative Agent with respect to ownership of
such Commitments and Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitments and Loans shall remain owing
to the transferor. The registration of assignment or transfer of all or part
of any Commitments and Loans shall be recorded by the Administrative Agent on
the Register only upon the acceptance by the Administrative Agent of a
properly executed and delivered Assignment and Assumption Agreement pursuant
to Section 12.04(b). Coincident with the delivery of such an Assignment and
Assumption Agreement to the Administrative Agent for acceptance and regis-
tration of assignment or transfer of all or part of a Loan, or as soon
thereafter as practicable, the assigning or transferor Bank shall surrender
the Note evidencing such Loan, and thereupon one or more new Notes in the same
aggregate principal amount shall be issued to the assigning or transferor Bank
and/or the new Bank.
SECTION 13. Holdings Guaranty.
13.01 The Guaranty. In order to induce the Banks to enter into
this Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by Holdings from the proceeds of the Loans and the
issuance of the Letters of Credit, Holdings hereby agrees with the Banks as
follows: Holdings hereby unconditionally and irrevocably guarantees as prim-
ary obligor and not merely as surety the full and prompt payment when due,
whether upon maturity, by acceleration or otherwise, of any and all of the
Guaranteed Obligations of the Borrower to the Secured Creditors. If any or
all of the Guaranteed Obligations of the Borrower to the Secured Creditors
becomes due and payable hereunder, Holdings unconditionally promises to pay
such indebtedness to the Secured Creditors, on order, or demand, together with
any and all reasonable expenses which may be incurred by the Administrative
Agent or the Secured Creditors in collecting any of the Guaranteed
Obligations.
13.02 Bankruptcy. Additionally, Holdings unconditionally and
irrevocably guarantees the payment of any and all of the Guaranteed
Obligations of the Borrower to the Secured Creditors whether or not then due
or payable by the Borrower upon the occurrence in respect of the Borrower of
any of the events specified in Section 9.05, and unconditionally and irrevoc-
ably promises to pay such Guaranteed Obligations to the Secured Creditors, on
order, or demand, in lawful money of the United States. Holdings' guaranty of
the payment of any and all of the Guaranteed Obligations hereunder shall
constitute a guaranty of payment, and not of collection.
13.03 Nature of Liability. The liability of Holdings hereunder is
exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of the Borrower whether executed by Holdings, any other
guarantor or by any other party, and the liability of Holdings hereunder shall
not be affected or impaired by (a) any direction as to application of payment
by the Borrower or by any other party, or (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other
party as to the Guaranteed Obligations of the Borrower, or (c) any payment on
or in reduction of any such other guaranty or undertaking, or (d) any dissol-
ution, termination or increase, decrease or change in personnel by the Bor-
rower, or (e) any payment made to the Administrative Agent or the Secured
Creditors on the indebtedness which the Administrative Agent or such Secured
Creditors repay the Borrower pursuant to court order in any bankruptcy, reor-
ganization, arrangement, moratorium or other debtor relief proceeding, and
Holdings waives any right to the deferral or modification of its obligations
hereunder by reason of any such proceeding.
13.04 Independent Obligation. The obligations of Holdings
hereunder are independent of the obligations of any other guarantor or the
Borrower, and a separate action or actions may be brought and prosecuted
against Holdings whether or not action is brought against any other guarantor
or the Borrower and whether or not any other guarantor or the Borrower be
joined in any such action or actions. Holdings waives, to the fullest extent
permitted by law, the benefit of any statute of limitations affecting its
liability hereunder or the enforcement thereof. Any payment by the Borrower
or other circumstance which operates to toll any statute of limitations as to
the Borrower shall operate to toll the statute of limitations as to Holdings.
13.05 Waiver of Notice, etc. Holdings hereby waives notice of
acceptance of this Guaranty and notice of any liability to which it may apply,
and waives promptness, diligence, presentment, demand of payment, protest,
notice of dishonor or nonpayment of any such liabilities, suit or taking of
other action by the Administrative Agent, any Bank, the Letter of Credit
Issuer, the Collateral Agent or the Security Trustee against, and any other
notice to, any party liable thereon (including Holdings, any other guarantor
or the Borrower).
13.06 Authorization. Holdings authorizes the Administrative Agent
and the Secured Creditors without notice or demand (except as shall be
required by applicable statute and cannot be waived), and without affecting or
impairing its liability hereunder, from time to time to:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, increase, accelerate or
alter, any of the Guaranteed Obligations (including any increase or
decrease in the rate of interest thereon), any security therefor, or any
liability incurred directly or indirectly in respect thereof, and the
Guaranty herein made shall apply to the Guaranteed Obligations as so
changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors,
the Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to its creditors other
than the Banks;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Secured Creditors
regardless of what liability or liabilities of Holdings or the Borrower
remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements
referred to herein, or otherwise amend, modify or supplement this
Agreement or any of such other instruments or agreements; and/or
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
Holdings from its liabilities under this Section 13.
13.07 Reliance. It is not necessary for the Administrative Agent
or the Secured Creditors to inquire into the capacity or powers of the
Borrower or its Subsidiaries or the officers, directors, partners or agents
acting or purporting to act on its behalf, and any Guaranteed Obligations made
or created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
13.08 Subordination. Any of the indebtedness of the Borrower
relating to the Guaranteed Obligations now or hereafter owing to Holdings is
hereby subordinated to the Guaranteed Obligations of the Borrower owing to the
Administrative Agent and the Secured Creditors; and if the Administrative
Agent so requests at a time when an Event of Default exists, all such
indebtedness relating to the Guaranteed Obligations of the Borrower to
Holdings shall be collected, enforced and received by Holdings for the benefit
of the Secured Creditors and be paid over to the Administrative Agent on
behalf of the Secured Creditors on account of the Guaranteed Obligations of
the Borrower to the Secured Creditors, but without affecting or impairing in
any manner the liability of Holdings under the other provisions of this Guar-
anty. Prior to the transfer by Holdings of any note or negotiable instrument
evidencing any of the indebtedness relating to the Guaranteed Obligations of
the Borrower to Holdings, Holdings shall mark such note or negotiable
instrument with a legend that the same is subject to this subordination.
13.09 Waiver. (a) Holdings waives any right (except as shall be
required by applicable statute and cannot be waived) to require the
Administrative Agent or the Secured Creditors to (i) proceed against the
Borrower, any other guarantor or any other party, (ii) proceed against or
exhaust any security held from the Borrower, any other guarantor or any other
party or (iii) pursue any other remedy in the Administrative Agent's or the
Secured Creditors' power whatsoever. Holdings waives any defense based on or
arising out of any defense of the Borrower, any other guarantor or any other
party, other than payment in full of the Guaranteed Obligations, based on or
arising out of the disability of the Borrower, any other guarantor or any
other party, or the unenforceability of the Guaranteed Obligations or any part
thereof from any cause, or the cessation from any cause of the liability of
the Borrower other than payment in full of the Guaranteed Obligations. The
Administrative Agent and the Secured Creditors may, at their election,
foreclose on any security held by the Administrative Agent, the Collateral
Agent or the Secured Creditors by one or more judicial or nonjudicial sales,
whether or not every aspect of any such sale is commercially reasonable (to
the extent such sale is permitted by applicable law), or exercise any other
right or remedy the Administrative Agent and the Secured Creditors may have
against the Borrower or any other party, or any security, without affecting or
impairing in any way the liability of Holdings hereunder except to the extent
the Guaranteed Obligations have been paid. Holdings waives any defense aris-
ing out of any such election by the Administrative Agent and the Secured
Creditors, even though such election operates to impair or extinguish any
right of reimbursement or subrogation or other right or remedy of Holdings
against the Borrower or any other party or any security.
(b) Holdings waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guaranty, and notices of the existence, creation or incurring of new
or additional Guaranteed Obligations. Holdings assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks which
Holdings assumes and incurs hereunder, and agrees that the Administrative
Agent and the Secured Creditors shall have no duty to advise Holdings of
information known to them regarding such circum-stances or risks.
* * *
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
Address: READING & BATES CORPORATION
901 Threadneedle
Suite 200 By
Houston, Texas 77079 Name:
Attn: General Counsel Title:
Telephone: (713) 496-5000
Facsimile: (713) 496-0285
READING & BATES DRILLING CO.
By
Name:
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH,
Individually and as Administrative Agent
By
Name:
Title:
By
Name:
Title:
BANQUE INDOSUEZ,
Individually and as Documentation Agent
By
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
Individually and as Documentation Agent
By
Name:
Title:
SKANDINAVISKA ENSKILDA BANKEN AB (publ.),
Individually and as Co-Manager
By
Name:
Title:
THE FUJI BANK LIMITED,
Individually and as Co-Manager
By
Name:
Title:
BANK AUSTRIA
By
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI LTD.
By
Name:
Title:
MEESPIERSON N.V.
By
Name:
Title:
SANWA BANK
By
Name:
Title:
FIRST NATIONAL BANK OF COMMERCE
By
Name:
Title:
THE SUMITOMO BANK LIMITED
By
Name:
Title:
ANNEX I
COMMITMENTS
Bank Commitment
Christiania Bank $65,000,000
Banque Indosuez $35,000,000
Credit Lyonnais $35,000,000
Skandinaviska Enskilda $32,000,000
Fuji Bank $32,000,000
Bank Austria $18,500,000
Bank of Tokyo-Mitsubishi $18,500,000
Mees Pierson $18,500,000
Sanwa Bank $18,500,000
First NBC $13,500,000
Sumitomo Bank $13,500,000
Total $300,000,000
ANNEX II
BANK ADDRESSES
Christiania Bank og Kreditkasse, 11 West 42nd Street
New York Branch 7th Floor
New York, NY 10036
Attn: Hans Chr. Kjelsrud
Tel. No.: (212) 827-4800
Fax No.: (212) 827-4888
Credit Lyonnais 1000 Louisiana
New York Branch Suite 5360
Houston, Texas 77002
Attn: Diane Scott
Tel. No.: (713) 751-0500
Fax No.: (713) 751-0307
Banque Indosuez Representative Office Norway
Ruselokkveien 6
0120 Oslo, Norway
Attn: Mr. Bjorn Hundevadt-Gulbrandsen
Mr. Hans Jorgen Wibstad
Tel. No.: 011 47 22 83 30 50
Fax No.: 011 47 22 83 30 55
Mees Pierson Camomile Court
23 Camomile Street
London EC3A 7PP
Attn: Harris Antoniou
Tel. No.: 44 171 444 8789
Fax No.: 44 171 444 8810
The Fuji Bank Limited Houston Agency
1 Houston Center, Suite 4100
1221 McKinney Street
Houston, TX 77010
Attn: Mark E. Polasek
Tel. No.: (713) 650-7863 or
(713) 759-1800
Fax No.: (713)759-0048
First National Bank of Commerce 210 Baronne Street
P.O. Box 60279
New Orleans, LA 70160-0279
Attn: Joshua C. Cummings
Mr. Jesse Shannon
Anthony Restell
Tel. No.: (504) 561-1361
Fax No.: (504) 561-1316
Sanwa Bank Dallas Agency 1
220 Ross Avenue
Suite 4100W
Dallas, TX 75201
Attn: Matt Patrick
Erik Reimer
Tel. No.: (214) 744-555
(214) 665-0243
Fax No.: (214) 741-6535
Bank Austria 565 Fifth Avenue
New York, NY 10017
Attn: Paul H. Deerin
Jonathan Bakker
Tel. No.: (212) 880-1033
(212) 880-1074
Fax No.: (212) 880-1040
Skandinaviska Enskilda Banken AB Rosenkrantz GT 22
Box 1843 Vika
N-0123 Oslo, Norway
Attn: Bjarte Boe
Snorre Krogstad
Tel. No.: 47 22 82 70 04
47 22 82 70 05
Fax No.: 47 22 82 71 11
The Bank of Tokyo-Mitsubishi Ltd. Houston Agency
1100 Louisiana, Suite 2800
Houston, TX 77002
Attn: Deanna Breland
Tel. No.: (713) 655-3810
Fax No.: (713) 65-0116
The Sumitomo Bank Limited Houston Agency
700 Louisiana Street, Suite 1750
Houston, TX 77002
Attn: Robert Johnson
William R. McKown
Tel. No.: (713) 238-8235
Fax No.: (713) 759-0020
Exhibit 10.118
SECURITY AGREEMENT
SECURITY AGREEMENT (as amended, modified or supplemented from time
to time, this "Agreement"), dated as of November 13, 1996, between Reading &
Bates Drilling Co. (the "Borrower"), Reading & Bates Exploration Co., Reading
& Bates Offshore, Limited, HRB Rig Corporation, Reading & Bates (A) Pty. Ltd.
and Reading and Bates Borneo Drilling Co., Ltd. (collectively the "Subsidiary
Guarantors" and, together with the Borrower, the "Assignors"), and Christiania
Bank og Kreditkasse, New York Branch, as Collateral Agent (the "Collateral
Agent"), for the benefit of the Banks, the Letter of Credit Issuer, and the
Administrative Agent under, and as defined in, the Credit Agreement
hereinafter referred to (such Banks, Letter of Credit Issuer and
Administrative Agent are hereinafter called the "Secured Creditors"). Except
as otherwise defined herein, capitalized terms used herein and defined in the
Credit Agreement shall be used herein as so defined.
W I T N E S S E T H :
WHEREAS, Reading & Bates Corporation, the Borrower, the financial
institutions from time to time party thereto, Banque Indosuez and Credit
Lyonnais New York Branch, as Documentation Agents, and Christiania Bank og
Kreditkasse, New York Branch, as Administrative Agent have entered into a
Credit Agreement, dated as of November 13, 1996 (as modified, supplemented or
amended from time to time, the "Credit Agreement"), providing for the making
of Loans and the issuance of, and participation in, Letters of Credit as
contemplated therein;
WHEREAS, the Subsidiary Guarantors have executed the Subsidiary
Guaranty and thereby guaranteed the obligations of the Borrower under the
Credit Agreement and the other Credit Documents;
WHEREAS, the Borrower desires to incur Loans and to have Letters
of Credit issued for its account under the Credit Agreement;
WHEREAS, Reading & Bates Drilling Co., an Oklahoma corporation, is
the sole owner of the United States registered offshore drilling rigs Jack
Bates (official No. 906283), Randolph Yost (official no. 601699), J.T. Angel
(official no. 651645), and Roger W. Mowell (official no. 645360);
WHEREAS, Reading & Bates Exploration Co., an Oklahoma corporation,
is the sole owner of the United States registered offshore drilling rigs W.D.
Kent (official no. 583169) and D.R. Stewart (official no. 626904);
WHEREAS, Reading & Bates Offshore, Limited, an Oklahoma
corporation, is the sole owner of the United States registered offshore
drilling rigs F.G. McClintok (official no. 562059) and George H. Galloway
(official no. 651646);
WHEREAS, HRB Rig Corporation, an Oklahoma corporation, is the sole
owner of the United States registered offshore drilling rig Harvey H. Ward
(official no. 642693);
WHEREAS, Reading & Bates Borneo Drilling Co., Ltd., an Oklahoma
corporation, is the sole owner of the Panamanian registered offshore drilling
rig Charley Graves (official no. 6618-76-CH);
WHEREAS, Reading & Bates Drilling Co., an Oklahoma corporation, is
the sole owner of the Panamanian registered offshore drilling rigs Rig 41
(provisional official no. 23630-PEXT-1) and J.W. McLean (official no. 25384-
PEXT);
WHEREAS, Reading & Bates (A) Pty. Ltd., a company organized and
existing under the laws of the State of Western Australia and the Commonwealth
of Australia, is the sole owner of the Australian registered offshore drilling
rig Ron Tappmeyer (official no. 855213) (all of the aforementioned vessels
being herein collectively referred to as the "Rigs");
WHEREAS, it is a condition precedent to the making of Loans and
the issuance of Letters of Credit under the Credit Agreement and to the
occurrence of the Effective Date that the Assignors shall have executed and
delivered to the Collateral Agent this Agreement; and
WHEREAS, the Assignors desire to execute this Agreement to satisfy
the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to the
Assignors, the receipt and sufficiency of which are hereby acknowledged, the
Assignors hereby make the following representations and warranties to the
Collateral Agent and hereby covenant and agree with the Collateral Agent as
follows:
SECTION 1. Obligations Secured.
1.01 Obligations Secured. The Agreement is made for the benefit
of the Secured Creditors to secure (i) the full and prompt payment when due of
(x) the principal of and interest on the Notes issued, and Loans made, under
the Credit Agreement, and all reimbursement obligations and Unpaid Drawings
with respect to the Letters of Credit issued under the Credit Agreement and
(y) all other obligations and indebtedness (including, without limitation,
indemnities, Fees and interest thereon) of the Borrower to the Secured
Creditors, whether now existing or hereafter incurred under, arising out of or
in connection with the Credit Agreement and the other Credit Documents and the
due performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the other
Credit Documents; (ii) any and all sums advanced by the Collateral Agent in
order to preserve the Collateral (as hereinafter defined) or preserve its
security interest in the Collateral; (iii) in the event of any proceeding for
the collection or enforcement of any indebtedness, obligations, or liabilities
of the Borrower referred to in clause (i) above, after an Event of Default
shall have occurred and be continuing, the reasonable expenses of the
Collateral Agent of re-taking, holding, preparing for sale or lease, selling
or otherwise disposing of or realizing on the Collateral, or of any exercise
by the Collateral Agent of its rights hereunder, together with reasonable
attorneys' fees of counsel to the Collateral Agent and court costs; and (iv)
all amounts paid by any Indemnitee as to which such Indemnitee has the right
to reimbursement under Section 11 of this Agreement (all such obligations,
liabilities, sums and expenses referred to in clauses (i) through (iv) above
being collectively referred to as the "Obligations"). It is acknowledged and
agreed that the "Obligations" shall include extensions of credit of the types
described above, whether outstanding on the date of this Agreement or extended
from time to time after the date of this Agreement.
SECTION 2. ASSIGNMENT OF EARNINGS.
2.01 The Assignors, as legal and beneficial owners, hereby
assign, transfer and set over unto the Collateral Agent for the benefit of the
Secured Creditors and their successors and assigns, and hereby grant the
Collateral Agent a security interest in, all of their respective right, title
and interest in and to (collectively, the "Earnings Collateral"): (i) the
earnings of the Rigs 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 Rigs; and (iii) all proceeds of the foregoing. As used
herein, "earnings" in (i) means:
(a) all rent, charterhire and other moneys and rights and
claims to moneys other than the local currency portion
necessary to cover direct operating expenses relating
to the relevant contract (the "Local Currency
Portion");
(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 Rigs,
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, drilling contract, or other contract for the
use or employment of the Rigs; 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 Rigs
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.
2.02 Subject to the provisions of Section 2.03 of this Agreement,
the Collateral Agent's security interest in all accounts receivable included
in, or representing proceeds of, the Earnings Collateral shall automatically
be and be deemed released, without the need for any action on the part of the
Collateral Agent, from time to time as such accounts receivable arise or are
created, or as funds representing payments of such Collateral (or part
thereof) are collected by the applicable Assignor.
2.03 Upon the occurrence of an Event of Default pursuant to
Section 9.05 of the Credit Agreement (a "Bankruptcy Default") and without any
further act or notice, or upon the giving by the Collateral Agent of a written
notice (a "Release Termination Notice") to any Assignor after the occurrence
and during the continuance of an Event of Default, the automatic release set
forth in Section 2.02 of this Agreement shall terminate.
2.04 Upon the occurrence of an Event of Default, the Assignors
hereby represent, warrant and undertake that:
(a) notice of this Agreement in the form attached hereto
as Exhibit 1 will be promptly delivered to any
charterers of the Rigs; and
(b) it will use its good faith efforts to cause any
charterer to execute a Consent and Agreement to this
Agreement in the form attached hereto as Exhibit 2 and
deliver such Consent and Agreement to the Collateral
Agent.
2.05 Upon the occurrence of an Event of Default, the Collateral
Agent shall be entitled to receive all payments of earnings of the Rigs
payable to the Assignors and assigned hereby. Such payment shall be made to
the account of the Collateral Agent, and the Assignors shall cause all sums so
payable to the Assignors and assigned hereby to be paid directly into such
account.
2.06 It is hereby expressly agreed that, anything contained
herein to the contrary notwithstanding, the Assignors shall remain liable
under all charters and contracts pertaining to the Rigs to perform the
obligations assumed by it thereunder, and the Collateral Agent shall have no
obligation or liability of any nature whatsoever under any such charter or
contract by reason of, or arising out of, this Agreement, nor shall the
Collateral Agent be required to assume or be obligated in any manner to
perform or fulfill any obligation of the Assignors 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 Collateral Agent, 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.
2.07 The respective Assignor shall promptly notify the Collateral
Agent in writing of the commencement and termination of any period during
which any of the Rigs owned by it is requisitioned.
2.08 Upon the occurrence of an Event of Default, the Collateral
Agent has the right to give notice of this Agreement to all account debtors.
2.09 The Collateral Agent shall not be required to make any
inquiry as to the nature or sufficiency of any payment received by the
Collateral Agent, 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.
SECTION 3. COLLATERAL ASSIGNMENT OF INSURANCE
3.01 The Assignors hereby sell, assign, transfer, set over and
grant a security interest unto the Collateral Agent as collateral security for
the Obligations, in and to the following (all of the following, collectively,
the "Insurance Collateral" and, together with the Earnings Collateral, the
"Collateral"): (i) all insurances (including, without limitation, all
certificates of entry in protection and indemnity and war risks associations
or clubs) in respect of such Rigs, 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 Assignors under or in respect of
said insurances and (iv) any proceeds of any of the foregoing.
3.02 It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Assignors shall remain liable under said
insurances to perform all of the obligations assumed by it thereunder and the
Collateral Agent 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 Collateral Agent be
required or obligated in any manner to perform or fulfill any obligations of
the Assignors 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.
3.03 The Assignors hereby covenant and agree to deliver notice of
this Assignment, in the form of Annex I hereto, to all underwriters and that
where the consent of any underwriter is required pursuant to any of the
insurances assigned hereby, the Assignor shall use its good faith efforts to
obtain such consent in the form of Annex II hereto, and evidence thereof shall
be given to the Collateral Agent, and 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 additional named assured or loss payees as the Collateral Agent
may reasonably request. In all cases, unless otherwise agreed in writing by
the Collateral Agent, such slips, cover notes, notices, certificates of entry
or other instruments shall show the Collateral Agent and the Banks as
additional named assured and shall provide that there will be no recourse
against the Collateral Agent for payment of premiums, calls or assessments.
3.04 In the event that the Insurance Collateral or any portion
thereof is sold in connection with a sale permitted by Section 8.02 of the
Credit Agreement or is otherwise released at the direction of the Required
Banks (or all the Banks, to the extent required by Section 12.12 of the Credit
Agreement), the Collateral Agent, at the request and expense of the Assignors,
will duly assign, transfer and deliver to the Assignors (without recourse and
without any representation or warranty) such of the Insurance Collateral (and
releases therefor) as is then being (or has been) so sold or released and as
may be in the possession of the Collateral Agent and has not theretofore been
released pursuant to this Agreement. At any time the Assignors desire that
the Insurance Collateral or a portion thereof be released as provided in this
section, the Assignors shall deliver to the Collateral Agent a certificate
signed by an Authorized Officer (as defined in the Credit Agreement) stating
that the release of the Insurance Collateral or portion thereof is permitted
pursuant to this section.
3.05 The Assignors hereby authorize the Collateral Agent to
execute and file Financing Statements (Form UCC-1) and amendments thereto as
provided in Article 9 of the Uniform Commercial Code.
SECTION 4. FURTHER ASSURANCES.
The Assignors will, at any time and from time to time, at their
own expense, promptly execute and deliver all further agreements, instruments
and other documents and take all further action that may be necessary or that
the Collateral Agent may reasonably request in order to perfect and protect
the security interest purported to be created hereby or otherwise to enable
the Collateral Agent to exercise and enforce its rights and remedies
hereunder.
SECTION 5. TRANSFERS AND OTHER LIENS.
The Assignors will not, without the written consent of the
Collateral Agent, (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of any interest in the Collateral or (ii) create or suffer
to exist any Lien, security interest or other charge or encumbrance upon or
with respect to any Collateral except for the security interest purported to
be created hereby.
SECTION 6. ATTORNEY-IN-FACT.
The Assignors hereby appoint the Collateral Agent as the
Assignors' attorney-in-fact, with full authority only after the occurrence of
and during the continuance of an Event of Default, in the place and stead of
the Assignors and in the name of the Assignors or otherwise, from time to time
in the Collateral Agent's discretion to execute any instrument and to take any
other action which the Collateral Agent may in good faith reasonably deem
necessary or advisable to accomplish the purposes of this Agreement or to
facilitate the assignment or other transfer by the Collateral Agent of any or
all of its rights hereunder, including, without limitation, (i) to receive,
endorse and collect all instruments made payable to the Assignors and
representing any interest payment or other distribution in respect of the
Collateral and to give full discharge for the same and (ii) to execute and
deliver any and all instruments and other documents that the Collateral Agent
may request in connection with the exercise by the Collateral Agent of any or
all of its rights hereunder. Such appointment of the Collateral Agent as
attorney-in-fact is irrevocable and coupled with an interest.
SECTION 7. PERFORMANCE BY THE COLLATERAL AGENT.
If the Assignors fail to perform any agreement or obligation
contained herein, the Collateral Agent itself may perform or cause performance
of such agreement or obligation, and the reasonable expenses of the Collateral
Agent (or Collateral Trustee, as the case may be) incurred in connection
therewith shall be payable to the Collateral Agent (or Collateral Trustee, as
the case may be) by the Assignors.
SECTION 8. RESPONSIBILITY OF THE COLLATERAL AGENT.
Other than the exercise of reasonable care to assure the safe
custody of the Collateral while held hereunder, the Collateral Agent shall
have no duty or liability to preserve rights pertaining thereto and shall be
relieved of all responsibility for the Collateral upon surrendering it or
tendering surrender of it to the Assignors. The Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Collateral Agent accords its own
property. Without limiting the generality of the foregoing, neither the
Collateral Agent nor any of its directors, officers, agents or employees shall
be liable (i) for any failure to invest or reinvest any cash in accordance
herewith in the absence of its or their own gross negligence or willful
misconduct or for any losses incurred by reason of investments made by the
Collateral Agent pursuant to Section 2.03 or (ii) for any action taken or
omitted to be taken by the Collateral Agent (x) in good faith in accordance
with the advice of counsel with respect to any question as to the construction
of any provision hereof or any action to be taken by the Collateral Agent
hereunder or (y) in accordance with any instructions or other notice which the
Collateral Agent believes in good faith to be properly given by the Assignors
hereunder. This Section 8 shall have no application to Christiania Bank og
Kreditkasse except in its capacity as Collateral Agent.
SECTION 9. APPLICATION OF PROCEEDS.
(a) Subject to the applicability of Section 6.01(b) of the US
Mortgages and Panamanian Mortgages, or Section 5(A)(ii) of the Australian
Mortgage, all moneys collected by the Collateral Agent upon any sale or other
disposition of any Collateral, together with all other moneys received by the
Collateral Agent hereunder or under any of the other Security Documents, shall
be applied as follows:
(i) first, to the payment of all amounts owing the Collateral Agent of
the type described in clauses (ii) and (iii) of Section 1.01;
(ii) second, to the extent moneys remain after the application pursuant
to the preceding clause (i), an amount equal to the outstanding
Obligations shall be paid to the Secured Creditors as provided in
Section 9(c), with each Secured Creditor receiving an amount equal to
such Obligations held by it or, if the proceeds are insufficient to pay
in full all such Obligations, its Pro Rata Share (as defined below) of
the amount remaining to be distributed; and
(iii) third, to the extent moneys remain after the application pursuant
to the preceding clauses (i) and (ii), and following the termination of
this Agreement pursuant to Section 12, any surplus then remaining shall
be paid to the Assignors, subject, however, to the rights of the holder
of any then existing Lien of which the Collateral Agent has actual
notice (without investigation).
(b) For purposes of this Agreement "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount in
respect of any Obligations, the amount (expressed as a percentage) equal to a
fraction the numerator of which is the then unpaid amount of such Obligations
owing to or held by such Secured Creditor and the denominator of which is the
then outstanding amount of all such Obligations. For purposes of determining
the amount payable to each Secured Creditor, the Collateral Agent shall be
entitled to request each Secured Creditor to furnish it with written notice of
the amount of Obligations then owed to it and shall be entitled to rely upon
the amounts stated therein in making such distributions.
(c) All payments required to be made to Secured Creditors
hereunder shall be made to the Collateral Agent for the account of the Secured
Creditors.
(d) For purposes of applying payments received in accordance
with this Section 9, the Collateral Agent shall be entitled to rely upon (i)
the Administrative Agent under the Credit Agreement and (ii) the Secured
Creditors for a determination (which the Administrative Agent and each Secured
Creditor, by their acceptance of the benefits of this Agreement shall be
obligated to provide upon request of the Collateral Agent) of the outstanding
Obligations owed to the Secured Creditors. Unless it has actual knowledge
(including by way of written notice from a Secured Creditor) to the contrary,
the Administrative Agent under the Credit Agreement, in furnishing information
pursuant to the preceding sentence, and the Collateral Agent, in acting
hereunder, shall be entitled to assume that (x) no obligations other than
principal, interest and regularly accruing fees are owing to any Secured
Creditor.
SECTION 10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
ASSIGNORS.
The Assignors hereby warrant and represent that they have not
assigned or pledged, and hereby covenant that, without the prior written
consent thereof of the Collateral Agent, so long as this Agreement 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 Collateral
Agent, its successors or assigns, and that they will not take or omit to take
any action, the taking or omission of which might result in an alteration or
impairment of the Collateral or this Agreement, or of any of the rights
created in the Collateral by this Agreement.
SECTION 11. INDEMNITY.
11.01 Indemnity. (a) The Assignors agree to indemnify,
reimburse and hold the Collateral Agent, each Secured Creditor and their
respective successors, assigns, employees, agents and servants (hereinafter in
this Section 11.01 referred to individually as "Indemnitee," and collectively
as "Indemnitees") harmless from any and all liabilities, obligations, damages,
injuries, penalties, claims, demands, actions, suits, judgments and any and
all costs and expenses (including reasonable attorneys' fees and expenses)
(for the purposes of this Section 11.01 the foregoing are collectively called
"expenses") of whatsoever kind and nature imposed on, asserted against or
incurred by any of the Indemnitees in any way relating to or arising out of
this Agreement, the Credit Agreement, any other Credit Document or the
documents executed in connection herewith and therewith or in any other way
connected with the administration of the transactions contemplated hereby and
thereby or the enforcement of any of the terms of, or the preservation of any
rights under any such Credit Document or other document, or in any way
relating to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral
(including, without limitation, latent or other defects, whether or not
discoverable), the violation of the laws of any country, state or other
governmental body or unit, any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on
account of injury to or the death of any Person (including any Indemnitee), or
property damage), or contract claim; provided that no Indemnitee shall be
indemnified pursuant to this Section 11.01(a) for losses, damages or
liabilities to the extent caused by the gross negligence or wilful misconduct
of such Indemnitee. The Assignors agree that upon written notice by any
Indemnitee of the assertion of such a liability, obligation, damage, injury,
penalty, claim, demand, action, judgment or suit, the Assignors shall assume
full responsibility for the defense thereof. Each Indemnitee agrees to use
its best efforts to promptly notify the Assignors of any such assertion of
which such Indemnitee has knowledge.
(b) Without limiting the application of Section 11.01(a), the
Assignors agree to pay, or reimburse the Collateral Agent for any and all
fees, costs and expenses of whatever kind or nature incurred in connection
with the creation, preservation or protection of the Collateral Agent's Liens
on, and security interest in, the Collateral, including, without limitation,
all fees and taxes in connection with the recording or filing of instruments
and documents in public offices, payment or discharge of any taxes or Liens
upon or in respect of the Collateral, premiums for insurance with respect to
the Collateral and all other fees, costs and expenses in connection with
protecting, maintaining or preserving the Collateral and the Collateral
Agent's interest therein, whether through judicial proceedings or otherwise,
or in defending or prosecuting any actions, suits or proceedings arising out
of or relating to the Collateral.
(c) Without limiting the application of Section 11.01(a) or (b),
the Assignors agree to pay, indemnify and hold each Indemnitee harmless from
and against any loss, costs, damages and expenses which such Indemnitee may
suffer, expend or incur in consequence of or growing out of any
misrepresentation by the Assignors in this Agreement, the Credit Agreement or
any other Credit Document or in any statement or writing contemplated by or
made or delivered pursuant to or in connection with this Agreement, the Credit
Agreement or any other Credit Document.
(d) If and to the extent that the obligations of the Assignors
under this Section 11.01 are unenforceable for any reason, the Assignors
hereby agree to make the maximum contribution to the payment and satisfaction
of such obligations which is permissible under applicable law.
11.02 Indemnity Obligations Secured by Collateral; Survival. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of the Assignors contained in this Section 11 shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement and all of the other Obligations and
notwithstanding the discharge thereof.
SECTION 12. TERMINATION; RELEASE; PARTIAL RELEASE.
(a) On the date on which the Credit Agreement and all Letters of
Credit shall have been terminated, when no Note remains outstanding and all
Obligations shall have been irrevocably paid in full, this Agreement shall
terminate, and the Collateral Agent, at the request and expense of the
Assignors, will execute and deliver to the Assignors a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement,
and will duly assign, transfer and deliver to the Assignors (without recourse
and without any representation or warranty) such of the Collateral as may
remain in the possession of the Collateral Agent together with any moneys at
the time held by the Collateral Agent hereunder.
SECTION 13. NOTICES, ETC.
Except as otherwise expressly provided herein, all notices and
other communications provided for hereunder shall be delivered and become
effective in accordance with Section 12.03 of the Credit Agreement.
SECTION 14. MISCELLANEOUS.
14.01 This Agreement shall be binding upon the Assignors and
their successors and assigns (although the Assignors may not assign their
rights or obligations under this Agreement) and shall inure to the benefit of
and be enforceable by the Collateral Agent and its successors and assigns.
The headings in this Agreement are for purposes of reference only and shall
not limit or define the meaning hereof. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
be governed by the law of the State of New York. This Agreement may be
executed in any number of counterparts, each of which shall be an original,
but all of which shall constitute one instrument. This Agreement shall become
effective on the date on which each of the parties shall have executed and
delivered a copy hereof. In the event that any provision of this Agreement
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 Agreement, or the validity of this Agreement 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 Agreement is rendered either wholly or partly
defective, the Assignors shall furnish the Collateral Agent 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 Agreement.
14.02 It is declared and agreed that the security created by this
Agreement shall be held by the Collateral Agent 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 Assignors under the Credit Agreement and the other
Credit Documents and that the security so created shall not be satisfied by
all 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 Collateral Agent for all or any part of the moneys
hereby secured.
14.03 Each and every right, power and remedy given herein or in
the Credit Agreement or in the other Credit Documents to the Collateral Agent
shall be cumulative and shall be in addition to every other right, power and
remedy of the Collateral Agent 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
Collateral Agent, 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 Collateral Agent in the exercise of any right or
power in the pursuance of any remedy accruing upon any breach or default by
the Assignors 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 Collateral Agent of any security or
of any payment of or on account of any of the amounts due from the Assignors
to the Collateral Agent 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.
SECTION 15. WAIVER; AMENDMENT.
None of the terms and conditions of this Agreement may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Assignors and the Collateral Agent (with the consent of either
the Required Banks (as defined in the Credit Agreement) or, to the extent
required by Section 12.12 of the Credit Agreement, all of the Banks).
SECTION 16. SECURED CREDITOR ACKNOWLEDGMENT.
By accepting the benefits of this Agreement, each Secured Creditor
acknowledges and agrees that the rights and obligations of the Collateral
Agent shall be as set forth in Section 12 of the Credit Agreement.
IN WITNESS WHEREOF, the Assignors and the Collateral Agent have
caused this Agreement to be executed by their duly elected officers duly
authorized as of the date first above written.
ADDRESS: READING & BATES DRILLING CO.
901 Threadneedle
Suite 200
Houston, Texas 77079 By________________________________
Attention: General Counsel Title:
Tel: (713) 496-5000
Fax: (713) 496-0285
READING & BATES EXPLORATION CO.
By_______________________________
Title:
READING & BATES (A) PTY. LTD.
By_______________________________
Title:
READING AND BATES BORNEO DRILLING
CO., LTD.
By_______________________________
Title:
READING & BATES OFFSHORE LIMITED
By_______________________________
Title:
HRB RIG CORPORATION
By_______________________________
Title:
11 West 42nd Street CHRISTIANIA BANK og KREDITKASSE,
New York, New York 10036 NEW YORK BRANCH, as Collateral Agent
Attention: Hans Chr. Kjelsrud
Tel: (212) 827-4814
Fax: (212) 827-4888
By________________________________
Title:
By________________________________
Title:
EXHIBIT 1
to
Security Agreement
NOTICE OF ASSIGNMENT
TO:
TAKE NOTICE THAT:
By a Security Agreement, dated the __ day of November, 1996 made by us
to Christiania Bank og Kreditkasse, as agent (the "Assignee"), and
relating to the [United States] [Panamanian] [Australian] flag vessel
________ (the "Rig"), we have assigned to the Assignee as from the date
hereof all our right, title and interest in and to any moneys whatsoever
payable to us under that certain [Charter Contract] dated as of
________, ____ as at any time amended (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.
DATED THIS day of , ____.
[ ]
By ___________________
Its:
EXHIBIT 2
to
Security Agreement
CONSENT AND AGREEMENT
The undersigned, [ ], a party to the Contract to which the
Notice of Assignment delivered pursuant to the foregoing Security Agreement
refers (terms defined in the Security Agreement 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, as agent (the "Assignee"), the receipt of
which is hereby acknowledged, hereby acknowledges notice of and consents and
agrees to the foregoing collateral assignment of earnings and to all of the
terms thereof and agrees that: (1) it will make payment directly to the
account advised by the Assignee, 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 Banks secured by said Security Agreement 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 Security Agreement
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 Security Agreement of amounts owing to the undersigned by the Assignor
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: ___________, ____
[ ]
By _________________
ANNEX I
to
Security Agreement
NOTICE OF ASSIGNMENT
(the "Owner"), the
owner of the [United States] [Panamanian] [Australian] flag offshore
drilling rig (the "Rig"), HEREBY GIVES NOTICE that by a
Security Agreement dated November __, 1996 and made between the Owner
and Christiania Bank og Kreditkasse, New York Branch, as Collateral
Agent (the "Assignee") for itself and certain other Banks, 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 loss payable clauses acceptable to the Assignee are to be indorsed
on all policies and certificates of entry evidencing such insurance.
[OWNER]
By
Its:
ANNEX II
to
Security Agreement
CONSENT AND AGREEMENT
The undersigned, [ ], a party to the Contract to which
the Notice of Assignment delivered pursuant to the foregoing Security
Agreement refers (terms defined in the Security Agreement are used
herein with the same meaning), hereby acknowledges notice of and
consents and agrees to the foregoing collateral assignment of
insurance and to all of the terms thereof and agrees that it will make
payment directly to the account advised by the Christiania Bank og
Kreditkasse, New York Branch (the "Assignee"), 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 Banks secured by
said Security Agreement have been paid in full.
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: ___________, ____
[ ]
By _________________
Exhibit 10.119
SUBSIDIARY GUARANTY
SUBSIDIARY GUARANTY, dated as of November 13, 1996 made by the
undersigned (each a "Guarantor" and collectively, the "Guarantors"). Except
as otherwise defined herein, terms used herein and defined in the Credit
Agreement (as hereinafter defined) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Reading & Bates Corporation, Reading & Bates Drilling Co.
(the "Borrower"), various financial institutions from time to time party
thereto (the "Banks"), Banque Indosuez and Credit Lyonnais New York Branch, as
Documentation Agents, and Christiania Bank og Kreditkasse, New York Branch,
as Administrative Agent (the "Administrative Agent") have entered into a
Credit Agreement, dated as of November 13, 1996 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), providing for the
making of Loans and the issuance of, and participation in, Letters of Credit
as contemplated therein (the Banks, the Documentation Agents, the
Administrative Agent, the Letter of Credit Issuer, and the Collateral Agent
are herein collectively called the "Creditors");
WHEREAS, the Borrower owns, directly or indirectly, 100% of the
capital stock of each Guarantor;
WHEREAS, it is a condition to the making of Loans and the issuance
of, and participation in, Letters of Credit under the Credit Agreement that
each Guarantor shall have executed and delivered this Guaranty; and
WHEREAS, each Guarantor will obtain benefits from the incurrence
of Loans by the Borrower and the issuance of Letters of Credit under the
Credit Agreement and, accordingly, desires to execute this Guaranty in order
to satisfy the conditions described in the preceding paragraph and to induce
the Banks to make Loans to the Borrower and the Letter of Credit Issuer to
issue Letters of Credit;
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to each Guarantor, the receipt and sufficiency of which are
hereby acknowledged, each Guarantor hereby makes the following representations
and warranties to the Creditors and hereby covenants and agrees with each
Creditor as follows:
1. Each Guarantor, jointly and severally, irrevocably and
unconditionally, guarantees, as primary obligor and not merely as surety, to
the Creditors the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of (x) the principal of and interest
on the Notes issued by, and the Loans made to, the Borrower under the Credit
Agreement, and all reimbursement obligations and Unpaid Drawings with respect
to the Letters of Credit issued under the Credit Agreement and (y) all other
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing
by the Borrower to the Creditors under the Credit Agreement (including, with-
out limitation, indemnities, Fees and interest thereon) now existing or
hereafter incurred under, arising out of or in connection with the Credit
Agreement or any other Credit Document and the due performance and compliance
with the terms of the Credit Documents by the Borrower (all such principal,
interest, liabilities and obligations being herein collectively called the
"Guaranteed Obligations"). Each Guarantor understands, agrees and confirms
that the Creditors may enforce this Guaranty up to the full amount of the
Guaranteed Obligations against each Guarantor without proceeding against any
other Guarantor or the Borrower, against any security for the Guaranteed
Obligations, or under any other guaranty covering all or a portion of the
Guaranteed Obligations. All payments by each Guarantor under this Guaranty
shall be made on the same basis as payments by the Borrower under Sections
4.03 and 4.04 of the Credit Agreement.
2. Additionally, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations of the Borrower to the Creditors whether or not due or
payable by the Borrower upon the occurrence in respect of the Borrower of any
of the events specified in Section 9.05 of the Credit Agreement, and
unconditionally and irrevocably, jointly and severally, promises to pay such
Guaranteed Obligations to the Creditors, or order, on demand, in lawful money
of the United States. This Guaranty shall constitute a guaranty of payment,
and not of collection.
3. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the indebtedness of the
Borrower whether executed by such Guarantor, any other Guarantor, any other
guarantor or by any other party, and the liability of each Guarantor hereunder
shall not be affected or impaired by (a) any direction as to application of
payment by the Borrower or by any other party, (b) any other continuing or
other guaranty, undertaking or maximum liability of a guarantor or of any
other party as to the indebtedness of the Borrower, (c) any payment on or in
reduction of any such other guaranty or undertaking, (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower, (e)
any payment made to any Creditor on the indebtedness which any Creditor repays
the Borrower pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and each Guarantor
waives any right to the deferral or modification of its obligations hereunder
by reason of any such proceeding, (f) any action or inaction by the Creditors
as contemplated in Section 6 hereof, or (g) any invalidity, irregularity or
unenforceability of all or part of the Guaranteed Obligations or of any
security therefor.
4. The obligations of each Guarantor hereunder are independent of
the obligations of any other Guarantor, any other guarantor or the Borrower,
and a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor or the Borrower and whether or not any other Guarantor, any
other guarantor or the Borrower be joined in any such action or actions. Any
payment by the Borrower or other circumstance which operates to toll any
statute of limitations as to the Borrower shall operate to toll the statute of
limitations as to each Guarantor.
5. Each Guarantor hereby waives notice of acceptance of this
Guaranty and notice of any liability to which it may apply, and waives
promptness, diligence, presentment, demand of payment, protest, notice of
dishonor or nonpayment of any such liabilities, suit or taking of other action
by the Administrative Agent or any other Creditor against, and any other
notice to, any party liable thereon (including such Guarantor, any other
guarantor or the Borrower).
6. Any Creditor may at any time and from time to time without the
consent of, or notice to, any Guarantor, without incurring responsibility to
such Guarantor, without impairing or releasing the obligations of such
Guarantor hereunder, upon or without any terms or conditions and in whole or
in part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter, any of the
Guaranteed Obligations, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the guaranty herein made
shall apply to the Guaranteed Obligations as so changed, extended,
renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to creditors of the
Borrower;
(e) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Creditors regardless
of what liabilities of the Borrower remain unpaid;
(f) release or substitute any one or more endorsers, guarantors,
any Credit Party or other obligors;
(g) consent to or waive any breach of, or any act, omission or
default under, any of the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or supplement
any of the Credit Documents or any of such other instruments or agree-
ments; and/or
(h) act or fail to act in any manner referred to in this
Guaranty which may deprive such Guarantor of its right to subrogation
against the Borrower to recover full indemnity for any payments made
pursuant to this Guaranty.
7. No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might constitute a legal or
equitable discharge of a surety or guarantor except payment in full of the
Guaranteed Obligations.
8. This Guaranty is a continuing one and all liabilities to which
it applies or may apply under the terms hereof shall be conclusively presumed
to have been created in reliance hereon. No failure or delay on the part of
any Creditor in exercising 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. The rights
and remedies herein expressly specified are cumulative and not exclusive of
any rights or remedies which any Creditor would otherwise have. No notice to
or demand on any Guarantor in any case shall entitle such Guarantor to any
other further notice or demand in similar or other circumstances or constitute
a waiver of the rights of any Creditor to any other or further action in any
circumstances without notice or demand. It is not necessary for any Creditor
to inquire into the capacity or powers of the Borrower or any of its
Subsidiaries or the officers, directors, partners or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
9. Any indebtedness of the Borrower now or hereafter held by any
Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Creditors; and such indebtedness of the Borrower to any Guarantor, if the
Administrative Agent, after an Event of Default has occurred, so requests,
shall be collected, enforced and received by such Guarantor as trustee for the
Creditors and be paid over to the Creditors on account of the indebtedness of
the Borrower to the Creditors, but without affecting or impairing in any
manner the liability of such Guarantor under the other provisions of this
Guaranty. Prior to the transfer by any Guarantor of any note or negotiable
instrument evidencing any indebtedness of the Borrower to such Guarantor, such
Guarantor shall mark such note or negotiable instrument with a legend that the
same is subject to this subordination. Without limiting the generality of the
foregoing, each Guarantor hereby agrees with the Creditors that it will not
exercise any right of subrogation which it may at any time otherwise have as a
result of this Guaranty (whether contractual, under Section 509 of the
Bankruptcy Code or otherwise) until all Guaranteed Obligations have been
irrevocably paid in full in cash.
10. (a) Each Guarantor waives any right (except as shall be
required by applicable law and cannot be waived) to require the Creditors to
(A) proceed against the Borrower, any other Guarantor, any other guarantor or
any other party, (B) proceed against or exhaust any security held from the
Borrower, any other Guarantor, any other guarantor or any other party or (C)
pursue any other remedy in the Creditors' power whatsoever. Each Guarantor
waives any defense based on or arising out of any defense of the Borrower, any
other Guarantor, any other guarantor or any other party other than payment in
full of the Guaranteed Obligations, including without limitation any defense
based on or arising out of the disability of the Borrower, any other
Guarantor, any other guarantor or any other party, or the unenforceability of
the Guaranteed Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of the Borrower other than payment
in full of the Guaranteed Obligations. The Creditors may, at their election,
foreclose on any security held by the Administrative Agent or the other Credi-
tors by one or more judicial or nonjudicial sales, whether or not every aspect
of any such sale is commercially reasonable (to the extent such sale is
permitted by applicable law), or exercise any other right or remedy the
Creditors may have against the Borrower or any other party, or any security,
without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent the Guaranteed Obligations have been paid in
full. Each Guarantor waives any defense arising out of any such election by
the Creditors, even though such election operates to impair or extinguish any
right of reimbursement or subrogation or other right or remedy of such
Guarantor against the Borrower or any other party or any security.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guaranty, and notices of the existence, creation or incurring of new
or additional indebtedness. Each Guarantor assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks which
such Guarantor assumes and incurs hereunder, and agrees that the Creditors
shall have no duty to advise any Guarantor of information known to them
regarding such circumstances or risks.
11. The Creditors agree that this Guaranty may be enforced only
by the action of the Administrative Agent or the Collateral Agent, in each
case acting upon the instructions of the Required Banks and that no Creditor
shall have any right individually to seek to enforce or to enforce this
Guaranty, it being understood and agreed that such rights and remedies may be
exercised by the Administrative Agent or the Collateral Agent for the benefit
of the Creditors upon the terms of this Guaranty. The Creditors further agree
that this Guaranty may not be enforced against any director, officer, employee
or stockholder of any Guarantor (except to the extent such stockholder is also
a Guarantor hereunder).
12. Each Guarantor covenants and agrees that on and after the
date hereof and until the termination of the Total Commitment and when no
Letter of Credit or Note remains outstanding and all Guaranteed Obligations
have been paid in full, such Guarantor shall take, or will refrain from
taking, as the case may be, all actions that are necessary to be taken or not
taken so that no violation of any provision, covenant or agreement contained
in Section 7 or 8 of the Credit Agreement, and so that no Event of Default, is
caused by the actions of such Guarantor or any of its Subsidiaries.
13. The Guarantors hereby jointly and severally agree to pay all
reasonable out-of-pocket costs and expenses (x), after an Event of Default
shall have occurred and be continuing, of each Creditor in connection with the
enforcement of this Guaranty and the protection of such Creditor's rights
hereunder (including, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel) employed by any of the
Creditors) and (y) of the Administrative Agent in connection with any
amendment, waiver or consent relating hereto (including, without limitation,
the reasonable fees and disbursements of counsel (including in-house counsel)
employed by the Administrative Agent.
14. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and
their successors and assigns.
15. Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated except with the written consent of
the Required Banks (or to the extent required by Section 12.12 of the Credit
Agreement, with the written consent of each Bank) and each Guarantor affected
thereby (it being understood that the addition or release of any Guarantor
hereunder shall not constitute a change, waiver, discharge or termination
affecting any Guarantor other than the Guarantor so added or released).
16. Each Guarantor acknowledges that an executed (or conformed)
copy of each of the Credit Documents has been made available to its principal
executive officers and such officers are familiar with the contents thereof.
17. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of an Event of Default (such term to
mean and include any "Event of Default" as defined in the Credit Agreement
continuing after any applicable grace period), each Creditor is hereby
authorized at any time or from time to time, without notice to any Guarantor
or to any other Person, any such notice being expressly waived, to set off and
to appropriate and apply any and all deposits (general or special) and any
other indebtedness at any time held or owing by such Creditor to or for the
credit or the account of such Guarantor, against and on account of the
obligations and liabilities of such Guarantor to such Creditor under this
Guaranty, irrespective of whether or not such Creditor shall have made any
demand hereunder and although said obligations, liabilities, deposits or
claims, or any of them, shall be contingent or unmatured.
18. All notices, requests, demands or other communications
pursuant hereto shall be deemed to have been duly given or made when delivered
to the Person to which such notice, request, demand or other communication is
required or permitted to be given or made under this Guaranty, addressed to
such party at (i) in the case of any Creditor, as provided in the Credit
Agreement and (ii) in the case of any Guarantor, at its address set forth
opposite its signature below; or in any case at such other address as any of
the Persons listed above may hereafter notify the others in writing.
19. If claim is ever made upon any Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part
of said amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (b) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the Borrower), then and in such event each
Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon such Guarantor, notwithstanding any revoca-
tion hereof or of any other instrument evidencing any liability of the
Borrower, and such Guarantor shall be and remain liable to the aforesaid
payees hereunder for the amount so repaid or recovered to the same extent as
if such amount had never originally been received by any such payee.
20. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or
proceeding with respect to this Guaranty or any other Credit Document may be
brought in the courts of the State of New York or of the United States of
America for the Southern District of New York, and, by execution and delivery
of this Guaranty, each Guarantor hereby accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts and hereby irrevocably waives any right it may have to object to the
laying of venue of any such action or proceeding in the aforesaid courts and
hereby further irrevocably waives and agrees not to plead or claim that any
such action or proceeding has been brought in an inconvenient forum. Each
Guarantor hereby irrevocably designates, appoints and empowers the Borrower,
with offices on the date hereof at 901 Threadneedle, Suite 200, Houston, Texas
77079 as its designee, appointee and agent to receive, accept and acknowledge
for any on its behalf, and in respect of its property, service or any and all
legal process, summons, notices and documents which may be served in any such
action or proceeding. If for any reason such designee, appointee and agent
shall cease to be available to act as such, each Guarantor agrees to designate
a new designee, appointee and agent in New York City on the terms and for the
purposes of this provision satisfactory to the Administrative Agent for the
Banks under this Guaranty. Each Guarantor further irrevocably consents to the
service of process out of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to each Guarantor at its address set forth opposite its
signature below. Nothing herein shall affect the right of any of the
Creditors to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against each Guarantor in any other
jurisdiction.
(b) Each Guarantor hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Guaranty or
any other credit document brought in the courts referred to in clause (a)
above and hereby further irrevocably waives and agrees not to plead or claim
in any such court that such action or proceeding brought in any such court has
been brought in an inconvenient forum.
21. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of or liquidated in compliance with
the requirements of Section 8.02 of the Credit Agreement (or such sale or
other disposition has been approved in writing by the Required Banks (or all
Banks if required by Section 12.12 of the Credit Agreement)) and the proceeds
of such sale, disposition or liquidation are applied in accordance with the
provisions of the Credit Agreement, to the extent applicable, such Guarantor
shall be released from this Guaranty and this Guaranty shall, as to each such
Guarantor or Guarantors, terminate, and have no further force or effect (it
being understood and agreed that the sale of any Person that owns, directly or
indirectly, the capital stock of any Guarantor shall be deemed to be a sale of
such Guarantor for the purposes of this Section 21).
22. At any time a payment in respect of the Guaranteed Obli-
gations is made under this Guaranty, the right of contribution, if any, of
each Guarantor against any other Guarantor required to make any payment to
such Guarantor pursuant to this Section 22 (a "Contributor") shall be
determined as provided in the immediately following sentence, with the right
of contribution of each Guarantor to be revised and restated as of each date
on which a payment (a "Relevant Payment") is made on the Guaranteed
Obligations under this Guaranty. At any time that a Relevant Payment is made
by a Guarantor that results in the aggregate payments made by such Guarantor
in respect of the Guaranteed Obligations to and including the date of the
Relevant Payment exceeding such Guarantor's Contribution Percentage (as
hereinafter defined) of the aggregate payments made by all Guarantors in
respect of the Guaranteed Obligations to and including the date of the
Relevant Payment (such excess, the "Aggregate Excess Amount"), each such
Guarantor shall have a right of contribution against each Contributor who has
made payments in respect of the Guaranteed Obligations to and including the
date of the Relevant Payment in an aggregate amount less than such
Contributor's Contribution Percentage of the aggregate payments made to and
including the date of the Relevant Payment by all Guarantors in respect of the
Guaranteed Obligations (the aggregate amount of such deficit, the "Aggregate
Deficit Amount") in an amount equal to (x) a fraction the numerator of which
is the Aggregate Excess Amount of such Guarantor and the denominator of which
is the Aggregate Excess Amount of all Guarantors multiplied by (y) the
Aggregate Deficit Amount of such Contributor. A Guarantor's right of
contribution, if any, pursuant to the preceding sentences shall arise at the
time of each computation, subject to adjustment to the time of any subsequent
computation; provided, that no Guarantor may take any action to enforce such
right until the Guaranteed Obligations have been paid in full, all Letters of
Credit have terminated and the Total Commitment has been terminated, it being
expressly recognized and agreed by all parties hereto that any Guarantor's
right of contribution arising pursuant to this Section 22 against any
Contributor shall be expressly junior and subordinate to such Contributor's
obligations and liabilities in respect of the Guaranteed Obligations and any
other obligations owing under this Guaranty. As used in this Agreement, (i)
each Contributor's "Contribution Percentage" shall mean the percentage
obtained by dividing (x) the Adjusted Net Worth of such Contributor by (y) the
aggregate Adjusted Net Worth of all Guarantors; (ii) the "Adjusted Net Worth"
of each Guarantor shall mean the greater of (x) the Net Worth of such
Guarantor or (y) zero; and (iii) the "Net Worth" of each Guarantor shall mean
the amount by which the fair salable value of such Guarantor's assets on the
Initial Borrowing Date exceeds its existing debts and other liabilities
(including contingent liabilities, but without giving effect to any Guaranteed
Obligations arising under this Guaranty), in each case after giving effect to
all transactions occurring on the Initial Borrowing Date.
23. Each Guarantor recognizes and agrees that, except for any
right of contribution arising pursuant to Section 22, until the Guaranteed
Obligations have been paid in full, each Guarantor who makes any payment in
respect of the Guaranteed Obligations shall have no right of contribution or
subrogation against any other Guarantor in respect of such payment, any such
right of contribution or subrogation arising under law or otherwise being
expressly waived by all Guarantors until the Guaranteed Obligations have been
paid in full.
24. Each Guarantor recognizes and acknowledges that the rights to
contribution arising hereunder shall constitute an asset in favor of the party
entitled to such contribution. In this connection, each Guarantor has the
right to waive its contribution right against any other Guarantor to the
extent that after giving effect to such waiver such Guarantor would remain
solvent, in the determination of the Required Banks.
25. This Guaranty may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Guarantors and the
Administrative Agent.
26. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
27. It is understood and agreed that any Subsidiary of the
Borrower that is required to execute a counterpart of this Guaranty pursuant
to the Credit Agreement shall automatically become a Guarantor hereunder by
executing a counterpart hereof and delivering the same to the Administrative
Agent.
28. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense.
* * * *
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
Address for each Guarantor
c/o Reading & Bates Drilling Co. READING & BATES
901 Threadneedle EXPLORATION CO.
Suite 200
Houston, Texas 77079 By________________________
Attention: General Counsel Title:
Tel: (713) 496-5000
Fax: (713) 496-0285
READING & BATES (A)
PTY. LTD.
By________________________
Title:
READING AND BATES BORNEO
DRILLING CO., LTD.
By________________________
Title:
READING & BATES
OFFSHORE, LIMITED
By________________________
Title:
HRB RIG CORPORATION
By________________________
Title:
Accepted and Agreed to:
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Administrative Agent
By____________________________
Title:
By____________________________
Title:
Exhibit 10.120
FIRST PREFERRED MORTGAGE
Dated November 13, 1996
READING & BATES EXPLORATION CO.
- in favor of -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Security Trustee
D. R. STEWART
==============================================================================
INDEX
CLAUSE SUBJECT MATTERPAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . 10
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 18
9 ENFORCEABILITY AND TRUSTEE'S POWERS . . . . . . . . . . . . . 19
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 21
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 22
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 22
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 23
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 25
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 25
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 25
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 26
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
EXHIBIT 2 FORM OF SUBSIDIARY GUARANTY
==============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 13th day of
November, 1996
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) CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, a Norwegian banking
corporation having its office at 11 West 42nd Street, New York, New
York, as security trustee for the Banks (as hereinafter defined) and
as mortgagee (the "Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the jack-up drilling rig
D. R. STEWART documented under the laws and flag of the United States
of America with Official Number 626904 of 6,494 gross registered tons
and 5,834 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation
("Holdings"), (ii) Reading & Bates Drilling Co., an Oklahoma
corporation (the "Borrower"), (iii) the banks party thereto (the
"Banks"), (iv) Credit Lyonnais New York Branch and Banque Indosuez, as
documentation agents (the "Documentation Agents") and (v) the Trustee,
as administrative agent, arranger and security trustee (in such
capacity, the "Administrative Agent") (the form of which Credit
Agreement together with Exhibit B thereto but without the remaining
attachments is attached hereto as Exhibit 1), it was agreed among
other things that the Banks would make available to the Borrower upon
the terms and conditions therein described a reducing revolving credit
facility (the "Facility") in an aggregate amount at any time
outstanding of Three Hundred Million United States Dollars
(US$300,000,000), providing for the making of Loans and the issuance
of, and participation in, Letters of Credit as contemplated therein.
(C) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Borrower payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(D) The Owner, for good and valuable consideration has authorized,
executed and delivered a Subsidiary Guaranty (as modified, amended or
supplemented from time to time, the "Subsidiary Guaranty"), the form
of which Subsidiary Guaranty is attached hereto as Exhibit 2, in favor
of the Administrative Agent guaranteeing the performance by the
Borrower of its obligations under the Credit Agreement and the other
Credit Documents.
(E) This Mortgage is made for the benefit of the Trustee to secure the
guaranty by the Owner of (i) the full and prompt payment when due of
(x) the principal of and interest on the Notes issued, and Loans made,
under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued under the
Credit Agreement and (y) all other obligations and indebtedness
(including, without limitation, indemnities, Fees and interest
thereon) of the Borrower to the Secured Creditors (as hereinafter
defined), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and the other Credit
Documents including, without limitation, this Mortgage and the due
performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents including, without limitation, this Mortgage;
(ii) any and all sums advanced by the Trustee in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest
in the Collateral; (iii) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or
liabilities of the Borrower referred to in clause (i) above, after an
Event of Default shall have occurred and be continuing, the reasonable
expenses of the Trustee of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Trustee of its rights hereunder,
together with reasonable attorneys' fees of counsel to the Trustee and
court costs; and (iv) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Clause 13 of this
Mortgage (all such obligations, liabilities, sums and expenses
referred to in clauses (i) through (iv) above being collectively
referred to as the "Obligations"). It is acknowledged and agreed that
the "Obligations" shall include extensions of credit of the types
described above, whether outstanding on the date of this Mortgage or
extended from time to time after the date of this Mortgage.
(F) This First Preferred Mortgage is entered into by the Owner in
consideration of the Banks agreeing to make the Facility available to
the Borrower and as a condition thereto and for other good and
valuable consideration provided by the Banks (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:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Borrower, the Banks, the Documentation
Agents, and the Administrative Agent first referred to in Recital (B)
hereto, as modified, amended or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings together with interest, fees and all other obligations are
paid in full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et
seq. and any applicable state and local or foreign counterparts or
equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Borrower referred to in
Recital (C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (E) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
semi-submersible drilling rig JACK BATES owned by the Borrower
documented under the laws and flag of the United States with Official
Number 906283 of 19,928 gross registered tons and 14,948 net
registered tons; (ii) the offshore drilling rig W. D. KENT owned by
the Owner documented under the laws and flag of the United States with
Official Number 583169 of 5,383 gross registered tons and 4,185 net
registered tons; (iii) the offshore drilling rig CHARLEY GRAVES owned
by Reading and Bates Borneo Drilling Co., Ltd. documented under the
laws and flag of the Republic of Panama with Patente Number 6618-76-CH
of 5,829 gross registered tons and 1,748 net registered tons; (iv) the
jack-up drilling rig RON TAPPMEYER owned by Reading & Bates (A) Pty
Ltd. documented under the laws and flag of Australia with Official
Number 855213 of 11,455 gross registered tons and 3,436 net registered
tons; (v) the semi-submersible drilling rig J. W. McLEAN owned by the
Borrower documented under the laws and flag of the Republic of Panama
with Patente Number 25384-PEXT of 15,453 gross registered tons and
4,636 net registered tons; (vi) the semi-submersible drilling rig RIG
41 owned by the Borrower documented under the laws and flag of the
Republic of Panama with the Patente Number to be assigned on the date
hereof of 10,078 gross registered tons and 3,024 net registered tons;
(vii) the jack-up drilling rig HARVEY H. WARD owned by HRB Rig
Corporation documented under the laws and flag of the United States of
America with Official Number 642693 of 4,121 gross registered tons and
3,079 net registered tons; (viii) the jack-up drilling rig F. G.
McCLINTOCK owned by Reading & Bates Offshore, Limited documented under
the laws and flag of the United States of America with Official Number
562059 of 5,525 gross registered tons and 1,657 net registered tons;
(ix) the jack-up drilling rig RANDOLPH YOST owned by the Borrower
documented under the laws and flag of the United States of America
with Official Number 601699 of 4,701 gross registered tons and 4,701
net registered tons; (x) the jack-up drilling rig J. T. ANGEL owned by
the Borrower documented under the laws and flag of the United States
of America with Official Number 651645 of 4,186 gross registered tons
and 3,090 net registered tons; (xi) the jack-up drilling rig ROGER W.
MOWELL owned by the Borrower documented under the laws and flag of the
United States of America with Official Number 645360 of 4,121 gross
registered tons and 3,079 net registered tons; (xii) the jack-up
drilling rig GEORGE H. GALLOWAY owned by Reading & Bates Offshore,
Limited documented under the laws and flag of the United States of
America with Official Number 651646 of 3,729 gross registered tons and
2,496 net registered tons; and (xiii) the jack-up drilling rig C. E.
THORNTON to be owned by HRB Rig Corporation documented under the laws
and flag of the United States of America with Official Number 673210
of 6,096 gross registered tons and 6,096 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 written request of the
Administrative Agent, provide a bond or other security satisfactory to
the Administrative 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 written request of the Administrative Agent, provide a bond
or other security satisfactory to the Administrative 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 Administrative 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
Administrative Agent have been made as evidenced by the Administrative
Agent's written consent to such lien; (8) any lien in favor of the
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Administrative Agent under and as defined in the
Credit Agreement;
"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;
"Subsidiary Guaranty" means the agreement dated as of November 13,
1996 made by the Owner in favor of the Administrative Agent as first
referred to in Recital (D) hereto, as modified, amended or
supplemented from time to time;
"Ship Mortgage Act" means the United States Ship Mortgage Act, 1920,
as amended, recodified at 46 U.S.C. 31301, et seq.;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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) the Owner is in compliance with all applicable Environmental
Laws and all 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 Loan and at the time of the
issuance of each 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 Obligations, the Owner has granted, conveyed
and mortgaged and does by these presents grant, convey and mortgage
unto the Trustee, its successors and assigns, the whole of the Rig TO
HAVE AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty and
this Mortgage and shall observe and comply with the covenants, terms
and conditions contained in the Subsidiary Guaranty 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 Trustee agrees 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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 Secured Creditors (or in
respect of which the Owner agrees in this Mortgage to indemnify
any of the Secured Creditors) 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 any
Secured Creditor for payment by the Owner of the relevant expense,
claim, liability, loss, cost, duty, fee, charge or other money
incurred by a Secured Creditor 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 a Secured Creditor under this Mortgage and the Subsidiary
Guaranty 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 Trustee
as a continuing security for the performance of the Obligations
and that the security so created shall not be satisfied by any
intermediate payment or satisfaction of any part of the
Obligations;
(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 Trustee shall not have to wait for the Administrative Agent 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 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 Trustee may deem expedient;
and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Secured Creditors or any other person:
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other persons;
or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other person;
or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents (other than this Mortgage) or any other
document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any obligations
of any of the Credit Parties or any other person under the Credit
Agreement, any of the other Security Documents (other than this
Mortgage) or any other document or security.
6. INSURANCE
6.01 The Owner covenants with the Trustee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains 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
Administrative 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 Rigs, such aggregate amount
shall be at least 110% of the Total Commitment. 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
American, British and Scandinavian insurance markets or in such
other major international markets reasonably acceptable to the
Administrative 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 Administrative Agent. In addition,
the Owner shall, at its own expense, furnish to the Administrative
Agent a mortgagee's single interest policy providing coverage
which, when aggregated with the mortgagee's interest insurance
furnished to the Administrative Agent in respect of the Other
Rigs, shall be in an amount equal to at least 110% of the
aggregate amount of the Total Commitment (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 Administrative
Agent). Such mortgagee's interest insurance and any additional
insurance policies for the benefit of the Administrative Agent
shall be maintained in the broadest form available in the
American, British and Scandinavian markets or other major
international markets acceptable to the Administrative Agent
through underwriters acceptable to the Administrative 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 Administrative
Agent.
(b) The policy or policies of insurance shall be issued by responsible
underwriters reasonably acceptable to the Administrative Agent,
shall contain conditions, terms, stipulations and insuring
covenants satisfactory to the Administrative Agent, and shall be
kept in full force and effect by the Owner so long as any
Obligations remain 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 Administrative Agent for
distribution by it to itself, the Banks and the Owner as their
interests may appear, and shall provide for at least ten days'
prior notice to be given to the Administrative 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 Administrative Agent and the Trustee shall be
named as co-assureds on all such policies and insurance contracts,
but without liability of the Administrative Agent or the Trustee
for premiums or calls. Certified copies of all such policies,
binders and other interim insurance contracts shall be deposited
with the Administrative Agent. Originals shall also be provided
upon the request of the Administrative Agent. The Owner shall
furnish to the Administrative Agent annually a detailed report
signed by a firm of marine insurance brokers satisfactory to the
Administrative 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 Administrative Agent by notice to
the underwriters, although the following insurance is payable to
the Administrative 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 directly
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 Administrative Agent (which consent shall not be
unreasonably withheld). Any loss covered by this paragraph which
is paid to the Administrative 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
Administrative Agent to, or as directed by, the Owner and all
other payments to the Administrative Agent of losses covered by
this paragraph shall be applied by the Administrative 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 Administrative
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
Administrative Agent.
(c) In the event of an actual or constructive Total Loss of the Rig,
the Administrative 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 Secured Creditors 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 provided in
Clause 10.
(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 Administrative
Agent advised of the progress of such renewals, and procure that
the insurers shall promptly confirm in writing to the
Administrative 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
Administrative 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 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 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 Self-Elevating Drilling Unit) 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
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 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 Trustee and the Administrative Agent copies of all survey
reports issued in respect thereof;
(g) permit the representatives of the Administrative Agent or
independent surveyors representing the 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
Administrative Agent may require;
(j) promptly furnish to the 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 request of the Trustee in writing, copies of all
charters and other contracts for her employment or otherwise
howsoever concerning her;
(k) notify both the Trustee and the Administrative 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 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 Trustee; and
(vi) any intended deactivation or lay-up of the Rig (other than
for normal periods of inactivity between contracts for the
Rig during which periods the Rig remains manned) and obtain
the prior written consent of the Trustee;
(l) keep proper books of account in respect of the Rig and as and when
the Trustee or the Administrative Agent may so reasonably require
make such books available for inspection on behalf of the 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) observe the obligations contained in Sections 7 and 8 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;
(n) not without the previous consent in writing of the 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 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 Trustee from time to time such
proof as the 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 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 CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH, as Security Trustee for the
Banks 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 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 Trustee
advised, in writing on such regular basis and in such detail
as the Trustee shall require, of the Owner's response to
such Environmental Claim or Environmental Incident;
(s) not sell, mortgage or transfer the Rig (other than as permitted by
the Credit Agreement) without the written consent of the Trustee
having first been obtained, and any such written consent to any
one such sale, mortgage or transfer shall not be construed to be a
waiver of this provision with respect to any subsequent proposed
sale, mortgage or transfer. Any such sale, mortgage or transfer
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 sail
in Cuban waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Trustee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of 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 Trustee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit 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 Credit 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 Secured Creditors 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 Administrative 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 Administrative 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 Administrative 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 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 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 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 Required Banks having
served on the Owner any such notice as is referred to in Section 9 of
the Credit Agreement) the security constituted by this Mortgage shall
become immediately enforceable and the 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 Trustee
without legal process and without liability of the 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 Administrative Agent;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Administrative 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 Administrative
Agent take over or institute all such proceedings in connection
with the Rig, the Insurances, or any Requisition Compensation as
the 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 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 Obligations;
(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 Trustee in its absolute discretion deems
expedient and for the purposes aforesaid the 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 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 Trustee in or about the exercise
of the power vested in the 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 Trustee in or about or
incidental to the exercise by it of any of the powers aforesaid.
9.02 The 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 Trustee by this Mortgage or to which the Trustee may
at any time be entitled hereunder.
9.03 Neither the Secured Creditors, 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 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 Trustee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Trustee has arisen in the manner provided in this Mortgage
and the sale shall be deemed to be within the power of the Trustee and
the receipt of the 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 Trustee (or any other Secured Creditor, as
the case may be) in respect of sale of the Rig or any part thereof, in
respect of recovery under the Insurances or in respect of Requisition
Compensation, shall be applied in the following manner:
(i) first, to the payment of all amounts owing the Trustee of the
type described in clauses (ii) and (iii) of Recital E;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to the
outstanding Obligations shall be paid to the Secured Creditors
as provided in Clause 10.01(c), with each Secured Creditor
receiving an amount equal to such Obligations held by it or, if
the proceeds are insufficient to pay in full all such
Obligations, its Pro Rata Share (as defined below) of the amount
remaining to be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and following
the termination of this Mortgage pursuant to Clause 3.01, any
surplus then remaining shall be paid to the Owner, subject,
however, to the rights of the holder of any then existing Lien
of which the Trustee has actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the then
unpaid amount of such Obligations owing to or held by such Secured
Creditor and the denominator of which is the then outstanding
amount of all such Obligations. For purposes of determining the
amount payable to each Secured Creditor, the Trustee shall be
entitled to request each Secured Creditor to furnish it with
written notice of the amount of Obligations then owed to it and
shall be entitled to reply upon the amounts stated therein in
making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with this
Clause 10.01, the Trustee shall be entitled to reply upon (i) the
Administrative Agent under the Credit Agreement and (ii) the
Secured Creditors for a determination (which the Administrative
Agent and each Secured Creditor, by their acceptance of the
benefits of this Mortgage shall be obligated to provide upon
request of the Trustee) of the outstanding Obligations owed to the
Secured Creditors. Unless it has actual knowledge (including by
way of written notice from a Secured Creditor) to the contrary,
the Administrative Agent under the Credit Agreement, in furnishing
information pursuant to the preceding sentence, and the Trustee,
in acting hereunder, shall be entitled to assume that no
obligations other than principal, interest and regularly accruing
fees are owing to any Secured Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the 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 Trustee and the
other Secured Creditors 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 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
Trustee under this Mortgage,
in any such case, forthwith upon demand by the 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 Obligations, hereby irrevocably appoints the
Trustee as its attorney until the Total Commitment is terminated and
none of the Obligations remain outstanding 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 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 Trustee shall not put any person dealing with the
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 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 each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the Trustee
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and each of the Secured Creditors 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 such Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 the Subsidiary Guaranty or 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 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 Trustee against the amount of such shortfall. For
the purposes of this Clause 13.03, "rate of exchange" means the rate
at which the Trustee is able on the date of such payment (or, if it is
not practicable for the 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 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 any Secured Creditor on demand all costs, fees
and expenses, including, but not limited to, legal fees and expenses
and valuation fees and Taxes thereon incurred by any Secured Creditor
or for which any Secured Creditor may become liable in connection
with:
(a) the negotiation, preparation and execution of the Credit
Agreement, the Subsidiary Guaranty and the Credit 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, the
Subsidiary Guaranty or the Credit Documents (or any of them).
14.02 The Owner shall pay to the Trustee and the Administrative Agent on
demand all costs, fees and expenses (including, but not limited to,
legal fees and expenses) and Taxes thereon incurred by any Secured
Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the terms
of the Credit Agreement, the Subsidiary Guaranty or the Credit
Documents (or any of them) requested by the Owner, necessary or
advisable under applicable law or relating to the syndication of
the Facility, or initiated during the occurrence and continuation
of an Event of Default; and/or
(b) any consent or waiver required from the Trustee in relation to the
Credit Agreement, the Subsidiary Guaranty and the Credit 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, the Subsidiary
Guaranty and the Credit Documents (or any of them) may be subject or
give rise and shall indemnify the 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 Trustee hereunder shall be in writing and shall be
made to the following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Telefax: (212) 827-4888
Attention: Loan Administration
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit of
the Owner, the Secured Creditors 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 Section 12.04 of the Credit Agreement, each Bank 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 Trustee shall notify the Owner promptly following any such
assignment, transfer or change.
17. TOTAL AMOUNT, ETC.
17.01 The total amount of the direct or contingent obligations secured by
this Mortgage is Three Hundred Million U.S. Dollars (US$300,000,000)
of principal plus interest, fees, commissions and performance of
mortgage covenants. The interest of the Owner in the Rig is 100%.
The interest of the Trustee in the Rig is 100%. The date of maturity
is November 13, 2001, and the discharge amount is the same as the
total amount plus such other sums as shall be payable by the Owner to
the Banks under the Credit Agreement or the Subsidiary Guaranty.
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 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 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 Trustee may think fit. The 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 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 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the 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 Trustee may bring before the courts of such jurisdiction or
other judicial authority and for the purpose of any action which the
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 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_____________________________________
Name: T.W. Nagle
Title: Vice President and Treasurer
ACKNOWLEDGEMENT OF MORTGAGE
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 13th day of November, 1996 before me personally appeared Timothy W.
Nagle to me known who being by me duly sworn did depose and say that he
resides at 13307 Tosca Lane, Houston, TX; 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 10.121
FIRST PREFERRED MORTGAGE
Dated November 13, 1996
READING & BATES DRILLING CO.
- in favor of -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Security Trustee
JACK BATES
==============================================================================
INDEX
CLAUSE SUBJECT MATTERPAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . . 9
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 18
9 ENFORCEABILITY AND INDENTURE TRUSTEE'S POWERS . . . . . . . . 19
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 21
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 22
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 22
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 25
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 25
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 25
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
==============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 13th day of
November, 1996
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) CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, a Norwegian banking
corporation having its office at 11 West 42nd Street, New York, New
York, as security trustee for the Banks (as hereinafter defined) and
as mortgagee (the "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 906283 of 19,928 gross
registered tons and 14,948 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation,
("Holdings"), (ii) the Owner, as borrower, (iii) the banks party
thereto (the "Banks"), (iv) Credit Lyonnais New York Branch and Banque
Indosuez, as documentation agents (the "Documentation Agents") and (v)
the Trustee, as administrative agent, arranger and security trustee
(in such capacity, the "Administrative Agent") (the form of which
Credit Agreement together with Exhibit B thereto but without the
remaining attachments is attached hereto as Exhibit 1), it was agreed
among other things that the Banks would make available to the Owner
upon the terms and conditions therein described a reducing revolving
credit facility (the "Facility") in an aggregate amount at any time
outstanding of Three Hundred Million United States Dollars
(US$300,000,000), providing for the making of Loans and the issuance
of, and participation in, Letters of Credit as contemplated therein.
(C) The obligations of the Owner with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Owner payable to the order of
the respective Banks (each a "Note" and collectively the "Notes") (the
form of which is attached as Exhibit B to the Credit Agreement).
(D) This Mortgage is made for the benefit of the Trustee to secure (i) the
full and prompt payment when due of (x) the principal of and interest
on the Notes issued, and Loans made, under the Credit Agreement, and
all reimbursement obligations and Unpaid Drawings with respect to the
Letters of Credit issued under the Credit Agreement and (y) all other
obligations and indebtedness (including without limitation,
indemnities, Fees and interest thereon) of the Owner to the Secured
Creditors (as hereinafter defined), whether now existing or hereafter
incurred under, arising out of or in connection with the Credit
Agreement and the other Credit Documents including, without
limitation, this Mortgage and the due performance and compliance by
the Owner with all of the terms, conditions and agreements contained
in the Credit Agreement and the other Credit Documents including,
without limitation, this Mortgage; (ii) any and all sums advanced by
the Trustee in order to preserve the Collateral (as hereinafter
defined) or preserve its security interest in the Collateral; (iii) in
the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of the Owner referred to in
clause (i) above, after an Event of Default shall have occurred and be
continuing, the reasonable expenses of the Trustee of re-taking,
holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Trustee
of its rights hereunder, together with reasonable attorneys' fees of
counsel to the Trustee and court costs; and (iv) all amounts paid by
any Indemnitee as to which such Indemnitee has the right to
reimbursement under Clause 13 of this Mortgage (all such obligations,
liabilities, sums and expenses referred to in clauses (i) through (iv)
above being collectively referred to as the "Obligations"). It is
acknowledged and agreed that the "Obligations" shall include
extensions of credit of the types described above, whether outstanding
on the date of this Mortgage or extended from time to time after the
date of this Mortgage.
(E) This First Preferred Mortgage is entered into by the Owner in
consideration of the Banks agreeing, at the request of the Owner, to
make the Facility available to the Owner under the terms of the Credit
Agreement and as a condition thereto and for other good and valuable
consideration provided by the Banks (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:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Owner, the Banks, the Documentation
Agents and the Administrative Agent first referred to in Recital (B)
hereto, as modified, amended or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings, together with interest, fees and all other obligations are
paid in full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et
seq. and any applicable state and local or foreign counterparts or
equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Owner referred to in Recital
(C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (D) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
jack-up drilling rig D. R. STEWART owned by Reading & Bates
Exploration Co. ("R&B Exploration") documented under the laws and flag
of the United States with Official Number 626904 of 6,494 gross
registered tons and 5,834 net registered tons; (ii) the offshore
drilling rig W. D. KENT owned by R&B Exploration documented under the
laws and flag of the United States with Official Number 583169 of
5,383 gross registered tons and 4,185 net registered tons; (iii) the
offshore drilling rig CHARLEY GRAVES owned by Reading and Bates Borneo
Drilling Co., Ltd. documented under the laws and flag of the Republic
of Panama with Patente Number 6618-76-CH of 5,829 gross registered
tons and 1,748 net registered tons; (iv) the jack-up drilling rig RON
TAPPMEYER owned by Reading & Bates (A) Pty Ltd. documented under the
laws and flag of Australia with Official Number 855213 of 11,455 gross
registered tons and 3,436 net registered tons; (v) the semi-
submersible drilling rig J. W. McLEAN owned by the Owner documented
under the laws and flag of the Republic of Panama with Patente Number
25384-PEXT of 15,453 gross registered tons and 4,636 net registered
tons; (vi) the semi-submersible drilling rig RIG 41 owned by the Owner
documented under the laws and flag of the Republic of Panama with the
Patente Number to be assigned on the date hereof of 10,078 gross
registered tons and 3,024 net registered tons; (vii) the jack-up
drilling rig HARVEY H. WARD owned by HRB Rig Corporation documented
under the laws and flag of the United States of America with Official
Number 642693 of 4,121 gross registered tons and 3,079 net registered
tons; (viii) the jack-up drilling rig F. G. McCLINTOCK owned by
Reading & Bates Offshore, Limited documented under the laws and flag
of the United States of America with Official Number 562059 of 5,525
gross registered tons and 1,657 net registered tons; (ix) the jack-up
drilling rig RANDOLPH YOST owned by the Owner documented under the
laws and flag of the United States of America with Official Number
601699 of 4,701 gross registered tons and 4,701 net registered tons;
(x) the jack-up drilling rig J. T. ANGEL owned by the Owner documented
under the laws and flag of the United States of America with Official
Number 651645 of 4,186 gross registered tons and 3,090 net registered
tons; (xi) the jack-up drilling rig ROGER W. MOWELL owned by the Owner
documented under the laws and flag of the United States of America
with Official Number 645360 of 4,121 gross registered tons and 3,079
net registered tons; (xii) the jack-up drilling rig GEORGE H. GALLOWAY
owned by Reading & Bates Offshore, Limited documented under the laws
and flag of the United States of America with Official Number 651646
of 3,729 gross registered tons and 2,496 net registered tons; and
(xiii) the jack-up drilling rig C. E. THORNTON to be owned by HRB Rig
Corporation documented under the laws and flag of the United States of
America with Official Number 673210 of 6,096 gross registered tons and
6,096 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 written request of the
Administrative Agent, provide a bond or other security satisfactory to
the Administrative 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 written request of the Administrative Agent, provide a bond
or other security satisfactory to the Administrative 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 Administrative 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
Administrative Agent have been made as evidenced by the Administrative
Agent's written consent to such lien; (8) any lien in favor of the
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Administrative Agent under and as defined in the
Credit Agreement;
"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;
"Ship Mortgage Act" means the United States Ship Mortgage Act, 1920,
as amended, recodified at 46 U.S.C. 31301, et seq.;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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) the Owner is in compliance with all applicable Environmental
Laws and all 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 Loan and at the time of the
issuance of each 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 Obligations, the Owner has granted, conveyed
and mortgaged and does by these presents grant, convey and mortgage
unto the Trustee, its successors and assigns, the whole of the Rig TO
HAVE AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty and
this Mortgage and shall observe and comply with the covenants, terms
and conditions contained in the Subsidiary Guaranty 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 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors 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 any
Secured Creditor 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 any Secured Creditor 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 any Secured Creditor under this Mortgage and the other
Credit 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
Trustee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Trustee shall not have to wait for the Administrative Agent,
the Banks or the Letter of Credit Issuer 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 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 Trustee
may deem expedient; and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Credit Parties, the Secured Creditors or any other
person:
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents (other than this Mortgage) or any other
document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Credit Parties or any other person
under the Credit Agreement, any of the other Credit Documents
(other than this Mortgage) or any other document or security.
5.04 Until the Obligations have been satisfied in full to the satisfaction
of the Trustee, the Owner shall not by virtue of any payment made
hereunder on account of the Obligations or by virtue of any
enforcement by the 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 Holdings (whether
such relationship or transaction shall constitute the Owner a creditor
of Holdings, a guarantor of the obligations of Holdings or a party
subrogated to the rights of others against Holdings 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 Secured
Creditors 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 guaranty, security or agreement; or
(c) exercise any right of set-off or counterclaim against Holdings
or any such co-surety; or
(d) receive, claim or have the benefit of any payment, distribution,
security or indemnity from Holdings or any such co-surety; or
(e) unless so directed by the Trustee (when the Owner will prove in
accordance with such directions), claim as a creditor of
Holdings or any such co-surety in competition with the Trustee.
The Owner shall hold in trust for the Trustee and forthwith pay or
transfer (as appropriate) to the 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 guaranty (whether
by reason of legal limitation, illegality, disability or incapacity on
or of Holdings 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, Holdings, the Trustee or any other person),
then the Owner will, as a separate and independent stipulation and as
a primary obligor, pay to the 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
Trustee against any loss or liability suffered or incurred by the
Secured Creditors or any of them as a result of such irrecoverability.
6. INSURANCE
6.01 The Owner covenants with the Trustee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligations remain 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 Administrative 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 Rigs, such aggregate amount shall be at least 110%
of the Total Commitment. 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 American,
British and Scandinavian insurance markets or in such other
major international markets reasonably acceptable to the
Administrative 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
Administrative Agent. In addition, the Owner shall, at its own
expense, furnish to the Administrative Agent a mortgagee's
single interest policy providing coverage which, when aggregated
with the mortgagee's interest insurance furnished to the
Administrative Agent in respect of the Other Rigs, shall be in
an amount equal to at least 110% of the aggregate amount of the
Total Commitment (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 Administrative Agent). Such
mortgagee's interest insurance and any additional insurance
policies for the benefit of the Administrative Agent shall be
maintained in the broadest form available in the American,
British and Scandinavian markets or other major international
markets acceptable to the Administrative Agent through
underwriters acceptable to the Administrative 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
Administrative Agent.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the
Administrative Agent, shall contain conditions, terms,
stipulations and insuring covenants satisfactory to the
Administrative Agent, and shall be kept in full force and effect
by the Owner so long as any Obligations remain 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 Administrative Agent for distribution by it to itself, the
Banks and the Owner as their interests may appear, and shall
provide for at least ten days' prior notice to be given to the
Administrative 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 Administrative Agent and
the Trustee shall be named as co-assureds on all such policies
and insurance contracts, but without liability of the
Administrative Agent or the Trustee for premiums or calls.
Certified copies of all such policies, binders and other interim
insurance contracts shall be deposited with the Administrative
Agent. Originals shall also be provided upon the request of the
Administrative Agent. The Owner shall furnish to the
Administrative Agent annually a detailed report signed by a firm
of marine insurance brokers satisfactory to the Administrative
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 Administrative Agent by notice
to the underwriters, although the following insurance is payable
to the Administrative 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
directly 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 Administrative Agent (which
consent shall not be unreasonably withheld). Any loss covered
by this paragraph which is paid to the Administrative 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 Administrative Agent to, or as directed by, the Owner and
all other payments to the Administrative Agent of losses covered
by this paragraph shall be applied by the Administrative 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 Administrative
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 Administrative Agent.
(c) In the event of an actual or constructive Total Loss of the Rig,
the Administrative 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 Secured Creditors 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 provided in
Clause 10.
(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 Administrative
Agent advised of the progress of such renewals, and procure that
the insurers shall promptly confirm in writing to the
Administrative 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 Administrative 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 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 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 M Column Stabilized Drilling Unit Ice Strengthening Class
IC) 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 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
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 Trustee and the Administrative Agent copies of all
survey reports issued in respect thereof;
(g) permit the representatives of the Administrative Agent or
independent surveyors representing the 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 Administrative Agent may require;
(j) promptly furnish to the 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 request of the Trustee in writing, copies
of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(k) notify both the Trustee and the Administrative 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 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
Trustee; and
(vi) any intended deactivation or lay-up of the Rig (other than
for normal periods of inactivity between contracts for the
Rig during which periods the Rig remains manned) and
obtain the prior written consent of the Trustee;
(l) keep proper books of account in respect of the Rig and as and
when the Trustee or the Administrative Agent may so reasonably
require make such books available for inspection on behalf of
the 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) observe the obligations contained in Sections 7 and 8 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;
(n) not without the previous consent in writing of the 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 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 Trustee from time to time
such proof as the 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 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 CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH, as Security Trustee for
the Banks 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 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 Trustee
advised, in writing on such regular basis and in such
detail as the Trustee shall require, of the Owner's
response to such Environmental Claim or Environmental
Incident;
(s) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Trustee having first been obtained, and any such written consent
to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Trustee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of 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 Trustee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit 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 Credit 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 Secured Creditors 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 Administrative 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 Administrative 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 Administrative 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 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 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 Required Banks having
served on the Owner any such notice as is referred to in Section 9 of
the Credit Agreement) the security constituted by this Mortgage shall
become immediately enforceable and the 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 Trustee
without legal process and without liability of the 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 Administrative
Agent;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Administrative 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 Administrative
Agent take over or institute all such proceedings in connection
with the Rig, the Insurances, or any Requisition Compensation as
the 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 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 Obligations;
(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 Trustee in its absolute discretion
deems expedient and for the purposes aforesaid the 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 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 Trustee in or about the
exercise of the power vested in the 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 Trustee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The 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 Trustee by this Mortgage or to which the Trustee may
at any time be entitled hereunder.
9.03 Neither the Secured Creditors 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 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 Trustee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Trustee has arisen in the manner provided in this Mortgage
and the sale shall be deemed to be within the power of the Trustee and
the receipt of the 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 (a) All moneys received by the Trustee (or any other Secured
Creditor, as the case may be) in respect of sale of the Rig or
any part thereof; in respect of recovery under the Insurances;
or in respect of Requisition Compensation, shall be applied in
the following manner:
(i) first, to the payment of all amounts owing the Trustee of
the type described in clauses (ii) and (iii) of Recital
D;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to
the outstanding Obligations shall be paid to the Secured
Creditors as provided in Clause 10.01(c), with each
Secured Creditor receiving an amount equal to such
Obligations held by it or, if the proceeds are
insufficient to pay in full all such Obligations, its Pro
Rata Share (as defined below) of the amount remaining to
be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and
following the termination of this Mortgage pursuant to
Clause 3.01, any surplus then remaining shall be paid to
the Owner, subject, however, to the rights of the holder
of any then existing Lien of which the Trustee has actual
notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Trustee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Trustee shall be entitled to reply upon
(i) the Administrative Agent under the Credit Agreement and (ii)
the Secured Creditors for a determination (which the
Administrative Agent and each Secured Creditor, by their
acceptance of the benefits of this Mortgage shall be obligated
to provide upon request of the Trustee) of the outstanding
Obligations owed to the Secured Creditors. Unless it has actual
knowledge (including by way of written notice from a Secured
Creditor) to the contrary, the Administrative Agent under the
Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Trustee, in acting hereunder, shall
be entitled to assume that no obligations other than principal,
interest and regularly accruing fees are owing to any Secured
Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the 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 Trustee, and
the other Secured Creditors 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 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
Trustee under this Mortgage,
in any such case, forthwith upon demand by the 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 Obligations, hereby irrevocably appoints the
Trustee as its attorney until the Total Commitment is terminated and
none of the Obligations remain outstanding 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 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 Trustee shall not put any person dealing with the
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 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 each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the Trustee
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and the Secured Creditors 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 such Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 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 Trustee against the amount of such shortfall. For the purposes of
this Clause 13.03, "rate of exchange" means the rate at which the
Trustee is able on the date of such payment (or, if it is not
practicable for the 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 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 any Secured Creditor on demand all costs, fees
and expenses, including, but not limited to, legal fees and expenses
and valuation fees and Taxes thereon incurred by any Secured Creditor
or for which any Secured Creditor may become liable in connection
with:
(a) the negotiation, preparation and execution of the Credit
Agreement and the Credit 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
Credit Documents (or any of them).
14.02 The Owner shall pay to the Trustee and the Administrative Agent on
demand all costs, fees and expenses (including, but not limited to,
legal fees and expenses) and Taxes thereon incurred by any Secured
Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement and the Credit Documents (or any
of them) requested by the Owner, necessary or advisable under
applicable law or relating to the syndication of the Facility,
or initiated during the occurrence and continuation of an Event
of Default; and/or
(b) any consent or waiver required from the Trustee in relation to
the Credit Agreement and the Credit 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 Credit
Documents (or any of them) may be subject or give rise and shall
indemnify the 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 Trustee hereunder shall be in writing and shall be
made to the following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Telefax: (212) 827-4888
Attention: Loan Administration
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit of
the Owner, the Secured Creditors 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 Section 12.04 of the Credit Agreement, each Bank 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 Trustee shall notify the Owner promptly following any such
assignment, transfer or change.
17. TOTAL AMOUNT, ETC.
17.01 The total amount of the direct or contingent obligations secured by
this Mortgage is Three Hundred Million U.S. Dollars (US$300,000,000)
of principal plus interest, fees, commissions and performance of
mortgage covenants. The interest of the Owner in the Rig is 100%.
The interest of the Trustee in the Rig is 100%. The date of maturity
is November 13, 2001, and the discharge amount is the same as the
total amount plus such other sums as shall be payable by the Owner to
the Banks under the Credit Agreement.
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 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 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 Trustee may think fit. The 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 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 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 enforce the Obligations and for the purpose
of any proceedings for such enforcement the Owner hereby submits to
the jurisdiction of the courts of any country of the choice of the
Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the 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 Trustee may bring before the courts of such jurisdiction or
other judicial authority and for the purpose of any action which the
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 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_____________________________________
Name: T.W. Nagle
Title: Vice President and Treasurer
ACKNOWLEDGEMENT OF MORTGAGE
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 13th day of November, 1996 before me personally appeared Timothy W.
Nagle to me known who being by me duly sworn did depose and say that he
resides at 13307 Tosca Lane, Houston, TX; 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 10.122
FIRST PREFERRED MORTGAGE
Dated November 13, 1996
READING & BATES EXPLORATION CO.
- in favor of -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Security Trustee
W. D. KENT
=============================================================================
INDEX
CLAUSE SUBJECT MATTERPAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . 10
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 13
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 17
9 ENFORCEABILITY AND TRUSTEE'S POWERS . . . . . . . . . . . . . 18
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 21
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 21
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 22
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 24
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 24
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 25
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
EXHIBIT 2 FORM OF SUBSIDIARY GUARANTY
=============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 13th day of
November, 1996
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) CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, a Norwegian banking
corporation having its office at 11 West 42nd Street, New York, New
York, as security trustee for the Banks (as hereinafter defined) and
as mortgagee (the "Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the offshore drilling rig
W. D. KENT documented under the laws and flag of the United States of
America with Official Number 583169 of 5,383 gross registered tons and
4,185 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation
("Holdings"), (ii) Reading & Bates Drilling Co., an Oklahoma
corporation (the "Borrower"), (iii) the banks party thereto (the
"Banks"), (iv) Credit Lyonnais New York Branch and Banque Indosuez, as
documentation agents (the "Documentation Agents") and (v) the Trustee,
as administrative agent, arranger and security trustee (in such
capacity, the "Administrative Agent") (the form of which Credit
Agreement together with Exhibit B thereto but without the remaining
attachments is attached hereto as Exhibit 1), it was agreed among
other things that the Banks would make available to the Borrower upon
the terms and conditions therein described a reducing revolving credit
facility (the "Facility") in an aggregate amount at any time
outstanding of Three Hundred Million United States Dollars
(US$300,000,000), providing for the making of Loans and the issuance
of, and participation in, Letters of Credit as contemplated therein.
(C) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Borrower payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(D) The Owner, for good and valuable consideration has authorized,
executed and delivered a Subsidiary Guaranty (as modified, amended or
supplemented from time to time, the "Subsidiary Guaranty"), the form
of which Subsidiary Guaranty is attached hereto as Exhibit 2, in favor
of the Administrative Agent guaranteeing the performance by the
Borrower of its obligations under the Credit Agreement and the other
Credit Documents.
(E) This Mortgage is made for the benefit of the Trustee to secure the
guaranty by the Owner of (i) the full and prompt payment when due of
(x) the principal of and interest on the Notes issued, and Loans made,
under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued under the
Credit Agreement and (y) all other obligations and indebtedness
(including, without limitation, indemnities, Fees and interest
thereon) of the Borrower to the Secured Creditors (as hereinafter
defined), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and the other Credit
Documents including, without limitation, this Mortgage and the due
performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents including, without limitation, this Mortgage;
(ii) any and all sums advanced by the Trustee in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest
in the Collateral; (iii) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or
liabilities of the Borrower referred to in clause (i) above, after an
Event of Default shall have occurred and be continuing, the reasonable
expenses of the Trustee of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Trustee of its rights hereunder,
together with reasonable attorneys' fees of counsel to the Trustee and
court costs; and (iv) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Clause 13 of this
Mortgage (all such obligations, liabilities, sums and expenses
referred to in clauses (i) through (iv) above being collectively
referred to as the "Obligations"). It is acknowledged and agreed that
the "Obligations" shall include extensions of credit of the types
described above, whether outstanding on the date of this Mortgage or
extended from time to time after the date of this Mortgage.
(F) This First Preferred Mortgage is entered into by the Owner in
consideration of the Banks agreeing to make the Facility available to
the Borrower and as a condition thereto and for other good and
valuable consideration provided by the Banks (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:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Borrower, the Banks, the Documentation
Agents, and the Administrative Agent first referred to in Recital (B)
hereto, as modified, amended or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings together with interest, fees and all other obligations are
paid in full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et
seq. and any applicable state and local or foreign counterparts or
equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Borrower referred to in
Recital (C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (E) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
semi-submersible drilling rig JACK BATES owned by the Borrower
documented under the laws and flag of the United States with Official
Number 906283 of 19,928 gross registered tons and 14,948 net
registered tons; (ii) the jack-up drilling rig GEORGE H. GALLOWAY
owned by Reading & Bates Offshore, Limited documented under the laws
and flag of the United States with Official Number 651646 of 3,729
gross registered tons and 2,496 net registered tons; (iii) the
offshore drilling rig CHARLEY GRAVES owned by Reading and Bates Borneo
Drilling Co., Ltd. documented under the laws and flag of the Republic
of Panama with Patente Number 6618-76-CH of 5,829 gross registered
tons and 1,748 net registered tons; (iv) the jack-up drilling rig RON
TAPPMEYER owned by Reading & Bates (A) Pty Ltd. documented under the
laws and flag of Australia with Official Number 855213 of 11,455 gross
registered tons and 3,436 net registered tons; (v) the semi-
submersible drilling rig J. W. McLEAN owned by the Borrower documented
under the laws and flag of the Republic of Panama with Patente Number
25384-PEXT of 15,453 gross registered tons and 4,636 net registered
tons; (vi) the semi-submersible drilling rig RIG 41 owned by the
Borrower documented under the laws and flag of the Republic of Panama
with the Patente Number to be assigned on the date hereof of 10,078
gross registered tons and 3,024 net registered tons; (vii) the jack-up
drilling rig HARVEY H. WARD owned by HRB Rig Corporation documented
under the laws and flag of the United States of America with Official
Number 642693 of 4,121 gross registered tons and 3,079 net registered
tons; (viii) the jack-up drilling rig F. G. McCLINTOCK owned by
Reading & Bates Offshore, Limited documented under the laws and flag
of the United States of America with Official Number 562059 of 5,525
gross registered tons and 1,657 net registered tons; (ix) the jack-up
drilling rig RANDOLPH YOST owned by the Borrower documented under the
laws and flag of the United States of America with Official Number
601699 of 4,701 gross registered tons and 4,701 net registered tons;
(x) the jack-up drilling rig J. T. ANGEL owned by the Borrower
documented under the laws and flag of the United States of America
with Official Number 651645 of 4,186 gross registered tons and 3,090
net registered tons; (xi) the jack-up drilling rig ROGER W. MOWELL
owned by the Borrower documented under the laws and flag of the United
States of America with Official Number 645360 of 4,121 gross
registered tons and 3,079 net registered tons; (xii) the jack-up
drilling rig of D. R. STEWART owned by the Owner documented under the
laws and flag of the United States of America with Official Number
626904 of 6,494 gross registered tons and 5,834 net registered tons;
and (xiii) the jack-up drilling rig C. E. THORNTON to be owned by HRB
Rig Corporation documented under the laws and flag of the United
States of America with Official Number 673210 of 6,096 gross
registered tons and 6,096 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 written request of the
Administrative Agent, provide a bond or other security satisfactory to
the Administrative 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 written request of the Administrative Agent, provide a bond
or other security satisfactory to the Administrative 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 Administrative 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
Administrative Agent have been made as evidenced by the Administrative
Agent's written consent to such lien; (8) any lien in favor of the
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Administrative Agent under and as defined in the
Credit Agreement;
"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;
"Subsidiary Guaranty" means the agreement dated as of November 13,
1996 made by the Owner in favor of the Administrative Agent as first
referred to in Recital (D) hereto, as modified, amended or
supplemented from time to time;
"Ship Mortgage Act" means the United States Ship Mortgage Act, 1920,
as amended, recodified at 46 U.S.C. 31301, et seq.;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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) the Owner is in compliance with all applicable Environmental
Laws and all 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 Loan and at the time of the
issuance of each 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 Obligations, the Owner has granted, conveyed
and mortgaged and does by these presents grant, convey and mortgage
unto the Trustee, its successors and assigns, the whole of the Rig TO
HAVE AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty and
this Mortgage and shall observe and comply with the covenants, terms
and conditions contained in the Subsidiary Guaranty 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 Trustee agrees 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 any
Secured Creditor for payment by the Owner of the relevant
expense, claim, liability, loss, cost, duty, fee, charge or
other money incurred by a Secured Creditor 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 a Secured Creditor under this Mortgage and the
Subsidiary Guaranty 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
Trustee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Trustee shall not have to wait for the Administrative Agent
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 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 Trustee
may deem expedient; and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Secured Creditors or any other person:
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents (other than this Mortgage) or any other
document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Credit Parties or any other person
under the Credit Agreement, any of the other Security Documents
(other than this Mortgage) or any other document or security.
6. INSURANCE
6.01 The Owner covenants with the Trustee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains 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 Administrative 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 Rigs, such aggregate amount shall be at least 110%
of the Total Commitment. 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 American,
British and Scandinavian insurance markets or in such other
major international markets reasonably acceptable to the
Administrative 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
Administrative Agent. In addition, the Owner shall, at its own
expense, furnish to the Administrative Agent a mortgagee's
single interest policy providing coverage which, when aggregated
with the mortgagee's interest insurance furnished to the
Administrative Agent in respect of the Other Rigs, shall be in
an amount equal to at least 110% of the aggregate amount of the
Total Commitment (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 Administrative Agent). Such
mortgagee's interest insurance and any additional insurance
policies for the benefit of the Administrative Agent shall be
maintained in the broadest form available in the American,
British and Scandinavian markets or other major international
markets acceptable to the Administrative Agent through
underwriters acceptable to the Administrative 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
Administrative Agent.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the
Administrative Agent, shall contain conditions, terms,
stipulations and insuring covenants satisfactory to the
Administrative Agent, and shall be kept in full force and effect
by the Owner so long as any Obligations remain 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 Administrative Agent for distribution by it to itself, the
Banks and the Owner as their interests may appear, and shall
provide for at least ten days' prior notice to be given to the
Administrative 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 Administrative Agent and
the Trustee shall be named as co-assureds on all such policies
and insurance contracts, but without liability of the
Administrative Agent or the Trustee for premiums or calls.
Certified copies of all such policies, binders and other interim
insurance contracts shall be deposited with the Administrative
Agent. Originals shall also be provided upon the request of the
Administrative Agent. The Owner shall furnish to the
Administrative Agent annually a detailed report signed by a firm
of marine insurance brokers satisfactory to the Administrative
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 Administrative Agent by notice
to the underwriters, although the following insurance is payable
to the Administrative 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
directly 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 Administrative Agent (which
consent shall not be unreasonably withheld). Any loss covered
by this paragraph which is paid to the Administrative 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 Administrative Agent to, or as directed by, the Owner and
all other payments to the Administrative Agent of losses covered
by this paragraph shall be applied by the Administrative 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 Administrative
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 Administrative Agent.
(c) In the event of an actual or constructive Total Loss of the Rig,
the Administrative 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 Secured Creditors 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 provided in
Clause 10.
(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 Administrative
Agent advised of the progress of such renewals, and procure that
the insurers shall promptly confirm in writing to the
Administrative 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 Administrative 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 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 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 Barge) 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 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
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 Trustee and the Administrative Agent copies of all
survey reports issued in respect thereof;
(g) permit the representatives of the Administrative Agent or
independent surveyors representing the 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 Administrative Agent may require;
(j) promptly furnish to the 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 request of the Trustee in writing, copies
of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(k) notify both the Trustee and the Administrative 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 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
Trustee; and
(vi) any intended deactivation or lay-up of the Rig (other than
for normal periods of inactivity between contracts for the
Rig during which periods the Rig remains manned) and
obtain the prior written consent of the Trustee;
(l) keep proper books of account in respect of the Rig and as and
when the Trustee or the Administrative Agent may so reasonably
require make such books available for inspection on behalf of
the 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) observe the obligations contained in Sections 7 and 8 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;
(n) not without the previous consent in writing of the 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 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 Trustee from time to time
such proof as the 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 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 CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH, as Security Trustee for
the Banks 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 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 Trustee
advised, in writing on such regular basis and in such
detail as the Trustee shall require, of the Owner's
response to such Environmental Claim or Environmental
Incident;
(s) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Trustee having first been obtained, and any such written consent
to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Trustee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of 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 Trustee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit 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 Credit 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 Secured Creditors 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 Administrative 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 Administrative 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 Administrative 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 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 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 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 Required Banks having
served on the Owner any such notice as is referred to in Section 9 of
the Credit Agreement) the security constituted by this Mortgage shall
become immediately enforceable and the 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 Trustee
without legal process and without liability of the 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 Administrative
Agent;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Administrative 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 Administrative
Agent take over or institute all such proceedings in connection
with the Rig, the Insurances, or any Requisition Compensation as
the 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 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 Obligations;
(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 Trustee in its absolute discretion
deems expedient and for the purposes aforesaid the 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 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 Trustee in or about the
exercise of the power vested in the 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 Trustee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The 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 Trustee by this Mortgage or to which the Trustee may
at any time be entitled hereunder.
9.03 Neither the Secured Creditors, 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 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 Trustee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Trustee has arisen in the manner provided in this Mortgage
and the sale shall be deemed to be within the power of the Trustee and
the receipt of the 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 Trustee (or any other Secured Creditor, as
the case may be) in respect of sale of the Rig or any part thereof, in
respect of recovery under the Insurances or in respect of Requisition
Compensation, shall be applied in the following manner:
(i) first, to the payment of all amounts owing the Trustee of the
type described in clauses (ii) and (iii) of Recital E;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to the
outstanding Obligations shall be paid to the Secured Creditors
as provided in Clause 10.01(c), with each Secured Creditor
receiving an amount equal to such Obligations held by it or, if
the proceeds are insufficient to pay in full all such
Obligations, its Pro Rata Share (as defined below) of the amount
remaining to be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and following
the termination of this Mortgage pursuant to Clause 3.01, any
surplus then remaining shall be paid to the Owner, subject,
however, to the rights of the holder of any then existing Lien
of which the Trustee has actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Trustee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Trustee shall be entitled to reply upon
(i) the Administrative Agent under the Credit Agreement and (ii)
the Secured Creditors for a determination (which the
Administrative Agent and each Secured Creditor, by their
acceptance of the benefits of this Mortgage shall be obligated
to provide upon request of the Trustee) of the outstanding
Obligations owed to the Secured Creditors. Unless it has actual
knowledge (including by way of written notice from a Secured
Creditor) to the contrary, the Administrative Agent under the
Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Trustee, in acting hereunder, shall
be entitled to assume that no obligations other than principal,
interest and regularly accruing fees are owing to any Secured
Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the 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 Trustee and
the other Secured Creditors 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 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
Trustee under this Mortgage,
in any such case, forthwith upon demand by the 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 Obligations, hereby irrevocably appoints the
Trustee as its attorney until the Total Commitment is terminated and
none of the Obligations remain outstanding 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 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 Trustee shall not put any person dealing with the
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 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 each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the Trustee
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and each of the Secured Creditors 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 such Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 the Subsidiary Guaranty or 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 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 Trustee against the amount of such shortfall. For
the purposes of this Clause 13.03, "rate of exchange" means the rate
at which the Trustee is able on the date of such payment (or, if it is
not practicable for the 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 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 any Secured Creditor on demand all costs, fees
and expenses, including, but not limited to, legal fees and expenses
and valuation fees and Taxes thereon incurred by any Secured Creditor
or for which any Secured Creditor may become liable in connection
with:
(a) the negotiation, preparation and execution of the Credit
Agreement, the Subsidiary Guaranty and the Credit 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, the
Subsidiary Guaranty or the Credit Documents (or any of them).
14.02 The Owner shall pay to the Trustee and the Administrative Agent on
demand all costs, fees and expenses (including, but not limited to,
legal fees and expenses) and Taxes thereon incurred by any Secured
Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement, the Subsidiary Guaranty or the
Credit Documents (or any of them) requested by the Owner,
necessary or advisable under applicable law or relating to the
syndication of the Facility, or initiated during the occurrence
and continuation of an Event of Default; and/or
(b) any consent or waiver required from the Trustee in relation to
the Credit Agreement, the Subsidiary Guaranty and the Credit
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, the Subsidiary
Guaranty and the Credit Documents (or any of them) may be subject or
give rise and shall indemnify the 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 Trustee hereunder shall be in writing and shall be
made to the following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Telefax: (212) 827-4888
Attention: Loan Administration
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit of
the Owner, the Secured Creditors 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 Section 12.04 of the Credit Agreement, each Bank 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 Trustee shall notify the Owner promptly following any such
assignment, transfer or change.
17. TOTAL AMOUNT, ETC.
17.01 The total amount of the direct or contingent obligations secured by
this Mortgage is Three Hundred Million U.S. Dollars (US$300,000,000)
of principal plus interest, fees, commissions and performance of
mortgage covenants. The interest of the Owner in the Rig is 100%.
The interest of the Trustee in the Rig is 100%. The date of maturity
is November 13, 2001, and the discharge amount is the same as the
total amount plus such other sums as shall be payable by the Owner to
the Banks under the Credit Agreement or the Subsidiary Guaranty.
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 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 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 Trustee may think fit. The 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 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 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the 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 Trustee may bring before the courts of such jurisdiction or
other judicial authority and for the purpose of any action which the
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 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_____________________________________
Name: T.W. Nagle
Title: Vice President and Treasurer
ACKNOWLEDGEMENT OF MORTGAGE
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 13th day of November, 1996 before me personally appeared Timothy W.
Nagle to me known who being by me duly sworn did depose and say that he
resides at 13307 Tosca Lane, Houston, TX; 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 10.123
FIRST PREFERRED MORTGAGE
Dated November 13, 1996
READING & BATES DRILLING CO.
- in favor of -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Security Trustee
RANDOLPH YOST
==============================================================================
INDEX
CLAUSE SUBJECT MATTERPAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . . 9
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 18
9 ENFORCEABILITY AND INDENTURE TRUSTEE'S POWERS . . . . . . . . 19
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 21
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 22
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 22
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 25
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 25
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 25
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
==============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 13th day of
November, 1996
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) CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, a Norwegian banking
corporation having its office at 11 West 42nd Street, New York, New
York, as security trustee for the Banks (as hereinafter defined) and
as mortgagee (the "Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the jack-up drilling rig
RANDOLPH YOST documented under the laws and flag of the United States
of America with Official Number 601699 of 4,701 gross registered tons
and 4,701 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation,
("Holdings"), (ii) the Owner, as borrower, (iii) the banks party
thereto (the "Banks"), (iv) Credit Lyonnais New York Branch and Banque
Indosuez, as documentation agents (the "Documentation Agents") and (v)
the Trustee, as administrative agent, arranger and security trustee
(in such capacity, the "Administrative Agent") (the form of which
Credit Agreement together with Exhibit B thereto but without the
remaining attachments is attached hereto as Exhibit 1), it was agreed
among other things that the Banks would make available to the Owner
upon the terms and conditions therein described a reducing revolving
credit facility (the "Facility") in an aggregate amount at any time
outstanding of Three Hundred Million United States Dollars
(US$300,000,000), providing for the making of Loans and the issuance
of, and participation in, Letters of Credit as contemplated therein.
(C) The obligations of the Owner with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Owner payable to the order of
the respective Banks (each a "Note" and collectively the "Notes") (the
form of which is attached as Exhibit B to the Credit Agreement).
(D) This Mortgage is made for the benefit of the Trustee to secure (i) the
full and prompt payment when due of (x) the principal of and interest
on the Notes issued, and Loans made, under the Credit Agreement, and
all reimbursement obligations and Unpaid Drawings with respect to the
Letters of Credit issued under the Credit Agreement and (y) all other
obligations and indebtedness (including without limitation,
indemnities, Fees and interest thereon) of the Owner to the Secured
Creditors (as hereinafter defined), whether now existing or hereafter
incurred under, arising out of or in connection with the Credit
Agreement and the other Credit Documents including, without
limitation, this Mortgage and the due performance and compliance by
the Owner with all of the terms, conditions and agreements contained
in the Credit Agreement and the other Credit Documents including,
without limitation, this Mortgage; (ii) any and all sums advanced by
the Trustee in order to preserve the Collateral (as hereinafter
defined) or preserve its security interest in the Collateral; (iii) in
the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of the Owner referred to in
clause (i) above, after an Event of Default shall have occurred and be
continuing, the reasonable expenses of the Trustee of re-taking,
holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Trustee
of its rights hereunder, together with reasonable attorneys' fees of
counsel to the Trustee and court costs; and (iv) all amounts paid by
any Indemnitee as to which such Indemnitee has the right to
reimbursement under Clause 13 of this Mortgage (all such obligations,
liabilities, sums and expenses referred to in clauses (i) through (iv)
above being collectively referred to as the "Obligations"). It is
acknowledged and agreed that the "Obligations" shall include
extensions of credit of the types described above, whether outstanding
on the date of this Mortgage or extended from time to time after the
date of this Mortgage.
(E) This First Preferred Mortgage is entered into by the Owner in
consideration of the Banks agreeing, at the request of the Owner, to
make the Facility available to the Owner under the terms of the Credit
Agreement and as a condition thereto and for other good and valuable
consideration provided by the Banks (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:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Owner, the Banks, the Documentation
Agents and the Administrative Agent first referred to in Recital (B)
hereto, as modified, amended or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings, together with interest, fees and all other obligations are
paid in full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et
seq. and any applicable state and local or foreign counterparts or
equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Owner referred to in Recital
(C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (D) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
jack-up drilling rig D. R. STEWART owned by Reading & Bates
Exploration Co. ("R&B Exploration") documented under the laws and flag
of the United States with Official Number 626904 of 6,494 gross
registered tons and 5,834 net registered tons; (ii) the offshore
drilling rig W. D. KENT owned by R&B Exploration documented under the
laws and flag of the United States with Official Number 583169 of
5,383 gross registered tons and 4,185 net registered tons; (iii) the
offshore drilling rig CHARLEY GRAVES owned by Reading and Bates Borneo
Drilling Co., Ltd. documented under the laws and flag of the Republic
of Panama with Patente Number 6618-76-CH of 5,829 gross registered
tons and 1,748 net registered tons; (iv) the jack-up drilling rig RON
TAPPMEYER owned by Reading & Bates (A) Pty Ltd. documented under the
laws and flag of Australia with Official Number 855213 of 11,455 gross
registered tons and 3,436 net registered tons; (v) the semi-
submersible drilling rig J. W. McLEAN owned by the Owner documented
under the laws and flag of the Republic of Panama with Patente Number
25384-PEXT of 15,453 gross registered tons and 4,636 net registered
tons; (vi) the semi-submersible drilling rig RIG 41 owned by the Owner
documented under the laws and flag of the Republic of Panama with the
Patente Number to be assigned on the date hereof of 10,078 gross
registered tons and 3,024 net registered tons; (vii) the jack-up
drilling rig HARVEY H. WARD owned by HRB Rig Corporation documented
under the laws and flag of the United States of America with Official
Number 642693 of 4,121 gross registered tons and 3,079 net registered
tons; (viii) the jack-up drilling rig F. G. McCLINTOCK owned by
Reading & Bates Offshore, Limited documented under the laws and flag
of the United States of America with Official Number 562059 of 5,525
gross registered tons and 1,657 net registered tons; (ix) the semi-
submersible drilling rig JACK BATES owned by the Owner documented
under the laws and flag of the United States of America with Official
Number 906283 of 19,928 gross registered tons and 14,948 net
registered tons; (x) the jack-up drilling rig J. T. ANGEL owned by the
Owner documented under the laws and flag of the United States of
America with Official Number 651645 of 4,186 gross registered tons and
3,090 net registered tons; (xi) the jack-up drilling rig ROGER W.
MOWELL owned by the Owner documented under the laws and flag of the
United States of America with Official Number 645360 of 4,121 gross
registered tons and 3,079 net registered tons; (xii) the jack-up
drilling rig GEORGE H. GALLOWAY owned by Reading & Bates Offshore,
Limited documented under the laws and flag of the United States of
America with Official Number 651646 of 3,729 gross registered tons and
2,496 net registered tons; and (xiii) the jack-up drilling rig C. E.
THORNTON to be owned by HRB Rig Corporation documented under the laws
and flag of the United States of America with Official Number 673210
of 6,096 gross registered tons and 6,096 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 written request of the
Administrative Agent, provide a bond or other security satisfactory to
the Administrative 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 written request of the Administrative Agent, provide a bond
or other security satisfactory to the Administrative 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 Administrative 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
Administrative Agent have been made as evidenced by the Administrative
Agent's written consent to such lien; (8) any lien in favor of the
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Administrative Agent under and as defined in the
Credit Agreement;
"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;
"Ship Mortgage Act" means the United States Ship Mortgage Act, 1920,
as amended, recodified at 46 U.S.C. 31301, et seq.;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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) the Owner is in compliance with all applicable Environmental
Laws and all 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 Loan and at the time of the
issuance of each 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 Obligations, the Owner has granted, conveyed
and mortgaged and does by these presents grant, convey and mortgage
unto the Trustee, its successors and assigns, the whole of the Rig TO
HAVE AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty and
this Mortgage and shall observe and comply with the covenants, terms
and conditions contained in the Subsidiary Guaranty 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 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors 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 any
Secured Creditor 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 any Secured Creditor 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 any Secured Creditor under this Mortgage and the other
Credit 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
Trustee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Trustee shall not have to wait for the Administrative Agent,
the Banks or the Letter of Credit Issuer 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 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 Trustee
may deem expedient; and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Credit Parties, the Secured Creditors or any other
person:
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents (other than this Mortgage) or any other
document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Credit Parties or any other person
under the Credit Agreement, any of the other Credit Documents
(other than this Mortgage) or any other document or security.
5.04 Until the Obligations have been satisfied in full to the satisfaction
of the Trustee, the Owner shall not by virtue of any payment made
hereunder on account of the Obligations or by virtue of any
enforcement by the 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 Holdings (whether
such relationship or transaction shall constitute the Owner a creditor
of Holdings, a guarantor of the obligations of Holdings or a party
subrogated to the rights of others against Holdings 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 Secured
Creditors 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 guaranty, security or agreement; or
(c) exercise any right of set-off or counterclaim against Holdings
or any such co-surety; or
(d) receive, claim or have the benefit of any payment, distribution,
security or indemnity from Holdings or any such co-surety; or
(e) unless so directed by the Trustee (when the Owner will prove in
accordance with such directions), claim as a creditor of
Holdings or any such co-surety in competition with the Trustee.
The Owner shall hold in trust for the Trustee and forthwith pay or
transfer (as appropriate) to the 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 guaranty (whether
by reason of legal limitation, illegality, disability or incapacity on
or of Holdings 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, Holdings, the Trustee or any other person),
then the Owner will, as a separate and independent stipulation and as
a primary obligor, pay to the 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
Trustee against any loss or liability suffered or incurred by the
Secured Creditors or any of them as a result of such irrecoverability.
6. INSURANCE
6.01 The Owner covenants with the Trustee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligations remain 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 Administrative 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 Rigs, such aggregate amount shall be at least 110%
of the Total Commitment. 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 American,
British and Scandinavian insurance markets or in such other
major international markets reasonably acceptable to the
Administrative 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
Administrative Agent. In addition, the Owner shall, at its own
expense, furnish to the Administrative Agent a mortgagee's
single interest policy providing coverage which, when aggregated
with the mortgagee's interest insurance furnished to the
Administrative Agent in respect of the Other Rigs, shall be in
an amount equal to at least 110% of the aggregate amount of the
Total Commitment (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 Administrative Agent). Such
mortgagee's interest insurance and any additional insurance
policies for the benefit of the Administrative Agent shall be
maintained in the broadest form available in the American,
British and Scandinavian markets or other major international
markets acceptable to the Administrative Agent through
underwriters acceptable to the Administrative 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
Administrative Agent.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the
Administrative Agent, shall contain conditions, terms,
stipulations and insuring covenants satisfactory to the
Administrative Agent, and shall be kept in full force and effect
by the Owner so long as any Obligations remain 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 Administrative Agent for distribution by it to itself, the
Banks and the Owner as their interests may appear, and shall
provide for at least ten days' prior notice to be given to the
Administrative 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 Administrative Agent and
the Trustee shall be named as co-assureds on all such policies
and insurance contracts, but without liability of the
Administrative Agent or the Trustee for premiums or calls.
Certified copies of all such policies, binders and other interim
insurance contracts shall be deposited with the Administrative
Agent. Originals shall also be provided upon the request of the
Administrative Agent. The Owner shall furnish to the
Administrative Agent annually a detailed report signed by a firm
of marine insurance brokers satisfactory to the Administrative
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 Administrative Agent by notice
to the underwriters, although the following insurance is payable
to the Administrative 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
directly 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 Administrative Agent (which
consent shall not be unreasonably withheld). Any loss covered
by this paragraph which is paid to the Administrative 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 Administrative Agent to, or as directed by, the Owner and
all other payments to the Administrative Agent of losses covered
by this paragraph shall be applied by the Administrative 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 Administrative
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 Administrative Agent.
(c) In the event of an actual or constructive Total Loss of the Rig,
the Administrative 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 Secured Creditors 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 provided in
Clause 10.
(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 Administrative
Agent advised of the progress of such renewals, and procure that
the insurers shall promptly confirm in writing to the
Administrative 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 Administrative 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 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 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 Self-Elevating Drilling Unit) the American Bureau of
Shipping free of recommendations and qualifications and change
of class, save those notified to and approved in writing by the
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
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 Trustee and the Administrative Agent copies of all
survey reports issued in respect thereof;
(g) permit the representatives of the Administrative Agent or
independent surveyors representing the 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 Administrative Agent may require;
(j) promptly furnish to the 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 request of the Trustee in writing, copies
of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(k) notify both the Trustee and the Administrative 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 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
Trustee; and
(vi) any intended deactivation or lay-up of the Rig (other than
for normal periods of inactivity between contracts for the
Rig during which periods the Rig remains manned) and
obtain the prior written consent of the Trustee;
(l) keep proper books of account in respect of the Rig and as and
when the Trustee or the Administrative Agent may so reasonably
require make such books available for inspection on behalf of
the 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) observe the obligations contained in Sections 7 and 8 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;
(n) not without the previous consent in writing of the 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 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 Trustee from time to time
such proof as the 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 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 CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH, as Security Trustee for
the Banks 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 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 Trustee
advised, in writing on such regular basis and in such
detail as the Trustee shall require, of the Owner's
response to such Environmental Claim or Environmental
Incident;
(s) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Trustee having first been obtained, and any such written consent
to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Trustee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of 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 Trustee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit 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 Credit 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 Secured Creditors 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 Administrative 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 Administrative 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 Administrative 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 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 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 Required Banks having
served on the Owner any such notice as is referred to in Section 9 of
the Credit Agreement) the security constituted by this Mortgage shall
become immediately enforceable and the 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 Trustee
without legal process and without liability of the 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 Administrative
Agent;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Administrative 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 Administrative
Agent take over or institute all such proceedings in connection
with the Rig, the Insurances, or any Requisition Compensation as
the 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 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 Obligations;
(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 Trustee in its absolute discretion
deems expedient and for the purposes aforesaid the 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 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 Trustee in or about the
exercise of the power vested in the 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 Trustee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The 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 Trustee by this Mortgage or to which the Trustee may
at any time be entitled hereunder.
9.03 Neither the Secured Creditors 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 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 Trustee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Trustee has arisen in the manner provided in this Mortgage
and the sale shall be deemed to be within the power of the Trustee and
the receipt of the 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 (a) All moneys received by the Trustee (or any other Secured
Creditor, as the case may be) in respect of sale of the Rig or
any part thereof; in respect of recovery under the Insurances;
or in respect of Requisition Compensation shall be applied in
the following manner:
(i) first, to the payment of all amounts owing the Trustee of
the type described in clauses (ii) and (iii) of Recital D;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to
the outstanding Obligations shall be paid to the Secured
Creditors as provided in Clause 10.01(c), with each
Secured Creditor receiving an amount equal to such
Obligations held by it or, if the proceeds are
insufficient to pay in full all such Obligations, its Pro
Rata Share (as defined below) of the amount remaining to
be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and
following the termination of this Mortgage pursuant to
Clause 3.01, any surplus then remaining shall be paid to
the Owner, subject, however, to the rights of the holder
of any then existing Lien of which the Trustee has actual
notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Trustee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Trustee shall be entitled to reply upon
(i) the Administrative Agent under the Credit Agreement and (ii)
the Secured Creditors for a determination (which the
Administrative Agent and each Secured Creditor, by their
acceptance of the benefits of this Mortgage shall be obligated
to provide upon request of the Trustee) of the outstanding
Obligations owed to the Secured Creditors. Unless it has actual
knowledge (including by way of written notice from a Secured
Creditor) to the contrary, the Administrative Agent under the
Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Trustee, in acting hereunder, shall
be entitled to assume that no obligations other than principal,
interest and regularly accruing fees are owing to any Secured
Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the 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 Trustee, and
the other Secured Creditors 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 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
Trustee under this Mortgage,
in any such case, forthwith upon demand by the 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 Obligations, hereby irrevocably appoints the
Trustee as its attorney until the Total Commitment is terminated and
none of the Obligations remain outstanding 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 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 Trustee shall not put any person dealing with the
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 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 each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the Trustee
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and the Secured Creditors 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 such Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 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 Trustee against the amount of such shortfall. For the purposes of
this Clause 13.03, "rate of exchange" means the rate at which the
Trustee is able on the date of such payment (or, if it is not
practicable for the 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 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 any Secured Creditor on demand all costs, fees
and expenses, including, but not limited to, legal fees and expenses
and valuation fees and Taxes thereon incurred by any Secured Creditor
or for which any Secured Creditor may become liable in connection
with:
(a) the negotiation, preparation and execution of the Credit
Agreement and the Credit 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
Credit Documents (or any of them).
14.02 The Owner shall pay to the Trustee and the Administrative Agent on
demand all costs, fees and expenses (including, but not limited to,
legal fees and expenses) and Taxes thereon incurred by any Secured
Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement and the Credit Documents (or any
of them) requested by the Owner, necessary or advisable under
applicable law or relating to the syndication of the Facility,
or initiated during the occurrence and continuation of an Event
of Default; and/or
(b) any consent or waiver required from the Trustee in relation to
the Credit Agreement and the Credit 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 Credit
Documents (or any of them) may be subject or give rise and shall
indemnify the 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 Trustee hereunder shall be in writing and shall be
made to the following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Telefax: (212) 827-4888
Attention: Loan Administration
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit of
the Owner, the Secured Creditors 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 Section 12.04 of the Credit Agreement, each Bank 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 Trustee shall notify the Owner promptly following any such
assignment, transfer or change.
17. TOTAL AMOUNT, ETC.
17.01 The total amount of the direct or contingent obligations secured by
this Mortgage is Three Hundred Million U.S. Dollars (US$300,000,000)
of principal plus interest, fees, commissions and performance of
mortgage covenants. The interest of the Owner in the Rig is 100%.
The interest of the Trustee in the Rig is 100%. The date of maturity
is November 13, 2001, and the discharge amount is the same as the
total amount plus such other sums as shall be payable by the Owner to
the Banks under the Credit Agreement.
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 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 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 Trustee may think fit. The 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 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 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 enforce the Obligations and for the purpose
of any proceedings for such enforcement the Owner hereby submits to
the jurisdiction of the courts of any country of the choice of the
Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the 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 Trustee may bring before the courts of such jurisdiction or
other judicial authority and for the purpose of any action which the
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 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_____________________________________
Name: T.W. Nagle
Title: Vice President and Treasurer
ACKNOWLEDGEMENT OF MORTGAGE
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 13th day of November, 1996 before me personally appeared Timothy W.
Nagle to me known who being by me duly sworn did depose and say that he
resides at 13307 Tosca Lane, Houston, TX; 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 10.124
FIRST PREFERRED MORTGAGE
Dated November 13, 1996
READING & BATES OFFSHORE, LIMITED
- in favor of -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Security Trustee
GEORGE H. GALLOWAY
==============================================================================
INDEX
CLAUSE SUBJECT MATTERPAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . 10
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 13
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 17
9 ENFORCEABILITY AND TRUSTEE'S POWERS . . . . . . . . . . . . . 18
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 21
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 21
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 22
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 24
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 24
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 25
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
EXHIBIT 2 FORM OF SUBSIDIARY GUARANTY
==============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 13th day of
November, 1996
BY
(1) READING & BATES OFFSHORE, LIMITED, an Oklahoma corporation having its
principal offices at 901 Threadneedle, Suite 200, Houston, Texas 77079
(the "Owner"),
IN FAVOR OF
(2) CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, a Norwegian banking
corporation having its office at 11 West 42nd Street, New York, New
York, as security trustee for the Banks (as hereinafter defined) and
as mortgagee (the "Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the jack-up drilling rig
GEORGE H. GALLOWAY documented under the laws and flag of the United
States of America with Official Number 673210 of 3,729 gross
registered tons and 2,496 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation
("Holdings"), (ii) Reading & Bates Drilling Co., an Oklahoma
corporation (the "Borrower"), (iii) the banks party thereto (the
"Banks"), (iv) Credit Lyonnais New York Branch and Banque Indosuez, as
documentation agents (the "Documentation Agents") and (v) the Trustee,
as administrative agent, arranger and security trustee (in such
capacity, the "Administrative Agent") (the form of which Credit
Agreement together with Exhibit B thereto but without the remaining
attachments is attached hereto as Exhibit 1), it was agreed among
other things that the Banks would make available to the Borrower upon
the terms and conditions therein described a reducing revolving credit
facility (the "Facility") in an aggregate amount at any time
outstanding of Three Hundred Million United States Dollars
(US$300,000,000), providing for the making of Loans and the issuance
of, and participation in, Letters of Credit as contemplated therein.
(C) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Borrower payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(D) The Owner, for good and valuable consideration has authorized,
executed and delivered a Subsidiary Guaranty (as modified, amended or
supplemented from time to time, the "Subsidiary Guaranty"), the form
of which Subsidiary Guaranty is attached hereto as Exhibit 2, in favor
of the Administrative Agent guaranteeing the performance by the
Borrower of its obligations under the Credit Agreement and the other
Credit Documents.
(E) This Mortgage is made for the benefit of the Trustee to secure the
guaranty by the Owner of (i) the full and prompt payment when due of
(x) the principal of and interest on the Notes issued, and Loans made,
under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued under the
Credit Agreement and (y) all other obligations and indebtedness
(including, without limitation, indemnities, Fees and interest
thereon) of the Borrower to the Secured Creditors (as hereinafter
defined), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and the other Credit
Documents including, without limitation, this Mortgage and the due
performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents including, without limitation, this Mortgage;
(ii) any and all sums advanced by the Trustee in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest
in the Collateral; (iii) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or
liabilities of the Borrower referred to in clause (i) above, after an
Event of Default shall have occurred and be continuing, the reasonable
expenses of the Trustee of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Trustee of its rights hereunder,
together with reasonable attorneys' fees of counsel to the Trustee and
court costs; and (iv) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Clause 13 of this
Mortgage (all such obligations, liabilities, sums and expenses
referred to in clauses (i) through (iv) above being collectively
referred to as the "Obligations"). It is acknowledged and agreed that
the "Obligations" shall include extensions of credit of the types
described above, whether outstanding on the date of this Mortgage or
extended from time to time after the date of this Mortgage.
(F) This First Preferred Mortgage is entered into by the Owner in
consideration of the Banks agreeing to make the Facility available to
the Borrower and as a condition thereto and for other good and
valuable consideration provided by the Banks (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:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Borrower, the Banks, the Documentation
Agents, and the Administrative Agent first referred to in Recital (B)
hereto, as modified, amended or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings together with interest, fees and all other obligations are
paid in full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et
seq. and any applicable state and local or foreign counterparts or
equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Borrower referred to in
Recital (C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (E) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
semi-submersible drilling rig JACK BATES owned by the Borrower
documented under the laws and flag of the United States with Official
Number 906283 of 19,928 gross registered tons and 14,948 net
registered tons; (ii) the offshore drilling rig W. D. KENT owned by
Reading & Bates Exploration Co. documented under the laws and flag of
the United States with Official Number 583169 of 5,383 gross
registered tons and 4,185 net registered tons; (iii) the offshore
drilling rig CHARLEY GRAVES owned by Reading and Bates Borneo Drilling
Co., Ltd. documented under the laws and flag of the Republic of Panama
with Patente Number 6618-76-CH of 5,829 gross registered tons and
1,748 net registered tons; (iv) the jack-up drilling rig RON TAPPMEYER
owned by Reading & Bates (A) Pty Ltd. documented under the laws and
flag of Australia with Official Number 855213 of 11,455 gross
registered tons and 3,436 net registered tons; (v) the semi-
submersible drilling rig J. W. McLEAN owned by the Borrower documented
under the laws and flag of the Republic of Panama with Patente Number
25384-PEXT of 15,453 gross registered tons and 4,636 net registered
tons; (vi) the semi-submersible drilling rig RIG 41 owned by the
Borrower documented under the laws and flag of the Republic of Panama
with the Patente Number to be assigned on the date hereof of 10,078
gross registered tons and 3,024 net registered tons; (vii) the jack-up
drilling rig HARVEY H. WARD owned by HRB Rig Corporation documented
under the laws and flag of the United States of America with Official
Number 642693 of 4,121 gross registered tons and 3,079 net registered
tons; (viii) the jack-up drilling rig F. G. McCLINTOCK owned by the
Owner documented under the laws and flag of the United States of
America with Official Number 562059 of 5,525 gross registered tons and
1,657 net registered tons; (ix) the jack-up drilling rig RANDOLPH YOST
owned by the Borrower documented under the laws and flag of the United
States of America with Official Number 601699 of 4,701 gross
registered tons and 4,701 net registered tons; (x) the jack-up
drilling rig J. T. ANGEL owned by the Borrower documented under the
laws and flag of the United States of America with Official Number
651645 of 4,186 gross registered tons and 3,090 net registered tons;
(xi) the jack-up drilling rig ROGER W. MOWELL owned by the Borrower
documented under the laws and flag of the United States of America
with Official Number 645360 of 4,121 gross registered tons and 3,079
net registered tons; (xii) the jack-up drilling rig D. R. STEWART
owned by Reading & Bates Exploration Co. documented under the laws and
flag of the United States of America with Official Number 626904 of
6,494 gross registered tons and 5,834 net registered tons; and (xiii)
the jack-up drilling rig C. E. THORNTON to be owned by HRB Rig
Corporation documented under the laws and flag of the United States of
America with Official Number 673210 of 6,096 gross registered tons and
6,096 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 written request of the
Administrative Agent, provide a bond or other security satisfactory to
the Administrative 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 written request of the Administrative Agent, provide a bond
or other security satisfactory to the Administrative 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 Administrative 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
Administrative Agent have been made as evidenced by the Administrative
Agent's written consent to such lien; (8) any lien in favor of the
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Administrative Agent under and as defined in the
Credit Agreement;
"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;
"Subsidiary Guaranty" means the agreement dated as of November 13,
1996 made by the Owner in favor of the Administrative Agent as first
referred to in Recital (D) hereto, as modified, amended or
supplemented from time to time;
"Ship Mortgage Act" means the United States Ship Mortgage Act, 1920,
as amended, recodified at 46 U.S.C. 31301, et seq.;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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) the Owner is in compliance with all applicable Environmental
Laws and all 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 Loan and at the time of the
issuance of each 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 Obligations, the Owner has granted, conveyed
and mortgaged and does by these presents grant, convey and mortgage
unto the Trustee, its successors and assigns, the whole of the Rig TO
HAVE AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty and
this Mortgage and shall observe and comply with the covenants, terms
and conditions contained in the Subsidiary Guaranty 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 Trustee agrees 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 any
Secured Creditor for payment by the Owner of the relevant
expense, claim, liability, loss, cost, duty, fee, charge or
other money incurred by a Secured Creditor 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 a Secured Creditor under this Mortgage and the
Subsidiary Guaranty 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
Trustee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Trustee shall not have to wait for the Administrative Agent
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 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 Trustee
may deem expedient; and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Secured Creditors or any other person:
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents (other than this Mortgage) or any other
document or uch jurisdiction or
other judicial authority and for the purpose of any action which the
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 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 OFFSHORE, LIMITED
By_____________________________________
Name: T.W. Nagle
Title: Vice President and Treasurer
ACKNOWLEDGEMENT OF MORTGAGE
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 13th day of November, 1996 before me personally appeared Timothy W.
Nagle to me known who being by me duly sworn did depose and say that he
resides at 13307 Tosca Lane, Houston, TX; that he is Vice President and
Treasurer for READING & BATES OFFSHORE, LIMITED, 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 OFFSHORE,
LIMITED.
_____________________
Notary Public
Exhibit 10.125
FIRST PREFERRED MORTGAGE
Dated November 13, 1996
READING & BATES OFFSHORE, LIMITED
- in favor of -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Security Trustee
F. G. McCLINTOCK
==============================================================================
INDEX
CLAUSE SUBJECT MATTERPAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . 10
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 18
9 ENFORCEABILITY AND TRUSTEE'S POWERS . . . . . . . . . . . . . 19
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 21
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 22
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 22
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 23
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 25
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 25
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 25
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 26
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
EXHIBIT 2 FORM OF SUBSIDIARY GUARANTY
==============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 13th day of
November, 1996
BY
(1) READING & BATES OFFSHORE, LIMITED, an Oklahoma corporation having its
principal offices at 901 Threadneedle, Suite 200, Houston, Texas 77079
(the "Owner"),
IN FAVOR OF
(2) CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, a Norwegian banking
corporation having its office at 11 West 42nd Street, New York, New
York, as security trustee for the Banks (as hereinafter defined) and
as mortgagee (the "Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the jack-up drilling rig
F. G. McCLINTOCK documented under the laws and flag of the United
States of America with Official Number 562059 of 5,525 gross
registered tons and 1,657 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation
("Holdings"), (ii) Reading & Bates Drilling Co., an Oklahoma
corporation (the "Borrower"), (iii) the banks party thereto (the
"Banks"), (iv) Credit Lyonnais New York Branch and Banque Indosuez, as
documentation agents (the "Documentation Agents") and (v) the Trustee,
as administrative agent, arranger and security trustee (in such
capacity, the "Administrative Agent") (the form of which Credit
Agreement together with Exhibit B thereto but without the remaining
attachments is attached hereto as Exhibit 1), it was agreed among
other things that the Banks would make available to the Borrower upon
the terms and conditions therein described a reducing revolving credit
facility (the "Facility") in an aggregate amount at any time
outstanding of Three Hundred Million United States Dollars
(US$300,000,000), providing for the making of Loans and the issuance
of, and participation in, Letters of Credit as contemplated therein.
(C) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Borrower payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(D) The Owner, for good and valuable consideration has authorized,
executed and delivered a Subsidiary Guaranty (as modified, amended or
supplemented from time to time, the "Subsidiary Guaranty"), the form
of which Subsidiary Guaranty is attached hereto as Exhibit 2, in favor
of the Administrative Agent guaranteeing the performance by the
Borrower of its obligations under the Credit Agreement and the other
Credit Documents.
(E) This Mortgage is made for the benefit of the Trustee to secure the
guaranty by the Owner of (i) the full and prompt payment when due of
(x) the principal of and interest on the Notes issued, and Loans made,
under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued under the
Credit Agreement and (y) all other obligations and indebtedness
(including, without limitation, indemnities, Fees and interest
thereon) of the Borrower to the Secured Creditors (as hereinafter
defined), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and the other Credit
Documents including, without limitation, this Mortgage and the due
performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents including, without limitation, this Mortgage;
(ii) any and all sums advanced by the Trustee in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest
in the Collateral; (iii) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or
liabilities of the Borrower referred to in clause (i) above, after an
Event of Default shall have occurred and be continuing, the reasonable
expenses of the Trustee of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Trustee of its rights hereunder,
together with reasonable attorneys' fees of counsel to the Trustee and
court costs; and (iv) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Clause 13 of this
Mortgage (all such obligations, liabilities, sums and expenses
referred to in clauses (i) through (iv) above being collectively
referred to as the "Obligations"). It is acknowledged and agreed that
the "Obligations" shall include extensions of credit of the types
described above, whether outstanding on the date of this Mortgage or
extended from time to time after the date of this Mortgage.
(F) This First Preferred Mortgage is entered into by the Owner in
consideration of the Banks agreeing to make the Facility available to
the Borrower and as a condition thereto and for other good and
valuable consideration provided by the Banks (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:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Borrower, the Banks, the Documentation
Agents, and the Administrative Agent first referred to in Recital (B)
hereto, as modified, amended or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings together with interest, fees and all other obligations are
paid in full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et
seq. and any applicable state and local or foreign counterparts or
equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Borrower referred to in
Recital (C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (E) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
semi-submersible drilling rig JACK BATES owned by the Borrower
documented under the laws and flag of the United States with Official
Number 906283 of 19,928 gross registered tons and 14,948 net
registered tons; (ii) the offshore drilling rig W. D. KENT owned by
Reading & Bates Exploration Co. documented under the laws and flag of
the United States with Official Number 583169 of 5,383 gross
registered tons and 4,185 net registered tons; (iii) the offshore
drilling rig CHARLEY GRAVES owned by Reading and Bates Borneo Drilling
Co., Ltd. documented under the laws and flag of the Republic of Panama
with Patente Number 6618-76-CH of 5,829 gross registered tons and
1,748 net registered tons; (iv) the jack-up drilling rig RON TAPPMEYER
owned by Reading & Bates (A) Pty Ltd. documented under the laws and
flag of Australia with Official Number 855213 of 11,455 gross
registered tons and 3,436 net registered tons; (v) the semi-
submersible drilling rig J. W. McLEAN owned by the Borrower documented
under the laws and flag of the Republic of Panama with Patente Number
25384-PEXT of 15,453 gross registered tons and 4,636 net registered
tons; (vi) the semi-submersible drilling rig RIG 41 owned by the
Borrower documented under the laws and flag of the Republic of Panama
with the Patente Number to be assigned on the date hereof of 10,078
gross registered tons and 3,024 net registered tons; (vii) the jack-up
drilling rig HARVEY H. WARD owned by HRB Rig Corporation documented
under the laws and flag of the United States of America with Official
Number 642693 of 4,121 gross registered tons and 3,079 net registered
tons; (viii) the jack-up drilling rig GEORGE H. GALLOWAY owned by the
Owner documented under the laws and flag of the United States of
America with Official Number 651646 of 3,729 gross registered tons and
2,496 net registered tons; (ix) the jack-up drilling rig RANDOLPH YOST
owned by the Borrower documented under the laws and flag of the United
States of America with Official Number 601699 of 4,701 gross
registered tons and 4,701 net registered tons; (x) the jack-up
drilling rig J. T. ANGEL owned by the Borrower documented under the
laws and flag of the United States of America with Official Number
651645 of 4,186 gross registered tons and 3,090 net registered tons;
(xi) the jack-up drilling rig ROGER W. MOWELL owned by the Borrower
documented under the laws and flag of the United States of America
with Official Number 645360 of 4,121 gross registered tons and 3,079
net registered tons; (xii) the jack-up drilling rig D. R. STEWART
owned by Reading & Bates Exploration Co. documented under the laws and
flag of the United States of America with Official Number 626904 of
6,494 gross registered tons and 5,834 net registered tons; and (xiii)
the jack-up drilling rig C. E. THORNTON to be owned by HRB Rig
Corporation documented under the laws and flag of the United States of
America with Official Number 673210 of 6,096 gross registered tons and
6,096 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 written request of the
Administrative Agent, provide a bond or other security satisfactory to
the Administrative 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 written request of the Administrative Agent, provide a bond
or other security satisfactory to the Administrative 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 Administrative 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
Administrative Agent have been made as evidenced by the Administrative
Agent's written consent to such lien; (8) any lien in favor of the
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Administrative Agent under and as defined in the
Credit Agreement;
"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;
"Subsidiary Guaranty" means the agreement dated as of November 13,
1996 made by the Owner in favor of the Administrative Agent as first
referred to in Recital (D) hereto, as modified, amended or
supplemented from time to time;
"Ship Mortgage Act" means the United States Ship Mortgage Act, 1920,
as amended, recodified at 46 U.S.C. 31301, et seq.;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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) the Owner is in compliance with all applicable Environmental
Laws and all 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 Loan and at the time of the
issuance of each 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 Obligations, the Owner has granted, conveyed
and mortgaged and does by these presents grant, convey and mortgage
unto the Trustee, its successors and assigns, the whole of the Rig TO
HAVE AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty and
this Mortgage and shall observe and comply with the covenants, terms
and conditions contained in the Subsidiary Guaranty 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 Trustee agrees 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 any
Secured Creditor for payment by the Owner of the relevant
expense, claim, liability, loss, cost, duty, fee, charge or
other money incurred by a Secured Creditor 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 a Secured Creditor under this Mortgage and the
Subsidiary Guaranty 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
Trustee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Trustee shall not have to wait for the Administrative Agent
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 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 Trustee
may deem expedient; and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Secured Creditors or any other person:
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents (other than this Mortgage) or any other
document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Credit Parties or any other person
under the Credit Agreement, any of the other Security Documents
(other than this Mortgage) or any other document or security.
6. INSURANCE
6.01 The Owner covenants with the Trustee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains 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 Administrative 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 Rigs, such aggregate amount shall be at least 110%
of the Total Commitment. 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 American,
British and Scandinavian insurance markets or in such other
major international markets reasonably acceptable to the
Administrative 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
Administrative Agent. In addition, the Owner shall, at its own
expense, furnish to the Administrative Agent a mortgagee's
single interest policy providing coverage which, when aggregated
with the mortgagee's interest insurance furnished to the
Administrative Agent in respect of the Other Rigs, shall be in
an amount equal to at least 110% of the aggregate amount of the
Total Commitment (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 Administrative Agent). Such
mortgagee's interest insurance and any additional insurance
policies for the benefit of the Administrative Agent shall be
maintained in the broadest form available in the American,
British and Scandinavian markets or other major international
markets acceptable to the Administrative Agent through
underwriters acceptable to the Administrative 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
Administrative Agent.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the
Administrative Agent, shall contain conditions, terms,
stipulations and insuring covenants satisfactory to the
Administrative Agent, and shall be kept in full force and effect
by the Owner so long as any Obligations remain 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 Administrative Agent for distribution by it to itself, the
Banks and the Owner as their interests may appear, and shall
provide for at least ten days' prior notice to be given to the
Administrative 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 Administrative Agent and
the Trustee shall be named as co-assureds on all such policies
and insurance contracts, but without liability of the
Administrative Agent or the Trustee for premiums or calls.
Certified copies of all such policies, binders and other interim
insurance contracts shall be deposited with the Administrative
Agent. Originals shall also be provided upon the request of the
Administrative Agent. The Owner shall furnish to the
Administrative Agent annually a detailed report signed by a firm
of marine insurance brokers satisfactory to the Administrative
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 Administrative Agent by notice
to the underwriters, although the following insurance is payable
to the Administrative 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
directly 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 Administrative Agent (which
consent shall not be unreasonably withheld). Any loss covered
by this paragraph which is paid to the Administrative 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 Administrative Agent to, or as directed by, the Owner and
all other payments to the Administrative Agent of losses covered
by this paragraph shall be applied by the Administrative 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 Administrative
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 Administrative Agent.
(c) In the event of an actual or constructive Total Loss of the Rig,
the Administrative 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 Secured Creditors 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 provided in
Clause 10.
(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 Administrative
Agent advised of the progress of such renewals, and procure that
the insurers shall promptly confirm in writing to the
Administrative 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 Administrative 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 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 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 Self-Elevating Drilling Unit) 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
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
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 Trustee and the Administrative Agent copies of all
survey reports issued in respect thereof;
(g) permit the representatives of the Administrative Agent or
independent surveyors representing the 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 Administrative Agent may require;
(j) promptly furnish to the 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 request of the Trustee in writing, copies
of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(k) notify both the Trustee and the Administrative Agent forthwith
by telex or telecopy thereafter confirmed by letter of:
(i) any casualty to th e 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 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
Trustee; and
(vi) any intended deactivation or lay-up of the Rig (other
than for normal periods of inactivity between contracts
for the Rig during which periods the Rig remains manned)
and obtain the prior written consent of the Trustee;
(l) keep proper books of account in respect of the Rig and as and
when the Trustee or the Administrative Agent may so reasonably
require make such books available for inspection on behalf of
the 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) observe the obligations contained in Sections 7 and 8 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;
(n) not without the previous consent in writing of the 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 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 Trustee from time to time
such proof as the 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 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 CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH, as Security Trustee for
the Banks 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 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 Trustee
advised, in writing on such regular basis and in such
detail as the Trustee shall require, of the Owner's
response to such Environmental Claim or Environmental
Incident;
(s) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Trustee having first been obtained, and any such written consent
to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Trustee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of 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 Trustee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit 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 Credit 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 Secured Creditors 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 Administrative 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 Administrative 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 Administrative 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 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 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 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 Required Banks having
served on the Owner any such notice as is referred to in Section 9 of
the Credit Agreement) the security constituted by this Mortgage shall
become immediately enforceable and the 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 Trustee
without legal process and without liability of the 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 Administrative
Agent;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Administrative 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 Administrative
Agent take over or institute all such proceedings in connection
with the Rig, the Insurances, or any Requisition Compensation as
the 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 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 Obligations;
(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 Trustee in its absolute discretion
deems expedient and for the purposes aforesaid the 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 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 Trustee in or about the
exercise of the power vested in the 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 Trustee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The 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 Trustee by this Mortgage or to which the Trustee may
at any time be entitled hereunder.
9.03 Neither the Secured Creditors, 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 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 Trustee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Trustee has arisen in the manner provided in this Mortgage
and the sale shall be deemed to be within the power of the Trustee and
the receipt of the 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 Trustee (or any other Secured Creditor, as
the case may be) in respect of sale of the Rig or any part thereof, in
respect of recovery under the Insurances or in respect of Requisition
Compensation, shall be applied in the following manner:
(i) first, to the payment of all amounts owing the Trustee of the
type described in clauses (ii) and (iii) of Recital E;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to the
outstanding Obligations shall be paid to the Secured Creditors
as provided in Clause 10.01(c), with each Secured Creditor
receiving an amount equal to such Obligations held by it or, if
the proceeds are insufficient to pay in full all such
Obligations, its Pro Rata Share (as defined below) of the amount
remaining to be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and following
the termination of this Mortgage pursuant to Clause 3.01, any
surplus then remaining shall be paid to the Owner, subject,
however, to the rights of the holder of any then existing Lien
of which the Trustee has actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Trustee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Trustee shall be entitled to reply upon
(i) the Administrative Agent under the Credit Agreement and (ii)
the Secured Creditors for a determination (which the
Administrative Agent and each Secured Creditor, by their
acceptance of the benefits of this Mortgage shall be obligated
to provide upon request of the Trustee) of the outstanding
Obligations owed to the Secured Creditors. Unless it has actual
knowledge (including by way of written notice from a Secured
Creditor) to the contrary, the Administrative Agent under the
Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Trustee, in acting hereunder, shall
be entitled to assume that no obligations other than principal,
interest and regularly accruing fees are owing to any Secured
Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the 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 Trustee and
the other Secured Creditors 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 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
Trustee under this Mortgage,
in any such case, forthwith upon demand by the 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 Obligations, hereby irrevocably appoints the
Trustee as its attorney until the Total Commitment is terminated and
none of the Obligations remain outstanding 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 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 Trustee shall not put any person dealing with the
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 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 each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the Trustee
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and each of the Secured Creditors 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 such Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 the Subsidiary Guaranty or 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 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 Trustee against the amount of such shortfall. For
the purposes of this Clause 13.03, "rate of exchange" means the rate
at which the Trustee is able on the date of such payment (or, if it is
not practicable for the 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 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 any Secured Creditor on demand all costs, fees
and expenses, including, but not limited to, legal fees and expenses
and valuation fees and Taxes thereon incurred by any Secured Creditor
or for which any Secured Creditor may become liable in connection
with:
(a) the negotiation, preparation and execution of the Credit
Agreement, the Subsidiary Guaranty and the Credit 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, the
Subsidiary Guaranty or the Credit Documents (or any of them).
14.02 The Owner shall pay to the Trustee and the Administrative Agent on
demand all costs, fees and expenses (including, but not limited to,
legal fees and expenses) and Taxes thereon incurred by any Secured
Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement, the Subsidiary Guaranty or the
Credit Documents (or any of them) requested by the Owner,
necessary or advisable under applicable law or relating to the
syndication of the Facility, or initiated during the occurrence
and continuation of an Event of Default; and/or
(b) any consent or waiver required from the Trustee in relation to
the Credit Agreement, the Subsidiary Guaranty and the Credit
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, the Subsidiary
Guaranty and the Credit Documents (or any of them) may be subject or
give rise and shall indemnify the 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 Trustee hereunder shall be in writing and shall be
made to the following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Telefax: (212) 827-4888
Attention: Loan Administration
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit of
the Owner, the Secured Creditors 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 Section 12.04 of the Credit Agreement, each Bank 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 Trustee shall notify the Owner promptly following any such
assignment, transfer or change.
17. TOTAL AMOUNT, ETC.
17.01 The total amount of the direct or contingent obligations secured by
this Mortgage is Three Hundred Million U.S. Dollars (US$300,000,000)
of principal plus interest, fees, commissions and performance of
mortgage covenants. The interest of the Owner in the Rig is 100%.
The interest of the Trustee in the Rig is 100%. The date of maturity
is November 13, 2001, and the discharge amount is the same as the
total amount plus such other sums as shall be payable by the Owner to
the Banks under the Credit Agreement or the Subsidiary Guaranty.
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 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 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 Trustee may think fit. The 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 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 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the 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 Trustee may bring before the courts of such jurisdiction or
other judicial authority and for the purpose of any action which the
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 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 OFFSHORE, LIMITED
By_____________________________________
Name: T.W. Nagle
Title: Vice President and Treasurer
ACKNOWLEDGEMENT OF MORTGAGE
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 13th day of November, 1996 before me personally appeared Timothy W.
Nagle to me known who being by me duly sworn did depose and say that he
resides at 13307 Tosca Lane, Houston, TX; that he is Vice President and
Treasurer for READING & BATES OFFSHORE, LIMITED, 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 OFFSHORE,
LIMITED.
___________________
Notary Public
Exhibit 10.126
FIRST PREFERRED MORTGAGE
Dated November 13, 1996
READING & BATES DRILLING CO.
- in favor of -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Security Trustee
J. T. ANGEL
==============================================================================
INDEX
CLAUSE SUBJECT MATTER PAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . . 9
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 18
9 ENFORCEABILITY AND INDENTURE TRUSTEE'S POWERS . . . . . . . . 19
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 21
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 22
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 22
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 25
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 25
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 25
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
==============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 13th day of
November, 1996
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) CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, a Norwegian banking
corporation having its office at 11 West 42nd Street, New York, New
York, as security trustee for the Banks (as hereinafter defined) and
as mortgagee (the "Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the jack-up drilling rig
J. T. ANGEL documented under the laws and flag of the United States of
America with Official Number 651645 of 4,186 gross registered tons and
3,090 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation,
("Holdings"), (ii) the Owner, as borrower, (iii) the banks party
thereto (the "Banks"), (iv) Credit Lyonnais New York Branch and Banque
Indosuez, as documentation agents (the "Documentation Agents") and (v)
the Trustee, as administrative agent, arranger and security trustee
(in such capacity, the "Administrative Agent") (the form of which
Credit Agreement together with Exhibit B thereto but without the
remaining attachments is attached hereto as Exhibit 1), it was agreed
among other things that the Banks would make available to the Owner
upon the terms and conditions therein described a reducing revolving
credit facility (the "Facility") in an aggregate amount at any time
outstanding of Three Hundred Million United States Dollars
(US$300,000,000), providing for the making of Loans and the issuance
of, and participation in, Letters of Credit as contemplated therein.
(C) The obligations of the Owner with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Owner payable to the order of
the respective Banks (each a "Note" and collectively the "Notes") (the
form of which is attached as Exhibit B to the Credit Agreement).
(D) This Mortgage is made for the benefit of the Trustee to secure (i) the
full and prompt payment when due of (x) the principal of and interest
on the Notes issued, and Loans made, under the Credit Agreement, and
all reimbursement obligations and Unpaid Drawings with respect to the
Letters of Credit issued under the Credit Agreement and (y) all other
obligations and indebtedness (including without limitation,
indemnities, Fees and interest thereon) of the Owner to the Secured
Creditors (as hereinafter defined), whether now existing or hereafter
incurred under, arising out of or in connection with the Credit
Agreement and the other Credit Documents including, without
limitation, this Mortgage and the due performance and compliance by
the Owner with all of the terms, conditions and agreements contained
in the Credit Agreement and the other Credit Documents including,
without limitation, this Mortgage; (ii) any and all sums advanced by
the Trustee in order to preserve the Collateral (as hereinafter
defined) or preserve its security interest in the Collateral; (iii) in
the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of the Owner referred to in
clause (i) above, after an Event of Default shall have occurred and be
continuing, the reasonable expenses of the Trustee of re-taking,
holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Trustee
of its rights hereunder, together with reasonable attorneys' fees of
counsel to the Trustee and court costs; and (iv) all amounts paid by
any Indemnitee as to which such Indemnitee has the right to
reimbursement under Clause 13 of this Mortgage (all such obligations,
liabilities, sums and expenses referred to in clauses (i) through (iv)
above being collectively referred to as the "Obligations"). It is
acknowledged and agreed that the "Obligations" shall include
extensions of credit of the types described above, whether outstanding
on the date of this Mortgage or extended from time to time after the
date of this Mortgage.
(E) This First Preferred Mortgage is entered into by the Owner in
consideration of the Banks agreeing, at the request of the Owner, to
make the Facility available to the Owner under the terms of the Credit
Agreement and as a condition thereto and for other good and valuable
consideration provided by the Banks (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:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Owner, the Banks, the Documentation
Agents and the Administrative Agent first referred to in Recital (B)
hereto, as modified, amended or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings, together with interest, fees and all other obligations are
paid in full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et
seq. and any applicable state and local or foreign counterparts or
equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Owner referred to in Recital
(C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (D) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
jack-up drilling rig D. R. STEWART owned by Reading & Bates
Exploration Co. ("R&B Exploration") documented under the laws and flag
of the United States with Official Number 626904 of 6,494 gross
registered tons and 5,834 net registered tons; (ii) the offshore
drilling rig W. D. KENT owned by R&B Exploration documented under the
laws and flag of the United States with Official Number 583169 of
5,383 gross registered tons and 4,185 net registered tons; (iii) the
offshore drilling rig CHARLEY GRAVES owned by Reading and Bates Borneo
Drilling Co., Ltd. documented under the laws and flag of the Republic
of Panama with Patente Number 6618-76-CH of 5,829 gross registered
tons and 1,748 net registered tons; (iv) the jack-up drilling rig RON
TAPPMEYER owned by Reading & Bates (A) Pty Ltd. documented under the
laws and flag of Australia with Official Number 855213 of 11,455 gross
registered tons and 3,436 net registered tons; (v) the semi-
submersible drilling rig J. W. McLEAN owned by the Owner documented
under the laws and flag of the Republic of Panama with Patente Number
25384-PEXT of 15,453 gross registered tons and 4,636 net registered
tons; (vi) the semi-submersible drilling rig RIG 41 owned by the Owner
documented under the laws and flag of the Republic of Panama with the
Patente Number to be assigned on the date hereof of 10,078 gross
registered tons and 3,024 net registered tons; (vii) the jack-up
drilling rig HARVEY H. WARD owned by HRB Rig Corporation documented
under the laws and flag of the United States of America with Official
Number 642693 of 4,121 gross registered tons and 3,079 net registered
tons; (viii) the jack-up drilling rig F. G. McCLINTOCK owned by
Reading & Bates Offshore, Limited documented under the laws and flag
of the United States of America with Official Number 562059 of 5,525
gross registered tons and 1,657 net registered tons; (ix) the semi-
submersible drilling rig JACK BATES owned by the Owner documented
under the laws and flag of the United States of America with Official
Number 906283 of 19,928 gross registered tons and 14,948 net
registered tons; (x) the jack-up drilling rig RANDOLPH YOST owned by
the Owner documented under the laws and flag of the United States of
America with Official Number 601699 of 4,701 gross registered tons and
4,701 net registered tons; (xi) the jack-up drilling rig ROGER W.
MOWELL owned by the Owner documented under the laws and flag of the
United States of America with Official Number 645360 of 4,121 gross
registered tons and 3,079 net registered tons; (xii) the jack-up
drilling rig GEORGE H. GALLOWAY owned by Reading & Bates Offshore,
Limited documented under the laws and flag of the United States of
America with Official Number 651646 of 3,729 gross registered tons and
2,496 net registered tons; and (xiii) the jack-up drilling rig C. E.
THORNTON to be owned by HRB Rig Corporation documented under the laws
and flag of the United States of America with Official Number 673210
of 6,096 gross registered tons and 6,096 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 written request of the
Administrative Agent, provide a bond or other security satisfactory to
the Administrative 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 written request of the Administrative Agent, provide a bond
or other security satisfactory to the Administrative 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 Administrative 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
Administrative Agent have been made as evidenced by the Administrative
Agent's written consent to such lien; (8) any lien in favor of the
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Administrative Agent under and as defined in the
Credit Agreement;
"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;
"Ship Mortgage Act" means the United States Ship Mortgage Act, 1920,
as amended, recodified at 46 U.S.C. 31301, et seq.;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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) the Owner is in compliance with all applicable Environmental
Laws and all 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 Loan and at the time of the
issuance of each 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 Obligations, the Owner has granted, conveyed
and mortgaged and does by these presents grant, convey and mortgage
unto the Trustee, its successors and assigns, the whole of the Rig TO
HAVE AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty and
this Mortgage and shall observe and comply with the covenants, terms
and conditions contained in the Subsidiary Guaranty 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 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors 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 any
Secured Creditor 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 any Secured Creditor 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 any Secured Creditor under this Mortgage and the other
Credit 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
Trustee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Trustee shall not have to wait for the Administrative Agent,
the Banks or the Letter of Credit Issuer 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 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 Trustee
may deem expedient; and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Credit Parties, the Secured Creditors or any other
person:
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents (other than this Mortgage) or any other
document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Credit Parties or any other person
under the Credit Agreement, any of the other Credit Documents
(other than this Mortgage) or any other document or security.
5.04 Until the Obligations have been satisfied in full to the satisfaction
of the Trustee, the Owner shall not by virtue of any payment made
hereunder on account of the Obligations or by virtue of any
enforcement by the 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 Holdings (whether
such relationship or transaction shall constitute the Owner a creditor
of Holdings, a guarantor of the obligations of Holdings or a party
subrogated to the rights of others against Holdings 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 Secured
Creditors 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 guaranty, security or agreement; or
(c) exercise any right of set-off or counterclaim against Holdings
or any such co-surety; or
(d) receive, claim or have the benefit of any payment, distribution,
security or indemnity from Holdings or any such co-surety; or
(e) unless so directed by the Trustee (when the Owner will prove in
accordance with such directions), claim as a creditor of
Holdings or any such co-surety in competition with the Trustee.
The Owner shall hold in trust for the Trustee and forthwith pay or
transfer (as appropriate) to the 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 guaranty (whether
by reason of legal limitation, illegality, disability or incapacity on
or of Holdings 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, Holdings, the Trustee or any other person),
then the Owner will, as a separate and independent stipulation and as
a primary obligor, pay to the 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
Trustee against any loss or liability suffered or incurred by the
Secured Creditors or any of them as a result of such irrecoverability.
6. INSURANCE
6.01 The Owner covenants with the Trustee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligations remain 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 Administrative 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 Rigs, such aggregate amount shall be at least 110%
of the Total Commitment. 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 American,
British and Scandinavian insurance markets or in such other
major international markets reasonably acceptable to the
Administrative 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
Administrative Agent. In addition, the Owner shall, at its own
expense, furnish to the Administrative Agent a mortgagee's
single interest policy providing coverage which, when aggregated
with the mortgagee's interest insurance furnished to the
Administrative Agent in respect of the Other Rigs, shall be in
an amount equal to at least 110% of the aggregate amount of the
Total Commitment (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 Administrative Agent). Such
mortgagee's interest insurance and any additional insurance
policies for the benefit of the Administrative Agent shall be
maintained in the broadest form available in the American,
British and Scandinavian markets or other major international
markets acceptable to the Administrative Agent through
underwriters acceptable to the Administrative 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
Administrative Agent.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the
Administrative Agent, shall contain conditions, terms,
stipulations and insuring covenants satisfactory to the
Administrative Agent, and shall be kept in full force and effect
by the Owner so long as any Obligations remain 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 Administrative Agent for distribution by it to itself, the
Banks and the Owner as their interests may appear, and shall
provide for at least ten days' prior notice to be given to the
Administrative 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 Administrative Agent and
the Trustee shall be named as co-assureds on all such policies
and insurance contracts, but without liability of the
Administrative Agent or the Trustee for premiums or calls.
Certified copies of all such policies, binders and other interim
insurance contracts shall be deposited with the Administrative
Agent. Originals shall also be provided upon the request of the
Administrative Agent. The Owner shall furnish to the
Administrative Agent annually a detailed report signed by a firm
of marine insurance brokers satisfactory to the Administrative
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 Administrative Agent by notice
to the underwriters, although the following insurance is payable
to the Administrative 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
directly 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 Administrative Agent (which
consent shall not be unreasonably withheld). Any loss covered
by this paragraph which is paid to the Administrative 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 Administrative Agent to, or as directed by, the Owner and
all other payments to the Administrative Agent of losses covered
by this paragraph shall be applied by the Administrative 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 Administrative
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 Administrative Agent.
(c) In the event of an actual or constructive Total Loss of the Rig,
the Administrative 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 Secured Creditors 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 provided in
Clause 10.
(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 Administrative
Agent advised of the progress of such renewals, and procure that
the insurers shall promptly confirm in writing to the
Administrative 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 Administrative 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 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 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 Self-Elevating Drilling Unit) 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
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
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 Trustee and the Administrative Agent copies of all
survey reports issued in respect thereof;
(g) permit the representatives of the Administrative Agent or
independent surveyors representing the 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 Administrative Agent may require;
(j) promptly furnish to the 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 request of the Trustee in writing, copies
of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(k) notify both the Trustee and the Administrative 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 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
Trustee; and
(vi) any intended deactivation or lay-up of the Rig (other
than for normal periods of inactivity between contracts
for the Rig during which periods the Rig remains manned)
and obtain the prior written consent of the Trustee;
(l) keep proper books of account in respect of the Rig and as and
when the Trustee or the Administrative Agent may so reasonably
require make such books available for inspection on behalf of
the 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) observe the obligations contained in Sections 7 and 8 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;
(n) not without the previous consent in writing of the 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 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 Trustee from time to time
such proof as the 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 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 CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH, as Security Trustee for
the Banks 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 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
Trustee advised, in writing on such regular basis and in
such detail as the Trustee shall require, of the Owner's
response to such Environmental Claim or Environmental
Incident;
(s) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Trustee having first been obtained, and any such written consent
to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Trustee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of 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 Trustee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit 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 Credit 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 Secured Creditors 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 Administrative 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 Administrative 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 Administrative 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 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 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 Required Banks having
served on the Owner any such notice as is referred to in Section 9 of
the Credit Agreement) the security constituted by this Mortgage shall
become immediately enforceable and the 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 Trustee
without legal process and without liability of the 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 Administrative
Agent;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Administrative 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 Administrative
Agent take over or institute all such proceedings in connection
with the Rig, the Insurances, or any Requisition Compensation as
the 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 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 Obligations;
(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 Trustee in its absolute discretion
deems expedient and for the purposes aforesaid the 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 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 Trustee in or about the
exercise of the power vested in the 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 Trustee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The 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 Trustee by this Mortgage or to which the Trustee may
at any time be entitled hereunder.
9.03 Neither the Secured Creditors 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 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 Trustee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Trustee has arisen in the manner provided in this Mortgage
and the sale shall be deemed to be within the power of the Trustee and
the receipt of the 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 (a) All moneys received by the Trustee (or any other Secured
Creditor, as the case may be) in respect of sale of the Rig or
any part thereof; in respect of recovery under the Insurances;
or in respect of Requisition Compensation, shall be applied in
the following manner:
(i) first, to the payment of all amounts owing the Trustee of
the type described in clauses (ii) and (iii) of Recital
D;
(ii) second, to the extent moneys remain after the applic-
ation application pursuant to the preceding clause (i),
an amount equal to the outstanding Obligations shall be
paid to the Secured Creditors as provided in Clause
10.01(c), with each Secured Creditor receiving an amount
equal to such Obligations held by it or, if the
proceeds are insufficient to pay in full all such
Obligations, its Pro Rata Share (as defined below) of
the amount remaining to be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and
following the termination of this Mortgage pursuant to
Clause 3.01, any surplus then remaining shall be paid
to the Owner, subject, however, to the rights of the
holder of any then existing Lien of which the Trustee
has actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Trustee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Trustee shall be entitled to reply upon
(i) the Administrative Agent under the Credit Agreement and (ii)
the Secured Creditors for a determination (which the
Administrative Agent and each Secured Creditor, by their
acceptance of the benefits of this Mortgage shall be obligated
to provide upon request of the Trustee) of the outstanding
Obligations owed to the Secured Creditors. Unless it has actual
knowledge (including by way of written notice from a Secured
Creditor) to the contrary, the Administrative Agent under the
Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Trustee, in acting hereunder, shall
be entitled to assume that no obligations other than principal,
interest and regularly accruing fees are owing to any Secured
Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the 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 Trustee, and
the other Secured Creditors 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 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
Trustee under this Mortgage,
in any such case, forthwith upon demand by the 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 Obligations, hereby irrevocably appoints the
Trustee as its attorney until the Total Commitment is terminated and
none of the Obligations remain outstanding 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 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 Trustee shall not put any person dealing with the
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 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 each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the Trustee
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and the Secured Creditors 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 such Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 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 Trustee against the amount of such shortfall. For the purposes of
this Clause 13.03, "rate of exchange" means the rate at which the
Trustee is able on the date of such payment (or, if it is not
practicable for the 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 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 any Secured Creditor on demand all costs, fees
and expenses, including, but not limited to, legal fees and expenses
and valuation fees and Taxes thereon incurred by any Secured Creditor
or for which any Secured Creditor may become liable in connection
with:
(a) the negotiation, preparation and execution of the Credit
Agreement and the Credit 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
Credit Documents (or any of them).
14.02 The Owner shall pay to the Trustee and the Administrative Agent on
demand all costs, fees and expenses (including, but not limited to,
legal fees and expenses) and Taxes thereon incurred by any Secured
Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement and the Credit Documents (or any
of them) requested by the Owner, necessary or advisable under
applicable law or relating to the syndication of the Facility,
or initiated during the occurrence and continuation of an Event
of Default; and/or
(b) any consent or waiver required from the Trustee in relation to
the Credit Agreement and the Credit 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 Credit
Documents (or any of them) may be subject or give rise and shall
indemnify the 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 Trustee hereunder shall be in writing and shall be
made to the following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Telefax: (212) 827-4888
Attention: Loan Administration
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit of
the Owner, the Secured Creditors 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 Section 12.04 of the Credit Agreement, each Bank 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 Trustee shall notify the Owner promptly following any such
assignment, transfer or change.
17. TOTAL AMOUNT, ETC.
17.01 The total amount of the direct or contingent obligations secured by
this Mortgage is Three Hundred Million U.S. Dollars (US$300,000,000)
of principal plus interest, fees, commissions and performance of
mortgage covenants. The interest of the Owner in the Rig is 100%.
The interest of the Trustee in the Rig is 100%. The date of maturity
is November 13, 2001, and the discharge amount is the same as the
total amount plus such other sums as shall be payable by the Owner to
the Banks under the Credit Agreement.
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 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 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 Trustee may think fit. The 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 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 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 enforce the Obligations and for the purpose
of any proceedings for such enforcement the Owner hereby submits to
the jurisdiction of the courts of any country of the choice of the
Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the 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 Trustee may bring before the courts of such jurisdiction or
other judicial authority and for the purpose of any action which the
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 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_____________________________________
Name: T.W. Nagle
Title: Vice President and Treasurer
ACKNOWLEDGEMENT OF MORTGAGE
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 13th day of November, 1996 before me personally appeared Timothy W.
Nagle to me known who being by me duly sworn did depose and say that he
resides at 13307 Tosca Lane, Houston, TX; 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 10.127
FIRST PREFERRED MORTGAGE
Dated November 13, 1996
READING & BATES DRILLING CO.
- in favor of -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Security Trustee
ROGER W. MOWELL
==============================================================================
INDEX
CLAUSE SUBJECT MATTER PAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . . 9
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 18
9 ENFORCEABILITY AND INDENTURE TRUSTEE'S POWERS . . . . . . . . 19
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 21
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 22
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 22
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 25
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 25
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 25
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
==============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 13th day of
November, 1996
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) CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, a Norwegian banking
corporation having its office at 11 West 42nd Street, New York, New
York, as security trustee for the Banks (as hereinafter defined) and
as mortgagee (the "Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the jack-up drilling rig
ROGER W. MOWELL documented under the laws and flag of the United
States of America with Official Number 645360 of 4,121 gross
registered tons and 3,079 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation,
("Holdings"), (ii) the Owner, as borrower, (iii) the banks party
thereto (the "Banks"), (iv) Credit Lyonnais New York Branch and Banque
Indosuez, as documentation agents (the "Documentation Agents") and (v)
the Trustee, as administrative agent, arranger and security trustee
(in such capacity, the "Administrative Agent") (the form of which
Credit Agreement together with Exhibit B thereto but without the
remaining attachments is attached hereto as Exhibit 1), it was agreed
among other things that the Banks would make available to the Owner
upon the terms and conditions therein described a reducing revolving
credit facility (the "Facility") in an aggregate amount at any time
outstanding of Three Hundred Million United States Dollars
(US$300,000,000), providing for the making of Loans and the issuance
of, and participation in, Letters of Credit as contemplated therein.
(C) The obligations of the Owner with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Owner payable to the order of
the respective Banks (each a "Note" and collectively the "Notes") (the
form of which is attached as Exhibit B to the Credit Agreement).
(D) This Mortgage is made for the benefit of the Trustee to secure (i) the
full and prompt payment when due of (x) the principal of and interest
on the Notes issued, and Loans made, under the Credit Agreement, and
all reimbursement obligations and Unpaid Drawings with respect to the
Letters of Credit issued under the Credit Agreement and (y) all other
obligations and indebtedness (including without limitation,
indemnities, Fees and interest thereon) of the Owner to the Secured
Creditors (as hereinafter defined), whether now existing or hereafter
incurred under, arising out of or in connection with the Credit
Agreement and the other Credit Documents including, without
limitation, this Mortgage and the due performance and compliance by
the Owner with all of the terms, conditions and agreements contained
in the Credit Agreement and the other Credit Documents including,
without limitation, this Mortgage; (ii) any and all sums advanced by
the Trustee in order to preserve the Collateral (as hereinafter
defined) or preserve its security interest in the Collateral; (iii) in
the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of the Owner referred to in
clause (i) above, after an Event of Default shall have occurred and be
continuing, the reasonable expenses of the Trustee of re-taking,
holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Trustee
of its rights hereunder, together with reasonable attorneys' fees of
counsel to the Trustee and court costs; and (iv) all amounts paid by
any Indemnitee as to which such Indemnitee has the right to
reimbursement under Clause 13 of this Mortgage (all such obligations,
liabilities, sums and expenses referred to in clauses (i) through (iv)
above being collectively referred to as the "Obligations"). It is
acknowledged and agreed that the "Obligations" shall include
extensions of credit of the types described above, whether outstanding
on the date of this Mortgage or extended from time to time after the
date of this Mortgage.
(E) This First Preferred Mortgage is entered into by the Owner in
consideration of the Banks agreeing, at the request of the Owner, to
make the Facility available to the Owner under the terms of the Credit
Agreement and as a condition thereto and for other good and valuable
consideration provided by the Banks (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:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Owner, the Banks, the Documentation
Agents and the Administrative Agent first referred to in Recital (B)
hereto, as modified, amended or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings, together with interest, fees and all other obligations are
paid in full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et
seq. and any applicable state and local or foreign counterparts or
equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Owner referred to in Recital
(C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (D) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
jack-up drilling rig D. R. STEWART owned by Reading & Bates
Exploration Co. ("R&B Exploration") documented under the laws and flag
of the United States with Official Number 626904 of 6,494 gross
registered tons and 5,834 net registered tons; (ii) the offshore
drilling rig W. D. KENT owned by R&B Exploration documented under the
laws and flag of the United States with Official Number 583169 of
5,383 gross registered tons and 4,185 net registered tons; (iii) the
offshore drilling rig CHARLEY GRAVES owned by Reading and Bates Borneo
Drilling Co., Ltd. documented under the laws and flag of the Republic
of Panama with Patente Number 6618-76-CH of 5,829 gross registered
tons and 1,748 net registered tons; (iv) the jack-up drilling rig RON
TAPPMEYER owned by Reading & Bates (A) Pty Ltd. documented under the
laws and flag of Australia with Official Number 855213 of 11,455 gross
registered tons and 3,436 net registered tons; (v) the semi-
submersible drilling rig J. W. McLEAN owned by the Owner documented
under the laws and flag of the Republic of Panama with Patente Number
25384-PEXT of 15,453 gross registered tons and 4,636 net registered
tons; (vi) the semi-submersible drilling rig RIG 41 owned by the Owner
documented under the laws and flag of the Republic of Panama with the
Patente Number to be assigned on the date hereof of 10,078 gross
registered tons and 3,024 net registered tons; (vii) the jack-up
drilling rig HARVEY H. WARD owned by HRB Rig Corporation documented
under the laws and flag of the United States of America with Official
Number 642693 of 4,121 gross registered tons and 3,079 net registered
tons; (viii) the jack-up drilling rig F. G. McCLINTOCK owned by
Reading & Bates Offshore, Limited documented under the laws and flag
of the United States of America with Official Number 562059 of 5,525
gross registered tons and 1,657 net registered tons; (ix) the semi-
submersible drilling rig JACK BATES owned by the Owner documented
under the laws and flag of the United States of America with Official
Number 906283 of 19,928 gross registered tons and 14,948 net
registered tons; (x) the jack-up drilling rig J. T. ANGEL owned by the
Owner documented under the laws and flag of the United States of
America with Official Number 651645 of 4,186 gross registered tons and
3,090 net registered tons; (xi) the jack-up drilling rig RANDOLPH YOST
owned by the Owner documented under the laws and flag of the United
States of America with Official Number 601699 of 4,701 gross
registered tons and 4,701 net registered tons; (xii) the jack-up
drilling rig GEORGE H. GALLOWAY owned by Reading & Bates Offshore,
Limited documented under the laws and flag of the United States of
America with Official Number 651646 of 3,729 gross registered tons and
2,496 net registered tons; and (xiii) the jack-up drilling rig C. E.
THORNTON to be owned by HRB Rig Corporation documented under the laws
and flag of the United States of America with Official Number 673210
of 6,096 gross registered tons and 6,096 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 written request of the
Administrative Agent, provide a bond or other security satisfactory to
the Administrative 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 written request of the Administrative Agent, provide a bond
or other security satisfactory to the Administrative 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 Administrative 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
Administrative Agent have been made as evidenced by the Administrative
Agent's written consent to such lien; (8) any lien in favor of the
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Administrative Agent under and as defined in the
Credit Agreement;
"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;
"Ship Mortgage Act" means the United States Ship Mortgage Act, 1920,
as amended, recodified at 46 U.S.C. 31301, et seq.;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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) the Owner is in compliance with all applicable Environmental
Laws and all 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 Loan and at the time of the
issuance of each 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 Obligations, the Owner has granted, conveyed
and mortgaged and does by these presents grant, convey and mortgage
unto the Trustee, its successors and assigns, the whole of the Rig TO
HAVE AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty and
this Mortgage and shall observe and comply with the covenants, terms
and conditions contained in the Subsidiary Guaranty 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 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors 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 any
Secured Creditor 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 any Secured Creditor 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 any Secured Creditor under this Mortgage and the other
Credit 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
Trustee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Trustee shall not have to wait for the Administrative Agent,
the Banks or the Letter of Credit Issuer 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 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 Trustee
may deem expedient; and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Credit Parties, the Secured Creditors or any other
person:
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents (other than this Mortgage) or any other
document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Credit Parties or any other person
under the Credit Agreement, any of the other Credit Documents
(other than this Mortgage) or any other document or security.
5.04 Until the Obligations have been satisfied in full to the satisfaction
of the Trustee, the Owner shall not by virtue of any payment made
hereunder on account of the Obligations or by virtue of any
enforcement by the 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 Holdings (whether
such relationship or transaction shall constitute the Owner a creditor
of Holdings, a guarantor of the obligations of Holdings or a party
subrogated to the rights of others against Holdings 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 Secured
Creditors 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 guaranty, security or agreement; or
(c) exercise any right of set-off or counterclaim against Holdings
or any such co-surety; or
(d) receive, claim or have the benefit of any payment, distribution,
security or indemnity from Holdings or any such co-surety; or
(e) unless so directed by the Trustee (when the Owner will prove in
accordance with such directions), claim as a creditor of
Holdings or any such co-surety in competition with the Trustee.
The Owner shall hold in trust for the Trustee and forthwith pay or
transfer (as appropriate) to the 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 guaranty (whether
by reason of legal limitation, illegality, disability or incapacity on
or of Holdings 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, Holdings, the Trustee or any other person),
then the Owner will, as a separate and independent stipulation and as
a primary obligor, pay to the 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
Trustee against any loss or liability suffered or incurred by the
Secured Creditors or any of them as a result of such irrecoverability.
6. INSURANCE
6.01 The Owner covenants with the Trustee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligations remain 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 Administrative 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 Rigs, such aggregate amount shall be at least 110%
of the Total Commitment. 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 American,
British and Scandinavian insurance markets or in such other
major international markets reasonably acceptable to the
Administrative 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
Administrative Agent. In addition, the Owner shall, at its own
expense, furnish to the Administrative Agent a mortgagee's
single interest policy providing coverage which, when aggregated
with the mortgagee's interest insurance furnished to the
Administrative Agent in respect of the Other Rigs, shall be in
an amount equal to at least 110% of the aggregate amount of the
Total Commitment (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 Administrative Agent). Such
mortgagee's interest insurance and any additional insurance
policies for the benefit of the Administrative Agent shall be
maintained in the broadest form available in the American,
British and Scandinavian markets or other major international
markets acceptable to the Administrative Agent through
underwriters acceptable to the Administrative 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
Administrative Agent.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the
Administrative Agent, shall contain conditions, terms,
stipulations and insuring covenants satisfactory to the
Administrative Agent, and shall be kept in full force and effect
by the Owner so long as any Obligations remain 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 Administrative Agent for distribution by it to itself, the
Banks and the Owner as their interests may appear, and shall
provide for at least ten days' prior notice to be given to the
Administrative 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 Administrative Agent and
the Trustee shall be named as co-assureds on all such policies
and insurance contracts, but without liability of the
Administrative Agent or the Trustee for premiums or calls.
Certified copies of all such policies, binders and other interim
insurance contracts shall be deposited with the Administrative
Agent. Originals shall also be provided upon the request of the
Administrative Agent. The Owner shall furnish to the
Administrative Agent annually a detailed report signed by a firm
of marine insurance brokers satisfactory to the Administrative
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 Administrative Agent by notice
to the underwriters, although the following insurance is payable
to the Administrative 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
directly 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 Administrative Agent (which
consent shall not be unreasonably withheld). Any loss covered
by this paragraph which is paid to the Administrative 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 Administrative Agent to, or as directed by, the Owner and
all other payments to the Administrative Agent of losses covered
by this paragraph shall be applied by the Administrative 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 Administrative
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 Administrative Agent.
(c) In the event of an actual or constructive Total Loss of the Rig,
the Administrative 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 Secured Creditors 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 provided in
Clause 10.
(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 Administrative
Agent advised of the progress of such renewals, and procure that
the insurers shall promptly confirm in writing to the
Administrative 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 Administrative 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 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 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 Self-Elevating Drilling Unit) 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
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
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 Trustee and the Administrative Agent copies of all
survey reports issued in respect thereof;
(g) permit the representatives of the Administrative Agent or
independent surveyors representing the 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 Administrative Agent may require;
(j) promptly furnish to the 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 request of the Trustee in writing, copies
of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(k) notify both the Trustee and the Administrative 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 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
Trustee; and
(vi) any intended deactivation or lay-up of the Rig (other
than for normal periods of inactivity between contracts
for the Rig during which periods the Rig remains manned)
and obtain the prior written consent of the Trustee;
(l) keep proper books of account in respect of the Rig and as and
when the Trustee or the Administrative Agent may so reasonably
require make such books available for inspection on behalf of
the 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) observe the obligations contained in Sections 7 and 8 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;
(n) not without the previous consent in writing of the 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 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 Trustee from time to time
such proof as the 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 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 CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH, as Security Trustee for
the Banks 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 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
Trustee advised, in writing on such regular basis and in
such detail as the Trustee shall require, of the Owner's
response to such Environmental Claim or Environmental
Incident;
(s) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Trustee having first been obtained, and any such written consent
to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Trustee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of 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 Trustee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit 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 Credit 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 Secured Creditors 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 Administrative 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 Administrative 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 Administrative 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 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 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 Required Banks having
served on the Owner any such notice as is referred to in Section 9 of
the Credit Agreement) the security constituted by this Mortgage shall
become immediately enforceable and the 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 Trustee
without legal process and without liability of the 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 Administrative
Agent;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Administrative 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 Administrative
Agent take over or institute all such proceedings in connection
with the Rig, the Insurances, or any Requisition Compensation as
the 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 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 Obligations;
(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 Trustee in its absolute discretion
deems expedient and for the purposes aforesaid the 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 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 Trustee in or about the
exercise of the power vested in the 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 Trustee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The 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 Trustee by this Mortgage or to which the Trustee may
at any time be entitled hereunder.
9.03 Neither the Secured Creditors 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 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 Trustee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Trustee has arisen in the manner provided in this Mortgage
and the sale shall be deemed to be within the power of the Trustee and
the receipt of the 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 (a) All moneys received by the Trustee (or any other Secured
Creditor, as the case may be) in respect of sale of the Rig or
any part thereof; in respect of recovery under the Insurances;
or in respect of Requisition Compensation, shall be applied in
the following manner:
(i) first, to the payment of all amounts owing the Trustee of
the type described in clauses (ii) and (iii) of Recital
D;
(ii) second, to the extent moneys remain after the
application pursuant to the preceding clause (i), an
amount equal to the outstanding Obligations shall be paid
to the Secured Creditors as provided in Clause 10.01(c),
with each Secured Creditor receiving an amount equal to
such Obligations held by it or, if the proceeds are
insufficient to pay in full all such Obligations, its Pro
Rata Share (as defined below) of the amount remaining
to be distributed; and
(iii) third, to the extent moneys remain after the
application pursuant to the preceding clauses (i) and (ii),
and following the termination of this Mortgage pursuant
to Clause 3.01, any surplus then remaining shall be paid
to the Owner, subject, however, to the rights of the
holder of any then existing Lien of which the Trustee has
actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Trustee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Trustee shall be entitled to reply upon
(i) the Administrative Agent under the Credit Agreement and (ii)
the Secured Creditors for a determination (which the
Administrative Agent and each Secured Creditor, by their
acceptance of the benefits of this Mortgage shall be obligated
to provide upon request of the Trustee) of the outstanding
Obligations owed to the Secured Creditors. Unless it has actual
knowledge (including by way of written notice from a Secured
Creditor) to the contrary, the Administrative Agent under the
Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Trustee, in acting hereunder, shall
be entitled to assume that no obligations other than principal,
interest and regularly accruing fees are owing to any Secured
Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the 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 Trustee, and
the other Secured Creditors 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 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
Trustee under this Mortgage,
in any such case, forthwith upon demand by the 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 Obligations, hereby irrevocably appoints the
Trustee as its attorney until the Total Commitment is terminated and
none of the Obligations remain outstanding 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 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 Trustee shall not put any person dealing with the
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 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 each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the Trustee
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and the Secured Creditors 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 such Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 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 Trustee against the amount of such shortfall. For the purposes of
this Clause 13.03, "rate of exchange" means the rate at which the
Trustee is able on the date of such payment (or, if it is not
practicable for the 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 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 any Secured Creditor on demand all costs, fees and
expenses, including, but not limited to, legal fees and expenses and
valuation fees and Taxes thereon incurred by any Secured Creditor or
for which any Secured Creditor may become liable in connection with:
(a) the negotiation, preparation and execution of the Credit
Agreement and the Credit 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
Credit Documents (or any of them).
14.02 The Owner shall pay to the Trustee and the Administrative Agent on
demand all costs, fees and expenses (including, but not limited to,
legal fees and expenses) and Taxes thereon incurred by any Secured
Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement and the Credit Documents (or any
of them) requested by the Owner, necessary or advisable under
applicable law or relating to the syndication of the Facility,
or initiated during the occurrence and continuation of an Event
of Default; and/or
(b) any consent or waiver required from the Trustee in relation to
the Credit Agreement and the Credit 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 Credit
Documents (or any of them) may be subject or give rise and shall
indemnify the 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 Trustee hereunder shall be in writing and shall be
made to the following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Telefax: (212) 827-4888
Attention: Loan Administration
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit of
the Owner, the Secured Creditors 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 Section 12.04 of the Credit Agreement, each Bank 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 Trustee shall notify the Owner promptly following any such
assignment, transfer or change.
17. TOTAL AMOUNT, ETC.
17.01 The total amount of the direct or contingent obligations secured by
this Mortgage is Three Hundred Million U.S. Dollars (US$300,000,000)
of principal plus interest, fees, commissions and performance of
mortgage covenants. The interest of the Owner in the Rig is 100%.
The interest of the Trustee in the Rig is 100%. The date of maturity
is November 13, 2001, and the discharge amount is the same as the
total amount plus such other sums as shall be payable by the Owner to
the Banks under the Credit Agreement.
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 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 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 Trustee may think fit. The 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 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 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 enforce the Obligations and for the purpose
of any proceedings for such enforcement the Owner hereby submits to
the jurisdiction of the courts of any country of the choice of the
Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the 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 Trustee may bring before the courts of such jurisdiction or
other judicial authority and for the purpose of any action which the
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 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_____________________________________
Name: T.W. Nagle
Title: Vice President and Treasurer
ACKNOWLEDGEMENT OF MORTGAGE
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 13th day of November, 1996 before me personally appeared Timothy W.
Nagle to me known who being by me duly sworn did depose and say that he
resides at 13307 Tosca Lane, Houston, TX; 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 10.128
FIRST PREFERRED MORTGAGE
Dated November 13, 1996
HRB RIG CORPORATION
- in favor of -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
as Security Trustee
HARVEY H. WARD
=============================================================================
INDEX
CLAUSE SUBJECTMATTERPAGE
1 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 2
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 7
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . 10
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 13
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 17
9 ENFORCEABILITY AND TRUSTEE'S POWERS . . . . . . . . . . . . . 18
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 21
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 21
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 22
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 24
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 24
18 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 24
19 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 25
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT
EXHIBIT 2 FORM OF SUBSIDIARY GUARANTY
==============================================================================
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 13th day of
November, 1996
BY
(1) HRB RIG CORPORATION, an Oklahoma corporation having its principal
offices at 901 Threadneedle, Suite 200, Houston, Texas 77079 (the
"Owner"),
IN FAVOR OF
(2) CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, a Norwegian banking
corporation having its office at 11 West 42nd Street, New York, New
York, as security trustee for the Banks (as hereinafter defined) and
as mortgagee (the "Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the jack-up drilling rig
HARVEY H. WARD documented under the laws and flag of the United States
of America with Official Number 642693 of 4,121 gross registered tons
and 3,079 net registered tons (the "Rig").
(B) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation
("Holdings"), (ii) Reading & Bates Drilling Co., an Oklahoma
corporation (the "Borrower"), (iii) the banks party thereto (the
"Banks"), (iv) Credit Lyonnais New York Branch and Banque Indosuez, as
documentation agents (the "Documentation Agents") and (v) the Trustee,
as administrative agent, arranger and security trustee (in such
capacity, the "Administrative Agent") (the form of which Credit
Agreement together with Exhibit B thereto but without the remaining
attachments is attached hereto as Exhibit 1), it was agreed among
other things that the Banks would make available to the Borrower upon
the terms and conditions therein described a reducing revolving credit
facility (the "Facility") in an aggregate amount at any time
outstanding of Three Hundred Million United States Dollars
(US$300,000,000), providing for the making of Loans and the issuance
of, and participation in, Letters of Credit as contemplated therein.
(C) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Borrower payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(D) The Owner, for good and valuable consideration has authorized,
executed and delivered a Subsidiary Guaranty (as modified, amended or
supplemented from time to time, the "Subsidiary Guaranty"), the form
of which Subsidiary Guaranty is attached hereto as Exhibit 2, in favor
of the Administrative Agent guaranteeing the performance by the
Borrower of its obligations under the Credit Agreement and the other
Credit Documents.
(E) This Mortgage is made for the benefit of the Trustee to secure the
guaranty by the Owner of (i) the full and prompt payment when due of
(x) the principal of and interest on the Notes issued, and Loans made,
under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued under the
Credit Agreement and (y) all other obligations and indebtedness
(including, without limitation, indemnities, Fees and interest
thereon) of the Borrower to the Secured Creditors (as hereinafter
defined), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and the other Credit
Documents including, without limitation, this Mortgage and the due
performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents including, without limitation, this Mortgage;
(ii) any and all sums advanced by the Trustee in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest
in the Collateral; (iii) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or
liabilities of the Borrower referred to in clause (i) above, after an
Event of Default shall have occurred and be continuing, the reasonable
expenses of the Trustee of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Trustee of its rights hereunder,
together with reasonable attorneys' fees of counsel to the Trustee and
court costs; and (iv) all amounts paid by any Indemnitee as to which
such Indemnitee has the right to reimbursement under Clause 13 of this
Mortgage (all such obligations, liabilities, sums and expenses
referred to in clauses (i) through (iv) above being collectively
referred to as the "Obligations"). It is acknowledged and agreed that
the "Obligations" shall include extensions of credit of the types
described above, whether outstanding on the date of this Mortgage or
extended from time to time after the date of this Mortgage.
(F) This First Preferred Mortgage is entered into by the Owner in
consideration of the Banks agreeing to make the Facility available to
the Borrower and as a condition thereto and for other good and
valuable consideration provided by the Banks (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:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Borrower, the Banks, the Documentation
Agents, and the Administrative Agent first referred to in Recital (B)
hereto, as modified, amended or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings together with interest, fees and all other obligations are
paid in full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et
seq. and any applicable state and local or foreign counterparts or
equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Borrower referred to in
Recital (C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (E) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
semi-submersible drilling rig JACK BATES owned by the Borrower
documented under the laws and flag of the United States with Official
Number 906283 of 19,928 gross registered tons and 14,948 net
registered tons; (ii) the offshore drilling rig W. D. KENT owned by
Reading & Bates Exploration Co. documented under the laws and flag of
the United States with Official Number 583169 of 5,383 gross
registered tons and 4,185 net registered tons; (iii) the offshore
drilling rig CHARLEY GRAVES owned by Reading and Bates Borneo Drilling
Co., Ltd. documented under the laws and flag of the Republic of Panama
with Patente Number 6618-76-CH of 5,829 gross registered tons and
1,748 net registered tons; (iv) the jack-up drilling rig RON TAPPMEYER
owned by Reading & Bates (A) Pty Ltd. documented under the laws and
flag of Australia with Official Number 855213 of 11,455 gross
registered tons and 3,436 net registered tons; (v) the semi-
submersible drilling rig J. W. McLEAN owned by the Borrower documented
under the laws and flag of the Republic of Panama with Patente Number
25384-PEXT of 15,453 gross registered tons and 4,636 net registered
tons; (vi) the semi-submersible drilling rig RIG 41 owned by the
Borrower documented under the laws and flag of the Republic of Panama
with the Patente Number to be assigned on the date hereof of 10,078
gross registered tons and 3,024 net registered tons; (vii) the jack-up
drilling rig GEORGE H. GALLOWAY owned by Reading & Bates Offshore,
Limited documented under the laws and flag of the United States of
America with Official Number 651646 of 3,729 gross registered tons and
2,496 net registered tons; (viii) the jack-up drilling rig F. G.
McCLINTOCK owned by Reading & Bates Offshore, Limited documented under
the laws and flag of the United States of America with Official Number
562059 of 5,525 gross registered tons and 1,657 net registered tons;
(ix) the jack-up drilling rig RANDOLPH YOST owned by the Borrower
documented under the laws and flag of the United States of America
with Official Number 601699 of 4,701 gross registered tons and 4,701
net registered tons; (x) the jack-up drilling rig J. T. ANGEL owned by
the Borrower documented under the laws and flag of the United States
of America with Official Number 651645 of 4,186 gross registered tons
and 3,090 net registered tons; (xi) the jack-up drilling rig ROGER W.
MOWELL owned by the Borrower documented under the laws and flag of the
United States of America with Official Number 645360 of 4,121 gross
registered tons and 3,079 net registered tons; (xii) the jack-up
drilling rig D. R. STEWART owned by Reading & Bates Exploration Co.
documented under the laws and flag of the United States of America
with Official Number 626904 of 6,494 gross registered tons and 5,834
net registered tons; and (xiii) the jack-up drilling rig C. E.
THORNTON to be owned by HRB Rig Corporation documented under the laws
and flag of the United States of America with Official Number 673210
of 6,096 gross registered tons and 6,096 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 written request of the
Administrative Agent, provide a bond or other security satisfactory to
the Administrative 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 written request of the Administrative Agent, provide a bond
or other security satisfactory to the Administrative 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 Administrative 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
Administrative Agent have been made as evidenced by the Administrative
Agent's written consent to such lien; (8) any lien in favor of the
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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 preferred 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 Creditors" shall mean the Trustee, the Banks, the Letter of
Credit Issuer and the Administrative Agent under and as defined in the
Credit Agreement;
"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;
"Subsidiary Guaranty" means the agreement dated as of November 13,
1996 made by the Owner in favor of the Administrative Agent as first
referred to in Recital (D) hereto, as modified, amended or
supplemented from time to time;
"Ship Mortgage Act" means the United States Ship Mortgage Act, 1920,
as amended, recodified at 46 U.S.C. 31301, et seq.;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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 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
the lien of 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 Obligations 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 relating 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 during 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) the Owner is in compliance with all applicable Environmental
Laws and all 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 Loan and at the time of the
issuance of each 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 Obligations, the Owner has granted, conveyed
and mortgaged and does by these presents grant, convey and mortgage
unto the Trustee, its successors and assigns, the whole of the Rig TO
HAVE AND TO HOLD the same unto the Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
Obligations.
Provided only and the condition of these presents is such that if all
of the Obligations secured by this Mortgage have terminated or have
been performed in full as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty and
this Mortgage and shall observe and comply with the covenants, terms
and conditions contained in the Subsidiary Guaranty 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 Trustee agrees 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 none of the Secured Creditors 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 Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 any
Secured Creditor for payment by the Owner of the relevant
expense, claim, liability, loss, cost, duty, fee, charge or
other money incurred by a Secured Creditor 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 a Secured Creditor under this Mortgage and the
Subsidiary Guaranty 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
Trustee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Trustee shall not have to wait for the Administrative Agent
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 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 Trustee
may deem expedient; and
(e) any waiver by the Trustee of any terms of this Mortgage or any
consent given by the 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 Trustee
and the Owner shall be conditional upon no security or payment to the
Secured Creditors or any of them by the Credit Parties 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 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 Secured Creditors 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 Secured Creditors or any other person:
(a) any time or waiver granted to the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents (other than this Mortgage) or any other
document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Credit Parties or any other person
under the Credit Agreement, any of the other Security Documents
(other than this Mortgage) or any other document or security.
6. INSURANCE
6.01 The Owner covenants with the Trustee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains 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 Administrative 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 Rigs, such aggregate amount shall be at least 110%
of the Total Commitment. 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 American,
British and Scandinavian insurance markets or in such other
major international markets reasonably acceptable to the
Administrative 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
Administrative Agent. In addition, the Owner shall, at its own
expense, furnish to the Administrative Agent a mortgagee's
single interest policy providing coverage which, when aggregated
with the mortgagee's interest insurance furnished to the
Administrative Agent in respect of the Other Rigs, shall be in
an amount equal to at least 110% of the aggregate amount of the
Total Commitment (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 Administrative Agent). Such
mortgagee's interest insurance and any additional insurance
policies for the benefit of the Administrative Agent shall be
maintained in the broadest form available in the American,
British and Scandinavian markets or other major international
markets acceptable to the Administrative Agent through
underwriters acceptable to the Administrative 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
Administrative Agent.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the
Administrative Agent, shall contain conditions, terms,
stipulations and insuring covenants satisfactory to the
Administrative Agent, and shall be kept in full force and effect
by the Owner so long as any Obligations remain 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 Administrative Agent for distribution by it to itself, the
Banks and the Owner as their interests may appear, and shall
provide for at least ten days' prior notice to be given to the
Administrative 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 Administrative Agent and
the Trustee shall be named as co-assureds on all such policies
and insurance contracts, but without liability of the
Administrative Agent or the Trustee for premiums or calls.
Certified copies of all such policies, binders and other interim
insurance contracts shall be deposited with the Administrative
Agent. Originals shall also be provided upon the request of the
Administrative Agent. The Owner shall furnish to the
Administrative Agent annually a detailed report signed by a firm
of marine insurance brokers satisfactory to the Administrative
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 Administrative Agent by notice
to the underwriters, although the following insurance is payable
to the Administrative 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
directly 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 Administrative Agent (which
consent shall not be unreasonably withheld). Any loss covered
by this paragraph which is paid to the Administrative 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 Administrative Agent to, or as directed by, the Owner and
all other payments to the Administrative Agent of losses covered
by this paragraph shall be applied by the Administrative 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 Administrative
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 Administrative Agent.
(c) In the event of an actual or constructive Total Loss of the Rig,
the Administrative 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 Secured Creditors 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 provided in
Clause 10.
(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 Administrative
Agent advised of the progress of such renewals, and procure that
the insurers shall promptly confirm in writing to the
Administrative 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 Administrative 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 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 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 Self-Elevating Drilling Unit) 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
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
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 Trustee and the Administrative Agent copies of all
survey reports issued in respect thereof;
(g) permit the representatives of the Administrative Agent or
independent surveyors representing the 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 Administrative Agent may require;
(j) promptly furnish to the 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 request of the Trustee in writing, copies
of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(k) notify both the Trustee and the Administrative 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 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
Trustee; and
(vi) any intended deactivation or lay-up of the Rig (other than
for normal periods of inactivity between contracts for the
Rig during which periods the Rig remains manned) and
obtain the prior written consent of the Trustee;
(l) keep proper books of account in respect of the Rig and as and
when the Trustee or the Administrative Agent may so reasonably
require make such books available for inspection on behalf of
the 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) observe the obligations contained in Sections 7 and 8 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;
(n) not without the previous consent in writing of the 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 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 Trustee from time to time
such proof as the 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 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 CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH, as Security Trustee for
the Banks 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 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 Trustee
advised, in writing on such regular basis and in such
detail as the Trustee shall require, of the Owner's
response to such Environmental Claim or Environmental
Incident;
(s) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Trustee having first been obtained, and any such written consent
to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Trustee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of 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 Trustee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit 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 Credit 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 Secured Creditors 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 Administrative 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 Administrative 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 Administrative 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 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 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 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 Required Banks having
served on the Owner any such notice as is referred to in Section 9 of
the Credit Agreement) the security constituted by this Mortgage shall
become immediately enforceable and the 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 Trustee
without legal process and without liability of the 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 Administrative
Agent;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Administrative 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 Administrative
Agent take over or institute all such proceedings in connection
with the Rig, the Insurances, or any Requisition Compensation as
the 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 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 Obligations;
(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 Trustee in its absolute discretion
deems expedient and for the purposes aforesaid the 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 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 Trustee in or about the
exercise of the power vested in the 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 Trustee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The 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 Trustee by this Mortgage or to which the Trustee may
at any time be entitled hereunder.
9.03 Neither the Secured Creditors, 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 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 Trustee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Trustee has arisen in the manner provided in this Mortgage
and the sale shall be deemed to be within the power of the Trustee and
the receipt of the 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 Trustee (or any other Secured Creditor, as
the case may be) in respect of sale of the Rig or any part thereof, in
respect of recovery under the Insurances or in respect of Requisition
Compensation, shall be applied in the following manner:
(i) first, to the payment of all amounts owing the Trustee of the
type described in clauses (ii) and (iii) of Recital E;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to the
outstanding Obligations shall be paid to the Secured Creditors
as provided in Clause 10.01(c), with each Secured Creditor
receiving an amount equal to such Obligations held by it or, if
the proceeds are insufficient to pay in full all such
Obligations, its Pro Rata Share (as defined below) of the amount
remaining to be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and following
the termination of this Mortgage pursuant to Clause 3.01, any
surplus then remaining shall be paid to the Owner, subject,
however, to the rights of the holder of any then existing Lien
of which the Trustee has actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Trustee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Trustee shall be entitled to reply upon
(i) the Administrative Agent under the Credit Agreement and (ii)
the Secured Creditors for a determination (which the
Administrative Agent and each Secured Creditor, by their
acceptance of the benefits of this Mortgage shall be obligated
to provide upon request of the Trustee) of the outstanding
Obligations owed to the Secured Creditors. Unless it has actual
knowledge (including by way of written notice from a Secured
Creditor) to the contrary, the Administrative Agent under the
Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Trustee, in acting hereunder, shall
be entitled to assume that no obligations other than principal,
interest and regularly accruing fees are owing to any Secured
Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the 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 Trustee and
the other Secured Creditors 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 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
Trustee under this Mortgage,
in any such case, forthwith upon demand by the 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 Obligations, hereby irrevocably appoints the
Trustee as its attorney until the Total Commitment is terminated and
none of the Obligations remain outstanding 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 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 Trustee shall not put any person dealing with the
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 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 each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the Trustee
under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and each of the Secured Creditors 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 such Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 the Subsidiary Guaranty or 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 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 Trustee against the amount of such shortfall. For
the purposes of this Clause 13.03, "rate of exchange" means the rate
at which the Trustee is able on the date of such payment (or, if it is
not practicable for the 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 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 any Secured Creditor on demand all costs, fees
and expenses, including, but not limited to, legal fees and expenses
and valuation fees and Taxes thereon incurred by any Secured Creditor
or for which any Secured Creditor may become liable in connection
with:
(a) the negotiation, preparation and execution of the Credit
Agreement, the Subsidiary Guaranty and the Credit 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, the
Subsidiary Guaranty or the Credit Documents (or any of them).
14.02 The Owner shall pay to the Trustee and the Administrative Agent on
demand all costs, fees and expenses (including, but not limited to,
legal fees and expenses) and Taxes thereon incurred by any Secured
Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement, the Subsidiary Guaranty or the
Credit Documents (or any of them) requested by the Owner,
necessary or advisable under applicable law or relating to the
syndication of the Facility, or initiated during the occurrence
and continuation of an Event of Default; and/or
(b) any consent or waiver required from the Trustee in relation to
the Credit Agreement, the Subsidiary Guaranty and the Credit
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, the Subsidiary
Guaranty and the Credit Documents (or any of them) may be subject or
give rise and shall indemnify the 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 Trustee hereunder shall be in writing and shall be
made to the following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Telefax: (212) 827-4888
Attention: Loan Administration
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit of
the Owner, the Secured Creditors 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 Section 12.04 of the Credit Agreement, each Bank 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 Trustee shall notify the Owner promptly following any such
assignment, transfer or change.
17. TOTAL AMOUNT, ETC.
17.01 The total amount of the direct or contingent obligations secured by
this Mortgage is Three Hundred Million U.S. Dollars (US$300,000,000)
of principal plus interest, fees, commissions and performance of
mortgage covenants. The interest of the Owner in the Rig is 100%.
The interest of the Trustee in the Rig is 100%. The date of maturity
is November 13, 2001, and the discharge amount is the same as the
total amount plus such other sums as shall be payable by the Owner to
the Banks under the Credit Agreement or the Subsidiary Guaranty.
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 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 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 Trustee may think fit. The 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 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 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the 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 Trustee may bring before the courts of such jurisdiction or
other judicial authority and for the purpose of any action which the
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 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.
HRB RIG CORPORATION
By_____________________________________
Name: T.W. Nagle
Title: Vice President
ACKNOWLEDGEMENT OF MORTGAGE
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this 13th day of November, 1996 before me personally appeared Timothy W.
Nagle to me known who being by me duly sworn did depose and say that he
resides at 13307 Tosca Lane, Houston, TX; that he is Vice President for HRB
RIG CORPORATION, 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 HRB RIG CORPORATION.
________________________
Notary Public
Exhibit 10.129
INDENTURE OF FIRST NAVAL MORTGAGE
READING AND BATES BORNEO DRILLING CO., LTD.
- and -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
administrative agent, arranger and security trustee,
as Mortgagee
CHARLEY GRAVES
Dated November 13, 1996
==============================================================================
INDEX
CLAUSE SUBJECT MATTER PAGE
1 REPRESENTATIONS AND COVENANTS . . . . . . . . . . . . . . . . . 2
2 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 4
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . 10
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . 10
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 18
9 ENFORCEABILITY AND MORTGAGEE'S POWERS . . . . . . . . . . . . 19
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 21
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 22
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 22
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 23
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 25
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 25
18 WAIVER; AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 25
19 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 25
20 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT 1 FORM OF CREDIT AGREEMENT
EXHIBIT 2 FORM OF SUBSIDIARY GUARANTY
==============================================================================
THIS INDENTURE OF FIRST NAVAL MORTGAGE made and entered into this 13th
day of November, 1996, between READING AND BATES BORNEO DRILLING CO., LTD., an
Oklahoma company duly constituted and existing in conformity with the laws of
the State of Oklahoma with its principal office at 901 Threadneedle, Suite
200, Houston, Texas 77079 (hereinafter called the "Owner") and CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH having its office at 11 West 42nd Street,
New York, NY 10036, as agent for the Banks (as hereinafter defined)
(hereinafter called the "Mortgagee"), on the Panamanian offshore drilling rig
CHARLEY GRAVES of 5,829 gross tons, 1,748 net tons and with a length of
87.78m, a breadth of 21.34m and a depth of 6.55m and Permanent Patent of
Navigation No. 6618-76-CH (hereinafter called the "Rig"), duly registered
under the laws and flag of the Republic of Panama, the detailed description of
which is hereinafter more particularly set forth.
W I T N E S S E T H :
WHEREAS
(A) The Owner is the sole owner of the whole of the offshore drilling rig
CHARLEY GRAVES documented under the laws and flag of the Republic of
Panama.
(B) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation, as
guarantor ("Holdings"), (ii) Reading & Bates Drilling Co., an Oklahoma
corporation (the "Borrower"), (iii) the banks party thereto (the
"Banks"), (iv) Credit Lyonnais New York Branch and Banque Indosuez, as
documentation agents (the "Documentation Agents") and (v) the
Mortgagee, as administrative agent, arranger and security trustee (in
such capacity, the "Administrative Agent") (the form of which Credit
Agreement together with the form of promissory note of the Borrower
attached as Exhibit B thereto but without the remaining exhibits is
attached hereto as Exhibit 1), it was agreed amongst other things that
the Banks would make available to the Borrower a reducing revolving
credit facility (the "Facility") in the maximum aggregate principal
amount at any one time outstanding of Three Hundred Million United
States Dollars (U.S.$300,000,000), providing for the making of Loans
and the issuance of and participations in Letters of Credit as
contemplated therein. As required by Article 1515 Section 3 of the
Commercial Code of Panama, the dates on which payments of principal in
respect of the Loans are due may be determined from the provisions of
the Credit Agreement including Section 4.
(C) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Borrower payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(D) The Owner, for good and valuable consideration has authorized,
executed and delivered a Subsidiary Guaranty (as modified, amended or
supplemented from time to time, the "Subsidiary Guaranty"), the form
of which Subsidiary Guaranty is attached hereto as Exhibit 2, in favor
of the Agent guaranteeing the performance by the Borrower of its
obligations under the Credit Agreement and the other Credit Documents.
(E) This Mortgage is made for the benefit of the Mortgagee to secure the
guaranty by the Owner of (i) the full and prompt payment when due of
(x) the principal of interest on the Notes issued, and Loans made,
under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued under the
Credit Agreement and (y) all other obligations and indebtedness
(including, without limitation, indemnities, Fees and interest
thereon) of the Borrower to the Secured Creditors (as hereinafter
defined), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and the other Credit
Documents including, without limitation, this Mortgage and the due
performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Credit Agreement and the
other Credit Documents including, without limitation, this Mortgage;
(ii) any and all sums advanced by the Mortgagee in order to preserve
the Collateral (as hereinafter defined) or preserve its security
interest in the Collateral; (iii) in the event of any proceeding for
the collection or enforcement of any indebtedness, obligations, or
liabilities of the Borrower referred to in clause (i) above, after an
Event of Default shall have occurred and be continuing, the reasonable
expenses of the Mortgagee of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Mortgagee of its rights
hereunder, together with reasonable attorneys' fees of counsel to the
Mortgagee and court costs; and (iv) all amounts paid by any Indemnitee
as to which such Indemnitee has the right to reimbursement under
Clause 13 of this Mortgage (all such obligations, liabilities, sums
and expenses referred to in clauses (i) through (iv) above being
collectively referred to as the "Obligations"). It is acknowledged
and agreed that the "Obligations" shall include extensions of credit
of the types described above, whether outstanding on the date of this
Mortgage or extended from time to time after the date of this
Mortgage.
(F) This Indenture of First Naval Mortgage, which is entered into by the
Owner in consideration of the Banks agreeing to make the Facility
available to the Borrower and as a condition thereto and for other
good and valuable consideration provided by the Banks (the sufficiency
of which the Owner hereby acknowledges).
NOW, THEREFORE, the appearing parties, each in the name and on behalf of his
respective principal, state that they hereby execute this Indenture of First
Naval Mortgage pursuant to the following representations:
1. REPRESENTATIONS AND COVENANTS
1.01 The Owner represents and covenants to the Mortgagee that:
a. The Rig is permanently registered in the name of the Owner in
the Public Registry of the City of Panama, Republic of Panama in
the Microfilm Section (Mercantile), Microjacket N-12808, Roll
34425, Frame 95;
b. The Owner, as sole legal and beneficial owner of the Rig, has
received and presently possesses a Permanent Patent of
Navigation for the Rig, duly issued by the Republic of Panama
under No. 6618-76-CH;
c. Neither the whole nor any share in the Rig is subject to any
Security Interest (as defined herein) (except for Permitted
Liens (as defined herein) and the lien of this Mortgage);
d. the Owner has not sold or transferred, or agreed to sell or
transfer, title to the Rig or any share therein;
e. the Owner is a corporation duly organized and validly existing
and in good standing under the laws of the State of Oklahoma;
f. the Owner has full power and authority (i) to execute and
deliver this Mortgage, (ii) to mortgage the Rig as security for
the Obligations and (iii) to comply with the provisions of, and
perform all its obligations under, this Mortgage;
g. the Owner has complied with all statutory and other material
requirements relative to the ownership, registration and
operation of the Rig;
h. 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 preliminarily recorded with the
Public Registry in Panama through the Panamanian Consulate in
New York, New York will create a legal, valid and enforceable
first priority mortgage lien on the Rig subject only to the
permanent filing of this Mortgage in the Public Registry in
Panama within six months of the date of the preliminary recorded
filing;
i. the entry into and performance by the Owner of this Mortgage
does not and will not during the Credit Facility Period (as
defined herein) 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;
j. 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 during the
Credit Facility Period;
k. 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;
l. the Owner is in compliance with all applicable Environmental
Laws (as defined herein) and all Environmental Approvals (as
defined herein) 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;
m. no Environmental Claim (as defined herein) has been made or
threatened against the Owner or otherwise in connection with the
Rig;
n. no Environmental Incident (as defined herein) which has
resulted, or which could reasonably be expected to result, in an
Environmental Claim in excess of US$200,000 has occurred; and
o. The Owner hereby affirms as its representations all of the
statements contained in the "WHEREAS" clauses of this Mortgage.
1.02 The representations and warranties of the Owner set out in Clause 1.01
shall survive the execution of this Mortgage and shall be deemed to be
repeated at the time of the making of each Loan (as defined herein)
and at the time of the issuance of each Letter of Credit, with respect
to the facts and circumstances existing at each such time, as if made
at each such time.
1.03 The Mortgagee represents that the Banks have made the Facility
available to the Borrower, as evidenced by, inter alia, the Credit
Agreement, the Notes and the Security Documents (as defined herein),
and accepts the Mortgage constituted by this instrument upon the Rig
as security for the due and prompt payment and performance of the
obligations of the Owner under the Subsidiary Guaranty.
1.04 Each of the contracting parties declares that it is satisfied with the
representations and covenants made by the other and accepts them as
true; and the parties mutually acknowledge their respective legal
status as well as the authority of the persons representing them
respectively in this instrument to sign the same on behalf of their
respective principals.
2. DEFINITIONS AND INTERPRETATION
2.01 In this Mortgage unless the context otherwise requires, the following
expressions shall have the following meanings:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Commitment" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Borrower, the Banks, the Documentation
Agents, and the Administrative Agent first referred to in Recital (B)
hereto as modified, amended or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Unpaid Drawings
together with interest, fees and all other obligations are paid in
full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et
seq. and any applicable state and local or foreign counterparts or
equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Borrower referred to in
Recital (C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (E) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
semi-submersible drilling rig JACK BATES owned by the Borrower
documented under the laws and flag of the United States of America
with Official Number 906283 of 19,928 gross registered tons and 14,948
net registered tons; (ii) the jack-up drilling rig D. R. STEWART owned
by Reading & Bates Exploration Co. ("R&B Exploration") documented
under the laws and flag of the United States with Official Number
626904 of 6,494 gross registered tons and 5,834 net registered tons;
(iii) the offshore drilling rig W. D. KENT owned by R&B Exploration
documented under the laws and flag of the United States with Official
Number 583169 of 5,383 gross registered tons and 4,185 net registered
tons; (iv) the jack-up drilling rig RON TAPPMEYER owned by Reading &
Bates (A) Pty Ltd. documented under the laws and flag of Australia
with Official Number 855213 of 11,455 gross registered tons and 3,436
net registered tons; (v) the semi-submersible drilling J. W. McLEAN
owned by the Borrower documented under the laws and flag of the
Republic of Panama with Patente Number 25384-PEXT of 15,453 gross
registered tons and 4,636 net registered tons; (vi) the semi-
submersible drilling rig RIG 41 owned by the Borrower documented under
the laws and flag of the Republic of Panama with the Patente Number to
be assigned on the date hereof of 10,078 gross registered tons and
3,024 net registered tons; (vii) the jack-up drilling rig HARVEY H.
WARD owned by HRB Rig Corporation documented under the laws and flag
of the United States of America with Official Number 642693 of 4,121
gross registered tons and 3,079 net registered tons; (viii) the jack-
up drilling rig F. G. McCLINTOCK owned by Reading & Bates Offshore,
Limited documented under the laws and flag of the United States of
America with Official Number 562059 of 5,525 gross registered tons and
1,657 net registered tons; (ix) the jack-up drilling rig RANDOLPH YOST
owned by the Borrower documented under the laws and flag of the United
States of America with Official Number 601699 of 4,701 gross
registered tons and 4,701 net registered tons; (x) the jack-up
drilling rig J. T. ANGEL owned by the Borrower documented under the
laws and flag of the United States of America with Official Number
651645 of 4,186 gross registered tons and 3,090 net registered tons;
(xi) the jack-up drilling rig ROGER W. MOWELL owned by the Borrower
documented under the laws and flag of the United States of America
with Official Number 645360 of 4,121 gross registered tons and 3,079
net registered tons; (xii) the jack-up drilling rig GEORGE H. GALLOWAY
owned by Reading & Bates Offshore, Limited documented under the laws
and flag of the United States of America with Official Number 651646
of 3,729 gross registered tons and 2,496 net registered tons; and
(xiii) the jack-up drilling rig C. E. THORNTON to be owned by HRB Rig
Corporation documented under the laws and flag of the United States of
America with Official Number 673210 of 6,096 gross registered tons and
6,096 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 written request of the
Administrative Agent, provide a bond or other security satisfactory to
the Administrative 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 written request of the Administrative Agent, provide a bond
or other security satisfactory to the Administrative 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 Administrative 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
Administrative Agent have been made as evidenced by the Administrative
Agent's written consent to such lien; (8) any lien in favor of the
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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);
"Required Banks" shall have the meaning for such term as set forth in
the Credit Agreement;
"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 Creditors" shall mean the Banks, the Letter of Credit Issuer
and the Administrative Agent under and as defined in the Credit
Agreement;
"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;
"Subsidiary Guaranty" means the agreement dated as of November 13,
1996 made by the Owner in favor of the Administrative Agent as first
referred to in Recital (D) hereto;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised total loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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.
2.02 Except where otherwise expressly provided or unless the context
otherwise requires, words and expressions defined in the Credit
Agreement shall bear the same meanings when used in this Mortgage.
2.03 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.
3. MORTGAGE
3.01 In order to secure the Obligations the Owner has granted, conveyed and
mortgaged and does by these presents grant, convey and mortgage unto
the Mortgagee, its successors and assigns, in accordance with the
provisions of Chapter V, Title IV of Book Second of the Code of
Commerce and pertinent provisions of the Civil Code and other
legislation of the Republic of Panama, the whole of the Rig, the
detailed description of which is as follows:
offshore drilling rig CHARLEY GRAVES; gross tonnage
approximately 5,829; net tonnage approximately 1,748; length
overall 87.78 meters, breadth 21.34 meters; depth 6.55 meters;
built in 1975 by Far East Livingston Shipbuilding Ltd.; radio
call letters HP-3275;
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 Obligations.
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 to
the Secured Creditors and their respective successors or assigns the
Obligations as and when the same shall become due and payable in
accordance with the terms of the Subsidiary Guaranty and this Mortgage
and shall observe and comply with the covenants terms and conditions
contained in the Subsidiary Guaranty 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, then these presents and
the rights hereunder shall cease, determine and be void and, in such
event, the Mortgagee agrees to furnish, execute and record, at the
expense of the Owner, all such documents as the Owner may reasonably
require to discharge this Mortgage, otherwise to be and remain in full
force and effect.
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 none of the Secured Creditors 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.
3.03 This Mortgage, when it shall have been duly executed and signed on
behalf of the parties, shall be provisionally recorded through the
Panamanian Consulate at New York, New York and thereafter within three
months permanently recorded in the Public Registry in Panama.
4. PAYMENT COVENANTS
4.01 The Owner hereby covenants with the Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 the relevant expense,
claim, liability, loss, cost, duty, fee, charge or other money
is paid by any Secured Creditor (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 any Secured Creditor, as the case may be, under this
Mortgage and the Subsidiary Guaranty 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
Mortgagee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Mortgagee shall not have to wait for the Administrative
Agent to enforce any of the other Security Documents before
enforcing the security created by this Mortgage;
(d) no failure or delay on the part of the Mortgagee in exercising
any right, power, privilege or remedy hereunder and no course of
dealing between Owner and Mortgagee or the Administrative Agent
shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power, privilege or remedy
hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The
rights and remedies herein expressly provided are cumulative and
not exclusive of any rights or remedies which the Mortgagee or
the Administrative Agent would otherwise have. No notice to or
demand on the Owner in any case shall entitle the Owner to any
other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the
Mortgagee or the Administrative Agent to any other or further
action in any circumstances without notice or demand; and
(e) any waiver by the Mortgagee of any terms of this Mortgage or any
consent given by the Mortgagee 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 Mortgagee
and the Owner shall be conditional upon no security or payment to the
Secured Parties or any of them by the Credit Parties 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 Mortgagee 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 Secured Creditors 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 Credit Parties, the Secured Creditors or any other
person:
(a) any waiver granted to or composition with the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents or any other document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of the Credit Party or any other person under the
Credit Agreement, any of the other Credit Documents or any other
document or security.
6. INSURANCE
6.01 The Owner covenants with the Mortgagee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains 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 Administrative 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 agreed value of the Rig, and when such amount is
aggregated with the total amount of such insurance coverage on
the Other Rigs, such aggregate amount shall be at least 110% of
the aggregate amount of the Total Commitment. Such insurance
shall cover marine and war risk perils, on hull and machinery,
with per occurrence 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 American, British and Scandinavian insurance markets or in
such other major international markets acceptable to the
Mortgagee. The Owner shall maintain protection and indemnity
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 at least equal from time
to time to the limitation of liability amount applicable to the
Rig under the Oil Pollution Act 1990 or other Environmental
Laws), through underwriters or associations acceptable to the
Mortgagee. In addition, the Owner shall, at its own expense,
furnish to the Administrative Agent a mortgagee's single
interest policy providing coverage which, when aggregated with
the mortgagee's interest insurance furnished to the
Administrative Agent in respect of the Other Rigs, shall be in
an amount equal to at least 110% of the Total Commitment (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
Administrative Agent). Such mortgagee's interest insurance and
any additional insurance policies for the benefit of the
Administrative Agent shall be maintained in the broadest form
available in the American, British and Scandinavian markets or
other major international markets acceptable to the
Administrative Agent through underwriters acceptable to the
Administrative 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 satisfying the conditions of the relevant policies
evidence of which shall be furnished to the Mortgagee.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the
Administrative Agent, shall contain conditions, terms,
stipulations and insuring covenants satisfactory to the
Administrative 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 the Mortgagee shall be the loss
payee for distribution by it to itself, the Banks and the Owner
as their interests may appear, and shall provide for at least
ten days' prior notice to be given to the Mortgagee 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 Mortgagee and the Banks shall be named as co-
assureds on all such policies and insurance contracts, but
without liability of the Mortgagee, or the Banks for premiums or
calls. Complete certified copies of all such policies, binders
and other interim insurance contracts shall be delivered to the
Mortgagee. Originals shall also be provided upon the request of
the Mortgagee. The Owner shall furnish to the Mortgagee
annually a detailed report signed by a firm of marine insurance
brokers satisfactory to the Mortgagee 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 Mortgagee, by notice to the
underwriters, although the following insurance is payable to the
Mortgagee, (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 directly for the
repair, salvage or other charges involved or, if the Owner shall
have first fully repaired the damage or paid 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$1,000,000.00 (One Million U.S.
Dollars), the underwriters shall not make such payment without
first obtaining the written consent thereto of the Mortgagee
(which consent shall not be unreasonably withheld). Any loss
covered by this paragraph which is paid to the Mortgagee 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 Mortgagee to, or as directed by, the Owner and all other
payments to the Mortgagee of losses covered by this paragraph
shall be applied by the Mortgagee in accordance with Clause
10.01.
In the event of a Total Loss, all insurance payments therefor
shall be paid to the Mortgagee. The Owner shall not declare or
agree with the underwriters that the Rig is a Total Loss without
the prior written consent of the Mortgagee.
(c) In the event of a Total Loss of the Rig, the Mortgagee 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
Secured Creditors under the Security Documents, whether or not
the same shall be then due and payable, together with accrued
interest and the cost, if any, of collecting the insurance, and
pay the balance as provided in Clause 10.
(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 in which the Rig from time to time is engaged.
(e) The Owner shall renew all such insurances as they expire and so
as to insure that there is no gap in coverage, keep the
Mortgagee advised of the progress of such renewals, and shall
provide evidence of such renewal in writing to the Mortgagee 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 Mortgagee.
(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 to such employment of the insurers
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 Mortgagee that throughout the Credit
Facility Period the Owner will:
(a) keep the Rig documented in its name as a Panamanian flag vessel
and do or allow to be done nothing whereby such documentation
may be forfeited or imperilled;
(b) not without the previous consent in writing of the Mortgagee
except as otherwise contemplated by the Credit Agreement, change
the name of the Rig or make any modification to the Rig which
would materially alter the structure, type or performance
characteristics of the Rig and which would materially reduce the
value of the Rig;
(c) keep the Rig in a good and efficient state of repair consistent
with first-class ship-ownership and management practice employed
by owners of drilling rigs of similar size and type and so as to
maintain her present class (namely +A1 Barge) at American Bureau
of Shipping free of recommendations and qualifications and
change of class, save those approved in writing by the Mortgagee
and so as to comply with all applicable laws, treaties and
conventions of the Republic of Panama and other applicable
jurisdictions, and rules and regulations issued thereunder, and
have on board as and when required thereby valid certificates
showing compliance therewith;
(d) procure that all repairs to or replacement of any damaged, worn
or lost parts or equipment in such manner (both as regards
workmanship and quality of materials) as to not materially
diminish the value of the Rig and not to remove any material
part of, or item of equipment owned by the Owner installed on,
the Rig unless (i) 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 Mortgagee and becomes on
installation on the Rig the property of the Owner and subject to
the security constituted by this Mortgage or (ii) the removal
will not materially diminish the value of the Rig;
(e) submit the Rig to such periodical or other surveys as may be
required for classification purposes and if so required to
supply to the Mortgagee copies of all survey reports issued in
respect thereof;
(f) permit the Mortgagee by independent surveyors 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,
provided that unless an Event of Default shall have occurred and
be continuing, the cost of any such inspection shall be for the
account of the Mortgagee;
(g) 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;
(h) 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 can reasonably be expected to 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 Mortgagee may reasonably
require;
(i) promptly furnish to the Mortgagee 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 request of the Mortgagee in writing,
copies of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(j) notify the Mortgagee forthwith by 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 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 Mortgagee 30 days prior notice, provided,
that in the event of any emergency dry docking of the Rig,
the Owner shall immediately notify the Mortgagee; and
(vi) any intended deactivation or lay-up of the Rig (other than
for normal periods of inactivity between contracts for the
Rig during which periods the Rig remains manned) and
obtain the prior written consent of the Mortgagee;
(k) keep proper books of account in respect of the Rig and as and
when the Mortgagee may so reasonably require make such books
available for inspection on behalf of the Mortgagee 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;
(l) observe the obligations contained in Sections 7 and 8 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;
(m) not without the previous consent in writing of the Mortgagee
(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 United States Dollars (US$2,500,000.00) (or the
equivalent in any other currency) unless (i) such person shall
first have given to the Mortgagee and in terms satisfactory to
it a written undertaking not to exercise any lien on the Rig for
the cost of such work or otherwise or (ii) the cost of such work
shall be fully covered by applicable insurance;
(n) comply with and satisfy all the provisions of applicable laws
and regulations of the Republic of Panama, as at any time
amended, in order to establish and maintain this Mortgage as a
first priority naval mortgage thereunder upon the Rig and upon
all renewals, improvements and replacements made in or to the
same, and promptly to furnish to the Mortgagee from time to time
such proofs as the Mortgagee may request for its satisfaction
with respect to the compliance by the Owner with the provisions
of this sub-clause, including, appropriate certificates of the
Public Registry showing that this Mortgage has been duly
registered and filed and is a first and absolute lien on the
Rig;
(o) 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 and
salvage and to any representative of the Mortgagee 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 subject to an Indenture of First Naval
Mortgage in favor of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH, as Administrative Agent for the Banks defined in said
Mortgage, in conformity with the provisions of Chapter V, Title
IV of Book Second of the Code of Commerce, and the pertinent
provisions of the Civil Code and other legislation of the
Republic of Panama. Under the terms of said Mortgage neither
the owner, any charterer, the Master of the Rig nor any other
person shall have the right, power or authority to create, incur
or permit to be placed upon the Rig any other lien whatsoever
other than for current crew's wages and salvage and Permitted
Liens (as that term is defined in said Mortgage)."
(p) 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;
(q) notify the Mortgagee 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
Mortgagee advised, in writing on such regular basis and in
such detail as the Mortgagee shall require, of the Owner's
response to such Environmental Claim or Environmental
Incident.
(r) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Mortgagee having first been obtained, and any such written
consent to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Mortgagee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of the Rig;
(s) shall not cause or permit the Rig to be operated in any manner
contrary to law (except where the failure to operate in
compliance with any law would not have a material adverse effect
on the Owner, the Rig or the lien of this Mortgage), shall not
abandon the Rig in a foreign port and shall not engage in any
unlawful trade or violate any law or carry any cargo that shall
expose the Rig to forfeiture or capture.
8. PROTECTION OF SECURITY
8.01 The Mortgagee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit Documents be entitled (but
not bound) at any time and as often as may be necessary (but unless an
Event of Default shall have occurred and be continuing with prior
written notice to the Owner) 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 Credit 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, reasonable legal
fees) so incurred by the Secured Creditors 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 in any material respect with the
provisions of Clause 6 or any of them the Mortgagee shall be
entitled (but not bound) to effect or to replace and renew and
thereafter to maintain the Insurances in such manner it, in its
discretion, 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 Mortgagee
may nominate and, upon the direction of the Mortgagee 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 Mortgagee 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;
(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 Mortgagee 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 Mortgagee 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 MORTGAGEE'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 Mortgagee or the
Required Banks having served on the Owner any such notice as is
referred to in Section 9 of the Credit Agreement) the security
constituted by this Mortgage shall become immediately enforceable and
the Mortgagee 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 the laws of the Republic of
Panama or other applicable laws;
(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 Mortgagee
without legal process and without liability of the Mortgagee 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 Mortgagee;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Mortgagee 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) all such proceedings in connection with the Rig, the
Insurances, or any Requisition Compensation as the Mortgagee 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 Mortgagee
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
Obligations, subject to notice of sale being given by the
Mortgagee to the Owner and other mortgagees of record, if any,
by airmail, postage pre-paid and by publication once in a
newspaper of general circulation in the City of Panama, Republic
of Panama, not less than twenty (20) calendar days in advance of
the sale, to satisfy the requirement of notice of sale contained
in Article 1527 of the Panama Code of Commerce. Such notice
shall be necessary only in respect of the initial date of sale;
(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 Mortgagee in its absolute discretion
deems expedient and for the purposes aforesaid the Mortgagee
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 Mortgagee 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 Mortgagee in or about the
exercise of the power vested in the Mortgagee under
Clause 9.01(g);
(i) generally, to recover from the Owner on demand each and every
expense, liability or loss incurred by the Mortgagee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The Mortgagee 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 Mortgagee by this Mortgage or to which
the Mortgagee may at any time be entitled hereunder.
9.03 Neither the Secured Creditors 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 Mortgagee 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 Mortgagee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Mortgagee has arisen in the manner provided in this
Mortgage and the sale shall be deemed to be within the power of the
Mortgagee and the receipt of the Mortgagee for the purchase money
shall effectively discharge the purchaser who shall not be concerned
with the manner of application of the proceeds of sale or be in any
way answerable therefor.
10. APPLICATION OF MONEYS
10.01 (a) All moneys received by the Mortgagee or any other Secured
Creditor, including, without limitation, in respect of sale of
the Rig or any part thereof, in respect of recovery under the
Insurances, or in respect of Requisition Compensation, shall be
applied in the following manner:
(i) first, to the payment of all amounts owing the Mortgagee
of the type described in clauses (ii) and (iii) of Recital
E;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to
the outstanding Obligations shall be paid to the Secured
Creditors as provided in Clause 10.01(c), with each
Secured Creditor receiving an amount equal to such
Obligations held by it or, if the proceeds are
insufficient to pay in full all such Obligations, its Pro
Rata Share (as defined below) of the amount remaining to
be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and
following the termination of this Mortgage pursuant to
Clause 3.01, any surplus then remaining shall be paid to
the Owner, subject, however, to the rights of the holder
of any then existing Lien of which the Mortgagee has
actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Mortgagee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Mortgagee shall be entitled to reply upon
(i) the Administrative Agent under the Credit Agreement and (ii)
the Secured Creditors for a determination (which the
Administrative Agent and each Secured Creditor, by their
acceptance of the benefits of this Mortgage shall be obligated
to provide upon request of the Mortgagee) of the outstanding
Obligations owed to the Secured Creditors. Unless it has actual
knowledge (including by way of written notice from a Secured
Creditor) to the contrary, the Administrative Agent under the
Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Mortgagee, in acting hereunder,
shall be entitled to assume that no obligations other than
principal, interest and regularly accruing fees are owing to any
Secured Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the Mortgagee 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 Mortgagee and
the other Secured Creditors 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
inure to the benefit of any transferee, successor or assignee of
the Mortgagee; 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
Mortgagee under this Mortgage,
in any such case, forthwith upon demand by the Mortgagee and at the
expense of the Owner.
12. POWER OF ATTORNEY
12.01 The Owner, by way of security and in order to more fully secure the
performance of the Obligations under this Mortgage, hereby irrevocably
appoints the Mortgagee 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 Mortgagee 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 Mortgagee shall not put any person dealing with the
Mortgagee 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 Mortgagee of such
power shall be conclusive evidence as against third parties of its
right to exercise the same.
13. INDEMNITIES
13.01 The Owner will indemnify and save harmless each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the
Mortgagee under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and the Secured Creditors 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 a Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 the Subsidiary Guaranty or 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 Mortgagee,
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 Mortgagee against the amount of such
shortfall. For the purposes of this Clause 13.03, "rate of exchange"
means the rate at which the Mortgagee is able on the date of such
payment (or, if it is not practicable for the Mortgagee 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 Mortgagee 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 any Secured Creditor the Mortgagee on demand
all costs, fees and expenses, including, but not limited to, legal
fees and expenses and valuation fees and Taxes thereon incurred by any
Secured Creditor or for which any Secured Creditor may become liable
in connection with:
(a) the negotiation, preparation and execution of the Credit
Agreement, the Subsidiary Guaranty and the other Credit
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, the
Subsidiary Guaranty or the other Credit Documents (or any of
them).
14.02 The Owner shall pay to the Mortgagee on demand all costs, fees and
expenses (including, but not limited to, legal fees and expenses) and
Taxes thereon incurred by any Secured Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement, the Subsidiary Guaranty or the
other Credit 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 Mortgagee in relation to
the Credit Agreement, the Subsidiary Guaranty and the other
Credit 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, the Subsidiary
Guaranty and the other Credit Documents (or any of them) may be
subject or give rise and shall indemnify the Mortgagee 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 required to be given to the Mortgagee shall be made to the
following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Attention: Loan Administration
Telephone: (212) 827-4800
Telefax: (212) 827-4888
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall inure to the benefit of
the Secured Creditors 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 Section 12.04 of the Credit Agreement, each Bank 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 Mortgagee 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 Three Hundred Million US Dollars
(US$300,000,000) of principal plus interest, fees, commissions and
performance of mortgage covenants. The discharge amount is the same
as the total amount.
18. WAIVER; AMENDMENT
18.01 None of the terms and conditions of this Mortgage may be changed,
waived, modified or varied in any manner whatsoever unless in writing
duly signed by the Owner and the Mortgagee (with the consent of either
the Required Banks or, to the extent required by Section 12.12 of the
Credit Agreement, all of the Banks). No amendment to the Subsidiary
Guaranty which affects the rights and obligations of the Mortgagee
hereunder shall be effective without the consent of the Mortgagee
thereto.
19. MISCELLANEOUS
19.01 This Mortgage shall be governed by the laws of the Republic of Panama.
19.02 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.
19.03 The Mortgagee, 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 Mortgagee under this Mortgage in
relation to the Rig. Any such delegation may be made upon such terms
and subject to such regulations as the Mortgagee may think fit. The
Mortgagee 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.
19.04 The appearing parties hereby confer a special power of attorney on
Benedetti & Benedetti, lawyers of Panama, Republic of Panama and/or
any partners in the firm authorizing such firm or any such partner to
take all necessary steps to record this Indenture of First Naval
Mortgage in the appropriate registries of the City of Panama, and to
substitute this Power of Attorney herein granted.
19.05 A certification or determination by the Mortgagee as to any matter
provided for in this Mortgage shall, in the absence of manifest error,
be conclusive and binding on the Owner.
19.06 The Mortgagee declares that it accepts the naval mortgage hereby
created under the terms above set forth.
20. JURISDICTION
20.01 The Owner agrees that the Mortgagee 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Mortgagee.
20.02 Without prejudice to the generality of Clause 20.01, the Mortgagee
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 Mortgagee may bring before the courts of such
jurisdiction or other judicial authority and for the purpose of any
action which the Mortgagee 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.
20.03 The Owner agrees that should the Mortgagee 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 and the Mortgagee have duly executed these
presents the day and year first before written.
READING AND BATES BORNEO DRILLING CO., LTD.
By: _____________________________________
Name: T.W. Nagle
Title: Vice President and Treasurer
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH
By: _____________________________________
Name:
Title:
By: ______________________________________
Name:
Title:
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 13th day of November, 1996, before me personally
appeared Timothy W. Nagle, to me known and who resides at 13307 Tosca Lane,
Houston, TX; and who submitted evidence to me that he is a Vice President and
Treasurer of READING AND BATES BORNEO DRILLING CO., LTD., the company
described in and which executed the foregoing mortgage; and that he signed his
name thereto pursuant to authority granted to him by the Board of Directors of
said corporation.
___________________________________
Notary Public
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 13th day of November, 1996, before me personally
appeared Han Chr. Kjelsrud to me known and who resides at 115 East 87th
Street, New York, NY; and who submitted evidence to me that he/she is Vice
President of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, the corporation
described in and which executed the foregoing mortgage; and that he/she signed
his/her name thereto pursuant to authority granted to him/her by the Board of
Directors of said corporation.
____________________________________
Notary Public
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 13th day of November, 1996, before me personally
appeared Justin McCarty, III to me known and who resides at 35 Pleasant
Street, Katonah, NY; and who submitted evidence to me that he/she is Vice
President of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, the corporation
described in and which executed the foregoing mortgage; and that he/she signed
his/her name thereto pursuant to authority granted to him/her by the Board of
Directors of said corporation.
____________________________________
Notary Public
Exhibit 10.130
INDENTURE OF FIRST NAVAL MORTGAGE
READING & BATES DRILLING CO.
- and -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
administrative agent, arranger and security trustee,
as Mortgagee
J. W. McLEAN
Dated November 13, 1996
============================================================================
INDEX
CLAUSE SUBJECT MATTER PAGE
1 REPRESENTATIONS AND COVENANTS . . . . . . . . . . . . . . . . . 2
2 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 4
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . 10
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . 10
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 18
9 ENFORCEABILITY AND MORTGAGEE'S POWERS . . . . . . . . . . . . 19
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 22
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 22
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 23
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 25
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 25
18 WAIVER; AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 25
19 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 25
20 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT 1 FORM OF CREDIT AGREEMENT
==============================================================================
THIS INDENTURE OF FIRST NAVAL MORTGAGE made and entered into this 13th
day of November, 1996, between READING & BATES DRILLING CO., an Oklahoma
corporation duly constituted and existing in conformity with the laws of the
State of Oklahoma with its principal office at 901 Threadneedle, Suite 200,
Houston, Texas 77079 (hereinafter called the "Owner") and CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH having its office at 11 West 42nd Street, New
York, NY 10036, as agent for the Banks (as hereinafter defined) (hereinafter
called the "Mortgagee"), on the Panamanian offshore drilling rig J. W. McLEAN
of 15,453 gross registered tons, 4,636 net registered tons and with a length
of 111.86m, a breadth of 64.01m and a depth of 42.67m and Provisional Patent
of Navigation No. 25384-PEXT (hereinafter called the "Rig"), duly registered
under the laws and flag of the Republic of Panama, the detailed description of
which is hereinafter more particularly set forth.
W I T N E S S E T H :
WHEREAS
(A) The Owner is the sole owner of the whole of the semi-submersible
drilling rig J. W. McLEAN documented under the laws and flag of the
Republic of Panama.
(B) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation, as
guarantor ("Holdings"), (ii) the Owner, as borrower, (iii) the banks
party thereto (the "Banks"), (iv) Credit Lyonnais New York Branch and
Banque Indosuez, as documentation agents (the "Documentation Agents")
and (v) the Mortgagee, as administrative agent, arranger and security
trustee (in such capacity, the "Administrative Agent") (the form of
which Credit Agreement together with the form of promissory note of
the Owner attached as Exhibit B thereto but without the remaining
exhibits is attached hereto as Exhibit 1); it was agreed among other
things that the Banks would make available to the Owner a reducing
revolving credit facility (the "Facility") in the maximum aggregate
principal amount at any one time outstanding of Three Hundred Million
United States Dollars (U.S.$300,000,000), providing for the making of
Loans and the issuance of and participations in Letters of Credit as
contemplated therein. As required by Article 1515 Section 3 of the
Commercial Code of Panama, the dates on which payments of principal in
respect of the Loans are due may be determined from the provisions of
the Credit Agreement including Section 4.
(C) The obligations of the Owner with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Owner payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(D) This Mortgage is made for the benefit of the Mortgagee to secure (i)
the full and prompt payment when due of (x) the principal of and
interest on the Notes issued, and Loans made, under the Credit
Agreement, and all reimbursement obligations and Unpaid Drawings with
respect to the Letters of Credit issued under the Credit Agreement and
(y) all other obligations and indebtedness (including, without
limitation, indemnities, Fees and interest thereon) of the Owner to
the Secured Creditors (as hereinafter defined), whether now existing
or hereafter incurred under, arising out of or in connection with the
Credit Agreement and the other Credit Documents including, without
limitation, this Mortgage and the due performance and compliance by
the Owner with all of the terms, conditions and agreements contained
in the Credit Agreement and the other Credit Documents including,
without limitation, this Mortgage; (ii) any and all sums advanced by
the Mortgagee in order to preserve the Collateral (as defined in the
Credit Agreement) or preserve its security interest in the Collateral;
(iii) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities of the Owner referred
to in clause (i) above, after an Event of Default shall have occurred
and be continuing, the reasonable expenses of the Mortgagee of re-
taking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, or of any exercise by the
Mortgagee of its rights hereunder, together with reasonable attorneys'
fees of counsel to the Mortgagee and court costs; and (iv) all amounts
paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement under Clause 13 of this Mortgage (all such obligations,
liabilities, sums and expenses referred to in clauses (i) through (iv)
above being collectively referred to as the "Obligations"). It is
acknowledged and agreed that the "Obligations" shall include
extensions of credit of the types described above, whether outstanding
on the date of this Mortgage or extended from time to time after the
date of this Mortgage.
(E) This Indenture of First Naval Mortgage, which is entered into by the
Owner in consideration of the Banks entering into the Credit Agreement
and agreeing to make the Facility available to the Owner and as a
condition thereto and for other good and valuable consideration
provided by the Banks (the sufficiency of which the Owner hereby
acknowledges).
NOW, THEREFORE, the appearing parties, each in the name and on behalf of his
respective principal, state that they hereby execute this Indenture of First
Naval Mortgage pursuant to the following representations:
1. REPRESENTATIONS AND COVENANTS
1.01 The Owner represents and covenants to the Mortgagee that:
a. The Owner is the sole and absolute owner of the Rig under the
laws and the flag of the Republic of Panama;
b. The Owner, as sole legal and beneficial owner of the Rig, has
received and presently possesses a Provisional Patent of
Navigation for the Rig, duly issued by the Republic of Panama
under No. 25384-PEXT;
c. Neither the whole nor any share in the Rig is subject to any
Security Interest (as defined herein) (except for Permitted
Liens (as defined herein) and the lien of this Mortgage);
d. the Owner has not sold or transferred, or agreed to sell or
transfer, title to the Rig or any share therein;
e. the Owner is a corporation duly organized and validly existing
and in good standing under the laws of the State of Oklahoma;
f. the Owner has full power and authority (i) to execute and
deliver this Mortgage, (ii) to mortgage the Rig as security for
the Obligations and (iii) to comply with the provisions of, and
perform all its obligations under, this Mortgage;
g. the Owner has complied with all statutory and other material
requirements relative to the ownership, registration and
operation of the Rig;
h. 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 preliminarily recorded with the
Public Registry in Panama through the Panamanian Consulate in
New York, New York will create a legal, valid and enforceable
first priority mortgage lien on the Rig subject only to the
permanent filing of this Mortgage in the Public Registry in
Panama within six months of the date of the preliminary recorded
filing;
i. the entry into and performance by the Owner of this Mortgage
does not and will not during the Credit Facility Period (as
defined herein) 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;
j. 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 during the
Credit Facility Period;
k. 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;
l. the Owner is in compliance with all applicable Environmental
Laws (as defined herein) and all Environmental Approvals (as
defined herein) 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;
m. no Environmental Claim (as defined herein) has been made or
threatened against the Owner or otherwise in connection with the
Rig;
n. no Environmental Incident (as defined herein) which has
resulted, or which could reasonably be expected to result, in an
Environmental Claim in excess of US$200,000 has occurred; and
o. The Owner hereby affirms as its representations all of the
statements contained in the "WHEREAS" clauses of this Mortgage.
1.02 The representations and warranties of the Owner set out in Clause 1.01
shall survive the execution of this Mortgage and shall be deemed to be
repeated at the time of the making of each Loan (as defined herein)
and at the time of the issuance of each Letter of Credit, with respect
to the facts and circumstances existing at each such time, as if made
at each such time.
1.03 The Mortgagee represents that the Banks have made the Facility
available to the Owner, as evidenced by, inter alia, the Credit
Agreement, the Notes and the Security Documents (as defined herein),
and accepts the Mortgage constituted by this instrument upon the Rig
as security for the due and prompt payment and performance of the
obligations of the Owner under the Credit Agreement and the other
Credit Documents.
1.04 Each of the contracting parties declares that it is satisfied with the
representations and covenants made by the other and accepts them as
true; and the parties mutually acknowledge their respective legal
status as well as the authority of the persons representing them
respectively in this instrument to sign the same on behalf of their
respective principals.
2. DEFINITIONS AND INTERPRETATION
2.01 In this Mortgage unless the context otherwise requires, the following
expressions shall have the following meanings:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Commitment" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Owner, the Banks, the Documentation
Agents, and the Administrative Agent, first referred to in Recital (B)
hereto, as modified, amended or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Unpaid Drawings
together with interest, fees and all other obligations are paid in
full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of business of such entity and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et
seq. and any applicable state and local or foreign counterparts or
equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Owner referred to in Recital
(C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (D) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
semi-submersible drilling rig JACK BATES owned by the Owner documented
under the laws and flag of the United States of America with Official
Number 906283 of 19,928 gross registered tons and 14,948 net
registered tons; (ii) the jack-up drilling rig D. R. STEWART owned by
Reading & Bates Exploration Co. ("R&B Exploration") documented under
the laws and flag of the United States of America with Official Number
626904 of 6,494 gross registered tons and 5,834 net registered tons;
(iii) the offshore drilling rig W. D. KENT owned by R&B Exploration
documented under the laws and flag of the United States of America
with Official Number 583169 of 5,383 gross registered tons and 4,185
net registered tons; (iv) the jack-up drilling rig RON TAPPMEYER owned
by Reading & Bates (A) Pty Ltd. documented under the laws and flag of
Australia with Official Number 855213 of 11,455 gross registered tons
and 3,436 net registered tons; (v) the semi-submersible drilling rig
RIG 41 owned by the Owner documented under the laws and flag of the
Republic of Panama with the Patente Number to be assigned on the date
hereof of 10,078 gross registered tons and 3,024 net registered tons;
(vi) the offshore drilling rig CHARLEY GRAVES owned by Reading and
Bates Borneo Drilling Co., Ltd. documented under the laws and flag of
the Republic of Panama with Patente Number 6618-76 CH of 5,829 gross
registered tons and 1,748 net registered tons; (vii) the jack-up
drilling rig HARVEY H. WARD owned by HRB Rig Corporation documented
under the laws and flag of the United States of America with Official
Number 642693 of 4,121 gross registered tons and 3,079 net registered
tons; (viii) the jack-up drilling rig F. G. McCLINTOCK owned by
Reading & Bates Offshore, Limited documented under the laws and flag
of the United States of America with Official Number 562059 of 5,525
gross registered tons and 1,657 net registered tons; (ix) the jack-up
drilling rig RANDOLPH YOST owned by the Owner documented under the
laws and flag of the United States of America with Official Number
601699 of 4,701 gross registered tons and 4,701 registered tons; (x)
the jack-up drilling rig J. T. ANGEL owned by the Owner documented
under the laws and flag of the United States of America with Official
Number 651645 of 4,186 gross registered tons and 3,090 net registered
tons; (xi) the jack-up drilling rig ROGER W. MOWELL owned by the Owner
documented under the laws and flag of the United States of America
with Official Number 645360 of 4,121 gross registered tons and 3,079
net registered tons; (xii) the jack-up drilling rig GEORGE H. GALLOWAY
owned by Reading & Bates Offshore, Limited documented under the laws
and flag of the United States of America with Official Number 651646
of 3,729 gross registered tons and 2,496 net registered tons; and
(xiii) the jack-up drilling rig C. E. THORNTON to be owned by HRB Rig
Corporation documented under the laws and flag of the United States of
America with Official Number 673210 of 6,096 gross registered tons and
6,096 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 written request of the
Administrative Agent, provide a bond or other security satisfactory to
the Administrative 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 written request of the Administrative Agent, provide a bond
or other security satisfactory to the Administrative 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 Administrative 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
Administrative Agent have been made as evidenced by the Administrative
Agent's written consent to such lien; (8) any lien in favor of the
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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);
"Required Banks" shall have the meaning for such term as set forth in
the Credit Agreement;
"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 Creditors" shall mean the Banks, the Letter of Credit Issuer
and the Administrative Agent under and as defined in the Credit
Agreement;
"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;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised total loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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.
2.02 Except where otherwise expressly provided or unless the context
otherwise requires, words and expressions defined in the Credit
Agreement shall bear the same meanings when used in this Mortgage.
2.03 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.
3. MORTGAGE
3.01 In order to secure the Obligations the Owner has granted, conveyed and
mortgaged and does by these presents grant, convey and mortgage unto
the Mortgagee, its successors and assigns, in accordance with the
provisions of Chapter V, Title IV of Book Second of the Code of
Commerce and pertinent provisions of the Civil Code and other
legislation of the Republic of Panama, the whole of the Rig, the
detailed description of which is as follows:
offshore drilling rig J. W. McLEAN; gross tonnage approximately
15,453; net tonnage approximately 4,636; length overall 111.86
meters, breadth 64.01 meters; depth 42.67 meters; built in 1974
by Bethlehem Steel Corporation in Beaumont, Texas; radio call
letters HP-8713;
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 Obligations.
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 to
the Secured Creditors and their respective successors or assigns the
Obligations as and when the same shall become due and payable in
accordance with the terms of the Credit Agreement and this Mortgage
and the Owner and its successors and assigns shall observe and comply
with the covenants, terms and conditions contained in the Credit
Agreement 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, then these presents and the rights hereunder
shall cease, determine and be void and, in such event, the Mortgagee
agrees to furnish, execute and record, at the expense of the Owner,
all such documents as the Owner may reasonably require to discharge
this Mortgage, otherwise to be and remain in full force and effect.
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 none of the Secured Creditors 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.
3.03 This Mortgage, when it shall have been duly executed and signed on
behalf of the parties, shall be provisionally recorded through the
Panamanian Consulate at New York, New York and thereafter within three
months permanently recorded in the Public Registry in Panama.
4. PAYMENT COVENANTS
4.01 The Owner hereby covenants with the Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 the relevant expense,
claim, liability, loss, cost, duty, fee, charge or other money
is paid by any Secured Creditor (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 any Secured Creditor, as the case may be, under this
Mortgage and the Credit Agreement 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
Mortgagee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Mortgagee shall not have to wait for the Administrative
Agent to enforce any of the other Security Documents before
enforcing the security created by this Mortgage;
(d) no failure or delay on the part of the Mortgagee in exercising
any right, power, privilege or remedy hereunder and no course of
dealing between Owner and Mortgagee or the Administrative Agent
shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power, privilege or remedy
hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The
rights and remedies herein expressly provided are cumulative and
not exclusive of any rights or remedies which the Mortgagee or
the Administrative Agent would otherwise have. No notice to or
demand on the Owner in any case shall entitle the Owner to any
other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the
Mortgagee or the Administrative Agent to any other or further
action in any circumstances without notice or demand; and
(e) any waiver by the Mortgagee of any terms of this Mortgage or any
consent given by the Mortgagee 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 Mortgagee
and the Owner shall be conditional upon no security or payment to the
Secured Parties or any of them by the Credit Parties 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 Mortgagee 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 Secured Creditors 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 Credit Parties, the Secured Creditors or any other
person:
(a) any waiver granted to or composition with the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents or any other document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of the Credit Party or any other person under the
Credit Agreement, any of the other Credit Documents or any other
document or security.
6. INSURANCE
6.01 The Owner covenants with the Mortgagee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains 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 Administrative 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 agreed value of the Rig, and when such amount is
aggregated with the total amount of such insurance coverage on
the Other Rigs, such aggregate amount shall be at least 110% of
the aggregate amount of the Total Commitment. Such insurance
shall cover marine and war risk perils, on hull and machinery,
with per occurrence 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 American, British and Scandinavian insurance markets or in
such other major international markets acceptable to the
Mortgagee. The Owner shall maintain protection and indemnity
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 at least equal from time
to time to the limitation of liability amount applicable to the
Rig under the Oil Pollution Act 1990 or other Environmental
Laws), through underwriters or associations acceptable to the
Mortgagee. In addition, the Owner shall, at its own expense,
furnish to the Administrative Agent a mortgagee's single
interest policy providing coverage which, when aggregated with
the mortgagee's interest insurance furnished to the
Administrative Agent in respect of the Other Rigs, shall be in
an amount equal to at least 110% of the Total Commitment (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
Administrative Agent). Such mortgagee's interest insurance and
any additional insurance policies for the benefit of the
Administrative Agent shall be maintained in the broadest form
available in the American, British and Scandinavian markets or
other major international markets acceptable to the
Administrative Agent through underwriters acceptable to the
Administrative 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 satisfying the conditions of the relevant policies
evidence of which shall be furnished to the Mortgagee.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the
Administrative Agent, shall contain conditions, terms,
stipulations and insuring covenants satisfactory to the
Administrative 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 the Mortgagee shall be the loss
payee for distribution by it to itself, the Banks and the Owner
as their interests may appear, and shall provide for at least
ten days' prior notice to be given to the Mortgagee 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 Mortgagee and the Banks shall be named as co-
assureds on all such policies and insurance contracts, but
without liability of the Mortgagee, or the Banks for premiums or
calls. Complete certified copies of all such policies, binders
and other interim insurance contracts shall be delivered to the
Mortgagee. Originals shall also be provided upon the request of
the Mortgagee. The Owner shall furnish to the Mortgagee
annually a detailed report signed by a firm of marine insurance
brokers satisfactory to the Mortgagee 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 Mortgagee, by notice to the
underwriters, although the following insurance is payable to the
Mortgagee, (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 directly for the
repair, salvage or other charges involved or, if the Owner shall
have first fully repaired the damage or paid 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$1,000,000.00 (One Million U.S.
Dollars), the underwriters shall not make such payment without
first obtaining the written consent thereto of the Mortgagee
(which consent shall not be unreasonably withheld). Any loss
covered by this paragraph which is paid to the Mortgagee 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 Mortgagee to, or as directed by, the Owner and all other
payments to the Mortgagee of losses covered by this paragraph
shall be applied by the Mortgagee in accordance with Clause
10.01.
In the event of a Total Loss, all insurance payments therefor
shall be paid to the Mortgagee. The Owner shall not declare or
agree with the underwriters that the Rig is a Total Loss without
the prior written consent of the Mortgagee.
(c) In the event of a Total Loss of the Rig, the Mortgagee 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
Secured Creditors under the Security Documents, whether or not
the same shall be then due and payable, together with accrued
interest and the cost, if any, of collecting the insurance, and
pay the balance as provided in Clause 10.
(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 in which the Rig from time to time is engaged.
(e) The Owner shall renew all such insurances as they expire and so
as to insure that there is no gap in coverage, keep the
Mortgagee advised of the progress of such renewals, and shall
provide evidence of such renewal in writing to the Mortgagee 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 Mortgagee.
(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 to such employment of the insurers
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 Mortgagee that throughout the Credit
Facility Period the Owner will:
(a) keep the Rig documented in its name as a Panamanian flag vessel
and do or allow to be done nothing whereby such documentation
may be forfeited or imperilled;
(b) not without the previous consent in writing of the Mortgagee
except as otherwise contemplated by the Credit Agreement, change
the name of the Rig or make any modification to the Rig which
would materially alter the structure, type or performance
characteristics of the Rig and which would materially reduce the
value of the Rig;
(c) keep the Rig in a good and efficient state of repair consistent
with first-class ship-ownership and management practice employed
by owners of drilling rigs of similar size and type and so as to
maintain her present class (namely +A1 Column Stabilized
Drilling Unit) at Det Norske Veritas free of recommendations and
qualifications and change of class, save those approved in
writing by the Mortgagee and so as to comply with all applicable
laws, treaties and conventions of the Republic of Panama and
other applicable jurisdictions, and rules and regulations issued
thereunder, and have on board as and when required thereby valid
certificates showing compliance therewith;
(d) procure that all repairs to or replacement of any damaged, worn
or lost parts or equipment in such manner (both as regards
workmanship and quality of materials) as to not materially
diminish the value of the Rig and not to remove any material
part of, or item of equipment owned by the Owner installed on,
the Rig unless (i) 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 Mortgagee and becomes on
installation on the Rig the property of the Owner and subject to
the security constituted by this Mortgage or (ii) the removal
will not materially diminish the value of the Rig;
(e) submit the Rig to such periodical or other surveys as may be
required for classification purposes and if so required to
supply to the Mortgagee copies of all survey reports issued in
respect thereof;
(f) permit the Mortgagee by independent surveyors 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,
provided that unless an Event of Default shall have occurred and
be continuing, the cost of any such inspection shall be for the
account of the Mortgagee;
(g) 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 expenses
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;
(h) 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 can reasonably be expected to 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 Mortgagee may reasonably
require;
(i) promptly furnish to the Mortgagee 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 request of the Mortgagee in writing,
copies of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(j) notify the Mortgagee forthwith by 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 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 Mortgagee 30 days prior notice, provided,
that in the event of any emergency dry docking of the Rig,
the Owner shall immediately notify the Mortgagee; and
(vi) any intended deactivation or lay-up of the Rig (other than
for normal periods of inactivity between contracts for the
Rig during which periods the Rig remains manned) and
obtain the prior written consent of the Mortgagee;
(k) keep proper books of account in respect of the Rig and as and
when the Mortgagee may so reasonably require make such books
available for inspection on behalf of the Mortgagee 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;
(l) observe the obligations contained in Sections 7 and 8 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;
(m) not without the previous consent in writing of the Mortgagee
(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 United States Dollars (US$2,500,000.00) (or the
equivalent in any other currency) unless (i) such person shall
first have given to the Mortgagee and in terms satisfactory to
it a written undertaking not to exercise any lien on the Rig for
the cost of such work or otherwise or (ii) the cost of such work
shall be fully covered by applicable insurance;
(n) comply with and satisfy all the provisions of applicable laws
and regulations of the Republic of Panama, as at any time
amended, in order to establish and maintain this Mortgage as a
first priority naval mortgage thereunder upon the Rig and upon
all renewals, improvements and replacements made in or to the
same, and promptly to furnish to the Mortgagee from time to time
such proofs as the Mortgagee may request for its satisfaction
with respect to the compliance by the Owner with the provisions
of this sub-clause, including, appropriate certificates of the
Public Registry showing that this Mortgage has been duly
registered and filed and is a first and absolute lien on the
Rig;
(o) 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 and
salvage and to any representative of the Mortgagee 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 subject to an Indenture of First Naval
Mortgage in favor of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
BRANCH, as Administrative Agent for the Banks defined in said
Mortgage, in conformity with the provisions of Chapter V, Title
IV of Book Second of the Code of Commerce, and the pertinent
provisions of the Civil Code and other legislation of the
Republic of Panama. Under the terms of said Mortgage neither
the owner, any charterer, the Master of the Rig nor any other
person shall have the right, power or authority to create, incur
or permit to be placed upon the Rig any other lien whatsoever
other than for current crew's wages and salvage and Permitted
Liens (as that term is defined in said Mortgage)."
(p) 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;
(q) notify the Mortgagee 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
Mortgagee advised, in writing on such regular basis and in
such detail as the Mortgagee shall require, of the Owner's
response to such Environmental Claim or Environmental
Incident.
(r) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Mortgagee having first been obtained, and any such written
consent to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Mortgagee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of the Rig;
(s) shall not cause or permit the Rig to be operated in any manner
contrary to law (except where the failure to operate in
compliance with any law would not have a material adverse effect
on the Owner, the Rig or the lien of this Mortgage), shall not
abandon the Rig in a foreign port and shall not engage in any
unlawful trade or violate any law or carry any cargo that shall
expose the Rig to forfeiture or capture.
8. PROTECTION OF SECURITY
8.01 The Mortgagee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit Documents be entitled (but
not bound) at any time and as often as may be necessary (but unless an
Event of Default shall have occurred and be continuing with prior
written notice to the Owner) 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 Credit 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, reasonable legal
fees) so incurred by the Secured Creditors 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 in any material respect with the
provisions of Clause 6 or any of them the Mortgagee shall be
entitled (but not bound) to effect or to replace and renew and
thereafter to maintain the Insurances in such manner it, in its
discretion, 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 Mortgagee
may nominate and, upon the direction of the Mortgagee 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 Mortgagee 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;
(b) if the Owner does not comply with the provisions of Clause
7.01(d) or 7.01(f) the Mortgagee shall be entitled (but not
bound) to arrange for the carrying out of such repairs to 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) the Mortgagee 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 MORTGAGEE'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 Mortgagee or the Banks
having served on the Owner any such notice as is referred to in
Section 9 of the Credit Agreement) the security constituted by this
Mortgage shall become immediately enforceable and the Mortgagee 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 the laws of the Republic of
Panama or other applicable laws;
(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 Mortgagee
without legal process and without liability of the Mortgagee 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 Mortgagee;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Mortgagee 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) all such proceedings in connection with the Rig, the
Insurances, or any Requisition Compensation as the Mortgagee 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 Mortgagee
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
Obligations, subject to notice of sale being given by the
Mortgagee to the Owner and other mortgagees of record, if any,
by airmail, postage pre-paid and by publication once in a
newspaper of general circulation in the City of Panama, Republic
of Panama, not less than twenty (20) calendar days in advance of
the sale, to satisfy the requirement of notice of sale contained
in Article 1527 of the Panama Code of Commerce. Such notice
shall be necessary only in respect of the initial date of sale;
(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 Mortgagee in its absolute discretion
deems expedient and for the purposes aforesaid the Mortgagee
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 Mortgagee 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 Mortgagee in or about the
exercise of the power vested in the Mortgagee under
Clause 9.01(g);
(i) generally, to recover from the Owner on demand each and every
expense, liability or loss incurred by the Mortgagee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The Mortgagee 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 Mortgagee by this Mortgage or to which
the Mortgagee may at any time be entitled hereunder.
9.03 Neither the Secured Creditors 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 Mortgagee 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 Mortgagee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Mortgagee has arisen in the manner provided in this
Mortgage and the sale shall be deemed to be within the power of the
Mortgagee and the receipt of the Mortgagee for the purchase money
shall effectively discharge the purchaser who shall not be concerned
with the manner of application of the proceeds of sale or be in any
way answerable therefor.
10. APPLICATION OF MONEYS
10.01 (a) All moneys received by the Mortgagee or any other Secured
Creditor, including, without limitation, in respect of sale of
the Rig or any part thereof, in respect of recovery under the
Insurances, or in respect of Requisition Compensation, shall be
applied in the following manner:
(i) first, to the payment of all amounts owing the Mortgagee
of the type described in clauses (ii) and (iii) of Recital
(D);
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to
the outstanding Obligations shall be paid to the Secured
Creditors as provided in Clause 10.01(c), with each
Secured Creditor receiving an amount equal to such
Obligations held by it or, if the proceeds are
insufficient to pay in full all such Obligations, its Pro
Rata Share (as defined below) of the amount remaining to
be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and
following the termination of this Mortgage pursuant to
Clause 3.01, any surplus then remaining shall be paid to
the Owner, subject, however, to the rights of the holder
of any then existing Lien of which the Mortgagee has
actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Mortgagee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Mortgagee shall be entitled to reply upon
(i) the Administrative Agent under the Credit Agreement and (ii)
the Secured Creditors for a determination (which the
Administrative Agent and each Secured Creditor, by their
acceptance of the benefits of this Mortgage shall be obligated
to provide upon request of the Mortgagee) of the outstanding
Obligations owed to the Secured Creditors. Unless it has actual
knowledge (including by way of written notice from a Secured
Creditor) to the contrary, the Administrative Agent under the
Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Mortgagee, in acting hereunder,
shall be entitled to assume that no obligations other than
principal, interest and regularly accruing fees are owing to any
Secured Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the Mortgagee 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 Mortgagee and
the other Secured Creditors 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
inure to the benefit of any transferee, successor or assignee of
the Mortgagee; 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
Mortgagee under this Mortgage,
in any such case, forthwith upon demand by the Mortgagee and at the
expense of the Owner.
12. POWER OF ATTORNEY
12.01 The Owner, by way of security and in order to more fully secure the
performance of the Obligations under this Mortgage, hereby irrevocably
appoints the Mortgagee 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 Mortgagee 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 Mortgagee shall not put any person dealing with the
Mortgagee 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 Mortgagee of such
power shall be conclusive evidence as against third parties of its
right to exercise the same.
13. INDEMNITIES
13.01 The Owner will indemnify and save harmless each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the
Mortgagee under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and the Secured Creditors 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 a Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 the Credit Agreement or 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 Mortgagee, 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 Mortgagee against the amount of such shortfall. For
the purposes of this Clause 13.03, "rate of exchange" means the rate
at which the Mortgagee is able on the date of such payment (or, if it
is not practicable for the Mortgagee 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
Mortgagee 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 any Secured Creditor on demand all costs, fees
and expenses, including, but not limited to, legal fees and expenses
and valuation fees and Taxes thereon incurred by any Secured Creditor
or for which any Secured Creditor may become liable in connection
with:
(a) the negotiation, preparation and execution of the Credit
Agreement and the other Credit 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 or the
other Credit Documents (or any of them).
14.02 The Owner shall pay to the Mortgagee on demand all costs, fees and
expenses (including, but not limited to, legal fees and expenses) and
Taxes thereon incurred by any Secured Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement or the other Credit 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 Mortgagee in relation to
the Credit Agreement and the other Credit 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 other Credit
Documents (or any of them) may be subject or give rise and shall
indemnify the Mortgagee 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 required to be given to the Mortgagee shall be made to the
following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Attention: Loan Administration
Telephone: (212) 827-4800
Telefax: (212) 827-4888
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall inure to the benefit of
the Secured Creditors 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 Section 12.04 of the Credit Agreement, each Bank 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 Mortgagee 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 Three Hundred Million US Dollars
(US$300,000,000) of principal plus interest, fees, commissions and
performance of mortgage covenants. The discharge amount is the same
as the total amount.
18. WAIVER; AMENDMENT
18.01 None of the terms and conditions of this Mortgage may be changed,
waived, modified or varied in any manner whatsoever unless in writing
duly signed by the Owner and the Mortgagee (with the consent of either
the Required Banks or, to the extent required by Section 12.12 of the
Credit Agreement, all of the Banks). No amendment to the Credit
Agreement affects the rights and obligations of the Mortgagee
hereunder shall be effective without the consent of the Mortgagee
thereto.
19. MISCELLANEOUS
19.01 This Mortgage shall be governed by the laws of the Republic of Panama.
19.02 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.
19.03 The Mortgagee, 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 Mortgagee under this Mortgage in
relation to the Rig. Any such delegation may be made upon such terms
and subject to such regulations as the Mortgagee may think fit. The
Mortgagee 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.
19.04 The appearing parties hereby confer a special power of attorney on
Benedetti & Benedetti, lawyers of Panama, Republic of Panama and/or
any partners in the firm authorizing such firm or any such partner to
take all necessary steps to record this Indenture of First Naval
Mortgage in the appropriate registries of the City of Panama, and to
substitute this Power of Attorney herein granted.
19.05 A certification or determination by the Mortgagee as to any matter
provided for in this Mortgage shall, in the absence of manifest error,
be conclusive and binding on the Owner.
19.06 The Mortgagee declares that it accepts the naval mortgage hereby
created under the terms above set forth.
20. JURISDICTION
20.01 The Owner agrees that the Mortgagee 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Mortgagee.
20.02 Without prejudice to the generality of Clause 20.01, the Mortgagee
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 Mortgagee may bring before the courts of such
jurisdiction or other judicial authority and for the purpose of any
action which the Mortgagee 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.
20.03 The Owner agrees that should the Mortgagee 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 and the Mortgagee have duly executed these
presents the day and year first before written.
READING & BATES DRILLING CO.
By: _____________________________________
Name: T.W. Nagle
Title: Vice President and Treasurer
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH
By: _____________________________________
Name:
Title:
By: _____________________________________
Name:
Title:
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 13th day of November, 1996, before me personally
appeared Timothy W. Nagle, to me known and who resides at 13307 Tosca Lane,
Houston, Texas; and who submitted evidence to me that he is a Vice President
and Treasurer of READING & BATES DRILLING CO., the company described in and
which executed the foregoing mortgage; and that he signed his name thereto
pursuant to authority granted to him by the Board of Directors of said
corporation.
____________________________________
Notary Public
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 13th day of November, 1996, before me personally
appeared Hans Chr. Kjelsrud to me known and who resides at 115 East 87th
Street, New York, NY; and who submitted evidence to me that he/she is Vice
President of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, the corporation
described in and which executed the foregoing mortgage; and that he/she signed
his/her name thereto pursuant to authority granted to him/her by the Board of
Directors of said corporation.
____________________________________
Notary Public
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 13th day of November, 1996, before me personally
appeared Justin F. McCarty, III to me known and who resides at 35 Pleasant
Street, Katonah, NY; and who submitted evidence to me that he/she is Vice
President of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, the corporation
described in and which executed the foregoing mortgage; and that he/she signed
his/her name thereto pursuant to authority granted to him/her by the Board of
Directors of said corporation.
____________________________________
Notary Public
Exhibit 10.131
INDENTURE OF FIRST NAVAL MORTGAGE
READING & BATES DRILLING CO.
- and -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH,
administrative agent, arranger and security trustee
as Mortgagee
RIG 41
Dated November 13, 1996
==============================================================================
INDEX
CLAUSE SUBJECT MATTER PAGE
1 REPRESENTATIONS AND COVENANTS . . . . . . . . . . . . . . . . . 2
2 DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 4
3 MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . 10
5 PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . 10
6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7 RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
8 PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . 18
9 ENFORCEABILITY AND MORTGAGEE'S POWERS . . . . . . . . . . . . 19
10 APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . . 20
11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . 22
12 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . 22
13 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . 23
14 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15 COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . 24
16 ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 25
17 TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . 25
18 WAIVER; AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 25
19 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 25
20 JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT 1 FORM OF CREDIT AGREEMENT
==============================================================================
THIS INDENTURE OF FIRST NAVAL MORTGAGE made and entered into this 13th
day of November, 1996, between READING & BATES DRILLING CO., an Oklahoma
corporation duly constituted and existing in conformity with the laws of the
State of Oklahoma with its principal office at 901 Threadneedle, Suite 200,
Houston, Texas 77079 (hereinafter called the "Owner") and CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH having its office at 11 West 42nd Street, New
York, NY 10036, as agent for the Banks (as hereinafter defined) (hereinafter
called the "Mortgagee"), on the Panamanian offshore drilling rig RIG 41 of
10,078 gross registered tons, 3,024 net registered tons and with a length of
108.2m, a breadth of 67.36m and a depth of 36.58m and Permanent Patent of
Navigation No. 22365-95 (hereinafter called the "Rig"), duly registered under
the laws and flag of the Republic of Panama, the detailed description of which
is hereinafter more particularly set forth.
W I T N E S S E T H :
WHEREAS
(A) The Owner is the sole owner of the whole of the semi-submersible
drilling rig RIG 41 documented under the laws and flag of the Republic
of Panama.
(B) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation, as
guarantor ("Holdings"), (ii) the Owner, as borrower, (iii) the banks
party thereto (the "Banks"), (iv) Credit Lyonnais New York Branch and
Banque Indosuez, as documentation agents (the "Documentation Agents")
and (v) the Mortgagee, as administrative agent, arranger and security
trustee (in such capacity the "Administrative Agent"), (the form of
which Credit Agreement together with the form of promissory note of
the Owner attached as Exhibit B thereto but without the remaining
exhibits is attached hereto as Exhibit 1), it was agreed among other
things that the Banks would make available to the Owner a reducing
revolving credit facility (the "Facility") in the maximum aggregate
principal amount at any one time outstanding of Three Hundred Million
United States Dollars (U.S.$300,000,000), providing for the making of
Loans and the issuance of and participations in Letters of Credit as
contemplated therein. As required by Article 1515 Section 3 of the
Commercial Code of Panama, the dates on which payments of principal in
respect of the Loans are due may be determined from the provisions of
the Credit Agreement including Section 4.
(C) The obligations of the Owner with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents,
including the promissory notes of the Owner payable to the order of
the respective Banks (each a "Note" and, collectively, the "Notes")
(the form of which is attached as Exhibit B to the Credit Agreement).
(D) This Mortgage is made for the benefit of the Mortgagee to secure (i)
the full and prompt payment when due of (x) the principal and interest
on the Notes issued, and Loans made, under the Credit Agreement, and
all reimbursement obligations and Unpaid Drawings with respect to the
Letters of Credit issued under the Credit Agreement and (y) all other
obligations and indebtedness (including, without limitation,
indemnities, Fees and interest thereon) of the Owner to the Secured
Creditors (as hereinafter defined), whether now existing or hereafter
incurred under, arising out of or in connection with the Credit
Agreement and the other Credit Documents including, without
limitation, this Mortgage and the due performance and compliance by
the Owner with all of the terms, conditions and agreements contained
in the Credit Agreement and the other Credit Documents including,
without limitation, this Mortgage; (ii) any and all sums advanced by
the Mortgagee in order to preserve the Collateral (as hereinafter
defined) or preserve its security interest in the Collateral; (iii) in
the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of the Owner referred to in
clause (i) above, after an Event of Default shall have occurred and be
continuing, the reasonable expenses of the Mortgagee of re-taking,
holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Mortgagee
of its rights hereunder, together with reasonable attorneys' fees of
counsel to the Mortgagee and court costs; and (iv) all amounts paid by
any Indemnitee (as defined herein) as to which such Indemnitee has the
right to reimbursement under Clause 13 of this Mortgage (all such
obligations, liabilities, sums and expenses referred to in clauses (i)
through (iv) above being collectively referred to as the
"Obligations"). It is acknowledged and agreed that the "Obligations"
shall include extensions of credit of the types described above,
whether outstanding on the date of this Mortgage or extended from time
to time after the date of this Mortgage.
(E) This Indenture of First Naval Mortgage, which is entered into by the
Owner in consideration of the Banks entering into the Credit Agreement
and agreeing to make the Facility available to the Owner and as a
condition thereto and for other good and valuable consideration
provided by the Banks (the sufficiency of which the Owner hereby
acknowledges).
NOW, THEREFORE, the appearing parties, each in the name and on behalf of his
respective principal, state that they hereby execute this Indenture of First
Naval Mortgage pursuant to the following representations:
1. REPRESENTATIONS AND COVENANTS
1.01 The Owner represents and covenants to the Mortgagee that:
a. The Owner is the sole and absolute owner of the Rig under the
laws and flag of the Republic of Panama;
b. The Owner, as sole legal and beneficial owner of the Rig, has
received and presently possesses a Provisional Patent of
Navigation for the Rig, duly issued by the Republic of Panama
under No. __________;
c. Neither the whole nor any share in the Rig is subject to any
Security Interest (as defined herein) (except for Permitted
Liens (as defined herein) and the lien of this Mortgage);
d. the Owner has not sold or transferred, or agreed to sell or
transfer, title to the Rig or any share therein;
e. the Owner is a corporation duly organized and validly existing
and in good standing under the laws of the State of Oklahoma;
f. the Owner has full power and authority (i) to execute and
deliver this Mortgage, (ii) to mortgage the Rig as security for
the Obligations and (iii) to comply with the provisions of, and
perform all its obligations under, this Mortgage;
g. the Owner has complied with all statutory and other material
requirements relative to the ownership, registration and
operation of the Rig;
h. 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 preliminarily recorded with the
Public Registry in Panama through the Panamanian Consulate in
New York, New York will create a legal, valid and enforceable
first priority mortgage lien on the Rig subject only to the
permanent filing of this Mortgage in the Public Registry in
Panama within six months of the date of the preliminary recorded
filing;
i. the entry into and performance by the Owner of this Mortgage
does not and will not during the Credit Facility Period (as
defined herein) 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;
j. 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 during the
Credit Facility Period;
k. 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;
l. the Owner is in compliance with all applicable Environmental
Laws (as defined herein) and all Environmental Approvals (as
defined herein) 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;
m. no Environmental Claim (as defined herein) has been made or
threatened against the Owner or otherwise in connection with the
Rig;
n. no Environmental Incident (as defined herein) which has
resulted, or which could reasonably be expected to result, in an
Environmental Claim in excess of US$200,000 has occurred; and
o. The Owner hereby affirms as its representations all of the
statements contained in the "WHEREAS" clauses of this Mortgage.
1.02 The representations and warranties of the Owner set out in Clause 1.01
shall survive the execution of this Mortgage and shall be deemed to be
repeated at the time of the making of each Loan (as defined herein)
and at the time of the issuance of each Letter of Credit, with respect
to the facts and circumstances existing at each such time, as if made
at each such time.
1.03 The Mortgagee represents that the Banks have made the Facility
available to the Owner, as evidenced by, inter alia, the Credit
Agreement, the Notes and the Security Documents (as defined herein),
and accepts the Mortgage constituted by this instrument upon the Rig
as security for the due and prompt payment and performance of the
obligations of the Owner under the Credit Agreement and the other
Credit Documents.
1.04 Each of the contracting parties declares that it is satisfied with the
representations and covenants made by the other and accepts them as
true; and the parties mutually acknowledge their respective legal
status as well as the authority of the persons representing them
respectively in this instrument to sign the same on behalf of their
respective principals.
2. DEFINITIONS AND INTERPRETATION
2.01 In this Mortgage unless the context otherwise requires, the following
expressions shall have the following meanings:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Commitment" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Owner, the Banks, the Documentation
Agents, and the Administrative Agent first referred to in Recital (B)
hereto, as modified, amended or supplemented from time to time;
"Credit Documents" shall have the meaning for such term as set forth
in the Credit Agreement;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Unpaid Drawings
together with interest, fees and all other obligations are paid in
full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of business of such entity and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or
judgment, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701 et
seq. and any applicable state and local or foreign counterparts or
equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any
other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13.01;
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Owner referred to in Recital
(C) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (D) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
semi-submersible drilling rig JACK BATES owned by the Owner documented
under the laws and flag of the United States of America with Official
Number 906283 of 19,928 gross registered tons and 14,948 net
registered tons; (ii) the jack-up drilling rig D. R. STEWART owned by
Reading & Bates Exploration Co. ("R&B Exploration") documented under
the laws and flag of the United States of America with Official Number
626904 of 6,494 gross registered tons and 5,834 net registered tons;
(iii) the offshore drilling rig W. D. KENT owned by R&B Exploration
documented under the laws and flag of the United States of America
with Official Number 583169 of 5,383 gross registered tons and 4,185
net registered tons; (iv) the jack-up drilling rig RON TAPPMEYER owned
by Reading & Bates (A) Pty Ltd. documented under the laws and flag of
Australia with Official Number 855213 of 11,455 gross registered tons
and 3,436 net registered tons; (v) the semi-submersible drilling rig
J. W. McLEAN owned by the Owner documented under the laws and flag of
the Republic of Panama with Patente Number 25384-PEXT of 15,453 gross
registered tons and 4,636 net registered tons; (vi) the offshore
drilling rig CHARLEY GRAVES owned by Reading and Bates Borneo Drilling
Co., Ltd. documented under the laws and flag of the Republic of Panama
with Patente Number 6618-76 CH of 5,829 gross registered tons and
1,748 net registered tons; (vii) the jack-up drilling rig HARVEY H.
WARD owned by HRB Rig Corporation documented under the laws and flag
of the United States of America with Official Number 642693 of 4,121
gross registered tons and 3,079 net registered tons; (viii) the jack-
up drilling rig F. G. McCLINTOCK owned by Reading & Bates Offshore,
Limited documented under the laws and flag of the United States of
America with Official Number 562059 of 5,525 gross registered tons and
1,657 net registered tons; (ix) the jack-up drilling rig RANDOLPH YOST
owned by the Owner documented under the laws and flag of the United
States of America with Official Number 601699 of 4,701 gross
registered tons and 4,701 net registered tons; (x) the jack-up
drilling rig J. T. ANGEL owned by the Owner documented under the laws
and flag of the United States of America with Official Number 651645
of 4,186 gross registered tons and 3,090 net registered tons; (xi) the
jack-up drilling rig ROGER W. MOWELL owned by the Owner documented
under the laws and flag of the United States of America with Official
Number 645360 of 4,121 gross registered tons and 3,079 net registered
tons; (xii) the jack-up drilling rig GEORGE H. GALLOWAY owned by
Reading & Bates Offshore, Limited documented under the laws and flag
of the United States of America with Official Number 651646 of 3,729
gross registered tons and 2,496 net registered tons; and (xiii) the
jack-up drilling rig C. E. THORNTON to be owned by HRB Rig Corporation
documented under the laws and flag of the United States of America
with Official Number 673210 of 6,096 gross registered tons and 6,096
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 written request of the
Administrative Agent, provide a bond or other security satisfactory to
the Administrative 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 written request of the Administrative Agent, provide a bond
or other security satisfactory to the Administrative 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 Administrative 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
Administrative Agent have been made as evidenced by the Administrative
Agent's written consent to such lien; (8) any lien in favor of the
Banks; and provided that Permitted Liens shall not include any liens
described in subclauses (1) through (7) 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);
"Required Banks" shall have the meaning for such term as set forth in
the Credit Agreement;
"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 Creditors" shall mean the Banks, the Letter of Credit Issuer
and the Administrative Agent under and as defined in the Credit
Agreement;
"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;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised total loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within ninety
(90) days after the occurrence thereof;
"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.
2.02 Except where otherwise expressly provided or unless the context
otherwise requires, words and expressions defined in the Credit
Agreement shall bear the same meanings when used in this Mortgage.
2.03 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.
3. MORTGAGE
3.01 In order to secure the Obligations the Owner has granted, conveyed and
mortgaged and does by these presents grant, convey and mortgage unto
the Mortgagee, its successors and assigns, in accordance with the
provisions of Chapter V, Title IV of Book Second of the Code of
Commerce and pertinent provisions of the Civil Code and other
legislation of the Republic of Panama, the whole of the Rig, the
detailed description of which is as follows:
semi-submersible drilling rig RIG 41; gross tonnage
approximately 10,078; net tonnage approximately 3,024; length
overall 108.2 meters, breadth 67.36 meters; depth 36.58 meters;
built in 1975 by Bergens Mek. Versteder in Bergen, Norway; radio
call letters HP-7970;
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 Obligations.
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 to
the Secured Creditors and their respective successors or assigns the
Obligations as and when the same shall become due and payable in
accordance with the terms of the Credit Agreement and this Mortgage
and the Owner and its successors and assigns shall observe and comply
with the covenants, terms and conditions contained in the Credit
Agreement 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, then these presents and the rights hereunder
shall cease, determine and be void and, in such event, the Mortgagee
agrees to furnish, execute and record, at the expense of the Owner,
all such documents as the Owner may reasonably require to discharge
this Mortgage, otherwise to be and remain in full force and effect.
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 none of the Secured Creditors 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.
3.03 This Mortgage, when it shall have been duly executed and signed on
behalf of the parties, shall be provisionally recorded through the
Panamanian Consulate at New York, New York and thereafter within three
months permanently recorded in the Public Registry in Panama.
4. PAYMENT COVENANTS
4.01 The Owner hereby covenants with the Secured Creditors:
(a) to pay and indemnify the Secured Creditors 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
Secured Creditors (or in respect of which the Owner agrees in
this Mortgage to indemnify any of the Secured Creditors) 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 the relevant expense,
claim, liability, loss, cost, duty, fee, charge or other money
is paid by any Secured Creditor (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 any Secured Creditor, as the case may be, under this
Mortgage and the Credit Agreement 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
Mortgagee as a continuing security for the performance of the
Obligations and that the security so created shall not be
satisfied by any intermediate payment or satisfaction of any
part of the Obligations;
(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 Mortgagee shall not have to wait for the Administrative
Agent to enforce any of the other Security Documents before
enforcing the security created by this Mortgage;
(d) no failure or delay on the part of the Mortgagee in exercising
any right, power, privilege or remedy hereunder and no course of
dealing between Owner and Mortgagee or the Administrative Agent
shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power, privilege or remedy
hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The
rights and remedies herein expressly provided are cumulative and
not exclusive of any rights or remedies which the Mortgagee or
the Administrative Agent would otherwise have. No notice to or
demand on the Owner in any case shall entitle the Owner to any
other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the
Mortgagee or the Administrative Agent to any other or further
action in any circumstances without notice or demand; and
(e) any waiver by the Mortgagee of any terms of this Mortgage or any
consent given by the Mortgagee 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 Mortgagee
and the Owner shall be conditional upon no security or payment to the
Secured Parties or any of them by the Credit Parties 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 Mortgagee 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 Secured Creditors 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 Credit Parties, the Secured Creditors or any other
person:
(a) any waiver granted to or composition with the Credit Parties 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 Credit Parties or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Credit Parties or any other
person; or
(d) any amendment or supplement to the Credit Agreement, any of the
other Credit Documents or any other document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Credit Parties or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of the Credit Party or any other person under the
Credit Agreement, any of the other Credit Documents or any other
document or security.
6. INSURANCE
6.01 The Owner covenants with the Mortgagee throughout the Credit Facility
Period that:
(a) The Owner shall, at its own expense, when and so long as any
Obligation remains 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 Administrative 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 agreed value of the Rig, and when such amount is
aggregated with the total amount of such insurance coverage on
the Other Rigs, such aggregate amount shall be at least 110% of
the aggregate amount of the Total Commitment. Such insurance
shall cover marine and war risk perils, on hull and machinery,
with per occurrence 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 American, British and Scandinavian insurance markets or in
such other major international markets acceptable to the
Mortgagee. The Owner shall maintain protection and indemnity
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 at least equal from time
to time to the limitation of liability amount applicable to the
Rig under the Oil Pollution Act 1990 or other Environmental
Laws), through underwriters or associations acceptable to the
Mortgagee. In addition, the Owner shall, at its own expense,
furnish to the Administrative Agent a mortgagee's single
interest policy providing coverage which, when aggregated with
the mortgagee's interest insurance furnished to the
Administrative Agent in respect of the Other Rigs, shall be in
an amount equal to at least 110% of the Total Commitment (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
Administrative Agent). Such mortgagee's interest insurance and
any additional insurance policies for the benefit of the
Administrative Agent shall be maintained in the broadest form
available in the American, British and Scandinavian markets or
other major international markets acceptable to the
Administrative Agent through underwriters acceptable to the
Administrative 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 satisfying the conditions of the relevant policies
evidence of which shall be furnished to the Mortgagee.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the
Administrative Agent, shall contain conditions, terms,
stipulations and insuring covenants satisfactory to the
Administrative 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 the Mortgagee shall be the loss
payee for distribution by it to itself, the Banks and the Owner
as their interests may appear, and shall provide for at least
ten days' prior notice to be given to the Mortgagee 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 Mortgagee and the Banks shall be named as co-
assureds on all such policies and insurance contracts, but
without liability of the Mortgagee, or the Banks for premiums or
calls. Complete certified copies of all such policies, binders
and other interim insurance contracts shall be delivered to the
Mortgagee. Originals shall also be provided upon the request of
the Mortgagee. The Owner shall furnish to the Mortgagee
annually a detailed report signed by a firm of marine insurance
brokers satisfactory to the Mortgagee 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 Mortgagee, by notice to the
underwriters, although the following insurance is payable to the
Mortgagee, (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 directly for the
repair, salvage or other charges involved or, if the Owner shall
have first fully repaired the damage or paid 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$1,000,000.00 (One Million U.S.
Dollars), the underwriters shall not make such payment without
first obtaining the written consent thereto of the Mortgagee
(which consent shall not be unreasonably withheld). Any loss
covered by this paragraph which is paid to the Mortgagee 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 Mortgagee to, or as directed by, the Owner and all other
payments to the Mortgagee of losses covered by this paragraph
shall be applied by the Mortgagee in accordance with Clause
10.01.
In the event of a Total Loss, all insurance payments therefor
shall be paid to the Mortgagee. The Owner shall not declare or
agree with the underwriters that the Rig is a Total Loss without
the prior written consent of the Mortgagee.
(c) In the event of a Total Loss of the Rig, the Mortgagee 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
Secured Creditors under the Security Documents, whether or not
the same shall be then due and payable, together with accrued
interest and the cost, if any, of collecting the insurance, and
pay the balance as provided in Clause 10.
(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 in which the Rig from time to time is engaged.
(e) The Owner shall renew all such insurances as they expire and so
as to insure that there is no gap in coverage, keep the
Mortgagee advised of the progress of such renewals, and shall
provide evidence of such renewal in writing to the Mortgagee 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 Mortgagee.
(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 to such employment of the insurers
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 Mortgagee that throughout the Credit
Facility Period the Owner will:
(a) keep the Rig documented in its name as a Panamanian flag vessel
and do or allow to be done nothing whereby such documentation
may be forfeited or imperilled;
(b) not without the previous consent in writing of the Mortgagee
except as otherwise contemplated by the Credit Agreement, change
the name of the Rig or make any modification to the Rig which
would materially alter the structure, type or performance
characteristics of the Rig and which would materially reduce the
value of the Rig;
(c) keep the Rig in a good and efficient state of repair consistent
with first-class ship-ownership and management practice employed
by owners of drilling rigs of similar size and type and so as to
maintain her present class (namely +1A1 Column Stabilized
Drilling Unit) at Det Norske Veritas free of recommendations and
qualifications and change of class, save those approved in
writing by the Mortgagee and so as to comply with all applicable
laws, treaties and conventions of the Republic of Panama and
other applicable jurisdictions, and rules and regulations issued
thereunder, and have on board as and when required thereby valid
certificates showing compliance therewith;
(d) procure that all repairs to or replacement of any damaged, worn
or lost parts or equipment in such manner (both as regards
workmanship and quality of materials) as to not materially
diminish the value of the Rig and not to remove any material
part of, or item of equipment owned by the Owner installed on,
the Rig unless (i) 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 Mortgagee and becomes on
installation on the Rig the property of the Owner and subject to
the security constituted by this Mortgage or (ii) the removal
will not materially diminish the value of the Rig;
(e) submit the Rig to such periodical or other surveys as may be
required for classification purposes and if so required to
supply to the Mortgagee copies of all survey reports issued in
respect thereof;
(f) permit the Mortgagee by independent surveyors 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,
provided that unless an Event of Default shall have occurred and
be continuing, the cost of any such inspection shall be for the
account of the Mortgagee;
(g) 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 expenses
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;
(h) 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 can reasonably be expected to 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 Mortgagee may reasonably
require;
(i) promptly furnish to the Mortgagee 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 request of the Mortgagee in writing,
copies of all charters and other contracts for her employment or
otherwise howsoever concerning her;
(j) notify the Mortgagee forthwith by 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 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 Mortgagee 30 days prior notice, provided,
that in the event of any emergency dry docking of the Rig,
the Owner shall immediately notify the Mortgagee; and
(vi) any intended deactivation or lay-up of the Rig (other
than for normal periods of inactivity between contracts
for the Rig during which periods the Rig remains manned)
and obtain the prior written consent of the Mortgagee;
(k) keep proper books of account in respect of the Rig and as and
when the Mortgagee may so reasonably require make such books
available for inspection on behalf of the Mortgagee 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;
(l) observe the obligations contained in Sections 7 and 8 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;
(m) not without the previous consent in writing of the Mortgagee
(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 United States Dollars (US$2,500,000.00) (or the
equivalent in any other currency) unless (i) such person shall
first have given to the Mortgagee and in terms satisfactory to
it a written undertaking not to exercise any lien on the Rig for
the cost of such work or otherwise or (ii) the cost of such work
shall be fully covered by applicable insurance;
(n) comply with and satisfy all the provisions of applicable laws
and regulations of the Republic of Panama, as at any time
amended, in order to establish and maintain this Mortgage as a
first priority naval mortgage thereunder upon the Rig and upon
all renewals, improvements and replacements made in or to the
same, and promptly to furnish to the Mortgagee from time to time
such proofs as the Mortgagee may request for its satisfaction
with respect to the compliance by the Owner with the provisions
of this sub-clause, including, appropriate certificates of the
Public Registry showing that this Mortgage has been duly
registered and filed and is a first and absolute lien on the
Rig;
(o) 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 and
salvage and to any representative of the Mortgagee 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 subject to an Indenture of First Naval Mortgage
in favor of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, as
Administrative Agent for the Banks defined in said Mortgage, in
conformity with the provisions of Chapter V, Title IV of Book
Second of the Code of Commerce, and the pertinent provisions of
the Civil Code and other legislation of the Republic of Panama.
Under the terms of said Mortgage neither the owner, any
charterer, the Master of the Rig nor any other person shall have
the right, power or authority to create, incur or permit to be
placed upon the Rig any other lien whatsoever other than for
current crew's wages and salvage and Permitted Liens (as that
term is defined in said Mortgage)."
(p) 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;
(q) notify the Mortgagee 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
Mortgagee advised, in writing on such regular basis and
in such detail as the Mortgagee shall require, of the
Owner's response to such Environmental Claim or
Environmental Incident.
(r) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Mortgagee having first been obtained, and any such written
consent to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban
waters or enter any Cuban port for any purpose 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; if such
transaction or violation would (i) expose the Mortgagee to any
penalty, sanction or investigation or (ii) jeopardize the lien
created by this Mortgage or (iii) have a material adverse effect
on the Owner or the operation of the Rig;
(s) shall not cause or permit the Rig to be operated in any manner
contrary to law (except where the failure to operate in
compliance with any law would not have a material adverse effect
on the Owner, the Rig or the lien of this Mortgage), shall not
abandon the Rig in a foreign port and shall not engage in any
unlawful trade or violate any law or carry any cargo that shall
expose the Rig to forfeiture or capture.
8. PROTECTION OF SECURITY
8.01 The Mortgagee shall without prejudice to its other rights and powers
under this Mortgage and the other Credit Documents be entitled (but
not bound) at any time and as often as may be necessary (but unless an
Event of Default shall have occurred and be continuing with prior
written notice to the Owner) 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 Credit 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, reasonable legal
fees) so incurred by the Secured Creditors 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 in any material respect with the
provisions of Clause 6 or any of them the Mortgagee shall be
entitled (but not bound) to effect or to replace and renew and
thereafter to maintain the Insurances in such manner it, in its
discretion, 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 Mortgagee
may nominate and, upon the direction of the Mortgagee 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 Mortgagee 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;
(b) if the Owner does not comply with the provisions of Clause
7.01(d) or 7.01(f) the Mortgagee 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) the Mortgagee 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 MORTGAGEE'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 Mortgagee or the Banks
having served on the Owner any such notice as is referred to in
Section 9 of the Credit Agreement) the security constituted by this
Mortgage shall become immediately enforceable and the Mortgagee 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 the laws of the Republic of
Panama or other applicable laws;
(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 Mortgagee
without legal process and without liability of the Mortgagee 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 Mortgagee;
(d) to collect, recover, compromise and give a good discharge for or
procure that the Mortgagee 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) all such proceedings in connection with the Rig, the
Insurances, or any Requisition Compensation as the Mortgagee 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 Mortgagee
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
Obligations, subject to notice of sale being given by the
Mortgagee to the Owner and other mortgagees of record, if any,
by airmail, postage pre-paid and by publication once in a
newspaper of general circulation in the City of Panama, Republic
of Panama, not less than twenty (20) calendar days in advance of
the sale, to satisfy the requirement of notice of sale contained
in Article 1527 of the Panama Code of Commerce. Such notice
shall be necessary only in respect of the initial date of sale;
(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 Mortgagee in its absolute discretion
deems expedient and for the purposes aforesaid the Mortgagee
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 Mortgagee 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 Mortgagee in or about the
exercise of the power vested in the Mortgagee under
Clause 9.01(g);
(i) generally, to recover from the Owner on demand each and every
expense, liability or loss incurred by the Mortgagee in or about
or incidental to the exercise by it of any of the powers
aforesaid.
9.02 The Mortgagee 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 Mortgagee by this Mortgage or to which
the Mortgagee may at any time be entitled hereunder.
9.03 Neither the Secured Creditors 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 Mortgagee 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 Mortgagee the
purchaser shall not be bound to see or enquire whether the power of
sale of the Mortgagee has arisen in the manner provided in this
Mortgage and the sale shall be deemed to be within the power of the
Mortgagee and the receipt of the Mortgagee for the purchase money
shall effectively discharge the purchaser who shall not be concerned
with the manner of application of the proceeds of sale or be in any
way answerable therefor.
10. APPLICATION OF MONEYS
10.01 (a) All moneys received by the Mortgagee or any other Secured
Creditor, including, without limitation, in respect of sale of
the Rig or any part thereof, in respect of recovery under the
Insurances, or in respect of Requisition Compensation, shall be
applied in the following manner:
(i) first, to the payment of all amounts owing the Mortgagee of
the type described in clauses (ii) and (iii) of Recital
(E);
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to
the outstanding Obligations shall be paid to the Secured
Creditors as provided in Clause 10.01(c), with each
Secured Creditor receiving an amount equal to such
Obligations held by it or, if the proceeds are
insufficient to pay in full all such Obligations, its Pro
Rata Share (as defined below) of the amount remaining to
be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and
following the termination of this Mortgage pursuant to
Clause 3.01, any surplus then remaining shall be paid to
the Owner, subject, however, to the rights of the holder
of any then existing Lien of which the Mortgagee has
actual notice (without investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Mortgagee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations then
owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10.01, the Mortgagee shall be entitled to reply upon
(i) the Administrative Agent under the Credit Agreement and (ii)
the Secured Creditors for a determination (which the
Administrative Agent and each Secured Creditor, by their
acceptance of the benefits of this Mortgage shall be obligated
to provide upon request of the Mortgagee) of the outstanding
Obligations owed to the Secured Creditors. Unless it has actual
knowledge (including by way of written notice from a Secured
Creditor) to the contrary, the Administrative Agent under the
Credit Agreement, in furnishing information pursuant to the
preceding sentence, and the Mortgagee, in acting hereunder,
shall be entitled to assume that no obligations other than
principal, interest and regularly accruing fees are owing to any
Secured Creditor.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things as
the Mortgagee 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 Mortgagee and
the other Secured Creditors 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
inure to the benefit of any transferee, successor or assignee of
the Mortgagee; 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
Mortgagee under this Mortgage,
in any such case, forthwith upon demand by the Mortgagee and at the
expense of the Owner.
12. POWER OF ATTORNEY
12.01 The Owner, by way of security and in order to more fully secure the
performance of the Obligations under this Mortgage, hereby irrevocably
appoints the Mortgagee 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 Mortgagee 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 Mortgagee shall not put any person dealing with the
Mortgagee 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 Mortgagee of such
power shall be conclusive evidence as against third parties of its
right to exercise the same.
13. INDEMNITIES
13.01 The Owner will indemnify and save harmless each of the Secured
Creditors and each agent or attorney appointed under or pursuant to
this Mortgage (each an "Indemnitee") from and against any and all
expenses, claims, liabilities, losses, taxes, costs, duties, fees and
charges suffered, incurred or made by such Secured Creditor 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 rights of the
Mortgagee under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and the Secured Creditors 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 Secured Creditors 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 Secured Creditors 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 Hazardous Materials 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 the Credit Agreement or 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 Mortgagee, 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 Mortgagee against the amount of such shortfall. For
the purposes of this Clause 13.03, "rate of exchange" means the rate
at which the Mortgagee is able on the date of such payment (or, if it
is not practicable for the Mortgagee 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
Mortgagee 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 any Secured Creditor on demand all costs, fees
and expenses, including, but not limited to, legal fees and expenses
and valuation fees and Taxes thereon incurred by any Secured Creditor
or for which any Secured Creditor may become liable in connection
with:
(a) the negotiation, preparation and execution of the Credit
Agreement and the other Credit 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 or the
other Credit Documents (or any of them).
14.02 The Owner shall pay to the Mortgagee on demand all costs, fees and
expenses (including, but not limited to, legal fees and expenses) and
Taxes thereon incurred by any Secured Creditor in connection with:
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement or the other Credit 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 Mortgagee in relation to
the Credit Agreement and the other Credit 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 other Credit
Documents (or any of them) may be subject or give rise and shall
indemnify the Mortgagee 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 required to be given to the Mortgagee shall be made to the
following address:
Christiania Bank og Kreditkasse, New York Branch
11 West 42nd Street
7th Floor
New York, New York 10036
Attention: Loan Administration
Telephone: (212) 827-4800
Telefax: (212) 827-4888
All other notices shall be made to the addresses provided for in
Section 12.03 of the Credit Agreement and Annex II thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall inure to the benefit of
the Secured Creditors 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 Section 12.04 of the Credit Agreement, each Bank 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 Mortgagee 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 Three Hundred Million US Dollars
(US$300,000,000) of principal plus interest, fees, commissions and
performance of mortgage covenants. The discharge amount is the same
as the total amount.
18. WAIVER; AMENDMENT
18.01 None of the terms and conditions of this Mortgage may be changed,
waived, modified or varied in any manner whatsoever unless in writing
duly signed by the Owner and the Mortgagee (with the consent of either
the Required Banks or, to the extent required by Section 12.12 of the
Credit Agreement, all of the Banks). No amendment to the Credit
Agreement which affects the rights and obligations of the Mortgagee
hereunder shall be effective without the consent of the Mortgagee
thereto.
19. MISCELLANEOUS
19.01 This Mortgage shall be governed by the laws of the Republic of Panama.
19.02 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.
19.03 The Mortgagee, 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 Mortgagee under this Mortgage in
relation to the Rig. Any such delegation may be made upon such terms
and subject to such regulations as the Mortgagee may think fit. The
Mortgagee 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.
19.04 The appearing parties hereby confer a special power of attorney on
Benedetti & Benedetti, lawyers of Panama, Republic of Panama and/or
any partners in the firm authorizing such firm or any such partner to
take all necessary steps to record this Indenture of First Naval
Mortgage in the appropriate registries of the City of Panama, and to
substitute this Power of Attorney herein granted.
19.05 A certification or determination by the Mortgagee as to any matter
provided for in this Mortgage shall, in the absence of manifest error,
be conclusive and binding on the Owner.
19.06 The Mortgagee declares that it accepts the naval mortgage hereby
created under the terms above set forth.
20. JURISDICTION
20.01 The Owner agrees that the Mortgagee 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 or to
enforce any provisions of this Mortgage or to enforce the Obligations
and for the purpose of any proceedings for such enforcement the Owner
hereby submits to the jurisdiction of the courts of any country of the
choice of the Mortgagee.
20.02 Without prejudice to the generality of Clause 20.01, the Mortgagee
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 Mortgagee may bring before the courts of such
jurisdiction or other judicial authority and for the purpose of any
action which the Mortgagee 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.
20.03 The Owner agrees that should the Mortgagee 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 and the Mortgagee have duly executed these
presents the day and year first before written.
READING & BATES DRILLING CO.
By: _____________________________________
Name: T. W. Nagle
Title: Vice President and Treasurer
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, as Administrative Agent
By: _____________________________________
Name:
Title:
By: _____________________________________
Name:
Title:
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 13th day of November, 1996, before me personally
appeared Timothy W. Nagle to me known and who resides at 13307 Tosca Lane,
Houston, TX; and who submitted evidence to me that he is a Vice President and
Treasurer of READING & BATES DRILLING CO., the company described in and which
executed the foregoing mortgage; and that he signed his name thereto pursuant
to authority granted to him by the Board of Directors of said corporation.
____________________________________
Notary Public
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 13th day of November, 1996, before me personally
appeared Hans Chr. Kjelsrud to me known and who resides at 115 East 87th
Street, New York, NY; and who submitted evidence to me that he is Vice
President of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, the corporation
described in and which executed the foregoing mortgage; and that he signed his
name thereto pursuant to authority granted to him by the Board of Directors of
said corporation.
____________________________________
Notary Public
ACKNOWLEDGMENT OF MORTGAGE
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 13th day of November, 1996, before me personally
appeared Justin McCarty, III to me known and who resides at 35 Pleasant
Street, Katonah, New York; and who submitted evidence to me that he/she is
Vice President of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, the
corporation described in and which executed the foregoing mortgage; and that
he/she signed his/her name thereto pursuant to authority granted to him/her by
the Board of Directors of said corporation.
____________________________________
Notary Public
Exhibit 10.132
READING & BATES (A) PTY. LTD.
- to -
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH
__________________________
FIRST PRIORITY MORTGAGE
Dated November 13, 1996
_________________________
RON TAPPMEYER
===========================================================================
THIS FIRST PRIORITY MORTGAGE is made the 13th day of November, 1996 by
READING & BATES (A) PTY. LTD., ACN 064 532 252, a company organized and
existing under the laws of the State of Western Australia and the
Commonwealth of Australia and having its registered office 66 Kings Park
Road, West Perth, West Australia, (the "Owner") to CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH having its office at 11 West 42nd Street, 7th
Floor, New York, NY 10036 (the "Mortgagee", which expression shall include
its successors and assigns),
WHEREAS:
(1) The Owner is the sole, absolute and unencumbered owner of sixty-four
sixty-fourth shares of the Rig described in the Schedule 1 hereto.
(2) By a Credit Agreement dated as of November 13, 1996 (as modified,
amended or supplemented from time to time, the "Credit Agreement")
among (i) Reading & Bates Corporation, a Delaware corporation,
("Holdings"), (ii) Reading & Bates Drilling Co. (the "Borrower"),
(iii) the banks party thereto (the "Banks"), (iv) Credit Lyonnais New
York Branch and Banque Indosuez, as documentation agents (the
"Documentation Agents") and (v) the Mortgagee, as administrative
agent, arranger and security trustee for the Banks (in such capacity,
the "Administrative Agent") (the form of which Credit Agreement
together with Exhibit B thereto but without the remaining attachments
is attached hereto as Exhibit 1), it was agreed among other things
that the Banks would make available to the Borrower upon the terms
and conditions therein described a reducing revolving credit facility
in an aggregate amount at any one time outstanding of Three Hundred
Million United States Dollars (US$300,000,000) providing for the
making of Loans and the issuance of and participations in, Letters of
Credit as contemplated therein.
(3) The obligations of the Borrower with respect to the Facility are
evidenced by the Credit Agreement and the other Credit Documents, and
including the promissory notes of the Borrower payable to the order
of the respective Banks (each a "Note" and, collectively, the
"Notes") (the form of which is attached as Exhibit B to the Credit
Agreement).
(4) The Owner, for good and valuable consideration, has authorized,
executed and delivered a Subsidiary Guaranty (as modified, amended or
supplemented from time to time, the "Subsidiary Guaranty"), the form
of which Subsidiary Guaranty is attached hereto as Exhibit 2, in
favor of the Administrative Agent guaranteeing the performance by the
Borrower of its obligations under the Credit Agreement including the
payment, when due, of all Obligations.
(5) This Mortgage is made for the benefit of the Mortgagee to secure the
guaranty by the Owner of (i) the full and prompt payment when due of
(x) the principal of and interest on the Notes issued, and Loans
made, under the Credit Agreement, and all reimbursement obligations
and Unpaid Drawings with respect to the Letters of Credit issued
under the Credit Agreement and (y) all other obligations and
indebtedness (including, without limitation, indemnities, Fees and
interest thereon) of the Borrower to the Secured Creditors (as
hereinafter defined), whether now existing or hereafter incurred
under, arising out of or in connection with the Credit Agreement and
the other Credit Documents including, without limitation, this
Mortgage and the due performance and compliance by the Borrower with
all of the terms, conditions and agreements contained in the Credit
Agreement and the other Credit Documents including, without
limitation, this Mortgage; (ii) any and all sums advanced by the
Mortgagee in order to preserve the Rig or preserve its security
interest in the Rig; (iii) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or
liabilities of the Borrower referred to in clause (i) above, after an
Event of Default shall have occurred and be continuing, the
reasonable expenses of the Mortgagee or re-taking, holding, preparing
for sale or lease, selling or otherwise disposing of or realizing on
the Rig, or of any exercise by the Mortgagee of its rights hereunder,
together with reasonable attorneys' fees of counsel to the Mortgagee
and court costs; and (iv) all amounts paid by any Indemnitee as to
which such Indemnitee has the right to reimbursement under Clause 13
of this Mortgage (all such obligations, liabilities, sums and
expenses referred to in clauses (i) through (iv) above being
collectively referred to as the "Obligations"). It is acknowledged
and agreed that the "Obligations" shall include extensions of credit
of the types described above, whether outstanding on the date of this
Mortgage or extended from time to time after the date of this
Mortgage.
(6) This First Priority Mortgage, which is entered into by the Owner in
consideration of the Banks entering into the Credit Agreement and
agreeing to make the Facility available to the Borrower and as a
condition thereto and for other good and valuable consideration
provided by the Banks (the sufficiency of which the Owner hereby
acknowledges).
NOW THIS MORTGAGE WITNESSETH AND IT IS HEREBY AGREED as follows:
1. (A) In this Mortgage unless the context otherwise requires:
"Administrative Agent" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Bank" means any lender listed from time to time on Annex I to the
Credit Agreement (collectively, the "Banks");
"Collateral" shall have the same meaning for such term as set forth
in the Credit Agreement;
"Credit Agreement" means the Credit Agreement, dated as of November
13, 1996, among Holdings, the Borrower, the Banks, the Documentation
Agents and the Administrative Agent first referred to in Recital (2)
hereto, as modified, amended or supplemented from time to time;
"Credit Facility Period" shall mean the period commencing on the date
hereof and ending on the date the Total Commitments have terminated,
no Letters of Credit remain outstanding and the Loans and the Unpaid
Drawings, together with interest, fees and all other obligations are
paid in full;
"Default Rate" shall mean the rate of interest calculated in
accordance with Section 1.08(c) of the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claims" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than
internal reports prepared by Holdings or any of its Subsidiaries
solely in the ordinary course of such Person's business and not in
response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any
permit issued, or any approval given, under any such Environmental
Law (hereafter, "Claims"), including, without limitation, (a) any and
all Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials arising from alleged injury or
threat of injury to health, safety or the environment;
"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 Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guide, policy
and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgement, relating to the environment, health, safety or Hazardous
Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq.;
the Toxic Substances Control Act, 15 U.S.C. 7401 et seq.; the Clean
Air Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42
U.S.C. 3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C.
2701 et seq. and any applicable state and local or foreign
counterparts or equivalents;
"Fees" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other
equipment that contained, electric fluid containing levels of
polychlorinated biphenyls, and radon gas; (b) any chemicals,
materials or substances defined as or included in the definition of
"hazardous substances," "hazardous waste," "hazardous materials,"
"extremely hazardous waste," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or
words of similar import, under any applicable Environmental Law; and
(c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority;
"Indemnitee" shall have the meaning set forth in Section 13(A);
"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 Administrative 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 Section 1.09 of the Credit Agreement;
"Letter of Credit" shall have the same meaning for such term as set
forth in Section 2.01(a) of the Credit Agreement;
"Loan(s)" shall have the same meaning for such term as set forth in
the Credit Agreement;
"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 each promissory note of the Borrower referred to in
Recital (3) hereto and in Section 1.05(a) of the Credit Agreement;
"Obligations" shall have the meaning provided in Recital (5) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33 U.S.C.
2701 et seq.), as amended;
"Other Rigs" means, individually or collectively, each of (i) the
semi-submersible drilling rig JACK BATES owned by the Borrower
documented under the laws and flag of the United States with Official
Number 906283 of 19,928 gross registered tons and 14,948 net
registered tons; (ii) the offshore drilling rig W. D. KENT owned by
Reading & Bates Exploration Co. ("R&B Exploration") documented under
the laws and flag of the United States with Official Number 583169 of
5,383 gross registered tons and 4,185 net registered tons; (iii) the
offshore drilling rig CHARLEY GRAVES owned by Reading and Bates
Borneo Drilling Co., Ltd. documented under the laws and flag of the
Republic of Panama with Patente Number 6618-76-CH of 5,829 gross
registered tons and 1,748 net registered tons; (iv) the drilling rig
D. R. STEWART owned by R&B Exploration documented under the laws and
flag of United States with Official Number 626904 of 6,494 gross
registered tons and 5,834 net registered tons; (v) the semi-
submersible drilling rig J. W. McLEAN owned by the Borrower
documented under the laws and flag of the Republic of Panama with
Official Number 25384-PEXT of 15,453 gross registered tons and 4,636
net registered tons; (vi) the semi-submersible drilling rig RIG 41
owned by the Borrower documented under the laws and flag of the
Republic of Panama with the Patente Number to be assigned on the date
hereof of 10,078 gross registered tons and 3,024 net registered tons;
(vii) the jack-up drilling rig HARVEY H. WARD owned by HRB Rig
Corporation documented under the laws and flag of the United States
of America with Official Number 642693 of 4,121 gross registered tons
and 3,079 net registered tons; (vii) the jack-up drilling rig F. G.
McCLINTOCK owned by Reading & Bates Offshore, Limited documented
under the laws and flag of the United States of America with Official
Number 562059 of 5,525 gross registered tons and 1,657 net registered
tons; (viii) the jack-up drilling rig RANDOLPH YOST owned by the
Borrower documented under the laws and flag of the United States of
America with Official Number 601699 of 4,701 gross registered tons
and 4,701 net registered tons; (ix) the jack-up drilling rig J. T.
ANGEL owned by the Borrower documented under the laws and flag of the
United States of America with Official Number 651645 of 4,186 gross
registered tons and 3,090 net registered tons; (x) the jack-up
drilling rig ROGER W. MOWELL owned by the Borrower documented under
the laws and flag of the United States of America with Official
Number 645360 of 4,121 gross registered tons and 3,079 net registered
tons; (xi) the jack-up drilling rig GEORGE H. GALLOWAY owned by
Reading & Bates Offshore, Limited documented under the laws and flag
of the United States of America with Official Number 651646 of 3,729
gross registered tons and 2,496 net registered tons; and (xii) the
jack-up drilling rig C.E. THORNTON to be owned by HRB Rig Corporation
documented under the laws and flag of the United States of America
with Official Number 673210 of 6,096 gross registered tons and 6,096
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 written request of the
Administrative Agent, provide a bond or other security satisfactory
to the Administrative 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 written request of the Administrative Agent, provide
a bond or other security satisfactory to the Administrative 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 Administrative 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 Administrative Agent have been made as
evidenced by the Administrative Agent's written consent to such lien;
(8) any lien in favor of the Banks; and provided that Permitted Liens
shall not include any liens described in subclauses (1) through (7)
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 referred to in Recital (1) hereto and more
fully described in Schedule 1 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 Creditors" shall mean the Banks, the Letter of Credit Issuer
and the Administrative Agent under and as defined in the Credit
Agreement;
"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;
"Subsidiary Guaranty" means the agreement dated as of November 13,
1996 made by the Owner in favor of the Administrative Agent as first
referred to in Recital (4) hereto, as modified, amended or
supplemented from time to time;
"Taxes" shall have the same meaning for such term as set forth in the
Credit Agreement;
"Total Commitment" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Total Loss" means (a) the actual, constructive, arranged, agreed, or
compromised Total Loss of the Rig; (b) the requisition for title or
other compulsory acquisition or forfeiture of the Rig otherwise than
by requisition for hire; (c) the capture, seizure, arrest, detention
or confiscation of the Rig by any government or by persons acting or
purporting to act on behalf of any government unless the Rig be
released from such capture, seizure, arrest or detention within
ninety (90) days after the occurrence thereof;
"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;
(B) In Clause 5(A) hereof:
(i) "Excess risks" means the proportion of claims for general
average and salvage charges and under the ordinary
running-down clause not recoverable in consequence of the
value at which a vessel is assessed for the purpose of
such claim exceeding her insured value;
(ii) "Protection and indemnity risks" means the usual risks
covered by a protection and indemnity association
including the proportion not recoverable in case of
collision under the ordinary running-down clause;
(iii) "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.
(C) This Mortgage shall be read together with the Credit Agreement,
the Notes, the Subsidiary Guaranty and the other Credit
Security Documents.
(D) The Owner hereby represents and warrants to the Mortgagee that:
(i) 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 the lien of this Mortgage);
(ii) the Owner has not sold or transferred, or agreed to sell
or transfer, title to the Rig or any share therein;
(iii) the Owner is a corporation duly organized and validly
existing and in good standing under the laws of the State
of Western Australia and the Commonwealth of Australia;
(iv) the Owner has full power and authority (i) to register
the Rig in its name under Australian flag, (ii) to
execute and deliver this Mortgage, (iii) to mortgage the
Rig as security for the Obligations and (iv) to comply
with the provisions of, and perform all its obligations
under, this Mortgage;
(v) the Owner has complied with all statutory and other
material requirements relating to the ownership,
registration and operation of the Rig;
(vi) 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 Registrar of Ships at
the Australian Shipping Registration Office and the
Australian Securities Commission will create a legal,
valid and enforceable first preferred mortgage lien on
the Rig;
(vii) 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 its Memorandum and Articles of Association, 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;
(viii) 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 during the Credit Facility Period;
(ix) 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;
(x) the Owner is in compliance with all applicable
Environmental Laws and all Environmental Approvals
relating to the Rig, its operation and management and the
business of the Owner (as now conducted and reasonably
anticipated to be conducted in the future) have been
obtained or complied with;
(xi) no Environmental Claim has been made or threatened
against the Owner, the Approved Manager or otherwise in
connection with the Rig; and
(xii) 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. In order to induce Banks to enter into the Credit Agreement and to
make the Facility available thereunder and in consideration of other
valuable consideration (receipt whereof is hereby acknowledged by the
Owner) the Owner hereby covenants with the Mortgagee as follows:
(A) The Owner shall pay the full amount of all moneys comprising
the Obligations as and when the same shall become due and
payable in accordance with the terms of the Subsidiary Guaranty
and the other Credit Documents.
(B) The Owner will pay to or indemnify the Mortgagee for such
additional amounts as may be necessary in order that all
payments under this Mortgage after deduction of, for, or on
account of every present or future tax, assessment and
governmental charge imposed by any competent authority in the
State of Western Australia or Commonwealth of Australia (or in
such other jurisdictions to the revenue laws of which the Owner
may for the time being be subject) shall be no less than such
payments would have been had there been no such tax, assessment
or charge.
3. By way of security for the performance of the Obligations THE OWNER
as BENEFICIAL OWNER HEREBY MORTGAGES AND CHARGES to and in favor of
the Mortgagee all the Owner's interest in the Rig, including, without
limitation, all 64 shares in the Rig, the Earnings and the Insurances
(all of which the Owner hereby warrants to be free at the date hereof
from any other charge or incumbrance whatsoever, other than Permitted
Liens, if any) and Requisition Compensation and without prejudice to
the generality of the foregoing THE OWNER HEREBY ASSIGNS AND AGREES
to assign to the Mortgagee (or to procure to assign to the Mortgagee
as the case may be) the Earnings and the Insurances and Requisition
Compensation as defined herein PROVIDED HOWEVER that any sums
receivable in respect of the Insurances shall be payable as follows:
(A) There shall be paid to the Mortgagee any and every sum
receivable in respect of a Total Loss.
(B) Unless and until Underwriters have been otherwise instructed by
notice in writing from the Mortgagee, (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, (ii) in the case of any loss
(other than a Total Loss or a loss covered by (i) above) under
any insurance with respect to the Rig involving any damage to
the Rig, the Underwriters may pay directly for the repair,
salvage, liability or other charges involved or, if the Owners
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 Owners as
reimbursement therefor, provided, however, that if such damage
involves a loss in excess of U.S. $1,000,000 or its equivalent
the Underwriters shall not make such payment without first
obtaining the written consent thereto of the Mortgagee.
4. It is declared and agreed that the security created by this Mortgage
shall be held by the Mortgagee as a continuing security for the
performance of all Obligations under the Credit Documents and the
performance and observance of and compliance with all of the
covenants, terms and conditions therein and herein contained and that
the security so created shall not be satisfied by any intermediate
payment or satisfaction of any part of the amount hereby and thereby
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 Mortgagee for all or any
part of the moneys hereby and thereby secured and that every power
and remedy given to the Mortgagee hereunder shall be in addition to,
and not a limitation of, any and every other power or remedy vested
in the Mortgagee under the Subsidiary Guaranty and the other Credit
Documents or any other document or instrument entered into pursuant
to the Credit Agreement or at law and that all the powers so vested
in the Mortgagee may be exercised from time to time and as often as
the Mortgagee may deem expedient.
5. The Owner further covenants with the Mortgagee and undertakes that:
(A)(i) The Owner shall, at its own expense, when and so long as
the Obligations remain 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 Mortgagee. 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 Rigs, such
aggregate amount shall be at least 110% of the aggregate
amount of the Total Commitment. 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
American, British and Scandinavian insurance markets or
in such other major international markets reasonably
acceptable to the Mortgagee. 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
Mortgagee. In addition, the Owner shall, at its own
expense, furnish to the Mortgagee a mortgagee's single
interest policy providing coverage which, when aggregated
with the mortgagee's interest insurance furnished to the
Mortgagee in respect of the Other Rigs, shall be in an
amount equal to at least 110% of the aggregate amount of
the Total Commitment (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
Mortgagee). Such mortgagee's interest insurance and any
additional insurance policies for the benefit of the
Mortgagee shall be maintained in the broadest form
available in the American, British and Scandinavian
markets or other major international markets acceptable
to the Mortgagee through underwriters acceptable to the
Mortgagee. 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 Mortgagee.
(ii) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the
Mortgagee, shall contain conditions, terms, stipulations
and insuring covenants satisfactory to the Mortgagee, and
shall be kept in full force and effect by the Owner so
long as the Obligations 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 Mortgagee for distribution by it to
itself, the Banks and the Owner as their interests may
appear, and shall provide for at least ten days' prior
notice to be given to the Mortgagee 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. Certified copies of all such
policies, binders and other interim insurance contracts
shall be deposited with the Mortgagee. Originals shall
also be provided upon the request of the Mortgagee. The
Owner shall furnish to the Mortgagee annually a detailed
report signed by a firm of marine insurance brokers
satisfactory to the Mortgagee 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 5(A).
Unless otherwise required by the Mortgagee by notice to
the underwriters, although the following insurance is
payable to the Mortgagee, (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 5(A)(ii) under any insurance with respect
to the Rig involving any damage to the Rig, the
underwriters may pay directly 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 Mortgagee
(which consent shall not be unreasonably withheld). Any
loss covered by this paragraph which is paid to the
Mortgagee 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 Mortgagee to, or as
directed by, the Owner and all other payments to the
Mortgagee of losses covered by this paragraph shall be
applied by the Mortgagee in accordance with Clause 10.
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 Mortgagee. 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 Mortgagee.
(iii) In the event of an actual or constructive Total Loss of the
Rig, the Mortgagee 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 Secured Creditors under the Credit
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 provided in
Clause 10.
(iv) 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.
(v) The Owner shall renew all insurances as they expire and
so as to insure that there is no gap in coverage, keep
the Mortgagee advised of the progress of such renewals,
and procure that the insurers shall promptly confirm in
writing to the Mortgagee as and when each such renewal is
effected.
(vi) 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 Mortgagee.
(vii) 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.
(viii) 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.
(B) maintain its existence as a corporation in good standing duly
organized under the laws of the State of Western Australia and
Commonwealth of Australia;
(C) Not to change the name of the Rig without the Mortgagee's prior
approval and to keep the Rig registered as an Australian Rig
and not do or suffer to be done anything, or omit to do
anything the doing or omission of which could or might result
in such registration being forfeited or imperilled or which
could or might result in the Rig being required to be
registered otherwise than as an Australian Rig and not to
register the Rig or permit its registration under any other
flag or at any other port without the prior written consent of
the Mortgagee.
(D) not without the previous consent in writing of the Mortgagee
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;
(E) To 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 Rig Class +A1 Self-Elevating Drilling
Rig) and so as to comply with the provisions of the Shipping
Registration Act 1981 (Commonwealth of Australia) and all other
laws, regulations and requirements (statutory or otherwise)
from time to time applicable to vessels registered in Australia
and to 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 not to diminish the value of the Rig;
(F) 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 Mortgagee and becomes on installation on
the Rig the property of the Owner and subject to the security
constituted by this Mortgage;
(G) submit the Rig to such periodical or other surveys as may be
required for classification purposes and if so required to
supply to the Mortgagee copies of all survey reports issued in
respect thereof;
(H) permit the representatives of the Mortgagee or independent
surveyors representing the Mortgagee 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;
(I) 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;
(J) 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 Mortgagee may require;
(K) Promptly to furnish to the Mortgagee 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 copies of all charters and other
contracts for her employment or otherwise howsoever concerning
her.
(L) To notify the Mortgagee forthwith by cable or telex confirmed
by letter of:
(i) Any accident to the Rig involving repairs the cost
whereof will or is likely to be a Major Casualty;
(ii) Any occurrence in consequence whereof the Rig has become
or is likely to become a Total Loss;
(iii) Any requirement or recommendation made by any insurer or
classification society or by any competent authority
which is not immediately complied with;
(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;
(v) any intended dry docking of the Rig, as to which the
Owner shall give the Mortgagee ten (10) days prior
notice, provided, that in the event of any emergency dry
docking of the Rig, the Owner shall immediately notify
the Mortgagee; and
(vi) any intended deactivation or lay-up of the Rig (other
than for normal periods of inactivity between contracts
for the Rig during which periods the Rig remains manned)
and obtain the prior written consent of the Mortgagee;
(M) keep proper books of account in respect of the Rig and as and
when the Mortgagee may so reasonably require make such books
available for inspection on behalf of the Mortgagee 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;
(N) observe the obligations contained in Sections 7 and 8 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;
(O) not without the previous consent in writing of the Mortgagee
(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 Mortgagee 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;
(P) Reimburse the Mortgagee promptly, with interest at the Default
Rate, for any and all expenditures which the Mortgagee may from
time to time make, lay out or expend in providing such
protection in respect of insurance, discharge of liens, taxes,
dues, assessments, governmental charges, fines and penalties
lawfully imposed, repairs, attorneys' fees and other matters as
the Shipowner is obligated herein to provide, but fails to
provide. Such obligation of the Owner to reimburse the
Mortgagee shall be an additional indebtedness due from the
Owner, secured by this Mortgage, and shall be payable by the
Owner on demand. The Mortgagee, though privileged so to do,
shall be under no obligation to the Owner to make any such
expenditures, nor shall the making thereof relieve the Owner of
any default in that respect.
(Q) To pay on demand to the Mortgagee (or as it may direct) the
amount of all investigation and legal expenses of any kind
whatsoever, stamp duties (if any), registration fees and any
other charges incurred reasonably and in good faith by the
Mortgagee in connection with the preparation, completion,
enforcement and registration of the Security Documents or
otherwise in connection with the Obligations and the security
therefor.
(R) 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;
(S) notify the Mortgagee 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
Mortgagee advised, in writing on such regular basis and
in such detail as the Mortgagee shall require, of the
Owner's response to such Environmental Claim or
Environmental Incident;
(T) not sell, mortgage or transfer the Rig (other than as permitted
by the Credit Agreement) without the written consent of the
Mortgagee having first been obtained, and any such written
consent to any one such sale, mortgage or transfer shall not be
construed to be a waiver of this provision with respect to any
subsequent proposed sale, mortgage or transfer. Any such sale,
mortgage or transfer 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 sail in Cuban waters or enter any Cuban port for any purpose
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; if such transaction or violation would (i) expose the
Mortgagee to any penalty, sanction or investigation or (ii)
jeopardize the lien created by this Mortgage or (iii) have a
material adverse effect on the Owner or the operation of the
Rig;
(U) 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
Australia and will at all times keep the Rig duly documented
thereunder.
6. (A) The Mortgagee shall without prejudice to its other rights and
powers hereunder be entitled (but not bound) at any time and as
often as may be necessary to take any such action as it may in
its discretion think fit for the purpose of protecting the
security created by the Credit Agreement, the Subsidiary
Guaranty and other Credit Documents and each and every expense
or liability so incurred by the Secured Creditors in or about
the protection of the security shall be repayable to it by the
Owner on demand together with interest thereon at the Default
Rate from the date whereon such expense or liability was
incurred by the Mortgagee until the date of actual receipt (as
well after as before any judgment).
(B) Without prejudice to the generality of the foregoing:
(i) In every case that the provisions of Clause 5(A) hereof
or any of them shall not be complied with, the Mortgagee
shall be at liberty to effect and thereafter to maintain
all such insurances upon the Rig as in its discretion it
may think fit;
(ii) In the event that the provisions of Clause 5(C) or 5(D)
hereof or any of them shall not be complied with, the
Mortgagee shall be at liberty to arrange for the carrying
out of such repairs and surveys as it may deem expedient
or necessary;
(iii) In the event that the provisions of Clause 5(F) hereof or
any of them shall not be complied with, the Mortgagee
shall be at liberty to pay and discharge all such debts,
damages and liabilities as are therein mentioned and to
take any such measures as it may deem expedient or
necessary for the purpose of securing the release of the
Rig.
Each and every expense or liability so incurred by the
Mortgagee shall be recoverable, together with interest at the
Default Rate, from the Owner as provided herein.
7. Upon the happening of any of the following events (the "Events of
Default") the security created by this Mortgage shall become
immediately enforceable:
(A) The owner does not pay to the Mortgagee forthwith any sum of
money payable under the Subsidiary Guaranty or the other Credit
Documents.
(B) If the Owner is in breach of the covenants contained in Clauses
5A, 5B, 5C, 5F, 5G, 5H, 5I, 5K, 5L, 5M, 5N or 5O.
(C) If the Owner is in breach of any of the other covenants, terms
and conditions hereof and such breach is not remediable or if
it is capable of being remedied, the same is not remedied
within 10 days of receipt of notice from the Mortgagee
requesting remedial action.
(D) It becomes impossible or unlawful for the Owner to fulfill any
of the covenants and obligations contained in the Subsidiary
Guaranty or the other Credit Documents or for the Mortgagee to
exercise the rights or any of them vested in it under the
Credit Documents or otherwise.
(E) Anything is done or suffered or omitted to be done by the Owner
which in the reasonable opinion of the Mortgagee may imperil
the security created by the Subsidiary Guaranty or the other
Security Documents.
(F) An Event of Default under the Credit Agreement shall have
occurred and be continuing.
8. Upon the security created by this Mortgage becoming immediately
enforceable pursuant to Clause 7 hereof the Mortgagee may by notice
of default given to the Owner declare the Obligations to be forthwith
due and payable and the Mortgagee shall become forthwith entitled as
and when it may see fit to put into force and exercise all the powers
possessed by it as mortgagee of the Rig and chargee of the Rig, the
insurances and the Earnings and in particular:
(A) To exercise all of the rights and remedies given to mortgagees
by the laws of the Commonwealth of Australia and the States and
Territories of Australia or other applicable laws, including
the right to cause the Rig to be arrested and sold by judicial
authority.
(B) To take possession of the Rig.
(C) To require that all policies, contracts and other records
relating to the Insurances or any of them (including details of
and correspondence concerning outstanding claims) be forthwith
delivered to such adjusters and/or brokers and/or other
insurers as the Mortgagee may nominate.
(D) To collect, recover, compromise and give a good discharge for
all claims then outstanding or thereafter arising under the
Insurances and to take over or institute (if necessary using
the name of the Owner) all such proceedings in connection
therewith as the Mortgagee in its absolute discretion thinks
fit and to permit any brokers through whom collection or
recovery is effected to charge the usual brokerage fees
therefor.
(E) 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 by public auction or private contract at
home or abroad and upon such terms as the Mortgagee in its
absolute discretion may determine with power to postpone any
such sale and without being answerable for any loss occasioned
by such sale or resulting from postponement thereof and itself
to purchase the Rig at any such public auction and to set off
the purchase price against all or any part of the Obligations.
(G) Pending sale of the Rig to manage, insure, maintain and repair
the Rig and to employ or lay up the Rig in such manner and for
such period as the Mortgagee in its absolute discretion deems
expedient and for the purposes aforesaid the Mortgagee shall be
entitled to do all acts and things incidental or conducive
thereto and in particular to enter into such arrangements
respecting the Rig, her insurance, management, maintenance,
repair, classification and employment in all respects as if the
Mortgagee were the owner of the Rig and without being
responsible for any loss thereby incurred.
(H) To recover from the Owner on demand any such losses as may be
incurred by the Mortgagee in or about the exercise of the power
vested in the Mortgagee under sub-clause (G) above with
interest thereon at the Default Rate from the date when such
losses were incurred by the Mortgagee until the date of actual
receipt (as well after as before any judgment).
(I) To recover from the Owner on demand all expenses, payments and
disbursements incurred by the Mortgagee in or about or
incidental to the exercise by it of any of the powers aforesaid
together with interest thereon at the Default Rate from the
date when such expenses, payments or disbursements were
incurred by the Mortgagee until the date of actual receipt (as
well after as before any judgment).
PROVIDED ALWAYS that upon any sale of the Rig or any share therein by the
Mortgagee pursuant to sub-clause (F) above the purchaser shall not be bound
to see or inquire whether the Mortgagee's power of sale has arisen in the
manner herein provided and the sale of the Rig shall be deemed to be within
the power of the Mortgagee and the receipt of the Mortgagee for the
purchase money shall effectively discharge the purchaser thereof who shall
not be concerned with the manner of application of the proceeds of sale or
be in any way answerable therefor.
9. Upon the security created by this Mortgage becoming immediately
enforceable pursuant to clause 7 hereof, the Mortgagee shall be
entitled to appoint a receiver or manager or receiver and manager
(the "Receiver") of the Rig and the freights, hire, insurances,
revenues, income and profits due or to become due and arising from
the operation of the Rig. Any Receiver so appointed shall be the
agent of the Owner unless at any time otherwise specified by the
Mortgagee. The Owner shall be solely responsible for the
remuneration, costs and expenses of the Receiver. The Mortgagee may
at any time terminate the appointment of the Receiver. In addition
to all the rights and powers conferred on the Receiver at law and in
equity, a Receiver shall be entitled to exercise all of the powers
and rights conferred upon the Mortgagee under this Mortgage or any
other Credit Document.
10. (a) All moneys received by the Mortgagee in respect of any sale by
it of the Rig or any share therein or otherwise pursuant to the
provisions of this Mortgage shall be place to pay or retain all
such payments, disbursements, expenses and losses whatsoever
(together with interest thereon as provided herein) as may have
been incurred by the Mortgagee in or about or incidental to the
exercise by the Mortgagee of the powers applied in the
following manner:
(i) first, to the payment of all amounts owing the Mortgagee
of the type described in clauses (ii) and (iii) of Recital 5;
(ii) second, to the extent moneys remain after the application
pursuant to the preceding clause (i), an amount equal to the
outstanding Obligations shall be paid to the Secured Creditors
as provided in Clause 10(c), with each Secured Creditor
receiving an amount equal to such Obligations held by it or, if
the proceeds are insufficient to pay in full all such
Obligations, its Pro Rata Share (as defined below) of the
amount remaining to be distributed; and
(iii) third, to the extent moneys remain after the application
pursuant to the preceding clauses (i) and (ii), and following
the termination of this Mortgage pursuant to Clause 3, any
surplus then remaining shall be paid to the Owner, subject,
however, to the rights of the holder of any then existing Lien
of which the Mortgagee has actual notice (without
investigation).
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or
amount in respect of any Obligations, the amount (expressed as
a percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Obligations owing to or held by such
Secured Creditor and the denominator of which is the then
outstanding amount of all such Obligations. For purposes of
determining the amount payable to each Secured Creditor, the
Mortgagee shall be entitled to request each Secured Creditor to
furnish it with written notice of the amount of Obligations
then owed to it and shall be entitled to reply upon the amounts
stated therein in making such distribution.
(c) All payments required to be made to Secured Creditors hereunder
shall be made to the Administrative Agent under the Credit
Agreement for the account of the Secured Creditors.
(d) For purposes of applying payments received in accordance with
this Clause 10, the Mortgagee shall be entitled to reply upon
(i) the Administrative Agent under the Credit Agreement and
(ii) the Secured Creditors for a determination (which the
Administrative Agent and each Secured Creditor, by their
acceptance of the benefits of this Mortgage shall be obligated
to provide upon request of the Mortgagee) of the outstanding
Obligations owed to the Secured Creditors. Unless it has
actual knowledge (including by way of written notice from a
Secured Creditor) to the contrary, the Administrative Agent
under the Credit Agreement, in furnishing information pursuant
to the preceding sentence, and the Mortgagee, in acting
hereunder, shall be entitled to assume that no obligations
other than principal, interest and regularly accruing fees are
owing to any Secured Creditor.
11. No delay or omission of the Mortgagee to exercise any right or power
vested in it under the Subsidiary Guaranty or the other Credit
Documents shall impair such right or power or be construed as a
waiver of or an acquiescence in any default by the Owner and in event
of the Mortgagee at any time agreeing to waive any such right or
power such waiver shall be revocable by the Mortgagee at any time and
the right or power shall thenceforth be again exercisable as though
there had been no such waiver.
12. The Mortgagee shall be entitled at any time and as often as may be
expedient to delegate all or any of the powers and discretions vested
in it by the Subsidiary Guaranty or the other Credit Documents
(including the power vested in it by virtue of Clause 14 hereof) in
such manner upon such terms and to such persons as the Mortgagee in
its absolute discretion may think fit.
13. (A) The Owner will indemnify and save harmless each of the Secured
Creditors and each agent or attorney appointed under or
pursuant to this Mortgage (each an "Indemnitee") from and
against any and all expenses, claims, liabilities, losses,
taxes, costs, duties, fees and charges suffered, incurred or
made by such Secured Creditor 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 rights under
this Mortgage of the Mortgagee; or
(c) on the release of the Rig from the security created by
this Mortgage,
and the Secured Creditors 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 such Secured Creditors or such agent or attorney shall be
recoverable on a full indemnity basis.
(B) Without limiting the foregoing Clause 13(A), the Owner hereby
further indemnifies and holds harmless each of the Secured
Creditors 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 governmental authorities relating to Hazardous Materials at,
or discharged from the Rig.
(C) 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 Mortgagee, 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 Mortgagee against the amount of such shortfall.
For the purposes of this Clause C, "rate of exchange" means the
rate at which the Mortgagee is able on the date of such payment
(or, if it is not practicable for the Mortgagee) 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 Mortgagee 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. (A) The Owner hereby irrevocably appoints the Mortgagee as its
attorney-in-fact for the duration of the Credit Facility Period
for the purpose of doing in its name all acts which the Owner
itself could do in relation to the Rig, the Requisition
Compensation and the Insurances and the Earnings PROVIDED
HOWEVER that such power shall not be exercisable by or on
behalf of the Mortgagee unless an Event of Default shall have
occurred.
(B) The exercise of such power by or on behalf of the Mortgagee
shall not put any person dealing with the Mortgagee upon any
inquiry as to whether an Event of Default has occurred nor
shall such person be in any way affected by notice that an
Event of Default has not occurred and the exercise by the
Mortgagee of such power shall be conclusive evidence of its
right to exercise the same.
15. The Owner hereby further undertakes at its own expense to execute,
sign, perfect, do and (if required) register every such further
assurance, document, act or thing as in the opinion of the Mortgagee
may be necessary or desirable for the purpose of more effectually
mortgaging and charging the Rig or perfecting the security
constituted by the Subsidiary Guaranty and the other Security
Documents.
16. The Owner covenants with the Mortgagee that it will indemnify the
Mortgagee and hold it harmless against any loss or damage or expenses
which consequent upon a judgment being obtained or enforced in
respect of the non-payment by the Owner of any amount due under the
Subsidiary Guaranty and the other Credit Documents arises or results
from any variation in rates of exchange between U.S. Dollars and the
currency in which such judgment was obtained between the date of the
said amounts becoming due (or the date of the said judgment being
obtained as the case may be) and the date of actual payment thereof
and this indemnity shall not be affected by any time or indulgence
granted to the Owner from time to time and shall continue in full
force and effect notwithstanding any judgment in favor of the
Mortgagee.
17. (A) This Mortgage shall be construed and enforceable according to
the laws of the Australian Capital Territory, Australia.
(B) The Owner agrees that the Mortgagee shall have liberty but
shall not be obliged to take any proceedings in the Courts of
any country to protect or enforce the security hereby
constituted or to enforce any provisions of the Subsidiary
Guaranty and the other Credit Documents or to recover payment
of the Obligations and for the purpose of any proceedings for
the enforcement of the Subsidiary Guaranty or the other Credit
Documents the Owner hereby submits to the jurisdiction of the
Courts of any country of the choice of the Mortgagee.
18. All communications provided for or permitted hereunder shall be in
writing or by telex or telefax confirmed in writing and shall be
delivered, air mailed, telexed or telefaxed to the addresses provided
for in Section 12.03 of the Credit Agreement:
19. In accordance with section 282 of the Corporation Law (as set out in
section 82 of the Corporation Act 1989 (Western Australia)), the
maximum prospective liability secured by this Mortgage will be (U.S.
$350,000,000) Three Hundred Fifty Million United States Dollars, but
this clause shall not limit the amount secured by or recoverable
under this Mortgage or any other Credit Document.
IN WITNESS WHEREOF Reading & Bates (A) Pty. Ltd. has caused this
Mortgage to be executed by on the day and year first above written.
THE COMMON SEAL OF )
READING & BATES (A) )
PTY LTD (ACN )
064 532 252) was )
affixed by the authority of )
the Board of Directors in the )
presence of: )
Signature of Secretary Signature of Director
Name of Secretary Name of Director
Accepted and Agreed:
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH
By: ____________________________________
Title:
Accepted and Agreed:
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH
By: ____________________________________
Title:
SCHEDULE I hereinbefore referred to
The offshore drilling rig "RON TAPPMEYER" of the following dimensions
and tonnages:
Tons Gross approx. 11,455
Tons Net approx. 3,436
having Official Number 855213 at the Registry of Ships in Canberra,
Australia.
SCHEDULE II
AUSTRALIAN SHIPPING REGISTRATION ACT 1981
Particulars under section 38(2)
1. Name and Official Number:
"RON TAPPMEYER", Australian Official No. 855213.
2. The number of shares affected - 64
3. Name and address of the mortgagor
Reading & Bates (A) Pty. Ltd., a company organized and existing
under the laws of the State of Western Australia and the
Commonwealth of Australia and having its registered office at
66 Kings Park Road, West Perth, Western Australia.
4. Name and address of the mortgagee:
Christiania Bank og Kreditkasse, New York Branch, 11 West 42nd
Street, 7th Floor, New York, NY 10036
Signed by READING & BATES (A) PTY. LTD. by ________________________________
Its: Attorney-in-Fact
ACKNOWLEDGMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 13th day of November, 1996, before me personally came T.W.
Nagle, to me known, who being by me duly sworn did depose and say that he
resides at 13307 Tosca Lane, Houston, TX; that he is a Director for READING
& BATES (A) PTY. LTD., the corporation described in and which executed the
above First Priority Mortgage; and that he signed his name thereto pursuant
to authority granted to him by the Board of Directors of said corporation.
_________________________________
Notary Public
ACKNOWLEDGMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 13th day of November, 1996, before me personally came Hans
Chr. Kjelsrud, to me known, who being by me duly sworn did depose and say
that he resides at 115 East 87th Street, New York, NY; that he is a Vice
President for CHRISTIANIA BANK OG KREDITKASSE, the corporation described in
and which executed the above First Priority Mortgage; and that he signed
his name thereto pursuant to authority granted to him by the Board of
Directors of said corporation.
_________________________________
Notary Public
ACKNOWLEDGMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 13th day of November, 1996, before me personally came Justin
McCarty, III, to me known, who being by me duly sworn did depose and say
that he resides at 35 Pleasant Street, Katonah, NY; that he is a Vice
President for CHRISTIANIA BANK OG KREDITKASSE, the corporation described in
and which executed the above First Priority Mortgage; and that he signed
his name thereto pursuant to authority granted to him by the Board of
Directors of said corporation.
_________________________________
Notary Public
Exhibit 10.133
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of November 13, 1996 (as amended,
modified or supplemented from time to time, this "Agreement"), made by the
undersigned pledgor (the "Pledgor"), in favor of CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK BRANCH, as Collateral Agent (the "Pledgee"), for the
benefit of the Creditors (as defined below). Except as otherwise defined
herein, terms used herein and defined in the Credit Agreement (as defined
below) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Reading & Bates Drilling Corporation, Reading & Bates
Drilling Co. (the "Borrower"), various financial institutions from time to
time party thereto (the "Banks"), Banque Indosuez and Credit Lyonnais New York
Branch, as Documentation Agents (the "Documentation Agents"), and Christiania
Bank og Kreditkasse as Administrative Agent (together with any successor
agent, the "Administrative Agent," and together with the Banks and the
Documentation Agents, the "Creditors"), have entered into a Credit Agreement,
dated as of November 13, 1996 (as amended, modified or supplemented from time
to time, the "Credit Agreement"), providing for the making of Loans and the
issuance of, and participation in, Letters of Credit as contemplated therein;
WHEREAS, the Pledgor is a Guarantor of the obligations of the
Borrower under the Credit Agreement;
WHEREAS, it is a condition precedent to the making of Loans and
issuances of Letters of Credit under the Credit Agreement that the Pledgor
shall have executed and delivered to the Pledgee this Agreement;
WHEREAS, the Pledgor desires to execute this Agreement to satisfy
the conditions described in the preceding paragraph; and
NOW, THEREFORE, in consideration of the benefits accruing to the
Pledgor, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby makes the following representations and warranties to the
Pledgee and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by the
Pledgor for the benefit of the Creditors to secure:
(i) the Pledgor's guaranty of the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations and liabilities of the Borrower, now existing or hereafter
incurred under, arising out of or in connection with any Credit Document
to which the Borrower is a party and the due performance and compliance
by the Pledgor and the Borrower with the terms of each Credit Document;
(ii) any and all sums advanced by the Pledgee in order to preserve
the Collateral (as hereinafter defined) or preserve its security
interest in the *Collateral;
(iii) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities referred to
in clauses (i) and (ii) above, after an Event of Default shall have
occurred and be continuing, the reasonable expenses of retaking,
holding, preparing for sale or lease, selling or otherwise disposing or
realizing on the Collateral, or of any exercise by the Pledgee of its
rights hereunder, together with reasonable attorneys' fees and court
costs; and
(iv) all amounts paid by any Creditor as to which such Creditor has
the right to reimbursement under Section 10 of this Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (iv) of this Section 1 being herein collectively called the
"Obligations." The maximum amount secured under this Agreement is US
$300,000,000, plus any accrued and unpaid interest, fees and expenses.
2. DEFINITION OF SHARES. As used herein the term "Shares" shall
mean all of the issued and outstanding shares of capital stock at any time
owned by the Pledgor of Arcade Drilling, AS, a company formed under the laws
of Norway (the "Pledged Company"). The Pledgor represents and warrants that
on the date hereof such shares constitute 74.4% of the issued and outstanding
capital stock of the Pledged Company.
3. PLEDGE OF THE VPS ACCOUNT.
3.1. Pledge. To secure the Obligations and for the purposes set
forth in Section 1 hereof, the Pledgor hereby pledges to and deposits with the
Pledgee all of the Shares of the Pledged Company which are registered in the
Pledgor's VPS account number 05201.0184837 (the "VPS Account"), and delivers
to the Pledgee a duly executed mortgage deed in the form of Annex A hereto.
The Pledgor represents and warrants that on the date hereof, the Shares
registered in the VPS Account constitute 65% of the issued and outstanding
capital stock of the Pledged Company.
3.2. Subsequently Acquired Shares. If the Pledgor shall acquire
(by purchase, stock dividend or otherwise) any additional shares of the
Pledged Company at any time or from time to time after the date hereof
("Additional Shares"), the Pledgor will forthwith pledge to the Pledgee and
deposit into the VPS Account as many of such Additional Shares as is necessary
to maintain the number of Shares in the VPS Account at not less than 65% of
the total capital shares of the Pledged Company, and will promptly thereafter
deliver to the Pledgee a certificate executed by any Authorized Officer of the
Pledgor describing such Additional Shares and certifying that the same have
been duly pledged and deposited with the Pledgee hereunder.
3.3. Definition of Pledged Shares and Collateral. All Shares at
any time pledged or required to be pledged hereunder are hereinafter called
the "Pledged Shares," which together with all proceeds thereof, including any
securities and moneys received and at the time held by the Pledgee hereunder
and all Dividends and Distributions on or with respect to any Pledged Shares
is hereinafter called the "Collateral". As used herein the term (i) Dividends
shall mean all stock dividends, liquidating dividends, shares of stock
resulting from stock splits, reclassifications, warrants, options, non-cash
dividends and other distributions (whether similar or dissimilar to the
foregoing) on or with respect to any Pledged Shares or other shares of capital
stock constituting Collateral, but shall not mean Distributions and (ii)
Distributions shall mean all cash dividends and cash distributions with
respect to any Pledged Shares.
4. VOTING, ETC., WHILE NO NOTICED EVENT OF DEFAULT. Unless and
until a Noticed Event of Default shall have occurred and be continuing, the
Pledgor shall be entitled to exercise any and all voting and other consensual
rights pertaining to the Pledged Shares and to give all consents, waivers or
ratifications in respect thereof; provided, that no vote shall be cast or any
consent, waiver or ratification given or any action taken which would violate
or be inconsistent with any of the terms of this Agreement or any other Credit
Document, or which would have the effect of impairing the rights, priorities
or remedies of the Pledgee or any other Creditor under this Agreement or any
other Credit Document. All such rights of the Pledgor to vote and to give
consents, waivers and ratifications shall cease in case a Noticed Event of
Default shall occur and be continuing, and Section 6 hereof shall become
applicable. As used herein, a "Noticed Event of Default" shall mean (i) an
Event of Default with respect to any Borrower under Section 9.05 of the Credit
Agreement and (ii) any other Event of Default in respect of which the Pledgee
has given the Pledgor notice that such Event of Default constitutes a "Noticed
Event of Default". Immediately following the occurrence of a Noticed Event of
Default, the Pledgor shall give the Pledgee a signed and dated power of
attorney granting the Pledgee the right to vote all of the Pledged Shares in
respect of each and every future shareholders meeting.
5. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless a Noticed Event of
Default shall have occurred and be continuing, all cash dividends payable in
respect of the Pledged Shares shall be paid to the Pledgor. The Pledgee shall
also be entitled to receive directly or by way of deposit into the VPS
Account, and to retain as part of the Collateral:
(i) all other or additional stock or other securities or property
(other than cash) paid or distributed by way of dividend or otherwise in
respect of the Pledged Shares; and
(ii) all other or additional stock or other securities or property
(including cash) paid or distributed in respect of the Pledged Shares by
way of stock-split, spin-off, split-up, reclassification, combination of
shares or similar rearrangement.
6. REMEDIES IN CASE OF NOTICED EVENT OF DEFAULT. In case a
Noticed Event of Default shall have occurred and be continuing, the Pledgee
shall be entitled to exercise all of the rights, powers and remedies (whether
vested in it by this Agreement or by any other Credit Document or by law) for
the protection and enforcement of its rights in respect of the Collateral, and
the Pledgee shall be entitled, without limitation, to exercise the following
rights, which the Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of the Collateral
payable to the Pledgor under Section 5 hereof;
(ii) to sell all or part of the Pledged Shares through a licensed
securities firm in accordance with the Norwegian Enforcement Act of
1992;
(iii) to transfer all or any part of the Pledged Shares into the
Pledgee's name or the name of its nominee or nominees (the Pledgee
agrees to promptly notify the Pledgor after such transfer; provided,
however, that the failure to give such notice shall not affect the
validity of such transfer);
(iv) to vote all or any part of the Pledged Shares
7. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Pledgee provided for in this Agreement or any other Credit Document now or
hereafter existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other such right, power or
remedy. The exercise or beginning of the exercise by the Pledgee or any other
Creditor of any one or more of the rights, powers or remedies provided for in
this Agreement or any other Credit Document or now or hereafter existing at
law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by the Pledgee or any other Creditor of all
such other rights, powers or remedies, and no failure or delay on the part of
the Pledgee or any other Creditor to exercise any such right, power or remedy
shall operate as a waiver thereof. The Creditors agree that this Agreement
may be enforced only by the action of the Collateral Agent or the Pledgee, in
each case acting upon the instructions of the Required Banks and that no other
Creditor shall have any right individually to seek to enforce or to enforce
this Agreement or to realize upon the security to be granted hereby, it being
understood and agreed that such rights and remedies may be exercised by the
Collateral Agent for the benefit of the Creditors upon the terms of this
Agreement.
8. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Pledgee upon any sale or other disposition of the Collateral pursuant to the
terms of this Agreement, together with all other moneys received by the
Pledgeehereunder, shallbe appliedinthe mannerprovided inthe SecurityAgreement.
(b) It is understood and agreed that the Pledgor shall remain
liable to the extent of any deficiency between the amount of the proceeds of
the Collateral hereunder and the aggregate amount of the Obligations of the
Pledgor.
9. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by
the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall
not be obligated to see to the application of any part of the purchase money
paid over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
10. INDEMNITY. (a) The Pledgor agrees to indemnify, reimburse
and hold the Collateral Agent, each Creditor and its respective successors,
assigns, employees, agents and servants (hereinafter in this Section 10
referred to individually as "Indemnitee," and collectively as "Indemnitees")
harmless as set forth in Section 12.01 of the Credit Agreement.
(b) Without limiting the application of Section 10, the Pledgor
agrees to pay, or reimburse the Collateral Agent for (if the Collateral Agent
shall have incurred fees, costs or expenses because the Pledgor shall have
failed to comply with its obligations under this Agreement or any Credit
Document) any and all reasonable fees, costs and expenses of whatever kind or
nature incurred in connection with the creation, preservation or protection of
the Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all reasonable fees and taxes in connection
with the recording or filing of instruments and documents in public offices,
payment or discharge of any taxes or Liens upon or in respect of the
Collateral, premiums for insurance with respect to the Collateral and all
other reasonable fees, costs and expenses in connection with protecting,
maintaining or preserving the Collateral and the Collateral Agent's interest
therein, whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or relating to
the Collateral.
(c) Without limiting the application of Section 10(a) or (b),
the Pledgor agrees to pay, indemnify and hold each Indemnitee harmless from
and against any loss, costs, damages and expenses which such Indemnitee may
suffer, expend or incur in consequence of or growing out of any misrepresen-
tation by the Pledgor in this Agreement or in any writing contemplated by or
made or delivered pursuant to or in connection with this Agreement.
(d) If and to the extent that the obligations of the Pledgor
under this Section 11 are unenforceable for any reason, the Pledgor hereby
agrees to make the maximum contribution to the payment and satisfaction of
such obligations which is permissible under applicable law.
(e) Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute Obligations secured
by the Collateral. The indemnity obligations of the Pledgor contained in this
Section 10 shall continue in full force and effect notwithstanding the full
payment of all the Notes issued under the Credit Agreement and the payment of
all other Obligations and notwithstanding the discharge thereof.
11. THE PLEDGEE AS COLLATERAL AGENT. The Pledgee will hold in
accordance with this Agreement all items of the Collateral at any time
received under this Agreement. It is expressly understood and agreed that the
obligations of the Pledgee as holder of the Collateral and interests therein
and with respect to the disposition thereof, and otherwise under this
Agreement, are only those expressly set forth in this Agreement. The Pledgee
shall act hereunder on the terms and conditions set forth herein and in
Section 11 of the Credit Agreement.
12. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. The
Pledgor represents, warrants and covenants that (i) it is the legal, record
and beneficial owner of, and has good and marketable title to, all Shares
pledged by it hereunder; (ii) no consent of any other party (including, with-
out limitation, any stockholder or creditor of the Pledgor or any of its
Subsidiaries (including the Pledged Company)) and no consent, license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is
required to be obtained by the Pledgor in connection with the execution,
delivery or performance of this Agreement, or in connection with the exercise
of its rights and remedies pursuant to this Agreement, except those which have
been obtained or made or as may be required by laws affecting the offer and
sale of securities generally in connection with the exercise by the Pledgee of
certain of its remedies hereunder and (iii) all the Shares have been duly and
validly issued, are fully paid and nonassessable. The Pledgor covenants and
agrees that it will defend the Pledgee's right, title and security interest in
and to the Shares and the proceeds thereof against the claims and demands of
all persons whomsoever; and the Pledgor covenants and agrees that it will have
like title to and right to pledge any other property at any time hereafter
pledged to the Pledgee as Collateral hereunder and will likewise defend the
right thereto and security interest therein of the Pledgee and the other
Creditors.
13. TERMINATION, RELEASE. (a) After the Termination Date (as
defined below), this Agreement shall terminate (provided that all indemnities
set forth herein including, without limitation, in Section 10 hereof shall
survive any such termination) and the Pledgee, at the request and expense of
the Pledgor, will promptly execute and deliver to the Pledgor a proper
instrument or instruments acknowledging the satisfaction and termination of
this Agreement, and will duly assign, transfer and deliver to the Pledgor
(without recourse and without any representation or warranty) such of the
Collateral as may be in the possession of the Pledgee and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the date
upon which the Total Commitment has been terminated, no Note or Letter of
Credit is outstanding and all other Obligations then due and payable have been
paid in full.
(b) In the event that any part of the Collateral is sold in
connection with a sale permitted by Section 8.02 of the Credit Agreement or is
otherwise released at the direction of the Required Banks (or all the Banks if
required by Section 12.12 of the Credit Agreement), the Pledgee, at the
request and expense of the Pledgor will duly assign, transfer and deliver to
the Pledgor (without recourse and without any representation or warranty) such
of the Collateral as is then being (or has been) so sold or released and as
may be in possession of the Pledgee and has not theretofore been released
pursuant to this Agreement.
(c) At any time that the Pledgor desires that Collateral be
released as provided in the foregoing Section 13(a) or (b), it shall deliver
to the Pledgee a certificate signed by an Authorized Officer of the Pledgor
stating that the release of the Collateral is permitted pursuant to Section
13(a) or (b).
14. NOTICES, ETC. All notices and other communications hereunder
shall be in writing and shall be delivered or mailed by first class mail,
postage prepaid, addressed:
(a) if to the Pledgor, at its address set forth opposite its
signature below;
(b) if to the Pledgee, at:
Christiania Bank og Kreditkasse
New York Branch
11 West 42nd St.
New York, New York 10036
Attention: Hans Chr. Kjelsrud
(c) if to any Bank (other than the Pledgee), at such address as
such Bank shall have specified in the Credit Agreement;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
15. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Pledgor and the Pledgee (with the written
consent of the Required Banks (or all the Banks if required by Section 12.12
of the Credit Agreement)).
16. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns. THIS AGREEMENT
SHALL TO THE EXTENT POSSIBLE BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAW OF THE STATE OF NEW YORK, though the enforcement hereof and certain
remedies available hereunder may be governed by Norwegian law. The headings
in this Agreement are for purposes of reference only and shall not limit or
define the meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one instrument.
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
Address:
901 Threadneedle
Houston, Texas 77079
Telephone No.: (713) 492-5000
Telecopier No.:(713) 492-0285
READING & BATES CORPORATION
By_________________________
Title:
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH
as Pledgee
By____________________________
Title:
By____________________________
Title:
ANNEX A
to
PLEDGE AGREEMENT
FORM OF MORTGAGE DEED
Exhibit 10.134
LETTER OF CREDIT AGREEMENT
among
READING & BATES CORPORATION,
READING & BATES DRILLING CO.,
and
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH
____________________________________
Dated as of December 30, 1996
____________________________________
==============================================================================
TABLE OF CONTENTS
Page
SECTION 1. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Letter of Credit Requests; Request for Issuance of Letter of
Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.03 Agreement to Repay Letter of Credit Payments . . . . . . . . 2
1.04 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . 3
1.05 Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2. Fees; Commitments . . . . . . . . . . . . . . . . . . . . . . 4
2.01 Fees; Commitments . . . . . . . . . . . . . . . . . . . . . . 4
2.02 Voluntary Reduction of Commitments . . . . . . . . . . . . . 5
2.03 Mandatory Adjustments of Commitments, etc. . . . . . . . . . 5
SECTION 3. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.01 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . 5
3.02 Method and Place of Payment . . . . . . . . . . . . . . . . . 5
3.03 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4. Conditions Precedent . . . . . . . . . . . . . . . . . . . . 7
4.01 Execution of Agreement . . . . . . . . . . . . . . . . . . . 7
4.02 No Default; Representations and Warranties . . . . . . . . . 7
4.03 Officer's Certificate . . . . . . . . . . . . . . . . . . . . 7
4.04 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . 8
4.05 Corporate Proceedings . . . . . . . . . . . . . . . . . . . . 8
4.06 Adverse Change, etc. . . . . . . . . . . . . . . . . . . . . 8
4.07 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.08 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.09 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5. Representations, Warranties and Agreements . . . . . . . . . 9
5.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . 9
5.02 Corporate Power and Authority . . . . . . . . . . . . . . . . 10
5.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . 10
5.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.05 Use of Credit; Margin Regulations . . . . . . . . . . . . . . 10
5.06 Governmental Approvals . . . . . . . . . . . . . . . . . . . 11
5.07 Investment Company Act . . . . . . . . . . . . . . . . . . . 11
5.08 Public Utility Holding Company Act . . . . . . . . . . . . . 11
5.09 True and Complete Disclosure . . . . . . . . . . . . . . . . 11
5.10 Financial Condition; Financial Statements; Projections . . . 12
5.11 Tax Returns and Payments . . . . . . . . . . . . . . . . . . 12
5.12 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . 13
5.13 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 13
5.14 Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . . 13
5.15 Pollution and Other Regulations . . . . . . . . . . . . . . . 14
5.16 Properties . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.17 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . 15
5.18 Existing Indebtedness . . . . . . . . . . . . . . . . . . . . 15
SECTION 6. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . 15
6.01 Information Covenants . . . . . . . . . . . . . . . . . . . . 16
6.02 Books, Records and Inspections . . . . . . . . . . . . . . . 17
6.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.04 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . 17
6.05 Consolidated Corporate Franchises . . . . . . . . . . . . . . 18
6.06 Compliance with Statutes, etc. . . . . . . . . . . . . . . . 18
6.07 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.08 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . 18
6.09 Use of Credit . . . . . . . . . . . . . . . . . . . . . . . . 18
6.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7. Negative Covenants . . . . . . . . . . . . . . . . . . . . . 19
7.01 Changes in Business . . . . . . . . . . . . . . . . . . . . . 19
7.02 Consolidation, Merger or Sale of Assets, etc. . . . . . . . . 20
7.03 Liens on Assets . . . . . . . . . . . . . . . . . . . . . . . 20
7.04 Dividends; Restrictions on Subsidiaries, etc. . . . . . . . . 20
7.05 Transactions with Affiliates . . . . . . . . . . . . . . . . 22
7.06 Vessel Management; Registry . . . . . . . . . . . . . . . . . 22
7.07 Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 23
7.08 Working Capital . . . . . . . . . . . . . . . . . . . . . . . 23
7.09 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8. Events of Default . . . . . . . . . . . . . . . . . . . . . . 23
8.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.02 Representations, etc. . . . . . . . . . . . . . . . . . . . . 23
8.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.04 Default Under Other Agreements . . . . . . . . . . . . . . . 23
8.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . 24
8.06 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.07 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.08 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 25
8.09 Change of Control . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 9. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 37
10.01 Payment of Expenses, etc. . . . . . . . . . . . . . . . . . 37
10.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . 39
10.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . 39
10.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . 40
10.06 Calculations; Computations . . . . . . . . . . . . . . . . . 41
10.07 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . 41
10.08 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 42
10.09 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . 42
10.10 Headings Descriptive . . . . . . . . . . . . . . . . . . . . 42
10.11 Amendment or Waiver . . . . . . . . . . . . . . . . . . . . 42
10.12 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.13 Domicile of Letters of Credit . . . . . . . . . . . . . . . 43
10.14 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 43
10.15 Registry . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 11. Holdings Guaranty . . . . . . . . . . . . . . . . . . . . . 43
11.01 The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . 44
11.02 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.03 Nature of Liability . . . . . . . . . . . . . . . . . . . . 44
11.04 Independent Obligation . . . . . . . . . . . . . . . . . . . 44
11.05 Waiver of Notice, etc. . . . . . . . . . . . . . . . . . . . 45
11.06 Authorization . . . . . . . . . . . . . . . . . . . . . . . 45
11.07 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.08 Subordination . . . . . . . . . . . . . . . . . . . . . . . 46
11.09 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ANNEX I -- Existing Letters of Credit
ANNEX II -- Subsidiaries
ANNEX III -- Rigs and Vessels
ANNEX IV -- Existing Indebtedness
EXHIBIT A -- Form of Letter of Credit Request
EXHIBIT B -- Form of Opinion of Wayne Hillin, Esq.
EXHIBIT C -- Form of Officers' Certificate
EXHIBIT D -- Form of Compliance Certificate
==============================================================================
LETTER OF CREDIT AGREEMENT, dated as of December 30, 1996, among
READING & BATES CORPORATION ("Holdings"), a Delaware corporation, READING &
BATES DRILLING CO. (the "Obligor"), an Oklahoma corporation and CHRISTIANIA
BANK OG KREDITKASSE, NEW YORK BRANCH (the "Bank"). Unless otherwise defined
herein, all capitalized terms used herein and defined in Section 9 are used
herein as so defined.
W I T N E S S E T H :
WHEREAS, the Obligor desires to execute this Agreement for the
purpose of (i) refinancing outstanding letters of credit under that certain
credit agreement, dated as of November 13, 1996, among Holdings, the Obligor,
various financial institutions, Banque Indosuez and Credit Lyonnais New York
Branch, as documentation agents and the Bank, as administrative agent (as
amended, modified or supplemented from time to time, the "Existing Credit
Agreement") and (ii) supporting the issuance of new letters of credit for its
account;
WHEREAS, subject to and upon the terms and conditions herein set
forth, including, without limitation, the guaranty by Holdings of all
obligations of the Obligor under this Agreement, the Bank agrees to issue from
time to time at the request and for the account of the Obligor the Letters of
Credit described herein; and
WHEREAS, Holdings will obtain benefits from the issuance of
Letters of Credit to the Obligor under this Agreement and, accordingly,
desires to execute this Agreement in order to satisfy the conditions described
in the preceding paragraph and to induce the Bank to issue Letters of Credit
for the account of the Obligor;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Letters of Credit.
1.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Obligor may request that the Bank at any time
and from time to time on or after the Effective Date and prior to the Business
Day immediately preceding the Maturity Date issue, for the account of the
Obligor and in support of L/C Supportable Obligations, and subject to and upon
the terms and conditions herein set forth, the Bank agrees to issue from time
to time, irrevocable standby letters of credit denominated in US Dollars or
any other currency acceptable to the Bank (subject to the provisions of
Section 1.01(b)) and in such form as may be approved by the Bank (each such
standby letter of credit, a "Letter of Credit" and collectively, the "Letters
of Credit"). Annex I contains a description of all letters of credit issued
under the Existing Credit Agreement prior to the Effective Date and which will
remain outstanding on the Effective Date. Each such letter of credit,
including any extension thereof (each an "Existing Letter of Credit") shall
constitute a "Letter of Credit" for all purposes of this Agreement and shall
be deemed issued for purposes of Section 2.01 on the Effective Date.
(b) Whenever the Bank issues a Letter of Credit in a currency
other than US Dollars, the Letter of Credit Outstandings relating to such
Letter of Credit at such time shall be calculated on the basis of the US
Dollar Equivalent of the Stated Amount of such Letter of Credit. Any US
Dollar Equivalent established according to the preceding sentence shall remain
in effect until such date as the calculation of the US Dollar Equivalent
determined as above, if made on such date, would yield a US Dollar Equivalent
which varies by greater than 10.0% from the US Dollar Equivalent then in
effect, at which time the Letter of Credit Outstandings shall be adjusted to
reflect the current US Dollar Equivalent of the Stated Amount of such Letter
of Credit. Subsequent adjustments shall then be made on any date on which the
current calculation of the US Dollar Equivalent would yield a result which
varies by greater than 10.0% from the US Dollar Equivalent then in effect.
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall
be issued, the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of,
and prior to the issuance of, the respective Letter of Credit) at such time,
would exceed $20,000,000 and (ii) no Letter of Credit shall have an expiry
date later than the Business Day immediately preceding the Maturity Date.
1.02 Letter of Credit Requests; Request for Issuance of Letter of
Credit. (a) Whenever it desires that a Letter of Credit be issued, the
Obligor shall give the Bank written notice (including by way of telecopier) in
the form of Exhibit A prior to 1:00 P.M. (New York time) at least three
Business Days (or such shorter period as may be acceptable to the Bank) 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 any
documents that the Bank customarily requires in connection therewith.
(b) The Bank shall, on the date of each issuance of a Letter of
Credit by it, give the Obligor written or telephonic notice of the issuance of
such Letter of Credit.
1.03 Agreement to Repay Letter of Credit Payments. (a) The
Obligor hereby agrees to reimburse the Bank, by making payment at the Payment
Office, for any payment or disbursement made by the Bank under any Letter of
Credit (each such amount so paid or disbursed until reimbursed, an "Unpaid
Drawing") immediately after, and in any event on the date on which the Obligor
is notified by the Bank of such payment or disbursement with interest on the
amount so paid or disbursed by the Bank, 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
Bank is reimbursed therefor at a rate per annum which shall be the Base Rate
as in effect on the date of such notice of payment or disbursements (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.
(b) The Obligor's obligation under this Section 1.03 to reimburse
the Bank with respect to Unpaid Drawings (including, in each case, interest
thereon) shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which the
Obligor may have or have had against the Bank, including, without limitation,
any defense based upon the failure of any drawing under a Letter of Credit to
conform to the terms of the Letter of Credit (other than the failure of the
Bank to determine that any documents required to be delivered under such
Letter of Credit have been delivered and that they substantially comply on
their face with the requirements of such Letter of Credit) or any
non-application or misapplication by the beneficiary of the proceeds of such
drawing; provided, however, that the Obligor shall not be obligated to
reimburse the Bank for any wrongful payment made by the Bank under a Letter of
Credit as a result of acts or omissions constituting willful misconduct or
gross negligence on the part of the Bank.
1.04 Increased Costs. If at any time after the date of the
Agreement, the adoption or effectiveness of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by the Bank with any request or directive (whether or not having
the force of law but with which such Bank customarily complies even though the
failure to comply therewith would not be unlawful) by any such authority,
central bank or comparable agency shall either (i) impose, modify or make
applicable any reserve, deposit, capital adequacy or similar requirement
against Letters of Credit issued by the Bank, or (ii) shall impose on the Bank
any other conditions affecting this Agreement or any Letter of Credit; and the
result of any of the foregoing is to increase the cost to the Bank of issuing
or maintaining any Letter of Credit, or to reduce the amount of any sum
received or receivable by the Bank hereunder (other than any increased cost or
reduction in the amount received or receivable resulting from the imposition
of or a change in the rate or basis of taxes or similar charges), then, upon
demand to the Obligor by the Bank, the Obligor shall (to the extent
applicable) pay to the Bank such additional amount or amounts as will
compensate the Bank for such increased cost or reduction. A certificate
submitted to the Obligor by the Bank setting forth the basis for the
determination of such additional amount or amounts necessary to compensate the
Bank as aforesaid shall be conclusive and binding on the Obligor absent
manifest error, although the failure to deliver any such certificate shall not
release or diminish any of the Obligor's obligations to pay additional amounts
pursuant to this Section 1.04 upon the subsequent receipt thereof.
1.05 Indemnities. The Obligor hereby agrees to reimburse and
indemnify the Bank 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 Bank in performing its respective duties
in any way relating to or arising out of its issuance of Letters of Credit;
provided that the Obligor shall not be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Bank's gross
negligence or willful misconduct.
SECTION 2. Fees; Commitments.
2.01 Fees; Commitments. (a) The Obligor agrees to pay to the
Bank a fee in respect of each Letter of Credit (the "Letter of Credit Fee")
computed at a rate per annum equal to 1.25% on the daily Stated Amount of such
Letter of Credit. Accrued Letter of Credit Fees shall be due and payable
quarterly in arrears on the first day of each January, April, July and October
of each year and on the earlier of the Maturity Date or the date on which the
Commitment is terminated and no Letters of Credit remain outstanding.
(b) The Obligor agrees to pay to the Bank a commitment fee in
respect of the Bank's Commitment hereunder (the "Commitment Fee") computed at
the rate of .375% per annum on the daily Unutilized Commitment. Accrued
Commitment Fees shall be due and payable quarterly in arrears on the first day
of each January, April, July and October of each year and on the earlier of
the Maturity Date or the date on which the Commitment is terminated and no
Letters of Credit remain outstanding.
(c) The Obligor agrees to pay directly to the Bank upon request
the amount of any charges or expenses incurred by the Bank in connection with
any confirmation of Letters of Credit by local banks requested by the Obligor
or any beneficiary of any Letter of Credit.
(d) The Obligor shall pay to the Bank on the Effective Date such
fees as heretofore agreed in writing by the Obligor and the Bank, when and as
due.
(e) All computations of Fees shall be made in accordance with
Section 10.06(b).
2.02 Voluntary Reduction of Commitments. Upon at least thirty
Days' prior written notice (or telephonic notice confirmed in writing) to the
Bank at its Notice Office, the Obligor shall have the right, without premium
or penalty, to terminate or partially reduce the Commitment, provided that (x)
no such reduction shall reduce the Commitment to an amount that is less than
the Letter of Credit Outstandings and (y) any partial reduction pursuant to
this Section 2.02 shall be in the amount of at least $1,000,000.
2.03 Mandatory Adjustments of Commitments, etc. The Commitment
shall terminate on the earlier of (i) the Maturity Date, (ii) December 31,
1996, unless the Effective Date has occurred on or before such date and (iii)
unless the Bank otherwise consents, the date on which any Change of Control
occurs.
SECTION 3. Payments.
3.01 Mandatory Prepayments. If on any date the aggregate amount
of Letter of Credit Outstandings exceeds the Commitment then in effect, the
Obligor shall pay to the Bank an amount in cash and/or Cash Equivalents equal
to such excess (up to the aggregate amount of the Letter of Credit
Outstandings at such time) and the Bank shall hold such payment as security
for the obligations of the Obligor hereunder pursuant to a cash collateral
agreement to be entered into in form and substance reasonably satisfactory to
the Bank (which shall permit certain investments in Cash Equivalents
satisfactory to the Bank, until the proceeds are applied to the secured
obligations).
3.02 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made
to the Bank not later than 1:00 P.M. (New York time) on the date when due and
shall be made in immediately available funds and in lawful money of the United
States of America at the Payment Office, it being understood that written
notice by the Obligor to the Bank to make a payment from the funds in the
Obligor's account at the Payment Office shall constitute the making of such
payment to the extent of such funds held in such account. Any payments under
this Agreement which are made later than 1:00 P.M. (New York time) shall be
deemed to have been made on the next succeeding Business Day. Whenever any
payment to be made hereunder shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest shall be
payable during such extension at the applicable rate in effect immediately
prior to such extension.
3.03 Net Payments. (a) All payments made by the Obligor
hereunder will be made without setoff, counterclaim or other defense. Except
as provided in Section 3.03(b), all such payments will be made free and clear
of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or by any political subdivision
or taxing authority thereof or therein with respect to such payments (but
excluding, except as provided in the second succeeding sentence, any tax
imposed on or measured by the net income or net profits of the Bank pursuant
to the laws of the jurisdiction in which it is organized or managed and
controlled or the jurisdiction in which the principal office or applicable
lending office of the Bank is located or any subdivision thereof or therein)
and all interest, penalties or similar liabilities with respect thereto (all
such non-excluded taxes, levies, imposts, duties, fees, assessments or other
charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, the Obligor agrees to pay the full amount of such Taxes,
and such additional amounts, if any, as may be necessary so that every payment
of all amounts due under this Agreement, after withholding or deduction for or
on account of any Taxes, will not be less than the amount provided for herein.
If any amounts are payable by the Obligor in respect of Taxes pursuant to the
preceding sentence, the Obligor agrees to reimburse the Bank, upon the written
request of the Bank, for taxes imposed on or measured by the net income or net
profits of the Bank pursuant to the laws of the jurisdiction in which the
principal office or applicable lending office of the Bank is located or under
the laws of any political subdivision or taxing authority of any such
jurisdiction in which the principal office or applicable lending office of the
Bank is located and for any withholding of taxes as the Bank shall determine
are payable by, or withheld from, the Bank in respect of such amounts so paid
to or on behalf of the Bank pursuant to the preceding sentence and in respect
of any amounts paid to or on behalf of the Bank pursuant to this sentence.
The Obligor will furnish to the Bank within 45 days after the date the payment
of any Taxes is due pursuant to applicable law certified copies of tax
receipts evidencing such payment by the Obligor. The Obligor agrees to
indemnify and hold harmless the Bank, and reimburse the Bank upon its written
request, for the amount of any Taxes so levied or imposed and paid by the
Bank.
(b) The Bank agrees to deliver to the Obligor on or prior to the
date of this Agreement, two accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to
the Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments to be made under this Agreement. In addition,
the Bank agrees that from time to time after the date of this Agreement, when
a lapse in time or change in circumstances renders the previous certification
obsolete or inaccurate in any material respect, it will deliver to the Obligor
two new accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 and such other forms as may be required in order to
confirm or establish the entitlement of the Bank to a continued exemption from
or reduction in United States withholding tax with respect to payments under
this Agreement, or it shall immediately notify the Obligor of its inability to
deliver any such Form or Certificate. Notwithstanding anything to the
contrary contained in Section 3.03(a), but subject to Section 10.04(b) and the
immediately succeeding sentence, (x) the Obligor shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder for the account of the Bank for U.S. Federal income tax purposes to
the extent that the Bank has not provided to the Obligor U.S. Internal Revenue
Service Forms that establish a complete exemption from such deduction or
withholding and (y) the Obligor shall not be obligated pursuant to Section
3.03(a) hereof to gross-up payments to be made to the Bank in respect of
income or similar taxes imposed by the United States if (I) the Bank has not
provided to the Obligor the Internal Revenue Service Forms required to be
provided to the Obligor pursuant to this Section 3.03(b). Notwithstanding
anything to the contrary contained in the preceding sentence or elsewhere in
this Section 3.03 and except as set forth in Section 10.04(b), the Obligor
agrees to pay additional amounts and to indemnify the Bank in the manner set
forth in Section 3.03(a) (without regard to the identity of the jurisdiction
requiring the deduction or withholding) in respect of any amounts deducted or
withheld by it as described in the immediately preceding sentence as a result
of any changes after the date of this Agreement in any applicable law, treaty,
governmental rule, regulation, guideline or order, or in the interpretation
thereof, relating to the deducting or withholding of income or similar Taxes,
provided the Bank shall provide to the Obligor any reasonably available
applicable IRS tax form (reasonably similar in its simplicity and lack of
detail to IRS Form 1001) necessary or appropriate for the exemption or
reduction in the rate of such U.S. federal withholding tax.
SECTION 4. Conditions Precedent. The obligation of the Bank to
issue Letters of Credit hereunder, is subject, at the time of each such Credit
Event (except as otherwise hereinafter indicated), to the satisfaction of each
of the following conditions:
4.01 Execution of Agreement. The Effective Date shall have
occurred as provided in Section 10.09.
4.02 No Default; Representations and Warranties. At the time of
each Credit Event and also after giving effect thereto, (i) there shall exist
no Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents in effect at such time shall
be 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 of
such Credit Event (except to the extent that such representations and
warranties expressly relate to an earlier date, in which case they shall be
true and correct in all material respects as of such earlier date).
4.03 Officer's Certificate. On the Effective Date, the Bank
shall have received a certificate dated such date signed by the President or
any Vice President of the Obligor stating that there has been no Material
Adverse Change in the financial condition of the Obligor or of Holdings and
its Subsidiaries taken as a whole since the date of the last audited financial
statements provided by Holdings or the Obligor to the Bank and that all of the
applicable conditions set forth in Sections 4.02 and 4.08(a) exist as of such
date.
4.04 Opinions of Counsel. On the Effective Date, the Bank shall
have received opinions, addressed to the Bank and dated the Effective Date,
from (i) Wayne Hillin, Esq., General Counsel to the Credit Parties, which
opinion shall cover the matters contained in Exhibit B.
4.05 Corporate Proceedings. (a) On the Effective Date, the Bank
shall have received from each Credit Party a certificate, dated the Effective
Date, signed by the President or any Vice-President or other appropriate
representative of such Credit Party in the form of Exhibit C with appropriate
insertions and deletions, together with copies of the certificate of
formation, the by-laws, or other organizational documents of such Credit Party
and the resolutions, or such other administrative approval, of such Credit
Party referred to in such certificate and all of the foregoing (including each
such certificate of formation, certificate of incorporation and by-laws) shall
be reasonably satisfactory to the Bank.
(b) On the Effective Date, all corporate and legal proceedings
and all instruments and agreements in connection with the transactions contem-
plated by this Agreement and the other Credit Documents shall be reasonably
satisfactory in form and substance to the Bank, and the Bank shall have
received all information and copies of all certificates, documents and papers,
including good standing certificates and any other records of corporate pro-
ceedings and governmental approvals, if any, which the Bank may have
reasonably requested in connection therewith, such documents and papers, where
appropriate, to be certified by proper corporate or governmental authorities.
4.06 Adverse Change, etc. From December 31, 1995 to the
Effective Date, nothing shall have occurred (and the Bank shall not have
become aware of any facts or conditions not previously known) which the Bank
shall determine (a) has, or is reasonably likely to have, a material adverse
effect on the rights or remedies of the Bank, or on the ability of Holdings,
the Obligor or any Subsidiary to perform their respective obligations to the
Bank, or (b) has, or is reasonably likely to have, a Material Adverse Effect.
4.07 Litigation. On the Effective Date, there shall be no
actions, suits or proceedings pending or threatened (a) with respect to this
Agreement or any other Credit Document or the transactions contemplated hereby
or thereby or (b) which the Bank shall determine is reasonably likely to (i)
have a Material Adverse Effect or (ii) have a material adverse effect on the
rights or remedies of the Bank hereunder or under any other Credit Document or
on the ability of Holdings or the Obligor to perform their respective
obligations to the Bank hereunder or under any other Credit Document.
4.08 Approvals. On the Effective Date, all material necessary
governmental and third party approvals in connection with the transactions
contemplated by the Credit Documents and otherwise referred to herein or
therein shall have been obtained and remain in effect, and all applicable
waiting periods shall have expired without any action being taken by any
competent authority which restrains or prevents such transactions or imposes,
in the reasonable judgment of the Bank, materially adverse conditions upon the
consummation of such transactions.
4.09 Fees. On the Effective Date, the Obligor shall have paid to
the Bank all Fees and expenses agreed upon by such parties to be paid on or
prior to such date.
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by Holding and the Obligor to the
Bank that all of the conditions specified above which are applicable in
accordance with their express terms at the time of such acceptance exist as of
that time. All of the certificates, legal opinions and other documents and
papers referred to in this Section 4, unless otherwise specified, shall be
delivered to the Bank at its Notice Office and shall be satisfactory in form
and substance to the Bank.
SECTION 5. Representations, Warranties and Agreements. In order
to induce the Bank to enter into this Agreement and to issue Letters of Credit
provided for herein, each of Holdings and the Obligor makes the following
representations and warranties to, and agreements with, the Bank, all of which
shall survive the execution and delivery of this Agreement (with the making of
each Credit Event thereafter being deemed to constitute a representation and
warranty that the matters specified in this Section 5 are true and correct in
all material respects on and as of the date of each such Credit Event unless
such representation and warranty expressly indicates that it is being made as
of any specific date, in which case such representations and warranties shall
be true and correct in all material respects as of such date):
5.01 Corporate Status. Each Credit Party (i) is a duly organized
and validly existing corporation in good standing under the laws of the juris-
diction of its organization and has the corporate power and authority to own
its property and assets and to transact the business in which it is engaged,
except in such case where the failure to be so duly organized and validly
existing in good standing and to have such corporate power and authority (x)
is not reasonably likely to have a Material Adverse Effect and (y) is not
reasonably likely to have a material adverse effect on the rights or remedies
of the Bank or on the ability of Holdings or the Obligor to perform its
obligations to the Bank hereunder and under the other Credit Documents to
which it is a party, and (ii) has duly qualified and is authorized to do busi-
ness and is in good standing in all jurisdictions where it is required to be
so qualified and where the failure to be so qualified would have a Material
Adverse Effect.
5.02 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. Each Credit Party
has duly executed and delivered each Credit Document to which it is a party
and each such Credit Document constitutes the legal, valid and binding
obligation of such Credit Party enforceable against such Person in accordance
with its terms, except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
5.03 No Violation. Neither the execution, delivery and
performance by any Credit Party of the Credit Documents to which it is a party
nor compliance with the terms and provisions thereof, nor the consummation of
the transactions contemplated therein (i) will contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality of the United States or
any State thereof, (ii) will result in any breach of any of the terms, coven-
ants, conditions or provisions of, or constitute a default under, or result in
the creation or imposition of (or the obligation to create or impose) any Lien
upon any of the property or assets of Holdings, the Obligor or any of their
respective Subsidiaries pursuant to the terms of, any material indenture,
mortgage, deed of trust, agreement or other instrument to which Holdings, the
Obligor or any of their respective Subsidiaries is a party or by which it or
any of its property or assets are bound or to which it is subject or (iii)
will violate any provision of the Certificate of Incorporation or By-Laws of
Holdings, the Obligor or any of their respective Subsidiaries.
5.04 Litigation. There are no actions, suits or proceedings
pending or, to the best of Holding's or the Obligor's knowledge threatened
with respect to Holdings, the Obligor or any of their respective Subsidiaries
(i) that are likely to have a Material Adverse Effect or (ii) that are
reasonably likely to have a material adverse effect on the rights or remedies
of the Bank or on the ability of any Credit Party to perform its obligations
to the Bank hereunder and under the other Credit Documents to which it is a
party.
5.05 Use of Credit; Margin Regulations. (a) All Letters of
Credit issued hereunder shall be utilized to provide for the general corporate
purposes of Holdings, the Obligor and their respective Subsidiaries.
(b) Neither the issuance of any Letter of Credit hereunder, nor
the use of any proceeds thereof, will violate or be inconsistent with the
provisions of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System and no part of the proceeds of any Letter of Credit will be
used to purchase or carry any Margin Stock in violation of Regulation U or to
extend credit for the purpose of purchasing or carrying any Margin Stock.
5.06 Governmental Approvals. Except for the orders, consents,
approvals, licenses, authorizations, validations, recordings, registrations
and exemptions that have already been duly made or obtained and remain in full
force and effect, no order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption by, any
foreign or domestic governmental or public body or authority, or any
subdivision thereof, is required to authorize or is required in connection
with (i) the execution, delivery and performance of any Credit Document or
(ii) the legality, validity, binding effect or enforceability of any Credit
Document.
5.07 Investment Company Act. None of Holdings, the Obligor or
any of their respective Subsidiaries is an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
5.08 Public Utility Holding Company Act. None of Holdings, the
Obligor or any of their respective Subsidiaries is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the mean-
ing of the Public Utility Holding Company Act of 1935, as amended.
5.09 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf
of Holdings, the Obligor or any of their respective Subsidiaries in writing to
the Bank for purposes of or in connection with this Agreement or any
transaction contemplated herein is, and all other such factual information
(taken as a whole) hereafter furnished by or on behalf of any such Person in
writing to the Bank will be, true and accurate in all material respects on the
date as of which such information is dated or certified and not incomplete by
omitting to state any material fact necessary to make such information (taken
as a whole) not misleading at such time in light of the circumstances under
which such information was provided. The Projections and pro forma financial
information contained in such materials are based on good faith estimates and
assumptions believed by such Persons to be reasonable at the time made, it
being recognized by the Bank that such Projections as to future events are not
to be viewed as facts and that actual results during the period or periods
covered by any such Projections may differ from the projected results. There
is no fact known to Holdings or the Obligor which is reasonably likely to have
a Material Adverse Effect, which has not been disclosed herein or in such
other documents, certificates and statements furnished to the Bank for use in
connection with the transactions contemplated hereby.
5.10 Financial Condition; Financial Statements; Projections. (a)
On and as of the Effective Date, on a pro forma basis after giving effect to
all Indebtedness incurred, and to be incurred, and Liens created, and to be
created, by Holdings and its Subsidiaries in connection therewith, (x) the sum
of the assets, at a fair valuation, of Holdings and its Subsidiaries taken as
a whole will exceed its debts, (y) Holdings and its Subsidiaries taken as a
whole will not have incurred or intended to, or believe that they will, incur
debts beyond their ability to pay such debts as such debts mature and (z)
Holdings and its Subsidiaries taken as a whole will not have unreasonably
small capital with which to conduct its business.
(b) (i) The consolidated balance sheet of Holdings and its
Subsidiaries at December 31, 1995 and the related consolidated statements of
operations and cash flows of Holdings and its Subsidiaries for the fiscal
year, as the case may be, ended as of said date, which have been examined by
Arthur Andersen LLP, independent certified public accountants, who delivered
an unqualified opinion in respect therewith, and (ii) the consolidated balance
sheet of Holdings and its Subsidiaries as of September 30, 1996, copies of
which have heretofore been furnished to the Bank, present fairly the financial
position of such entities at the dates of said statements and the results for
the period covered thereby in accordance with GAAP (or, in the case of the
balance sheet, presents a good faith estimate of the consolidated financial
condition of Holdings and its Subsidiaries at the date thereof), except to the
extent provided in the notes to said financial statements and, in the case of
the September 30, 1996 statements, subject to normal and recurring year-end
audit adjustment. All such financial statements (other than the aforesaid
balance sheet) have been prepared in accordance with generally accepted
accounting principles and practices consistently applied except to the extent
provided in the notes to said financial statements. Nothing has occurred
since December 31, 1995 that has had or is reasonably likely to have a
Material Adverse Effect.
(c) Except as reflected in the financial statements and the notes
thereto described in Section 5.10(b), there were as of the Effective Date no
liabilities or obligations with respect to Holdings, the Obligor or any of
their respective Subsidiaries of a nature (whether absolute, accrued,
contingent or otherwise and whether or not due) which, either individually or
in aggregate, would be material to Holdings and its Subsidiaries taken as a
whole, except as incurred subsequent to December 31, 1995 in the ordinary
course of business consistent with past practices.
5.11 Tax Returns and Payments. Each of Holdings, the Obligor and
each of their respective Subsidiaries has filed all federal income tax returns
and all other material tax returns, domestic and foreign, required to be filed
by it and has paid all material taxes and assessments payable by it which have
become due, other than those not yet delinquent and except for those contested
in good faith. Holdings, the Obligor and each of their respective Subsi-
diaries has paid, or has provided adequate reserves with respect thereto, in
accordance with GAAP, for the payment of, all federal, state and foreign
income taxes applicable for all prior fiscal years and for the current fiscal
year to the date hereof.
5.12 Compliance with ERISA. (a) Each Plan is in substantial
compliance with ERISA and the Code; no Reportable Event has occurred with
respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an
accumulated or waived funding deficiency or has applied for an extension of
any amortization period within the meaning of Section 412 of the Code; all
contributions required to be made with respect to a Plan and a Foreign Pension
Plan have been timely made; neither Holdings nor the Obligor nor any
Subsidiary of the Obligor nor any ERISA Affiliate has incurred any material
liability to or on account of a Plan pursuant to Section 409, 502(i), 502(l),
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29),
4971, 4975 or 4980 of the Code or expects to incur any liability (including
any indirect, contingent, or secondary liability) under any of the foregoing
Sections with respect to any Plan; no proceedings have been instituted to
terminate or appoint a trustee to administer any Plan; no condition exists
which presents a material risk to Holdings, the Obligor or any Subsidiary of
the Obligor or any ERISA Affiliate of incurring a liability to or on account
of a Plan pursuant to the foregoing provisions of ERISA and the Code; or
except as would reasonably be expected to have a Material Adverse Effect, no
lien imposed under the Code or ERISA on the assets of the Obligor or any
Subsidiary of the Obligor or any ERISA Affiliate exists or is reasonably
likely to arise on account of any Plan; and Holdings, the Obligor and their
respective Subsidiaries do not maintain or contribute to any employee welfare
benefit plan (as defined in Section 3(1) of ERISA) which provides benefits to
retired employees or other former employees (other than as required by Section
601 of ERISA) or any employee pension benefit plan (as defined in Section 3(2)
of ERISA) the obligations with respect to which are not properly recognized or
disclosed in such entity's consolidated financial statements and notes related
thereto.
(b) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. None of
Holdings, the Obligor or any of their respective Subsidiaries has incurred any
obligation in connection with the termination of or withdrawal from any
Foreign Pension Plan.
5.13 Subsidiaries. Annex II lists each Subsidiary of Holdings
(and the direct and indirect ownership interest of Holdings therein), in each
case existing on the Effective Date.
5.14 Patents, etc. Holdings and each of its Subsidiaries has
obtained all material patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their businesses taken as a whole as
presently conducted.
5.15 Pollution and Other Regulations. (a) Each of Holdings and
its Subsidiaries is in substantial compliance with all applicable
Environmental Laws governing its business for which failure to comply is
reasonably likely to have a Material Adverse Effect, and neither Holdings nor
any of its Subsidiaries is liable for any material penalties, fines or
forfeitures for failure to comply with any of the foregoing. All licenses,
permits, registrations or approvals required for the business of Holdings and
each of its Subsidiaries, as conducted as of the Effective Date, under any
Environmental Law have been secured and Holdings and each of its Subsidiaries
is in substantial compliance therewith, except such licenses, permits, regis-
trations or approvals the failure to secure or to comply therewith is not
likely to have a Material Adverse Effect. Neither Holdings nor any of its
Subsidiaries is in any respect in noncompliance with, breach of or default
under any writ, order, judgment, injunction, or decree to which Holdings or
such Subsidiary is a party or which would affect the ability of Holdings or
such Subsidiary to operate any Real Property, offshore drilling rig or other
facility and no event has occurred and is continuing which, with the passage
of time or the giving of notice or both, would constitute noncompliance,
breach of or default thereunder, except in each such case, such noncompliance,
breaches or defaults as are not likely to, in the aggregate, have a Material
Adverse Effect. There are as of the Effective Date no Environmental Claims
pending or, to the best knowledge of Holdings and the Obligor, threatened,
against Holdings or any of its Subsidiaries wherein an unfavorable decision,
ruling or finding would be reasonably likely to have a Material Adverse
Effect. There are no facts, circumstances, conditions or occurrences on any
Real Property, offshore drilling rig or other facility owned or operated by
Holdings or any of its Subsidiaries that is reasonably likely (i) to form the
basis of an Environmental Claim against Holdings, any of its Subsidiaries or
any Real Property, offshore drilling rig or other facility owned by Holdings
or any of its Subsidiaries, or (ii) to cause such Real Property, offshore
drilling rig or other facility to be subject to any restrictions on its
ownership, occupancy, use or transferability under any Environmental Law,
except in each such case, such Environmental Claims or restrictions that in-
dividually or in the aggregate are not reasonably likely to have a Material
Adverse Effect.
(b) Hazardous Materials have not at any time been (i) generated,
used, treated or stored on, or transported to or from, any Real Property,
offshore drilling rig or other facility at any time owned or operated by
Holdings or any of its Subsidiaries, or (ii) released on or from any such Real
Property, offshore drilling rig or other facility, in each case where, to the
best of Holdings' or the Obligor's knowledge, such occurrence or event
individually or in the aggregate is reasonably likely to have a Material
Adverse Effect.
5.16 Properties. (a) Holdings and each of its Subsidiaries has
title to all material properties owned by them including all property
reflected in the consolidated balance sheet of Holdings and its Subsidiaries
as referred to in Section 5.10(b), free and clear of all Liens, other than (i)
as referred to in the consolidated balance sheet or in the notes thereto or
(ii) Permitted Liens.
(b) Annex III sets forth all the offshore drilling rigs and other
vessels owned or chartered by Holdings and each of its Subsidiaries on the
Effective Date, and identifies the registered owner, flag, official or patent
number, as the case may be, the home port, class, location and operating
status on the Effective Date, and, if chartered-in by Holdings or any of its
Subsidiaries, the name and address of the owner of such chartered-in vessel.
5.17 Labor Relations. Neither Holdings nor its Subsidiaries is
engaged in any unfair labor practice that is reasonably likely to have a
Material Adverse Effect. There is (i) no unfair labor practice complaint
pending against Holdings or any of its Subsidiaries or threatened against any
of them, before the National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against Holdings or any of its Subsidiaries or, to the
best of Holdings' or the Obligor's knowledge, threatened against any of them,
(ii) no strike, labor dispute, slowdown or stoppage pending against Holdings
or any of its Subsidiaries or, to the best of Holdings' or the Obligor's
knowledge, threatened against Holdings or any of its Subsidiaries and (iii) no
union representation petition existing with respect to the employees of
Holdings or any of its Subsidiaries and no union organizing activities are
taking place, except with respect to any matter specified in clause (i), (ii)
or (iii) above, either individually or in the aggregate, such as is not
reasonably likely to have a Material Adverse Effect.
5.18 Existing Indebtedness. Annex IV sets forth a true and
complete list of all Indebtedness of Holdings and each of its Subsidiaries on
the Effective Date and which is to remain outstanding after the Effective Date
(excluding the Letters of Credit, the "Existing Indebtedness"), in each case
showing the aggregate principal amount thereof and the name of the respective
borrower (or issuer) and any other entity which directly or indirectly
guaranteed such debt.
SECTION 6. Affirmative Covenants. Holdings and the Obligor
covenant and agree that on the Effective Date and thereafter for so long as
this Agreement is in effect (and until the Commitments have terminated, no
Letters of Credit are outstanding and all Unpaid Drawings, together with
interest, Fees and all other Obligations incurred hereunder, are paid in
full):
6.01 Information Covenants. Holdings and/or the Obligor will
furnish to the Bank:
(a) Annual Financial Statements. Within 90 days after the close
of each fiscal year of Holdings, the consolidated balance sheet of
Holdings and its Subsidiaries, as at the end of such fiscal year and the
related consolidated statements of operations and of cash flows for such
fiscal year, including the amount of Consolidated Capital Expenditures
made during such fiscal year, in each case setting forth comparative
consolidated figures for the preceding fiscal year, and examined by
independent certified public accountants of recognized national standing
whose opinion shall not be qualified as to the scope of audit and as to
the status of Holdings and its Subsidiaries as a going concern, together
with a certificate of such accounting firm stating that in the course of
its regular audit of the business of Holdings and the Obligor, which
audit was conducted in accordance with generally accepted auditing
standards, such accounting firm has obtained no knowledge of any Default
or Event of Default which has occurred and is continuing or, if in the
opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof.
(b) Quarterly Financial Statements. As soon as available and in
any event within 45 days after the close of each of the first three
quarterly accounting periods in each fiscal year, the consolidated
balance sheet of Holdings and its Subsidiaries, as at the end of such
quarterly period and the related consolidated statements of operations
and of cash flows for such quarterly period and for the elapsed portion
of the fiscal year ended with the last day of such quarterly period,
including the amount of Consolidated Capital Expenditures made during
such period, and in each case setting forth comparative consolidated
figures for the related period in the prior fiscal year, all of which
shall be unaudited, but certified by the chief financial officer or
controller of Holdings, subject to changes resulting from audit and
normal year-end audit adjustments.
(c) Compliance Certificate. At the time of the delivery of the
financial statements provided for in Sections 7.01(a) and (b), a
certificate of Holdings and/or the Obligor signed by its chief financial
officer, controller or other Authorized Officer in the form of Exhibit D
to the effect that no Default or Event of Default exists or, if any
Default or Event of Default does exist, specifying the nature and extent
thereof, which certificate shall set forth the calculations required to
establish whether Holdings and its Subsidiaries were in compliance with
the provisions of Section 7 as at the end of such fiscal period or year,
as the case may be.
(d) Notice of Default or Litigation. Promptly, and in any event
within (x) three Business Days after Holdings or the Obligor obtains
knowledge thereof, notice of the occurrence of any event which
constitutes a Default or Event of Default which notice shall specify the
nature thereof, the period of existence thereof and what action Holdings
or the Obligor proposes to take with respect thereto and (y) ten
Business Days after the Obligor obtains knowledge thereof, notice of the
commencement of or any significant development in any litigation or
governmental proceeding pending against Holdings or the Obligor or any
of their respective Subsidiaries which is likely to have a Material
Adverse Effect or is likely to have a material adverse effect on the
ability of Holdings or the Obligor to perform its obligations hereunder
or under any other Credit Document.
(e) Other Information. From time to time, such other information
or documents (financial or otherwise) as the Bank may reasonably
request.
6.02 Books, Records and Inspections. Holdings will, and will
cause each of its Subsidiaries to, permit, upon reasonable notice to the chief
financial officer, controller or any other Authorized Officer of Holdings or
the Obligor, officers and designated representatives of the Bank, to the
extent necessary, to examine the books of account of Holdings and any of its
Subsidiaries and discuss the affairs, finances and accounts of Holdings and of
any of its Subsidiaries with, and be advised as to the same by, its and their
officers and independent accountants, all at such reasonable times and inter-
vals and to such reasonable extent as the Bank may desire.
6.03 Insurance. Holdings will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance in
such amounts with carriers of such insurance industry ratings, covering such
risks and liabilities and with such deductibles or self-insured retentions as
are in accordance with normal industry practice for similarly situated
insureds.
6.04 Payment of Taxes. Holdings will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become
a Lien or charge upon any properties of Holdings or any of its Subsidiaries,
provided that neither Holdings nor any Subsidiary shall be required to pay any
such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with GAAP.
6.05 Consolidated Corporate Franchises. Holdings will do, and
will cause each of its Subsidiaries to do, or cause to be done, all things
necessary to preserve and keep in full force and effect its existence,
material rights and authority, unless the failure to do so is not reasonably
likely to have a Material Adverse Effect, provided that any transaction
permitted by Section 7.02 will not constitute a breach of this Section 6.05.
6.06 Compliance with Statutes, etc. Holdings will, and will
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property other than those the non-
compliance with which would not have a Material Adverse Effect or would not
have a material adverse effect on the ability of any Credit Party to perform
its obligations under any Credit Document to which it is party.
6.07 Good Repair. Except for offshore drilling rigs currently
under or scheduled to be repaired or which have been damaged or have suffered
a casualty as to which (within a reasonable period of time) Holdings and/or
the Obligor have not made a determination whether to replace or repair, or if
the determination to replace or repair has been made, as to which such
replacement or repairs are being undertaken, subject to availability of
equipment, materials and/or repair facilities, Holdings will, and will cause
each of its Subsidiaries to, keep its properties and equipment used or useful
in its business, in whomsoever's possession they may be, in good repair,
working order and condition, normal wear and tear excepted, and, subject to
Section 7.02, see that from time to time there are made in such properties and
equipment all necessary and proper repairs, renewals, replacements,
extensions, additions, betterments and improvements thereto to the extent and
in the manner useful or customary for companies in similar businesses.
6.08 End of Fiscal Years; Fiscal Quarters. Holdings will, for
financial reporting purposes, cause (i) each of its fiscal years to end on
December 31 of each year and (ii) each of its fiscal quarters to end on March
31, June 30, September 30 and December 31 of each year.
6.09 Use of Credit. All Letters of Credit shall be used as
provided in Section 5.05.
6.10 ERISA. As soon as possible and, in any event, within 10
days after Holdings, the Obligor or any of their respective Subsidiaries or
any ERISA Affiliate knows or has reason to know of the occurrence of any of
the following, Holdings or the Obligor will deliver to the Bank a certificate
of the Chief Financial Officer of Holdings or the Obligor setting forth
details as to such occurrence and the action, if any, that Holdings, the
Obligor, such Subsidiary or such ERISA Affiliate is required or proposes to
take, together with any notices required or proposed to be given to or filed
with or by Holdings, the Obligor, such Subsidiary, the ERISA Affiliate, the
PBGC, or a Plan participant or the Plan administrator with respect thereto:
that a Reportable Event has occurred; that an accumulated funding deficiency
has been incurred or an application may be or has been made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code or Section 302 of ERISA with
respect to a Plan; that a contribution required to be made to a Plan or
Foreign Pension Plan has not been timely made; that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that a Plan has an Unfunded Current Liability giving rise to a lien
under ERISA or the Code; that proceedings may be or have been instituted to
terminate or appoint a trustee to administer a Plan, that a proceeding has
been instituted pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan; that Holdings, the Obligor, any of their respective
Subsidiaries or any ERISA Affiliate will or may incur any liability (including
any indirect contingent or secondary liability) to or on account of the
termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069,
4201, 4204 or 4212 of ERISA or with respect to a Plan under Section
401(a)(29), 4971 or 4975 of the Code or Section 409 or 502(i) or 502(l) of
ERISA; or that Holdings, the Obligor or any Subsidiary may incur any material
unrecognized liability pursuant to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) that provides benefits to retired employees
or other former employees (other than as required by Section 601 of ERISA) or
any employee pension benefit plan (as defined in Section 3(2) of ERISA). Upon
request, Holdings or the Obligor will deliver to the Bank a complete copy of
the annual report (Form 5500) of each Plan (including to the extent required,
the related financial and actuarial statements and opinions and other
supporting statements, certifications, schedules and information) required to
be filed with the Internal Revenue Service. In addition to any certificates
or notices delivered to the Bank pursuant to the first sentence hereof, copies
of annual reports, and any material notices received by Holdings, the Obligor
or any of their respective Subsidiaries or any ERISA Affiliate from any
governmental agency with respect to any Plan shall be delivered to the Bank no
later than 10 days after the date such report has been filed with the Internal
Revenue Service or such notice has been received by Holdings, the Obligor, the
Subsidiary or the ERISA Affiliate, as applicable.
SECTION 7. Negative Covenants. Holdings and the Obligor hereby
covenant and agree that as of the Effective Date and thereafter for so long as
this Agreement is in effect and until the Commitment has terminated, no
Letters of Credit are outstanding and all Unpaid Drawings, together with in-
terest, Fees and all other Obligations incurred hereunder, are paid in full:
7.01 Changes in Business. Holdings and the Obligor will not, and
will not permit any of their respective Subsidiaries to, materially alter the
character of the business of Holdings and its Subsidiaries taken as a whole
from that conducted at the Effective Date (including any material expansion
outside of the offshore contract drilling and production business), provided
that this Section 7.01 shall not restrict the engaging in business ancillary
to the offshore contract drilling and production business.
7.02 Consolidation, Merger or Sale of Assets, etc. Neither
Holdings nor the Obligor will wind up, liquidate or dissolve its affairs, or
enter into any transaction of merger or consolidation, sell or otherwise
dispose of all or substantially all of its property or assets or agree to do
any of the foregoing at any future time, except that the following shall be
permitted:
(a) Holdings may liquidate or dissolve or consolidate or merge
into another entity, provided (i) Holdings is the successor or survivor
in respect of such merger, and after giving effect thereto Holdings will
be in full compliance with the terms of this Agreement and (ii) Standard
& Poor's shall have affirmed in writing that such transaction will not
impair Holdings' implied senior debt rating as such debt rating is in
effect immediately prior to the announcement or consummation of such
liquidation, dissolution, consolidation or merger;
(b) other sales or dispositions of assets provided that (x) each
such sale or disposition shall be in an amount at least equal to the
fair market value thereof (as determined by the Board of Directors of
the Borrower in the case of sales in excess of $20,000,000) and for
proceeds consisting solely of not less than 100% cash in the case of
assets constituting Collateral and (y) no such sale or disposition shall
constitute the sale or disposition of all or substantially all of the
combined assets of Holdings and its Subsidiaries taken together; and
(c) other sales or dispositions of assets in each case to the
extent the Bank has consented in writing thereto and subject to such
conditions as may be set forth in such consent.
7.03 Liens on Assets. Holdings and the Obligor will not, and
will not permit any of their respective Subsidiaries to, create, incur, assume
or suffer to exist any Lien other than Permitted Liens.
7.04 Dividends; Restrictions on Subsidiaries, etc. (a) Holdings
will not, and will not permit any of its Subsidiaries to, declare or pay any
dividends (other than dividends (i) payable solely in capital stock of
Holdings or rights in respect thereof or (ii) constituting spin-offs of
divisions or direct or indirect operating subsidiaries of Holdings (other than
Arcade and the Obligor and their direct or indirect Subsidiaries) or return
any capital to, the stockholders of Holdings or authorize or make any other
distribution, payment or delivery of property or cash to the stockholders of
Holdings as such, or redeem, retire, purchase or otherwise acquire, directly
or indirectly, for a consideration, any shares of any class of the capital
stock of Holdings now or hereafter outstanding (or any warrants for or options
or stock appreciation rights in respect of any of such shares), or set aside
any funds for any of the foregoing purposes, or permit any of its Subsidiaries
to purchase or otherwise acquire for consideration any shares of any class of
the capital stock of Holdings, now or hereafter outstanding (or any options or
warrants or stock appreciation rights issued by Holdings with respect to its
capital stock) (all of the foregoing "Dividends"), except that:
(i) Holdings may redeem or repurchase common stock of Holdings (or
options to purchase such common stock) from (1) present or former
officers, employees and directors of Holdings, the Obligor, or any of
their Subsidiaries (or their estates) upon the death, permanent disabil-
ity, retirement or termination of employment of any such Person or
otherwise in accordance with any stock option plan or any employee stock
ownership plan, or (2) stockholders of Holdings so long as the purpose
of such purchase is to acquire common stock of Holdings for reissuance
to new officers, employees and directors (or their estates) of Holdings,
the Obligor or any of their respective Subsidiaries to the extent so
reissued within 12 months of any such purchase, provided that in all
such cases (x) no Default or Event of Default is then in existence or
would arise therefrom, (y) the aggregate amount of all cash paid in
respect of all such shares so redeemed or repurchased in any calendar
year does not exceed $15,000,000 plus proceeds of key man life insurance
used for the purpose of repurchasing such common stock owned by such
Person and, provided further, that in the event that Holdings sub-
sequently resells to any member of its, or any Subsidiary's management,
any shares redeemed or repurchased pursuant to this clause (i), the
amount of repurchases Holdings may make from officers, employees and
directors pursuant to this clause (i) shall be increased by an amount
equal to any cash received by Holdings upon the resale of such shares;
(ii) Holdings may pay or make Dividends on (i) existing Class A
common stock (up to a maximum of $100 per annum) and (ii) any issue of
preferred stock whether now existing or hereafter issued; and
(iii) so long as no Default or Event of Default exists or would
result therefrom, Holdings shall be permitted to pay or make Dividends
in an amount not to exceed 50%, in the aggregate, of Consolidated Net
Income on a cumulative basis beginning October 1, 1996.
(b) Holdings and the Obligor will not, and will not permit any of
the Subsidiary Guarantors to, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or otherwise restricts (A) the
ability of any Subsidiary Guarantor to (a) pay dividends or make other dis-
tributions or pay any Indebtedness owed to the Obligor or any Subsidiary
Guarantor, or (b) make loans or advances to the Obligor or any Subsidiary
Guarantor, (c) transfer any of its properties or assets to the Obligor or any
Subsidiary Guarantor or (B) the ability of the Obligor or any other Subsidiary
Guarantor of the Obligor to create, incur, assume or suffer to exist any Lien
upon its property or assets to secure the Obligations, other than prohibitions
or restrictions existing under or by reason of:
(i) this Agreement and the other Credit Documents;
(ii) applicable law;
(iii) customary non-assignment provisions entered into in the
ordinary course of business and consistent with past practices;
(iv) any restriction or encumbrance with respect to a Subsidiary
Guarantor imposed pursuant to an agreement which has been entered into
for the sale or disposition of all or substantially all of the capital
stock or assets of such Subsidiary Guarantor, so long as such sale or
disposition is permitted under this Agreement; and
(v) Permitted Liens and any documents or instruments governing the
terms of any Indebtedness or other obligations secured by any such
Liens, provided that such prohibitions or restrictions apply only to the
assets subject to such Liens.
7.05 Transactions with Affiliates. Holdings and the Obligor will
not, and will not permit any of their respective Subsidiaries to, enter into
any transaction or series of transactions after the Effective Date whether or
not in the ordinary course of business, with any Affiliate other than on terms
and conditions substantially as favorable to Holdings or such Subsidiary as
would be obtainable by Holdings or such Subsidiary at the time in a comparable
arm's-length transaction with a Person other than an Affiliate, provided that
the foregoing restrictions shall not apply to (i) employment arrangements
entered into in the ordinary course of business with officers of Holdings and
its Subsidiaries, (ii) customary fees paid to members of the Board of
Directors of Holdings and of its Subsidiaries, (iii) capital contributions
made by Holdings to the Obligor, (iv) all transactions between or among
Holdings and its Subsidiaries, (v) all immaterial transactions with the
officers or members of the Board of Directors of Holdings or its Subsidiaries
and (vi) all immaterial transactions with Affiliates.
7.06 Vessel Management; Registry. Holdings and the Obligor will
not, and will not permit any of their Subsidiaries to, (i) change the overall
management of any drilling rig from Holdings or any of its Subsidiaries or
(ii) change the national registry of any drilling rig.
7.07 Coverage Ratio. Holdings will not permit the ratio of (i)
Consolidated EBITDAR to (ii) the sum of Consolidated Interest Expense plus
Consolidated Rent Expense for any fiscal quarter of Holdings to be less than
4.00:1.00.
7.08 Working Capital. Holdings will not permit Working Capital
on the last day of any fiscal quarter of Holdings to be less than $0 if
Working Capital was less than $0 on the last day of the immediately preceding
fiscal quarter.
7.09 Leverage Ratio. Holdings will not permit the Leverage Ratio
at the end of any fiscal quarter ending prior to the Maturity Date to be
greater than 0.50:1.00.
SECTION 8. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
8.01 Payments. The Obligor shall default, and such default shall
continue for three or more Business Days after notice by the Bank, in the
payment when due of any Unpaid Drawing or any Fees or any other amounts owing
hereunder or under any other Credit Document; or
8.02 Representations, etc. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or
in any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or
8.03 Covenants. Holdings or the Obligor shall (a) default in the
due performance or observance by it of any term, covenant or agreement
contained in Section 6.08 or Section 7 or (b) default in the due performance
or observance by it of any term, covenant or agreement (other than those
referred to in Section 8.01, 8.02 or clause (a) of this Section 8.03) con-
tained in this Agreement and such default shall continue unremedied for a
period of at least 30 days after notice to the Obligor by the Bank; or
8.04 Default Under Other Agreements. (a) Holdings, the Obligor
or any of their respective Subsidiaries shall (i) default in any payment with
respect to any Indebtedness (including, without limitation, the Obligations as
defined in the Existing Credit Agreement) beyond the period of grace, if any,
applicable thereto or (ii) default in the observance or performance of any
agreement or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other
event or condition results in acceleration or the renegotiation of the
material payment terms of any such Indebtedness to become due prior to its
stated maturity; or (b) any such Indebtedness of Holdings or any of its
Subsidiaries shall be declared to be due and payable, or required to be
prepaid other than by a regularly scheduled required prepayment, prior to the
stated maturity thereof, provided that it shall not constitute an Event of
Default pursuant to this Section 8.04 unless the aggregate principal amount of
such Indebtedness in default exceeds $5,000,000 at any one time; or
8.05 Bankruptcy, etc. Holdings, the Obligor or any of their
respective Subsidiaries shall commence a voluntary case concerning itself
under Title 11 of the United States Code entitled "Bankruptcy," as now or
hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an
involuntary case is commenced against Holdings, the Obligor or any of their
respective Subsidiaries and the petition is not controverted within 10 days,
or is not dismissed within 60 days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of Holdings, the Obligor
or any of their respective Subsidiaries; or Holdings, the Obligor or any of
their respective Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dis-
solution, insolvency or liquidation or similar law of any jurisdiction whether
now or hereafter in effect relating to Holdings, the Obligor or any of their
respective Subsidiaries; or there is commenced against Holdings, the Obligor
or any of their respective Subsidiaries any such case or proceeding which
remains undismissed for a period of 60 days; or Holdings, the Obligor or any
of their respective Subsidiaries is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is
entered; Holdings, the Obligor or any of their respective Subsidiaries suffers
any appointment of any custodian or the like for it or any substantial part of
its property to continue undischarged or unstayed for a period of 60 days; or
Holdings, the Obligor or any of their respective Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action is taken by
Holdings, the Obligor or any of their respective Subsidiaries for the purpose
of effecting any of the foregoing; or
8.06 Guaranty. The Guaranty or any provision thereof shall cease
to be in full force and effect, or the Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm all or any portion of the
Guarantor's obligation thereunder, or the Guarantor shall default in the
observance of any term, covenant or agreement on its part to be performed or
observed pursuant thereto and such default (other than any default arising
from a failure to make any payment thereunder) shall continue unremedied for a
period of at least 30 days after notice to the Obligor by the Bank; or
8.07 Judgments. One or more judgments or decrees shall be
entered against Holdings or the Obligor involving a liability of $1,000,000 or
more in the case of any one such judgment or decree and $5,000,000 or more in
the aggregate for all such judgments and decrees for Holdings and the Obligor
(not paid or to the extent not covered by insurance) and any such judgments or
decrees shall not have been vacated, discharged or stayed or bonded pending
appeal within 60 days from the entry thereof; or
8.08 Employee Benefit Plans. (a)(i) A contribution required to be
made with respect to any (x) employee pension benefit plan (as defined in
Section 3(2) of ERISA) maintained or contributed to by (or to which there is
an obligation to contribute of) Holdings or a Subsidiary or an ERISA Affiliate
or (y) Foreign Pension Plan has not been timely made or (ii) Holdings or any
Subsidiary has incurred or is likely to incur liabilities pursuant to one or
more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that
provide benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or employee pension benefit plans (as
defined in Section 3(2) of ERISA); (b) there shall result from any such event
or events the imposition of a lien, the granting of a security interest, or a
liability or a material risk of incurring a liability; and (c) which lien,
security interest or liability, individually, and/or in the aggregate, in the
opinion of the Bank, will have a Material Adverse Effect; or
8.09 Change of Control. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Bank shall, by written notice to the
Obligor, take any or all of the following actions, without prejudice to the
rights of the Bank to enforce its claims against any Credit Party, except as
otherwise specifically provided for in this Agreement (provided that, if an
Event of Default specified in Section 8.05 shall occur with respect to the
Obligor, the result which would occur upon the giving of written notice by the
Bank as specified in clauses (i) and (ii) below shall occur automatically
without the giving of any such notice): (i) declare the Commitment termi-
nated, whereupon the Commitment shall terminate immediately and any Commitment
Commission or any other Fees shall forthwith become due and payable without
any other notice of any kind; (ii) declare all obligations owing hereunder
(including, without limitation, Unpaid Drawings) to be, whereupon the same
shall become, forthwith due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by each Credit
Party; (iii) terminate any Letter of Credit which may be terminated in
accordance with its terms; (iv) direct the Obligor to pay (and the Obligor
hereby agrees upon receipt of such notice, or upon the occurrence of any Event
of Default specified in Section 8.05 in respect of the Obligor, it will pay)
to the Bank at the Payment Office such additional amounts of cash, to be held
as security for the Obligor's reimbursement obligations in respect of Letters
of Credit then outstanding equal to the aggregate Stated Amount of all Letters
of Credit then outstanding; and (v) apply any amounts held as cash collateral
pursuant to Section 3.01 or this Section 8 to repay Obligations.
SECTION 9. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise
requires. Defined terms in this Agreement shall include in the singular
number the plural and in the plural the singular:
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control
a corporation if such Person possesses, directly or indirectly, the power (i)
to vote 10% or more of the securities having ordinary voting power for the
election of directors of such corporation or (ii) to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Letter of Credit Agreement, as the
same may be from time to time modified, amended and/or supplemented.
"Approved Bank" shall have the meaning provided in the definition
of "Cash Equivalents."
"Approved Company" shall have the meaning provided in the
definition of "Cash Equivalents."
"Arcade" shall mean Arcade Drilling AS, a Norwegian Corporation.
"Authorized Officer" shall mean any officer of Holdings or the
Obligor designated as such in writing to the Bank by Holdings or the Obligor.
"Bank" shall have the meaning provided in the first paragraph of
this Agreement and shall include any successor to the Bank appointed pursuant
to Section 10.04.
"Bankruptcy Code" shall have the meaning provided in Section 8.05.
"Base Rate" shall mean the rate which CBK announces from time to
time as its prime lending rate, the Base Rate to change when and as such prime
lending rate changes.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in the Cities of New York and/or London a legal holiday or a
day on which banking institutions are authorized by law or other governmental
actions to close and (ii) with respect to all notices and determinations in
connection with, and payments on, Letters of Credit, any day which is a
Business Day described in clause (i) and which is also a day for trading by
and between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with
GAAP, including all such expenditures with respect to fixed or capital assets
(including, without limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with generally accepted accounting princi-
ples) and the amount of Capitalized Lease Obligations incurred by such Person.
"Capital Lease" as applied to any Person shall mean any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in conformity with GAAP, is accounted for as a capital lease on the balance
sheet of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of Holdings or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly
and fully guaranteed or insured by the United States of America or any agency
or instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof) having maturities of
not more than six months from the date of acquisition, (ii) U.S. dollar
denominated time deposits, certificates of deposit and bankers' acceptances of
(x) the Bank, (y) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000 or (z) any bank (or the parent
company of such bank) whose short-term commercial paper rating from Standard &
Poor's Corporation ("S&P") is at least A-1 or the equivalent thereof or from
Moody's Investors Service, Inc. ("Moody's") is at least P-1 or the equivalent
thereof (any such bank, an "Approved Bank"), in each case with maturities of
not more than six months from the date of acquisition, (iii) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clause (i) above entered into with any bank meeting
the qualifications specified in clause (ii) above, (iv) commercial paper
issued by any Bank or Approved Bank or by the parent company of the Bank or
any Approved Bank and commercial paper issued by, or guaranteed by, any
industrial or financial company with a short-term commercial paper rating of
at least A-1 or the equivalent thereof by S&P or at least P-1 or the equiv-
alent thereof by Moody's (any such company, an "Approved Company"), or guaran-
teed by any industrial company with a long term unsecured debt rating of at
least A or A2, or the equivalent of each thereof, from S&P or Moody's, as the
case may be, and in each case maturing within six months after the date of
acquisition and (v) investments in money market funds substantially all of
whose assets are comprised of securities of the type described in clauses (i)
through (iv) above.
"CBK" shall mean Christiania Bank og Kreditkasse, New York Branch.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. 9601 et seq.
"Change of Control" shall mean (a) Holdings shall at any time
cease to own 100% of the capital stock of the Obligor or, directly or
indirectly, any Subsidiary Guarantor, (b) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the total voting power of the Voting Stock
of Holdings or (c) during any period of two consecutive years individuals who
at the beginning of such period constituted the Board of Directors of Holdings
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of Holdings was approved by
a vote of a majority of the directors of Holdings then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of Holdings then in office.
"Claims" shall have the meaning provided in the definition of
"Environmental Claims."
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time and the regulations promulgated and the rulings issued
thereunder. Section references to the Code are to the Code, as in effect at
the Effective Date and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Commitment" shall mean the Bank's Commitment to issue Letters of
Credit to the extent the Letter of Credit Outstandings (exclusive of Unpaid
Drawings which are repaid on the date of and prior to the issuance of, the
respective Letter of Credit) do not exceed $20,000,000.
"Consolidated Capital Expenditures" shall mean, for any period,
the aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including in all events all amounts expended or capitalized
under Capital Leases) by Holdings and its Subsidiaries during that period
that, in conformity with GAAP, are or are required to be included in the
property, plant or equipment reflected in the consolidated balance sheet of
Holdings and its Subsidiaries, provided that Consolidated Capital Expenditures
shall in any event include the purchase price paid in connection with the
acquisition of any Person (including through the purchase of all of the
capital stock or other ownership interests of such Person or through merger or
consolidation) to the extent allocable to "drilling and other property and
equipment" provided further, that Consolidated Capital Expenditures shall only
include the amount thereof actually paid in cash during such period.
"Consolidated Current Assets" shall mean, the current assets of
Holdings and its Subsidiaries determined on a consolidated basis in accordance
with GAAP, including cash and Cash Equivalents.
"Consolidated Current Liabilities" shall mean, the current
liabilities of Holdings and its Subsidiaries determined on a consolidated
basis in accordance with GAAP, but excluding (i) the current portion under the
Holdings Convertible Debentures and (ii) the current liability associated with
the required repayment of "Loans" in connection with the "Scheduled Commitment
Reduction" occurring on the "Maturity Date" (all as defined in the Existing
Credit Agreement).
"Consolidated EBIT" shall mean, for any period, (A) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) provisions for
taxes based on income, (iii) Consolidated Interest Expense, (iv) amortization
or write-off of deferred financing costs to the extent deducted in determining
Consolidated Net Income and (v) losses on sales of assets (excluding sales in
the ordinary course of business) and other extraordinary losses less (B) the
amount for such period of gains on sales of assets (excluding sales in the
ordinary course of business) and other extraordinary gains, all as determined
on a consolidated basis in accordance with GAAP.
"Consolidated EBITDAR" shall mean, for any period, the sum of the
amounts for such period of (i) Consolidated EBIT, (ii) depreciation expense,
(iii) amortization expense and (iv) Consolidated Rent Expense, all as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Funded Indebtedness" shall mean, all Indebtedness of
Holdings and its Subsidiaries calculated on a consolidated basis in accordance
with GAAP; provided that with respect to calculations made pursuant to Section
8.10 only, Funded Debt shall exclude up to $200,000,000 of unsecured
subordinated debt issued by Holdings in one or more public offerings following
the Effective Date, which shall (i) mature after the Maturity Date, (ii) not
have any principal payments prior to the Maturity Date, and (iii) be
explicitly subordinated to this Facility.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to Capital Leases) of Holdings
and its Subsidiaries in accordance with GAAP on a consolidated basis with
respect to all outstanding Indebtedness of Holdings and its Subsidiaries,
including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing.
"Consolidated Net Income" shall mean for any period, the net
income (or loss) of Holdings and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in conformity with
GAAP.
"Consolidated Net Worth" shall mean, at any time, shareholders
equity (excluding treasury stock) of Holdings and its Subsidiaries on a
consolidated basis determined in accordance with GAAP.
"Consolidated Rent Expense" shall mean for any period, the rent
expense of Holdings and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in accordance with GAAP.
"Contingent Obligations" shall mean as to any Person any
obligation of such Person guaranteeing or intending to guarantee any
Indebtedness ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment
of such primary obligation or (d) otherwise to assure or hold harmless the
owner of such primary obligation against loss in respect thereof, provided,
however, that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of
which such Contingent Obligation is made or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in good
faith.
"Credit Documents" shall mean this Agreement and any documents
executed in connection herewith.
"Credit Event" shall mean and include the issuance of a Letter of
Credit.
"Credit Party" shall mean Holdings and the Obligor.
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Dividends" shall have the meaning provided in Section 7.04.
"Effective Date" shall have the meaning provided in Section 10.09.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined by Regulation
D of the Securities Act of 1933).
"Employee Benefit Plan" shall have the meaning provided in Section
8.08.
"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than internal
reports prepared by Holdings or any of its Subsidiaries solely in the ordinary
course of such Person's business and not in response to any third party action
or request of any kind) or proceedings relating in any way to any
Environmental Law or any permit issued, or any approval given, under any such
Environmental Law (hereafter, "Claims"), including, without limitation,
(a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all Claims by
any third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Law" means any applicable Federal, state, foreign
or local statute, law, rule, regulation, ordinance, code, guide, policy and
rule of common law now or hereafter in effect and in each case as amended, and
any judicial or administrative interpretation thereof, including any judicial
or administrative order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including, without limita-
tion, CERCLA; RCRA; the Federal Water Pollution Control Act, as amended, 33
U.S.C. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. 7401 et
seq.; the Clean Air Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water
Act, 42 U.S.C. 3808 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. 2701
et seq. and any applicable state and local or foreign counterparts or equiv-
alents.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the Effective Date and any subsequent provisions of ERISA, amend-
atory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section
3(9) of ERISA) which together with Holdings or any Subsidiary would be deemed
to be a "single employer" (i) within the meaning of Sections 414(b), (c), (m)
and (o) of the Code or (ii) as a result of Holdings or any Subsidiary being or
having been a general partner of such person.
"Event of Default" shall have the meaning provided in Section 8.
"Existing Credit Agreement" shall have the meaning provided in the
recitals to this Agreement.
"Existing Indebtedness" shall have the meaning provided in Section
5.18.
"Existing Letter of Credit" shall have the meaning provided in
Section 1.01(a).
"Facility" shall mean the letter of credit facility established
under this Agreement.
"Fees" shall mean all amounts payable pursuant to, or referred to
in, Section 2.01.
"Foreign Pension Plan" means any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by Holdings or any one or more
of its Subsidiaries primarily for the benefit of employees of Holdings or such
Subsidiaries residing outside the United States of America, which plan, fund
or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect on the date of this Agreement; it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section 7, including defined terms as used therein, are subject (to the
extent provided therein) to Section 10.06(a).
"Guaranteed Obligations" shall mean all obligations of the Obligor
to the Bank for the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all reimbursement obligations and
Unpaid Drawings with respect to Letters of Credit, together with all the other
obligations and liabilities (including, without limitation, indemnities, fees
and interest thereon) of the Obligor to the Bank now existing or hereafter in-
curred under, arising out of or in connection with this Agreement or any other
Credit Document and the due performance and compliance with all the terms,
conditions and agreements contained in the Credit Documents by the Obligor.
"Guarantor" shall mean Holdings.
"Guaranty" shall mean the guaranty of Holdings pursuant to Section
11 hereof.
"Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment
that contained, electric fluid containing levels of polychlorinated biphenyls,
and radon gas; (b) any chemicals, materials or substances defined as or
included in the definition of "hazardous substances," "hazardous waste,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," "toxic substances," "toxic pollutants," "contaminants," or
"pollutants," or words of similar import, under any applicable Environmental
Law; and (c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority.
"Holdings" shall have the meaning provided in the first paragraph
of this Agreement.
"Holdings Convertible Debentures" shall mean Holdings' 8% Senior
Subordinated Convertible Debentures due December 1998.
"Indebtedness" of any Person shall mean without duplication (i)
all indebtedness of such Person for borrowed money, (ii) the deferred purchase
price of assets or services which in accordance with GAAP would be shown on
the liability side of the balance sheet of such Person, (iii) the face amount
of all letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed, (v) all Capitalized Lease
Obligations of such Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vii) all net obligations
of such Person under Interest Rate Agreements and (viii) all Contingent
Obligations of such Person (other than Contingent Obligations arising from the
guaranty by such Person of the obligations of Holdings, the Obligor and/or
their respective Subsidiaries to the extent such guaranteed obligations are
permitted under this Agreement); provided that Indebtedness shall not include
(x) trade payables and accrued expenses, in each case arising in the ordinary
course of business and (y) Indebtedness of a direct or indirect Subsidiary of
Holdings (the "Relevant Subsidiary"), of which neither Holdings, nor the
Obligor, nor any of their Subsidiaries other than the Relevant Subsidiary is
liable or obligated in any manner.
"Interest Rate Agreement" shall mean any interest rate swap
agreement, any interest rate cap agreement, any interest rate collar agreement
or other similar agreement or arrangement designed to protect any Credit Party
against interest rate risk.
"L/C Supportable Obligations" shall mean such obligations of the
Obligor, the Guarantors or their Subsidiaries (other than obligations in
respect of Indebtedness) as are not inconsistent with the policies of the
Bank.
"Leasehold" of any Person means all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section
1.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Outstandings" shall mean, at any time, the sum
of, without duplication, (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in
respect of all Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in
Section 1.02(a).
"Leverage Ratio" shall mean, at any date of determination, the
ratio of Consolidated Funded Indebtedness on such date to Total Capitalization
on such date.
"Lien" shall mean any mortgage, pledge, security interest,
security title, encumbrance, lien or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement or any lease in the nature thereof) other than arising
from an event constituting a Total Loss (as defined in the Existing Credit
Agreement).
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on
the business, property, assets, liabilities, operations, condition (financial
or otherwise) or prospects of the Obligor or Holdings and its Subsidiaries
taken as a whole.
"Maturity Date" shall mean June 30, 1998.
"Notice Office" shall mean the office of the Bank at 11 West 42nd
Street, 7th Floor, New York, New York 10036 or such other office as the Bank
may designate to the Obligor from time to time.
"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time
existing, owing to the Bank pursuant to the terms of this Agreement or any
other Credit Document.
"Obligor" shall have the meaning provided in the first paragraph
of this Agreement.
"Payment Office" shall mean the office of the Bank at 11 West 42nd
Street, 7th Floor, New York, New York 10036 or such other office as the Bank
may designate to the Obligor from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Liens" shall mean Liens permitted pursuant to Section
8.03 of the Existing Credit Agreement.
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of) Holdings or a Subsidiary of
Holdings or an ERISA Affiliate.
"Projections" shall mean the financial projections, together with
adjustments thereto, previously delivered to the Bank and prepared on a basis
consistent with the financial statements referred to in Section 5.10(a).
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. 6901 et seq.
"Real Property" of any Person shall mean all of the right, title
and interest of such Person in and to land, improvements and fixtures,
including Leaseholds.
"Register" shall have the meaning provided in Section 10.15.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing margin requirements.
"Relevant Subsidiary" shall have the meaning provided in the
definition of Indebtedness.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan other than those events as to which
the 30-day notice period is waived under subsection .13, .14, .16, .18, .19 or
.20 of PBGC Regulation Section 2615.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Stated Amount" of each Letter of Credit shall mean the maximum
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Subsidiary" of any Person shall mean and include (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 or not 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 through Subsidiaries and (ii) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries, has more than a 50% equity interest at the
time. Unless otherwise expressly provided, all references herein to
"Subsidiary" shall mean a Subsidiary of Holdings.
"Subsidiary Guarantor" shall have the meaning assigned in the
Existing Credit Agreement.
"Taxes" shall have the meaning provided in Section 3.03(a).
"Total Capitalization" shall mean, at any time, the sum of
Consolidated Funded Indebtedness and Consolidated Net Worth at such time.
"Unfunded Current Liability" of any Plan means the amount, if any,
by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"Unpaid Drawing" shall have the meaning provided in Section
1.03(a).
"Unutilized Commitment" shall mean the excess of the Commitment
over the Letter of Credit Outstandings at such time.
"US Dollar Equivalent" shall mean, at any time for the
determination thereof, the amount of US Dollars necessary to purchase the
amount of the relevant currency at the spot exchange rate therefor as quoted
by the Bank as of 11:00 A.M. (London time) on the date two Business Days prior
to the date of any determination thereof for purchase on such date.
"US Dollars" shall mean freely transferable lawful money of the
United States.
"Voting Stock" shall mean, with respect to any corporation, the
outstanding stock of all classes (or equivalent interests) which ordinarily,
in the absence of contingencies, entitles holders thereof to vote for the
election of directors (or Persons performing similar functions) of such
corporation, even though the right so to vote has been suspended by the
happening of such a contingency.
"Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary
of such Person to the extent all of the capital stock or other ownership
interests in such Subsidiary, other than directors' qualifying shares or
shares held by a nominee or in trust for such Person, is owned directly or
indirectly by such Person.
"Working Capital" shall mean the excess of Consolidated Current
Assets over Consolidated Current Liabilities exclusive of the Holdings
Convertible Debentures.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex or facsimile transmission.
SECTION 10. Miscellaneous.
10.01 Payment of Expenses, etc. The Obligor agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Bank in connection with the
negotiation, preparation, execution and delivery of the Credit Documents and
the documents and instruments referred to therein and any amendment, waiver or
consent relating thereto (including, without limitation, the reasonable fees
and disbursements of White & Case) and, after the occurrence and during the
continuance of an Event of Default, all expenses incurred in connection with
the enforcement of the Credit Documents and the documents and instruments
referred to therein (including, without limitation, the actual reasonable fees
and disbursements of counsel for the Bank); (ii) pay and hold the Bank
harmless from and against any and all present and future stamp and other sim-
ilar taxes with respect to the foregoing matters and save the Bank harmless
from and against any and all liabilities with respect to or resulting from any
delay or omission (other than to the extent attributable to the Bank) to pay
such taxes; and (iii) indemnify the Bank, its officers, directors, employees,
representatives and agents from and hold each of them harmless 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 any of them as
a result of, or arising out of, or in any way related to, or by reason of, (a)
any investigation, litigation or other proceeding (whether or not the Bank is
a party thereto) related to the entering into and/or performance of any Credit
Document or the use of the proceeds of any Letter of Credit hereunder or the
consummation of any transactions contemplated in any Credit Document, whether
initiated by the Obligor or any other Person, including, without limitation,
the actual reasonable fees and disbursements of counsel incurred in connection
with any such investigation, litigation or other proceeding (but excluding any
such losses, liabilities, claims, damages or expenses to the extent incurred
by reason of the gross negligence or willful misconduct of the Person to be
indemnified) or (b) the actual or alleged presence of Hazardous Materials in
the air, surface water, groundwater, surface or subsurface of any Real
Property, offshore drilling rig, facility or location at any time owned or
operated by Holdings or any of its Subsidiaries, the generation, storage,
transportation or disposal of Hazardous Materials at any Real Property,
offshore drilling rig, facility or location at any time owned or operated by
Holdings or any of its Subsidiaries, the non-compliance of any Real Property,
offshore drilling rig, facility or location at any time owned or operated by
Holdings or any of its Subsidiaries with federal, state and local laws,
regulations, and ordinances (including applicable permits thereunder) applic-
able to any such Real Property, offshore drilling rig, facility or location,
or any Environmental Claim asserted against Holdings, any of its Subsidiaries,
or any Real Property, offshore drilling rig, facility or location at any time
owned or operated by Holdings or any of its Subsidiaries, including, in each
case, without limitation, the actual reasonable fees and disbursements of
counsel and other consultants incurred in connection with any such
investigation, litigation or other proceeding (but excluding any losses, lia-
bilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified). To
the extent that the undertaking to indemnify, pay or hold harmless the Bank
set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Obligor shall make the maximum
contribution to the payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.
10.02 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, if an Event of Default then exists, the Bank is hereby authorized
at any time or from time to time, without presentment, demand, protest or
other notice of any kind to the Obligor or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and apply
any and all deposits (general or special) and any other Indebtedness at any
time held or owing by the Bank (including without limitation by branches and
agencies of the Bank wherever located) to or for the credit or the account of
the Obligor against and on account of the Obligations and liabilities of the
Obligor to the Bank under this Agreement or under any of the other Credit
Documents and all other claims of any nature or description arising out of or
connected with this Agreement or any other Credit Document, irrespective of
whether or not the Bank shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
10.03 Notices. (a) Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be
in writing (including telex or telecopier communication) and mailed, telexed,
telecopied or delivered, if to Holdings or its Subsidiaries, at the address
specified opposite its signature below or in the other relevant Credit
Documents, as the case may be; if to the Bank, at its Notice Office; or, at
such other address as shall be designated by any party in a written notice to
the other parties hereto. All such notices and communications shall be
effective when received.
(b) Without in any way limiting the obligation of the Obligor to
confirm in writing any telephonic notice permitted to be given hereunder, the
Bank may, prior to receipt of written confirmation, act without liability upon
the basis of such telephonic notice believed by the Bank in good faith to be
from an Authorized Officer of the Obligor. In each such case, the Obligor
hereby waives the right to dispute the Bank's record of the terms of such
telephonic notice.
10.04 Benefit of Agreement. (a) This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that the Obligor may
not assign or transfer any of its rights or obligations hereunder without the
prior written consent of the Bank. The Bank may at any time grant
participations in any of its rights hereunder to another financial
institution, provided that in the case of any such participation, the
participant shall not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against the Bank in respect of such
participation to be those set forth in the agreement executed by the Bank in
favor of the participant relating thereto) and all amounts payable by the
Obligor hereunder shall be determined as if the Bank had not sold such parti-
cipation, except that the participant shall be entitled to the benefits of
Sections 1.04 and 3.03 of this Agreement to the extent that the Bank would be
entitled to such benefits if the participation had not been entered into or
sold, and, provided further, that the Bank shall not transfer, grant or assign
any participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Credit Document except
to the extent such amendment or waiver would (i) reduce the rate or extend the
time of payment of interest or Fees (except in connection with a waiver of the
applicability of any post-default increase in interest rates), or increase
such participant's participating interest in any Commitment over the amount
thereof then in effect or (ii) consent to the assignment or transfer by the
Obligor of any of its rights and obligations under this Agreement.
(b) Notwithstanding the foregoing, (x) the Bank may assign all or
a portion of its outstanding Commitment and its rights and obligations here-
under to its Affiliate and (y) with the consent of the Obligor (which consent
shall not be unreasonably withheld), the Bank may assign all or a portion of
its outstanding Commitment and its rights and obligations hereunder to one or
more Eligible Transferees. If the Bank so sells or assigns all or a part of
its rights hereunder, any reference in this Agreement to the Bank shall there-
after refer to the Bank and to the respective assignee to the extent of their
respective interests and the respective assignee shall have, to the extent of
such assignment (unless otherwise provided therein), the same rights and
benefits as it would if it were the Bank. Each assignment pursuant to this
Section 10.04(b) shall be effected by the Bank and the assignee bank executing
an assignment and assumption agreement. The Bank and the Obligor agree to
execute such documents (including, without limitation, amendments to this
Agreement and the other Credit Documents) as shall be necessary to effect the
foregoing.
(c) Notwithstanding any other provisions of this Section 10.04,
no transfer or assignment of the interests or obligations of the Bank
hereunder or any grant of participation therein shall be permitted if such
transfer, assignment or grant would require Holdings or the Obligor to file a
registration statement with the SEC.
(d) The Bank hereby represents, and each Person will, upon its
becoming party to this Agreement, represent that it is a commercial lender,
other financial institution or other "accredited" investor (as defined in SEC
Regulation D) which makes loans in the ordinary course of its business and
that it will make or acquire Letters of Credit for its own account in the
ordinary course of such business, provided that subject to the preceding
clauses (a) and (b), the disposition of any promissory notes or other
evidences of or interests in Indebtedness held by such Person shall at all
times be within its exclusive control.
10.05 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Bank in exercising any right, power or privilege hereunder or
under any other Credit Document and no course of dealing between Holdings or
any of its Subsidiaries and the Bank shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege here-
under or under any other Credit Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege here-
under or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Bank would
otherwise have. No notice to or demand on Holdings or any of its Subsidiaries
in any case shall entitle Holdings or any of its Subsidiaries to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Bank to any other or further action in any cir-
cumstances without notice or demand.
10.06 Calculations; Computations. (a) The financial statements
to be furnished to the Bank pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by Holdings or the Obligor to the Bank), provided that (x) except as otherwise
specifically provided herein, all computations determining compliance with
Section 7, including definitions used therein, shall utilize accounting
principles and policies in effect at the time of the preparation of, and in
conformity with those used to prepare, the December 31, 1995 historical
financial statements of Holdings delivered to the Bank pursuant to Section
5.10(b) and (y) that if at any time the computations determining compliance
with Section 7 utilize accounting principles different from those utilized in
the financial statements furnished to the Bank, such financial statements
shall be accompanied by reconciliation work-sheets.
(b) All computations of interest and Fees hereunder shall be made
on the actual number of days elapsed over a year of 360 days.
10.07 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, HOLDINGS AND THE OBLIGOR HEREBY IRREVOCABLY ACCEPT
FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. HOLDINGS AND THE
OBLIGOR FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
OBLIGOR LOCATED OUTSIDE NEW YORK CITY AND BY HAND DELIVERY TO THE OBLIGOR
LOCATED WITHIN NEW YORK CITY, AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION
10.03, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
HOLDINGS OR THE OBLIGOR IN ANY OTHER JURISDICTION.
(b) HOLDINGS AND THE OBLIGOR HEREBY IRREVOCABLY WAIVE ANY
OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO
IN CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVE AND AGREE NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
10.08 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Obligor and the Bank.
10.09 Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which Holdings, the Obligor and the Bank shall
have signed a copy hereof (whether the same or different copies) and shall
have delivered the same to the Bank at the Payment Office of the Bank.
10.10 Headings Descriptive. The headings of the several sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
10.11 Amendment or Waiver. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination
is in writing signed by the Obligor and the Bank.
10.12 Survival. All indemnities set forth herein including,
without limitation, in Section 1.04, 1.05, 3.03 or 10.01 shall survive the
execution and delivery of this Agreement and the making and repayment of the
Letters of Credit.
10.13 Domicile of Letters of Credit. The Bank may transfer and
carry its Letters of Credit at, to or for the account of any branch office,
subsidiary or Affiliate of the Bank, provided that the Obligor shall not be
responsible for costs arising under Section 1.04 or 3.03 resulting from any
such transfer (other than a transfer pursuant to Section 1.12(a)) to the
extent not otherwise applicable to the Bank prior to such transfer.
10.14 Confidentiality. Subject to Section 10.04, the Bank shall
hold all non-public information obtained pursuant to the requirements of this
Agreement in accordance with its customary procedure for handling confidential
information of this nature and in accordance with safe and sound banking prac-
tices and in any event may make disclosure reasonably required by any bona
fide transferee or participant in connection with the contemplated transfer of
any Letters of Credit or participation therein (so long as such transferee or
participant agrees to be bound by the provisions of this Section 10.14) or as
required or requested by any governmental agency or representative thereof or
pursuant to legal process, provided that, unless specifically prohibited by
applicable law or court order, the Bank shall notify the Obligor of any
request by any governmental agency or representative thereof (other than any
such request in connection with an examination of the financial condition of
the Bank by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information, and provided further that
in no event shall the Bank be obligated or required to return any materials
furnished by Holdings or any Subsidiary.
10.15 Registry. The Obligor hereby designates the Bank to serve
as the Obligor's agent, solely for purposes of this Section 10.15, to maintain
a register (the "Register") on which it will record the Commitments, the
Letters of Credit issued and outstanding hereunder and each repayment in
respect of Unpaid Drawings. Failure to make any such recordation, or any
error in such recordation shall not affect the Obligor's obligations in
respect of such Letters of Credit. The transfer of the Commitments of the
Bank and the rights to the fees and interest on, any Letter of Credit issued
pursuant to such Commitment shall not be effective until such transfer is
recorded on the Register maintained by the Bank with respect to ownership of
such Commitment and prior to such recordation all amounts owing to the
transferor with respect to such Commitment shall remain owing to the
transferor.
SECTION 11. Holdings Guaranty.
11.01 The Guaranty. In order to induce the Bank to enter into
this Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by Holdings from the issuance of the Letters of
Credit, Holdings hereby agrees with the Bank as follows: Holdings hereby
unconditionally and irrevocably guarantees as primary obligor and not merely
as surety the full and prompt payment when due, whether upon maturity, by
acceleration or otherwise, of any and all of the Guaranteed Obligations of the
Obligor to the Bank. If any or all of the Guaranteed Obligations of the Obl-
igor to the Bank becomes due and payable hereunder, Holdings unconditionally
promises to pay such indebtedness to the Bank, on order, or demand, together
with any and all reasonable expenses which may be incurred by the Bank in col-
lecting any of the Guaranteed Obligations.
11.02 Bankruptcy. Additionally, Holdings unconditionally and
irrevocably guarantees the payment of any and all of the Guaranteed
Obligations of the Obligor to the Bank whether or not then due or payable by
the Obligor upon the occurrence in respect of the Obligor of any of the events
specified in Section 8.05, and unconditionally and irrevocably promises to pay
such Guaranteed Obligations to the Bank, on order, or demand, in lawful money
of the United States. Holdings' guaranty of the payment of any and all of the
Guaranteed Obligations hereunder shall constitute a guaranty of payment, and
not of collection.
11.03 Nature of Liability. The liability of Holdings hereunder is
exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of the Obligor whether executed by Holdings, any other
guarantor or by any other party, and the liability of Holdings hereunder shall
not be affected or impaired by (a) any direction as to application of payment
by the Obligor or by any other party, or (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other
party as to the Guaranteed Obligations of the Obligor, or (c) any payment on
or in reduction of any such other guaranty or undertaking, or (d) any dissol-
ution, termination or increase, decrease or change in personnel by the Obl-
igor, or (e) any payment made to the Bank on the indebtedness which the Bank
repay the Obligor pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and Holdings waives
any right to the deferral or modification of its obligations hereunder by rea-
son of any such proceeding.
11.04 Independent Obligation. The obligations of Holdings
hereunder are independent of the obligations of any other guarantor or the
Obligor, and a separate action or actions may be brought and prosecuted
against Holdings whether or not action is brought against any other guarantor
or the Obligor and whether or not any other guarantor or the Obligor be joined
in any such action or actions. Holdings waives, to the fullest extent permit-
ted by law, the benefit of any statute of limitations affecting its liability
hereunder or the enforcement thereof. Any payment by the Obligor or other
circumstance which operates to toll any statute of limitations as to the Obl-
igor shall operate to toll the statute of limitations as to Holdings.
11.05 Waiver of Notice, etc. Holdings hereby waives notice of
acceptance of this Guaranty and notice of any liability to which it may apply,
and waives promptness, diligence, presentment, demand of payment, protest,
notice of dishonor or nonpayment of any such liabilities, suit or taking of
other action by the Bank against, and any other notice to, any party liable
thereon (including Holdings, any other guarantor or the Obligor).
11.06 Authorization. Holdings authorizes the Bank without notice
or demand (except as shall be required by applicable statute and cannot be
waived), and without affecting or impairing its liability hereunder, from time
to time to:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, increase, accelerate or
alter, any of the Guaranteed Obligations (including any increase or
decrease in the rate of interest thereon), any security therefor, or any
liability incurred directly or indirectly in respect thereof, and the
Guaranty herein made shall apply to the Guaranteed Obligations as so
changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Obligor or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors,
the Obligor or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Obligor to its creditors other
than the Bank;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Obligor to the Bank regardless of
what liability or liabilities of Holdings or the Obligor remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements
referred to herein, or otherwise amend, modify or supplement this
Agreement or any of such other instruments or agreements; and/or
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
Holdings from its liabilities under this Section 13.
11.07 Reliance. It is not necessary for the Bank to inquire into
the capacity or powers of the Obligor or its Subsidiaries or the officers,
directors, partners or agents acting or purporting to act on its behalf, and
any Guaranteed Obligations made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
11.08 Subordination. Any of the indebtedness of the Obligor
relating to the Guaranteed Obligations now or hereafter owing to Holdings is
hereby subordinated to the Guaranteed Obligations of the Obligor owing to the
Bank; and if the Bank so requests at a time when an Event of Default exists,
all such indebtedness relating to the Guaranteed Obligations of the Obligor to
Holdings shall be collected, enforced and received by Holdings for the benefit
of the Bank and be paid over to the Bank on account of the Guaranteed
Obligations of the Obligor to the Bank, but without affecting or impairing in
any manner the liability of Holdings under the other provisions of this Guar-
anty. Prior to the transfer by Holdings of any note or negotiable instrument
evidencing any of the indebtedness relating to the Guaranteed Obligations of
the Obligor to Holdings, Holdings shall mark such note or negotiable
instrument with a legend that the same is subject to this subordination.
11.09 Waiver. (a) Holdings waives any right (except as shall be
required by applicable statute and cannot be waived) to require the Bank to
(i) proceed against the Obligor, any other guarantor or any other party, (ii)
proceed against or exhaust any security held from the Obligor, any other
guarantor or any other party or (iii) pursue any other remedy in the Bank's
power whatsoever. Holdings waives any defense based on or arising out of any
defense of the Obligor, any other guarantor or any other party, other than
payment in full of the Guaranteed Obligations, based on or arising out of the
disability of the Obligor, any other guarantor or any other party, or the
unenforceability of the Guaranteed Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of the Obligor other
than payment in full of the Guaranteed Obligations. The Bank may, at its
election, foreclose on any security held by the Bank by one or more judicial
or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable (to the extent such sale is permitted by applicable
law), or exercise any other right or remedy the Bank may have against the
Obligor or any other party, or any security, without affecting or impairing in
any way the liability of Holdings hereunder except to the extent the
Guaranteed Obligations have been paid. Holdings waives any defense arising
out of any such election by the Bank, even though such election operates to
impair or extinguish any right of reimbursement or subrogation or other right
or remedy of Holdings against the Obligor or any other party or any security.
(b) Holdings waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guaranty, and notices of the existence, creation or incurring of new
or additional Guaranteed Obligations. Holdings assumes all responsibility for
being and keeping itself informed of the Obligor's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks which
Holdings assumes and incurs hereunder, and agrees that the Bank shall have no
duty to advise Holdings of information known to them regarding such cir-
cumstances or risks.
* * *
(c) IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
Address: READING & BATES CORPORATION
901 Threadneedle
Suite 200
Houston, Texas 77079 By
Attn: General Counsel Name:
Telephone: (713) 496-5000 Title:
Facsimile: (713) 496-0285
READING & BATES DRILLING CO.
By
Name:
Title:
11 West 42nd Street CHRISTIANIA BANK OG KREDITKASSE, NEW YORK
7th Floor BRANCH
New York, NY 10036
Attn: Hans Chr. Kjelsrud
Tel. No.: (212) 827-4800
Fax No.: (212) 827-4888 By
Name:
Title:
By
Name:
Title:
Exhibit 10.152
PARTICIPATION AGREEMENT
OUTER CONTINENTAL SHELF - GULF OF MEXICO
This Participation Agreement ("Agreement") is entered into effective December
4, 1996 by and between Santa Fe Energy Resources, Inc. ("Santa Fe") and
Reading & Bates Development Co. ("RB"). Santa Fe and RB may hereinafter be
referred to individually as "Party" or collectively as "Parties".
In consideration of the mutual covenants and obligations contained herein, the
parties hereby agree to the following basic terms and conditions under which
RB shall acquire an interest in certain Outer Continental Shelf ("OCS") Gulf
of Mexico leases from Santa Fe with the intent that the Parties will jointly
explore and develop such leases pursuant to a mutually acceptable program
("Program").
1. The Gulf of Mexico leases ("Leases"), blocks ("Blocks") and prospects
("Prospects") covered by this Agreement are the following:
a. Prospect Tourmaline
(i) Lease OCS - G 16404, Ship Shoal, South Addition, Block 365
(ii) Lease OCS - G 16405, Ship Shoal, South Addition, Block 366
b. Prospect Emerald
(i) Lease OCS - G 16567, Ewing Bank, Block 786
(ii) Lease OCS - G 16568, Ewing Bank, Block 787
c. Prospect Ruby
(i) Lease OCS - G 16578, Ewing Bank, Block 919
(ii) Lease OCS - G 16579, Ewing Bank, Block 920
d. Prospect Amundsen
(i) Lease OCS - G 17251, East Breaks, Block 335
e. Prospect Knight
(i) Lease award pending, Garden Banks, Block 372
2. Santa Fe holds 100% record title interest in all of the Leases. Santa
Fe was high bidder at OCS Lease Sale 161 for Garden Banks, Block 372 and
anticipates lease award of 100% record title before December 31, l996.
3. RB will acquire an undivided fifty percent (50%) interest in the Leases
by agreeing to pay 100% of the initial exploration and drilling costs on
the Leases incurred after the Closing up to a maximum of $24,353,610, as
provided in this paragraph 3. In the event the Minerals Management
Service ("MMS") does not award the lease for Garden Banks, Block 372 to
Santa Fe, RB's maximum obligation to pay 100% of costs will be reduced
from $24,353,610 to $21,665,522. Thereupon, said Block will no longer
be covered by this Agreement, but it will still be subject to the
Confidentiality Agreement dated October 22, 1996, by and between Santa
Fe and RB.
Closing shall occur in the offices of Santa Fe on December 11, 1996 or
such other time as may be mutually agreed by the Parties. At Closing,
RB agrees to pay a cash advance of $12,176,805 to Santa Fe, as Operator,
to fund 50% of RB's obligation to pay 100% of the initial exploration
and drilling costs as described above. Santa Fe will cash call RB for
the remaining 50% as costs are incurred, in accordance with the terms of
the JOA's (as defined below).
4. The Parties will enter into mutually acceptable offshore operating
agreements covering each Prospect, designating Santa Fe as Operator (the
"JOA's").
5. After fulfilling its obligation as described in paragraph 3 above, RB
will pay its proportionate fifty percent (50%) share of ongoing costs
relative to the Prospects, including drilling and development costs, as
provided in the JOA's, and Santa Fe will do likewise.
6. In the event of a discovery of hydrocarbons in commercial quantities on
one or more of the Prospects, RB shall pay to Santa Fe the amount of
$500,000 for the first discovery on each Prospect. Such amount will be
paid thirty (30) days after the date of the first sale of production
from each such discovery. Only one $500,000 payment per Prospect will
be due and only in the event of a discovery on such Prospect.
7. The Parties agree that Total Offshore Production Systems ("TOPS"), a
joint venture in which RB has an ownership interest, shall be the
designated contractor of the Parties for the development of any
discoveries made under the Program (exclusive of drilling, completion,
or other downhole operations), such work to be undertaken by TOPS, at
the option of the Parties exercised under the relevant JOA's, either on
the basis of a mutually agreeable fixed turnkey price or on the basis of
reimbursement of TOPS documented costs (including overhead) plus a fixed
15% markup on such costs. Alternative incentive and/or gainshare
provisions shall be subject to mutual agreement between TOPS and the
Parties.
8. TOPS will make a presentation to Santa Fe regarding the development
technology and operations that will be employed by TOPS in its
performance of the work on each Prospect.
9. Santa Fe has contracted with Diamond Offshore Drilling, Inc. for the
Ocean Whittington rig to drill the initial well in each Prospect, with
the exception of Prospect Amundsen. Prospect Knight is the initial
Prospect to be drilled under the Program (currently scheduled in the
second quarter of 1997), subject to lease award. The Parties will
mutually agree on the drilling order following Prospect Knight, taking
into account minimizing rig mob/demob.
10. The Parties will execute other agreements including, but not limited to
the JOA's, as may be necessary to carry out the intent of the Parties.
At closing Santa Fe shall assign an undivided fifty percent (50%) record
title interest in each such Lease, free and clear of all liens and
encumbrances (other than RB's obligation to pay all exploration and
drilling costs up to a maximum of $24,353,610 as described in paragraph
3 above and the royalty provided therein) and with all cash bonus and
delay rentals paid to date, to RB, subject to the approval of the MMS,
each such assignment to be substantially in the form attached as Exhibit
"A" hereto. In the event any such approval has not been obtained within
one year after the date of closing, or such other time period as may be
mutually agreed by the Parties, each non-approved assignment shall be
deemed to be void, and Santa Fe shall return to RB that portion of the
amount paid by RB as specified in paragraph 3 above attributable to the
Lease covered by each such non-approved assignment.
11. RB will have seventy-five (75) days from the date of a technical
presentation by Santa Fe, to be held on or about December 16, 1996, in
which to elect to acquire fifty percent (50%) of Santa Fe's interest in
one or more of seven additional prospects (Scott, Cortez, DeLong,
Baritone, Columbus, Boone, Stefansson), on the same terms and conditions
as set forth herein, and in accordance with the Schedule attached hereto
as Exhibit "B". Leases for Scott, Cortez, DeLong, Baritone and the
south half of Columbus have been awarded to Santa Fe. Lease award for
the north half of Columbus, Boone and Stefansson are pending.
12. This Agreement is not assignable by either Party without the express
prior written consent of the other Party. The interest in the Leases to
be acquired by RB in accordance with Section 10 above shall not be
assigned by RB without the prior written consent of Santa Fe, which
shall not be unreasonably withheld. Notwithstanding the foregoing,
neither party shall sell, assign or transfer its interests in the Leases
to a third party without first offering to sell such interests to the
other Party hereto on substantially the same terms and conditions.
1. Except as is otherwise provided herein the respective obligations and
liabilities of the Parties shall be several, not joint or collective, and
each Party shall be responsible only for its own obligations. It is not
the purpose or intention of this Agreement to create a relationship
whereby the Parties shall be liable for acts, either of commission or
omission, of the other Parties, except within the limited scope of
authorized joint venture activity.
1. This Agreement represents the entire understanding of the parties with
respect to the basic terms and conditions and supersedes all prior
agreements, understandings and discussions, whether oral or written, of
the Parties pertaining to the subject matter hereof, with the exception
of the Confidentiality Agreement referred to in paragraph 3 hereof. No
modification of this Agreement shall be binding unless executed in
writing by the Parties.
1. This Agreement shall be effective as of the date first written above and,
when executed by an authorized representative of each Party, shall
constitute a fully effective and binding document.
SANTA FE ENERGY RESOURCES, INC. READING & BATES DEVELOPMENT CO.
By:____________________________ By:______________________________
A. T. McCarroll D. C. Toalson
Division Manager, Exploration President
Gulf Division
Exhibit 10.153
ASSIGNMENT OF RECORD TITLE INTEREST
UNITED STATES OF AMERICA
OUTER CONTINENTAL SHELF
OFFSHORE LOUISIANA
WITNESSETH:
THAT, SANTA FE ENERGY RESOURCES, INC., a Delaware corporation, the address of
which is 1616 South Voss, Suite 1000, Houston, Texas 77057 ( Assignor ), for
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby grant, convey, assign, transfer and deliver to
READING & BATES DEVELOPMENT CO., a Delaware corporation, the address of which
is 901 Threadneedle, Houston, Texas 77079-2902 ( Assignee ), an undivided
fifty percent (50.00000%) record title interest (the Interest ) in and to the
following described Oil and Gas Lease (hereinafter the Lease ), to wit:
Oil and Gas Lease of Submerged Lands under the Outer Continental
Shelf Lands Act, bearing Serial No. OCS-G 16404, effective
September 1, 1996 covering all of Block 365, Ship Shoal Area,
South Addition, OCS Leasing Map No. 5A, containing approximately
5000 acres, more or less.
TO HAVE AND TO HOLD the Interest in and to the Lease unto Assignee, its
successors and assigns, together with all rights and privileges appurtenant
thereto, subject to and in accordance with all the terms and provisions of the
Lease.
This Assignment is made without warranty of title, express, implied or
statutory, except as to persons lawfully claiming by, through or under
Assignor, but not otherwise; however, Assignee shall have the right of full
substitution and subrogation, to the extent assignable, in and to any and all
rights and actions in warranty which Assignor may have against its
predecessors in title.
This Assignment is made by Assignor and accepted by Assignee subject to all
the terms and conditions of that certain Participation Agreement dated
December 4, 1996. Assignor warrants that the Interest is not subject to any
liens or encumbrances other than Lessor s royalty and that lease bonus and
delay rentals have been paid to date.
The terms and conditions of this Assignment shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
assigns.
This Assignment is made effective December 11, 1996, subject to the approval
by the Minerals Management Service, United States Department of the Interior,
pursuant to 30 CFR 256.
IN WITNESS WHEREOF, this Assignment is executed as of the dates shown in the
respective acknowledgments of the parties hereto, but effective for all
purposes as of December 11, 1996.
ASSIGNOR:
Witnesses: SANTA FE ENERGY RESOURCES, INC.
By: A. T. McCarroll
Title: Division Manager, Exploration
Gulf Division
ASSIGNEE:
Witnesses: READING & BATES DEVELOPMENT CO.
By: Wayne K. Hillin
Title: Secretary
Exhibit 10.154
ASSIGNMENT OF RECORD TITLE INTEREST
UNITED STATES OF AMERICA
OUTER CONTINENTAL SHELF
OFFSHORE LOUISIANA
WITNESSETH:
THAT, SANTA FE ENERGY RESOURCES, INC., a Delaware corporation, the address of
which is 1616 South Voss, Suite 1000, Houston, Texas 77057 ( Assignor ), for
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby grant, convey, assign, transfer and deliver to
READING & BATES DEVELOPMENT CO., a Delaware corporation, the address of which
is 901 Threadneedle, Houston, Texas 77079-2902 ( Assignee ), an undivided
fifty percent (50.00000%) record title interest (the Interest ) in and to the
following described Oil and Gas Lease (hereinafter the Lease ), to wit:
Oil and Gas Lease of Submerged Lands under the Outer Continental
Shelf Lands Act, bearing Serial No. OCS-G 16405, effective
September 1, 1996 covering all of Block 366, Ship Shoal Area,
South Addition, OCS Leasing Map No. 5A, containing approximately
5000 acres, more or less.
TO HAVE AND TO HOLD the Interest in and to the Lease unto Assignee, its
successors and assigns, together with all rights and privileges appurtenant
thereto, subject to and in accordance with all the terms and provisions of the
Lease.
This Assignment is made without warranty of title, express, implied or
statutory, except as to persons lawfully claiming by, through or under
Assignor, but not otherwise; however, Assignee shall have the right of full
substitution and subrogation, to the extent assignable, in and to any and all
rights and actions in warranty which Assignor may have against its
predecessors in title.
This Assignment is made by Assignor and accepted by Assignee subject to all
the terms and conditions of that certain Participation Agreement dated
December 4, 1996. Assignor warrants that the Interest is not subject to any
liens or encumbrances other than Lessor s royalty and that lease bonus and
delay rentals have been paid to date.
The terms and conditions of this Assignment shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
assigns.
This Assignment is made effective December 11, 1996, subject to the approval
by the Minerals Management Service, United States Department of the Interior,
pursuant to 30 CFR 256.
IN WITNESS WHEREOF, this Assignment is executed as of the dates shown in the
respective acknowledgments of the parties hereto, but effective for all
purposes as of December 11, 1996.
ASSIGNOR:
Witnesses: SANTA FE ENERGY RESOURCES, INC.
By: A. T. McCarroll
Title: Division Manager, Exploration
Gulf Division
ASSIGNEE:
Witnesses: READING & BATES DEVELOPMENT CO.
By: Wayne K. Hillin
Title: Secretary
Exhibit 10.155
ASSIGNMENT OF RECORD TITLE INTEREST
UNITED STATES OF AMERICA
OUTER CONTINENTAL SHELF
OFFSHORE LOUISIANA
WITNESSETH:
THAT, SANTA FE ENERGY RESOURCES, INC., a Delaware corporation, the address of
which is 1616 South Voss, Suite 1000, Houston, Texas 77057 ( Assignor ), for
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby grant, convey, assign, transfer and deliver to
READING & BATES DEVELOPMENT CO., a Delaware corporation, the address of which
is 901 Threadneedle, Houston, Texas 77079-2902 ( Assignee ), an undivided
fifty percent (50.00000%) record title interest (the Interest ) in and to the
following described Oil and Gas Lease (hereinafter the Lease ), to wit:
Oil and Gas Lease of Submerged Lands under the Outer Continental
Shelf Lands Act, bearing Serial No. OCS-G 16567, effective
September 1, 1996 covering all of Block 786, Ewing Bank, OCS
Official Protraction Diagram, NG 15-12, containing approximately
2006.38 acres, more or less.
TO HAVE AND TO HOLD the Interest in and to the Lease unto Assignee, its
successors and assigns, together with all rights and privileges appurtenant
thereto, subject to and in accordance with all the terms and provisions of the
Lease.
This Assignment is made without warranty of title, express, implied or
statutory, except as to persons lawfully claiming by, through or under
Assignor, but not otherwise; however, Assignee shall have the right of full
substitution and subrogation, to the extent assignable, in and to any and all
rights and actions in warranty which Assignor may have against its
predecessors in title.
This Assignment is made by Assignor and accepted by Assignee subject to all
the terms and conditions of that certain Participation Agreement dated
December 4, 1996. Assignor warrants that the Interest is not subject to any
liens or encumbrances other than Lessor s royalty and that lease bonus and
delay rentals have been paid to date.
The terms and conditions of this Assignment shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
assigns.
This Assignment is made effective December 11, 1996, subject to the approval
by the Minerals Management Service, United States Department of the Interior,
pursuant to 30 CFR 256.
IN WITNESS WHEREOF, this Assignment is executed as of the dates shown in the
respective acknowledgments of the parties hereto, but effective for all
purposes as of December 11, 1996.
ASSIGNOR:
Witnesses: SANTA FE ENERGY RESOURCES, INC.
By: A. T. McCarroll
Title: Division Manager, Exploration
Gulf Division
ASSIGNEE:
Witnesses: READING & BATES DEVELOPMENT CO.
By: Wayne K. Hillin
Title: Secretary
Exhibit 10.156
ASSIGNMENT OF RECORD TITLE INTEREST
UNITED STATES OF AMERICA
OUTER CONTINENTAL SHELF
OFFSHORE LOUISIANA
WITNESSETH:
THAT, SANTA FE ENERGY RESOURCES, INC., a Delaware corporation, the address of
which is 1616 South Voss, Suite 1000, Houston, Texas 77057 ( Assignor ), for
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby grant, convey, assign, transfer and deliver to
READING & BATES DEVELOPMENT CO., a Delaware corporation, the address of which
is 901 Threadneedle, Houston, Texas 77079-2902 ( Assignee ), an undivided
fifty percent (50.00000%) record title interest (the Interest ) in and to the
following described Oil and Gas Lease (hereinafter the Lease ), to wit:
Oil and Gas Lease of Submerged Lands under the Outer Continental
Shelf Lands Act, bearing Serial No. OCS-G 16568, effective
September 1, 1996 covering all of Block 787, Ewing Bank, OCS
Official Protraction Diagram, NG 15-12, containing approximately
4692.21 acres, more or less.
TO HAVE AND TO HOLD the Interest in and to the Lease unto Assignee, its
successors and assigns, together with all rights and privileges appurtenant
thereto, subject to and in accordance with all the terms and provisions of the
Lease.
This Assignment is made without warranty of title, express, implied or
statutory, except as to persons lawfully claiming by, through or under
Assignor, but not otherwise; however, Assignee shall have the right of full
substitution and subrogation, to the extent assignable, in and to any and all
rights and actions in warranty which Assignor may have against its
predecessors in title.
This Assignment is made by Assignor and accepted by Assignee subject to all
the terms and conditions of that certain Participation Agreement dated
December 4, 1996. Assignor warrants that the Interest is not subject to any
liens or encumbrances other than Lessor s royalty and that lease bonus and
delay rentals have been paid to date.
The terms and conditions of this Assignment shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
assigns.
This Assignment is made effective December 11, 1996, subject to the approval
by the Minerals Management Service, United States Department of the Interior,
pursuant to 30 CFR 256.
IN WITNESS WHEREOF, this Assignment is executed as of the dates shown in the
respective acknowledgments of the parties hereto, but effective for all
purposes as of December 11, 1996.
ASSIGNOR:
Witnesses: SANTA FE ENERGY RESOURCES, INC.
By: A. T. McCarroll
Title: Division Manager, Exploration
Gulf Division
ASSIGNEE:
Witnesses: READING & BATES DEVELOPMENT CO.
By: Wayne K. Hillin
Title: Secretary
Exhibit 10.157
ASSIGNMENT OF RECORD TITLE INTEREST
UNITED STATES OF AMERICA
OUTER CONTINENTAL SHELF
OFFSHORE LOUISIANA
WITNESSETH:
THAT, SANTA FE ENERGY RESOURCES, INC., a Delaware corporation, the address of
which is 1616 South Voss, Suite 1000, Houston, Texas 77057 ( Assignor ), for
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby grant, convey, assign, transfer and deliver to
READING & BATES DEVELOPMENT CO., a Delaware corporation, the address of which
is 901 Threadneedle, Houston, Texas 77079-2902 ( Assignee ), an undivided
fifty percent (50.00000%) record title interest (the Interest ) in and to the
following described Oil and Gas Lease (hereinafter the Lease ), to wit:
Oil and Gas Lease of Submerged Lands under the Outer Continental
Shelf Lands Act, bearing Serial No. OCS-G 16578, effective
September 1, 1996 covering all of Block 919, Ewing Bank, OCS
Official Protraction Diagram, NG 15-12, containing approximately
5760 acres, more or less.
TO HAVE AND TO HOLD the Interest in and to the Lease unto Assignee, its
successors and assigns, together with all rights and privileges appurtenant
thereto, subject to and in accordance with all the terms and provisions of the
Lease.
This Assignment is made without warranty of title, express, implied or
statutory, except as to persons lawfully claiming by, through or under
Assignor, but not otherwise; however, Assignee shall have the right of full
substitution and subrogation, to the extent assignable, in and to any and all
rights and actions in warranty which Assignor may have against its
predecessors in title.
This Assignment is made by Assignor and accepted by Assignee subject to all
the terms and conditions of that certain Participation Agreement dated
December 4, 1996. Assignor warrants that the Interest is not subject to any
liens or encumbrances other than Lessor s royalty and that lease bonus and
delay rentals have been paid to date.
The terms and conditions of this Assignment shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
assigns.
This Assignment is made effective December 11, 1996 subject to the approval by
the Minerals Management Service, United States Department of the Interior,
pursuant to 30 CFR 256.
IN WITNESS WHEREOF, this Assignment is executed as of the dates shown in the
respective acknowledgments of the parties hereto, but effective for all
purposes as of December 11, 1996.
ASSIGNOR:
Witnesses: SANTA FE ENERGY RESOURCES, INC.
By: A. T. McCarroll
Title: Division Manager, Exploration
- -
Gulf Division
ASSIGNEE:
Witnesses: READING & BATES DEVELOPMENT CO.
By: Wayne K. Hillin
Title: Secretary
Exhibit 10.158
ASSIGNMENT OF RECORD TITLE INTEREST
UNITED STATES OF AMERICA
OUTER CONTINENTAL SHELF
OFFSHORE LOUISIANA
WITNESSETH:
THAT, SANTA FE ENERGY RESOURCES, INC., a Delaware corporation, the address of
which is 1616 South Voss, Suite 1000, Houston, Texas 77057 ( Assignor ), for
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby grant, convey, assign, transfer and deliver to
READING & BATES DEVELOPMENT CO., a Delaware corporation, the address of which
is 901 Threadneedle, Houston, Texas 77079-2902 ( Assignee ), an undivided
fifty percent (50.00000%) record title interest (the Interest ) in and to the
following described Oil and Gas Lease (hereinafter the Lease ), to wit:
Oil and Gas Lease of Submerged Lands under the Outer Continental
Shelf Lands Act, bearing Serial No. OCS-G 16579, effective
September 1, 1996 covering all of Block 920, Ewing Bank, OCS
Official Protraction Diagram, NG 15-12, containing approximately
5760 acres, more or less.
TO HAVE AND TO HOLD the Interest in and to the Lease unto Assignee, its
successors and assigns, together with all rights and privileges appurtenant
thereto, subject to and in accordance with all the terms and provisions of the
Lease.
This Assignment is made without warranty of title, express, implied or
statutory, except as to persons lawfully claiming by, through or under
Assignor, but not otherwise; however, Assignee shall have the right of full
substitution and subrogation, to the extent assignable, in and to any and all
rights and actions in warranty which Assignor may have against its
predecessors in title.
This Assignment is made by Assignor and accepted by Assignee subject to all
the terms and conditions of that certain Participation Agreement dated
December 4, 1996. Assignor warrants that the Interest is not subject to any
liens or encumbrances other than Lessor s royalty and that lease bonus and
delay rentals have been paid to date.
The terms and conditions of this Assignment shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
assigns.
This Assignment is made effective December 11, 1996 subject to the approval by
the Minerals Management Service, United States Department of the Interior,
pursuant to 30 CFR 256.
IN WITNESS WHEREOF, this Assignment is executed as of the dates shown in the
respective acknowledgments of the parties hereto, but effective for all
purposes as of December 11, 1996.
ASSIGNOR:
Witnesses: SANTA FE ENERGY RESOURCES, INC.
By: A. T. McCarroll
Title: Division Manager, Exploration
Gulf Division
ASSIGNEE:
Witnesses: READING & BATES DEVELOPMENT CO.
By: Wayne K. Hillin
Title: Secretary
Exhibit 10.159
ASSIGNMENT OF RECORD TITLE INTEREST
UNITED STATES OF AMERICA
OUTER CONTINENTAL SHELF
OFFSHORE LOUISIANA
WITNESSETH:
THAT, SANTA FE ENERGY RESOURCES, INC., a Delaware corporation, the address of
which is 1616 South Voss, Suite 1000, Houston, Texas 77057 ( Assignor ), for
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby grant, convey, assign, transfer and deliver to
READING & BATES DEVELOPMENT CO., a Delaware corporation, the address of which
is 901 Threadneedle, Houston, Texas 77079-2902 ( Assignee ), an undivided
fifty percent (50.00000%) record title interest (the Interest ) in and to the
following described Oil and Gas Lease (hereinafter the Lease ), to wit:
Oil and Gas Lease of Submerged Lands under the Outer Continental
Shelf Lands Act, bearing Serial No. OCS-G 17251, effective
November 1, 1996 covering all of Block 335, East Breaks, OCS
Official Protraction Diagram, NG 15-1, containing approximately
5760 acres, more or less.
TO HAVE AND TO HOLD the Interest in and to the Lease unto Assignee, its
successors and assigns, together with all rights and privileges appurtenant
thereto, subject to and in accordance with all the terms and provisions of the
Lease.
This Assignment is made without warranty of title, express, implied or
statutory, except as to persons lawfully claiming by, through or under
Assignor, but not otherwise; however, Assignee shall have the right of full
substitution and subrogation, to the extent assignable, in and to any and all
rights and actions in warranty which Assignor may have against its
predecessors in title.
This Assignment is made by Assignor and accepted by Assignee subject to all
the terms and conditions of that certain Participation Agreement dated
December 4, 1996. Assignor warrants that the Interest is not subject to any
liens or encumbrances other than Lessor s royalty and that lease bonus and
delay rentals have been paid to date.
The terms and conditions of this Assignment shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
assigns.
This Assignment is made effective December 11, 1996, subject to the approval
by the Minerals Management Service, United States Department of the Interior,
pursuant to 30 CFR 256.
IN WITNESS WHEREOF, this Assignment is executed as of the dates shown in the
respective acknowledgments of the parties hereto, but effective for all
purposes as of December 11, 1996.
ASSIGNOR:
Witnesses: SANTA FE ENERGY RESOURCES, INC.
By: A. T. McCarroll
Title: Division Manager, Exploration -
Gulf Division
ASSIGNEE:
Witnesses: READING & BATES DEVELOPMENT CO.
By: Wayne K. Hillin
Title: Secretary
Exhibit 10.160
ASSIGNMENT OF RECORD TITLE INTEREST
UNITED STATES OF AMERICA
OUTER CONTINENTAL SHELF
OFFSHORE LOUISIANA
WITNESSETH:
THAT, SANTA FE ENERGY RESOURCES, INC., a Delaware corporation, the address of
which is 1616 South Voss, Suite 1000, Houston, Texas 77057 ( Assignor ), for
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby grant, convey, assign, transfer and deliver to
READING & BATES DEVELOPMENT CO., a Delaware corporation, the address of which
is 901 Threadneedle, Houston, Texas 77079-2902 ( Assignee ), an undivided
fifty percent (50.00000%) record title interest (the Interest ) in and to the
following described Oil and Gas Lease (hereinafter the Lease ), to wit:
Oil and Gas Lease of Submerged Lands under the Outer Continental
Shelf Lands Act, bearing Serial No. OCS-G 17355, effective January
1, 1997 covering all of Block 372, Garden Banks, OCS Official
Protraction Diagram, NG 15-2, containing approximately 5760 acres,
more or less.
TO HAVE AND TO HOLD the Interest in and to the Lease unto Assignee, its
successors and assigns, together with all rights and privileges appurtenant
thereto, subject to and in accordance with all the terms and provisions of the
Lease.
This Assignment is made without warranty of title, express, implied or
statutory, except as to persons lawfully claiming by, through or under
Assignor, but not otherwise; however, Assignee shall have the right of full
substitution and subrogation, to the extent assignable, in and to any and all
rights and actions in warranty which Assignor may have against its
predecessors in title.
This Assignment is made by Assignor and accepted by Assignee subject to all
the terms and conditions of that certain Participation Agreement dated
December 4, 1996. Assignor warrants that the Interest is not subject to any
liens or encumbrances other than Lessor s royalty and that lease bonus and
delay rentals have been paid to date.
The terms and conditions of this Assignment shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and
assigns.
This Assignment is made effective January 2, 1997, subject to the approval by
the Minerals Management Service, United States Department of the Interior,
pursuant to 30 CFR 256.
IN WITNESS WHEREOF, this Assignment is executed as of the dates shown in the
respective acknowledgments of the parties hereto, but effective for all
purposes as of January 2, 1997.
ASSIGNOR:
Witnesses: SANTA FE ENERGY RESOURCES, INC.
By: A. T. McCarroll
Title: Division Manager, Exploration
Gulf Division
ASSIGNEE:
Witnesses: READING & BATES DEVELOPMENT CO.
By: Wayne K. Hillin
Title: Secretary
EXHIBIT 10.161
JOINT VENTURE AGREEMENT
OUTER CONTINENTAL SHELF - GULF OF MEXICO
This Agreement, made and entered into as this 16th day of December,
1996, ("the Effective Date"), by Shell Deepwater Development Inc. (SDDI) and
SOI Finance Inc. (SOIFI), hereinafter collectively referred to as "Shell" and
Reading & Bates Development Co. (RB), hereinafter referred to singularly as a
"Party" and jointly as "Parties."
WHEREAS, the Parties are interested in exploring, appraising, developing
and operating offshore continental shelf leases for the production of
hydrocarbons and the transportation therefrom by pipeline or otherwise.
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 Contract Leases lying within the
Contract Area of the Gulf of Mexico for the production of Hydrocarbons and the
transportation therefrom by pipeline or otherwise according to the following
provisions:
ARTICLE 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 part of this Agreement and shall be deemed
incorporated into the body of this Agreement by this reference, as if the full
text of each Exhibit were contained within the text of this Agreement. If any
provision of any Exhibit is inconsistent with any provision contained in the
body of this Agreement, the provisions in the body of this Agreement shall
prevail.
1.1.1 Exhibit A Contract Area
1.1.2 Exhibit A-1 East Boomvang Leases
1.1.3 Exhibit A-2 North Boomvang Leases
1.1.3 Exhibit A-3 East Bequia, Leases
1.1.4 Exhibit B-1 Assignment Form - Record Title
1.1.5 Exhibit B-2 Assignment Form - Overriding Royalty Interest
1.1.6 Exhibit C Geophysical Data License Agreement dated September 16,
1996
1.1.7 Exhibit D Form of Joint Operating Agreement (including it's
Exhibits)
ARTICLE 2 - DEFINITIONS
As used in the Agreement, the following terms defined in this Article shall
have the meanings here ascribed to them.
2.0 Affiliate(s). Any company that is owned or controlled by or under
common control with a Party, with ownership or control existing of fifty
percent (50%) or more of the stock of such company that carries the
right to vote for directors is owned or controlled, directly or
indirectly, by the particular Party; or any parent company that owns or
controls, directly or indirectly, fifty percent (50%) or more of the
stock having the right to vote for directors of such Party.
2.1 Agreement. Shall mean this Joint Venture Agreement, together with its
attached Exhibits.
2.2 Appraisal Well. An Appraisal Well shall be defined as a Well targeted
to be drilled into a Producible Reservoir with a primary goal of
determining the economic viability of developing and producing the
Producible Reservoir.
2.3 Commitment Well. The Appraisal Well required under Subsection 7.1 of
this Agreement and the optional exploration wells contemplated in
Subsections 7.2 and 7.3 of this Agreement.
2.4 Confidential Information. Shall mean all proprietary geophysical
(including the Geophysical Survey Data), geological, geochemical,
reservoir, drilling, production, cost or engineering and technical data
owned or developed by the Parties or any logs or other information
pertaining to the progress, tests or results of any Well drilled or any
other operation conducted relating to operations conducted within the
Contract Area. The term shall also include (but my not be limited to):
Certain commercial, contractual or financial information,
Analyses, compilations, maps, models, interpretations or other
documents that reflect or incorporate Confidential Information;
Both originals and copies of geological and geophysical data, and
well logs directly related to the Contract Area; and all other
subsurface, seismic and related data acquired or derived from
operations conducted pursuant to this Agreement.
2.5 Contract Area. The area outlined on the attached plat, Exhibit A, in
the East Breaks Area, Gulf of Mexico.
2.6 Contract Prospect and or Leases. The eight (8) blocks falling within
the Contract Area shown on Exhibit A and identified by lease number on
Exhibits A-1, A-2, and A-3 and consisting of the following leases:
2.6 a East Boomvang Prospect and/or Leases. The area comprised of East
Breaks Blocks 688 and 732 which fall within the East Boomvang
portion of the Contract Area outline shown on Exhibit A and
identified by lease numbers on Exhibit A-1.
2.6 b North Boomvang Prospect and/or Leases. The area comprised
of East Breaks Blocks 642, 643 and 644 which fall within the
North Boomvang portion of the Contract Area outline shown on
Exhibit A and identified by lease numbers on Exhibit A-2.
2.6 c East Bequia Prospect and or Leases. The area comprised of
East Breaks Blocks 645, 646 and 690 which fall within the
East Bequia portion of the Contract Area outline shown on
Exhibit A and identified by lease numbers on Exhibit A-3.
2.7 Development Operations Shall mean all operations conducted pursuant to
a Development Plan.
2.8 Development Plan. As defined in the Joint Operating Agreement.
2.9 Development Well. As defined in the Joint Operating Agreement.
2.10 Exhibit. As defined in Article 1 - Exhibits
2.11 Geophysical Data License Agreement. The non-exclusive License Agreement
dated September 16, 1996 to govern use of, rights to, and ownership of
the Geophysical Survey Data and which was executed by the parties on
that date. If there is any conflict between the Boomvang License
Agreement and this Agreement, this Agreement shall control.
2.12 Geophysical Survey Data. That portion of SDDI's proprietary 3-D Seismic
Survey covering the following nine (9) block area: East Breaks Blocks
642, 643, 644, 645, 686, 687, 688, 689 and 732.
2.13 Joint Operating Agreement. The Joint Operating Agreement which shall
govern the joint exploration, development and operations of each
Prospect in the Contract Area individually for the production of
hydrocarbons therefrom. A separate Joint Operating Agreement shall be
executed for each Prospect prior to conducting joint operations on that
Prospect. The form of Joint Operating Agreement to be used is attached
to this Agreement as Exhibit D. If there is any conflict between the
Joint Operating Agreement for any Prospect and this Agreement, this
Agreement shall control.
2.14 Keeper Well. A well that will not be initially plugged and abandoned
but is intended to be utilized and designed for appraisal, development,
or production purposes.
2.15 Operator. RB is hereby designated as Operator of the East Boomvang
Leases as identified in Exhibit A.
2.16 Party or Parties (to this Agreement): Shall mean Shell Deepwater
Development Inc, SOI Finance Inc. and/or Reading & Bates Development Co.
singularly or collectively, as the case may be, with respect to this
Agreement.
2.17 Primary Objective Interval. For any Commitment Well the Primary
Objective Interval shall mean the shallower of the total footage to be
drilled (as measured in true vertical depth) or the penetration by the
drill bit sufficient to test the base of the stratigraphic of seismic
bright spot events. Said depth and seismic event(s) for each prospect
are set forth below:
PROSPECT DEPTH (TVD) SEISMIC EVENT(S)
East Boomvang 10,000' Bright Spots 30, 40 and 45 #
North Boomvang 10,000' Bright Spots 30 and 40 #
East Bequia 10,500' Bright Spot 25 *
# As found in Shell's EB 688 #1 Well
* As found in Mobil's EB 689 #1 Well
2.18 RB's Earned Interest. That portion of Shell's leasehold and rights to
production to be delivered to RB in accordance with Article 9 of this
Agreement.
2.19 Shallow Hazards Data. Data derived from the shallow hazards survey
referenced in
Article 4.
2.20 Sidetrack. The directional control and intentional deviation of a Well
so as to change the bottom hole location whether or not it is to the
original Primary Objective Interval.
2.21 Shell's Retained Interest. That portion of the leasehold and rights to
production to be retained by Shell in accordance with Articles 9 and 10
of this Agreement.
2.22 Standard Log Evaluation Program. For the Commitment Wells required in
Subsection 7.1 of this Agreement, the Standard Log Evaluation Program
shall be defined as:
- MWD
- Phaser Induction
- Long-Spaced Sonic
- LDT-CNL (Litho Density Tool - Compensated Neutron Log)
- FMS (Formation Microscanner)
- SHDT - Dual Dipmeter (High Resolution)
- RFT - Repeat Formation Test
- SWC - Sidewall Core *
- VSP - Vertical Seismic Profile
* Only in those zones of interest as indicated by hydrocarbon shows.
2.23 Substitute Well. For any Commitment Well, a Substitute Well shall be
defined as a Well drilled to the same Primary Objective Interval (unless
mutually agreed otherwise) as planned for in the original Commitment
Well for which it is a substitute.
2.24 Well. For any Commitment Well, a Well shall be defined as the drilling,
Standard Log Evaluation Program and plugging and abandonment of the
original straight hole; or the drilling, Standard Log Evaluation Program
and the temporary plugging and abandonment of the original straight
hole.
2.25 Working Interest. Shall mean the leasehold or operating rights interest
of each Party in and to each Lease within a Contract Area (expressed as
a percentage).
ARTICLE 3 - CONFIDENTIALITY
Pursuant to this Agreement, the Parties will from time to time make available
to each other certain Confidential Information. The Confidential Information
will be made available for the purpose of evaluating the Contract Area and
Contract Leases, planning operations, determining whether to develop the
Leases and whether to participate in Development Operations. The Parties
shall use the Confidential Information solely for the aforesaid purposes and
shall maintain the confidential nature of such information.
3.1 Each Party agrees to deliver such Confidential Information relating to
the Contract Area as may be required by the other Party pursuant to this
Agreement upon request or as otherwise provided and mutually agreed.
3.2 The Parties agree to keep, save and hold as confidential all
Confidential Information disclosed hereunder relating to the Contract
Area.
3.3 Except as otherwise provided herein, the Confidential Information shall
not be disclosed or revealed by any Party, its employees, officers,
Affiliates, consultants or agents and representatives to any individual
or entity not a party hereto without prior written consent of the other
Party. Any incidental disclosure of a business or technical nature to
which any Party's employees or agents are exposed by virtue to their
exposure to the Confidential Information shall be subject to this
Agreement.
3.4 All Confidential Information made available to any party shall be done
on an "as is" basis without any warranties either express or implied, as
to the accuracy, validity or utility of such information. In no event
shall any Party be liable for any incidental, consequential or other
damages arising out of or resulting from the Confidential. Information
conveyed or otherwise made available through this Agreement. Parties
receiving Confidential Information shall conduct at their own expense
and rely solely on their own independent investigation and evaluation
of, and appraisal and judgement with respect to, the geological and
geophysical characteristics of the Contract Area, the estimated
hydrocarbon reserves recoverable therefrom, and expense assumptions
applicable thereto.
3.5 Any Party may make Confidential Information available to geologic,
and/or geophysic consultants, reputable engineering firms, service
firms, gas transmission and crude oil purchasing companies for reserve
and other technical evaluations and to reputable financial institutions
for study prior to commitment of funds and shall notify the other
Parties of such disclosure. Any third party permitted such access shall
first agree in writing to neither disclose such data to others nor use
such data except for the purpose for which it is disclosed.
3.6 Disclosure of the Confidential Information shall be restricted to only
those employees of the Parties or of other entities as provided for in
this Article 3 who have a need to know such information to carry out the
purposes of this Agreement.
3.7 Each party shall have the right to make Confidential Information
available to bona fide prospective purchasers or assignees of such
party's Working Interest in any Leases which is the subject of such data
provided that such Party has given the other Parties at least ten (10)
days prior written notice identifying the prospective purchaser, stating
when and where such data or information will be disclosed and describing
the data or information to be disclosed. Disclosure shall include
copies or tracings supplied to a bona fide prospective purchaser. Any
third party permitted such access shall first agree in writing to
neither disclose such data to others nor use such data except for the
purpose for which it is disclosed. Any Party may provide Confidential
Information to its Affiliates, provided its Affiliates accept and
maintain such information subject to the confidentiality provisions of
this Agreement.
3.8 No Party shall distribute any information or photographs regarding the
Contract Area to the press or other media without the prior agreement of
the participating Parties in the operation which is the subject of the
release. When all parties have reviewed such material, and issuance of
the material has received approval of the participating Parties,
Operator shall have the principal responsibility for its issuance and
each other party may issue such approved material without restriction.
The only exception to the foregoing shall be that in the event of an
emergency involving extensive property damage, operations failure, loss
of human life, or other clear emergency, Operator is authorized to
furnish such minimum, strictly factual information as shall be necessary
to satisfy the legitimate public interest on the part of the media and
duly constituted authorities if time does not permit the obtaining of
prior approval of the information so furnished.
3.9 It is mutually agreed that in order to comply with bylaws of the
Offshore Oil Scouts Association, the Operator may furnish the following
Well information at weekly Offshore Oil Scout meetings:
3.9.1 Well Location:
Proposed surface location
Surveyed surface location with X & Y
Proposed bottom hole location
KB and water depth
OCS number and Well number
Actual bottom hole location (must be reported within two weeks of
reaching Total Depth of the Well)
3.9.2 Well operations
Rig move in date
Spud date
Weekly drilling depth
Casing depths, cement, EMW's
Mud weight, sidewall cores, cores, RT's (only that they were taken)
Logs (only the depths and time which they were run)
Date Total Depth is reached
Date rig is released
3.9.3 Well Completion Information
Any Media release or public filing of Well completion information will
be furnished at weekly Scout meetings
3.10 Provisions for the use and disclosure of Confidential Information shall
not apply to information that was in the public knowledge or literature
at the time of disclosure or which the Parties agree was already in a
parties possession at the time of disclosure without obligation of
confidentiality.
3.11 Provisions for use and disclosure of Confidential Information shall
cease to apply if the Confidential Information becomes part of the
public knowledge without fault of either Party, or is disclosed to a
Party without obligation of confidentiality by a third party having the
right to do so.
3.12 For the purposes of these provisions, specific disclosure made hereunder
shall not be deemed to be within the exceptions at Article 3.10 and 3.11
above merely because they are embraced by general disclosures in the
public knowledge or literature or in the Party's possession and any
combination of features disclosed hereunder shall not be deemed within
the above exceptions merely because individual features are in the
public knowledge or literature or in the Party's possession.
3.13 This Agreement shall not be construed to grant any Party any license or
other right to use the Confidential Information except for the purposes
of this Agreement.
3.14 In no event shall the obligation to keep the Confidential Information
confidential exceed two (2) years from the termination date of this
Agreement or the Joint Operating Agreement. The confidentiality
provisions of this Agreement shall be binding on either Party's
successors and assigns.
3.15 The Parties represent and warrant that they have the right to provide
the Confidential Information which they disclose under the terms and
conditions of this Agreement without violating the legal rights of, or
its contractual obligations to, any third party.
3.16 Restrictions on Confidentiality shall not apply to any required
disclosures to or required by governmental agencies or stock exchanges.
ARTICLE 4 - SHALLOW HAZARDS DATA
SDDI has conducted a shallow hazards survey in the Gulf of Mexico. The
shallow hazards survey covers East Breaks protraction blocks 688 and 732.
4.1 Strictly as an accommodation, SDDI agrees to provide raw and interpreted
Shallow Hazards Data and reports to RB.
4.2 THE SHALLOW HAZARDS DATA IS PROVIDED ON AN "AS IS" BASIS WITHOUT ANY
WARRANTIES EITHER EXPRESS OR IMPLIED, AS TO THE ACCURACY, VALIDITY OR
UTILITY OF SUCH INFORMATION.
4.3 RB agrees to return all Shallow Hazards Data to SDDI within 180 days.
In the event RB does not return all such Shallow Hazards Data to SDDI,
SDDI shall have the election to either 1) require RB to reacquire the
missing Shallow Hazards Data, or 2) require RB, to pay SDDI the
replacement cost of the Shallow Hazards Data.
4.4 The 180 day period referred to in Subsection 4.3, above, may be extended
by mutual agreement in writing.
ARTICLE 5 - GEOPHYSICAL SURVEY DATA
SDDI has acquired a proprietary 3-D seismic survey in the Gulf of Mexico.
SDDI has granted certain rights to RB covering nine (9) blocks comprised of
East Breaks Blocks 642, 643, 644, 645, 686, 687, 688, 689 and 732, hereinafter
referred to as "Geophysical Survey Data" under the terms of the Geophysical
Data License Agreement executed by both Parties on September 16, 1996 and
attached as Exhibit C.
5.1 Said Geophysical Data License Agreement shall govern the use, rights to,
and ownership of the Geophysical Survey Data.
5.2 The Geophysical Data License Agreement prohibits RB from selling,
trading or showing the Geophysical Survey Data and governs the
confidentiality of the data.
5.3 Said Geophysical Data License Agreement provides for SDDI to have the
right to sell the Geophysical Survey Data.
5.4 Upon the execution of the Geophysical Data License Agreement, SDDI
delivered to RB one copy of the Geophysical Survey Data and RB hereby
confirms receipt of said Geophysical Survey Data.
ARTICLE 6 - OPERATOR
RB is hereby designated as Operator for all phases, including Development
Operations and production within the Contract Area pursuant to the terms of
this Agreement.
6.1 RB has been designated as Lease Operator of the two (2) East Boomvang
Prospect Leases.
6.2 Within fifteen (I 5) days of receiving a written request from RB, SDDI
shall deliver to RB four (4) executed Designation of Operator forms
designating RB as Operator for any requested lease(s) in North Boomvang
or East Bequia Prospects.
6.3 In the event RB reduces any Working Interest earned under this Agreement
through sales or trades to a level which is less than SDDI's Working
Interest, then SDDI shall have the option to become Operator.
ARTICLE 7 - DRILLING PROGRAM - COMMITMENT WELLS
7.1 By executing this Agreement, RB commits to drill and evaluate (using the
Standard Log Evaluation program) one (1) Appraisal Well and Sidetrack
(if Sidetrack is warranted) to the Primary Objective Interval at its
sole risk and liability, and to pay 100% of all costs (permitting,
drilling, evaluation, testing and plugging/abandonment or temporary
abandonment of the Well) on the East Boomvang Prospect.
7.1.1 RB shall use its best efforts as a prudent Operator to conduct the
Standard LogEvaluation Program. Drill stem tests and production
tests are not deemed to be part of the Standard Log Evaluation
Program. A decision to test the East Boomvang Appraisal Well,
expand the Standard Log Evaluation Program or sidetrack the well
shall be entirely RB's and the costs borne by RB.
7.1.2 It is anticipated that said Appraisal Well will be a Keeper Well.
In the event that the Well is temporarily abandoned, any
additional expenditures thereafter decided upon by RB and SDDI (to
complete the Well for appraisal, development or production
purposes, to plug/abandon, etc) shall be shared under the Joint
Operating Agreement if applicable.
7.1.3 The parties agree to meet to select a mutually agreeable well
location and well plan for said Appraisal Well. In the event SDDI
and RB fail to reach mutual agreement on a well location or on any
item described in the well plan, the final decision for the well
location and/or well plan shall rest with RB.
7.2 Subsequent to a notification of intent to Develop under Article 8, RB
has the right but not the obligation to drill and evaluate at its sole
cost, risk and liability, one (1) Exploration Well on the North
Boorrivang Prospect to the Primary Objective Interval.
7.2.1 RB agrees to pay 100% of all Costs (hazard survey, permitting,
drilling, evaluating, testing, Standard Log Evaluation Program,
temporary abandonment of the Well or plugging/abandonment if
required).
7.2.2 RB. shall use its best efforts as a prudent Operator to conduct
the Standard Log Evaluation Program. Drill stem tests and
production tests are not deemed to be part of the Standard Log
Evaluation Prograrn. A decision to test the North Boomvang
Exploration Well, expand the Standard Log Evaluation Program, or
sidetrack the well shall be entirely RB's and the costs borne by
RB.
7.2.3 In the event that the Well is temporarily abandoned, any
additional expenditures thereafter decided upon by SDDI and RB (to
complete the Well for appraisal, development or production
purposes, to plug/abandon, etc) shall be shared according to the
Joint Operating Agreement if applicable.
7.3 Subsequent to a notification of intent to develop under Article 8, RB
has the right but not the obligation to drill and evaluate at its sole
cost, risk and liability, one (1) Exploration Well on the East Bequia
Prospect to the Primary Objective Interval.
7.3.1 RB agrees to pay 100% of all costs (hazard survey, permitting,
drilling, testing, evaluating, Standard Log Evaluation Program,
temporary abandonment of the Well or plugging/abandonment if
required).
7.3.2 RB shall use its best efforts as a prudent Operator to conduct the
Standard Log Evaluation Program. Drill stem tests and production
tests are not deemed to be part of the Standard Log Evaluation
Program. A decision to test the East Bequia Exploration Well,
expand the Standard Log Evaluation Program, or sidetrack the well
shall be entirely RB's and the costs borne by RB.
7.3.3 In the event that the Well is temporarily abandoned, any
additional expenditures thereafter decided upon by SDDI and RB (to
complete the Well for appraisal, development or production
purposes, to plug/abandon, etc) shall be shared according to the
Joint Operating Agreement if applicable.
7.4 The Commitment Well required under Subsection 7.1 of this Agreement and
the optional Commitment Wells contemplated under Subsections 7.2 and 7.3
shall be spudded by RB within six (6) months of the selection of a
mutually agreeable drillsite unless spudding of the Well is delayed by
rig unavailability, rig upgrades, permitting or other reasons beyond
RB's reasonable control. In such event, SDDI and RB shall mutually
agree upon a practicable drilling schedule.
ARTICLE 8 - OPTION TO DEVELOP
Within thirty (30) days after the cessation of operations associated with the
Appraisal Well or Sidetrack (if Sidetrack is warranted) required under
Subsection 7.1 RB shall elect to either:
(i) Notify SDDI in writing of its intention to develop (i.e., propose
a development plan to the MMS and conduct Development Operations)
the East Boomvang Prospect or
(ii) Terminate this Agreement, upon which RB shall have no rights to
the East Boomvang Leases.
(iii) In the event RB needs additional time to make its election to
develop, RB may request an extension. Approval of an extension
by SDDI shall not be unreasonably withheld.
ARTICLE 9 - WORKING INTEREST
9.1 In the event RB notifies SDDI of its intent to develop East Boomvang
Prospect under Article 8, RB shall have earned an assignment of an
undivided 50% Working Interest in the East Boomvang leases.
9.1.1 Within ninety (90) days of SDDI's receipt of RB's notification of
its intent to Develop the East Boomvang Prospect, Shell shall
prepare and deliver to RB assignments conveying RB's 50% earned
leasehold interest in the East Boomvang Leases.
9.1.2 In the event RB notifies SDDI of its intent to develop the East
Boomvang Prospect under Article 8, SDDI may elect to remain as a
50% Working Interest partner, such election to be made within
sixty (60) days of receipt of RB's notification of its intent to
develop East Boomvang. In the event SDDI needs additional time to
make its election, SDDI may request an extension. Approval of an
extension by RB shall not be unreasonably withheld. In the event
of such election, all Operations subsequent to the temporary
abandonment of the Appraisal Well required under Subsection 7.1
will be conducted under a Joint Operating Agreement in the form of
Exhibit D and the Parties shall execute said Joint Operating
Agreement within thirty (30) days of such election by SDDI.
Section 24.2.3 (b) of such Joint Operating Agreement shall not
apply unless or until the Fabrication AFE for the Initial
Production System has been approved by an Election under Section
12.8 of such Joint Operating Agreement.
9.1.3 SDDI shall bear and pay one hundred percent (100 %) of the
rentals, delay rentals or minimum royalties for the East Boomvang
Leases until such time as RB has earned a Working Interest in said
leases and Shell has conveyed RB's Working Interest to RB in
accordance with Subsection 9.1.1 above or Subsection 10.1.
Thereafter, RB shall pay its proportionate share of such rentals,
delay rentals or minimum royalties for the East Boomvang Leases.
9.1.4 In the event an additional well is spudded on the East Boomvang
Leases prior to the Election by SDDI to remain as a 50% Working
Interest partner, the Parties agree that the additional well will
be drilled as a fight hole and no information on the well,
including but not limited to, logs, surveys will be provided to
SDDI until after SDDI's Article 9.1.2 election is made.
9.1.5 In regard to wells proposed under a Joint Operating Agreement,
prior to RB utilizing a drilling rig owned by RB's affiliate, the
parties will establish a mutually agreeable day rate based upon
the average commercial rates for a similar specification drilling
rig prevailing in the immediate area.
9.1.6 In order to facilitate early production, the parties recognize
that orders for certain long lead time components may be placed
prior to SDDI's election to participate as a 50% Working Interest
partner under Subsection 9.1.2 or formal approval of a Fabrication
AFE under Subsection 12.8 of the Joint Operating Agreement.
Within thirty (30) days of RB's election to develop under Article
8 (i), RB may deliver the following documents to SDDI:
a. A preliminary development plan substantially in the form required
by Subsection 12.5 of the Joint Operating Agreement.
b. A list of identified long lead time components with delivery
times.
c. An Interim Fabrication AFE for the identified long lead time
components.
Any election by SDDI to remain as a 50% Working Interest owner under
Subsection 9.1.2 after receipt of such documents will include a firm
commitment to pay SDDI's share of the Interim Fabrication AFE for long
lead time components.
9.2 In the event RB drills and evaluates a Well on the North Boomvang
Prospect pursuant to Article 7.2, RB shall have earned an assignment of
an undivided 65% Working Interest in the North Boomvang Leases.
9.2.1 Within thirty (30) days after the release from location of the rig
that drilled the Well on the North Boomvang Prospect, Shell shall
prepare and deliver to RB assignments conveying RB's 65% earned
leasehold interest in the North Boomvang Leases.
9.2.2 All future Operations on the North Boomvang Leases will be
conducted under a Joint Operating Agreement in the form of Exhibit
D and the Parties shall execute said Joint Operating Agreement
concurrent with conveyance of RB's Earned Interest in the North
Boomvang Leases.
9.2.3 SDDI shall bear and pay one hundred percent (100 %) of the
rentals, delay rentals or minimum royalties for the North Boomvang
Leases until such time as RB has earned a Working Interest in said
leases and Shell has conveyed RB's Working Interest to RB in
accordance with Subsection 9.2.1 above. Thereafter, RB shall pay
its proportionate share of such rentals, delay rentals or minimum
royalties for the North Boomvang Leases.
9.3 In the event RB drills and evaluates a Well on the East Bequia Prospect
pursuant to Article 7.3, RB shall have earned an assignment of an
undivided 65% Working Interest in the East Bequia Leases.
9.3.1 Within thirty (3 0) days after the release from location of the
rig that drilled the Well on the East Bequia, Prospect, Shell
shall prepare and deliver to RB assignments conveying RB's 65%
earned leasehold interest in the East Bequia Leases.
9.3.2 All future Operations on the East Bequia Leases will be conducted
under a Joint Operating Agreement in the form of Exhibit D and the
Parties shall execute said Joint Operating Agreement concurrent
with conveyance of RB's Earned Interest in the East Bequia Leases.
9.3.3 SDDI shall bear and pay one hundred percent (100 %) of the
rentals, delay rentals or minimum royalties for the East Bequia
Leases until such time as RB has earned a Working Interest in said
leases and Shell has conveyed RB's Working Interest to RB in
accordance with Subsection 9.3.1 above. Thereafter, RB shall pay
its proportionate share of such rentals, delay rentals or minimum
royalties for the East Bequia Leases.
ARTICLE 10 - FARMOUT
In the event RB notifies SDDI of its intent to develop the East Boomvang
Prospect under Article8, and SDDI does not elect to remain as a 50% Working
Interest partner in East Boomvang underArticle 9.1.2, SDDI agrees to farmout
its Working Interest in East Boomvang to RB under thefollowing terms:
10.1 Shell, within ninety (90) days of SDDI's receipt of RB's election to
develop the East Boomvang Prospect, shall prepare and deliver to RB
assignments conveying 100% of Shell's rights, title and interest in East
Boomvang Leases.
10.2 SDDI shall retain a three percent of eight-eighths (3% of 8/8ths)
overriding royalty interest in the East Boonivang Leases.
10.3 After cumulative production of 200 BCF from the East Boonivang Leases,
SDDI may elect as follows:
10.3.1 convert the three percent of eight-eighths (3% of 8/8ths)
overriding royalty interest in Subsection 10.2 to an
undivided twenty five percent (25%) Working Interest.
Within thirty (30) days after such election, RB shall
prepare and deliver to SDDI assignments conveying a 25%
leasehold interest in the East Boonivang Leases.
10.3.2 escalate the three percent of eight-eighths (3% of 8/8ths)
overriding royalty interest in Subsection 10.2 to a five
percent of eight-eighths (5% of 8/8ths) overriding royalty
interest.
10.4 If pursuant to Subsection 10.3.1, SDDI elected to convert the three
percent of eight-eighths (3% of 8/8ths) overriding royalty interest in
Subsection 10.3.1 to an undivided twenty five percent (25%) Working
Interest, then after cumulative production of 350 BCF from the East
Boomvang Leases, the undivided twenty five percent (25%) Working
Interest shall increase to an undivided thirty five percent (35%)
Working Interest. Within. thirty (30) days after such increase, RB
shall prepare and deliver to SDDI assignments conveying to SDDI the
increased leasehold interest in the East Boonivang Leases .
10.5 This volume based Working Interest conversion shall only be prospective
(i.e., in the event the payout account is negative. SDD1 shall not be
required to pay its share of previous unrecouped expenditures, if any).
Therefore, SDDI as a new Working Interest owner, shall only be entitled
to its proportionate share of revenue and be responsible for its
proportionate share of expenses subsequent to the effective date of
SDDI's Working Interest conversion as set out in Section 10.3.
10.6 The overriding royalty interest set out in Subsection 10.2 and 10.3.2
shall be calculated and paid in the same manner and at the same time as
royalties to the Minerals Management Service.
ARTICLE 11 - SUSPENSION AND TERMINATION
11.1 In the event of, and upon SDDI's receipt of notice from RB that RB
elects not to develop the East Boomvang Prospect under Article 8, this
Agreement shall ipso facto terminate.
11.2 In the event RB elects to develop the East Boonivang Prospect pursuant
to Article 8, and SDDI does not elect to remain as a 50% Working
Interest partner in East Boomvang under Article 9.1.2, RB will proceed
with Development Operations; however it may suspend Development
Operations at its sole election.
11.3 In the event RB elects to Develop the East Boonivang Prospect pursuant
to Article 8, but suspends Development Operations pursuant to Subsection
11.2 for a period of 180 days or more, this Agreement shall terminate.
Should RB need additional time to commence Development Operations, RB
may request an extension of the 180 day period. It is intended that the
approval for an extension shall not be unreasonably withheld by SDDI.
11.4 In the event of termination pursuant to Subsections 1 1. I or 1 1. 3
above, the Parties agree as follows:
11.4.1 This Agreement shall terminate and RB shall not have earned
any interest in SDDI's leasehold and RB rights to earn any
interests in SDDI's leasehold shall terminate; however, RB
shall continue to be bound by the confidentiality and
indemnity provisions in force between the Parties.
11.4.2 Within thirty (30) days of RB's election to terminate under
this Article 11, RB shall prepare and deliver to SDDI
assignments conveying the relevant Worldng Interests in
SDDI's leasehold that SDDI may have previously assigned to
RB under this Agreement.
11.4.3 Within fifteen (15) days of RB's election to terminate under
this Article 11, RB shall prepare and deliver to SDDI
Designation of Operator forms designating SDDI as Operator
for all leases to which SDDI previously designated RB as
Operator.
11.4.4 The Geophysical Data License Agreement shall terminate and
RB shall return all data and all documents generated from
such data to SDDI which was previously furnished to RB under
the Geophysical Data License Agreement.
11.4.5 SDDI, at its sole election, may take over any previously
drilled but not plugged and abandoned well(s) and equipment
under this Agreement. In the event SDDI does not elect to
take over such well(s) and equipment, RB shall plug and
abandon any well(s) prior to termination of this Agreement.
ARTICLE 12 - AREA OF MUTUAL INTEREST
In the event all or a portion of the North Boomvang and/or East Bequia
Prospects expire, RB and SDDI shall establish a 50/50 area of mutual interest.
12.1 If, other than in conjunction with RB, SDDI or another party acting on
behalf of SDDI, acquires a lease covering North Boomvang Prospect and/or
East Bequia Prospect at the 1998 Western Gulf of Mexico Lease Sale,
hereinafter sometimes referred to as "AMI Obligation", then RB shall
have the right, but not the obligation, to acquire from SDDI an
undivided 50.00% of the interest acquired by SDDI. RB shall be notified
in writing by SDDI within fifteen (15) days of such acquisition and
shall have thirty (30) days after receipt of such notice to advise SDDI
whether or not RB elects to acquire its 50.00% share of the interest
acquired by SDD1. If RB elects to exercise its right under this
Agreement, the consideration owed by RB to SDDI shall equal 50.00% of
the consideration paid by SDDI for such interest.
12.2 If, other than in conjunction with SDD1, RB or another party acting on
behalf of RB, acquires a lease covering North Boomvang Prospect and/or
East Bequia Prospect at the 1998 Western Gulf of Mexico Lease Sale (AMI
Obligation), then SDDI shall have the right, but not the obligation, to
acquire from RB an undivided 50.00% of the interest acquired by RB.
SDDI shall be notified in writing by RB within fifteen (15) days of such
acquisition and shall have thirty (30) days after receipt of such notice
to advise RB whether or not SDDI elects to acquire its 50.00% share of
the interest acquired by RB. If SDDI elects to exercise its right under
this Agreement, the consideration owed by SDDI to RB shall equal 50.00%
of the consideration paid by RB for such interest.
12.3 All future operations would be conducted under a Joint Operating
Agreement in the form of Exhibit D and the Parties shall execute said
Joint Operating Agreement within thirty (30) days of any election to
acquire under the AMI Obligation.
ARTICLE 13 - DEVELOPMENT PLAN
In the event SDDI elects to retain a 50% working interest in the East
Boonivang Leases as provided in Subsection 9.1.2, the Development Plan shall
be proposed in accordance with the East Boomvang Prospect Joint Operating
Agreement.
In the event SDDI does not exercise its election to retain a working interest
in the East Boonivang Leases, as provided in Article 10, RB agrees to hold
periodic technical meetings with SDDI to allow SDDI to review and have input
into RB's plans for development of the East Boomvang Leases, it being
understood that the final decisions with respect to same shall be reserved to
RB.
ARTICLE 14 - CO-DEVELOPMENT BETWEEN
EAST BOOMVANG, NORTH BOOMVANG AND EAST BEQUIA
14.1 The Parties will attempt to co-develop successful wells from East
Boomvang, North Boonivang and East Bequia together to the extent such
co-development is feasible and practical. In such co-development, the
Parties agree to utilize gas throughput as a means to allocate the cost
of shared or common transportation pipelines, gathering facilities
and/or subsea production system, hereinafter referred to as "Common
Development Facilities and Pipelines".
14.2 In the event RB desires to co-develop East Boonivang, North Boonivang
and/or East Bequia, SDDI and RB may not have a consistent Working
Interest throughout all three prospects. Therefore, the Parties agree
that in the event (i) SDDI elects not to retain its entire Working
Interest in East Boonivang under Article 10 hereof, and (ii) that North
Boonivang and/or East Bequia share Common Development Facilities and
Pipelines with the East Boomvang development, SDDI shall have the
following election:
14.2.1 Farmout its Working Interest in North Boomvang and/or East
Bequia to RB under mutually agreeable terms.
14.2.2 Pay its Working Interest Share of well and subsea costs
directly attributable to North Boomvang and/or East Bequia
plus pay a mutually agreeable processing/transportation fee
to RB which will be intended to reimburse RB over time for
its cost of all the Common Development Facilities and
Pipelines (based upon mutually agreeable reserve evaluation)
which are attributable (utilizing gas throughput) to SDDI's
allocated proportionate share of the costs (including
financing costs).
ARTICLE 15 - WELL AND PRODUCTION INFORMATION
15.1 SDDI shall have the right to take its production in kind. SDDI's share
of any gas production is committed to a gas contract with Coral Energy.
15.2 Irrespective of SDDI's elections as set out above, except as provided in
Article 9.1.4, SDDI shall receive all well and production information
(including data from down hole pressure gauges) at the same time and
manner as a Working Interest owner.
ARTICLE 16 - UNITIZATION
Where applicable, it is the intent of the parties to secure MMS approval to
unitize prior to commencement of Development Operations. To facilitate
unitization, the Parties plan to seek MMS involvement as early as three (3)
months following cessation of operations associated with the drilling of any
Commitment Well.
ARTICLE 17 - SURFACE FACILITIES
In the event SDD1 does not exercise its election to retain a working interest
in the East Boomvang Leases as provided in Subsection 9.1.2 and RB installs a
facility for surface processing of production from the East Boomvang Leases,
RB agrees to allow SDDI to have access to such facility in the order of
priority follows:
a. production from the East Boomvang Leases;
b. joint RB/SDDI production from non-East Boomvang leases;
c. RB or SDDI non-East Boomvang leases; and
d. Third party production;
and RB agrees that SDDI will be charged a lower fee than other third party
production, subject to applicable law.
In the event SDDI owns a working interest, priority access to any such
facility shall be subject to the terms of any Joint Operating Agreement
executed between RB and SDD1.
ARTICLE 18 - PLATFORM ACCESS
RB has been in contact with various owners of platforms which could serve as a
processing facility, therefore the contingency set forth in paragraph 12(b) of
that certain Letter Agreement dated July 12, 1996 between Shell Offshore Inc.
and RB, regarding RB's successful negotiation of platform access is hereby
removed.
ARTICLE 19 - NOTICES
19.1 Any notice provided for or permitted to be given shall be in writing,
properly addressed to the Party to whom the notice is directed with
postage and charges prepaid, and, delivered by the United States
certified mail/return receipt requested or by commercial mail/return
receipt requested or by personal delivery/receipt or by fax
transmission/confirmation of receipt requested.
19.2 A notice delivered by mail or in person shall be deemed properly served
when actually received by the Party to whom the notice is directed.
Actual receipt of the notice shall be established by the date on which
the receipt accompanying the notice was signed by the receiving Party.
A notice delivered by fax shall be deemed properly served twenty-four
(24) hours after receipt is confirmed (excluding Saturdays, Sundays, and
Federal Holidays).
19.3 The address of each Party set forth below shall be its proper address
until such time as such Party gives all other Parties notice of change:
Reading & Bates Development Co. Shell Deepwater Development Inc.
Attention: President SOI Finance Inc.
901 Threadneedle, Suite 200 Attention: Manager Contracts
Houston, Tx 77079 Street: 701 Poydras Street (71039)
Tel (713) 496-5000 Post Office Box 60833
Fax (713) 496-0186 New Orleans, LA 70160
Tel (594) 588-6701
Fax (504) 588-6699
ARTICLE 20 - ASSIGNMENTS
20.1 All assignments shall be prepared utilizing the form of assignment
attached hereto as Exhibits B-1 and B-2.
ARTICLE 21 - SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the parties
and their respective heirs, successors and assigns and shall continue a
covenant running with each Contract Lease within the Contract Area. Each
Party shall incorporate in any assignment of an interest in the Contract
Leases a provision that such assignment is subject to this Agreement.
ARTICLE 22 - APPLICABLE LAW
THIS AGREEMENT SHALL BE INTERPRETED ACCORDING TO THE LAWS OF THE STATE OF
LOUISIANA.
ARTICLE 23 - HEADINGS FOR CONVENIENCE
The headings and table of contents used in this Agreement are for convenience
only and shall be disregarded in construing this Agreement.
ARTICLE 24 - MISCELLANEOUS
Reference herein to the plural of a noun or pronoun shall, whenever
appropriate, include the singular and vice versa. This Agreement is not
intended to benefit or create any rights in any entity not a Party to this
Agreement.
ARTICLE 25 - TERM OF AGREEMENT AND ADMINISTRATIVE PROVISIONS
Notwithstanding the provisions of Article 1 1 herein, this Agreement shall
remain in effect until:
(a) with respect to the East Boomvang Leases, until the earlier of the
cessation of production from such leases or the execution and
delivery of the Joint Operating Agreement by the Parties covering
such Leases;
(b) with respect to the North Boomvang Leases and the East Bequia,
Leases, until earlier of the expiration of the leases, or the
execution and delivery of the Joint Operating Agreement or Joint
Operating Agreements by the Parties covering such North Boomvang
Leases and/or East Bequia Leases.
Termination of this Agreement shall not relieve any Party from any liability
accrued or incurred prior to such termination.
ARTICLE 26 - ENTIRE AGREEMENT
This Agreement, including attached Exhibits contains every obligation and
understanding between the parties relating to the Contract Area, Contract
Leases, SDD1 property, Confidential Information, Shallow Hazards Data,
Geophysical Survey Data, and any exploration, appraisal, development,
operation, production or joint operations (as defined herein) and performance
hereunder and supersedes all previous agreements between the parties relating
to these. This Agreement can be modified only in writing properly executed by
duly authorized representatives of the Parties. Failure of either party to
insist on strict performance by the other of any provision hereunder shall not
be deemed or construed to in any way affect the right to require such
performance.
ARTICLE 27 - COUNTERPART EXECUTION
This Agreement may be executed by signing the original or a counterpart
thereof. If this Agreement is executed in counterparts, all counterparts
taken together shall have the same effect as if the Parties had signed the
same instrument.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
effectiveDecember 16, 1996.
SHELL DEEPWATER DEVELOPMENT INC.
WITNESS: By: ________________________
______________________
______________________ Its: _______________________
SOI FINANCE INC.
WITNESS: By: _________________________
______________________
______________________ Its: ___________________
READING & BATES DEVELOPMENT CO.
WITNESS: By: _________________________
______________________
______________________ Its: _________________________
EXHIBIT "A-1"
ATTACHED TO SDDI/SOIFI/RB
JOINT VENTURE AGREEMENT
DATED DECEMBER 16, 1996
EAST BOOMVANG LEASES
Lease Block Effective Expiration Gross
Number Number Date Date Acres
OCS-G 09191 688 11/01/87 10/31/97 5760
OCS-G 09194 732 10/01/87 09/30/97 5760
ORRI Ownership Lease
Royalty Company ORRI Ownership
1/8 USA SOIFI 25% * 100%
1/8 USA SOIFI 25% * 100%
*SOIFI 25% ORRI burdens SDDI's Working Interest only.
EXHIBIT "A-2"
ATTACHED TO SDDI/SOIFI/RB
JOINT VENTURE AGREEMENT
DATED DECEMBER 16, 1996
NORTH BOOMVANG LEASES
Lease Block Effective Expiration Gross
Number Number Date Date Acres
OCS-G 09183 642 10/01/87 09/30/97 5760
OCS-G 09184 643 10/01/87 09/30/97 5760
OCS-G 09185 644 10/01/87 09/30/97 5760
ORRI Ownership Lease
Royalty Company ORRI Ownership
1/8 USA SOIFI 25% * 100%
1/8 USA SOIFI 25% * 100%
1/8 USA SOIFI 25% * 100%
*SOIFI 25% ORRI burdens SDDI's Working Interest only.
EXHIBIT "A-3"
ATTACHED TO SDDI/SOIFI/RB
JOINT VENTURE AGREEMENT
DATED DECEMBER 16, 1996
EAST BEQUIA LEASES
Lease Block Effective Expiration Gross
Number Number Date Date Acres
OCS-G 09186 645 10/01/87 09/30/97 5760
OCS-G 09187 646 10/01/87 09/30/97 5760
OCS-G 10319 690 10/01/88 09/30/98 5760
ORRI Ownership Lease
Royalty Company ORRI Ownership
1/8 USA SOIFI 25% * 100%
1/8 USA SOIFI 25% * 100%
1/8 USA SOIFI 25% * 100%
*SOIFI 25% ORRI burdens SDDI's Working Interest only.
EXHIBIT "B-1"
ATTACHED TO SDDI/SOIFI/RB
JOINT VENTURE AGREEMENT
DATED DECEMBER 16,1996
ASSIGNMENT FORM
PARTIAL ASSIGNMENT OF RECORD TITLE INTEREST
IN FEDERAL OCS OIL AND GAS LEASE
KNOW ALL MEN BY THESE PRESENTS:
That SHELL DEEPWATER DEVELOPMENT INC., a Delaware corporation, whose
address is P. 0. Box 60833, New Orleans, Louisiana 70160-1933 (hereinafter
called 'Assignor"), for and in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, does hereby assign, transfer and
convey unto READING & BATES DEVELOPMENT CO., a Delaware corporation, whose
address is 901 Threadneedle, Houston, Texas 77079 (hereinafter called
"Assignee"), an undivided ___________ percent (______ %) of Assignor's
percent (_____%) right, title and interest in and to that certain Oil and Gas
Lease covering submerged land in the Gulf of Mexico (hereinafter called
"Lease"), more particularly described as follows:
OCS-G ____________ Oil and Gas Lease effective _________________, by and
between the United States of America as Lessor and Shell Offshore Inc.
as Lessee, covering all of Block _____, East Breaks, as shown on OCS
Official Protraction Diagram NG 15-1, containing 5,760 acres.
As a result of this Assignment, record title interest in said Lease is
now held as follows:
SHELL DEEPWATER DEVELOPMENT INC. _____________ %
READING & BATES DEVELOPMENT CO. ______________ %
This Assignment and Assignee's rights hereunder are subject to the
provisions of that certain Joint Venture Agreement dated December 16, 1996, by
and between SHELL DEEPWATER DEVELOPMENT INC., SOI FINANCE INC. and READING &
BATES DEVELOPMENT CO.
Assignee assumes, and agrees to be bound by, all of the obligations and
liabilities of Assignor as to the interest herein assigned, accruing on or
after the effective date hereof. The terms and provisions of this Assignment
shall inure to the benefit of, and be binding upon the parties hereto and
their respective successors and assigns. Assignor agrees to indemnify, defend
and hold Assignee harmless from and against any and all liabilities accruing
prior to the effective date of such Joint Venture Agreement and the Joint
Operating Agreement referred to in such Joint Venture Agreement.
TO HAVE AND TO HOLD said interest herein unto Reading & Bates
Development Co., its successors and assigns, forever, subject to the terms of
said Lease.
This Assignment is made without warranty of title, express or implied,
and without any recourse against Assignor in the event of any failure of title
to said Leases or any part thereof, except that Assignor warrants title
against all claims by, through or under Assignor but not otherwise and that
the title transferred hereunder is free and clear of all liens and
encumbrances (other than the royalty provisions contained in such lease and
the overriding royalty interest being transferred by SOI Finance Inc. to
Assignee concurrently with this Assignment).
IN WITNESS WHEREOF, this Assignment is executed by Assignor and Assignee
on the dates set forth below, but shall be effective for all purposes as of
December 16, 1996 at 7:00 a.m.
WITNESSES: ASSIGNOR:
SHELL DEEPWATER DEVELOPMENT INC.
____________________ By:_______________________
R. W. Robison, Jr.
____________________ Attorney-in-Fact
Date:______________________
WITNESSES: ASSIGNEE:
READING & BATES DEVELOPNENT CO.
____________________ By:________________________
____________________ Title:_____________________
Date:______________________
EXHIBIT "B-2"
ATTACHED TO SDDI/SOIFI/RB
JOINT VENTURE AGREEMENT
DATED DECEMBER 16,1996
ASSIGNMENT OF OVERRIDING ROYALTY INTEREST
IN FEDERAL OCS OIL AND GAS LEASE
KNOW ALL MEN BY THESE PRESENTS:
That SOI FINANCE INC., a Delaware corporation, whose address is P. 0.
Box 61933, New Orleans, Louisiana 70161-1933 (hereinafter called "Assignor"),
for and in consideration of the sum of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby assign, transfer and convey unto READING & BATES
DEVELOPMENT CO., a Delaware corporation, whose address is 901 Threadneedle,
Houston, Texas 77079 (hereinafter called "Assignee"), an
undivided______________ percent(______%) overriding royalty interest in and to
that certain Oil and Gas Lease covering submerged land in the Gulf of Mexico
(hereinafter called "Lease"), more particularly described as follows:
OCS-G_____ , Oil and Gas Lease effective covering all of Block ______,
East Breaks, as shown on OCS Official Protraction Diagram NG 15-1,
containing 5,760 acres.
As a result of this Assignment the overriding royalty interests conveyed
hereby shall be extinguished by confusion and merge into the working interests
out of which each was carved, such that the record title interest in said
Lease remains as follows:
SHELL DEEPWATER DEVELOPMENT INC. ______%
READING & BATES DEVELOPMENT CO. ______%
This Assignment and Assignee's rights hereunder are subject to the
provisions of that certain Joint Venture Agreement dated December 16,1996, by
and between SHELL DEEPWATER DEVELOPMENT INC., SOI FINANCE INC. and READING &
BATES DEVELOPMENT CO.
Assignee assumes, and agrees to be bound by, all of the obligations and
liabilities of Assignor as to the interest herein assigned, accruing on or
after the effective date hereof. The terms and provisions of this Assignment
shall inure to the benefit of, and be binding upon the parties hereto and
their respective successors and assigns. Assignor agrees to indemnify, defend
and hold Assignee harmless from and against any and all liabilities accruing
prior to the effective date of the Joint Venture Agreement dated December 16,
1996 by and between SHELL DEEPWATER DEVELOPMENT INC., SOI FINANCE INC. and
READING & BATES DEVELOPMENT CO. Under no circumstances shall this Assignment
be interpreted or deemed to include the assignment of any rights held or which
may be held by Assignor for mispayments, underpayments or other claims
regarding the overriding royalty interest conveyed hereby, which accrue prior
to the effective date hereof.
TO HAVE AND TO HOLD said interest herein unto Assignee, its successors
and assigns, forever, subject to the terms of said Lease.
Assignor hereby warrants title to the property it is conveying against
the claims and demands of all persons lawfully claiming the same by, through
or under such Assignor, but not otherwise.
IN WITNESS WHEREOF, this Assignment is executed by Assignor and Assignee
on the dates set forth below, but shall be effective for all purposes as of
December 16, 1996 at 7:01 am.
WITNESSES: ASSIGNOR:
SOI FINANCE INC.
______________________ By:__________________________
R. W. Robison, Jr.
______________________ Attorney-in-Fact
Date:_________________________
WITNESSES: ASSIGNEE:
READING & BATES DEVELOPMENT CO.
_____________________ By:__________________________
_____________________ Title:_________________________
Date:_________________________
EXHIBIT "C"
Attached to SDDI/SOIFI/RB
Joint Venture Agreement dated
December 16, 1996
GEOPHYSICAL DATA LICENSE AGREEMENT
Article I.
Contracting Parties
THIS AGREEMENT is entered into in New Orleans, Louisiana this 16th day
of September 1996 by and between Shell Offshore Inc. ("SOI") and Reading and
Bates Development Co. (the "Licensee").
Article II.
General Scope of the Agreement
WITNESSETH:
WHEREAS, SOI has acquired possession of results of the specified
proprietary geophysical surveys (the "Survey") in the Gulf of Mexico as
Detailed in Attachment One and is willing to grant certain rights with respect
to such Data (the "Data") to Reading and Bates Development Co. under such
terms and conditions hereinafter set forth; and
WHEREAS, the Licensee desires to obtain the non-exclusive right to
use the Data, as specified herein and as detailed by Supplement to this
Agreement, and adopted by reference as if incorporated herein, on such terms
and conditions as herein set forth;
IT IS FURTHER UNDERSTOOD AND AGREED that nothing herein shall be
construed to grant any Licensee any ownership interest in (1) the Data, (2)
any copy of the Data, or (3) any copyright to the Data.
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
Article III.
Provisions of the Agreement
1. Non-Exclusive License. In consideration of the mutual
covenants and agreements referenced in this Agreement, SOI offers to grant to
Licensee a non-exclusive license to use the Data as specified in Article III.
12.
2. Confidentiality. Licensee acknowledges that the Data
constitute valuable and highly confidential information that is not generally
available and is proprietary to SOI. Except as expressly otherwise permitted
hereunder, Licensee agrees to keep the Data strictly confidential, and to take
appropriate steps to ensure that its employees and agents keep it strictly
confidential, and to make no use thereof except as permitted by this
Agreement. Failure of Licensee to maintain the Data licensed herein strictly
confidential shall result in the termination of this license and forfeiture of
any and all Data licensed hereunder and any Supplement or copies of any such
Data or Supplements.
3. Control of Data; Related Parties. Except as provided
herein, Licensee shall not sell, convey, deliver, trade, exchange, lend,
disclose, show or otherwise share the Data, or structure maps, stratigraphic
interpretations or any other interpretations based on the Data, or any
reprocessed or redisplayed versions of the Data, to or with any party without
the express prior written approval of SOI, except under the following
conditions:
Licensee may indicate its possession of the Data to visitors of
Licensee and only under the following conditions. Licensee may
show limited profiles through the Data set on electronic media and
may refer to the data owner as Shell Offshore Inc. Licensee may
not reveal the geographic location represented by the Data or
provide details that identify the geographic location, such as
tying well locations.
Licensee is encouraged to and may demonstrate technology applied
to the Data by Licensee, by showing both SOI versions of the Data
delivered to the Licensee and modified Data produced by Licensee's
own processes. Licensee may not reveal location represented by
the Data or provide details that identify location, such as tying
well locations. Licensee may show volume renderings, event
oriented data, or time slice data on electronic media such as a
workstation screen, at Licensee's premises only. However,
Licensee may not produce hardcopy prints of volume renderings,
event oriented data, or time slice data without the prior written
permission of SOI. Licensee may not show volume renderings, event
oriented data, or time slice data at any other venue, without the
prior specific written permission of SOI. Licensee must offer SOI
the same opportunity to view Licensee modified data as any other
viewer. Licensee shall take such security as may be necessary to
protect the Data licensed herein from access from unauthorized
persons through electronic media such as Internet. Failure to
secure the Data from such unauthorized access shall constitute a
breach of this Agreement resulting in forfeiture of all data
licensed and such other penalties as authorized by law.
Licensee may publish and is encouraged to publish details of the
technology applied to the Data by Licensee, by using both SOI
versions of the Data delivered to the Licensee and modified Data
produced by Licensee's own processes. Licensee may not reveal
location represented by the Data or provide details that identify
location, such as tying well locations. Licensee may not publish
volume renderings, event oriented data, or time slice data without
the prior written permission of SOI. Licensee must offer at no
expense to SOI reprints of published materials containing Data or
modified Data obtained hereunder.
Any Company or Organization owning, directly or indirectly, au of the
equity interest in the Licensee and wholly-owned subsidiaries of the Licensee
shall have the same rights to the Data as has the Licensee provided such
company, subsidiary or affiliate agrees to abide in writing by the provisions
of this Agreement and any Supplements. The Licensee shall maintain
appropriate controls over the dissemination of Data by any party to whom it is
furnished in accordance with the provisions of this paragraph 3 and shall be
responsible for any unauthorized use or dissemination of the Data by any such
party. The Data or modified Data cannot be sold without the prior consent of
SOI and only upon such terms and conditions as agreed by SOI in writing.
4. Valid Regulations. The Data were obtained under U.S.
Geological Survey or Minerals Management Service Permits, and the use thereof
is governed by statute and by regulations published in the Federal Register.
By execution of this document Licensee acknowledges notification by SOI that
both SOI and Licensee are bound by such permits and regulations.
5. Transfer of Data. This Agreement and the rights to the Data
granted hereunder and any Supplement are intended to be for the sole use and
benefit of the Licensee and may not be sold, transferred or assigned to, or
placed under the direct or indirect control of any other person or entity
without the prior written consent of SOI whether by means of merger,
consolidation, stock or asset sale, liquidation or otherwise.
6. Entire Agreement. This Agreement, together with the
Supplement hereto, and any invoices issued pursuant hereto represents the
entire agreement between the parties in relation to the subject matter hereof
and shall not be amended or altered without the written consent of both
parties.
7. Representations and Warranties. Notwithstanding any
provision in this Agreement to the contrary, conveyance of a non-exclusive
license of the Data shall be without warranty, express, statutory, or implied.
Licensee specifically assumes all cost, risk, and expense, despite any fault
or negligence of SOI as to any use made of, or decisions based upon, the Data,
and agrees that SOI shall have no liability to Licensee as a result of
Licensee's use of the Data.
8. Independent Evaluation. Licensee acknowledges that SOI has
not made any statements or representations concerning the quality, condition
or accuracy of the Data or the present or future value to be derived from the
Data.
9. Remedies. With respect to any claim against SOI the
remedies of the Licensee hereunder shall be limited to a return of the Data
and no direct, indirect, punitive or consequential damages shall be available.
This Agreement shall be construed under the laws of the State of Louisiana
with venue in New Orleans, Louisiana. The parties hereby further agree that
any dispute arising out of this Agreement shall be resolved pursuant to the
Federal Arbitration Act which is referenced herein and adopted as if copied in
extenso herein, and agree to binding arbitration of any such disputes. The
parties further hereby adopt the Rules of the American Arbitration Association
to govern such proceedings.
10. Term. This Agreement shall be effective from the date set
forth above and shall continue in effect until terminated by either party on
10 days written notice to the other. However, any provisions relating to
confidentiality, restrictions on the use and remedies shall survive any
termination of this Agreement or any Supplement.
11. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
all shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
12. Description of Data. The data are from SOI's East Boomvang
3D Survey and cover East Breaks protraction area blocks 642, 643, 644, 645,
686, 687, 688, 689, and 732. The seismic deliverable shall be in SEGY format
after bandpass, gain and integration. The interpretation file shall be
included with the seismic deliverable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
SHELL OFFSHORE INC.
__________________________
__________________________ By:_________________________________
M. R. Kuzio
Chief Geophysicist Shelf Division,
Shell Offshore Inc.
READING & BATES DEVELOPMENT CO.
__________________________
__________________________ By:_______________________________
Name:
Title:
FORM OF JOINT OPERATING AGREEMENT
TABLE OF CONTENTS
ARTICLE CONTENTS PAGE
1. Contract Application 1
2. Definitions 1
3. Exhibits 7
4. Selection of Operator 7
5. Rights and Duties of Operator 10
6. Expenditures and Annual Operating Plan 12
7. Confidentiality of Data 18
8. Voting, Elections & Notices 21
9. Geophysical Operations 25
10. Exploratory Operations 26
11. Appraisal Operations 31
12. Development Plan 38
13. Development Operations 45
14. Facilities and Gathering Systems 51
15. Disposition of Hydrocarbon Production 52
16. Non-consent Operations 53
17. Withdrawal from Agreement 62
18. Abandonment and Salvage 64
19. Rentals, Royalties and Minimum Royalties 65
20. Taxes 66
21. Insurance and Bonds 67
22. Liability, Claims, Lawsuits and
AlternateDisputeResolution 68
23. Contributions 69
24. Assignments and Preferential Right to
Purchase 71
25. Force Majeure 74
26. Aministrative Provisions 74
EXHIBIT "D"
Attached to SDDI/SOIFI/RB Joint Venture
Agreement dated December 16, 1996
JOINT OPERATING AGREEMENT
OUTER CONTINENTAL SHELF - GULF OF MEXICO
THIS AGREEMENT is made effective as of the __________________________by
and between Shell Deepwater Development Inc. and Reading & Bates Development
Co., the signers hereof, herein referred to collectively as "Parties" and
individually as "Party."
WHEREAS, the Parties are owners of one or more OCS oil and gas Leases,
identified in Exhibit " A-1" (Description of Leases) and desire to jointly
explore, develop and operate 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
jointly explore, develop and operate the Contract Area according to the
following provisions:
ARTICLE 1
CONTRACT APPLICATION
1.1 Application in General: This Agreement applies to the joint exploration,
development and operation of the Contract Area for the production of
Hydrocarbons therefrom and the transportation of same by pipeline(s) or
otherwise from the Contract Areas.
1.2 Application to Contract Area: This Agreement shall apply to the Contract
Area as defined in Article 2 below. Unless otherwise provided for in this
Agreement, all the rights and obligations in and under the Lease(s) comprising
the Contract Area, all joint property and all Hydrocarbons produced from the
Contract Area shall be owned jointly by the Parties according to their
respective Working Interests in the Contract Area.
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 directly or indirectly owns or
controls fifty percent (50%) of the voting stock (or other interests) in the
other corporation.
- - 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 Joint Operating Agreement, together with its
attached Exhibits.
2.4 Annual Operating Plan: shall mean the operational plan and estimate of
Costs for joint operations in the next ensuing calendar year as described in
Article 6.7 (Annual Operating Plan).
2.5 Appraisal Operations: shall mean all operations conducted within a
Contract Area 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.
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 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. 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 Information;
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 Work Product" as that term is defined in
Exhibit "G" (Integrated Project Team and Technology Sharing).
2.9 Contract Area: shall mean the OCS Leases described on Exhibit "A-1", 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.
2.11 Deepen or Deepening: shall mean any operation to drill an existing well
(includingsidetracking a well) deeper than the stratigraphic equivalent of the
deepest formation previously 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 a Contract Area.
2.13 Development Operations: shall mean all operations conducted pursuant to
a Development Plan.
2.14 Development Phase: shall mean Development Operations associated with the
installation of a Production System within a Contract Area.
2.15 Development Plan: shall mean the plan for installing a Production System
and developing and producing Hydrocarbons from a Contract Area as described in
Article 12 (Development Plan). The Development Plan (as defined herein) is
not the Development Plan as required by the MMS under 30 CFR 250.34(a) nor
under the DOCD required under 30 CFR 250.34(d) (1).
2.16 Development Well: shall mean any well proposed within a Contract Area
subsequent to the approval of a Development Plan for such Contract Area.
2.17 Disproportionate Spending Settlement: shall mean tile 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.
2.18 Election: shall mean a decision by a Party to either participate or to
become a Non-Participating Party in a proposed operation (including the AFE
associated with the operation). 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
applicable time limit specified in this Agreement, or both.
2.19 Exploratory Operations: shall mean the first well drilled, or its
substitute, in the Contract Area as described in Article 10 (Exploratory
Operations).
2.20 Exploratory Well: shall mean any well proposed and drilled as an
Exploratory Operation.
2.21 Fabrication AFE: shall mean the individual AFEs collectively submitted
pursuant to an approved Development Plan for the construction and installation
of a Production System.
2.22 Facilities: shall mean all production equipment beyond the wellhead
connections (excluding Production Systems and Subsea Production Systems, but
including injection and disposal wells) installed for the benefit of the
Contract Area to handle or service Hydrocarbon production from the Contract
Area. Facilities also include (but are not limited to) the flowlines and
gathering lines that transport the Hydrocarbons from the wellhead but exclude
pipelines used to transport Hydrocarbons to shore.
2.23 Final Design AFEs: shall mean the individual AFEs, collectively
submitted pursuant to an approved Development Plan pursuant to Article 12.5
(Content of the Development Plan).
2.24 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;
depending on the type of proposal. 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.
2.25 Geophysical Operations: shall mean geophysical surveys proposed pursuant
to Article 9 (Geophysical Operations).
2.26 Hydrocarbons: shall mean the oil and gas and associated liquid and
gaseous by-products (except helium) which may be produced from a wellbore
located on the Contract Area.
2.27 Integrated Project Team: 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 a Contract Area, and
for the planning, design, engineering and installation of a Production System
for a Contract Area as further provided for in Exhibit "G" (Integrated Project
Team and Technology Sharing Provisions). The IPT shall be formed pursuant to
Article 12.0 (Development Plan).
2.28 Joint Account: shall mean the Operator's account 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.
2.29 Lease: shall mean each of the OCS federal oil and gas Leases (or portion
thereof) identified on Exhibit "A-1" attached hereto.
2.30 Non-Consent Operations: shall mean Exploratory Operations, Appraisal
Operations or Development Operations for which one or more Parties, having the
contractual right to do so, makes or is deemed to have made, an Election not
to participate in the proposed operation; and where the Participating Parties
proceed to conduct the operation at their sole Cost and risk pursuant to
provisions of Article 16 (Non-Consent Operations).
2.31 Non-Operating Party: shall mean any Party to this Agreement other than
the Operator (or a substitute Operator).
2.32 Non-Participating Party: shall mean any Party to this Agreement who,
having the contractual right to do so, makes 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).
2.33 Non-Participating Party's Share: shall mean the share of Working
Interest and Costs that a Non-Participating Party would have assumed if all
Parties had made an Election to participate in the proposed operation.
2.34 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 sufficient to test the stratigraphic equivalent 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.
2.35 Operator: shall mean the Party identified in Article 4.1 (Designation of
the Operator) designated to conduct all operations pursuant to the terms of
this Agreement. The term shall also refer to any successor or substitute
Operator selected pursuant to Article 4.2 (Substitute Operator) or Article 4.5
(Selection of Successor Operator).
2.36 Participating Interest: shall mean a Participating Party's percentage 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 (unless a different Cost sharing
basis has been agreed upon by the Participating Parties in such operation).
2.37 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.
2.38 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.
2.39 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.
2.40 Production System: shall mean an offshore structure (whether fixed,
compliant, subsea or floating), and all associated components thereof
including the associated Facilities, flowlines, gathering lines and risers
which are used for the production of Hydrocarbons from the Contract Area.
This term shall also include the following defined terms:
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 flowlines 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;
Initial Production System: shall mean the Production System for the
Contract Area included in the first approved Development Plan;
Subsequent Production System: shall mean any new or expanded Production
System proposed after the installation of the Initial Production System
for the Contract Area.
2.41 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.
2.42 Subsequent Exploratory Operation: shall mean any operations conducted
subsequent to an Exploratory Well reaching its Objective Depth but prior to
the plugging and abandonment of such Exploratory Well.
2.43 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).
2.44 Withdrawing Party: shall mean a Party that withdraws from this Agreement
under the conditions defined in Article 17.1 (Right of Withdrawal) or is
deemed to have withdrawn under Article 16.2 (Acreage Forfeiture Provisions).
2.45 Working Interest: shall mean the leasehold interest of each Party in and
to each Lease within the Contract Area (expressed as the percentage described
in Article I of Exhibit "A-2" attached hereto).
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'.
Exhibit "A-1" Contract Area
Exhibit "A-2" Contract Area, Working Interests of the Parties,
Operator and Representatives
Exhibit "B" Offshore Insurance Provisions
Exhibit "C" Accounting Procedure
Exhibit "D" Gas Balancing Agreement
Exhibit "E" Certification of Nonsegregated Facilities
Exhibit "F" News Release Guidelines
Exhibit "G" Integrated Project Team and Technology Sharing
Exhibit "H" Dispute Resolution Procedure
Exhibit "I" Memorandum of Joint Operating Agreement
ARTICLE 4
SELECTION OF OPERATOR
4.1 Designation of the Operator: Reading & Bates Development Co. is
designated as the Operator for the Contract Area and shall conduct all
operations within such Contract Area 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, 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 and subject to their
control, supervision and direction. 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 a Contract Area, 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 a
Contract Area or for good cause under the following circumstances.
4.4.1 Removal Upon Assignment: If the Operator assigns all or a portion
of it's Working Interest in a Contract Area (excluding any interest
assigned to an Affiliate) which reduces the Operator's Working Interest
in a Contract Area to less than the Working Interest of another Non-
Operating Party, 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.
4.4.2 Removal for Cause by Vote: The Operator may be removed for cause
by vote of the Parties as a General Matter if the Operator commits any
of the following acts:
(a) the Operator becomes insolvent or unable to pay its debts as
they mature, makes an assignment for the benefit of
creditors, commits any act of bankruptcy or seeks relief
under laws providing for the relief of debtors; or,
(b) a receiver is appointed for the Operator or for
substantially all of its property and/or affairs; or,
(c) the Operator commits an act of gross negligence or willful
misconduct; or,
(d) the Operator is unable to meet the standards of operation
contained in Articles 5.2 (Workmanlike Conduct), 5.3
(Drilling), 5.4 (Liens and Encumbrances) and 5.6 (Reports to
Government Agencies); or,
(e) the Operator commits a substantial breach of a material
provision of this Agreement and fails to cure same within
thirty (30) days after receipt of notice of such breach.
However, if the breach specified in the notice is of such a
nature that it reasonably cannot be corrected within the
thirty (30) day period, and the Operator within said period
begins corrective action or steps to correct the breach and
thereafter diligently carries such corrective action to
completion, the Operator shall not be removed.
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 am. 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 jointly owned by the Parties, including all funds
relating to the Joint Account, all joint Hydrocarbons, all joint equipment,
materials and appurtenances used in conducting operations and all books,
records and inventories relating to joint operations (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 joint operations 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 joint property and all joint Hydrocarbons, and
such inventory shall be used in the return of and the accounting for the joint
property and the joint Hydrocarbons 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 and personnel reasonably necessary for the Operator to conduct the
operations provided for in this Agreement.
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,
Operator owned 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 agreement 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. Prior to RB
utilizing a drilling rig owned by RB's affiliate, the parties will establish a
mutually agreeable day rate based upon the average commercial rates for a
similar specification drilling rig prevailing in the immediate area.
5.4 Liens and Encumbrances: The Operator shall use reasonable efforts to
keep the Leases, Production Systems, Facilities and other equipment and any
jointly owned Hydrocarbons free from all liens and encumbrances [except those
provided for in Article 6.3 (Security Rights) ] 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" (Accounting Procedure).
5.6 Reports to Government Agencies: The Operator shall make timely reports
to all governmental authorities 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 a Contract Area 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
cementation 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 or 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 Articles 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 Contract Area shall not be entitled to receive any
information specified in Articles 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 cooperate and use due diligence
to avoid gas imbalances resulting in pipeline penalties under the provisions
of the applicable transportation tariffs of any transporting pipelines. Any
additional costs imposed on Operator as a result of gas pipeline imbalances
with transporters shall be borne by the individual Parties in the proportion
that each individual Party's over and under deliveries caused such imbalance
penalty, except where the imbalance is caused by the gross negligence or
willful misconduct of Operator. For purposes of this Article, gas pipeline
imbalances shall be defined as the difference between gas nominations accepted
by the gas transporter and the actual volume delivered to the gas transporter
for each Party's account.
ARTICLE 6
EXPENDITURES AND ANNUAL OPERATING PLAN
6.1 Basis of Charges to the Parties: Except as otherwise provided, the
Operator shall pay all Costs of joint operations and each Participating Party
shall reimburse the Operator, in proportion to its Participating Interest, for
the Costs of each joint 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" (Accounting Procedure), attached hereto.
6.2 Authorization for Expenditure: The Operator shall not make any single
expenditure or undertake any project or operation costing Two Hundred Thousand
Dollars ($200,000) 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 Thousand Dollars ($200,000), 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 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%).
6.2.2 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 fifteen percent (15%) or three million
dollars ($3,000,000), 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 6.2.2 shall be subject to the provisions of Article
16 (Non-Consent Operations) only for the amount of such supplement, or
forfeiture of interest in the event of an Exploratory Operation.
6.2.3 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 fifteen percent (15%) or 4 million five hundred thousand dollars
($4,500,000), 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 6.2.3 shall be subject to the provisions of
Article 16.5.3 (Geophysical Operations, Feasibility Study, Integrated
project Team andlor Final Design AFE) only for the amount of such
supplement.
6.2.4 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 fifteen
percent (15%) or seven million five hundred thousand dollars
($7,500,000), 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 6.2.4 shall be subject to the provisions of Article 16.5.3
(Geophysical Operations, Feasibility Study, Integrated Project Team
andlor Final Design AFE) only for the amount of such supplement.
6.2.5 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 fifteen percent
(15%) or twenty million dollars ($20,000,000), 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 6.2.5 shall be subject to
the provisions of Article 16.2 (Non-Consent Fabrication AFE for the
Initial Production System).
6.2.6 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 fifteen
percent (15%) or three million dollars ($3,000,000), 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 6.2.6 shall be subject, if
applicable, to the provisions of Article 16 (Non-Consent Operations)
only for the amount of such supplement.
6.2.7 Further Operations During a Force Majeure: No Party shall be
allowed to make an Election not to participate in a further operations
under Articles 6.2.2 (Supplemental AFE for Cost Overruns for Wells),
6.2.3 (Supplemental AFE FOR Cost Overruns on Integrated Project Team
AFE), 6.2.4 (Supplemental AFE for Cost Overruns on Final Design AFE),
6.2.5 (Supplemental AFE for Cost Overruns on Fabrication AFE) or 6.2.6
(Supplemental AFE for Cost Overruns on All Other 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 Rights: In addition to any other security rights and remedies
provided by law with respect to services rendered or materials and equipment
furnished under this Agreement, the Parties shall have the following security
rights:
6.3.1 Operator's First Lien: Each Non-Operator grants the Operator a
first lien upon each Party's Working Interest in the Leases within a
Contract Area (including any interests in the Leases now owned or
hereafter acquired), including but not limited to (a) all equipment
installed on the Lease(s), (b) all Hydrocarbons or other minerals
severed and extracted from or attributable to the Leases, (c) all
accounts and proceeds of sale (including, but not limited to, accounts
resulting from the sale of such Hydrocarbons or other minerals),
contract rights and general intangibles arising in connection with the
sale of such Hydrocarbons or other minerals, (d) fixtures and (e) any
and all accessions, additions and attachments thereto and the proceeds
and products therefrom. This first lien shall secure the payment of all
charges against such Party, together with interest thereon at the rate
set forth in Exhibit "C" (Accounting Procedure) (or the maximum rate
allowed by law, whichever is the lesser), reasonable attorneys' fees,
court costs and other directly related collection costs. If any Party
does not pay such charges when due, the Operator shall have the
additional right to collect from the purchaser of defaulting Party's
Hydrocarbon production the proceeds from the sale of such Party's share
of Hydrocarbon production in the Contract Area until the amount owed has
been paid. Each purchaser shall be entitled to rely on the Operator's
statement concerning the amount owed.
6.3.2 Non-Operating Party's Security Interest: Operator grants a like
security interest to the Non-Operating Parties to secure payment of
Operator's proportionate share of expenses. Each Party paying its share
of unpaid expenses pursuant to Section 6.5 (Unpaid Charges) hereof
shall, to obtain reimbursement thereof, be subrogated to the security
rights described herein.
6.3.3 Recordation: To provide evidence of, and to better protect the
Parties' security rights created hereunder, upon request, each Party
agrees to and shall execute and notarize a financing statement on a UCC
form, and the Memorandum of Joint Operating Agreement attached as
Exhibit "I". The Parties hereby authorize the Operator to file the
notarized Memorandum of Joint Operating Agreement to provide record
notice of this Agreement in the appropriate public records.
6.4 Default: If any Party does not pay its share of the charges authorized
under this Agreement when due, the Operator may give that Party notice that
unless payment is made within thirty (30) days, the non-paying Party shall be
in default. Any Party in default shall have no further access to the rig,
maps, records, data, interpretations or other information obtained in
connection with operations or be allowed to participate in meetings. A Party
in default shall not be entitled to vote on any General Matter until such time
as the Party in default is no longer in default. The voting interest of each
non-defaulting Party shall be counted in the proportion its Participating
Interest bears to the total non-defaulting Participating Interests. As to any
operation approved during the time a Party is in default, such Party in
default shall be deemed to be a Non-Participating Party. If a Party notifies
the Operator in writing that all or a portion of such payment is not being
made as a result of a good faith dispute over such charges, said Party shall
not be considered in default as to the disputed amount, provided that any
undisputed portion of such Costs are promptly paid to the Operator.
6.5 Unpaid Charges: If any Participating Party fails to pay its share of the
charges due hereunder within thirty (30) days after receipt of the Operator's
statement, the Operator may take immediate steps to diligently pursue
collection and to exercise the Operator's lien and security rights granted by
this Agreement. The Operator shall keep an accurate account of amounts owed
(plus interest and costs) by the Party in default and any amounts collected
against the indebtedness. If a Party is in default and any indebtedness
remains delinquent for a period of three (3) months, the other Participating
Parties shall, upon the Operator's request, pay the unpaid amount in
proportion that their Participating Interest bears to all paying Participating
Interests. Each Participating Party paying its share of the unpaid amount
shall be subrogated to the Operator's lien and security rights to the extent
of such payment.
6.6 Carved-out Interests: The 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 Rights) 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 interests 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.
6.7 Annual Operating Plan: Beginning in the year in which a Development Plan
is approved for a Contract Area, and each subsequent year thereafter, the
Operator shall develop an Annual Operating Plan. The Annual Operating Plan
process will be used (1) as a reporting mechanism by which the- Operator will
inform the Non-Operating Parties of results of the previous year's activities,
(2) to review ongoing operations and (3) 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.
6.7.1 Development and Submission of the Annual Operating Plan: Prior to
May I 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 I of each year.
6.7.2 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 I of each
year.
6.7.3 Content of Annual Operating Plan: The Annual Operating Plan will
include an estimated capital budget, expense budget and Operator's
anticipated forecast as follows:
6.7.3.1 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.
6.7.3.2 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.
6.7.3.3 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.
6.7.4 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 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, Election & Notices), shall be deemed a
modification to the Annual Operating Plan.
ARTICLE 7
CONFIDENTIALITY OF DATA
7.1 Confidentiality Obligation: The Parties agree that all Confidential Data
acquired or obtained by any Party with respect to the joint operations
conducted under this Agreement (and the scope and terms of this Agreement
itself) 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" under Article 7.1.1
or as a "permitted disclosure" under Article 7.1.2).
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 a Party);
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 who 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 Contract Area, 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 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); M 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 a 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 a joint operation shall
be the joint 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 jointly owned Confidential Data for other
similar data and information owned by a third party. The approval of
such exchange or trade shall require unanimous approval of the
Participating Parties which own such data. Upon approval of such trade
by the 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 jointly owned by
the Party.
7.3 Access to the Lease and Rig: Each Participating Party's authorized
representatives shall have access to any drilling rig, Production System or
Facility serving a Contract Area 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 Contract Area 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 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: 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 thirty (30) days of receipt 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 & 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:
(1) "General Matters" for which a vote for approval is required prior
to action, but no accompanying Election regarding participation is
required (an example of such a General Matter is a well log trade
proposed and approved under Article 7.2.1), or;
(2) Proposed operations for which both a vote for approval as a
General Matter and an accompanying Election regarding
participation are required prior to conducting the operation. (An
example of such a General Matter is an Appraisal Well proposed,
approved and elected upon under Article 1 1. 1), or;
(3) Proposed operations for which a vote for approval as a General
Matter is not required and where only 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 8.0.
8.2 Voting Procedures on General Matters and Elections: Any General Matter
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 Contract Area 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 either:
(a) should there be only two (2) Parties to this Agreement a
General Matter approval shall require mutual consent of the
Parties, except as to any of the following proposed
operations (as to which such operations will require an
Election by the Parties rather than requiring the prior
approval by the Parties as a General Matter)
Exploratory Operations (Article 10),
Appraisal Operations (Article 11), or
Development Operations (Article 13).
(b) should there be three (3) or more Parties to this Agreement:
affirmative vote of two (2) or more of the Parties
having a combined voting interest of sixty percent
(60%) or more.
Each Party who voted to approve the General Matter shall execute the
accompanying AFE evidencing its Election to participate in the approved
proposal if an Election is necessary (i.e., proposal included AFE). 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 General
Matter which requires an Election (e.g., proposal, including AFE), any
Party who either: (i) voted against the proposal; or (ii) failed to
vote; shall have forty eight (48) hours (exclusive of Saturdays, Sundays
and federal holidays) from receipt of notice from the Operator that a
General Matter has been approved, to respond with an 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).
8.3 Response Time for General Matters and Elections: After receipt of notice
pursuant to 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
(2), or (ii) make an Election if the proposal does not require a vote as a
General Matter as described under Article 8.1(3). 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 their vote or Election within thirty (30) days after receipt of the
proposal. When a drilling rig is on location and standby charges are
accumulating, a vote or 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); 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 twenty (120) days after receipt of the
Fabrication AFEs.
8.3.3 Other AFE Related Operations: Except as otherwise provided for in
Articles 8.3.1 (Well Operation Proposal) and 8.3.2 (Production System
Construction), the response time to a proposed operation will depend
upon the AFE gross expenditure amount. Response times will be as
follows:
(a) AFE of $200,000 or more but less than $20,000,000 response will be
made within thirty (30) days after receipt of said proposal.
(b) AFE of $20,000,000 or more but less than $50,000,000 response will
be made within ninety (90) days after receipt of said proposal.
(c) AFE of $50,000,000 or more response will be made within one
hundred twenty (120) days after receipt of said proposal.
8.3.4 Other Proposals: For all other proposals requiring notice, each
Party shall
respond with an Election or vote 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 deemed a vote against a General
Matter (if required by the nature of the proposal) and, if applicable,
an Election not to participate.
8.3.6 Suspensions of Production: Anything in this Article 8.3 (Response
Time for General Matters and Elections) 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 Contract Area(s),
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: 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 6.7 (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.
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 IV of Exhibit "A-2" 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 to
the Objective Depth (including plugging/abandonment) as set out in the Well
Plan. An Election to participate in a Development Well shall also require 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. 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 DevelopmentOperation(s);
(b) the Well Plan 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.
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 independent operations and
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
joint 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 joint 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, Feasibility Study, Integrated
Project Team andlor 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 or partnership rates
available from most seismic contractors and will allow each Party a
license to use such data. For such joint 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: 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 the Contract Area by giving notice of the
proposal (along with the associated AFE and Well Plan) to all other Parties.
Each Exploratory Operation proposed shall require approval as a General Matter
except as provided in Article 8.2.2 (two party agreement) and/or Article
10.3.5 (Subsequent Exploratory Operations If Not Approved as a General Matter)
and Article 16.4 (Non-Consent Operations to Maintain Contract Area). Once an
Exploratory Operation is approved as a General Matter, the Operator (or
substitute operator) shall 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 Contract Area), Costs of a non-consent Subsequent 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(s) 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 & Revision of Well Plan:
Subsequent to the approval of the Exploratory Operation as a General
Matter, but prior to commencing such Exploratory Operation (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
joint signature of 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 a
Participation Election unless the Objective Depth is changed, or the
target bottom hole location is changed by more than 500 feet, in which
case the Exploratory Operation shall be proposed anew. The Well Plan
for an Exploratory Operation shall be deemed automatically revised with
each Sidetracking, Deepening or additional Exploratory Operation
approved by the Participating Parties.
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, pursuant to
Article 25.1 (Force Majeure), 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 Exploratory 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
Participating 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 being
required pursuant to Article 6.2 (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 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 proposal for a substitute Exploratory
Well shall not require approval as a General Matter. 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)., if such Election is made for a non-consent Subsequent
Exploratory Operation.
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 other operations on the well not listed;
(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, 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 bottom hole locations are proposed for
Subsequent Exploratory Operations, preference shall be given to the
shallowest depth (or the bottom hole location nearest the existing well
bore) and then to other depths or bottom hole 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
proposals) 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 shall commence the
Subsequent Exploratory Operation at the Cost(s) and risk of the
Participating Parties.
10.3.4 Approval of Subsequent Exploratory Operations as a General
Matter by Fewer Than All Parties: If a proposal for Subsequent
Exploratory Operations (except a proposal to plug and abandon), is
approved as a General Matter by fewer than all 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 as a
General Matter: If no proposed Exploratory Operation (except a proposal
to plug and abandon) receives sufficient vote to be approved as a
General Matter pursuant to Article 10.3.4 (Approval of Subsequent
Exploratory Operations as a General Matter by Fewer Than All Parties),
then prior to an Exploratory Well 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 Working Interest approval, and in
the event of tie vote between two (2) or more of such proposed
Subsequent Exploratory Operations, 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 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 as a General Matter by the Participating Parties or failing
General Matter 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
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.
10.5 Conclusion of Exploratory Operations: Exploratory Operations shall cease
in any Contract Area 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).
10.6 Subsurface Team: Within sixty (60) days after rig release of the Initial
Exploratory Well, unless otherwise mutually agreed, the Parties shall form a
subsurface team. The subsurface team will include at least one (1)
representative from each of the Parties. 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 Exploratory Well(s) in other Contract Areas,
making recommendations for Appraisal Operations, evaluating potential
Producible Reservoirs within a Contract Area(s), 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 Contract Area.
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 the
Contract Area by giving notice of the proposal (along with the associated AFE
and Well Plan) to all other Parties. Each Appraisal Operation proposed shall
require approval as a General Matter. Once an Appraisal Operation is approved
as a General Matter, the Operator (or substitute Operator) shall commence the
Appraisal Operation at the sole Cost and risk of the Participating Parties.
Costs of a Non-Consent Appraisal Operation will be recouped in accordance with
Article 16 (Non-Consent 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 & Revision of Well Plan: The Pre-
spud Technical Meeting & Revision of the Well Plan shall be in
accordance with Article 10.2.2 (Pre-Spud Technical Meeting & Revision of
Well Plan).
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 as a General Matter. If an approved
Appraisal Operation is deemed withdrawn due to lack of timely
commencement of operations, any Costs incurred during said one hundred
eighty (I80) 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 is
required pursuant to Article 6.2 (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 Appraisal Well is abandoned due to the conditions
described under 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 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 other operations on the well not listed;
(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, 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 convicting 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 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 the
then Participating Parties, the Operator shall commence the subsequent
Appraisal Operation it the Cost(s) and risk of the Participating
Parties.
11.2.4 Approval of Subsequent Appraisal Operations as a General
Matter by Fewer Than All Parties: If a proposal for subsequent Appraisal
Operations (except a proposal to plug and abandon), is approved as a
General Matter by fewer than all 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 as a General
Matter: If no proposed Appraisal Operation (except a proposal to plug
and abandon) receives sufficient vote to be approved as a General Matter
pursuant to Article 11.2.4 (Approval of Subsequent Appraisal Operations
as a General Matter by Fewer Than All 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 Working Interest approval, and in the event of tie vote
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. 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 as a General Matter 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 (Deeper Drilling) above, any Party may
either:
make an Election to participate in the proposed Deeper Drilling
operation; or make an Election not to participate in the proposed
Deeper Drilling operation;
or
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
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 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 Completion: If all the Participating Parties in the
well agree that a multiple well completion(s) is possible
and practicable involving 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-e Reservoir that are in excess of the original
Costs to drill and complete the well in the deepest
Producible Reservoir.
(b) Single Completions: If 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.
If, after having been drilled to an Objective Depth deeper than
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 depth 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 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. The overinvestment shall be depreciated at the
rate of one-half percent (1/2%) per month from the date the Deeper
Drilling operation commences to the earlier of the date of (i), (ii) or
(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 drilledbelow the deepest Producible Reservoir is
not completed for production in the deeperdepths, 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 as a General Matter by the Participating Parties or failing
General Matter 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.
11.6 Feasibility Study: Any Party may propose a feasibility study (the
conduct of such proposal shall not require approval as a General Matter) for
any technical, engineering or other issues affecting Appraisal or future
Development Operations on a Contract Area. The proposal of a feasibility
study shall not cause the formation of the Integrated Project Team. A
feasibility study may or may not require a study team, will be of a shorter
duration, and will be more narrow in scope than the Integrated Project Team.
The process for approving a feasibility study to be charged to the joint
account is listed below, however, any Party may prepare its own feasibility
study at its sole cost.
11.6.1 Feasibility Study Proposal and Meeting: A proposal for a
feasibility study shall be accomplished by a Party furnishing (1) memo
describing the scope of the feasibility study, and (2) cost estimate of
the feasibility study to the other Parties. Within thirty (30) days
after the feasibility study proposal, the Operator shall call a meeting
of the Parties. At such meeting, the Parties shall discuss and resolve:
(a) the positions of all Parties on the proposed feasibility
study,
(b) the necessity of the study,
(c) composition and organization of any study team, if
applicable, associated with the proposed feasibility study,
and
(d) any other related matter.
The Operator may modify any proposal for a feasibility study as a
result of such meeting. Operator may, within thirty (30) days after
such meeting, submit to the other Parties such feasibility study
proposal along with an AFE for approval.
11.6.2 Election on Proposed Feasibility Study: All Parties shall
notify the Operator of their Participation Election in the feasibility
study within thirty (30) days after receipt of the AFE for the proposed
feasibility study. If any Party makes an Election not to participate in
the feasibility study, then each Participating Party shall elect to
either: (i) proceed with the feasibility study 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 Operator
shall commence the feasibility study on behalf of all Participating
Parties. A Party making an Election not to participate in a proposed
feasibility study shall become a Non-Participating Party as to the costs
of the feasibility study and shall be subject to the provisions of
Article 16.5.3 (Non-Consent Geophysical Operations, Feasibility Study,
Integrated Project Team andlor Final Design AFE). A Non-Participating
Party shall not receive the data, information or results of the
feasibility study until satisfaction of the requirements of Article
16.5.3 (Non-Consent Geophysical Operations, Feasibility Study,
Integrated Project Team and/or Final Design AFE).
11.6.3 Costs of Feasibility Study: Costs and expenses of a
feasibility study charged to the Joint Account shall include, but not be
limited to, any study team formed in connection with the feasibility
study, contract services and related miscellaneous expenses. All Costs
and expenses of the feasibility study shall be handled in accordance
with Exhibit "C" (Accounting Procedure).
11.7 Conclusion of Appraisal Operations: Any Party may propose that Appraisal
Operations have been concluded on the Contract Area by notifying the other
Parties. Upon such notification the Parties shall meet to determine, as a
General Matter, the conclusion of Appraisal Operations. The formation of an
Integrated Project Team shall not require the conclusion of Appraisal
Operations and may occur concurrently with Appraisal Operations.
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 the Contract Area. The Operator shall prepare for the approval of the
Parties a Development Plan in order to pursue such development of the Contract
Area. 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 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 Contract Area, 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 Contract Area.
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 (Development Plan).
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 twelve (12) month period following rig release
for an Exploratory Well on any of the Contract Areas. However, if an
Appraisal Operation is approved by the Parties as a General Matter prior to
the proposal for the formation of the Integrated Project Team, the Operator's
exclusive proposal period shall be extended until twelve (12) months after rig
release of the last approved Appraisal Operation on any of the Contract Areas.
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, Feasibility Study, Integrated Project Team
andlor 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 (Non-Consent Geophysical Operations,
Feasibility Study, Integrated Project Team andlor Final Design AFE).
12.4 Proposal of a Development Plan: The Operator shall have the exclusive
right for a period of eighteen (18) 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 twelve (12) months of
the eighteen (18) 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 six (6) months from the expiration of the exclusive submission period.
The Parties shall not arbitrarily or unreasonably refuse a request for
extension of the Operator's submission period. 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 Requirementfor 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 projected time schedule for designing, contracting,
Fabricating, constructing, transporting and
installing;
(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;
(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 four (4) months
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 four (4) months 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
eight (8) month period provided in Article 12.6 (Approval of Development
Plan) above, then the unanimous agreement requirement, provided for
under Article 12.6 (Approval of a Development Plan) 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 eight
(8) month period, 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
this 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
fifty percent (50%) 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
one Development Plan receives an affirmative vote of at
least fifty percent (50%) of the voting interest and the
other Development Plan(s) receives an affirmative vote of
less than fifty percent (50%) of the voting interest, then
the Development Plan receiving the affirmative vote of at
least fifty percent (50%) of the voting interest shall be
deemed approved by the Parties;
c) If two competing Development Plans each receive an
affirmative vote of fifty percent (50%) voting interest, the
Parties will use reasonable efforts to diligently pursue a
compromise Development Plan.
12.7 Final Design AFE: Within six (6) months from the date the Development
Plan is approved as provided in Article 12.6 (Approval of a Development Plan),
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 8.3.3 (Other AFE Related Operations). 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, or (ii) change its Election to become a Non-Participating Party.
All risk, Cost and expense shall be borne in proportion to the
respective interest of the Participating Parties. Any Non-Participating
Party shall be subject to the Non-Consent provisions as set forth in
Article 16.5.3 (Geophysical Operations, Feasibility Study, Integrated
Project Team andlor Final Design AFE).
12.8 Fabrication AFE: Within twelve (12) months from the date of the last
Election for the Final Design AFE as provided in Article 12.7 (Final Design
AFE), 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 a Contract Area (or located off a
Contract Area but serving a Contract Area), 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-Operating 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 12.9 (Assignment of
Interest) 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 16.2.3 (Initial
Production System).
12.9 Assignment of Interest: If any Party makes an Election not to
participate in the Fabrication AFE for the Initial Production System under an
approved Development Plan, then the Non-Participating Party shall be subject
to Article 16.2 (Acreage Forfeiture Provisions) and be deemed a Withdrawing
Party subject to Article 17 (Withdrawal from Agreement). The Participating
Parties shall share the interest assigned in the proportion which a
Participating Party's Working Interest bears to the sum of the Working
Interests of all of the Participating Parties (unless otherwise unanimously
agreed by the Participating Parties). If the Operator makes an Election not
to participate in the Fabrication AFE, then the Participating Parties shall
select a successor Operator pursuant to Article 4.5 (Selection of Successor
Operator). If Development Operations under the Development Plan are not
timely commenced pursuant to Article 12.14 (Timely Operations for Production
Systems), the Non-Participating Party shall be entitled to a reassignment of
its Working Interest.
12.10 Minor Modifications and Revisions to Development Plans: In implementing
the Development Plan, the Operator shall advise the Participating Parties of
progress. As additional information becomes available, the Operator may make
modifications and revisions to the Development Plan subject to the following.
12.10.1 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 fifteen
percent (15%) or Fifteen Million Dollars ($15,000,000), 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.
12.10.2 Revisions to Development Plans: A Development Plan may be
revised as needed to accommodate new data, interpretations or other
changes not covered by Article 12.10.1 (Minor Modifications to
Development Plans) or by Article 12.11 (Major Modifications to
Development Plans). Any such revision pursuant to this Article 12.10.2
(Revisions to Development Plans) 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).
12.11 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 affirmative vote of all Participating Parties.
A major modification shall be deemed to have occurred when:
(i) the type of Production System is changed; 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
ninety (90) 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 Contract Area, 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.
12.12 Supplemental AFE for Cost Overruns on Fabrication AFE: As provided for
in Article 6.2.6 (Supplemental AFE for Cost Overruns on Fabrication AFE).
12.13 Termination of a Development Plan: Any proposed termination of an
approved Development Plan may only be accomplished by unanimous consent of the
Participating Parties.
12.14 Timely Operations for Production Systems: The Operator shall commence,
or cause to be commenced. the construction of a Production System 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 is 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.
12.15 Expansion, Modification or Repair of an Existing Production System:
Subsequent to the installation of the Production System described and approved
in the first Development Plan for a Contract Area, 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 6.7 (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
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 Production System unless otherwise agreed. This Article 12.15 shall
not constitute a limit on a Party's right to install its own Facilities under
Article 15 (Disposition of Hydrocarbon Production). The provisions of this
Article 12.15 shall not apply to subsequent Development Phase(s).
12.16 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 (Development Plan) for the preparation and approval of the
initial Development Plan.
12.17 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.
12.17.1 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 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 subsequent Development Operation associated with such
Development Phase, unless the Non-Participating Party makes an Election
to participate in such subsequent Development Operations 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 Contract Area 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 (including making 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 Operation. Hydrocarbon production volumes
shall be measured on the basis of well tests and operating expenses
allocated upon the basis of Hydrocarbon production volume throughput.
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 Participating Party in the Development Plan 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 the other Participating 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 in the Development Plan 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
Contract Area. 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 a Contract Area) 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 operation subject to
Article 16 (Non-Consent Operations). If the Operator's counterproposal
is not approved, the 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)
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 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 (not
requiring the installation of a Production System) shall be commenced
within one hundred twenty (120) days from the date upon which the last
applicable Election to participate was made. If operations have not been
timely commenced within one hundred twenty (120)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 twenty (120)
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; M 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, 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 convicting proposals for subsequent Development
Operations are made, preference 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 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 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 the then Participating 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 (H) 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. 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 (Deeper Drilling), any Party may
either:
make an Election to participate in the proposed Deeper Drilling
operation; or make an Election not to participate in the proposed
Deeper Drilling operation;
or,
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 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:
(i) considers the well to be capable of producing at or above the
deepest Producible Reservoir, and
(ii) 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 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.
If, after having been drilled to an Objective depth deeper than 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 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. The overinvestment shall be depreciated at the
rate of one-half percent (1/2%) per month from the date the Deeper
Drilling operation commences to the earlier of the date of (i), (ii) or
(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
FACILITIES AND GATHERING SYSTEMS
14.1 Facilities as a Part of Development Plan: The Development Plan shall
provide for the installation of all basic Facilities necessary to handle or
service Hydrocarbon production for the Contract Area. If the approved
Development Plan provides that Hydrocarbon production from the Contract Area
can most efficiently be processed and handled at Facilities located off the
Contract Area (an "offsite facility"), the Development Plan shall provide for
a Production System designed to utilize an "offsite facility".
14.2 Use of Facilities Off the Contract Area: In the event that excess
capacity exists at an "offsite facility" and the approved Development Plan
calls for a "tie-back" development of the Contract Area to an "offsite
facility", the Operator will use reasonable efforts to secure a "Facilities
Use and Production Handling Agreement" from the owners of the "offsite
facility" for use in handling Hydrocarbon production from the Contract Area.
However, the Operator shall have no duty (fiduciary or otherwise) beyond the
obligation to utilize reasonable efforts to secure access to the "offsite
facility" on behalf of the Participating Parties. Any access secured by such
"Facilities Use and Production Handling Agreement" to an "offsite facility"
shall be shared proportionately by the Parties on the basis of their
Participating Interests in the Development Plan. This Article 14.2 shall not
constitute a limit on a Party's right to install its own Facilities under
Article 15 (Disposition of Hydrocarbon Production).
14.3 Use of Facilities Located on the Contract Area: The Participating
Parties hereto shall have priority access to all jointly owned Facilities and
gathering system capacity for use in operating and developing the Contract
Area pursuant to an approved Development Plan. Use of the Facilities on the
Contract Area for handling production coming from outside the Contract Area
may be granted only if Facility capacity is available beyond the requirements
of an approved Development Plan for developing the Contract Area. Use of
excess capacity from Facilities shall be subject to the following priority of
usage:
a. First priority to Hydrocarbon production jointly owned by the
Participating Parties from inside the Contract Area.
b. Second priority to Hydrocarbon production Jointly owned by the
Participating Parties coming from outside the Contract Area.
c. Third priority to Hydrocarbon production owned by a Participating
Party coming from outside the contract Area.
d. Fourth priority to Hydrocarbon Production owned by third parties
coming from outside the Contract Area.
Priority "a" shall require approval by the Participating Parties as a
General Matter. Priorities "b", "c" and "d" shall require unanimous approval
by all the Participating Parties. In the event that unanimous approval cannot
be reached by the Participating Parties under priorities "b" and "c" above, as
to the means and methods for utilizing such excess capacity from Facilities,
such excess capacity shall be allocated to each Party in accordance with each
Party's Participating Interest in the Facilities having excess capacity, and
each Party shall be entitled to use its share of excess capacity as it deems
appropriate.
14.4 Approval of Additional Facilities on a Contract Area: This Article shall
only apply to Facilities located on the Contract Area which were not included
in the approved Development Plan. Any Party may propose the installation of
additional or expanded Facilities for the Contract Area 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 15.2 (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 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 16.5.6 (Non-Consent
Subsequent Production System and Facilities)
14.5 Contract Area Production: Notwithstanding any other provision of this
Agreement to the contrary, production owned by the Participating Parties from
the Contract Area shall at all times have first preference to use capacity
over any production from outside the ContractArea.
ARTICLE 15
DISPOSITION OF HYDROCARBON PRODUCTION
15.1 Duty to Take in Kind: Each Party shall have the right and duty to take
in kind or separately dispose of its share of the Hydrocarbons produced and
saved from a Contract Area, exclusive of Hydrocarbon production which the
Operator uses in production or Development Operations, in preparing and
treating Hydrocarbons for marketing purposes, and Hydrocarbon production which
is unavoidably lost.
15.2 Facilities to Take in Kind: Any Participating Party in Development
Operations shall have the right, at its sole risk and expense, to construct
Facilities for purposes of taking its share of Hydrocarbon production in kind,
provided that in the judgment of the Operator, the installation of such
Facilities do not interfere with continuing operations on the Production
System or a 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 damage or losses sustained by the other Parties as a
result of the construction or operation of such facilities.
15.3 Failure to Take Oil and/or Condensate in Kind: If any Party fails to
take in kind or dispose of its share of the oil and/or condensate produced
from a Contract Area, the Operator shall have the right, but never the
obligation to either (a) purchase the non-taking Party's share of the oil
and/or condensate production at the Operator's, or a third party's posted
price or, in the absence of a posted price or disagreement as to the third
party's posted price, at the price prevailing in the area for oil and/or
condensate of similar kind subject to adjustments for gravity, quality, and
less transportation to market, or (b) sell such oil and/or condensate to
others at the best price obtainable by the Operator, subject to revocation at
will by the non-taking Party. The non-taking Parties agree to accept
Operator's purchase or sale of the non-taking Party's share of the oil and/or
condensate production under (a) or (b) above. The Operator shall furnish
notification to non-taking Party at the time such option is exercised. All
contracts of sale by the Operator of any Party's share of oil and/or
condensate production shall be only for such reasonable periods of time as are
consistent with the minimum needs of the industry under the circumstances, but
in no event shall any contract be for a period in excess of one (1) year.
Proceeds of all sales made by the Operator pursuant to this Article shall be
paid to the Parties entitled thereto once in each calendar month.
Unless required by governmental authority or judicial process, no Party
shall be forced to share an available market with any non-taking Party.
15.4 Gas Balancing Provision: The Parties agree that in the event separate
disposition of gaseous Hydrocarbons causes split-stream deliveries to separate
pipelines and/or deliveries which on a day to day basis for any reason are not
equal to a Party's respective proportionate share of total gas sales to be
allocated to it, the gas balancing or accounting between the Parties shall be
handled in accordance with Exhibit "D" attached hereto, entitled "Gas
Balancing Agreement."
15.5 Expenses of Delivery in Kind: Any Cost incurred by the Operator in
making delivery of any Party's share of Hydrocarbon production or disposing of
same shall be borne by such Party. Any extra expenditure incurred in the
taking in kind or separate disposition by any Party of its proportionate share
of Hydrocarbon production shall be borne by such Party.
ARTICLE 16
NON-CONSENT OPERATIONS
16.1 Conduct of Non-Consent Operations: If any Party makes 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), 16.4 (Non-Consent Operations to Maintain the
Contract Area) 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 16.0 must be proposed in good faith using cost
estimates and Objective Depths which are reasonable for the Contract Area
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 joint
operations conducted by all Parties (unless the Non-Consent Operation will
maintain all or a portion of the Contract Area under Article 16.4 (Non-Consent
Operations to Maintain Contract Area).
16.1.1 Indemnity for Non-Consent Operations: The Participating
Parties shall (insofar as it may be within their control) keep the
Contract Area free from all liens and encumbrances which might arise by
reason of conducting the Non-Consent Operation and indemnify, defend and
hold harmless the Non- Participating Parties from any such liens and
encumbrances.
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. Within one
hundred twenty (120) days after completion of a Non-Consent Operations
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 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 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 (Non-Consent Operations), each
completion shall be considered as a separate well.
16.2 Acreage Forfeiture Provisions: In view of the significantly greater
risks associated with the Exploratory Well 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, interest (including operating
rights) in all of the Leases comprising a Contract Area. Within thirty (30)
days of the timely commencement of the 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, then each Participating Party shall accept its Participating Interest
share of the Non-Participating Party's assigned interest, unless otherwise
agreed. Except as provided in Article 16.4.3 (Limitations on Acreage
Forfeiture), the non-participating Party's Election not to participate in the
Initial Exploratory Well, Exploratory Well, or the Fabrication AFE for the
Initial Production System shall be deemed a withdrawal pursuant to Article
17.0 (Withdrawal From Agreement).
16.2.1 Exploratory Well: If one or more Participating Party(s)
proceed with operations for the Initial Exploratory Well on the Contract
Area as a Non-Consent Operation, any 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 Contract Area.
16.2.2 Initial Production System: If one or more Participating
Party(s) proceed with timely operations for the Initial Production
System 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 Contract Area.
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 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 Contract Area, the Operator shall
immediately furnish each of the Parties with a copy of such order or notice.
16.4 Non-Consent Operations to Maintain Contract Area: 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 Contract Area; or,
(b) a proposal is made for an operation within the final nine (9)
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:
(a) the response time provided in Article 8 (Voting, Election &
Notices), or;
(b) sixty (60) 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 Contract Area: If it is
necessary to drill or rework a well or conduct other operations to
maintain an entire Contract Area, 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 Contract Area
within thirty (30) days after commencement of such well or other
operation. Failure to participate in such well or other operations
shall be deemed a withdrawal and the provisions of Article 17
(Withdrawal From Agreement) shall apply.
16.4.2 Acreage Forfeiture in a Portion of a Contract Area: If a
well is drilled or reworked or other operations are conducted in order
to maintain a portion of a Contract Area, 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 a
Contract Area 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 a Contract Area forfeited. The
remaining Parties shall amend this Agreement to provide for a separate
operational area for the forfeited portion of a Contract Area 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 Contract Area or
the affected portion of a Contract Area, 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 a Contract Area 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 Contract Area), upon the timely commencement of any Non-Consent
Operation, each Non-Participating Party's Working Interest and leasehold
operating rights in the Non-Consent Operation along with title to any future
Hydrocarbon production 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 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. Such
interest, rights and title to future Hydrocarbon production shall revert to
each Non-Participating Party when the Participating Party has recouped from
the Non-Participating Party's Share of proceeds of future Hydrocarbon
production from such Non-Consent Operation an amount equal to the product of
the 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 and leasehold operating rights in the Non-Consent Operation,
along with the title to any future Hydrocarbon Production therefrom, 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 operations
conducted including, but not limited to, drilling, evaluating,
Deepening, Deeper Drilling, Sidetracking, completing, recompleting,
equipping, plugging back and plugging and abandonment of the Subsequent
Exploratory Operation multiplied by seven hundred percent (700%).
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, plugging back and
plugging and abandonment of the Appraisal Operation multiplied by four
hundred percent (400%). In addition to the recoupment amounts specified
in this Article, a Party making an Election not to participate in an
Appraisal Operation shall be an underinvested Party in an amount equal
to the amount such Party would have paid had it participated in the
Appraisal Operation. As an underinvested Party, the Non-Participating
Party will be responsible for all Costs of subsequent operations and/or
AFEs 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 Appraisal
Operation, until the underinvestment is eliminated. Upon the non-
consenting Party's written commitment to participate in the next
operation and/or AFE, the Non-Participating Party shall be entitled to
receive access to the well information and/or data derived from the
Appraisal Operation in which it made an Election not to participate.
16.5.3 Geophysical Operations, Feasibility Study, Integrated
Project Team and/or Final Design AFE: A Party making an Election not to
participate in a Geophysical Operations, Feasibility Study, 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
(Under-Investment of Cost). 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, Feasibility Study,
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, plugging back and plugging and abandoning 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 Contract Area for which the Non-Participating Party has a
Participating Interest; plus,
(c) one hundred percent (I 00%) 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: A Non-Participating
Party's Working Interest and leasehold operating rights subject to recoupment
from future Hydrocarbon production and/or a Disproportionate Spending
Settlement, 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 Contract Area) above)
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 and leasehold operating rights which have been relinquished
shall revert to the Non-Participating Party. However, all non-consent
Wells, Production Systems and Facilities [and rights to future
Hydrocarbon production from a Producible Reservoir under Article 16.5.7
(Recoupment From Hydrocarbon Production)] 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 recovered by the Participating Parties out of
the Non-Participating Party's Share of Hydrocarbon 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)
(Recoupment from Hydrocarbon Production), 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 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 Participation 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);
(d) Article 11.6.2 (Election on Proposed Feasibility Study);
(e) Article 12.3 (Integrated Project Team Election); M Article 12.7
(Final Design AFE);
(g) Article 12.11 (Major Modification to Development Plans);
(h) Article 13.3 (Election by Non-Participating Parties in Deepening
or Sidetracking Operations); and
(i) Article 13.4 (Deeper Drilling).
16.9.1 Settlement of Underinvestments: Upon making a revised
Participation Election, a Non-Participating Party shall settle any
underinvestment for its share of the Costs in a Non-Consent Operation by
either:
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,
making an immediate cash settlement to the original Participating
Parties in the full amount of the under-investment.
The original Participating Parties shall select the manner of
eliminating the underinvestment 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 Contract Area for which Costs
would be allocated toward the elimination of an under-investment, the
underinvested Party shall pay any over-invested Party the remaining
under-invested amount in cash. If operations on the Contract Area, 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/underinvestment.
ARTICLE 17
WITHDRAWAL FROM AGREEMENT
17.1 Right of Withdrawal: Subject to the limitations specified in this
Article, any Party (the "Withdrawing Party") may withdraw from this Agreement
by giving prior written notice to all other Parties (the "Remaining Parties")
stating its intention to withdraw from continued joint operations under this
Agreement. The withdrawal notice shall constitute an unconditional and
irrevocable offer by the Withdrawing Party to convey to the Remaining
Party(ies) the Withdrawing Party's entire Working Interest in all of the
Leases, the Production System, the Hydrocarbon production and all other
property and equipment within a Contract Area owned under the terms of this
Agreement. The withdrawal notice shall specify an effective date of
withdrawal which date shall be at least sixty (60) days but not more than one
hundred eighty (180) days after the date of the withdrawal notice.
17.2 Response to Withdrawal: Within thirty (30) days of receipt of the
notice of withdrawal, eachof the Remaining Parties shall elect in writing
either to join in the withdrawal or to remain a Party to this Agreement.
Failure to respond to a withdrawal notice shall be deemed an Election to
remain a Party to this Agreement.
17.2.1 Unanimous Withdrawal: If all the Parties agree to join in
the withdrawal, no assignment of Working Interests shall take place and
the Parties shall be deemed to have decided to abandon all joint
operations within a Contract Area pursuant to Article 18 (Abandonment
and Salvage) of this Agreement.
17.2.2 Acceptance of Withdrawing Interests: If fewer than all
Parties agree to join in the withdrawal, then the Remaining Parties must
accept an assignment of the Withdrawing Party's Working Interest.
Unless otherwise agreed by the Remaining Parties, the Withdrawing
Party's Working Interest shall be shared by the Remaining Party(ies) in
the proportions which each of their Working Interests (prior to the
withdrawal) bear to the sum of the Working Interests of all Remaining
Parties (prior to the withdrawal). The Withdrawing Party(ies) shall
take all necessary steps to accomplish the withdrawal by the effective
date and execute and deliver to the Remaining Party(ies) all necessary
instruments to assign its Working Interests to the Remaining Party(ies).
All expenses associated with the withdrawal and the transfer of Working
Interest shall be borne by the Withdrawing Party(ies).
17.3 Limitation Upon and Conditions of Withdrawal:
17.3.1 Current Operations and Voting: Any Party withdrawing prior
to completion of any operations (pursuant to an AFE) on a Contract Area
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, other than
General Matters for which the Withdrawing Party retains a financial
responsibility.
17.3.2 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 a final statement to the Withdrawing Party(ies) for its
share of all identifiable expenses incurred prior to the notice 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 which 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.
17.3.3 Abandonment Costs: The Withdrawing Party(ies) shall pay to
the Operator for the benefit of the Remaining Party(ies) the Withdrawing
Party's pro rata Working Interest share of the estimated current Costs
of plugging and abandoning all wells and removal of all Production
Systems, Facilities and other material and equipment serving a Contract
Area, less its pro rata share of the estimated salvage value of the
assets at the time of abandonment. Such Costs and salvage value shall
be prepared by the Operator according with Article IV of Exhibit "C" and
approved as a General Matter.
17.3.4 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 joint operations. The Withdrawing Party shall not be
required to return to the Remaining Party(ies) any Confidential Data
acquired prior to the effective date of the withdrawal. The Remaining
Party(ies) shall have no obligation of confidentiality to the
Withdrawing Party.
17.3.5 Emergencies and Force Majeure: No Party shall be allowed to
withdraw during a Force Majeure or other emergency as described in
Article 25.1 (Force Majeure), but may withdraw from this Agreement after
termination of such emergency. The Withdrawing Party shall remain
liable for its share of all Costs and liabilities arising from said
emergency, including but not limited to the drilling of relief wells,
containment and cleanup of oil spills and pollution and all Costs of
debris removal made necessary by the emergency.
ARTICLE 18
ABANDONMENT AND SALVAGE
18.1 Abandonment of Wells: Any Participating Party may propose the
abandonment of a well which has been drilled as a joint operation by notifying
the other Participating Parties. If approved as a General Matter, the well
shall be plugged and abandoned in accordance with applicable regulations at
the joint Cost and risk of the Participating Parties. If any Party fails to
respond within the notice period specified in Article 8.3 (Response Time for
General Matters and Elections), that Party shall be deemed to have consented
to the abandonment of the well.
18.2 Facilities and Production System Salvage and Removal Costs: When the
Parties owning a Production System, Facility or Subsea Production System
desire to dispose of such equipment, such equipment disposal shall be approved
as a General Matter. Upon approval as a General Matter, the Operator shall
dispose of such equipment in the manner approved by the Participating Parties.
The Costs, risks and net proceeds, if any, resulting from such disposition
shall be shared by the Participating Parties in proportion to their
Participating Interests in the equipment.
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 ilk addition to the lessor's
royalty stipulated in the Lease(s) (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 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
Rights) 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 Contract Area. 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 Contract Area. 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 Contract Area
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
taken from the Lease(s) for its account. During any time in which the
Participating Parties in a Non-Consent Operation takes a Non-
Participating Party's share of Hydrocarbon production, the Participating
Parties shall bear the Lease royalty on such Hydrocarbon production.
When necessary for calculating the recoupment of a Non-Consent Well, any
Non-Operating Party receiving its share of Hydrocarbon production in
kind 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 sold or
used off the premises and the prices received for such Hydrocarbon
production.
19.2.3 Federal Offshore Oil Pollution Compensation Fund Fee: Each
Party agrees to pay and bear the Federal Offshore Oil Pollution
Compensation Fund Fee payable on its share of Hydrocarbon production or
any fees being required by section 302 of the Outer Continental Shelf
Lands Act of 1978, the Oil Pollution Act of 1990 and any subsequent
statutes and regulations promulgated pursuant to those 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 1nternal Revenue Provision: Notwithstanding any provisions herein that
the rights and liabilities hereunder are several and not joint or collective
or that the Agreement and the operations hereunder shall not constitute a
partnership under state law, if, for federal income tax purposes, the
Agreement and the operations hereunder are regarded as a partnership, 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, of the Internal Revenue
Code of 1986, as amended, or similar provisions of applicable state laws.
20.2 Other Taxes and Assessments: The Operator, on behalf of 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, on behalf of the Joint
Account, 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 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, LAWSUITS AND ALTERNATE DISPUTE RESOLUTION
22.1 Individual Obligations: The obligations, duties and liabilities of the
Parties shall be several and not joint or collective; and, except as provided
in Article 20 (Taxes), 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
a 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 Contract 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) 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: he Operator shall supervise the conduct
of any litigation. During litigation, suits may be settled in excess of the
amount specified in Article 22.3 (Settlements) above only with the unanimous
consent of all Participating Parties in the operation out of which the claim
arose; however, any Party shall have the right to independently settle any
claim which is attributable to its interest alone as long as such settlement
does not directly adversely affect the interest or rights of the other
Parties. No charge shall be made for services performed by the staff
attorneys of any Party, but all other expenses incurred by the Operator in the
defense of suits for the Parties, 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
approval of the affected Parties as a General Matter under Article 8.2 (Voting
Procedures on General Matters and Elections). If it is agreed that outside
counsel is to be employed, the fees and expenses shall be charged to the
Parties in proportion to their Participating Interest in the operation out of
which such claim arose in accordance with Exhibit "C" (Accounting Procedure).
Each Party shall also have the right to hire its own outside counsel with
respect to its own defense.
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: To the extent allowed by
law, the Participating Parties agree to hold the Non-Participating Parties
(and their Affiliates, agents, insurers, directors, officers and employees)
harmless and to indemnify and protect them against all claims, demands,
liabilities, regulatory decrees and liens for environmental pollution and
property damage or personal injury, including sickness and death, caused by or
otherwise arising out of Non-Consent Operations, and any loss and cost
suffered by any Non-Participating Party as an incident thereof, except where
the negligent acts or omissions of any Non-Participating Party contribute 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 Indemnification for Prior Operations: To the extent allowed by law,
notwithstanding anything to the contrary in this Agreement, a Party shall not
be liable to any other Party for any losses, damages, costs, expenses, claims,
liabilities or lawsuits arising from operations which occurred prior to the
execution of or joinder to this Agreement. Furthermore, the Parties who are
responsible for such pre-execution or pre-joinder liability shall indemnify,
defend and hold harmless the aforesaid non-responsible Parties.
22.8 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 for loss of or damage to a
reservoir(s), loss of Hydrocarbons, or for loss of profits or for other
consequential or business interruption damages.
22.9 Non-Essential Personnel: A Party hereto who requests transportation
and/or access to a Production System, vessel or any other Facility utilized
for Lease operations for any person who is not directly involved with a joint
or Non-Consent 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 Lease 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.
22.10 Dispute Resolution Procedure: The Parties agree that any claim,
controversy or dispute arising out of, relating to or in connection with this
Agreement, including the interpretation, validity, termination or breach
thereof, shall be resolved solely in accordance with the Dispute Resolution
Procedure set forth in Exhibit "H" to this Agreement.
ARTICLE 23 CONTRIBUTIONS
23.1 Contributions from Third Parties: The Parties may seek to obtain support
from third partiesfor joint operations through contributions of cash, acreage
or data. Any Party may proposeto seek support for joint 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 joint 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 out of Hydrocarbon
production from the Non-Participating Parties in accordance with Article
16.0 (Non-Consent Operations).
23.1.2 Acreage Contributions: Any contribution of acreage toward
the drilling of a joint well 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 joint operations
shall be handled pursuant to Article 7.0 (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).
ARTICLE 24
ASSIGNMENTS AND PREFERENTIAL RIGHT TO PURCHASE
24.1 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:
24.1.1 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 share of
Hydrocarbon production from a Contract Area. However, 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; or,
(ii) A Party assigning all or an undivided part of its Working Interest
to an Affiliate.
24.1.2 Effective Date of Assignments: Except as otherwise provided
in this Agreement, the effective date for any assignment shall be at
least sixty (60) 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 24.1.1 (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) receipt of any necessary 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.
24.1.3 Minimum Transfer of Interest: Unless unanimously agreed
otherwise, any transfer to a third party shall be limited to a minimum
Working Interest of twelve and one-half percent (12.50%) in an entire
Contract Area. 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 undivided Working Interest in all of a Party's Working
Interest in a Contract Area unless otherwise provided under this
Agreement. This limitation on any sale or farmout shall terminate after
Election to participate in the Fabrication AFE. If the Working Interest
of any Party is subsequently conveyed or distributed to other entities,
so that any one of them owns a Working Interest of less than twelve and
one-half percent (12.50%), such entities collectively shall be entitled
to only a single joint representative at meetings of the Parties and
shall vote or act collectively on all General Matters or Participation
Elections. Such Parties shall be entitled to only a single set of logs,
samples, information and reports and shall be considered as only one
Party for all purposes under this Agreement.
24.1.4 Form of Assignments: Except in those certain transactions
set forth in Article 24.2.3, 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.
24.1.5 Limited Warranty: Any assignment, vesting or relinquishment
of Working Interest between the Parties under this Agreement shall be
made without warranty of title; however, all encumbrances made by
assignor or known by assignor shall be disclosed to assignee.
24.2 Preferential Right to Purchase: Subject to the provisions of this
Agreement, each Party shall have the right to freely transfer and alienate its
Working Interest. Any transfer of all or an undivided interest in the Party's
Working Interest, directly or indirectly, shall be subject to the following
provisions:
24.2.1 Notice of Proposed Transaction: Should any Party (the
"Assignor") desire to dispose of all or an undivided interest in its
Working Interest in a Contract Area (whether offered as a single
property disposition or as part of a multi-property disposition) through
one of the following type transactions:
farmout(s)
cash sale(s); or,
non-simultaneous like-kind exchange(s)
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 purchase or other acquisition of the Working Interest, each of
the remaining Parties to this Agreement shall have a preferential right
to purchase all or a Party's proportionate share 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 quivalent in U.S. Dollars based upon the
reasonable market value of any consideration other than cash), and
all other material terms of the offer.
24.2.2 Exercise of Preferential Right to Purchase: For a period of
thirty (30) days from receipt of the notice, the remaining Parties shall
have the optional right 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 preferentially purchase 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 preferentially purchase (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.
24.2.3 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 its interest (including assignments of Hydrocarbon
production executed as further security for the debt secured
by such mortgage), or
(b) exchange all or an undivided interest in its Working
Interest in the Contract Area for property identified
outside the Contract Area at the time of the exchange, or
(c) dispose of its Working Interest by:
merger, reorganization or consolidation;
a sale or other transfer of substantially all of a
Party's assets in the Gulf of Mexico; or
a sale or other transfer to an Affiliate.
24.2.4 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.
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. 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 A
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 a 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 a 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 joint
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 and 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 during the existence of this Agreement 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 a 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 TH1S AGREEMENT AND THE
RELATIONSHIP OF THE PARTIES SHALL BE GOVERNED AND INTERPRETED ACCORDING
TO FEDERAL LAWS AND LAWS OF STATE OF LOUISIANA WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD REFER THE MATTER TO THE LAWS
OF ANOTHER JURISDICTION. UNDER NO CIRCUMSTANCES WILL ANY PARTY BE
LIABLE TO THE OTHER FOR PUNITIVE DAMAGES, CONSEQUENTIAL, INDIRECT,
UNFORESEEN, LOSS OF PROFIT, OR OTHER INDIRECT OR PENALTY DAMAGES EITHER
IN LAW OR EQUITY.
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, 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 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. There are no representations, warranties or
promises, oral or written between the Parties other than those included in
this Agreement.
Upon execution of this Agreement, by all Parties, this Agreement shall
supersede and replace all previous negotiations, understandings or promises,
whether written or oral, relative to the subject of this Agreement. Each of
the Parties acknowledges that no other Party has made any promise,
representation or warranty that is not expressly stated in this Agreement 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
comprising a Contract Area. This Agreement does not benefit or create
any rights 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 counterpart 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.
WITNESSES SHELL DEEPWATER DEVELOPMENT INC.
__________________ BY: ______________________________
__________________ ITS:Attorney-in-Fact______________
Date: ____________________________
READING & BATES DEVELOPMENT CO.
__________________ BY: _____________________________
__________________ ITS: ____________________________
DATE: ___________________________
EXHIBIT "A-1"
Attached to and made a part of the Joint Operating Agreement dated effective
______________, by and between Shell Deepwater Development Inc.
and Reading & Bates Development Co.
Lease Block Effective Expiration Gross
Number Number Date Date Acres
Royalty ORR Lease Ownership
EXHIBIT "A-2"
Attached to and made a part of the Joint Operating Agreement
dated effective _______________by and between Shell Deepwater Development Inc.
and Reading & Bates Development Co.
WORKING INTEREST OF THE PARTIES, OPERATOR AND REPRESENTATIVES
I. Prospect Area
II. Working Interest of the Parties
III. Operator
IV. Addresses Names of Representatives
EXHIBIT "B"
Attached to and made a part of the Joint Operating Agreement
dated effective _______________ by and between Shell Deepwater Development
Inc.
and Reading & Bates Development Co.
OFFSHORE INSURANCE PROVISIONS
I. WORKERS COMPENSATION & EMPLOYERS LIABILITY INSURANCE
Operator will carry Workers Compensation insurance in compliance with all
State and Federal Regulations in the jurisdiction where any of the work under
this agreement shall be performed, including the following special coverage
extensions:
1. Employers' Liability coverage with limits of not less than $1 Million
per accident.
2. U.S. Longshoremen and Harbor Workers' Act and Outer Continental Shelf
Lands Act coverage.
3. Employers' Liability arising out of Maritime operations including
coverage for benefits and damages under the Jones Act with limits of
at least $1,000,000 per occurrence.
4. "In Rem" endorsement providing that a claim "In Rem" shall be treated
as a claim against the Operator.
5. Waiver of Subrogation endorsement which waives the insurers rights of
subrogation against all of the Parties to this agreement.
Premiums for the insurance above specified shall be charged to the Joint
Account. Provided, however, that if the Operator either self-insures or
effectively self-insures, the Operator shall charge to the joint account, in
lieu of any premiums for such insurance, an amount not to exceed the workers
compensation manual rates times the payroll. Claims under Operator's self-
insurance program shall not be charged to the joint account.
Except as provided above, Operator shall not be obligated to obtain or cause
to be carried insurance for the benefit of the joint account. Operator shall
not obtain or cause to be carried for the benefit of the joint account,
control of well or seepage and pollution insurance nor insurance against the
hazards of fire, windstorm, explosion, blowout, cratering, reservoir damage,
or insurance other than specified above.
II. INSURANCE NOT CHARGED TO THE JOINT ACCOUNT
At all times while the Joint Operating Agreement is in effect, each party to
the Agreement shall insure or self-insure for their share of any liabilities
assumed under the Joint Operating Agreement. The cost of these insurance or
self-insurance programs shall be the individual responsibilities of each of
the parties and none of the cost associated with these programs shall be
charged to the Joint Account. Each party shall insure or self-insure the
following coverage for the minimum limits stated.
1. Commercial General Liability Insurance covering all of the Parties
operations, including their offshore operations, and including
contractual liability coverage with combined single limits of at
least $10,000,000 per occurrence and in the annual aggregate.
2. Automobile Liability covering all owned, non-owned and leased
vehicles with combined single limits of at least $1,000,000 per
occurrence and in the annual aggregate.
3. Pollution Liability insurance covering offshore oil pollution with
limits of at least $10,000,000 per occurrence.
4. Physical Damage insurance and coverage for Wreck Removal for
Facilities covered by the Joint Operating Agreement, with limits not
less than the Parties share of the replacement cost of the facility.
5. Control of Well and Seepage and Pollution insurance with limits of at
least $10,000,000 per occurrence.
6. Non-owned aviation liability insurance in the amount of $1,000,000
per occurrence covering liability arising out of any leased aircraft
used in the connection with the work to be performed under the Joint
Operating Agreement.
All of the above coverages shall be endorsed to waive the insurers' rights of
subrogation against Operator and all other Parties to the Agreement. Any
Party to the Agreement, at the request of any other Party to the Agreement,
shall advise all of the other Parties to the Joint Operating Agreement as to
whether it will insure or self-insure the above mention coverages. If
Insurance is purchased, upon request, a Party will provide all other Parties
to the Joint Operating Agreement with a certificate of insurance evidencing
that all of the above insurance acid special insuring provisions are in place.
In the event a Party elects to self-insure all or part of the above
requirements, and if any of the other Parties to the Joint Operating Agreement
believe or have a concern that the Party does not have the financial
capability to meet its obligations under such self-insurance programs, any
Party to the Agreement may request any other Party to provide proof of its
ability to self-insure these risks. Proof will consist of independently
audited financial statements demonstrating Net Worth and assets in the United
States in an amount at least equal to six (6) times the amount of the above
required insurance that the Party elects to self-insure. If the self-insuring
Party is unable to meet that test, the other Parties to the Agreement may, but
are not required to do so, purchase any or all of the insurance that the Party
elected to self-insure. The cost of said insurance shall be for the
individual account of the Party on whose behalf the insurance was purchased.
III. CONTRACTORS INSURANCE
Operator (including any Party conducting Non-Consent Operations) shall use its
best efforts to require each contractor who performs work on behalf of the
Joint Operating Agreement to carry the following insurance and special
insuring provisions.
1. Workers' Compensation and Employers' Liability insurance in accordance
with all State and Federal Regulations in the jurisdiction where the
work is to be performed. This coverage shall contain the following
special endorsements:
a. Employers' Liability coverage with limits of not less than $1,000,000
per accident.
b. U.S. Longshoremen and Harbor Workers' Act and Outer Continental Shelf
Lands Act coverage.
c. Employers' Liability arising out of Maritime operations including
coverage for benefits and damages under the Jones Act with limits of
at least $1,000,000 per person and $2,000,000 all persons any one
occurrence.
d. "In Rem" endorsement providing that a claim "In Rem" shall be treated
as a claim against the Contractor.
e. "Borrowed Servant" endorsement providing that a Workers' Compensation
claim brought against Operator or any Party to the Agreement, by a
Contractors employee will be treated as a claim against the
Contractor.
f. Waiver of Subrogation endorsement which waives the insurers rights of
subrogation against all of the Parties to this agreement.
2. Commercial General Liability insurance and/or Excess Liability
insurance, including contractual liability covering the indemnity
obligations assumed in the contract with Operator, with combined single
limits of $5,000,000 per occurrence for injuries to or death of persons
and damage to property.
3. Automobile Liability insurance covering all owned, non-owned and hired
vehicles with combined single limits of at least $1,000,000 per
occurrence for injuries to or death of persons and damage to property.
4. In the event watercraft is used by the Contractor, contractor shall
carry or require owners of such watercraft to carry Protection and
Indemnity Insurance in the amount of not less than the market value of
the vessel or $1,000,000, whichever is greater.
5. If Contractor's operations require it to use aircraft, Contractor shall
carry or require the owners of such aircraft to carry aircraft liability
insurance with a combined single limit of $500,000 per passenger seat or
$1,000,000, whichever is greater.
6. Any other insurance that Operator deems necessary.
7. All of the insurance carried by Contractors pursuant to Sections 2
through 6 above shall contain endorsements waiving the insured's rights
of subrogation against Operator and all other Parties to the Agreement.
Operator shall make a good faith effort to obtain all of the above required
insurance and s)special insuring provisions. Operator shall also make a good
faith effort to obtain endorsements naming the Operator as an Additional
Insured on the policies of insurance where appropriate and to provide that the
word 'Insured! also includes any Party, Co-Owner or Joint Venturer. However,
Operator shall not be liable to non-operators or to their parent companies,
subsidiaries or any affiliated companies for failure to do any of the above.
It is recognized in the industry that there are certain contractors and
service companies whose services are necessary to operations contemplated by
the Parties, who as a matter of their policy refuse contractually to indemnify
working interest owners or to carry any insurance indemnifying Working
Interest owners. As to those entities, Operator may waive any requirement of
contractual indemnity or any or all of the insurance or special insurance
provisions required above.
IV. NOTICE
Operator shall promptly notify Non-operators of any loss, damage or claim not
covered by the insurance obtained hereunder for the joint account. All losses
which are not covered and all losses in excess of insurance coverage shall be
borne by the Parties in accordance with the terms of the Joint Operating
Agreement under which said operations are being conducted by the Parties.
EXHIBIT "C"
Attached to and made a part of
ACCOUNTING PROCEDURE
OFFSHORE JOINT OPERATIONS
I. GENERAL PROVISIONS
1. Definitions
"Joint Property" shall mean the real and personal property subject to
the Agreement to which this Accounting Procedure is attached.
"Joint Operations" shall mean all operations necessary to proper for the
development, operation, protection and maintenance of the Joint
Property.
"Joint Account" shall mean the account showing the charges paid and
credits received in the conduct of the Joint Operations and which are to
be shared by the Parties.
"Operator" shall mean the party designated to conduct the joint
Operations.
"Non-Operators" shall mean the Parties of the Agreement other than the
Operator.
"Parties" shall mean Operator and Non-Operator.
"First Level Supervisors" shall mean those employees whose primary
function in Joint Operations is the direct supervision of other
employees and/or contract labor directly employed on the Joint Property
in a field operating capacity.
"Technical Employees" shall mean those employees having special and
specific engineering, geological or other professional skills, and whose
primary function in Joint Operations is the handling of specific
operating conditions and professional skills, and whose primary function
in Joint Operations is the handling of specific operating conditions and
problems for the benefit of the Joint Property.
"Personal Expenses" shall mean travel and other reasonable reimbursable
expenses of Operator's employees.
"Material" shall mean personal property, equipment or supplies acquired
or held for use on the Joint Property.
"Controllable Material" shall mean Material which at the time is so
classified in the Material Classification Manual as most recently
recommended by the Council of Petroleum Accountants Societies.
"Shore Base Facilities" shall mean onshore support facilities that
during drilling, development, maintenance and producing operations
provide such services to the Joint Property as receiving and
transshipment point for supplies, materials and equipment, debarkation
point for drilling and production personnel and services; communication,
scheduling and dispatching center; other associated functions benefiting
the Joint Property.
"Offshore Facilities" shall mean platforms and support systems such as
oil and gas handling facilities, living quarters, offices, shops,
cranes, electrical supply equipment and systems, fuel and water storage
and piping, heliport, marine docking installations, communication
facilities, navigation aids, and other similar facilities necessary in
the conduct of offshore operations.
2. Statement and Billings
Operator shall bill Non-Operators on or before the last day of each
month for their proportionate share of the Joint Account for the
preceding month. Such bills will be accompanied by statements which
identify the authority for expenditure, lease or facility, and all
charges and credits, summarized by appropriate classifications of
investment and expense except that items of Controllable Material and
unusual charges and credits shall be separately identified and fully
described in detail.
3. Advances and Payments by Non-Operators
A. Unless otherwise provided for in the Agreement, the Operator may
require the Non-Operators to advance their share of estimated cash
outlay for the succeeding operation within thirty (30) days after
receipt of the billing or by the first day of the month for which the
advance is required, whichever is later. Operator shall adjust each
monthly billing to reflect advances received from the Non-Operators.
B. Each Non-Operator shall pay its proportion of all bills with thirty
(30) days after receipt. If payment is not made within such time,
the unpaid balance shall bear interest monthly at the prime rate in
effect at Chase Manhattan Bank on the first day of the month in which
delinquency occurs plus 1% or the maximum contract rate permitted by
the applicable usury laws of the jurisdiction in which the Joint
Property is located, whichever is the lesser, plus attorney's fees,
court costs, and other costs in connection with the collection of
unpaid amounts.
4. Adjustments
Payment of any such bills shall not prejudice the right of any Non-
Operator to protest or question the correctness thereof; provided,
however, all bills and statements rendered to Non-Operators by Operator
during any calendar year shall conclusively be presumed to be true and
correct after twenty-four (24) months following the end of any such
calendar year, unless within the said twenty-four (24) month period a
Non-Operator takes written exception thereto and makes claim on Operator
for adjustment. No adjustment favorable to Operator shall be made
unless it is made within the same prescribed period. The provisions of
this paragraph shall not prevent adjustments resulting from a physical
inventory of Controllable Material as provided for in Section V.
COPYRIGHT 1987 by the Council of Petroleum Accountants Societies.
5. Audits
A. A Non-Operator, upon notice in writing to Operator and all other Non-
Operators, shall have the right to audit Operator's accounts and
records relating to the Joint Account for any calendar year within
the twenty-four (24) month period following the end of such calendar
year; provided, however, the making of an audit shall not extend the
time for the taking of written exception to and the adjustments of
accounts as provided for in Paragraph 4 of this Section 1. Where
there are two or more Non-Operators, the Non-Operators shall make
every reasonable effort to conduct a joint audit in a manner which
will result in a minimum of inconvenience to the Operator. Operator
shall bear no portion of the Non-Operators' audit cost incurred under
this paragraph unless agreed to by the Operator. The audits shall
not be conducted more than once each year without prior approval of
Operator, except upon the resignation or removal of the Operator, and
shall be made at the expense of those Non-Operators approving such
audit.
B. The Operator shall reply in writing to an audit report within 180
days after receipt of such report.
6. Approval by Non-Operators
Where an approval or other agreement of the Parties or Non-Operators is
expressly required under other sections of this Accounting Procedure and
if the agreement to which this Accounting Procedure is attached contains
no contrary provisions in regard thereto, Operator shall notify all Non-
Operators of the Operator's proposal, and the agreement or approval of a
majority in interest of the Non-Operators shall be controlling on all
Non-Operators.
II. DIRECT CHARGES
Operator shall charge the Joint Account with the following items:
1. Rentals and Royalties
Lease rentals and royalties paid by Operator for the Joint Operations.
2. Labor
A. (1) Salaries and wages of Operator's field employees directly
employed on the Joint Property in the conduct of Joint
Operations.
(2) Salaries and wages of Operator's employees directly employed on
Shore Base Facilities or other Offshore Facilities serving the
Joint Property if such costs are not charged under Paragraph 7
of this Section II.
(3) Salaries of First Level Supervisors in the field.
(4) Salaries and wages of Technical Employees directly employed on
the Joint Property if such charges are excluded from the
Overhead rates.
(5) Salaries and wages of Technical Employees either temporarily or
permanently assigned to and directly employed in the operation
of the Joint Property if such charges are excluded from the
overhead rates.
B. Operator's cost of holiday, vacation, sickness and disability
benefits and other customary allowances paid to employees whose
salaries and wages are chargeable to the Joint Account under
Paragraph 2A of this Section II. Such costs under this Paragraph 2B
may be charged on a "when and as paid basis" or by "percentage
assessment" on the amount of salaries and wages chargeable to the
Joint Account under Paragraph 2A of this Section II. If percentage
assessment is used, the rate shall be based on the Operator's cost
experience.
C. Expenditures or contributions made pursuant to assessments imposed by
governmental authority which are applicable to Operator's costs
chargeable to the Joint Account under Paragraphs 2A and 2B of this
Section II.
D. Personal Expenses of those employees whose salaries and wages are
chargeable to the Joint Account under Paragraph 2A of this Section
II.
3. Employee Benefits
Operator's current costs of established plans for employees' group life
insurance, hospitalization, pension, retirement, stock purchase, thrift,
bonus, and other benefit plans of a like nature, applicable to
Operator's labor cost chargeable to the Joint Account under Paragraphs
2A and 2B of this Section II shall be Operator's actual cost not to
exceed the percent most recently recommended by the Council of Petroleum
Accountants Societies.
4. Material
Material purchased or furnished by Operator for use on the Joint
Property as provided under Section IV. Only such Material shall be
purchased for or transferred to the Joint Property as may be required
for immediate use and is reasonably practical and consistent with
efficient and economical operations. The accumulation of surplus stocks
shall be avoided.
5. Transportation
Transportation of employees and Material necessary for the Joint
Operations but subject to the following limitations:
A. If Material is moved to the Joint Property from the Operator's
warehouse or other properties, no charge shall be made to the Joint
Account for a distance greater than the distance from the nearest
reliable supply store where like material is normally available or
railway receiving point nearest the Joint Property unless agreed to
by the Parties.
B. If surplus Material is moved to Operator's warehouse or other storage
point, no charge shall be made to the Joint Account for a distance
greater than the distance to the nearest reliable supply store where
like material is normally available, or railway receiving point
nearest the Joint Property unless agreed to by the Parties. No
charge shall be made to the Joint Account for moving Material to
other properties belonging to Operator, unless agreed to by the
Parties.
C. In the application of subparagraph A and B above, the option to
equalize or charge actual trucking cost is available when the actual
charge is $400 or less excluding accessorial charges. The $400 will
be adjusted to the amount most recently recommended by the Council of
Petroleum Accountants Societies.
6. Services
The cost of contract services, equipment and utilities provided by
outside sources, except services excluded by Paragraph 9 of Section II
and Paragraph i and ii of Section III. The costs of professional
consultant services and contract services of technical personnel
directly engaged on the Joint Property if such charges are excluded from
the overhead rates. The cost of professional consultant services or
contract services of technical personnel directly engaged in the
operation of the Joint Property shall be charged to the Joint Account if
such charges are excluded from the overhead rates.
7. Equipment and Facilities Furnished by Operator
A. Operator shall charge the Joint Account for use of Operator-owned
equipment and facilities, including Shore Base and/or Offshore
Facilities, at rates commensurate with costs of ownership and
operation. Such rates may include labor, maintenance, repairs, other
operating expense, insurance, taxes, depreciation and interest on
gross investment less accumulated depreciation not to exceed eight
percent 8.0% per annum. In addition, for platforms only, the rate
may include an element of the estimated cost of platform
dismantlement. Such rates shall not exceed average commercial rates
currently prevailing in the immediate area of the Joint Property.
B. In lieu of charges in Paragraph 7A above, Operator may elect to use
average commercial rates prevailing in the immediate area of the
Joint Property less twenty percent (20%). For automotive equipment,
Operator may elect to use rates published by the Petroleum Motor
Transport Association. *
* If the Operator contracts a drilling rig from an affiliated company for
exploration, appraisal or development drilling, the day rates used will
be the average commercial rates for a similar specification rig
prevailing in the immediate area of the Joint Property.
8. Damages and Losses to Joint Property
All costs or expenses necessary for the repair or replacement of Joint
Property made necessary because of damages or losses incurred by fire,
flood, storm, theft, accident, or other causes, except those resulting
from Operator's gross negligence or willful misconduct. Operator shall
furnish Non-Operator written notice of damages or losses incurred as
soon as practicable after a report thereof has been received by
Operator.
9. Legal Expense
Expense of handling, investigating and settling litigation or claims,
discharging of liens, payments of judgements and amounts paid for
settlement of claims incurred in or resulting from operations under the
Agreement or necessary to protect or recover the Joint Property, except
that no charge for services of Operator's legal staff or fees or expense
of outside attorneys shall be made unless previously agreed to by the
Parties. All other legal expense is considered to be covered by the
overhead provisions of Section III unless otherwise agreed to by the
Parties, except as provided in Section I, Paragraph 3.
10. Taxes
All taxes of every kind and nature assessed or levied upon or in
connection with the Joint Property, the operation thereof, or the
production therefrom, and which taxes have been paid by the Operator for
the benefit of the Parties. If the ad valorem taxes are based in whole
or in part upon separate valuations of each party's working interest,
then notwithstanding anything to the contrary herein, charges to the
Joint Account shall be made and paid by the Parties hereto in accordance
with the tax value generated by each party's working interest.
11. Insurance
Net premiums paid for insurance required to be carried for the Joint
Operations for the protection of the Parties. In the event Joint
Operations are conducted at offshore locations in which Operator may act
as self-insurer for Workers' Compensation and Employers' Liability,
Operator may include the risk under its self-insurance program in
providing coverage under State and Federal laws and charge the Joint
Account at Operator's cost not to exceed manual rates.
12. Communications
Costs of acquiring, leasing, installing, operating, repairing and
maintaining communication systems including radio and microwave
facilities between the Joint Property and the Operator's nearest Shore
Base Facility. In the event communication facilities systems serving
the Joint Property are Operator-owned, charges to the Joint Account
shall be made as provided in Paragraph 7 of this Section II.
13. Ecological and Environmental
Costs incurred on the Joint Property as a result of statutory
regulations for archaeological and geophysical surveys relative to
identification and protection of cultural resources and/or other
environmental or ecological surveys as may be required by the Bureau of
Land Management or other regulatory authority. Also, costs to provide
or have available pollution containment and removal equipment plus costs
of actual control and cleanup and resulting responsibilities of oil
spills as required by applicable laws and regulations.
14. Abandonment and Reclamation
Costs incurred for abandonment of the Joint Property, including costs
required by governmental or other regulatory authority.
15. Other Expenditures
Any other expenditure not covered or dealt with in the foregoing
provisions of this Section II, or in Section III and which is of direct
benefit to the Joint Property and is incurred by the Operator in the
necessary and proper conduct of the Joint Operations.
III. OVERHEAD
As compensation for administrative, supervision, office services and
warehousing costs, Operator shall charge the Joint Account in accordance with
the Section III.
Unless otherwise agreed to by the Parties, such charge shall be in lieu of
costs and expenses of all offices and salaries or wages plus applicable
burdens and expenses of all personnel, except those directly chargeable under
Section II. The cost and expense of services from outside sources in
connection with matters of taxation, traffic, accounting or matters before or
involving governmental agencies shall be considered as included in the
overhead rates provided for in this Section III unless such cost and expense
are agreed to by the Parties as a direct charge to the Joint Account.
i Except as otherwise provided in Paragraph 2 of this Section III,
the salaries, wages and Personal Expenses of Technical Employees
and/or the cost of professional consultant services and contract
services of technical personnel directly employed on the Joint
Property:
( ) shall be covered by the overhead rates.
( X ) shall not be covered by the overhead rates.
ii Except as otherwise provided in Paragraph 2 of this Section III, the
salaries, wages and Personal Expenses of Technical Employees and/or
costs of professional consultant services and contract services of
technical personnel either temporarily or permanently assigned to
and directly employed in the operation of the Joint Property:
( X ) shall be covered by the overhead rates.
( ) shall not be covered by the overhead rates.
1. Overhead - Drilling and Producing Operations
As compensation for overhead incurred in connection with drilling and
producing operations, Operator shall charge on either:
( ) Fixed Rate Basis, Paragraph 1A, or
( X ) Percentage Basis, Paragraph 1B
A. Overhead - Fixed Rate Basis
(1) Operator shall charge the Joint Account at the following rates
per well per month:
Drilling Well Rate $_________________(Prorated for less than a
full month)
Producing Well Rate $_________________
(2) Application of Overhead - Fixed Rate Basis for Drilling Well
Rate shall be as follows:
(a) Charges for drilling wells shall begin on the date when
drilling or completion equipment arrives on location and
terminate on the date the drilling or completion equipment
moves off location or rig is released, whichever occurs
first, except that no charge shall be made during suspension
of drilling operations for fifteen (15) or more consecutive
calendar days.
(b) Charges for wells undergoing any type of workover or
recompletion for a period of five (5) consecutive work days
or more shall be made at the drilling well rate. Such
charges shall be applied for the period from date workover
operations, with rig or other units used in workover,
commence through date of rig or other unit release, except
that no charge shall be made during suspension of operations
for fifteen (15) or more consecutive calendar days.
(3) Application of Overhead - Fixed Rate Basis for Producing Well
Rate shall be as follows:
(a) An active well either produced or injected into for any
portion of the month shall be considered as a one-well
charge for the entire month.
(b) Each active completion in a multi-completed well in which
production is not commingled down hole shall be considered
as a one-well charge providing each completion is considered
a separate well by the governing regulatory authority.
(c) An inactive gas well shut in because of overproduction or
failure of purchaser to take the production shall be
considered as a one-well charge providing the gas well is
directly connected to a permanent sales outlet.
(d) A one-well charge shall be made for the month in which
plugging and abandonment operations are completed on any
well. This one-well charge shall be made whether or not the
well has produced except when drilling well rate applies.
(e) All other inactive wells (including but not limited to
inactive wells covered by unit allowable, lease allowable,
transferred allowable, etc.) shall not qualify for an
overhead charge.
(4) The well rates shall be adjusted as of the first day of April
each year following the effective date of the agreement to
which this Accounting Procedure is attached. The adjustment
shall be computed by multiplying the rate currently in use by
the percentage increase or decrease in the average weekly
earnings of Crude Petroleum and Gas Production Workers for the
last calendar year compared to the calendar year preceding as
shown by the index of average weekly earnings of Crude
Petroleum and Gas Fields Production Workers as published by the
United States Department of Labor, Bureau of Labor Statistics,
or the equivalent Canadian index as published by Statistics
Canada, as applicable. The adjusted rates shall be the rates
currently in use, plus or minus the computed adjustment.
B. Overhead - Percentage Basis
(1) Operator shall charge the Joint Account at the following rates:
(a) Development
Two and One-Half Percent (2.5%) of cost of Development of
the Joint Property exclusive of costs provided under
Paragraph 9 of Section II and all salvage credits.
(b) Operating
Thirteen Percent (13%) of the cost of Operating the Joint
Property exclusive of costs provided under Paragraphs 1 and
9 of Section II, all salvage credits, the value of injected
substances purchased for secondary recovery and all taxes
and assessments which are levied, assessed and paid upon the
mineral interest in and to the Joint Property.
(2) Application of Overhead - Percentage Basis shall be as follows:
For the purpose of determining charges on a percentage basis
under Paragraph 1B of this Section III, development shall
include all costs in connection with drilling, redrilling, or
deepening of any or all wells, and shall also include any
remedial operations requiring a period of five (5) consecutive
work days or more on any or all wells; also, preliminary
expenditures necessary in preparation for drilling and
expenditures incurred in abandoning when the well is not
completed as a producer, and original cost of construction or
installation of fixed assets, the expansion of fixed assets and
any other project clearly discernible as a fixed asset, except
Major Construction as defined in Paragraph 2 of this Section
III. All other costs shall be considered as Operating except
that catastrophe costs shall be assessed overhead as provided
in Section III, Paragraph 3.
2. Overhead - Major Construction
To compensate Operator for overhead costs incurred in the construction
and installation of fixed assets, the expansion of fixed assets, and any
other project clearly discernible as a fixed asset required for the
development and operation of the Joint Property, or in the dismantling
for abandonment of platforms and related production facilities, Operator
shall either negotiate a rate prior to the beginning of construction, or
shall charge the Joint Account for Overhead based on the following rates
for any Major Construction project in excess of $25,000.
A. N/A
B. If the Operator charges engineering, design and drafting costs as
defined in the attached Statement of Clarification and Intent related
to the project directly to the Joint Account:
(1) 2% of total costs
C. If Operator forms an Integrated Project Team and charges its costs as
defined in the attached Statement of Clarification and Intent
directly to the Joint Account:
(1) 2% of total costs
Total cost shall mean the gross cost of any one project. For the
purpose of this paragraph, the component parts of a single project shall
not be treated separately and the cost of drilling and workover wells
and artificial lift equipment shall be excluded.
On each project, Operator shall advise Non-Operation(s) in advance which
of the above options shall apply. In the event of any conflict between
the provisions of this paragraph and those provisions under Section II,
Paragraph 2 or Paragraph 6, the provisions of this paragraph shall
govern.
3. Overhead - Catastrophe:
Catastrophe Overhead shall be at the same applicable rates as Section
III, Paragraphs 1 and 2 (Drilling and Producing Overhead and Major
Construction Overhead).
4. Amendment of Rates
The Overhead rates provided for in this Section III may be amended from
time to time only by mutual agreement between the Parties hereto if, in
practice, the rates are found to be insufficient or excessive.
IV. PRICING OF JOINT ACCOUNT MATERIAL PURCHASES,
TRANSFERS AND DISPOSITIONS
Operator is responsible for Joint Account Material and shall make proper and
timely charges and credits for all Material movements affecting the Joint
Property. Operator shall provide all Material for use on the Joint Property;
however, at Operator's option, such Material may be supplied by the Non-
Operator. Operator shall make timely disposition of idle and/or surplus
Material, such disposal being made either through sale to Operator or Non-
Operator, division in kind, or sale to outsiders. Operator may purchase, but
shall be under no obligation to purchase, interest of Non-Operators in surplus
condition A or B Material. The disposal of surplus Controllable Material not
purchased by the Operator shall be agreed to by the Parties.
1. Purchases
Material purchased shall be charged at the price paid by Operator after
deduction of all discounts received. In case of Material found to be
defective or returned to vendor for any other reasons, credit shall be
passed to the Joint Account when adjustment has been received by the
Operator.
2. Transfers and Dispositions
Material furnished to the Joint Property and Material transferred from
the Joint Property or disposed of by the Operator, unless otherwise
agreed to by the Parties, shall be priced on the following bases
exclusive of cash discounts:
A. New Material (Condition A)
(1) Tubular Goods Other than Line Pipe
(a) Tubular goods, sized 2 1/2 inches OD and larger, except line
pipe, shall be priced at Eastern mill published carload base
prices effective as of date of movement plus transportation
cost using the 80,000 pound carload weight basis to the
railway receiving point nearest the Joint Property for which
published rail rates for tubular goods exist. If the 80,000
pound rail is not offered, the 70,000 pound or 90,000 pound
rail rate may be used. Freight charges for tubing will be
calculated from Lorain, Ohio and casing from Youngstown,
Ohio.
(b) For grades which are special to one mill only, prices shall
be computed at the mill base of that mill plus
transportation cost from that mill to the railway receiving
point nearest the Joint Property as provided above in
Paragraph 2.A.(1)(a). For transportation cost from points
other than Eastern mills, the 30,000 pound Oil Field Haulers
Association interstate truck rate shall be used.
(c) Special end finish tubular goods shall be priced at the
lowest published out-of-stock price, f.o.b. Houston, Texas,
plus transportation cost, using Oil Field Haulers
Association interstate 30,000 pound truck rate, to the
railway receiving point nearest the Joint Property.
(d) Macaroni tubing (size less that 2 1/2 inch OD) shall be
priced at the lowest published out-of-stock prices f.o.b.
the supplier plus transportation costs, using the Oil Field
Haulers Association interstate truck rate per weight of
tubing transferred, to the railway receiving point nearest
the Joint Property.
(2) Line Pipe
(a) Line pipe movements (except size 24 inch OD and larger with
walls 1/4 inch and over) 30,000 pounds or more shall be
priced under provisions of tubular goods pricing in
Paragraph A.(1)(a) as provided above. Freight charges shall
be calculated from Lorain, Ohio.
(b) Line pipe movements (except size 24 inch OD and larger with
walls 1/4 inch and over) less than 30,000 pounds shall be
priced at Eastern mill published carload base prices
effective as of date of shipment, plus 20 percent, plus
transportation costs based on freight rates as set forth
under provisions of tubular goods pricing in Paragraph
A.(1)(a) as provided above. Freight charges shall be
calculated from Lorain, Ohio.
(c) Line pipe 24 inch OD and over and 1/4 inch wall and larger
shall be priced f.o.b. the point of manufacture at current
new published prices plus transportation cost to the railway
receiving point nearest the Joint Property.
(d) Line pipe, including fabricated line pipe, drive pipe and
conduit not listed on published price lists shall be priced
at quoted prices plus freight to the railway receiving point
nearest the Joint Property or at prices agreed to by the
Parties.
(3) Other Material shall be priced at the current new price, in
effect at date of movement, as listed by a reliable supply
store nearest the Joint Property, or point of manufacture, plus
transportation costs, if applicable, to the railway receiving
point nearest the Joint Property.
(4) Unused new Material, except tubular goods, moved from the Joint
Property shall be priced at the current new price, in effect on
date of movement, as listed by a reliable supply store nearest
the Joint Property, or point of manufacture, plus
transportation costs, if applicable, to the railway receiving
point nearest the Joint Property. Unused new tubulars will be
priced as provided above in Paragraph 2.A.(1) and (2).
B. Good Used Material (Condition B)
Material in sound and serviceable condition and suitable for reuse
without reconditioning:
(1) Material moved to the Joint Property
At seventy-five percent (75%) of current new price, as
determined by Paragraph A.
(2) Material used on and moved from the Joint Property
(a) At seventy-five percent (75%) of current new price, as
determined by Paragraph A, if Material was originally
charged to the Joint Account as new Material or
(b) At sixty-five percent (65%) of current new price, as
determined by Paragraph A, if Material was originally
charged to the Joint Account as used Material.
(3) Material not used on and moved from the Joint Property
At seventy-five percent (75%) of current new price as
determined by Paragraph A.
The cost of reconditioning, if any, shall be absorbed by the
transferring property
C. Other Used Material
(1) Condition C
Material which is not in sound and serviceable condition and
not suitable for its original function until after
reconditioning shall be priced at fifty percent (50%) of
current new price as determined by Paragraph A. The cost of
reconditioning shall be charged to the receiving property,
provided Condition C value plus cost of reconditioning does
not exceed Condition B value.
(2) Condition D
Material, excluding junk, no longer suitable for its
original purpose, but usable for some other purpose shall be
priced on a basis commensurate with its use. Operator may
dispose of Condition D Material under procedures normally
used by Operator without prior approval of Non-Operators.
(a) Casing, tubing, or drill pipe used as line pipe shall
be priced as Grade A and B seamless line pipe of
comparable size and weight. Used casing, tubing or
drill pipe utilized as line pipe shall be priced at
used line pipe prices.
(b) Casing, tubing, or drill pipe used as higher pressure
service lines than standard line pipe, e.g. power oil
lines, shall be priced under normal pricing procedures
for casing, tubing, or drill pipe. Upset tubular
goods shall be priced on a non-upset basis.
(3) Condition E
Junk shall be priced at prevailing prices. Operator may
dispose of Condition E Material under procedures normally
utilized by Operator without prior approval of Non-
Operators.
D. Obsolete Material
Material which is serviceable and usable for its original function
but condition and/or value of such Material is not equivalent to
that which would justify a price as provided above may be
specially priced as agreed to by the Parties. Such price should
result in the Joint Account being charged with the value of the
service rendered by such Material.
E. Pricing Conditions
(1) Loading or unloading costs may be charged to the Joint
Account at the rate of thirty-five cents (35) per hundred
weight on all tubular goods movements, in lieu of actual
loading or unloading costs sustained at the stocking point.
The above rate shall be adjusted as of the first day of
April each year following January 1, 1985 by the same
percentage increase or decrease used to adjust overhead
rates in Section III, Paragraph 1.A(4). Each year, the rate
calculated shall be rounded to the nearest cent and shall be
the rate in effect until the first day of April next year.
Such rate shall be published each year by the Council of
Petroleum Accountants Societies.
(2) Material involving erection costs shall be charged at
applicable percentage of the current knocked-down price of
new Material.
3. Premium Prices
Whenever Material is not readily obtainable at published or listed
prices because of national emergencies, strikes or other unusual causes
over which the Operator has no control, the Operator may charge the
Joint Account for the required Material at the Operator's actual cost
incurred in providing such Material, in making it suitable for use, and
in moving it to the Joint Property; provided notice in writing is
furnished to Non-Operators of the proposed charge prior to billing Non-
Operators for such Material. Each Non-Operator shall have the right, by
so electing and notifying Operator within ten days after receiving
notice from Operator, to furnish in kind all or part of his share of
such Material suitable for use and acceptable to Operator.
4. Warranty of Material Furnished By Operator
Operator does not warrant the Material furnished. In case of defective
Material, credit shall not be passed to the Joint Account until
adjustment has been received by Operator from the manufacturers or their
agents.
V. INVENTORIES
The Operator shall maintain detailed records of Controllable Material.
1. Periodic Inventories, Notice and Representation
At reasonable intervals, inventories shall be taken by Operator of the
Joint Account Controllable Material. Written notice of intention to
take inventory shall be given by Operator at least thirty (30) days
before any inventory is to begin so that Non-Operators may be
represented when any inventory is taken. Failure of Non-Operators to be
represented at an inventory shall bind Non-Operators to accept the
inventory taken by Operator.
2. Reconciliation and Adjustment of Inventories
Adjustments to the Joint Account resulting from the reconciliation of a
physical inventory shall be made within six months following the taking
of the inventory. Inventory adjustment shall be made by Operator to the
Joint Account for overages and shortages, but, Operator shall be held
accountable only for shortages due to lack of reasonable diligence.
3. Special Inventories
Special Inventories may be taken whenever there is any sale, change of
interest, or change of Operator in the Joint Property. It shall be the
duty of the party selling to notify all other Parties as quickly as
possible after the transfer of interest takes place. In such cases,
both the seller and the purchaser shall be governed by such inventory.
In cases involving a change of Operator, all Parties shall be governed
by such inventory.
4. Expense of Conducting Inventories
A. The expense of conducting periodic inventories shall not be charged
to the Joint Account unless agreed to by the Parties.
B. The expense of conducting special inventories shall be charged to the
Parties requesting such inventories, except inventories required due
to change of Operator shall be charged to the Joint Account.
ADDENDUM TO EXHIBIT "C"
ACCOUNTING PROCEDURE
STATEMENT OF CLARIFICATION AND INTENT
These accounting procedures supplement Exhibit "C," (Accounting Procedure), of
the __________________________Joint Operating Agreement (Agreement).
To clarify the provisions of Paragraph 5 of Section I, General Provisions---
Audits, Paragraph 2 of Section H, Direct Charges---Labor, Paragraph I of
Section M, Overhead---Drilling and Producing Operations, Paragraph 2 of
Section M, Overhead-Major Construction and Section IV, Pricing of Joint
Account Material Purchases, Transfers and Dispositions, the following
statement of principles has been agreed upon by the Parties with respect to
the chargeability of certain expenditures incurred in connection with
Integrated Project Team, Major Construction and Drilling activities.
Expenditures for the Integrated Project Team activities, as defined in Article
12 and Exhibit "G' of the Agreement, Major Construction and Drilling shall
include all costs and related expenses for conceptual studies/design, detail
design, construction, commissioning and installation activities. This
includes, but is not limited to, cost associated with drilling/completion
engineering and design, well planning, regulatory requirements, prototype
design/development, studies, materials, engineering, site evaluation, surveys,
soil borings, preliminary design, detailed design, construction and
fabrication, mating and hook-up, transportation, commissioning, assembly and
testing, pipelines and related activities and any other expenditure incurred
by the Operator for the necessary and proper conduct of the Integrated Project
Team, Major Construction or Drilling activities.
Accounting for any of these activities shall be in accordance with appropriate
sections of this Exhibit "C" which specify those costs that are chargeable
direct and those to be recovered via the overhead rates. Each construction
AFE will specify which section shall apply, provided, however, that
establishment of an Integrated Project Team chargeable under the provisions of
Section III, Paragraph 2.C shall require approval of the Parties in accordance
with Article 12 and Exhibit "G' of the Agreement.
SECTION I, PARAGRAPH 5.B:
A contract representative from each participant will be appointed to the
contract committee to identify, recommend and/or implement changes necessary
to align contract provisions with current practice as agreed by all parties.
Changes which require amendment of the Joint Operating Agreement shall require
the unanimous approval of the Parties.
The roles and responsibilities of the contract committee will include the
review of COPAS updates for agreement applicability, resolution of Operator
billing practices and other matters which will improve the agreement and
relationships among the parties. The appointed representatives will meet on
an annual basis on a cycle coincident with the JOA execution date.
Audit exceptions, unresolved one year from the date of the audit report, will
be reviewed by the contract committee for resolution. If the contract
committee is unable to resolve the issue within one hundred eighty (180) days,
the issue will be handled in accordance with the dispute resolution procedures
described in Exhibit 'I" (Dispute Resolution Procedure).
SECTION II PARAGRAPH 2:
Upon request, the Operator will submit applicable organizational charts with
the Annual Operating Plan identifying positions to be directly charged to the
Joint Account in accordance ,with Paragraph 2.A of Section H.
SECTION III PARAGRAPH 2.B:
In order to clarify "engineering, design and drafting costs" chargeable under
Section M, Paragraph 2.B of this Exhibit "C," the following shall apply:
a. SERVICES RENDERED BY OPERATOR'S EMPLOYEES
All salaries, wages, payroll burden and Personal Expenses of personnel
performing technical services for the benefit of the Joint Account in
connection with the design, construction and installation of the Major
Construction project shall be charged direct regardless of location.
Such personnel shall be comprised of Operator's Producing and
Exploration Department employees including engineers, environmentalists,
technologists, engineering assistants, technicians, draftsmen,
construction representatives and other personnel performing technical
services.
Salaries will be charged to the Joint Account based on actual days
worked only when such time totals at least one day or more per month
that is devoted to the Major Construction project Payroll burden and
Personal Expenses associated with this labor will be charged to the
Joint Account consistent with the provisions of Section H, Paragraph 2,
Direct Charges-Labor and Paragraph 3, Direct Charges-Employee Benefits.
Personal Expenses include travel, accommodation, per diem, meals,
entertainment and other reasonable reimbursable costs incurred by
personnel in accordance with Operator standards whose salaries are
chargeable to the Joint Account. Relocation costs may be chargeable
only if the transfer is primarily for the benefit of the Joint Account
and the employee is assigned to the project for a minimum of twelve (12)
months.
b. AFFILIATE AND DRAFTING SERVICES
All salaries, wages, payroll burden, Personal Expenses and indirect
costs of Operator's Affiliates (which, for SOI, shall include their
Civil Engineering and Drafting groups) which provide requested services
for the design, construction and installation of the Major Construction
project shall be charged direct.
The cost of drafting services, including computer assisted drafting
(CAD), necessary for the design, construction and installation of the
Major Construction project shall be direct charged.
Operator/Non-Operators' Affiliate and computer services may be charged
on the basis of an all- inclusive standard hourly/daily rate (including
overhead) or cost allocation basis as is customarily charged to or by
its Affiliates for personnel and/or services.
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
1, Paragraph 5 of this Exhibit "C." If an all-inclusive standard unit
rate is used, such audit requirements shall be limited to verification
that such rate is, in fact, the rate(s) customarily charged by its
Affiliates.
c. THIRD-PARTY COSTS
All third-party expenditures incurred by the Operator for the direct and
primary benefit of the design, construction and installation of the
Major Construction 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
d. OVERHEAD APPLICATION
The Major Construction rates provided in Exhibit "C," Section III, 2.B shall
provide for all personnel not chargeable direct and all other Administrative
functions and associated cost indirectly serving the project including, but
not limited to, 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 such fixed
asset charged to the Joint Account. Total cost shall include all cost and
related expenses as defined in this Addendum to Section III.2.B.
SECTION III PARAGRAPH 2.C:
Prior to activating an Integrated Project Team pursuant to Article 12 and
Exhibit "G' of the Agreement, the following provisions shall apply in lieu of
Exhibit "C," Sections III.2.B. or III.2.C. In the event an Integrated Project
Team includes personnel involved in drill well design and development (i.e.
well completions, production/wellhead equipment, etc.) direct chargeable costs
associated with such well design and development prior to actual commencement
of drilling of Development Wells shall be defined by this Section.
a. SERVICES RENDERED BY EMPLOYEES OF PARTICIPANTS
All salaries, wages, payroll burden and Personal Expenses of management,
supervisory, technical and other personnel who are directly assigned to the
Integrated Project Team and engaged in project management, design,
construction and installation shall be charged direct regardless of location.
Such personnel may include, but are not limited to, project managers,
superintendents, technical managers, engineers, inspectors, environmentalists,
technologists, engineering assistants, technicians, draftsmen, engineering
clerks, secretaries, construction representatives, purchasing representatives,
material expediters, financial support and other technical, professional and
support personnel performing services for the Integrated Project Team. A pro
rata share of salaries, wages, payroll burden and Personal Expenses of part-
time technical personnel may be charged direct if the individual's time
devoted to the project totals at least one full day during a given month.
Costs incurred by Non-Operators for salaries, payroll burden and Personal
Expenses of personnel directly assigned to the Integrated Project Team
authorized by the Project Manager to provide services to the Integrated
Project Team will be billed to the Operator on or before the 20th day of the
following month. 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 based on
actual days worked only when such time totals at least one day or more per
month that is 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 Section II, Paragraph 2, Direct Charges-Labor and
Paragraph 3, Direct Charges-Employee Benefits.
Personal Expenses include travel, accommodation, per diem, meals,
entertainment and other reasonable reimbursable costs incurred by personnel in
accordance with Operator standards whose salaries are chargeable to the Joint
Account. Relocation costs may be chargeable only if the transfer is primarily
for the benefit of the Joint Account and the employee is assigned to the
Integrated Project Team for a minimum of twelve (12) months.
Each participant shall maintain auditable records to support any charges made
by it to the Joint Account and shall be subject to the audit requirements
provided in Section 1, 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, third-party invoices, organization charts or personnel listings for
the Integrated Project Team, etc.
b. AFFILIATE AND DRAFTING SERVICES
All salaries, wages, payroll burden, Personal Expenses and indirect costs of
Operator's Affiliates (which, for SOI, shall include their Civil Engineering
and Drafting groups) which provide requested services for the benefit of the
Project Team shall be direct charged. The cost of drafting services,
including computer assisted drafting (CAD), utilized by the Project Team shall
be direct charged. Costs incurred by Non-Operators for salaries, payroll
burden and Personal Expenses of personnel not directly assigned to the
Integrated Project Team may be charged to the Joint Account only with the
approval of the Project Manager.
Affiliate and computer services may be charged on the basis of an all
inclusive standard hourly/daily rate (including overhead) or cost allocation
basis as the Operator customarily charges its Affiliates (or the Operator's
Affiliate customarily charges the participant) for personnel and/or services.
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.' If an all inclusive standard unit rate is used, such audit
requirements shall be limited to verification that such rate is, in fact, the
rate(s) customarily charged by its Affiliates.
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.C shall
provide for all personnel above the Project Manager level and all other
Administrative functions and associated cost indirectly serving the project
including, but not limited to, 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 such fixed asset charged to the Joint Account. Total cost shall
include all cost and related expenses as defined in this Addendum to Section
III.2.C.
If the Project Manager elects to house the Integrated Project Team 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
Project Team. The actual 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 as stated in this
Statement of Clarification and Intent Section III, Paragraph 2.C(d).
SECTION IV, PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND
DISPOSITIONS:
The pricing of material transfers to and/or from the joint property will be
determined by utitilizing 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 is determined to occur when an agreement is made between an
Operator and a third party for the acquisition of materials for a specific
well site or location. Direct Purchases shall be charged to the Joint
Property 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, credit shall be passed to the Joint Property when adjustments have
been received by the Operator from the manufacturer, distributor or agent.
"Tubular substitutions" is defined where higher-than-specification grade or
size tubulars are charged to the Joint Property from Operator's inventory.
The Operator is entitled to charge the Joint Property at an equivalent price
of the well design specification tubulars.
EXHIBIT "D"
Attached to and made a part of the Joint Operating Agreement
dated effective , by and between Shell Deepwater Development Inc.
and Reading & Bates Development Co.
GAS BALANCING AGREEMENT ("AGREEMENT")
1. DEFINITIONS. The following definitions shall apply to this Agreement:
1.01 "Arms Length Agreement" shall mean any gas sales agreement with an
unaffiliated purchaser or any gas sales agreement with an affiliated
purchaser where the sales price represents market value in the Balancing
Area.
1.02 "Balancing Area" shall mean all of the acreage and depths subject
to the Operating Agreement.
1.03 "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.
1.04 "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.
1.05 "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.
1.06 "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.
1.07 "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.
1.08 "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.
1.09 "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.
1.10 "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.
1.11 "Party" shall mean those individuals or entities subject to this
Agreement, and their respective heirs, successors, transferees and
assigns.
1.12 "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.
1.13 "Royalty" shall mean payments on production of Gas from the
balancing Area to all owners of royalties, overriding royalties,
production payments or similar interests.
1.14 "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.
1.15 "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.
1.16 "Winter Period" shall mean the months October, November and
December in one calendar year and the month of January, February and
March 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
volumes 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.
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 audit the production and
Gas sales and transportation volumes of the non-reporting Party to
provide the required data. 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 will be based on the proceeds
received by the Overproduced Party 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 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
7.1 will be based on the proceeds received for the sale of the Gas by
the Overproduced Party calculated at the Balancing Area, under an Arm's
Length Agreement, 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 Overproduction
under an Arm's Length Agreement, the cash settlement will be based on
the weighted average price received by the Overproduced Party for any
gas sold from the Balancing Area under Arm's Length Agreements during
the months to which such Overproduction is attributed. 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 spot
sales price published for the applicable geographic area during such
month in a mutually acceptable pricing bulletin.
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 rst 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 imbalances
of the Underproduced Parties, and provided further that such settlements
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 event of any conflict between the provisions of this
Agreement and the provisions 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
provisions hereof, and nothing herein shall be construed or interpreted
as creating any rights 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.
13. ASSIGNMENT AND RIGHTS UPON ASSIGNMENT
13.1 Subject to the provisions of Sections 13.2 (if elected) 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 obligations 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 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.
EXHIBIT "E"
Attached to and made a part of the Joint Operating Agreement
dated effective , by and between Shell Deepwater
Development Inc.
and Reading & Bates Development Co.
CERTIFICATION OF NONSEGREGATED FACILITIES
Contractor certifies that it does not maintain or provide for its employees
any segregated facilities at any of its establishments and that it does not
permit its employees to perform their services at any location under its
control, where segregated facilities are maintained. Contractor certifies
further that it will not maintain or provide for its employees any segregated
facilities at any of its establishments and that it will not permit its
employees to perform their services at any location, under its control, where
segregated facilities are maintained. Contractor agrees that a breach of this
certification is a violation of the Equal Opportunity Clause in any Government
contract between Contractor and Operator. As used in this certification, the
term "segregated facilities" means any waiting rooms, work areas, rest rooms
and other storage or dressing areas, parking lots, drinking fountains,
recreation or entertainment areas, transportation, and housing facilities
provided for employees which are segregated by explicit directive or are in
fact segregated on the basis of race, color, religion, or national origin
because of habit, local custom or otherwise. Contractor further agrees that
(except where it has obtained identical certifications from proposed
subcontractors) prior to the award of subcontracts exceeding $10,000 which are
not exempt from the provisions of the Equal Opportunity Clause; that it will
retain such certifications in its files; and that it will forward the
following notice to such proposed subcontractors (except where the proposed
subcontractors have submitted identical certifications for specific time
periods):
NOTICE TO PROSPECTIVE SUBCONTRACTORS OF REQUIREMENT FOR CERTIFICATIONS OF
NONSEGREGATED FACILITIES. A Certification of Nonsegregated Facilities, as
required by the May 9, 1967 order on Elimination of Segregated Facilities, by
the Secretary of Labor (32 Fed. Reg. 7439, May 19, 1967), must be submitted
prior to the award of a subcontract exceeding $10,000 which is not exempt from
the provisions of the Equal Opportunity Clause. The certification may be
submitted either for each subcontract or for all subcontracts during a period
(i. e., quarterly, semi-annually or annually). (1968 MAR.) (Note: The penalty
for making false statements in offers is prescribed in 18. U.S.C. 1001.)
Whenever used in the foregoing Section, the term "contractor" refers to each
party to this agreement.
EXHIBIT "F"
Attached to and made a part of the Joint Operating Agreement
dated effective , by and between Shell Deepwater Development
Inc. and Reading & Bates Development Co.
NEWS RELEASE GUIDELINES
1. General: 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 and all such final test results have been received by all
Participating Parties.
2) Basic News Release: If a proposed news release is not approved as a
General Matter per Article 7.5 (News Releases) of the Agreement, the
Operator may, at its discretion, prepare a basic news release using the
following content guidelines:
1 . Name of Well and Rig Name
2. Location of Well by Area, Block, Water Depth and Adjacent
State
3. Bonus Price and Sale Date
4. Tested Interval(s), if appropriate
5. Participants and Percentages
6. Acreage Controlled
Proposed basic news releases shall be transmitted for review and comment
to the Non-Operating Parties not less than 72 hours (exclusive of
Saturdays, Sundays, and holidays) before being issued to the news media.
Any Non-Operating Party may have its name excluded from the release by
so informing the Operator during the 72-hour news release review period.
This exclusion however, does not apply to the list of participants and
percentage participation.
3) Supplemental News Release: Following receipt of Operator's proposed
release, any Participating Party may prepare its own news release
("Preparing Party") using the content guidelines above. The Preparing
Party shall send the other Parties a copy of the proposed supplemental
news release by facsimile transmission. A Non-Operating Party's news
release shall not be issued in advance of the Operator's release.
4) No News Release by Operator: The Operator may choose not to issue a
basic news release per Paragraph 2) above. In this event, within thirty
(30) days of the failed vote as a General Matter in Article 7.5 (News
Releases), a Non-Operating Party may make a limited news release. This
release shall be submitted to the Operator for review of content and
issuance of the news release. After Operator's review, the proposed
release shall be submitted to other Non-Operating Parties for review and
comment. After review and comment by all Parties, the limited news
release may be given to the news media.
EXHIBIT "G"
Attached to and made a part of the Joint Operating Agreement dated effective
, by and between Shell Deepwater Development Inc. and Reading &
Bates Development Co.
INTEGRATED PROJECT TEAM and TECHNOLOGY SHARING
WHEREAS, the Parties, desire to further provide for the formation and
operation of an Integrated Project Team for the purpose of assisting the
Operator with preparing a Development Plan for the Contract Area and in the
planning, design and engineering of an Initial Production System and any
Subsequent Production System for the Contract Area; and,
WHEREAS, Each of the Parties has considerable experience in developing
offshore oil and gas properties and the design and installation of an Initial
Production System will require significant engineering effort; and,
WHEREAS, The Parties desire to establish an understanding, relating to
i) the costs and expenses of the Integrated Project Team to be charged to the
Joint Account 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.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises exchanged and contained within this Integrated Project Team Exhibit,
the Parties have reached the following agreement concerning the formation and
operation of the Integrated Project Team.
SECTION 1.0 DEFINITIONS
As used in this Exhibit, the initially capitalized terms shall have the
meanings assigned in Article 2.0 of the Operating Agreement or as
specified below:
1.1 Confidential Work Product: shall mean all proprietary geophysical,
geochemical, drilling, engineering or other similar technical data,
along with information, reports, studies, analysis, models or similar
data and documents that are developed by the Integrated Project Team
within the scope of its work or received from or on behalf of the
Parties for use in the Integrated Project Team's work. The term shall
include all proprietary information developed by the Integrated Project
Team, the cost of which is charged to the Joint Account. The provisions
of this Exhibit shall not be applicable to "Confidential Data", as that
term is defined in the Operating Agreement.
1.2 Project Manager: shall mean the designated representative of the
Operator who will direct, supervise and oversee the work of the
Integrated Project Team.
1.3 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 a Prospect Area, and for the planning, design, engineering and
installation of a Production System for a Prospect Area as further
provided for in this Exhibit "G". The IPT shall be formed pursuant to
Article 12.0 (Development Plans).
1.4 Operating Agreement: shall mean that certain Joint Operating
Agreement effective to which this Exhibit "G" is attached.
1.5 Background Technology: shall mean any proprietary geophysical,
geochemical drilling, engineering or other similar technical data,
information, reports, studies, analysis, models or similar data and
documents developed or obtained by a Party outside of the scope of the
Operating Agreement (and this Exhibit) that is disclosed by a Party or
exchanged by the Parties for use by the Integrated Project Team.
1.6 Employees: Employees shall mean any individual under the
employment of any Party to this Operating Agreement including any
Affiliate or contractor which may represent any Party hereunder.
SECTION 2.0 INTEGRATED PROJECT TEAM FORMATION
2.1 Formation and Staffing of the Integrated Project Team: An IPT of
project, technical and support personnel may be established pursuant to
the terms of Article 12.2 (Proposal of Integrated Project Team) of the
Operating Agreement. Each Participating Party may nominate
representatives possessing specific backgrounds as identified by the
Project Manager to progress the Development Plan. Each Participating
Party may nominate a number of IPT members equal to its Participating
Interest in the IPT. Each Party shall have the right to have percentage
representation on the IPT up to its respective working interest share of
the total number of technical personnel to be assigned to the Integrated
Project Team. However, a Party shall not be precluded from having more
or less than its respective Participating Interest representation on the
IPT, if approved by the Project Manager and consistent with the needs of
the IPT. The Project Manager must approve actual participation of any
individual nominated by a Party for participation on the IPT, and such
approval shall not be unreasonably withheld.
2.1.1 Employee Staff Contribution: Each Participating Party in the
IPT AFE shall have the right (but not the obligation) to nominate
its Employees as members of the IPT. Nominated Employees may
include project, technical or support personnel.
2.1.2 Affiliate and Contract Staff: The IPT may utilize the
resources of Affiliates, consultants and contractors to carry out
the work of the IPT. Consultants or contractors nominated by
Participating Parties to serve on the IPT in the place of a
Participating Party's employees are included under the terms of
this Section 2.1.2. The individuals nominated for participation by
the Participating 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 IPT.
2.2 Status of Team Members: Each Employee member of the IPT shall
remain an employee of its respective company and each company shall
remain responsible for their employees' salaries and benefits as well as
maintaining worker's compensation insurance on their employees.
Accordingly, each Party will continue to administer the compensation,
benefits, allowances and staff planning of its employees on the IPT.
Each Party retains the right to ultimately direct the details and means
by which their representatives participate on the IPT. However,
Employees who participate on the IPT will receive team assignments and
general supervision from the Project Manager in connection with their
day to day work. An individual selected to the IPT shall, insofar as
possible, and consistent with the needs of the IPT and the individual's
employer, serve on the IPT for the duration of the IPT. Notwithstanding
the above, some IPT members may be selected for specific tasks or phases
of IPT work, and upon the conclusion of such tasks or phases these team
members may be dismissed by the Project Manager.
2.3 Project Manager: The IPT shall operate under the direction of the
Project Manager, who shall be selected by the Operator of the IPT. The
Project Manager shall be responsible for making team assignments and
shall be responsible for the overall management and supervision of
specific work tasks for the IPT. The Project Manager shall determine at
whose offices the IPT work is to be undertaken. The Project Manager
shall be responsible for selecting team members from the nominations
provided by Parties. The Project Manager shall also be responsible for
selecting contractors to perform certain IPT activities, acquiring
supplies and services needed by the IPT and for instituting rules and
procedures for maintaining confidential information. The Project
Manager shall also be responsible for making presentations on any
Initial or Subsequent Production System and associated documentation at
meetings which are conducted under the Operating Agreement.
2.4 Work Scope of the Integrated Project Team: The primary objective
for forming any IPT is to pool the talents of the Parties in preparing
feasibility studies prior to Development Operations and in planning,
design, engineering, fabricating, transportation and installation of any
Production System. The proposal of the Development Plan (including the
Initial Production System) and commitment of funds thereto shall be
handled in accordance with Article 12.0 (Development Plans) of the
Operating Agreement. For any project undertaken by the IPT, the
Operator shall provide: (1) a memo describing the anticipated scope of
the team's work to be undertaken in reasonable detail such that the Non-
Operator may make an informed decision concerning its participation in
the Integrated Project Team; (2) a memo describing the type and number
of staff required to complete the assignment; and (3) an AFE itemizing
the Operator's estimate of the Cost of the Integrated Project Team.
Approval of the IPT AFE (and scoping memo) shall be handled pursuant to
Article 12.1.1 (Integrated Project Team) of the Operating Agreement.
2.5 Reports by the Integrated Project Team: The IPT shall review the
progress of its work with all Participating Parties at least quarterly,
and present the results of any studies or planning upon their
conclusion. The time and place of the meetings of the IPT and location
for conducting IPT activities shall be determined by the Project
Manager.
2.6 Integrated Project Team Costs: The costs and expenses for the IPT
shall be charged to the Joint Account pursuant to Exhibit "C",
(Accounting Procedure) of the Operating Agreement. Each Participating
Party in the IPT shall be responsible for its Participating Interest
share of the IPT expenses, regardless of its level of Employee
participation on the IPT.
2.6.1 Employee Charges: Each Participating Party in an IPT shall
recover the costs of Employees assigned to or associated with the
IPT through charges to the joint account under Exhibit "C"
(Accounting Procedure) of the Operating Agreement.
2.6.2 Contractors and Consultants: The Project Manager may retain
the services of consultants and contractors as is reasonably
necessary to carry out the studies and tasks assigned to the IPT.
Costs of such consultants and contractors assigned to the IPT
shall be recovered by Operator through charges to the joint
account under Exhibit "C" (Accounting Procedure) of the Operating
Agreement. So long as the Costs of the consultant or contractor
are within the scope and amount of an approved AFE, the Project
Manager's retention of consultants shall not require additional
approval by the Participating Parties.
2.7 Liability of Integrated Project Team Members. 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) for any personal
injury (including death) of its Employees on the IPT irrespective of
whether any other party or its employees may have been or maybe alleged
to have been negligent or otherwise legally responsible.
SECTION 3.0 Security Provisions
3.1 Security Policies: All Operator and Non-Operator Employees and
associates with the IPT shall honor Operator's security system and shall treat
all information directly or indirectly learned or received by virtue of its
participation on the IPT as confidential in accordance with the provisions of
Operator's security manual, and all revisions thereto which are made prior to
termination of this Exhibit. A copy of the security manual and any revisions
thereto shall be made available to Non-Operator Employees by the Project
Manager for their use during the project. This obligation of confidentiality
shall also apply to any other proprietary and confidential information which
may relate to matters other than the Contract Area to which IPT members are
exposed by virtue of working in Operator's offices. Operator will use
reasonable efforts to minimize the exposure of Non-Operator personnel to the
Operator's proprietary and confidential information. In no event shall such
confidential information be disclosed to a third party without the prior
written consent of Operator and Non-Operator except as provided in the
Operating Agreement.
SECTION 4.0
Confidentiality
4.1 Confidentiality Obligation: Each Party agrees to maintain as
confidential and not to use or disclose to any third party the Confidential
Work Product, 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 (i) two (2) years following the termination of
the IPT work pursuant to Section 8 of this Exhibit "G" or (ii) 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 Work Product in the same manner as it
treats its own confidential information.
4.1.1 Background Technology: The Parties shall use best efforts to
declare and list Background Technology and information which will be
utilized by the IPT prior to establishment of the IPT. However a
Participating Party may declare and list additional Background
Technology after establishment of the IPT if it deems such technology
will be beneficial to the IPT. Prior to disclosing any Background
Technology to the IPT, the Participating Parties shall agree to exempt
the Background Technology from the terms of this Exhibit and the
Operating Agreement. If such agreement is not obtained, such Background
Technology need not be disclosed to the IPT. The receiving Party shall
maintain any Background Technology received as Confidential Work Product
under this Exhibit. In no event will Background Technology be disclosed
to a third party without the prior written consent of the Party
providing the Background Technology to the IPT. Any Background
Technology presently owned and developed by a Party prior to the
effective date of the Operating Agreement shall remain the sole property
of that Party.
4.1.2 Consultant Agreements: The Project Manager and each Party
soliciting work from third party contractors and consultants (or from
Affiliates) in connection with the IPT 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.
4.2 Exceptions and Permitted Disclosures: Any Participating Party may
disclose Confidential Work Product to third parties if such disclosure is
either an exception to the confidentiality obligation as listed in Article
7.1.1 (Exceptions to Confidentiality) or is a permitted disclosure under
Article 7.1.2 (Permitted Disclosures) of the Operating Agreement.
4.2.1 Patent Application Disclosures: Notwithstanding the foregoing,
each Party may use such Confidential Work Product under Subarticle 5.2
as reasonable necessary or appropriate to file patent applications
pursuant to Article 6. Prompt notice will be provided to the other
Parties of any such filing.
4.2.2 Subsequent Disclosures: Following the expiration of the period of
confidentiality set forth in Section 4.1 above, each Party may freely
use and disclose the Confidential Work Product without accounting to any
other Party, subject only to whatever patent rights, copyright
restrictions or confidentiality obligations are owed to third parties.
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.
4.3 Supporting Agreements: Each Party shall be responsible for insuring that
its respective representatives fully abide by all obligations associated with
the confidentiality of all information learned as a result of their
participation on the IPT and agree to convey such information to others in
their company on a "need-to-know" basis only. In this regard, there shall be
limited reproduction of IPT generated data. Upon the Project Manager's
request, each Party shall require its respective employees participating on
the IPT to execute a confidentiality agreement consistent with the
confidentiality obligations specified in the Operating Agreement and this
Exhibit and shall furnish the other Parties with a copy of same upon request.
Operator shall be responsible for securing confidentiality agreements from
outside contract services.
SECTION 5.0 USE OF CONFIDENTIAL WORK PRODUCT
5.1 Receipt of Confidential Work Product: Each Party will be entitled to
receive 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 IPT, an Affiliate or by a third party.
5.2 Right to use Confidential Work Product: Each Participating Party may use
for its own account (and free of cost) all Confidential Work Product received
or developed by the IPT which is (1) Background Technology or (2) developed by
the EPT under this Agreement or the cost of which is charged to the Joint
Account. Each Participating Party may disclose Confidential Work Product 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 Work Product in confidence and to use it only
for the benefit of that joint venture or production sharing arrangement.
5.3 Third Party Limitations: The Parties acknowledge that various Background
Technology 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 delivering Party agrees to identify,
in writing, any Background Technology subject to third party restrictions and
disclose the nature of the restriction to the receiving Party prior to
disclosure of the Background Technology. The delivering Party shall secure
the receiving Party's acknowledgment of such restrictions prior to transmittal
of such third party Background Technology. The receiving Party's
acknowledgment constitutes its acceptance of such obligations and restrictions
imposed upon disclosure and use of the Background Technology.
5.4 Proprietary Software: During the term of the IPT, a Party may be
authorized to use various computer software and programs which are identified
as being proprietary to one of the other Parties. Such proprietary computer
software and programs shall not be considered joint property and such computer
software and programs are not a deliverable under this Agreement. 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 were developed jointly by the IPT, shall be considered
Confidential Work Product and joint property.
SECTION 6.0 INVENTIONS, PATENTS AND COPYRIGHTS
6.1 Patent Assignment with Right to License and Sublicense: Patents on
inventions which are (1) conceived solely by outside contractors or
consultants employed for the joint account, or conceived jointly among the
Parties (each including its respective Affiliates) while working on the IPT
and (2) from work which has been funded by the Joint Account will be assigned
to the Operator. The Operator agrees to grant each Participating Party an
irrevocable, non-exclusive, 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 Section 6.1, 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, non-exclusive, 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 Commitment to Disclose Technology: Except as expressly set forth
above, nothing in this Exhibit "H" 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.
SECTION 7.0 WARRANTIES AND INDEMNITIES
7.1 Disclaimer of Warranties: ALL INFORMATION DISCLOSED OR 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 EXPRESS, IMPLIED OR STATUTORY WARRANTY OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED FROM THIS AGREEMENT.
IN NO EVENT SHALL A PARTY CONVEYING OR DISCLOSING INFORMATION BE LIABLE FOR
ANY INCIDENTAL, CONSEQUENTIAL OR OTHER DAMAGES ARISING OUT OF OR RESULTING
FROM THE USE OF INFORMATION CONVEYED OR DISCLOSED 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 Work Product,
Background Technology or other information or other technology disclosed,
exchanged under or developed pursuant to this Exhibit.
SECTION 8.0 MISCELLANEOUS PROVISIONS
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 relating to the evaluation of alternate
deepwater development systems even though such activities may parallel or
overlap the activities of the IPT. Any such Party conducting such independent
research activities shall be under no obligation pursuant to the Operating
Agreement or this Exhibit to disclose any results of independent research to
the other Party(ies) or with respect to the use or disposition of the results
of independent research, including but not limited to all information and data
resulting therefrom.
8.3 Duration of the Integrated Project Team: The IPT shall remain in place
until (1) the team has completed the work described in the IPT AFE and scoping
memo, or (2) the planning, design, construction, installation and start-up
phase of any Production System has been completed, or (3) IPT work has been
terminated by approval of the Participating Parties as a General Matter,
whichever is the earlier event. Upon dissolution of the IPT, the Operator
shall conduct any further work required for the installation of the Production
System. Any AFE in progress at the time of the IPT's dissolution shall
continue to be accounted for under Exhibit "C" (Accounting Procedure).
8.4 Assignability: Except in those certain transactions set forth in
Article 24.2.3 of the Operating Agreement, a third party (not currently a
Party to this Agreement) who acquires a Working Interest in the Contract Area
may join the IPT upon the approval of the Participating Parties as a General
Matter. A new Party joining the IPT must agree, in writing, to undertake all
obligations set forth for a Party under this Exhibit. Such new Party will
have all rights, duties and obligations under this Exhibit regarding the use
of all Confidential Work Product exchanged or developed prior to the date it
joins the IPT and during its participation thereunder. However, patent rights
received by such new Party hereunder pursuant to Section 7.0 of this Exhibit
shall be limited to patents based on developments after the date such Party
joins the IPT. 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 "H" relating to the confidentiality, restrictions on
use, patents, indemnity, and as applicable, duties to license the other
Parties.
8.5 Re-instatement of Integrated Project Team: The IPT may be reinstated by
the Operator to assist in further work on the Initial Production System or
planning and designing any Subsequent Production System. Any reinstated IPT
shall utilize the procedures of this Exhibit, with any applicable time periods
in Article 12 of the Operating Agreement running from the date of
reinstatement of the IPT.
EXHIBIT "H"
Attached to and made a part of the Joint Operating Agreement
dated effective , by and between Shell Deepwater Development Inc. and
Reading & Bates Development Co.
DISPUTE RESOLUTION PROCEDURE
1. OVERVIEW
A. Description and Goals. Arbitration as used in this statement is a
procedure whereby an Arbitrator resolves any claim(s), controversy(ies)
or dispute(s) (the "Dispute") between Shell Deepwater Development Inc.
and (hereinafter referred to singularly as "Party" and
collectively as "Parties") arising out of, relating to or in connection
with the Joint Operating Agreement (hereinafter "Agreement")
including the interpretation, validity, termination or breach thereof.
(i) Binding: The arbitration process is binding on the Parties
and this arbitration is intended to be a final resolution of any
Dispute between the Parties as described above, to the same extent
as a final judgment of a court of competent jurisdiction. Each
Party hereby expressly covenants that it shall not resort to court
remedies except as provided for herein, and for preliminary relief
in aid of arbitration
(ii) Violation: A non-prevailing Party shall pay all legal and
court costs incurred by the other Party in connection with the
enforcement of the final resolution of any Dispute under this
Dispute Resolution Procedure. Suits, actions or proceedings in
connection with such enforcement shall be instituted in the United
States District Court for the Eastern District of Louisiana, and
pursuant to Title IX of the United States Code. Each Party waives
any option or objection which it may now or thereafter have to the
laying of the venue in any such suit, action or proceeding and
irrevocably submits to the jurisdiction of such court in any such
suit, action or proceeding.
B. Duty to Negotiate: The Parties shall inform one another promptly
following the occurrence or discovery of any item or event which might
reasonably be expected to result in a Dispute in connection with the
Agreement. The Parties will attempt to resolve satisfactorily any such
matters.
C. Notice of Unresolved Dispute: Should a Dispute arise which the
Parties cannot resolve satisfactorily, either Party may deliver to the
other Party a written notice of the Dispute with supporting
documentation as to the circumstances leading to the Dispute (the
"Notice of Dispute"). The Parties, within ten (10) Business Days from
delivery of such notice, shall then each appoint a management
representative ("Management Representative") who has no prior direct
involvement with the subject matter of the Notice of Dispute and who is
duly authorized to investigate, negotiate, and settle the Dispute. The
Management Representative for each Party shall meet and confer as often
as they deem reasonably necessary for a period not exceeding thirty (30)
days following the delivery of the Notice of Dispute in good faith
negotiations to resolve the Dispute amicably. The parties in their sole
discretion may also agree to utilize the service of a mediator pursuant
to a joint engagement. Unless otherwise provided herein, all such
notices shall be served in accordance with the provisions of the
Agreement.
II. ARBITRATION PROCESS
A. Arbitration: If the Parties are unable to resolve the Dispute
within forty (40) days following the receipt of the Notice of Dispute,
or such additional time as may be mutually agreed, the matter shall be
submitted to arbitration in accordance with the procedures set forth
below.
B. Initiation of Arbitration: The arbitration shall be initiated by
either party delivering to the other a Notice of Intention to Arbitrate.
C. Governing Procedures: Except as expressly provided herein, the
arbitration shall be conducted in accordance with procedures that are
mutually acceptable to the Parties, including limited depositionless
discovery.
(i) Governing Law: The Arbitrator shall apply the governing
substantive law of the state chosen by the Parties to the
Agreement.
D. Arbitrator: There shall be one Arbitrator, who shall be
independent, impartial and experienced in arbitration proceedings.
Arbitrator shall be experienced in the oil and gas industry and
knowledgeable or specializing as to the subject matter involved in the
Dispute. The Arbitrator shall be chosen as follows: the Parties shall
have thirty (30) days from the delivery of a Notice of Intention to
Arbitrate to mutually agree on an Arbitrator. If the Parties cannot
mutually agree within said thirty (30) day period, then the Parties
shall, within three (3) days after expiration of the thirty (30) day
period, apply to the American Arbitration Association as the Appointing
Authority, for the appointment of an Arbitrator for or on behalf of the
Parties, and in such case the Arbitrator appointed by the Appointing
Authority shall meet the criteria set forth in this Section II.D and
shall act as if mutually agreed to by the Parties.
(i) Conflicts: Any Arbitrator, prior to his or her appointment,
shall disclose to the Parties all actual or perceived conflicts of
interest and business relationships involving the Dispute or the
Parties, including but not limited to, any professional or social
relationships, present or past, with any Party (or its
affiliates), including any Party's (or its affiliates) directors,
officers and supervisory personnel and counsel. Any Party may
challenge in writing the appointment or continued service of any
Arbitrator for lack of independence, partiality or any other cause
likely to impair such Arbitrator's ability to effectively
participate in the proceedings or render a fair and equitable
decision. Where such challenge is made, the Appointing Authority
shall uphold or dismiss the challenge. In the event a challenge
is upheld, the Arbitrator shall be replaced. A replacement will
be selected in the same manner as the original Arbitrator was
selected. If an Arbitrator resigns or becomes unable or unwilling
to continue to serve as the Arbitrator, a replacement shall be
selected in the same manner as that Arbitrator was chosen.
(ii) Multi-Party Arbitrations: Where more than two Parties are
involved in the Dispute ("Multi-Party Arbitration"), all Parties
shall jointly name and agree as the appointment of the Arbitrator
meeting the criteria set forth in Section II.D. above. If the
Parties cannot agree as to the choice of the Arbitrator within the
said thirty (30) days, any of the Parties hereto may in like
manner, within three (3) days after written notice to the other
Parties, apply to the Appointing Authority for the appointment of
an Arbitrator meeting the criteria set forth in Section II.D.
above.
(iii) Management of the Arbitration: The Arbitrator shall
actively manage the proceedings as he or she deems best so as to
make the same expeditious, economical and less burdensome and
adversarial than litigation.
E. Confidentiality: All documents, briefs, testimony, transcripts,
as well as, all Arbitrator decisions shall be confidential. Likewise,
the views, suggestions, admissions, proposals and other information
exchanged in the arbitration are confidential and are inadmissible in
any other proceeding.
F. Costs and Expenses: The Parties involved in the dispute shall be
equally responsible for all costs, fees and expenses incurred by the
Arbitrator and any other incidental costs incurred in connection with
the arbitration proceeding shall also be borne equally by the Parties.
Each Party is solely responsible for its own attorneys' fees and
expenses incurred in the Arbitration. In the event of a Multi-Party
Arbitration, all costs and expenses shall be borne equally by all
Parties.
G. Submissions: Within thirty (30) days after the selection of the
Arbitrator, each Party shall provide the Arbitrator with a short and
plain submission defining the issues to be decided and the nature of the
relief that the Arbitrator may award (the "Submission"). This
Submission shall explicitly authorize the Arbitrator to decide these
issues. This authorization shall stay in force for period no longer
than nine (9) months from this Submission. If the Parties are unable to
reach consensus as to the issues involved, the Arbitrator in his or her
sole discretion shall frame the issues through a reasonable procedure.
The Arbitrator will render decisions on the specific issues established
and shall fashion any remedy that the Arbitrator deems appropriate so
long as that remedy is consistent with the Parties' Submissions
hereunder. Any money judgment entered by the Arbitrator shall be
payable in U.S. dollars.
H. Transcriptions: The presentations and argument will be transcribed for
the benefit of the Arbitrator and the Parties.
I. Discovery: Commencing thirty (30) days after the receipt of the
opposing Party's Submission, each Party may serve upon the other Party up to
ten (10) requests for the production of documents, including subparts. The
requests shall be made in good faith and not be served for the purpose of
delay or harassment. Each request shall describe the type of document(s)
sought and each request shall be limited to documents that are relevant to a
claim or defense in the Arbitration proceeding, or reasonably calculated to
lead to the discovery of admissible evidence. The requests need not be served
all at once but may be served in stages.
(i) The Party served with a request under this provision shall
provide the adverse Party with copies of the requested documents,
and identify the request to which each document is responsive,
within twenty (20) days of the receipt of the request. If the
Party served with a request objects to the production of any of
the requested documents, it shall nevertheless produce within the
permitted time all documents responsive to any request that is not
objected to by that Party.
(ii) A Party that is served with a request may challenge the
propriety of the request within the time permitted for response by
a short written objection which shall be forwarded to the adverse
Party and to the Arbitrator. The adverse Party shall submit its
response, if any, to the objecting Party and the Arbitrator within
five (5) days of receipt of the objection. The Arbitrator shall
consider the request, the objection and the response, if any, and
decide whether the production shall be allowed or denied or
whether the request should be modified within ten (10) days after
the submission of the adverse Party's response.
J. Presentations: No later than twenty-five (25) days prior to the date
that presentations to the Arbitrator are to begin, each Party will submit to
the Arbitrator and serve on the other Party a written position statement. The
original statement of each Party shall not exceed thirty-five (35) typewritten
letter-size pages. Each Party shall have the right to submit reply statements
no later than fifteen (15) days prior to the date of the presentation. Such
reply statements shall not exceed fifteen (15) typewritten letter-size pages.
(i) All documents and affidavits that a Party intends to use
during its presentation shall be submitted to the Arbitrator and
served on the other Party with the position and reply statements.
All demonstrative exhibits shall be exchanged five (5) days in
advance of the presentations.
(ii) The presentations to the Arbitrator shall extend for such
time as the Arbitrator agrees to be appropriate. In the absence
of any agreement, the presentations for both Parties shall extend
for no longer than two (2) days and shall be concluded within six
(6) months after selection of the Arbitrator. Presentations of
each Party shall occur successively with no intervening delay.
(iii) Each Party shall make an oral and/or documentary
presentation of its position in such order and in accordance with
the time schedule established by the Arbitrator. The Arbitrator
may question each of the presenters during or following any and
all presentations.
The Arbitrator shall determine a reasonable time and location for the
presentations.
K. Decision and Award: The Arbitrator shall promptly (within sixty (60)
days of conclusion of the presentations or such longer period as the Parties
may mutually agree) determine the claims of the Parties and render a final
decision in writing. The decision shall state with specificity the findings
of fact and conclusions of law on which it rests. The decision rendered by
the Arbitrator may be enforced in accordance with Section I.A.(ii), above, and
may only be appealed pursuant to Section L below. The decision shall be
served upon each of the Parties by facsimile transmission and by first class
mail.
(i) If applicable law allows pre-award interest, the Arbitrator
may, in his or her discretion, grant pre-award interest and, if
so, such interest may be at commercial rates in the state chosen
by the Parties pursuant to Section II.C.(i) during the relevant
period. Further, the arbitrator may, in his or her discretion,
award to the prevailing party(ies) its (their) attorneys fees and
costs of arbitration. The Arbitrator shall not award
consequential, punitive, indirect or other noncompensatory
damages.
(ii) Within ten (10) days of receipt of the award either side may
submit a Motion to Modify the award. A response shall be due
within fifteen (15) days thereafter and the Arbitrator shall rule
thereon within fifteen (15) days after receipt of the response.
(iii) Judgment on the award may be entered in a United States
District Court for the Eastern District of Louisiana at any time
within one year after the decision is made.
L. Vacation of Award and Appeal: An appeal from an order or judgment pursuant
to this Section II.L. shall be instituted in the United States District Court
for the Eastern District of Louisiana. The court may vacate the award only if
the award was procured by or through fraud or corruption or bias or prejudice
of the Arbitrator. Each Party waives any option or objection which it may now
or thereafter have to the laying of the venue of any such suit, action or
proceeding and irrevocably submits to the jurisdiction of the court in any
such suit, action or proceeding. Each Party agrees that a remedy at law for a
violation of this Section II.L. may not be adequate and therefore agrees that
the remedies of specific performance and injunctive relief shall be available
in the event of any violation in addition to any other right or remedy at law
or in equity to which any Party may be entitled.
M. Res Judicata: To the extent permitted by law, any decision of the
Arbitrator shall not be res judicata or have any binding effect in any other
litigation or arbitration where any Party to this Agreement may also be a
party.
EXHIBIT "I"
Attached to and made a part of the Joint Operating Agreement
dated effective ______________, by and between Shell Deepwater Development
Inc.
and Reading & Bates Development Co.
MEMORANDUM OF OPERATING AGREEMENT
AND FINANCING STATEMENT
1.0 This Memorandum of Operating Agreement and Financing Statement
(hereinafter called "Memorandum") is effective as of the ______day of
____________________.
2.0 The parties hereto have entered into an Operating Agreement effective
_______________ (hereinafter referred to as the "Operating Agreement")
providing for the development and production of crude oil, natural gas
and associated substances from the lands and oil and gas leases
described in Exhibit "A-1" of the Operating Agreement attached hereto as
Attachment "1" (hereinafter called the "Contract Area"), and designating
as Operator to conduct such operations for itself and the undersigned
Non-Operators.
3.0 The Operating Agreement provides for certain liens, mortgages, pledges
and/or security interests to secure payment by the parties of their
respective share of costs under the Operating Agreement. The Operating
Agreement contains an Accounting Procedure, along with other provisions,
which supplement the lien, mortgage, pledge and/or security interest
provisions, including non-consent clauses which provide that parties who
elect not to participate in certain operations shall be deemed to have
relinquished their interest in production until the carrying consenting
parties are able to recover their costs of such operations plus a
specified amount. Should any person or firm desire additional
information regarding the Operating Agreement or wish to inspect a copy
of the Operating Agreement, said person or firm should contact the
Operator at P.O. Box 4587, Houston, Texas.
4.0 The purpose of this Memorandum is to more fully describe and implement
the liens, mortgages, pledges and/or security interests provided for in
the Operating Agreement, and to place third parties on notice thereof.
The purpose of this Memorandum is also to place third parties on notice
that the Operating Agreement does contain a Preferential Right to
Purchase provision.
5.0 In consideration of the mutual rights and obligations of the parties
hereunder, the parties hereto agree as follows:
5.1 The Operator shall conduct and direct and have full control of all
Operations on the Contract Area as permitted and required by, and
within the limits of the Operating Agreement.
5.2 The liability of the Parties shall be several, not joint or
collective. Each party shall be responsible only for its
obligations and shall be liable only for its proportionate share
of costs.
5.3 Each Non-Operator grants to Operator a lien and mortgage upon all
its rights, title and interests in the oil, gas and mineral leases
and other real property, in the Contract Area, and a pledge and
security interest in its share of oil and gas when extracted and
its interest in all equipment and property whether movable or
immovable, corporeal or incorporeal attached thereon, all such
property being more fully described in Paragraph 6.0, to secure
payment of its share of expense, arising out of the Operating
Agreement together with interest thereon at the rate provided in
the Accounting Procedure referred to in Paragraph 3.0 above. To
the extent that Operator has a security interest under the Uniform
Commercial Code of the state, Operator shall be entitled to
exercise the rights and remedies of a secured party under the
Code. The bringing of a suit and the obtaining of judgement by
Operator for the secured indebtedness shall not be deemed an
election of remedies or otherwise affect the rights or security
interest for the payment thereof.
5.4 If any Non-Operator fails to pay its share of costs when due,
Operator may require other Non-Operators to pay their
proportionate part of the unpaid share, whereupon the other Non-
Operators shall be subrogated to Operator's lien and security
interest.
5.5 The Operator grants to Non-Operators a lien, mortgage, pledge and
security interest equivalent to that granted to Operator as
described in Paragraph 5.3 above, to secure payment by Operator of
its own share of costs when due.
6.0 For purposes of protecting said liens, mortgages, pledges and security
interests, the parties hereto agree that the mutual lien, mortgage,
pledge, security interest, and this Memorandum shall cover all right,
title and interest of the debtor(s) in:
6.1 Property Subject to Liens, Pledges, and Security Interests
(A) All personal property located upon or used in connection with the
Contract Area.
(B) All equipment, fixtures, and appurtenances upon or used in
connection with the Contract Area, whether movable or immovable,
corporeal or incorporeal.
(C) All oil, gas and associated substances of value in, on or under
the Contract Area which may be extracted therefrom.
(D) All accounts and revenues resulting from the sale of the items
described in subparagraph (C) at the wellhead of every well
located on the Contract Area or on lands pooled or unitized
therewith.
(E) All items used, useful, or purchased for the production,
treatment, storage, transportation, manufacture, or sale of the
items described in subparagraph (C).
(F) All accounts, contract rights, rights under any gas balancing
agreement, general intangibles, equipment, inventory, farmout
rights, option farmout rights, acreage and or cash contributions,
and conversion rights, whether now owned or existing or hereafter
acquired or arising, including but not limited to all interest in
any partnership, tax partnership, limited partnership,
association, joint venture, or other entity or enterprise that
holds, owns, or controls any interest in the Contract Area or in
any property encumbered by this Memorandum.
(G) All severed and extracted oil, gas, and associated substances now
or hereafter produced from or attributable to the Contract Area,
including without limitation oil, gas and associated substances in
tanks or pipelines or otherwise held for treatment,
transportation, manufacture, processing or sale.
(H) All the proceeds and products of the items described in the
foregoing paragraphs now existing or hereafter arising, and all
substitutions therefor, replacements thereof, or accessions
thereto.
(I) All personal property and fixtures now and hereafter acquired in
furtherance of the purposes of the Operating Agreement. Certain
of the above-described items are or are to become fixtures on the
Contract Area.
(J) The proceeds and products of collateral are also covered.
6.2 Property Subject to Liens and Mortgages
(A) All real property and oil and gas leases within the Contract Area,
including all oil, gas and associated substances of value in, on
or under the Contract Area which may be extracted therefrom.
(B) All equipment, fixtures, and appurtenances upon or used in
connection with the Contract Area, whether movable or immovable,
corporeal or incorporeal.
(C) All real property and fixtures now and hereafter acquired in
furtherance of the purposes of the Operating Agreement, including
any easement, right-of-way, surface leases, and fee acreage.
7.0 The property described in Paragraphs 6.1 and 6.2 will be financed at the
wellhead of the well or wells located on the Contract Area or on lands
pooled or unitized therewith, and this Memorandum is to be filed for
record in the real estate records of the county or parish in which the
Contract Area is located, or, in the case of offshore leases, in the
county or parish adjacent thereto and in the appropriate Uniform
Commercial Code records. All parties who have executed the Operating
Agreement are identified on Attachment " 1 ". All farmors and option
farmors, if any, who have granted support within the Contract Area are
identified on Attachment "2".
8.0 Upon default of any covenant or condition of the Operating Agreement, in
addition to any other remedy afforded by law, each party to the
Operating Agreement and any successor to such party by assignment,
operation of law, or otherwise, shall have, and is hereby given and
vested with, the power and authority to take possession of and sell any
interest which the defaulting party has in the property described in
Paragraphs 6.1 and 6.2 and to foreclose this lien, mortgage, pledge, and
security interest in the manner provided by law.
9.0 Upon expiration of the subject Operating Agreement and the satisfaction
of all debts, the Operator shall file of record a release and
termination on behalf of all parties concerned. Upon the filing of such
release and termination, all benefits and obligations under this
Memorandum shall terminate as to all parties who have executed or
ratified this Memorandum. In addition, the Operator shall have the
right to file a continuation statement on behalf of all parties who have
executed or ratified this Memorandum.
10.0 It is understood and agreed by the parties hereto that if any part,
term, or provision of this Memorandum is by the courts held to be
illegal or in conflict with any law of the state where made, the
validity of the remaining portions or provisions shall not be affected,
and the rights and obligations of the parties shall be construed and
enforced as if the Memorandum did not contain the particular part, term
or provision held to be invalid.
11.0 This Memorandum shall be binding upon and shall inure to the benefit of
the parties hereto and to their respective heirs, devisees, legal
representatives, successors and assigns. The failure of one or more
persons owning an interest in the Contract Area to execute this
Memorandum shall not in any manner affect the validity of the Memorandum
as to those persons who have executed this Memorandum.
12.0 A party having an interest in the Contract Area can ratify this
Memorandum by execution and delivery of an instrument of ratification,
adopting and entering into this Memorandum, and such ratification shall
have the same effect as if the ratifying party had executed this
Memorandum or a counterpart thereof. By execution or ratification of
this Memorandum, such party hereby consents to its ratification and
adoption by any party who may have or may acquire any interest in the
Contract Area.
13.0 This Memorandum may be executed or ratified in one or more counterparts
and all of the executed or ratified counterparts shall together
constitute one instrument. For purposes of recording, only one copy of
this Memorandum with individual signature pages attached thereto needs
to be filed of record.
Non-Operators:
WITNESSES: ______________________(Company)
Attorney -in-Fact
Date: ________________
ACKNOWLEDGMENTS
STATE OF __________________
_______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 in and for
________________________
My Commission expires: _______________
ATTACHMENT "1" TO EXHIBIT "I"
Attached to and made a part of the Joint Operating Agreement
dated effective ________________________ by and between Shell Deepwater
Development Inc.
and Reading and Bates Development Co.
MEMORANDUM OF OPERATING AGREEMENT
AND FINANCING STATEMENT
I. DESCRIPTION OF LEASES
II. OPERATOR
III. REPRESENTATIVES AND ADDRESSES
Exhibit 10.162
LIMITED LIABILITY COMPANY AGREEMENT
TABLE OF CONTENTS
I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
II. FORMATION OF COMPANY; FILINGS . . . . . . . . . . . . . . . . . . . . 6
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Registered Office and Registered Agent. . . . . . . . . . . 6
2.3 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Relationship of the Parties . . . . . . . . . . . . . . . . 6
III. NAME; PURPOSE; PLACE OF BUSINESS; TERM . . . . . . . . . . . . . . . 7
3.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Place of Business . . . . . . . . . . . . . . . . . . . . . 8
3.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
IV. MEMBERS; RESTRICTION ON DISPOSITION OF INTEREST;PREFERENTIAL RIGHT OF
PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Members . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Restrictions on the Disposition of an Interest . . . . . . . 8
4.3 Preferential Right of Purchase . . . . . . . . . . . . . . . 9
4.4 Disposition Documents . . . . . . . . . . . . . . . . . . . 11
4.5 Legality . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 Status After Disposition . . . . . . . . . . . . . . . . . . 12
4.7 Disposition Costs . . . . . . . . . . . . . . . . . . . . . 12
4.8 Limitation on Transfer . . . . . . . . . . . . . . . . . . . 13
V. CONTRIBUTIONS; DISTRIBUTIONS; FAILURETO MAKE CONTRIBUTIONS TIMELY;
SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Initial Contributions . . . . . . . . . . . . . . . . . . . 14
5.2 Cost Overrun Contributions. . . . . . . . . . . . . . . . . 14
5.3 Additional Contributions . . . . . . . . . . . . . . . . . . 15
5.4 Distributable Cash . . . . . . . . . . . . . . . . . . . . . 15
5.5 Failure to Make Contributions . . . . . . . . . . . . . . . 16
5.6 Grant of Security Interest . . . . . . . . . . . . . . . . . 17
5.7 Secured Party. . . . . . . . . . . . . . . . . . . . . . . . 18
VI. TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1.1 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1.2 Information Request by TMP . . . . . . . . . . . . 19
6.1.3 TMP Agreements with IRS . . . . . . . . . . . . . . 19
6.1.4 Inconsistent Treatment of Company Item . . . . . . 20
6.1.5 Communication of Proceedings to Members . . . . . . 20
6.1.6 Requests for Administrative Adjustment . . . . . . 20
6.1.7 Judicial Proceedings . . . . . . . . . . . . . . . 20
6.2 Income Tax Compliance and Capital Accounts . . . . . . . . . 21
6.2.1 Tax Returns . . . . . . . . . . . . . . . . . . . . 21
6.2.2 Fair Market Value Capital Accounts . . . . . . . . 21
6.2.3 Information Request . . . . . . . . . . . . . . . . 21
6.3 Elections . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3.1 General Elections . . . . . . . . . . . . . . . . . 21
6.3.2 Other Elections or Consents . . . . . . . . . . . . 21
6.4 Capital Contributions and FMV Capital Accounts . . . . . . . 22
6.4.1 Capital Contributions . . . . . . . . . . . . . . . 22
6.4.2 FMV Capital Accounts . . . . . . . . . . . . . . . 22
6.5 Company Allocations . . . . . . . . . . . . . . . . . . . . 23
6.5.1 FMV Capital Account Allocations . . . . . . . . . . 23
6.5.2 Tax Returns and Tax Basis Capital Account
Allocation. . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Termination and Liquidating Distributions . . . . . . . . . 24
6.6.1 Termination . . . . . . . . . . . . . . . . . . . . 24
6.6.2 Section 708(b)(1)(A) Termination . . . . . . . . . 25
6.6.3 Balancing . . . . . . . . . . . . . . . . . . . . . 25
6.6.4 Final Distribution . . . . . . . . . . . . . . . . 26
6.7 Transfers, Indemnification, and Correspondence . . . . . . . 26
6.7.1 Transfers of Company Interests . . . . . . . . . . 26
6.7.2 Indemnification . . . . . . . . . . . . . . . . . . 26
6.7.3 Correspondence . . . . . . . . . . . . . . . . . . 27
6.8 No Interest . . . . . . . . . . . . . . . . . . . . . . . . 27
6.9 Return of Capital . . . . . . . . . . . . . . . . . . . . . 27
VII. ADMINISTRATIVE MATTERS . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 Books and Records . . . . . . . . . . . . . . . . . . . . . 27
7.2 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3 Bank Accounts; Investments . . . . . . . . . . . . . . . . . 28
7.4 Monthly Progress Reports . . . . . . . . . . . . . . . . . . 29
VIII.MANAGEMENT; MEMBERS COMMITTEE; MANAGER;
STANDARD OF CARE; INDEMNIFICATION . . . . . . . . . . . . . . . . . . 29
8.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.2 Members Committee . . . . . . . . . . . . . . . . . . . . . 29
8.3 Manager . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.4 Standard of Care . . . . . . . . . . . . . . . . . . . . . . 35
8.5 Indemnification of the Representatives and the Manager . . . 35
IX. VOLUNTARY WITHDRAWAL . . . . . . . . . . . . . . . . . . . . . . . . 36
9.1 Resignation by Member . . . . . . . . . . . . . . . . . . . 36
9.2 Wrongful Withdrawal . . . . . . . . . . . . . . . . . . . . 37
X. [DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
XI. DISSOLUTION; RECONSTITUTION; WINDING UP . . . . . . . . . . . . . . . 37
11.1 Events Deemed to Cause Dissolution . . . . . . . . . . . . . 38
11.2 Distribution of Assets . . . . . . . . . . . . . . . . . . . 39
11.3 Termination . . . . . . . . . . . . . . . . . . . . . . . . 39
XII. [DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
XIII.INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.1 Insurance Coverage . . . . . . . . . . . . . . . . . . . . . 40
13.2 Certain Requirements . . . . . . . . . . . . . . . . . . . . 41
XIV. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.1 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.2 Choice of Law; Submission to Jurisdiction . . . . . . . . . 42
14.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 42
14.5 Effect of Waiver or Consent . . . . . . . . . . . . . . . . 43
14.6 Amendment or Modification . . . . . . . . . . . . . . . . . 43
14.7 Binding Effect; Joinder of Additional Parties . . . . . . . 43
14.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 43
14.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . 43
14.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.11 Gender; Articles and Sections . . . . . . . . . . . . . . . 44
14.12 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.13 Further Assurances . . . . . . . . . . . . . . . . . . . . . 44
14.14 Independent Conduct . . . . . . . . . . . . . . . . . . . . 45
14.15 Deemed Assent . . . . . . . . . . . . . . . . . . . . . . . 45
14.16 Signing Members; Certificate of Authority . . . . . . . . . 45
14.17 Withholding or Granting of Consent . . . . . . . . . . . . . 46
14.18 Waiver of Certain Rights . . . . . . . . . . . . . . . . . . 46
14.19 U.S. Currency . . . . . . . . . . . . . . . . . . . . . . . 46
14.20 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . 46
14.21 Proprietary Information . . . . . . . . . . . . . . . . . . 46
14.22 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . 46
XV. DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . 47
15.2 Ancillary Agreements . . . . . . . . . . . . . . . . . . . . 47
Exhibit "A" - Description of Drillship
Exhibit "B" - Indemnification Agreements
Exhibit "C" - Sharing Ratios
Exhibit "D" - Certificate of Formation
Exhibit "E" - Form of Demand Promissory Note (Section 5.1)
Exhibit "F" - Marine Services Agreement
Exhibit "G" - Drilling Services Agreement
Exhibit "H" - Construction Financing Credit Agreement
==============================================================
LIMITED LIABILITY COMPANY AGREEMENT
This Limited Liability Company Agreement is made and entered into on
October 28, 1996 by and between Conoco Development Company, a Delaware
corporation having its principal office at 600 North Dairy Ashford, Houston,
Texas 77079 (sometimes referred to as "Conoco") and RB Deepwater Exploration
Inc., a Nevada corporation having its principal office at 901 Threadneedle,
Suite 200, Houston, Texas 77079 (sometimes referred to as "Reading & Bates").
FOR AND IN CONSIDERATION of the mutual covenants, rights, and
obligations contained herein, the benefits to be derived therefrom, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Members hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms
shall have the respective meanings indicated:
"Act" means the Delaware Limited Liability Company Act, 6 Del.
C. Sections 18-101, et seq., as amended, from time to time.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited
to all directors and officers of such Person), controlled by, or under
direct or indirect common control with such Person.
"Assets" shall mean the Drillship and all other assets of the
Company of every kind whatsoever, real or personal, tangible or
intangible.
"Agreement" shall mean this Limited Liability Company Agreement.
"Bankrupt" or "Bankruptcy" shall mean any of the events set out
in 18-304 of the Act happening with respect to a Member.
"Base Term" shall mean the period of time commencing on the date
of this Agreement and ending on the date one day after the later of
(i) the completion of the Drilling Contract, including any extensions
or renewals thereof, or (ii) the complete discharge of the Purchase
Note, including all interest accrued thereon.
"Builder" shall mean the shipbuilder selected by the Company to
construct and deliver the Drillship.
"Company" shall mean Deepwater Drilling L.L.C.
"Control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under direct or indirect common
control") shall mean, with respect to a Person that is a corporation,
the right to the exercise, directly or indirectly, more than 50% of
the voting rights attributable to the shares of the controlled Person
normally entitled to vote for the election of directors and, with
respect to a Person that is not a corporation, the possession,
directly or indirectly, of the power to direct or cause the direction
of the management or policies of the controlled Person.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the regulations issued thereunder.
"Default Interest Rate" shall mean a rate equal to the lesser of
(i) five (5) percentage points in excess of a varying rate per annum
that is equal to the interest rate publicly quoted by Texas Commerce
Bank, N.A., Houston, Texas, from time to time, as its prime commercial
rate, with adjustments in such varying rate to be made on the same
date as any change in the aforesaid prime rate, or (ii) the maximum
non-usurious rate permitted by applicable law.
"Delinquent Member" shall have the meaning attributed to it in
Section 5.5.
"Designated Representative" shall mean (a) when used with
respect to Reading & Bates, or any successor or permitted assign, the
chief executive officer of the ultimate parent of Reading & Bates or
any successor or permitted assign of Reading & Bates; and (b) when
used with respect to Conoco, or any successor or permitted assign, a
person who is at least a Vice President of Conoco Inc., or the
President of the successor or permitted assign of Conoco.
"Dispose" (or "Disposition") shall mean to sell or otherwise
transfer legal or beneficial ownership to any property or interest in
property, real or personal (or the act of such sale or transfer).
"Distributable Cash" means all cash of the Company in excess of
the amount which the Members Committee determines is required to meet
the Company's obligations (including reserves for projected
expenditures, working capital and contingencies).
"Disposition Notice" shall have the meaning attributed to it in
Section 4.3.
"Drilling Contract" shall mean the minimum five (5) year fixed
term (with ten extension options of one year each) drilling contract
contemplated to be awarded by Conoco Drilling Inc. to the Company for
the Drillship, such drilling contract to be on terms and conditions
satisfactory to the Members.
"Drillship" shall mean the shipshape self-propelled offshore
drilling vessel described in Exhibit "A" hereto, together with all of
her machinery and equipment, including without limitation all marine,
drilling and production equipment, drill string, risers, blowout
prevention equipment, spare and repair parts, inventory, whether
located on the vessel or on shore, belonging to the vessel (excluding,
however, equipment to be leased from third parties).
"First Member" shall have the meaning attributed to it in
Section 4.3.
"Indemnification Agreement" shall mean, with respect to Reading
& Bates, the indemnification agreement to be executed by Reading &
Bates Corporation, and with respect to Conoco the indemnification
agreement to be executed by Conoco Inc., each such indemnification
agreement to be in the form attached as Exhibit "C".
"Independent Accountants" shall mean Price Waterhouse LLP,
Arthur Anderson LLP or such other firm of certified public
accountants, as may from time to time be designated by the Members
Committee.
"Manager" shall mean such Person as may be designated as Manager
from time to time by the Members Committee.
"Member " or "Members" shall mean the Persons named in Section
4.1 or any Member who is admitted as a substitute Member pursuant
hereto.
"Members Committee" shall mean the committee described in and
functioning according to Section 8.2.
"Membership Interest" shall mean the ownership interest of a
Member in the Company (which shall be considered personal property for
all purposes) consisting of (i) such Member's Sharing Ratio of the
entire ownership interests of the Company, (ii) such Member's right to
vote or grant or withhold consent with respect to Company matters as
provided herein or in the Act, and (iii) such Member's other rights
and privileges as herein provided or as provided in the Act or
otherwise at law.
"Non-Delinquent Member" shall have the meaning attributed to it
in Section 5.5(b).
"Person" shall mean an individual, corporation, trust,
unincorporated association, or other entity or association.
"Permitted Security Interest" means the security interest given
under Section 5.6 of the Agreement, any security interests given under
the Construction Financing Credit Agreement attached as Exhibit H, and
any other security interest in a Membership Interest given by one or
more Members which is consented to in writing by all other Members.
"Proprietary Information" means patents, trade secrets,
proprietary systems, designs, and processes, and technical or business
know-how, which is not in the public domain.
"Purchase Note" shall mean the promissory note or notes
constituting the permanent financing by the Company of the purchase of
the Drillship, such note or notes not to have a term greater than five
years from delivery of the Drillship by the Builder, or to be in a
principal amount to exceed eighty percent (80%) of the acquisition
cost of the Drillship, without the prior written approval of the
Members (such financing to be on a basis of recourse limited to the
Drillship, her earnings and insurances); Conoco or an Affiliate has
the option to provide such permanent financing for the Company
provided: (i) the interest rate is no greater than 25 basis points in
excess of that interest rate and on such other terms as are comparable
to any other permanent financing available to the Company, and (ii)
such option is exercised in writing by Conoco to the Company no later
than ninety (90) days prior to the scheduled delivery of the Drillship
by the Builder to the Company .
"Representatives" shall have the meaning attributed to it in
Section 8.2(c).
"Second Member" shall have the meaning attributed to it in
Section 4.3.
"Sharing Ratio" shall mean, with respect to each Member, as of
the date of this Agreement, the percentage set forth beside such
Member's name on Exhibit "C" to this Agreement.
"TMP" shall have the meaning attributed to it in Section 6.1.
ARTICLE II
FORMATION OF COMPANY; FILINGS
2.1 Formation. The Company shall be organized by the Members upon
execution and delivery of this Agreement and the execution and filing of the
Certificate of Formation of the Company to the Delaware Secretary of State in
accordance with and pursuant to the Act, substantially in the form attached as
Exhibit "D" to this Agreement. Conoco or Reading & Bates shall be an
"authorized person" within the meaning of the Act for purposes of executing
the Certificate of Formation. The Manager may provide the Members with
written evidence of their Membership Interest in such form as the Members
Committee may from time to time determine, provided that, if issued, such
written evidence shall always indicate that a Member shall not transfer its
Membership Interest except in accordance with the terms of this Agreement.
Except as provided to the contrary in this Agreement, the rights and
obligations of the Members shall be governed by the provisions of the Act.
2.2 Registered Office and Registered Agent. The Company's initial
registered office shall be at the office of its registered agent at 1209
Orange Street, Wilmington, Delaware 19801, and the name of its initial
registered agent at such address shall be The Corporation Trust Company.
The registered office and registered agent may be changed from time to
time by filing the address of the new registered office and/or the name of the
new registered agent with the Delaware Secretary of State pursuant to the Act.
2.3 Filings. The Members, the Members Committee and/or the Manager,
as applicable, shall execute, deliver and file such additional documents and
perform such additional acts consistent with the terms of this Agreement as
may be necessary to comply with the requirements of law for the formation,
qualification, and operation of a limited liability company in each
jurisdiction in which the Company shall conduct business.
2.4 Relationship of the Parties. The Members understand and agree
that the arrangement and undertakings evidenced by the Agreement result in a
partnership for purposes of federal income taxation and certain state income
tax laws which incorporate or follow federal income tax principles. For every
other purpose of the Agreement, the Members understand and agree that their
legal relationship to each other and to any third parties under applicable
state law is that of members of a limited liability company and not as a
partnership.
ARTICLE III
NAME; PURPOSE; PLACE OF BUSINESS; TERM
3.1 Name. The name of the Company shall be "Deepwater Drilling
L.L.C.", and the business of the Company shall be conducted under such name or
under any other name or names as the Members Committee may from time to time
elect, or as may be necessary to comply with the laws of each jurisdiction in
which the Company conducts, or proposes to conduct, business.
3.2 Purposes. The purposes of the Company are (a) to cause the
Drillship to be built and equipped, as described in Exhibit "A", to take
delivery of the Drillship from the Builder, to operate the Drillship and
perform the Drilling Contract and other drilling and related contracts
obtained by the Company for the Drillship, and to carry out any and all
modifications to the Drillship deemed necessary or appropriate by the Members
Committee (including modifications to the Drillship which might change the
overall use of same from a mobile offshore drilling unit to a floating
production, storage and offloading vessel), (b) to obtain the necessary
permanent and construction financing [it being understood and agreed that with
respect to the construction financing Conoco or an Affiliate of Conoco shall
provide the necessary cost overrun guaranties in a form acceptable to Conoco
or its Affiliate and the Company (such construction financing meeting such
other conditions as Conoco or its Affiliate and the Company may require) to
support such financing for the Company from third parties (without any
obligation of Reading & Bates to provide any such guaranties) to enable the
Company to acquire the Drillship (including entering into the Purchase Note)],
and to enter into from time to time such other financing arrangements as may
be necessary, appropriate, or advisable to enable the Company to accomplish
its purposes and to mortgage, pledge, assign, grant a security interest in, or
otherwise encumber the Drillship, its earnings and insurances, and any or all
of the other Company assets to secure the Purchase Note and such other
financing arrangements, (c) to sell, assign, lease, exchange, or otherwise
Dispose of, or refinance or additionally finance, all or substantially all of
the Company's interest in one or more or all of its assets, (d) to maximize
the profits of the Company, and (e) to engage in all activities and to enter
into, exercise the rights and enjoy the benefits under, and discharge the
obligations of the Company pursuant to, all contracts, agreements, and
documents that may be necessary, appropriate, or advisable to enable the
Company to accomplish the purposes set forth in clauses (a), (b), (c) and (d)
of this sentence, and (f) any other lawful business purpose or activity that
may be legally exercised by a limited liability company under the Act, as the
Members may agree.
3.3 Place of Business. The principal place of business of the
Company shall be at 901 Threadneedle, Suite 200, Houston, Texas 77079. The
Company may establish offices at such other places within or outside the State
of Texas as the Members Committee may from time to time designate.
3.4 Term. The Company shall be deemed to have commenced effective
as of the date the Certificate of Formation of the Company is filed with the
Delaware Secretary of State. The Company shall continue until the close of
Company business on December 31, 2026 unless sooner terminated as provided in
this Agreement.
ARTICLE IV
MEMBERS; RESTRICTION ON DISPOSITION OF INTEREST;
PREFERENTIAL RIGHT OF PURCHASE
4.1 Members. Simultaneously with the execution of this Agreement,
Conoco and Reading & Bates are hereby admitted as Members of the Company.
4.2 Restrictions on the Disposition of an Interest. Each Member
shall be entitled from time to time, without the prior consent of the Members
Committee, but subject to the provisions of Sections 4.4, 4.5, 4.6, and 4.7,
to Dispose of all of its Membership Interest in the Company to an Affiliate of
such Member. Except as set forth in the immediately preceding sentence, no
Member shall have the right to effect a Disposition of all or any part of its
Membership Interest in the Company unless and until (i) the consent of the
Members Committee has been obtained and (ii) there has been compliance with
the provisions of Section 4.3, 4.4, 4.5, 4.6, and 4.7. If the Members
Committee consents to the Disposition of a Membership Interest in the Company,
the provisions of Section 4.3 shall then become applicable to the Disposition
in question. Any attempted Disposition by a Person of a Membership Interest
or right, or any part thereof, in or in respect of the Company in
contravention of this Section 4.2 shall be, and is hereby declared, null and
void ab initio.
4.3 Preferential Right of Purchase. (a) Subject to Section 4.2
should any Member at any time desire to Dispose of all or a portion of its
Membership Interest in the Company pursuant to a bona fide offer from another
Person (other than an Affiliate), such Member (the "First Member") shall
promptly give notice (the "Disposition Notice") thereof to the other Member
(hereinafter referred to as the "Second Member"). The Disposition Notice
shall set forth all relevant information in respect of the proposed
Disposition, including, without limitation, the name and address of the
prospective acquirer and each Person that Controls the prospective acquirer,
the purchase price (all of which must be payable in cash), and the terms of
any delayed payment of the purchase price. The Second Member shall have the
optional preferential right (to be exercised by notice to the First Member
given no later than ninety days after the Second Member's receipt of the
Disposition Notice) to acquire, for the same purchase price and on the same
terms of any delayed payment that are set forth in the Disposition Notice, the
Membership Interest that the First Member proposes to Dispose. If the Second
Member does not elect to exercise the optional right set forth in the
immediately preceding sentence within the time period set forth therein, the
First Member shall have the right, subject to compliance with the provisions
of Sections 4.2, 4.4, 4.5, 4.6 and 4.7, to Dispose of the Membership Interest
described in the Disposition Notice strictly in accordance with the terms of
the Disposition Notice for a period of sixty-five days after the expiration of
the above described ninety day preferential right period. If the First Member
fails so to Dispose of the Membership Interest within such sixty-five day
period, the proposed Disposition shall again become subject to the
preferential right set forth in this Section 4.3.
(b) If the Second Member exercises the preferential right set forth
in Section 4.3(a), the closing of the acquisition by the Second Member of the
First Member's Membership Interest shall be held at the principal place of
business of the Company on a date mutually acceptable to the First Member and
the Second Member, but in no event more than sixty days after receipt by the
First Member of notice of the Second Member's election to acquire the First
Member's Membership Interest. At such closing the following transactions
shall occur:
(i) The First Member shall convey and assign by assignment with
general warranty of title to the Second Member, free and clear of all liens,
claims, and encumbrances (other than any lien, claim, or encumbrance created
pursuant to Section 5.6, set forth in the Disposition Notice, or otherwise
expressly permitted by the Second Member), the Membership Interest in the
Company described in the Disposition Notice and shall execute and deliver to
the Second Member all documents that may be required to give effect to the
Disposition and acquisition of such interest; and
(ii) The Second Member shall pay to the First Member, in
accordance with the terms of payment set forth in the Disposition Notice (that
is, in cash, payable either 100% at the closing or in installments over time,
whichever is set forth in the Disposition Notice), the purchase price
specified in the Disposition Notice for the Membership Interest described in
the Disposition Notice whereupon such Second Member (or its designee) shall be
admitted as a substitute Member in respect of the Membership Interest so
purchased.
(c) If the Second Member exercises the preferential right set forth
in Section 4.3(a), in the notice to the First Member exercising such right the
Second Member shall be entitled to designate an Affiliate of the Second Member
to acquire the Membership Interest of the First Member. Upon such
designation, the designated Affiliate will be substituted in the place and
stead of the Second Member for purposes of the Disposition provided for in
Section 4.3(b)(i), but the Second Member will remain fully liable for making
any and all payments due under Section 4.3(b)(ii).
(d) It is expressly agreed that the remedy at law for breach of any
of the obligations set forth in this Section 4.3 is inadequate in view of (i)
the complexities and uncertainties in measuring the actual damages that would
be sustained by reason of the failure of a Member to comply fully with each of
said obligations, and (ii) the uniqueness of the Company business and the
relationship between the Members. Accordingly, each of the aforesaid
obligations shall be, and is hereby expressly made, enforceable by specific
performance.
4.4 Disposition Documents. Except as a result of the foreclosure of
a Permitted Security Interest in a Membership Interest, the Company shall not
recognize for any purpose any purported Disposition of all or any portion of a
Member's Membership Interest in the Company unless and until the provisions of
this Article have been satisfied and there shall have been delivered to the
Manager a dated notification of such Disposition (i) executed and acknowledged
by both the Member effecting such Disposition and the Person to whom such
Membership Interest is Disposed, (ii) if the Person to whom such Membership
Interest is Disposed is to become a Member in the Company, containing the
acceptance by such Person of all the terms and provisions of this Agreement
and an agreement by such Person to perform and discharge timely all of the
obligations and liabilities in respect of the Membership Interest Disposed of
that are attributable to the period on and subsequent to the date of the
Disposition, and (iii) containing a representation that such Disposition was
made in accordance with all applicable laws and regulations. Any Disposition
shall be effective as of the first day of the calendar month immediately
succeeding the month in which the Manager actually receives the aforesaid
notification of Disposition.
4.5 Legality. Notwithstanding any provision of this Agreement to
the contrary, no Disposition by a Member shall be effective unless (i) either
(aa) the Membership Interest in the Company subject to such Disposition shall
have been registered under the Securities Act of 1933, as amended, and any
applicable state securities laws or (bb) the Company shall have received a
favorable opinion of the Company's legal counsel or of other legal counsel
acceptable to the Members Committee to the effect that such Disposition is
exempt from registration under such laws, and (ii) unless waived by all of the
other Members the Company shall have received a favorable opinion of the
Company's legal counsel or of other legal counsel acceptable to the Members
Committee, to the effect that such Disposition would not (aa) when added to
the total of all other sales, assignments, or other Dispositions within the
preceding twelve months, result in the Company being considered to have
terminated within the meaning of section 708 of the Code, or (bb) cause the
Company to jeopardize its classification as a partnership for federal income
tax purposes.
4.6 Status After Disposition. Each Member shall have the right to
constitute the Person to whom its Membership Interest in the Company is
Disposed as a substituted Member if (i) the Disposition in question has been
effected in compliance with the provisions of this Article IV and (ii) the
preferential right of purchase set forth in Section 4.3 has not been
exercised. Each Member that Disposes of a Membership Interest in the Company
to a Member or to a Person that is admitted to the Company as a Member
contemporaneously with such Disposition shall, as between itself and the other
Members, remain responsible for the timely performance and discharge of all
obligations and liabilities in respect of the Membership Interest Disposed of
that are attributable to the period prior to the date of its Disposition but
shall, as between itself and the other Members, be released from all other
Company obligations and liabilities. Each Member that Disposes of a
Membership Interest in the Company to a Person that is not a Member or that is
not admitted to the Company as a Member contemporaneously with such
Disposition shall remain responsible for the timely performance and discharge
of all obligations and liabilities in respect of the Membership Interest
Disposed of, whether attributable to the period prior or subsequent to the
date of its Disposition.
4.7 Disposition Costs. All costs incurred by the Company in
connection with the Disposition of a Membership Interest in the Company
(including, without limitation, the legal fees incurred in connection with the
obtaining of the legal opinions referred to in Section 4.5) shall be borne and
paid by the Member effecting the Disposition within ten days after the receipt
by such Member of the Company's invoice for the amount due.
4.8 Limitation on Transfer. Except as otherwise specifically
provided in this Agreement, no Member shall have the right without the prior
written consent of the other Member, to:
(i) other than through a Permitted Security Interest, dispose of,
assign, pledge, hypothecate, transfer, exchange or otherwise
transfer for consideration all or any part of its Membership
Interest in the Company; or
(ii) Give or otherwise transfer for no consideration (whether or not
by operation of law) all or part of its Membership Interest in
the Company.
In any agreement granting a Permitted Security Interest (including
this Agreement), provided all other Members agree in writing, a Member may
provide in such agreement that in the event of the foreclosure of such
Permitted Security Interest, the party foreclosing on same may become a
substituted Member of the Company. In addition, if and only if, the
foreclosing party is a Member, such Member may designate an Affiliate to
exercise its rights so as to avoid a single-Member limited liability company.
Each Member covenants and agrees that it will not engage directly or
indirectly in any business other than the business arising out of its being a
Member of the Company; however, this provision is not intended in any manner
to prohibit an Affiliate of a Member from engaging in any business whatsoever
as further set out in Section 14.14.
If after the expiration of the Base Term a Member resigns (the
"Resigning Member"), the remaining Member (the "Non-Resigning Member") shall
have the option to purchase the Membership of the Resigning Member at the then
fair market value of the Resigning Member's Membership Interest. The Non-
Resigning Member shall have the right to designate an Affiliate to exercise
the rights provided in this Section. If a Non-Resigning Member exercises the
rights given in this Section, the Resigning Member and the Non-Resigning
Member shall close the sale of the Resigning Member's Membership Interest to
the Non-Resigning Member within twenty (20) days after the 365 days written
notice provided in Section 11.1(b), and the Members shall follow the
procedures set out in Section 4.3(b) in connection with the sale of the
Resigning Member's Membership Interest.
ARTICLE V
CONTRIBUTIONS; DISTRIBUTIONS; FAILURE
TO MAKE CONTRIBUTIONS TIMELY; SECURITY INTEREST
5.1 Initial Contributions. Each Member agrees that it will make an
equal initial equity contribution to the Company of $22,000,000 ($44,000,000
in the aggregate by Conoco and Reading & Bates). The equal initial equity
contributions represent the Sharing Ratios of Conoco and Reading & Bates, and
payment shall be made to the Company by such Members on the earlier of (i) on
August 31, 1998, (ii) with the prior written approval of the Member's
Committee, on demand, in whole or in part, or (iii) as provided in the
promissory notes referred to in the next succeeding sentence. In order to
secure its obligation to make such initial equity contribution, each Member
agrees upon execution of the Drilling Contract it will deliver to the Company
a demand promissory note in favor of the Company for $22,000,000, each such
demand promissory note to allow the Company to make demands contemporaneously
to each of the Members for equal payments of such notes on the Payment Date.
Such promissory notes shall be in the form attached as Exhibit "E" to this
Agreement and shall be payable as provided therein. It is understood and
agreed by the Members that any and all payments of such initial equity
contribution by a Member shall contemporaneously reduce the principal of that
Member's promissory note referred to in this Section 5.1 by the same amounts,
and likewise any and all payments made by a Member with respect to any demands
made with respect to such Member's promissory note shall contemporaneously be
credited against such Member's obligation to make its initial equity
contribution under this Section 5.1.
5.2 Cost Overrun Contributions. The Members acknowledge that Conoco,
in its individual capacity and not as a Member, or an Affiliate of Conoco,
will enter into cost overrun guaranties (or other similar type guaranties) in
favor of commercial lenders and in a form acceptable to Conoco (or an
Affiliate of Conoco), pursuant to which Conoco (or an Affiliate of Conoco)
would be obliged to guarantee that the Company will be able to fund the amount
of any cost overruns incurred by Company under the Shipbuilding Contract to be
entered into between the Company and Builder with respect to the Drillship, in
order for the Company to take delivery of the Drillship under such
Shipbuilding Contract. Accordingly, the Members also agree, within three
business days after demand by Conoco (or an Affiliate of Conoco), or any such
commercial lender, to contribute to the Company in cash, their respective
Member's Sharing Ratio of any and all such additional monies necessary in
order to enable Company to take delivery of the Drillship under such
Shipbuilding Contract (including owner furnished equipment) in compliance with
the terms of any such cost overrun guaranties (over and above the amount of
the promissory notes made by the Members referred to in Section 5.1 and the
amount of the Purchase Note). In the event the Shipbuilding Contract is
terminated, rescinded or otherwise cancelled for any reason whatsoever and as
a result demand for payment is made of Conoco Inc. or its Affiliate under any
such cost overrun guaranty, the Members agree to contribute their respective
Sharing Ratios of the amount necessary to enable the Company to reimburse
Conoco Inc. or its Affiliate for any such payment made by Conoco Inc. or its
Affiliate within 45 days after receipt by the Company of written notice of
same from Conoco Inc. or its Affiliate.
5.3 Additional Contributions. Except for initial working capital
for the Company to commence operations, the Members intend for the Company
operations to be self-sustaining, and after the Drillship goes into service,
for the Company to pay its costs and expenses from operating revenues.
However, without creating any rights, remedies, or claims in favor of or
enforceable by any third party, if at any time the Company, as determined by
the Members Committee, requires funds in excess of operating revenues which
are necessary to allow the Company to accomplish its objectives and purposes,
each Member shall, and hereby agrees to, contribute to the Company, in cash,
within ten days after receiving a request therefor from the Manager, such
Member's Sharing Ratio of all such additional monies that are necessary to
enable the Company to cause the Assets to be properly operated and maintained
and to discharge its costs, expenses, obligations, and liabilities.
5.4 Distributable Cash. The Distributable Cash of the Company shall
be determined on a quarterly basis and the amount thereof shall be distributed
to the Members pro rata according to their Sharing Ratios (except as otherwise
required to effect and carry out the provisions of Section 5.5(b)(iv), 14.1
and 14.12), provided however, that no distribution will be made to the extent
any such distribution will result in the minimum equity capital of the Company
falling below 3% of the total assets. Amounts payable to any Member other
than in its capacity as a Member, such as for services rendered, goods
purchased or money borrowed, shall not be treated as distributions for
purposes of this Section 5.4.
5.5 Failure to Make Contributions. If either Member fails to
contribute timely all or any portion of any monetary sum that it has agreed to
contribute to the Company pursuant to the provisions of Section 5.1, 5.2 or
5.3 the Company may exercise, by notice to such Member (the "Delinquent
Member") any one or more of the following rights or remedies:
(a) Taking such action (including, without limitation, the
filing of a lawsuit) as the Members Committee deems appropriate to
obtain payment by the Delinquent Member of that portion of its agreed
contribution that is in default, together with interest thereon at the
Default Interest Rate from the date that such contribution was due
until the date that such contribution is made, at the cost and expense
of the Delinquent Member;
(b) Permitting the other Members that desire to do so (the "Non-
Delinquent Members") to advance that portion of the contribution that is
in default, with the following results:
(i) The sum thus advanced shall be deemed to be a loan
from the Non-Delinquent Member to the Delinquent Member and a
contribution of such sum to the Company by the Delinquent Member
pursuant to Section 5.1, 5.2 or 5.3, as appropriate;
(ii) The principal balance of such loan and all accrued
unpaid interest thereon shall be due and payable in whole within
thirty days after written demand therefor has been given to the
Delinquent Member by the Non-Delinquent Member;
(iii) The loan shall bear interest at the Default Interest
Rate, from the date that the loan was made until the date that
such loan, together with all interest accrued thereon, is repaid
to the Non-Delinquent Member;
(iv) All distributions from the Company that would
otherwise be made to the Delinquent Member (whether before or
after dissolution of the Company) shall, instead, be paid to the
Non-Delinquent Member until the loan and all interest accrued
thereon have been repaid in full to the Non-Delinquent Member
(with all such payments being applied first to interest earned and
unpaid and then to principal); provided however, that for
purposes of Section 6.4, any amounts paid by the Company to the
Non-Delinquent Member shall nevertheless be treated as adjustments
to the Delinquent Member's Capital Account;
(v) The repayment of the loan and all interest accrued
thereon shall be secured by a security interest in the Delinquent
Member's interest in the Company, as more fully set forth in
Section 5.6, and
(vi) The Non-Delinquent Member shall have the right, in
addition to the other rights and remedies granted to it pursuant
to this Agreement or available to it at law or in equity, to take
such action (including, without limitation, the filing of a
lawsuit) as the Non-Delinquent Member deem appropriate to obtain
payment by the Delinquent Member of the principal balance of such
loan and all accrued and unpaid interest thereon, at the cost and
expense of the Delinquent Member;
(c) Exercising the rights of a secured party under the Uniform
Commercial Code of the State of Delaware, as more fully set forth in
Section 5.6;
(d) Dissolving the Company; or
(e) Exercising any other rights and remedies available at law or
in equity.
5.6 Grant of Security Interest. Each Member hereby grants to the
Company and to the Non-Delinquent Member, in respect of any loans made by the
Non-Delinquent Member to the Delinquent Member pursuant to Section 5.5(b), as
security for (i) the payment of all contributions to be made by such Member
pursuant to this Agreement and (ii) the repayment of any loans and all
interest accrued thereon made by the Non-Delinquent Member to a Delinquent
Member pursuant to Section 5.5(b), a security interest in and to its
Membership Interest in the Company, all pursuant to and in accordance with the
provisions of the Uniform Commercial Code of the State of Delaware, and agrees
that in the event of any default in the payment of such contributions or in
the repayment of such loans and all interest accrued thereon, the Company or
the Non-Delinquent Member, as applicable, shall have and are hereby granted
all the rights and remedies of a secured party under the Uniform Commercial
Code of the State of Delaware with respect to the security interest granted
herein. Each Member further agrees to execute and deliver to the other
Members all such financing statements and other instruments as may be required
by the Members Committee or the Non-Delinquent Members, as applicable, to
effect and carry out the provisions of the immediately preceding sentence and
agrees that this Agreement may serve as the necessary security agreement and
financing statement. The Company shall register on its books the security
interests given pursuant to this Section 5.6. The Members agree that the
security interests granted under this Section 5.6 shall be subordinate to
security interests granted to Conoco Inc. under the construction financing
agreement referred to in Exhibit "H".
5.7 Secured Party. A secured party of a Permitted Security Interest
with respect to any Member's Membership Interest shall not as the result of
the exercise of any of its rights as a secured party become liable for any of
the obligations of such Member under this Agreement.
ARTICLE VI
TAX MATTERS
6.1.1 Tax Matters Partner. The Members intend that the Company shall be
taxed as a partnership for federal, state, local and foreign income tax
purposes, and have agreed to certain provisions of this Agreement with that
intention in mind. The Members agree to take all reasonable actions,
including the amendment of this Agreement and the execution of such other
documents as may be reasonably required in order for the Company to qualify
and receive partnership treatment for federal, state, local and foreign income
tax purposes. At such time, if ever, as final regulations are promulgated as
heretofore proposed (61 F.R. Section 21989) under Section 7701 of the Code
with respect to classification of an entity as a partnership for federal
income tax purposes, the Members shall elect in compliance with such
regulations that the Company be treated, for federal income tax purposes, as a
partnership and take such other actions as may be reasonably necessary or
desirable in connection therewith. The Member from which the Manager is
selected by the Members Committee is designated as the Tax Matters Partner
("TMP"), as such term is defined in Section 6231(a)(7) of the Internal Revenue
Code of 1986, as amended, ("Code"). In the event of any change in the TMP,
the Member serving as TMP at the beginning of a given taxable year shall
continue as TMP with respect to all matters concerning such year. The TMP and
other Members shall use their best efforts to comply with responsibilities
outlined in this section and in Code Sections 6222 and 6233 and 6050K (and the
Treasury Regulations thereunder) and in doing so shall incur no liability to
any other Member. Notwithstanding the TMP's obligation to use its best
efforts in the fulfillment of its responsibilities, the TMP shall not be
required to incur any expenses for the preparation for, or pursuance of
administrative, or judicial proceedings, unless the Members agree on a method
for sharing such expenses.
6.1.2 Information Request by TMP. The Members shall furnish the TMP
within two weeks from the receipt of the request with such information
(including information specified in Code Sections 6230(e) on Member
identification and 6050K for transfers of Membership Interests) as the TMP may
reasonably request to permit it to provide the Internal Revenue Service with
sufficient information for purposes of Code Sections 6223(c) and 650K.
6.1.3 TMP Agreements with IRS.
6.1.3.1 The TMP shall not agree to any extension of the statute of
limitations for making assessments on behalf of the Company without
first obtaining the written consent of all Members. The TMP shall not
bind any other Member to a settlement agreement in tax audits without
obtaining the written concurrence of any such Member.
6.1.3.2 Any other Member who enters into a settlement agreement with
the Secretary of the Treasury with respect to any Company items, as
defined in Code Section 6231(a)(3), shall notify the other Members of
the terms within ninety (90) days from the date of such settlement.
6.1.4 Inconsistent Treatment of Company Item. If any Member intends to
file a notice of inconsistent treatment under Code Section 6222(b), such
Member shall, prior to the filing of such notice, notify the TMP of the
(actual or potential) inconsistency of the Member's intended treatment of a
Company item with the treatment of that item by the Company. Within one week
of receipt the TMP shall remit copies of such notification to other Members to
the Company. If an inconsistency notice is filed solely because a Member has
not received a Schedule K-1 in time for filing of its income tax return, the
TMP need not be notified.
6.1.5 Communication of Proceedings to Members. The TMP shall to the
extent and in the manner provided by regulations issued pursuant to Section
6223(g) of the Code, keep all Members informed of all administrative and
judicial proceedings for the adjustment at the Company level of Company items.
6.1.6 Requests for Administrative Adjustment. No Member shall file a
request pursuant to Code Section 6227 for an administrative adjustment of
Company items without first notifying all other Members. If all other Members
agree with the requested adjustment, the TMP shall file the request on behalf
of the Company. If unanimous consent is not obtained within thirty (30) days
from such notice, or within the period required to timely file the request for
administrative adjustment, if shorter, any Member, including the TMP, may file
a request for administrative adjustment on its own behalf.
6.1.7 Judicial Proceedings. Any Member intending to file a petition
under Code Sections 6226, 6228, or any other Code Section with respect to any
Company item, or other tax matters involving the Company, shall notify the
other Members, prior to such filing, of the nature of the contemplated
proceeding. In the case where the TMP is the Member intending to file such
petition, such notice shall be given within a reasonable time to allow the
other Members to participate in the choice of the forum for such petition. If
the Members do not agree on the appropriate forum, then the forum shall be
decided by majority vote. Each Member shall have a vote in accordance with
its percentage interest in the Company for the year under audit. If a
majority cannot agree, the TMP shall choose the forum. If a Member intends to
seek review of any court decision rendered as a result of such a proceeding
such Member shall notify the other Members, prior to seeking such review.
6.2 Income Tax Compliance and Capital Accounts
6.2.1 Tax Returns. The TMP shall prepare and file all required federal,
state, and local partnership income tax returns, as well as all sales, use and
other excise tax returns. In preparing such returns the TMP shall use its
best efforts and in doing so shall incur no liability to any other Member with
regard to such returns. Not less than thirty (30) days prior to the due date
(including extensions) the TMP shall submit to each Member a copy of the
income tax returns and/or franchise tax returns as proposed for review.
6.2.2 Fair Market Value Capital Accounts. The TMP shall establish and
maintain fair market value ("FMV") capital accounts and tax basis capital
accounts for each Member. Upon request, the TMP shall submit to each Member
along with a copy of any proposed partnership income tax return an accounting
of its respective FMV capital accounts as of the end of the tax return period.
6.2.3 Information Request. Each Member agrees to furnish to the TMP not
later than sixty (60) days before the return due date (including extensions)
such information relating to the operations conducted under this Agreement as
may be required for the proper preparation of all such tax returns and capital
accounts.
6.3 Elections
6.3.1 General Elections. For both income tax return and capital account
purposes, the Company shall elect: (a) to use the maximum allowable
accelerated tax method and the shortest permissible tax life for depreciation
purposes, (b) the accrual method of accounting, (c) to treat all
organizational costs of the Company as deferred expenses amortizable over a
sixty (60) month period pursuant to Section 709(b) of the Code and comparable
provisions of state law, (d) to amortize start-up expenditures over a sixty
(60) month period pursuant to Section 195(d) of the Code and comparable
provisions of state law, and (e) to report income on a calendar year basis.
6.3.2 Other Elections or Consents. In connection with any permitted
transfer of a Membership Interest in the Company under Article IV, the TMP
shall cause the Company, at the written request of a transferee or the
transferor, on behalf of the Company and at the time and manner provided under
Code Section 754 to adjust the basis of Company property with the adjustments
provided in Code Sections 734 for a distribution of property and 743 for a
transfer of a Membership Interest. In case of a distribution of property, the
TMP shall adjust all tax basis capital accounts. In case of a transfer of an
interest in the Company, the transferee shall, no later than sixty (60) days
prior to the due date of the Company tax return (including extensions),
cooperate with the TMP in the filing of tax returns by providing the TMP with
all reconciliations necessary to reflect such basis adjustments on the tax
return. Any election other than those referred to above must be approved by
the Members Committee.
6.4 Capital Contributions and FMV Capital Accounts
6.4.1 Capital Contributions. The respective capital contributions of
each Member to the Company shall be (a) any properties contributed to the
Company (net of liabilities that the Company assumes or takes the properties
subject to), and (b) all amounts paid by each Member characterized as
contributions to the Company or Company expenses borne and paid by such Member
on behalf of the Company.
6.4.2 FMV Capital Accounts. The FMV capital accounts shall be increased
and decreased as follows:
(a) The FMV capital accounts shall be increased by: (i) the amount of
money and the fair market value of any property contributed by each
Member, respectively, to the Company (net of liabilities assumed by the
Company or to which the contributed property is subject); (ii) that
Member's [Section 6.5.1] allocated share of Company income and gains, or
items thereof; and, (iii) that Member's share of Code Section
705(a)(1)(B) items.
(b) The FMV capital accounts shall be decreased by: (i) the amount of
money and the fair market value of property distributed to each Member
(net of liabilities assumed by such Member or to which the property is
subject); (ii) that Member's [Section 6.5.1] allocated share of Company
loss and deductions, or items thereof; and, (iii) that Member's share of
Code Section 705(a)(2)(B) items and Code Section 709 nondeductible and
nonamortizable items.
(c) "Fair market value" when it applies to property contributed by or
distributed to a Member or other Company property shall be determined by
the Members Committee.
6.5 Company Allocations
6.5.1 FMV Capital Account Allocations. Each item of income, gain, loss
or deduction shall be allocated to each Member as follows:
(a) Operating and maintenance cost shall be allocated to each
Member in accordance with its respective contribution, or
obligation to contribute, to such cost;
(b) Depreciation shall be allocated to each Member in accordance
with its contribution, or obligation to contribute, to the cost of
the underlying asset;
(c) Loss (or simulated loss) upon the sale, exchange,
distribution, abandonment or other disposition of depreciable
property, shall be allocated to the Members in the ratio of their
respective FMV capital account adjusted basis in the depreciable
property;
(d) Gain (or simulated gain) upon the sale, exchange,
distribution, or other disposition of depreciable or depletable
property shall be allocated to the Members so that the FMV capital
account balances of the Members will most closely reflect their
respective percentage or fractional interests under the Agreement;
(e) Costs or expenses of any other kind shall be allocated to
each Member in accordance with its respective contribution, or
obligation to contribute, to such costs or expenses; and,
(f) Any other income item shall be allocated to the Members in
accordance with the manner in which such income is realized by
each Member.
6.5.2 Tax Returns and Tax Basis Capital Account Allocation.
(a) Unless otherwise expressly provided herein the allocations of
Company items of income, gain, loss or deduction for tax return
and tax basis capital account purposes shall follow the principles
of allocation under Section 6.5.1. However, the Company's gain or
loss on the taxable disposition of any Company property in excess
of the gain or loss under Section 6.5.1, if any, is allocated to
the contributing Member to the extent of such Member's pre-
contribution gain or loss;
(b) Depreciation shall be allocated to each Member in accordance
with its contribution to the adjusted tax basis of the depreciable
asset;
(c) Any recapture of depreciation or any other item of deduction
or credit shall, to the extent possible, be allocated among the
Members in accordance with their sharing of the depreciation or
other item or deduction or credit which is recaptured;
(d) For Company properties with values different from their
adjusted tax bases, the Members intend that allocations described
in this Section 6.5.2 constitute a "reasonable method" of
allocating gain or loss under Treasury Regulations Section 1.704-
3(a)(1).
6.6 Termination and Liquidating Distributions
6.6.1 Termination. Termination shall occur on the earlier of the events
described in Code Sections 708(b)(1)(B) or 708 (b)(1)(A).
(a) Termination Under Code Section 708(b)(1)(B). Upon
termination under Code Section 708(b)(1)(B), each Member's FMV
capital account shall be adjusted as provided for in the
regulations, Section 1.704-1(b)(2)(iv)(1), and Section 6.6.3. The
distributions provided for in Sections 6.6.2 through 6.6.4 shall
be deemed to have occurred, with the Company cash and properties
deemed contributed to a new limited liability company, the terms
of which are identical to those contained in this Agreement.
(b) Termination Under Code Section 708(b)(1)(A). Upon
termination under Code Section 708(b)(1)(A), the business shall be
wound-up and concluded, and the assets shall be distributed to the
Members as described below by the end of such calendar year (or,
if later, within ninety (90) days after the date of such
termination). The assets shall be valued and distributed to the
creditors of the Company, if any, and to the Members in the order
provided in Sections 6.6.2 through 6.6.4.
6.6.2 Section 708(b)(1)(A) Termination. In the event of a Code Section
708(b)(1)(A) termination, the assets shall be valued, and the Company
shall first comply with Section 18-804(a)(1) of the Act, and second, all
cash representing unexpended contributions by any Member shall be
returned to the contributor.
6.6.3 Balancing. Third, the FMV capital accounts of the Members shall
be determined under this Section 6.6.3. The TMP shall take the actions
specified under this Section 6.6.3 in order to cause the ratio of the
Members' FMV capital accounts to reflect as closely as possible their
Sharing Ratios under the Agreement. The ratio of a Member's FMV capital
account is represented by a fraction, the numerator of which is the
Member's FMV capital account balance and the denominator of which is the
sum of all Members' FMV capital account balances. This is hereafter
referred to as "balancing of the FMV capital accounts", and when
completed, the FMV capital accounts of the Members shall be referred to
as being "balanced". The manner in which the FMV capital accounts of
the Members are to be balanced under this Section 6.6.3 shall be
determined as follows:
(a) The fair market value of all Company properties shall be
determined and the gain or loss for each property which would have
resulted if a sale thereof at such fair market value had occurred
shall be allocated in accordance with Section 6.5.1. If
thereafter any Member has a negative FMV capital account balance,
that is, a balance less than zero, in accordance with Treas. Reg.
Section 1.704-1(b)(2)(ii)(b)(3) such Member is obligated to
contribute an amount of cash to the Company to facilitate the
balancing of the FMV capital accounts. If after these adjustments
the FMV capital accounts are not balanced, Article 6.6.3(b) shall
apply; or
(b) If all the Members consent, any cash or an undivided interest
in certain selected properties shall be distributed to one or more
Members as necessary for the purpose of balancing the FMV capital
accounts;
(c) Unless (b) above applies, an undivided interest in each and
every property shall be distributed to one or more Members in
accordance with the ratios of their FMV capital accounts;
(d) If a property is to be valued under (a) above or distributed
pursuant to (b) or (c) above, the fair market value of the
property shall be agreed to by the Members. In the event all of
the Members do not reach agreement as to the fair market value of
property, the TMP shall cause a nationally recognized independent
engineering firm to prepare an evaluation of fair market value of
such property.
6.6.4 Final Distribution. Fourth, after the FMV capital accounts of the
Members have been adjusted, pursuant to Section 6.6.3 above, all other
or remaining property and interest then held by the Company shall be
distributed to the Members in accordance with their positive FMV capital
account balances.
6.7 Transfers, Indemnification, and Correspondence.
6.7.1 Transfers of Company Interests. Transfers of Membership Interests
shall be governed by the Agreement. A Member transferring its
Membership Interest, or any part thereof, shall notify the TMP in
writing within two weeks of such transfer.
6.7.2 Indemnification. This Agreement does not provide for any
indemnification provisions to protect Members against any harm caused by
a Code Section 708(b)(1)(B) termination. However, the Members agree
that if any of them makes a sale or assignment of its Membership
Interest under this Agreement, such sale or assignment shall be
structured, if reasonably possible, to avoid causing an Code Section
708(b)(1)(B) termination.
6.7.3 Correspondence. All correspondence relating to the preparation
and filing of the Company's income tax returns and capital accounts
shall be forwarded to the TMP.
6.8 No Interest. No Member shall be entitled to be paid interest in
respect of either its capital account or any contributions made by it to the
Company.
6.9 Return of Capital. Except as set forth in Section 6.6.2 hereof
and notwithstanding anything in this Agreement to the contrary, no Member is
entitled to a return on any cash or property that it has contributed to the
capital of the Company, but shall look solely to distributions from the
Company. No unrepaid capital contribution shall be deemed or considered to be
a liability of the Company or of any Member. No Member shall be required to
contribute any cash or property to the Company to enable the Company to return
any Member's capital contribution.
ARTICLE VII
ADMINISTRATIVE MATTERS
7.1 Books and Records. The books and records of the Company shall be
kept, at the expense of the Company, by the Member from which the Manager is
appointed in accordance with this Agreement, following that Member's normal
accounting systems, procedures and practices, consistent with generally
accepted accounting principles, on a calendar year basis for all purposes, and
shall reflect all Company transactions and be appropriate and adequate for
recording and reporting the financial condition of the Company. Within forty-
five days following the end of each calendar quarter, the Manager shall cause
to be prepared and submitted to the Members Committee and each Member an
unaudited balance sheet and an unaudited income statement of the Company and a
comparison to budgets in respect of such calendar quarter. In addition, on or
before March 31 (or as soon thereafter as may be practicable) of each year the
Manager shall cause to be delivered to each Member, in respect of the
immediately preceding year, an audited balance sheet, an audited income
statement, an audited annual statement of changes in financial position of the
Company together with a report by the Company's Independent Accountants to the
effect that such financial statements have been prepared in accordance with
generally accepted accounting principles and present fairly the Company's
financial position, results of operation, and changes in financial position,
and a report indicating each Member's share for federal income tax purposes of
the Company income, gain, credits, losses, and deductions prepared, in each
case, by the Company's Independent Accountants. A copy of each Company tax
return required to be filed with any governmental authority shall be delivered
to each Member at least ten days before such return is filed.
7.2 Inspection. Each Member, at its sole cost and expense, shall have
the right to inspect, copy, and audit the books and records of the Company
during reasonable business hours at the principal place of business of the
Company. No Person other than a Member (or its duly authorized
representative) and the Company's Independent Accountants shall have any right
to inspect the books and records of the Company for any purpose whatsoever.
Each Person that inspects the books and records of the Company shall maintain
the confidentiality of the information received pursuant to or in connection
with such inspection.
7.3 Bank Accounts; Investments. All funds of the Company shall be
deposited in its name in an account or accounts maintained in one or more
national or state bank or banks designated from time to time by the Members
Committee. The funds of the Company shall not be commingled with the funds of
any other Person. Checks shall be drawn upon the Company account or accounts
only for the purposes of the Company and shall be signed by such signatory
party or parties as may be designated by the Members Committee. The Manager
shall have the obligation from time to time to deposit Company funds that (i)
are not required for the operation of the business of the Company and (ii)
should not, in the Manager's opinion, be used to repay Company debt, in
interest bearing bank accounts or to purchase commercial paper, treasury
bills, or other high grade short term instruments following guidelines
approved by the Members Committee.
7.4 Monthly Progress Reports. At least once a month, the Manager, at
Company expense, shall furnish to the Members a progress report regarding the
operations of the Company.
ARTICLE VIII
MANAGEMENT; MEMBERS COMMITTEE; MANAGER;
STANDARD OF CARE; INDEMNIFICATION
8.1 Management. (a) The management and control of the Company
business shall be vested in the Members, who shall exercise such management
and control through and by virtue of their selection of the Members Committee
in accordance with the succeeding provisions of this Article VIII and their
participation in the making of the decisions accorded to them pursuant to this
Agreement.
(b) The Members shall be entitled to delegate any powers and authority
required for the management of the Company to the Members Committee, save that
the Members reserve the following powers and authority exclusively to
themselves, namely:
(i) to amend the purposes of the Company, as set out in Section 3.2;
(ii) to liquidate or otherwise dissolve the Company;
(iii) to approve the merger or consolidation of the Company with or into
an "other business entity," as such term is defined in 18-209(a)
of the Act, or the sale, exchange, or other disposition of all, or
substantially all of the Company's assets which is to occur as
part of a single transaction or plan;
(iv) to designate from time to time the Company's Independent
Accountants; and
(v) to amend this Agreement.
8.2 Members Committee.
(a) The Members Committee (herein referred to as the "Members
Committee") shall be responsible for the making of decisions with respect to
the Company business that are not accorded to the Members or the Manager
pursuant to this Agreement.
(b) Without limiting the generality of paragraph (a) of this Section
and subject always to the provisions of Section 8.1(b), the Members Committee
shall have the power to delegate to the Manager of the Company any powers and
authority necessary for the day-to-day operation of the business of the
Company, except that the Members Committee reserves the following powers and
authority exclusively to itself, namely:
(i) to set the overall policy and vision of the Company in
accordance with the purposes set out in Section 3.2;
(ii) to recommend to the annual meeting of the Members the
distribution policy of the Company and the level of
distribution to be declared;
(iii) to elect or appoint the Manager;
(iv) to approve capital expenditures of the Company in such amount
as the Members may from time to time determine;
(v) to approve the business and strategic plans and the annual
operating plans of the Company;
(vi) to recommend approval by the Members of any of the matters
referred to in Section 8.1(b);
(vii) to approve from time to time the location of the Company's
principal executive office;
(viii) to determine the banking policy of the Company and further in
that regard: to grant financial authorization (including the
opening and closing of bank accounts and to designate
signatories for such accounts) to the Manager; to approve all
borrowings by the Company of sums of money within the
limitations regarding amount as the Members may from time to
time determine, from banks, other lending institutions, the
Members or Affiliates of the Members, on such terms as the
Members Committee deems appropriate, and, in connection
therewith, to hypothecate, encumber, and grant security
interests in the assets of the Company to secure repayment of
the borrowed sums. No debt shall be contracted or liability
incurred by or on behalf of the Company except to the extent
permitted under the Act by the Manager or authorized agents of
the Company expressly authorized by the Members Committee to
contract such debt or incur such liability;
(ix) to approve the purchase of liability and other insurance to
protect the Company's property and business;
(x) to establish guidelines for the Manager in connection with the
temporary investment of Company funds;
(xi) to approve the execution on behalf of the Company of all
instruments and documents with a value in excess of such amount
as the Members may from time to time determine, including,
without limitation: checks; drafts; notes and other negotiable
instruments; mortgages or deeds of trust; security agreements;
financing statements; documents providing for the acquisition,
mortgage or disposition of the Company's property; assignments;
bills of sale; leases; partnership agreements; operating
agreements of other limited liability companies; agreements
between the Company and either of the Members or their
Affiliates; and any other instruments or documents necessary,
in the opinion of the Members Committee to the business of the
Company;
(xii) to assess the performance of the Manager of the Company;
(xiii) to approve the commencement or settlement of litigation
directly or indirectly involving the Company, where the claim
or potential liability of the Company or the amount of such
settlement is in excess of such amount as the Members may from
time to time determine;
(xiv) to determine the accounting policies of the Company and to
recommend to the Members the appointment of the Company's
Independent Accountants;
(xv) to approve the ethics, safety and health and environmental
policies of the Company; and
(xvi) to review and approve the terms of any public announcement
proposed to be made by the Company, as determined from time to
time by the Members Committee.
(c) The Members Committee shall be comprised of six individuals, three
of whom shall be named by each Member (individually a "Representative" and
collectively "Representatives"). These Representative(s) may be changed at
any time by the Members appointing such Representative(s) by written notice to
the other Member.
(d) Meetings of the Members Committee may be held at such regular
times as may be specified by the Members Committee and, in addition, may be
called by any Representative by giving at least ten days prior notice thereof
to each of the other Representatives. Notice of each meeting shall be in
writing and shall state the date, time, and place at which such meeting is to
be held and the purposes for which such meeting is called. Prior notice of a
meeting need not be given, however, if such notice is waived in writing by all
of the Representatives or if the action in question is taken pursuant to the
provisions of the second succeeding sentence. In addition, the attendance in
person or by a Person having the written proxy of a Representative at a
meeting shall constitute a waiver of notice of such meeting, except where the
Representative attends the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.) Any action required or permitted to be taken at a
meeting of the Members Committee may be taken (i) by means of a telephone
conference (notice of which shall be given to each of the Representatives) in
which all Representatives participating in the meeting in person or by a
Person having the written proxy and constituting a quorum can hear and speak
to each other (with the action taken during such telephone conference to be
reduced to writing and filed in the records of the Members Committee), or (ii)
by means of one Representative submitting to the other Representatives in
accordance with the provisions of Section 14.3 a statement of the matter to be
voted on, the purposes thereof, and the period within which the
Representatives must respond either in the affirmative or in the negative to
the matter in respect of which the vote is requested (which response period
shall not be less than seven business days nor more than twenty business days
from the date on which the Representative in question is deemed to have
received such request pursuant to Section 14.3). All action taken pursuant to
the immediately preceding sentence shall be deemed for all purposes to have
been taken at a meeting of the Members Committee. The Members Committee shall
conduct its proceedings in accordance with such rules as it may from time to
time establish and shall keep appropriate records of the action taken by it.
(e) At all meetings of the Members Committee, at least one
Representative representing each Member shall constitute a quorum for the
transaction of business, and subject to this Section 8.2, the unanimous act of
all of the Member Representatives present at any meeting at which there is a
quorum shall be the act of the Members Committee, except as set forth in
Section 8.2(f). If a quorum shall not be present at any meeting of the
Members Committee, the meeting may be rescheduled by any Representative by
giving seven days prior notice thereof to each of the other Representatives.
(f) Notwithstanding any provision of this Agreement to the contrary:
(i) neither a Member nor a Representative appointed by any Member that is the
subject of a vote with respect to the exercise of remedies relating to such
Member's delinquency or default under this Agreement, in the case of a vote
with respect to such matters; (ii) neither a Member nor a Representative
appointed by any Member that attempts to effect a Disposition of an interest
or right, or any part thereof, in or in respect of the Company in willful
contravention of Article IV, or in the case of any vote with respect to any
matter whatsoever subsequent to such attempted Disposition; or (iii) neither a
Delinquent Member nor the Representative appointed by any Delinquent Member,
in the case of any vote occurring during the period in which such Delinquent
Member is a Delinquent Member; will be entitled to vote on the issue in
question, and such Representative shall not be counted for voting or quorum
purposes in respect of the vote in question or the Members Committee meeting
at which the vote is taken. Instead, a quorum in respect of the vote in
question shall be comprised of one or more of all Representatives other than
those that are not entitled to vote on such issue, and the decisions in
respect of such issue shall be made by the unanimous vote of all
Representatives present that are entitled to vote on such issue.
8.3 Manager. The Manager (who shall be an employee of a Member or of
an Affiliate of a Member) shall be appointed by, and shall serve at the
pleasure of, the Members Committee, subject to the direction of the Members
Committee, and shall be responsible for the general supervision and management
of the business, affairs, and property of the Company and for the
implementation of the decisions of the Members Committee, and shall have, as
may be delegated by the Members Committee, the authority to conduct the day-
to-day affairs of the Company. Without limitation of the generality of the
preceding provisions of this Section, the Manager shall have (subject to the
limitations of Sections 8.1 and 8.2 and to budgetary limitations and such
other limitations as may be imposed from time to time by the Members
Committee) the authority, the right, and the power, on behalf of the Company:
(a) to enter into, make, and perform all contracts, agreements, and
other undertakings binding the Company as may be necessary, appropriate, or
advisable in furtherance of the purposes of the Company as the Manager may
determine in his or her discretion;
(b) to open, maintain, and close bank accounts, to designate and
change signatories on such accounts, and to draw checks and other orders for
the payment of monies;
(c) to maintain the assets of the Company in good order and repair;
(d) to collect all sums due the Company;
(e) to prepare and file all Company tax returns and to make all
elections for the Company thereunder in accordance with the instructions of
the TMP and the Members Committee;
(f) to the extent that funds of the Company are available therefor, to
pay as they become due all debts and obligations of the Company (including,
without limitation, the Purchase Note); and
(g) within any limitations as may be imposed from time to time by the
Members Committee, to take any and all other action that may be necessary,
appropriate, or advisable in furtherance of the purposes of the Company.
In addition, the Company shall reimburse the Manager, on a monthly
basis, for all reasonable out-of-pocket transportation, lodging and
entertainment expenses, incurred in connection with the business of the
Company, consistent with the normal reimbursement policies of the Member which
is providing the individual to be Manager of the Company.
8.4 Standard of Care. In the performance of their respective duties
under this Agreement, the Representatives and the Manager shall use reasonable
efforts to conduct the business of the Company in a good and businesslike
manner and in accordance with good practice within the industry.
Notwithstanding any provision of this Agreement to the contrary, however,
neither any Representative nor the Manager shall be held liable or responsible
to any Member or to the Company for any losses sustained, or liabilities
incurred, in connection with, or attributable to, errors in judgment,
negligence, or other fault of such individual, except that which is caused by
such Person's bad faith or willful misconduct.
8.5 Indemnification of the Representatives and the Manager. The
Company hereby agrees to defend, indemnify and hold harmless the
Representatives and the Manager from and against any and all claims, damages,
liabilities, costs (including, without limitation, the costs of litigation and
reasonable attorneys' fees), damages, and causes of action arising out of,
resulting from, or attributable to the Representatives' and the Manager's
management of the Company affairs, except where the claim at issue is based
upon the bad faith or willful misconduct of the Representative in question or
the Manager. The indemnification rights herein contained shall be (i)
cumulative of, and in addition to, any and all rights, remedies, and recourses
to which the Representatives and the Manager shall be entitled at law or in
equity, and (ii) shall only be for the benefit of the Company, the
Representatives, and the Manager, to the exclusion of all other purported
third party beneficiaries.
ARTICLE IX
VOLUNTARY WITHDRAWAL
9.1 Resignation by Member.
Each of the Members acknowledges:
(i) the unique nature of the business the Company will engage in
and the expertise and skills each of the Members brings to the
business and management of the Company;
(ii) the commitment of the Company to fully perform the terms and
conditions of the Drilling Contract and the Purchase Note; and
(iii) the need for the Company to enter into the Purchase Note and to
assure any lenders of the Company's commitment to the business
of the Company.
In furtherance of those objectives, the Members agree that no Member will have
the right to, and each Member agrees that it will not, resign or withdraw from
the Company prior to the expiration of the Base Term. In the event any
Member, prior to the expiration of the Base Term, resigns from the Company, or
otherwise takes any action having the effect of a withdrawal or termination of
its participation as a Member of the Company (a "Wrongful Withdrawal"), such
withdrawal shall be null and void and such Member shall remain fully liable as
a Member hereunder. In the event the Company is required by law to recognize
a Wrongful Withdrawal, the withdrawing Member will:
(w) pay to the Company the withdrawing Member's Sharing Ratio of
the Company's then known, outstanding and due obligations and
liabilities, including amounts then due and owing under the
Purchase Note, at the time of such Wrongful Withdrawal;
(x) as they thereafter become known, pay to the Company its Sharing
Ratio of the Company's liabilities that arose, or resulted from
activities of the Company, prior to the Wrongful Withdrawal;
(y) forfeit its Membership Interest in the Company to the other
Members on a pro-rata basis based on their respective Sharing
Ratios; and
(z) be liable for all damages attributable to the withdrawing
Member's breach of this Agreement.
Pursuant to Section 18-603 of the Act, the Members agree that no Member may
resign from the Company prior to the expiration of the Base Term, and
thereafter any Member may resign from the Company in accordance with this
Agreement.
9.2 Wrongful Withdrawal. If a Wrongful Withdrawal occurs, then within
a reasonable time after the expiration of the Base Term, there will be a
winding up of the Company and a distribution of the assets in accordance with
Section 11.2 of this Agreement, provided that, (i) the non-withdrawing Member
will act as the liquidating trustee under Section 11.2, (ii) no adjustment
will be made to the capital account of the Member who wrongfully withdrew, and
(iii) the wrongfully withdrawing Member's Membership Interest in the Company
to be forfeited to the other Members will be valued to the non-withdrawing
Member at the amount of such withdrawing Member's contributions to the Company
pursuant to Sections 5.1 and 5.2 hereof.
ARTICLE X
[INTENTIONALLY DELETED]
ARTICLE XI
DISSOLUTION; RECONSTITUTION; WINDING UP
11.1 Events Deemed to Cause Dissolution. Unless the business of the
Company is continued either by the consent of all remaining Members within 90
days following the occurrence of any such event or pursuant to a right to
continue provided under this Agreement, the Company shall be dissolved upon
the first to occur of the following:
(a) The expiration of the term provided in Section 3.4;
(b) The resignation of a Member upon 365 days prior written
notice given after the expiration of the Base Term,
provided however, the Company shall not be dissolved if
the Non-Resigning Member exercises its rights under
Section 4.8;
(c) the Bankruptcy of a Member;
(d) The sale of all or substantially all of the assets of the
Company;
(e) The unanimous vote of the Members to dissolve the Company;
(f) Unless the Members otherwise agree in writing, the failure
of one or more of the events set out in Section 15.1 to
occur on or before November 10, 1996;
(g) By order of a court of competent jurisdiction pursuant to
Section 18-802 of the Act, at such time as specified in
such order; or
(h) Upon the dissolution of either Member or any other event
that terminates the membership of a Member in the Company.
or otherwise as provided in Section 9.1 with respect to a Wrongful
Withdrawal. Subject to the provisions of Section 9.1 with respect to
Wrongful Withdrawal, dissolution of the Company shall be effective on
the day on which the event occurs giving rise to such dissolution, but
the Company shall not terminate until the assets of the Company have
been distributed as provided in Section 11.2.
11.2 Distribution of Assets. If the Company is dissolved pursuant to
this Article XI, an accounting of the Company assets, liabilities, and
operations through the last day of the month in which the dissolution occurs
shall be made by the Company's Independent Accountants, and the affairs of the
Company shall be wound up and terminated. The Members Committee shall serve
as the liquidating trustee. The liquidating trustee shall be responsible for
winding up and terminating the affairs of the Company and shall determine all
matters in connection therewith (including, without limitation, the
arrangements to be made with creditors, whether and to what extent and under
what terms of assets of the Company are to be sold or distributed in kind to
the Members, and, after consultation with the Company's Independent
Accountants, the amount or necessity of cash reserves to cover contingent
liabilities) as the liquidating trustee deems advisable and proper; provided,
however, that all decisions of the liquidating trustee shall be made in
accordance with the fiduciary duty owed by the liquidating trustee to the
Company and to each of the Members.
All assets remaining after the payment (or provision for payment) of
Company obligations to third parties shall be distributed to the Members (i)
first, in such amounts and proportions as may be necessary to effect and carry
out the provisions of Sections 5.5(b)(iv), 14.1 and 14.12, (ii) second, in
such amounts and proportions as may be necessary to cause the ratios of the
Members' respective capital accounts to be equal to the Members' respective
Sharing Ratios, and (iii) third, in the proportion of the Members' respective
Sharing Ratios then in effect.
The distribution (if any) to the Members of an interest in the Company
assets may be subject to such liens, encumbrances, and restrictions, and to
such leases, contracts, and agreements as in effect on the date of such
distribution.
11.3 Termination. After all of the assets of the Company have been
distributed, the Company shall terminate, and the Members shall (i) cause a
certificate of cancellation to be filed with the Delaware Secretary of State,
and (ii) file appropriate documentation reflecting such termination in all
other jurisdictions in which the Company may be qualified to do business.
ARTICLE XII
[INTENTIONALLY DELETED]
ARTICLE XIII
INSURANCE
13.1 Insurance Coverage. The Company shall carry the following
insurance or such other insurance as the Members Committee may deem
appropriate (to the extent in each case that same is obtainable on reasonably
commercial terms) for the protection of the Company and the Members:
(a) Insurance which shall comply with all applicable worker's
compensation and occupational disease laws and which shall cover all
employees of the Company engaged in operations under this Agreement; if
applicable, such insurance shall include coverage for claims under the
United States Longshoremen's and Harbor Worker's Act;
(b) Employer's liability insurance with a limit of not less
than $500,000 per occurrence , including maritime employer's liability
coverage with respect to the Jones Act, and general maritime liability
(if not covered by the protection & indemnity coverage referred to in
Section 13.1(f) below);
(c) Comprehensive general liability insurance with a combined
single limit of not less than $1,000,000 per occurrence;
(d) Automobile liability insurance with a combined single
limit of not less than $1,000,000 per occurrence;
(e) Marine "all risk" hull and machinery insurance (including
war risks, confiscation, nationalization and deprivation coverage for
operations outside the United States of America) to the full value of
the Drillship;
(f) Marine protection and indemnity insurance, or equivalent
coverage, including war risk protection and indemnity insurance for
operations outside the United States of America, to the full value of
the Drillship;
(g) Excess liability insurance (over the insurances set forth
in subparagraphs (b), (c), (d) and (f) above) with limits of not less
than $50,000,000 per occurrence;
(h) Contingent Operators Extra Expense Energy Exploration and
Development (well control and blowout) insurance including costs to
regain control of a well including underground blowout; costs to restore
or redrill a well as a result of a blowout, crater, or fire; costs to
remove, clean up, or contain pollution and contaminating substances
emanating from a well; legal liability costs for bodily injury and/or
loss of life, damage to, or loss to use of property caused by
contaminating substances from a well; with limits of not less than
$50,000,000; and
(i) Such other insurance as the Members Committee may deem
necessary, appropriate, or advisable in furtherance of the purposes of
the Company.
13.2 Certain Requirements. All insurance shall be placed through
underwriters and/or insurance companies which are financially sound and
responsible, and licensed to do business in all jurisdictions where such
licensing is required. Each policy of insurance [except that policy referred
to in Section 13.1(a)] shall, to the extent that the Members Committee deems
same practicable, either on its face or by appropriate endorsement, (i) name
the Company as a named insured and each Member as an additional named assured,
(ii) provide for reasonable deductibles acceptable to the Members Committee,
(iii) provide that it shall not be cancelled or amended or its coverage
reduced except upon thirty days prior notice to the Company (seven (7) days in
the case of war risk coverages), and (iv) contain waiver of subrogation
provisions pursuant to which each underwriter and/or insurer waives all
express and implies rights of subrogation against the Company and each Member.
13.3 The types, limits and terms of insurance coverages set out in this
Article may be modified as deemed appropriate by the Members Committee.
ARTICLE XIV
MISCELLANEOUS
14.1 Offset. In the event that any sum is payable to any Member
pursuant to this Agreement, any amounts owed by said Member to the Company
shall be deducted from said sum before payment to said Member.
14.2 Choice of Law; Submission to Jurisdiction. This Agreement shall
be subject to and governed by the laws of the State of Delaware, excluding any
conflicts-of-law rule or principle that might refer to the construction or
interpretation of this Agreement to the laws of another state. Each Member
hereby submits to the jurisdiction of the state and federal courts in the
State of Delaware and to venue in Wilmington, New Castle County, Delaware.
14.3 Notices. All notices or requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and must
be given by depositing same in the United States mail, addressed to the Person
to be notified, postpaid, and registered or certified with return receipt
requested or by delivering such notice in person to such party. Notices given
or served pursuant hereto shall be effective upon receipt by the Person to be
notified. All notices to be sent to the Members shall be sent to or made at
the addresses given under the respective parties' signatures below, or such
other addresses as such parties may stipulate to the other parties in the
manner provided in this Section 14.3.
14.4 Entire Agreement. This Agreement constitutes the entire agreement
of the Members relating to the matters contained herein, superseding all prior
contracts or agreements, whether oral or written.
14.5 Effect of Waiver or Consent. No waiver or consent, express or
implied, by any Member to or of any breach or default by any Person in the
performance by such Person of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in
the performance by such Person of the same or any other obligations of such
Person hereunder. Failure on the part of a Member to complain of any act of
any Person or to declare any Person in default, irrespective of how long such
failure continues, shall not constitute a waiver by such Member of its rights
hereunder until the applicable statute of limitation period has run.
14.6 Amendment or Modification. This Agreement may be amended or
modified from time to time only by the unanimous vote of all the Members.
Each such instrument shall be reduced to writing and shall be designated on
its face an "Amendment" or an "Addendum" to this Agreement.
14.7 Binding Effect; Joinder of Additional Parties. Subject to the
restrictions on Dispositions set forth herein, this Agreement shall be binding
upon and shall inure to the benefit of the Members and their respective
successors and assigns.
14.8 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed the
same document. All counterparts shall be construed together and shall
constitute one and the same instrument.
14.9 Severability. It is the express intention of the Members that,
except to the extent a provision of this Agreement expressly incorporates
federal income tax rules by reference to the Code or is expressly prohibited
or ineffective under the Act, this Agreement shall govern the relations among
the Members in their capacities as such. If any provision of this Agreement
or the application thereof to any Member or circumstance shall be held invalid
or unenforceable to any extent, (a) such provision shall be ineffective to the
extent, and only to the extent, of such unenforceability or prohibition and
shall be enforced to the extent permitted by law; (b) such unenforceability
or prohibition in any jurisdiction shall not invalidate or render
unenforceable such provision as applied (i) to any other Member or
circumstance or (ii) in any other jurisdiction; and (c) such unenforceability
or prohibition shall not affect or invalidate any other provision of this
Agreement. To the extent any provision of this Agreement is prohibited or
ineffective under the Act, this Agreement shall be considered amended to the
least degree possible in order to make this Agreement effective under the Act.
In the event the Act is subsequently amended or interpreted in such a way as
to make valid any provision of this Agreement that was formerly invalid, such
provision shall be considered to be valid from the effective date of such
interpretation or amendment. To the extent any provision of this Agreement is
held invalid or unenforceable, the Members shall negotiate, in good faith,
concerning an amendment to the Agreement that will achieve, to the extent
possible consistent with applicable law, the intended effect of the invalid or
unenforceable provision.
14.10 Headings. The headings in this Agreement are inserted for
convenience and identification only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
14.11 Gender; Articles and Sections. Whenever the context requires, the
gender of all words used in this Agreement shall include the masculine,
feminine, and neuter, and the number of all words shall include the singular
and the plural. All references to article and section numbers refer to
articles and sections of this Agreement.
14.12 Indemnity. Each Member hereby agrees to defend, indemnify, and
hold harmless the Company and the other Members from and against any and all
losses, costs (including, without limitation, the costs of litigation and
attorneys' fees), claims, causes of action, damages, and liabilities that are
attributable to the breach by the indemnifying Member of any of the provisions
of this Agreement (including, without limitation, the provisions of Section
9.1 hereof); provided however, the indemnity provided in this Section 14.12
shall be only for the benefit of the Company and other Members, to the
exclusion of all other purported third party beneficiaries.
14.13 Further Assurances. In connection with this Agreement, as well as
all transactions contemplated by this Agreement, each signatory party hereto
agrees to execute and deliver such additional documents and instruments and to
perform such additional acts as may be necessary or appropriate to effect,
carry out, and perform all of the terms, provisions, and conditions of this
Agreement and all such transactions.
14.14 Independent Conduct. The Representatives and the Manager shall
not be required to manage the Company as their sole and exclusive function and
such Manager and Representatives and Affiliates of any Member may have other
business interests and may engage in other investments or activities in
addition to those relating to the Company, irrespective of whether some may be
in competition with the business and activities of the Company. Neither the
Company nor any Member shall have any right, by virtue of this Agreement, to
share or participate in such other business interests, investments or
activities of a Manager or a Representative or an Affiliate of a Member, or to
the income or proceeds derived therefrom. No Manager or Representative shall
incur liability to the Company or to any Member solely by reason of engaging
in any such other business, investment or activity. Nothing in this Agreement
shall affect any obligations and liabilities of a Member Representative to the
Member that selected such Member Representative.
14.15 Deemed Assent. The failure of a Representative to respond, within
the response period set forth in the request in question (which response
period shall not be less than seven (7) business days nor more than twenty
(20) business days for from the date on which the Representative in question
is deemed to have received such request pursuant to Section 14.3) either in
the affirmative or in the negative, to any request it receives from another
Representative relating to a proposed act in respect of which such
Representative is entitled to vote pursuant to this Agreement, shall
conclusively be deemed for all purposes to be a vote by such Representative in
favor of any act set forth in such request.
14.16 Signing Members; Certificate of Authority. The Members Committee
shall designate from time to time one or more of the Members to execute (when
requested to do so by the Manager) documents on behalf of the Company. Each
Member agrees to execute (and acknowledge, if requested) and deliver such
documents and instruments as the Members Committee may request to evidence and
confirm to third parties the power, authority, and right of the Members
Committee, the Manager, and the Members designated pursuant to the immediately
preceding sentence to act on behalf of and bind the Company (but only to the
extent, in each case, that the action in question is one that the Members
Committee or Manager or Member in question is entitled to take pursuant to,
and not in violation of, this Agreement).
14.17 Withholding or Granting of Consent. Each Member and the Members
Committee may, with respect to any consent or approval that it is entitled to
grant pursuant to this Agreement, grant or withhold such consent or approval
in its sole and uncontrolled discretion, with or without cause, and subject to
such conditions as it shall deem appropriate.
14.18 Waiver of Certain Rights. Each Member irrevocably waives the
right it might have to maintain any action for partition of the property of
the Company.
14.19 U.S. Currency. All sums and amounts payable or to be payable
pursuant to the provisions of this Agreement shall be payable in coin or
currency of the United States of America that, at the time of payment, is
legal tender for the payment of public and private debts in the United States
of America.
14.20 Dispute Resolution. In the event the Members Committee cannot
reach a decision as to any matter concerning the business of the Company and
remains unable to do so with respect to any such matter for a period of not
less than 30 days, it shall refer such matter to the Designated Representative
of each of the Members for resolution.
14.21 Proprietary Information. Each of the Members acknowledges and
agrees that, to the extent in the performance of this Agreement and the
conduct of the business and operations of the Company, it receives Proprietary
Information from the other Partner, it will exert reasonable efforts to hold
such Proprietary Information confidential and not disclose the same to any
third party without the prior written consent of the other Member hereto.
Neither Member shall by virtue of this Agreement acquire any right, title or
interest in the Proprietary Information belonging to the other Member.
14.22 Publicity. Except as otherwise required by applicable
federal or state securities laws, regulations or rules or the rules of any
national stock exchange, neither of the Members will issue any press release
or other form of publicity without the prior written consent of the other
Member, such consent not to be unreasonably withheld.
ARTICLE XV
DISSOLUTION
15.1 Dissolution. Unless the Members otherwise agree in writing,
and as provided in Section 11.1(f) the Company shall be dissolved if on or
before November 10, 1996 all of the following events have not occurred:
a. The execution and delivery of this Agreement have been ratified by
the board of directors of Conoco, and Conoco shall have notified
Reading & Bates in writing of such ratification;
b. The execution and delivery of this Agreement have been ratified by
the board of directors of Reading & Bates, and Reading & Bates
shall have notified Conoco in writing of such ratification; and
c. Conoco Drilling Inc. shall have entered into the Drilling Contract
with the Company.
15.2 Ancillary Agreements. Upon the last to occur of the events set
out in Sections 15.1.a, 15.1.b and 15.1.c above, the Company shall enter into
negotiation as to those agreements referenced in paragraphs (a) and (b)
hereof, and enter into the agreement in paragraph (c), all as follows:
a. the Marine Services Agreement with Conoco or one of its Affiliates
in draft form attached as Exhibit "F" to this Agreement;
b. the Drilling Services Agreement with Reading & Bates Drilling Co.
or one of its Affiliates in draft form attached as Exhibit "G" to
this Agreement; and
c. the construction financing credit agreement between the Company
and Conoco Inc. substantially in the form attached as Exhibit "H"
to this Agreement.
EXECUTED on this day of October, 1996.
MEMBERS
CONOCO DEVELOPMENT COMPANY
By:
Its:
600 North Dairy Ashford
Houston, Texas 77079
Attention: __________________
Telecopy No.: (713) 293-3700
RB DEEPWATER EXPLORATION INC.
By:
Its:
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: President
Telecopy No.: (713) 496-0285
STATE OF TEXAS )
) SS
COUNTY OF HARRIS )
BEFORE me, , a Notary Public, on this day personally
appeared , , of
Conoco Development Company, a corporation, known to me to be the person whose
name is subscribed to the foregoing instrument, and acknowledged to me that he
executed said instrument for the purposes and consideration therein expressed.
Given under my hand and seal of office this day of ,
1996 in .
My commission expires:
Notary Public
STATE OF TEXAS )
) SS
COUNTY OF HARRIS )
BEFORE me, , a Notary Public, on this day personally
appeared , , of RB
Deepwater Exploration Inc., a corporation, known to me to be the person whose
name is subscribed to the foregoing instrument, and acknowledged to me that he
executed said instrument for the purposes and consideration therein expressed.
Given under my hand and seal of office this day of ,
1996 in .
My commission expires:
Notary Public
EXHIBIT "A" - DESCRIPTION OF DRILLSHIP
EXHIBIT "B" - INDEMNIFICATION AGREEMENTS
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") dated as of
October , 1996, is made by CONOCO INC., a Delaware corporation ("Conoco")
in favor of RB DEEPWATER EXPLORATION INC., a Nevada corporation ("RB").
WHEREAS, RB and Conoco Development Company, a Delaware corporation
("CDC") have entered into a Limited Liability Company Agreement (the "LLC
Agreement") dated of even date with respect to the formation of Deepwater
Drilling L.L.C. (the "Company") herewith;
WHEREAS, RB has requested Conoco execute and deliver this
Indemnification Agreement as partial consideration for RB's entering into the
LLC Agreement.
NOW THEREFORE, in consideration of the premises and in order to
induce RB to enter into the LLC Agreement, Conoco hereby agrees as follows:
SECTION 1. Indemnification. Conoco hereby agrees to pay,
protect, indemnify, hold harmless and defend RB from any failure of CDC to
make any equity contribution to the Company, as and when required under
Sections 5.1 and 5.2 of the LLC Agreement, and agrees that in the event of
such failure, Conoco will promptly pay on behalf of CDC any such amounts due
under Sections 5.1 or 5.2 of the LLC Agreement. No payment required to be
made by Conoco under this Section 1 shall be subject to any right of set off,
counterclaim, defense, abatement, suspension, deferment or reduction.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings ascribed to them in the LLC Agreement.
SECTION 2. Representations and Warranties. Conoco represents and
warrants to RB as follows:
(a) Conoco (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 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 Indemnification Agreement.
(b) The execution, delivery and performance by Conoco of this
Indemnification Agreement has been duly authorized and approved by all
necessary corporate action on the part of Conoco. This Indemnification
Agreement constitutes the legal, valid and binding obligation of Conoco
and is enforceable against Conoco 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) 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 RB 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 Indemnification Agreement.
(d) No bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
with respect to Conoco or any of its subsidiaries has been commenced in
any jurisdiction.
(e) There are no actions, suits or proceedings pending or to
Conoco's knowledge, threatened against or affecting Conoco or any of its
subsidiaries before any court or arbitrator which is reasonably likely
to have a material adverse effect on the financial condition, business
or operations of Conoco and its subsidiaries, taken as a whole, or would
impair the validity or enforceability of this Agreement.
SECTION 3. Amendments, Etc. No amendment or waiver of any
provision of this Indemnification Agreement nor consent to any departure by
Conoco therefrom shall in any event be effective unless the same shall be in
writing and signed by RB, and each such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 4. Notices, Etc. All notices and other communications
provided for herein shall be given or made in writing and addressed, if to
Conoco, at its address set forth under its signature below, or if to RB, at
its address set forth under its signature below, such notice or notices to be
effective only upon receipt by the party to which such notice is addressed.
SECTION 5. No Waiver; Remedies. No failure on the part of RB 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 Conoco and RB shall operate as
a waiver of any right of RB. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law, admiralty, equity or otherwise.
SECTION 6. Separability. Should any clause, sentence, paragraph,
sub-section or Section of this Indemnification Agreement be judicially
declared to be invalid, unenforceable or void, such decision will not have the
effect of invalidating or voiding the remainder of this Indemnification
Agreement, and Conoco agrees that the part or parts of the Indemnification
Agreement 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 7. Captions. The captions in this Indemnification
Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Indemnification Agreement.
SECTION 8. Successors and Assigns; Assignment. This
Indemnification Agreement shall (a) remain in full force and effect until CDC
has met its obligations under Sections 5.1 and 5.2 of the LLC Agreement; (b)
be binding upon Conoco, its successors and assigns; provided that Conoco's
rights and obligations hereunder may not be assigned without the prior written
consent of RB; and (c) inure to the benefit of and be enforceable only by RB
and its successors and assigns.
SECTION 9. Limitation by Law. All rights, remedies and powers
provided in this Indemnification Agreement 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 Indemnification Agreement 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
Indemnification Agreement invalid, unenforceable, in whole or in part, or not
entitled to be recorded, registered or filed under the provisions of any
applicable law.
SECTION 10. Survival of Covenants, Representations and
Warranties. All covenants, representations and warranties contained in this
Indemnification Agreement shall survive the execution and delivery of this
Indemnification Agreement and shall continue until CDC has met all of its
obligations under Sections 5.1 and 5.2 of the LLC Agreement. Any
investigation by RB shall not diminish in any respect whatsoever its right to
rely on such covenants, representations and warranties.
SECTION 11. Fees and Expenses. Conoco shall pay all costs, fees
and expenses (including, but not limited to, reasonable attorneys' fees and
disbursements) incurred by RB in collecting or enforcing Conoco's obligations
or RB's rights or remedies under this Indemnification Agreement.
SECTION 12. Governing Law. This Indemnification Agreement shall
be governed by and construed in accordance with the laws of the state of
Delaware, without regard to principles of conflict of laws.
SECTION 13. Final Agreement. This Indemnification Agreement
represents the final agreement between RB and Conoco with respect to the
subject matter hereof. Each of Conoco and RB 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 Indemnification
Agreement.
IN WITNESS WHEREOF, Conoco has caused this Indemnification
Agreement to be duly executed by its officer thereunto duly authorized, as of
the date first above written.
CONOCO INC.
By:
Name:
Title:
600 North Dairy Ashford
Houston, Texas 77079
Attention:
Telecopier No. (713)
ACCEPTED THIS DAY
OF OCTOBER 1996.
RB DEEPWATER EXPLORATION INC.
By:
Name:
Title:
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Chief Financial Officer
Telecopier No. (713) 496-0285
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") dated as of
October , 1996, is made by READING & BATES CORPORATION, a Delaware
corporation ("RB") in favor of CONOCO DEVELOPMENT COMPANY, a Delaware
corporation ("Conoco").
WHEREAS, Conoco and RB Deepwater Exploration, Inc., a Nevada
corporation ("Reading & Bates") have entered into a Limited Liability Company
Agreement (the "LLC Agreement") dated of even date herewith with respect to
the formation of Deepwater Drilling L.L.C. (the "Company");
WHEREAS, Conoco has requested RB execute and deliver this
Indemnification Agreement as partial consideration for Conoco's entering into
the LLC Agreement.
NOW THEREFORE, in consideration of the premises and in order to
induce Conoco to enter into the LLC Agreement, RB hereby agrees as follows:
SECTION 1. Indemnification. RB hereby agrees to pay, protect,
indemnify, hold harmless and defend Conoco from any failure of Reading & Bates
to make any equity contribution to the Company, as and when required under
Sections 5.1 and 5.2 of the LLC Agreement, and agrees that in the event of
such failure, RB will promptly pay on behalf of Reading & Bates any such
amounts due under Sections 5.1 or 5.2 of the LLC Agreement. No payment
required to be made by RB under this Section 1 shall be subject to any right
of set off, counterclaim, defense, abatement, suspension, deferment or
reduction. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the LLC Agreement.
SECTION 2. Representations and Warranties. RB represents and
warrants to Conoco as follows:
(a) RB (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 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
Indemnification Agreement.
(b) The execution, delivery and performance by RB of this
Indemnification Agreement has been duly authorized and approved by all
necessary corporate action on the part of RB. This Indemnification
Agreement constitutes the legal, valid and binding obligation of RB and
is enforceable against RB 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) 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 Conoco 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 Indemnification Agreement.
(d) No bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
with respect to RB or any of its subsidiaries has been commenced in any
jurisdiction.
(e) There are no actions, suits or proceedings pending or to
RB's knowledge, threatened against or affecting RB or any of its
subsidiaries before any court or arbitrator which is reasonably likely
to have a material adverse effect on the financial condition, business
or operations of RB and its subsidiaries, taken as a whole, or would
impair the validity or enforceability of this Agreement.
SECTION 3. Amendments, Etc. No amendment or waiver of any
provision of this Indemnification Agreement nor consent to any departure by RB
therefrom shall in any event be effective unless the same shall be in writing
and signed by Conoco, and each such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 4. Notices, Etc. All notices and other communications
provided for herein shall be given or made in writing and addressed, if to RB,
at its address set forth under its signature below, or if to Conoco, at its
address set forth under its signature below, such notice or notices to be
effective only upon receipt by the party to which such notice is addressed.
SECTION 5. No Waiver; Remedies. No failure on the part of Conoco
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 RB and Conoco shall operate as
a waiver of any right of Conoco. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law, admiralty, equity or
otherwise.
SECTION 6. Separability. Should any clause, sentence, paragraph,
sub-section or Section of this Indemnification Agreement be judicially
declared to be invalid, unenforceable or void, such decision will not have the
effect of invalidating or voiding the remainder of this Indemnification
Agreement, and RB agrees that the part or parts of the Indemnification
Agreement 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 7. Captions. The captions in this Indemnification
Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Indemnification Agreement.
SECTION 8. Successors and Assigns; Assignment. This
Indemnification Agreement shall (a) remain in full force and effect until
Reading & Bates has met its obligations under Sections 5.1 and 5.2 of the LLC
Agreement; (b) be binding upon RB, its successors and assigns; provided that
RB's rights and obligations hereunder may not be assigned without the prior
written consent of Conoco; and (c) inure to the benefit of and be enforceable
only by Conoco and its successors and assigns.
SECTION 9. Limitation by Law. All rights, remedies and powers
provided in this Indemnification Agreement 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 Indemnification Agreement 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
Indemnification Agreement invalid, unenforceable, in whole or in part, or not
entitled to be recorded, registered or filed under the provisions of any
applicable law.
SECTION 10. Survival of Covenants, Representations and
Warranties. All covenants, representations and warranties contained in this
Indemnification Agreement shall survive the execution and delivery of this
Indemnification Agreement and shall continue until Reading & Bates has met all
of its obligations under Sections 5.1 and 5.2 of the LLC Agreement. Any
investigation by Conoco shall not diminish in any respect whatsoever its right
to rely on such covenants, representations and warranties.
SECTION 11. Fees and Expenses. RB shall pay all costs, fees and
expenses (including, but not limited to, reasonable attorneys' fees and
disbursements) incurred by Conoco in collecting or enforcing RB's obligations
or Conoco's rights or remedies under this Indemnification Agreement.
SECTION 11. Governing Law. This Indemnification Agreement shall
be governed by and construed in accordance with the laws of the state of
Delaware, without regard to principles of conflict of laws.
SECTION 12. Final Agreement. This Indemnification Agreement
represents the final agreement between Conoco and RB with respect to the
subject matter hereof. Each of RB and Conoco 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 Indemnification
Agreement.
IN WITNESS WHEREOF, RB has caused this Indemnification Agreement
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
ACCEPTED THIS DAY
OF OCTOBER 1996.
CONOCO DEVELOPMENT COMPANY
By:
Name:
Title:
600 North Dairy Ashford
Houston, Texas 77079
Attention:
Telecopier No. (713)
EXHIBIT "C" - SHARING RATIOS
Conoco Development Company 0.50 (50%)
RB Deepwater Exploration Inc. 0.50 (50%)
EXHIBIT "D" - CERTIFICATE OF FORMATION
CERTIFICATE OF FORMATION
OF
DEEPWATER DRILLING L.L.C.
The Certificate of Formation of Deepwater Drilling L.L.C. (the "Company") is
being executed by the undersigned for the purpose of forming a limited
liability company pursuant to the Delaware Limited Liability Company Act.
(a) The name of the Company is Deepwater Drilling L.L.C.
(b) The address of the registered office of the Company in Delaware is 1209
Orange Street, Wilmington, Delaware 19801. The Company's registered
agent at that address is The Corporation Trust Company.
(c) Any rights of indemnification or guaranties provided for or referred to
in the Company's Limited Liability Company Agreement shall only be for
the benefit of the Company, the Members, the Members' Representatives or
the Manager, as applicable, to the exclusion of all other purported
third party beneficiaries.
IN WITNESS WHEREOF, the undersigned, each an authorized person of the Company,
have caused this Certificate of Formation to be duly executed as of the
day of , 1996.
RB DEEPWATER EXPLORATION INC., CONOCO DEVELOPMENT COMPANY,
An Authorized Person An Authorized Person
By: By:
Name: Name:
Title: Title:
EXHIBIT "E" - FORM OF DEMAND PROMISSORY NOTE
DEMAND PROMISSORY NOTE
$22,000,000.- [Houston, Texas]
[ , 1996]
This Demand Promissory Note is given the day and year first above
written and made and executed by ("Maker"),
a corporation. Capitalized terms used herein and not defined
herein will have the respective meanings assigned thereto in the Limited
Liability Company Agreement dated as of June 1, 1996 between Conoco
Development Company and RB Deepwater Exploration Inc. (the "Agreement").
For value received, Maker hereby promises to pay to the order of
Deepwater Drilling L.L.C. ("Payee"), on the earlier of (i) demand, as set out
in the Agreement, or (ii) August 31, 1998, or (iii) one business day prior to
delivery of the Drillship (in each case the "Maturity"), the principal amount
of Twenty-Two Million Dollars ($22,000,000). Payee may make demand for the
entire principal amount or for any part thereof, and if only a part thereof is
demanded, Payee shall be entitled to make subsequent demand(s) for the
balance, or any portion thereof prior to Maturity, with the remaining balance,
if any, due on Maturity. All amounts due hereunder will paid to Payee in New
York, New York, at such bank as Payee may designate by written notice to
Maker, as provided in the Agreement.
No interest shall accrue under this Demand Promissory Note unless or
until the earlier of demand or Maturity, and if a demand is made only with
respect to a portion of the principal amount, interest shall accrue only with
respect to that portion not paid on demand. Any interest accruing under this
Demand Promissory Note shall accrue at the lesser of (i) the interest rate
publicly quoted by Texas Commerce Bank, N.A., Houston, Texas, as its prime
commercial rate, plus five percent (5%), or (ii) the maximum non-usurious
interest rate permitted by applicable law. Such interest will accrue only if
payment of the principal amount hereunder, or in the event of a demand for a
portion thereof, such portion, is not paid forthwith by Maker, and such
interest will continue to accrue thereafter until such time as the unpaid
amount has been paid.
This Demand Promissory Note is delivered in accordance with the terms
and the conditions of the Agreement.
THIS DEMAND PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Maker
By:
Name:
Its:
EXHIBIT "F" - MARINE SERVICES AGREEMENT
MARINE SERVICES AGREEMENT
This Agreement is made on October __, 1996, by and between DEEPWATER
DRILLING L.L.C., a limited liability company under the laws of the state of
Delaware and having an office in Houston, Texas, hereinafter called "the
Company", and CONOCO SHIPPING COMPANY, a corporation incorporated under the
laws of Liberia and having an office in Houston, Texas, hereinafter called
"Contractor".
WITNESSETH
WHEREAS, the Company desires to provide offshore drilling services to
the oil and gas industry utilizing the dynamically positioned drillship under
construction by Samsung Heavy Industries Co., Ltd. and Samsung Corporation at
Koje Island, Korea, Builder's Hull No. 1220, hereinafter called "the Drilling
Unit", to be delivered to the Company upon completion of such construction;
WHEREAS, the Company intends to enter into a drilling contract with
Conoco Drilling Inc. ("Conoco") having a term of five (5) years, plus options
as further set out therein, hereinafter called the "Drilling Contract", to
provide drilling services utilizing the Drilling Unit upon completion of
construction and mobilization of the Drilling Unit to a U.S. Gulf of Mexico
port;
WHEREAS, the group of companies of which Contractor is a member has been
engaged in operating tankers and other vessels for many years and has acquired
a qualified and experienced operational, marketing, technical and
administrative staff with the knowledge, skill and experience to assist the
Company in the marine aspects of the construction and operations of the
Drilling Unit;
WHEREAS, the Company desires to avail itself of certain operational,
marketing, technical and administrative staff of Contractor and has requested
Contractor to provide certain services and personnel to the Company; and
WHEREAS, Contractor has agreed to provide such services and personnel to
the Company in accordance with the following terms and conditions.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Services to be Provided by Contractor
Pursuant to the terms of this Agreement Contractor agrees to
provide the following services as requested from time to time by
the Company.
A. Engineering and related technical services in the mechanical,
electrical, structural and marine engineering disciplines,
pertaining to the construction, installation, testing,
commissioning and operation of the marine systems applicable to
the Drilling Unit.
B. Assistance to the Company for the procurement and delivery of
necessary equipment, spare parts and supplies applicable to the
marine system of the Drilling Unit in a timely manner.
C. Policies, procedures and systems for project management,
management information, safety, preventive maintenance and
inventory control applicable to the marine systems of the
Drilling Unit.
D. Assistance in the recruitment of qualified and experienced
marine personnel for the Drilling Unit by the Company and for
the training of marine personnel to be assigned to the Drilling
Unit.
E. Project management, inspection and related technical assistance
services applicable to the marine systems of the Drilling Unit
prior to delivery of the Drilling Unit from the shipyard.
If Contractor is unable to provide the services requested for
whatever reason, Contractor shall promptly advise Company of same
in writing, and Contractor will owe no further obligation to
Company with respect to the requested services.
All services provided by Contractor under this Agreement shall be
in conformance with good and accepted marine practice and standard
operating procedures and practices of the industry.
2. Personnel
Contractor agrees to provide, or cause to be provided, to the
Company all marine and support personnel in the categories set out
in Exhibit A to this Agreement, as may be reasonably requested by
the Company from time to time, to assist the Company in connection
with the construction, installation, testing and commissioning and
operation of the marine system of the Drilling Unit, and in order
for the Company to meet the requirements of any drilling contract
for the Drilling Unit. With respect to the Drilling Contract,
Contractor agrees to provide at the request of the Company the
marine personnel set out in Appendix B of the Drilling Contract.
3. Remuneration
A. In consideration of the services being provided hereunder, the
Company agrees to pay Contractor, on a monthly basis in arrears,
the sum of not to exceed U.S. $1,000 per day commencing on the
Commencement Date of the Drilling Contract and continuing for the
duration of the Drilling Contract, such rate to be adjusted
quarterly based on changes in the Consumer Price Index, as
published in the Survey of Current Business Bulletin by the U.S.
Department of Labor, commencing with the index for the month of
September, 1998. The parties agree to negotiate, in good faith,
adjustments in such rate from time to time, based on the level of
marine services Contractor provides to Company and the level of
marine services provided to Contractor by third parties.
B. The Company agrees to reimburse Contractor for:
(1) Any and all payroll and payroll burden costs incurred by
Contractor in providing personnel pursuant to Section 2
of this Agreement since June 1, 1996, such payroll and
payroll burden costs to be in conformance with
Contractor's normal accounting practices and employee
benefits in effect from time to time;
(2) Any and all third party costs incurred by Contractor in
the procurement of equipment, materials, supplies, spare
parts or personnel requested by the Company, including all
relevant transportation, travel and insurance costs.
C. As additional consideration for the services provided
hereunder, the Company agrees to pay, on a monthly basis in
arrears, to Contractor an amount equal to one percent (1%) of
the monthly revenues accruing to Company under the Drilling
Contract excluding, however, amounts for which Company is
entitled to cost reimbursement from Conoco under the terms of
the Drilling Contract.
4. Payment
A. The Company shall pay all amounts due to Contractor under this
Agreement by wire transfer, in freely available funds, to a
bank to be designated by Contractor in ,
for credit to Contractor's account.
B. All such amounts shall be paid within twenty days following
receipt by the Company of monthly invoices supported by
reasonable documentation. All amounts not paid when due shall
earn interest until paid at the rate of 50 basis points over
the 3 month LIBOR in effect, from time to time, as published in
the "Wall Street Journal".
5. Confidential Information
Any proprietary or confidential information, documents, manuals,
systems, designs, drawings or other like or unlike material or
information made available to the Company by Contractor is for the use
only by the Company for use with the services to be provided by
Contractor pursuant to this Agreement and shall be so designated at the
time of disclosure. Title to all such material and information shall at
all times be in Contractor, and the Company shall not have any rights
with respect to such material and information except the use provided by
this Agreement. During the term of this Agreement and thereafter for
five years after the expiration or earlier termination thereof or the
date of disclosure of such information, whichever is earlier, the
Company will not permit the use of any such information by a third party
and will at all times keep it in the strictest confidence. Upon the
expiration or earlier termination of this Agreement, the Company shall
return to Contractor all such material received from Contractor or
prepared by Contractor pursuant to this Agreement and shall neither
retain any copy of such material nor thereafter use any such
information. It is expressly agreed that the obligation of the Company
under this section will continue and survive any expiration or earlier
termination of this Agreement, provided that this section shall not
apply to information which is:
A. Contained in a publication of general circulation;
B. Disclosed in good faith by a third party not in privity with
the party originally disclosing such information which has a
bona fide right to disclose such information; or
C. Information substantially acquired or developed for, or from,
the operations or maintenance of the Drilling Unit;
save that the Company shall be entitled, after reasonable prior notice
to Contractor, to disclose any such confidential information, report or
document: -
(a) in connection with any proceedings arising out of or in
connection with this Agreement to the extent necessary to
protect its interests;
(b) to any prospective assignee of any interest in the Company
subject to it obtaining an undertaking from such
prospective assignee in the terms of this section;
(c) if required to do so by an order of any court of competent
jurisdiction;
(d) in pursuance of any procedure for discovery of documents
in any proceedings before any such court;
(e) pursuant to any law or regulation having the force of law
or any national stock exchange requirement;
(f) pursuant to a requirement of any authority being an
authority with whose requirement, of the nature and to the
extent in question, it is accustomed to comply; or
(g) to the technical or legal advisers of the Company subject
to it obtaining an undertaking from such advisers in the
terms of this section;
and the Company shall be entitled so to disclose or use any such
information, report or document if the information contained therein
shall have emanated in conditions free from confidentiality bona fide
from some person other than Contractor or the agent of Contractor and
such party would, but for the preceding provisions of this sub-section,
be free so to disclose or use the same; provided that the Company shall
use all reasonable endeavors to avoid disclosure to any third party in
accordance with sub-sections (c) (d) (e) and (f) above.
6. Term
A. This Agreement shall remain in effect until the expiration or
earlier termination of the Drilling Contract as it may be
amended or extended from time to time, and shall be
automatically renewed on an annual basis thereafter unless
either party gives six months' prior written notice of its
intention to terminate this Agreement or renegotiate its terms
to the other party. If such notice is given, the parties agree
to meet promptly and discuss in good faith such termination or
renegotiation, as the case may be, and if mutual agreement is
not reached regarding same, this Agreement may be terminated by
either party, effective upon expiration of such six month
period.
B. In case of termination of this Agreement, Contractor shall be
entitled to any payments with respect to services performed or
costs or expenses incurred prior to such termination.
C. If either party materially defaults in the fulfillment of any
obligation under this Agreement without reasonable
justification therefor, the other party will not have any
further obligation to fulfil its obligations until such default
has been cured. If such default continues for a period of more
than 30 days, the non-defaulting party shall have the option to
terminate this Agreement, without prejudice to any other rights
it may have.
7. Taxes
The remuneration payable under Sections 3.A and 3.B has been
calculated on the basis that Contractor will be liable for all federal
and state income and franchise taxes on the profits arising to it under
this Agreement but no other taxes. Any and all such other taxes that
may be imposed by any governmental authority shall be borne by the
Company.
8. Assignment
Neither party shall assign or transfer any of its right, title or
interest in or to this Agreement (except to a successor to substantially
all of such party's business or to a corporation owned by or under
common ownership with such party which agrees to assume all obligations
of such party, provided that the assigning party shall not thereby be
released from its obligations hereunder) without the prior written
consent of the other party, and any such attempt to assign or transfer
without such consent shall have no effect. Contractor may subcontract
for any services requested by Company hereunder, provided Company has
approved any such subcontract, such approval not to be unreasonably
withheld.
9. Notices
Any notice or other communication for which this Agreement
provides shall be in writing and will be delivered to the addressee
thereof or sent to the address thereof by electronic facsimile
communication or by registered or certified mail, return receipt
requested, or by other method which will constitute adequate evidence of
delivery, as follows:
If to the Company:
Deepwater Drilling L.L.C.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Manager
If to Contractor:
Conoco Shipping Company
c/o Conoco Inc.
600 N. Dairy Ashford
Houston, Texas 77079
Attention:
or addressed at such other address as the addressee thereof may have
designated for that purpose by written notice given as above provided.
Any notice given in conformance with this clause will be considered as
received for all purposes on the date of delivery.
10. Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of Texas an the parties hereto submit to the non-exclusive
jurisdiction of the federal and state courts in Harris County, Texas.
11. Consequential Damages
In no event shall either party to this Agreement be liable to the
other party for loss of profits or other incidental, consequential or
special damages.
12. Indemnity
A. Contractor agrees to defend, indemnify and hold harmless the
Company, to the extent the Company is not insured or otherwise
indemnified, for all losses, claims, liabilities, obligations
or the like incurred by the Company or any member in the
Company either directly or through the Company arising from
Contractor's failure to perform its obligations hereunder
according to good marine practice and consistent with the
standard operating procedures and practices of the industry,
whether such obligations are to be performed by itself or
through an affiliate or sub-contractor appointed by it.
Further, it is agreed that Contractor's liability, if any,
under this paragraph shall not in any event exceed U.S.
$100,000.00 per occurrence, not to exceed U.S. $1,000,000 in
any one year.
B. Notwithstanding the foregoing it is agreed that Contractor
shall have no liability to the Company for pollution, well
control costs, reservoir or underground damage or loss of hole,
regardless of how caused, including, but not limited to, the
sole, joint or concurrent negligence, recklessness or wilful
misconduct of Contractor, its employees or sub-contractors.
13. Additional Insured and Waiver of Subrogation
The Company agrees to cause the relevant insurance policies and
cover notes being maintained at the expense of the Company for the
benefit of both parties to include both parties as named insureds and to
cause the interested underwriters to waive all rights of subrogation
against the parties hereto.
14. Force Majeure
The obligations (other than any obligations to pay money) of
either party to the Agreement shall be suspended (and failure to carry
out the same shall not constitute a breach of this Agreement) to the
extent, and during the period, that such party is prevented from
carrying out is obligations by virtue of any act or event outside the
reasonable control of that party.
15. Amendment
This Agreement may be amended, from time to time, only by mutual
agreement of the parties in writing.
IN WITNESS WHEREOF, the parties thereto have caused this Agreement to be
executed by its duly authorized representatives in Houston, Texas on
, 1996.
CONOCO SHIPPING COMPANY
By:
Its:
DEEPWATER DRILLING L.L.C.
By:
Its:
EXHIBIT "G" - DRILLING SERVICES AGREEMENT
DRILLING SERVICES AGREEMENT
This Agreement is made on October __, 1996, by and between DEEPWATER
DRILLING L.L.C., a limited liability company under the laws of the state of
Delaware and having an office in Houston, Texas, hereinafter called "the
Company", and READING & BATES DRILLING CO., a corporation incorporated under
the laws of Oklahoma and having an office in Houston, Texas, hereinafter
called "Contractor".
WITNESSETH
WHEREAS, the Company desires to provide offshore drilling services to
the oil and gas industry utilizing the dynamically positioned drillship under
construction by Samsung Heavy Industries Co., Ltd. and Samsung Corporation at
Koje Island, Korea, Builder's Hull No. 1220, hereinafter called "the Drilling
Unit", to be delivered to the Company upon completion of such construction;
WHEREAS, the Company intends to enter into a drilling contract with
Conoco Drilling Inc. ("Conoco") having a term of five (5) years, plus options
as further set out therein, hereinafter called the "Drilling Contract", to
provide offshore drilling services utilizing the Drilling Unit upon completion
of construction and mobilization of the Drilling Unit to a U.S. Gulf of Mexico
port;
WHEREAS, the group of companies of which Contractor is a member has been
engaged in operating offshore drilling units for many years and has acquired
a qualified and experienced operational, marketing, technical and
administrative staff with the knowledge, skill and experience to assist the
Company in the drilling aspects of the construction and operations of the
Drilling Unit;
WHEREAS, the Company desires to avail itself of certain operational,
marketing, technical and administrative staff of Contractor and has requested
Contractor to provide certain services and personnel to the Company; and
WHEREAS, Contractor has agreed to provide such services and personnel to
the Company in accordance with the following terms and conditions.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Services to be Provided by Contractor
Pursuant to the terms of this Agreement Contractor agrees to
provide the following services as requested from time to time by
the Company.
A. Engineering and related technical services in the mechanical,
electrical, structural and marine engineering disciplines,
pertaining to the construction, installation, testing,
commissioning and operation of the drilling and topsides
systems of the Drilling Unit.
B. Assistance to the Company's purchasing organization for the
procurement and delivery of necessary equipment, spare parts
and supplies applicable to the marine system of the Drilling
Unit in a timely manner.
C. Policies, procedures and systems for project management,
management information, safety, preventive maintenance and
inventory control applicable to the drilling and topsides
systems of the Drilling Unit.
D. Assistance in the recruitment of qualified and experienced
drilling personnel for the Drilling Unit by the Company and for
the training of drilling personnel to be assigned to the
Drilling Unit.
E. Project management, inspection and related technical assistance
services applicable to the drilling systems of the Drilling
Unit prior to delivery of the Drilling Unit from the shipyard.
If Contractor is unable to provide the services requested for whatever
reason, Contractor shall promptly advise Company of same in writing, and
Contractor will woe no further obligation to Company with respect to
those requested services.
All services provided by Contractor under this Agreement shall be in
conformance with good and accepted oilfield practice and standard
operating procedures and practices of the industry.
2. Personnel
Contractor agrees to provide, or cause to be provided, to the Company
all drilling and support personnel in the categories set out in Exhibit A to
this Agreement, as may be reasonably requested by the Company from time to
time, to assist the Company in connection with the construction, installation,
testing, commissioning and operation of the drilling and topsides systems of
the Drilling Unit, and in order for the Company to meet the requirements of
any drilling contract for the Drilling Unit. With respect to the Drilling
Contract, Contractor agrees to provide at the request of the Company the
drilling and support personnel set out in Appendix B of the Drilling Contract.
3. Remuneration
A. In consideration of the services being provided hereunder, the
Company agrees to pay Contractor, on a monthly basis in arrears,
the sum not to exceed U.S. $2,500 per day commencing on the
Commencement Date of the Drilling Contract and continuing for the
duration of the Drilling Contract, such rate to be adjusted
quarterly based on changes in the Consumer Price Index, as
published in the Survey of Current Business Bulletin by the U.S.
Department of Labor, commencing with the index for the month of
September, 1998. The parties agree to negotiate, in good faith,
adjustments to such rate based on the level of drilling services
Contractor provides to Company as compared to drilling services
obtained by the Company from third parties.
B. The Company agrees to reimburse Contractor for:
(1) Any and all payroll and payroll burden costs incurred by
Contractor in providing personnel pursuant to the Section
2 of this Agreement since June 1, 1996, such payroll and
payroll burden costs to be in conformance with
Contractor's normal accounting practices and employee
benefits in effect from time to time;
(2) Any and all third party costs incurred by Contractor in
the procurement of equipment, materials, supplies, spare
parts or personnel requested by the Company, including all
relevant transportation, travel and insurance costs.
C. As additional consideration for the services provided in
construction hereunder the Company agrees to pay, on a monthly
basis in arrears, to Contractor an amount equal to one percent
(1%) of the monthly revenues accruing to Company under the
Drilling Contract (excluding, however, amounts for which
Company is entitled to cost reimbursement from Conoco under the
terms of the Drilling Contract).
4. Payment
A. The Company shall pay all amounts due to Contractor under this
Agreement by wire transfer, in freely available funds, to a
bank to be designated by Contractor in ,
for credit to Contractor's account.
B. All such amounts shall be paid within twenty days following
receipt by the Company of monthly invoices supported by
reasonable documentation. All amounts not paid when due shall
earn interest until paid at the rate of 50 basis points over
the 3 month LIBOR in effect, from time to time, as published in
the "Wall Street Journal".
5. Confidential Information
Any proprietary or confidential information, documents, manuals,
systems, designs, drawings or other like or unlike material or
information made available to the Company by Contractor is for the use
only by the Company for use with the services to be provided by
Contractor pursuant to this Agreement and shall be so designated at the
time of disclosure. Title to all such material and information shall at
all times be in Contractor, and the Company shall not have any rights
with respect to such material and information except the use provided by
this Agreement. During the term of this Agreement and thereafter for
five years after the expiration or earlier termination thereof or the
date of disclosure of such information, whichever is earlier, the
Company will not permit the use of any such information by a third party
and will at all times keep it in the strictest confidence. Upon the
expiration or earlier termination of this Agreement, the Company shall
return to Contractor all such material received from Contractor or
prepared by Contractor pursuant to this Agreement and shall neither
retain any copy of such material nor thereafter use any such
information. It is expressly agreed that the obligation of the Company
under this section will continue and survive any expiration or earlier
termination of this Agreement, provided that this section shall not
apply to information which is:
A. Contained in a publication of general circulation;
B. Disclosed in good faith by a third party not in privity with
the party originally disclosing such information which has a
bona fide right to disclose such information; or
C. Information substantially acquired or developed for, or from,
the operations or maintenance of the Drilling Unit;
save that the Company shall be entitled, after reasonable prior notice
to Contractor, to disclose any such confidential information, report or
document: -
(a) in connection with any proceedings arising out of or in
connection with this Agreement to the extent necessary to
protect its interests;
(b) to any prospective assignee of any interest in the Company
subject to it obtaining an undertaking from such
prospective assignee in the terms of this section;
(c) if required to do so by an order of any court of competent
jurisdiction;
(d) in pursuance of any procedure for discovery of documents
in any proceedings before any such court;
(e) pursuant to any law or regulation having the force of law
or any national stock exchange requirement;
(f) pursuant to a requirement of any authority being an
authority with whose requirement, of the nature and to the
extent in question, it is accustomed to comply; or
(g) to the technical or legal advisers of the Company subject
to it obtaining an undertaking from such advisers in the
terms of this section;
and the Company shall be entitled so to disclose or use any such
information, report or document if the information contained therein
shall have emanated in conditions free from confidentiality bona fide
from some person other than Contractor or the agent of Contractor and
such party would, but for the preceding provisions of this sub-section,
be free so to disclose or use the same; provided that the Company shall
use all reasonable endeavors to avoid disclosure to any third party in
accordance with sub-sections (c) (d) (e) and (f) above.
6. Term
A. This Agreement shall remain in effect until the expiration or
earlier termination of the Drilling Contract, as it may be
amended or extended from time to time, and shall be
automatically renewed on an annual basis thereafter unless
either party gives six months' prior written notice of its
intention to terminate this Agreement or renegotiate its terms
to the other party. If such notice is given, the parties agree
to meet promptly and discuss in good faith such termination or
renegotiation, as the case may be, and if mutual agreement is
not reached regarding same, this Agreement may be terminated by
either party, effective upon expiration of such six month
period.
B. In case of termination of this Agreement, Contractor shall be
entitled to any payments with respect to services performed or
costs or expenses incurred prior to such termination.
C. If either party materially defaults in the fulfillment of any
obligation under this Agreement without reasonable
justification therefor, the other party will not have any
further obligation to fulfil its obligations until such default
has been cured. If such default continues for a period of more
than 30 days, the non-defaulting party shall have the option to
terminate this Agreement, without prejudice to any other rights
it may have.
7. Taxes
The remuneration payable under Sections 3.A and 3.B has been
calculated on the basis that Contractor will be liable for all federal
and state income and franchise taxes on the profits arising to it under
this Agreement but no other taxes. Any and all such other taxes that
may be imposed by any governmental authority shall be borne by the
Company.
8. Assignment
Neither party shall assign or transfer any of its right, title or
interest in or to this Agreement (except to a successor to substantially
all of such party's business or to a corporation owned by or under
common ownership with such party which agrees to assume all obligations
of such party, provided that the assigning party shall not thereby be
released from its obligations hereunder) without the prior written
consent of the other party, and any such attempt to assign or transfer
without such consent shall have no effect. Contractor may subcontract
for any services requested by the Company hereunder, provided Company
has approved any such subcontract, such approval not to be unreasonably
withheld.
9. Notices
Any notice or other communication for which this Agreement
provides shall be in writing and will be delivered to the addressee
thereof or sent to the address thereof by electronic facsimile
communication or by registered or certified mail, return receipt
requested, or by other method which will constitute adequate evidence of
delivery, as follows:
If to the Company:
Deepwater Drilling L.L.C.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Manager
If to Contractor:
Reading & Bates Drilling Co.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Manager
or addressed at such other address as the addressee thereof may have
designated for that purpose by written notice given as above provided.
Any notice given in conformance with this clause will be considered as
received for all purposes on the date of delivery.
10. Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of Texas an the parties hereto submit to the non-exclusive
jurisdiction of the federal and state courts in Harris County, Texas.
11. Consequential Damages
In no event shall either party to this Agreement be liable to the
other party for loss of profits or other incidental, consequential or
special damages.
12. Indemnity
A. Contractor agrees to defend, indemnify and hold harmless the
Company, to the extent the Company is not insured or otherwise
indemnified, for all losses, claims, liabilities, obligations
or the like incurred by the Company or any member in the
Company either directly or through the Company arising from
Contractor's failure to perform its obligations hereunder
according to good oil field practice and consistent with the
standard operating procedures and practices of the industry,
whether such obligations are to be performed by itself or
through an affiliate or sub-contractor appointed by it.
Further, it is agreed that Contractor's liability, if any,
under this paragraph shall not in any event exceed U.S.
$100,000.00 per occurrence, not to exceed U.S. $1,000,000 in
any one year.
B. Notwithstanding the foregoing it is agreed that Contractor
shall have no liability to the Company for pollution, well
control costs, reservoir or underground damage or loss of hole,
regardless of how caused, including, but not limited to, the
sole, joint or concurrent negligence, recklessness or wilful
misconduct of Contractor, its employees or sub-contractors.
13. Additional Insured and Waiver of Subrogation
The Company agrees to cause the relevant insurance policies and
cover notes being maintained at the expense of the Company for the
benefit of both parties to include both parties as named insureds and to
cause the interested underwriters to waive all rights of subrogation
against the parties hereto.
14. Force Majeure
The obligations (other than any obligations to pay money) of
either party to the Agreement shall be suspended (and failure to carry
out the same shall not constitute a breach of this Agreement) to the
extent, and during the period, that such party is prevented from
carrying out is obligations by virtue of any act or event outside the
reasonable control of that party.
15. Amendment
This Agreement may be amended, from time to time, only by mutual agreement of
the parties in writing.
IN WITNESS WHEREOF, the parties thereto have caused this Agreement to be
executed by its duly authorized representatives in Houston, Texas on
, 1996.
READING & BATES DRILLING CO.
By:
Its:
DEEPWATER DRILLING L.L.C.
By:
Its:
EXHIBIT "H" - CONSTRUCTION FINANCING CREDIT AGREEMENT
CREDIT AGREEMENT
DATED AS OF ____________________, 1996
BETWEEN
DEEPWATER DRILLING L.L.C.
AND
CONOCO INC.
TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
I. DEFINITIONS; CERTAIN TERMS . . . . . . . . . . . . . . . . . . . . . 2
II. THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.01 The Vessel Loans . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Making the Vessel Construction Loans . . . . . . . . . 6
(b) Interest; Vessel Capitalized Interest . . . . . . . . . 7
(c) Construction Financing . . . . . . . . . . . . . . . . 8
(d) Repayment; Vessel Note . . . . . . . . . . . . . . . . 9
(e) Prepayments . . . . . . . . . . . . . . . . . . . . . . 9
(f) Use of Proceeds . . . . . . . . . . . . . . . . . . . . 10
(g) Termination of Vessel Commitment . . . . . . . . . . . 10
2.02 Payments and Computations . . . . . . . . . . . . . . . . . . . 10
2.03 Maximum Amount of Loans . . . . . . . . . . . . . . . . . . . . 12
2.04 Grant of Security Interest . . . . . . . . . . . . . . . . . . 12
III. CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . 12
3.01 Conditions Precedent to the Initial Loan . . . . . . . . . . . 12
(a) Delivery of Documents . . . . . . . . . . . . . . . . . 12
(b) Proceedings; Receipt of Documents . . . . . . . . . . . 13
3.02 Conditions Precedent to All Loans . . . . . . . . . . . . . . . 13
(a) Representations and Warranties; No Event of Default . . 13
(b) Legality . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Borrowing Notice . . . . . . . . . . . . . . . . . . . 14
(d) Delivery of Documents . . . . . . . . . . . . . . . . . 14
IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 14
4.01 Representations and Warranties of the Borrower . . . . . . . . 14
(a) Organization, Good Standing, Etc. . . . . . . . . . . . 14
(b) Authorization, Etc. . . . . . . . . . . . . . . . . . . 14
(c) Governmental Approvals . . . . . . . . . . . . . . . . 15
(d) Enforceability of Loan Documents . . . . . . . . . . . 15
(e) No Material Adverse Change . . . . . . . . . . . . . . 15
(f) Litigation, Labor Controversies, Etc. . . . . . . . . . 15
(g) Subsidiaries . . . . . . . . . . . . . . . . . . . . . 16
(h) Ownership of Assets . . . . . . . . . . . . . . . . . . 16
V. COVENANTS OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . . 16
5.01 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . 16
(a) Reporting Requirements . . . . . . . . . . . . . . . . 16
(b) Preservation of Existence, Etc. . . . . . . . . . . . . 17
(c) Obtaining of Permits, Etc. . . . . . . . . . . . . . . 18
(d) Keeping of Records and Books of Account . . . . . . . . 18
(e) Compliance with Laws, Etc. . . . . . . . . . . . . . . 18
(f) Insurance . . . . . . . . . . . . . . . . . . . . . . . 18
5.02 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . 18
(a) Construction Contract . . . . . . . . . . . . . . . . . 18
(b) Liens, Etc. . . . . . . . . . . . . . . . . . . . . . 19
(c) Indebtedness . . . . . . . . . . . . . . . . . . . . . 19
VI. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Payment Default . . . . . . . . . . . . . . . . . . . . 19
(b) Breach of Warranty . . . . . . . . . . . . . . . . . . 20
(c) Judgments . . . . . . . . . . . . . . . . . . . . . . . 20
(d) Bankruptcy, Insolvency, Etc. . . . . . . . . . . . . . 20
e) Impairment of Security, Etc. . . . . . . . . . . . . . . . . 21
6.02 Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . 21
VII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.01 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.02 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . 22
7.03 No Waiver; Remedies, Etc. . . . . . . . . . . . . . . . . . . . 23
7.04 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 23
7.06 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.07 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 24
7.08 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . 25
7.09 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.11 Application of Refunds and Payments under
Korean Bank Guarantees . . . . . . . . . . . . . . . . . . . 27
7.12 No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.13 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . 28
7.14 Payment of Costs and Expenses . . . . . . . . . . . . . . . . . 28
Exhibits
Exhibit A Form of Promissory Note
Exhibit B Form of Borrowing Request
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of __________________, 1996, between Deepwater
Drilling L.L.C., a Delaware limited liability company, (the "Borrower"), and
Conoco Inc., a corporation organized under the laws of the State of Delaware
("Conoco").
RECITALS
The Borrower is a Delaware limited liability company whose members are RB
Deepwater Exploration Inc., a Nevada corporation, ("Reading & Bates") and
Conoco Development Company ("CDC"). The Borrower has entered into or will
enter into a construction contract (the "Vessel Construction Contract," as
more fully defined herein) with Samsung Co., Ltd. and Samsung Heavy Industries
Co., Ltd., each a Korean corporation, (collectively the "Builder") for the
construction of a drillship with top sides (the "Vessel," as more fully
defined herein). Under the Vessel Construction Contract, Borrower is or will
be obligated to make certain payments to the Builder. Further, during the
construction of the Vessel, Borrower may purchase certain equipment to be
integrated into or installed on the Vessel ("BFE," as more fully defined
herein) and may be required to pay certain amounts for the BFE. It is
Borrower's intention to seek construction financing from third party
commercial lenders to fund the payments that will be required to be made to
the Builder or which may be necessary for the purchase of BFE, but under the
Vessel Construction Contract, certain amounts will be due to the Builder prior
to Borrower completing the contemplated construction financing and Borrower
may also need to purchase BFE prior to the completion of the construction
financing.
The Borrower has asked Conoco to make term loans to the Borrower in an
aggregate principal amount not to exceed $85,000,000 (including capitalized
interest in an aggregate principal amount not to exceed $___________________),
the proceeds of which are to be used to pay a portion of the costs due to the
Builder under the Vessel Construction Contract prior to the delivery of the
Vessel and/or to purchase BFE. Conoco is willing to make such term loans to
the Borrower on the terms and conditions hereinafter set forth. Accordingly,
the Borrower and Conoco hereby agree as follows:
I. DEFINITIONS; CERTAIN TERMS
Definitions
As used in this Agreement, the following terms shall have the respective
meanings indicated below, such meanings to be applicable equally to both
the singular and plural forms of such terms:
"BFE" means the buyer furnished equipment that Borrower is to provide
under the terms of the Vessel Construction Contract.
"Borrower" has the meaning specified therefor in the preamble hereto.
"Borrowing Date" means each date on which a Loan is made hereunder.
"Builder" has the meaning specified therefor in the preamble hereto.
"Business Day" means a day on which commercial banks in Houston, Texas
and New York City, New York are not required or authorized by law to
close.
"Capitalized Interest Commitment" means the commitment of Conoco to make
the Vessel Capitalized Interest Loans to the Borrower pursuant to
Sections 2.01(b) and 2.02(b) hereof, respectively, in an aggregate
principal amount at any one time outstanding not to exceed
$___________________.
"Closing Date" means the date on which the initial Loan is made
hereunder.
"Commitment" means the Vessel Construction Commitment and the
Capitalized Interest Commitment.
"Conoco" has the meaning specified therefor in the preamble hereto.
"Construction Financing" means the financing Borrower will put in place
on or prior to October 10, 1997, (i) to repay the amounts borrowed
hereunder, along with interest, and (ii) to finance other amounts in
connection with the construction of the Vessel.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both
would constitute an Event of Default.
"Default Rate" means, for any day, a rate per annum equal to the Six
Month LIBOR Rate plus 3%.
"Dollars" and the symbol "$" means the lawful currency of the United
States of America.
"Event of Default" means any of the events set forth in Section 6.01
hereof.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Governmental Authority" means the United States or any state or
political subdivision thereof or any foreign nation or political
subdivision thereof, any entity, body or authority exercising executive,
legislative, judicial, regulatory or administrative functions of, or
pertaining to, government in the United States (or any state or
political subdivision thereof) or any foreign nation or any political
subdivision thereof, including, without limitation, any central bank or
other governmental or quasi-governmental authority exercising control
over banks or other financial institutions, and any corporation or other
entity or authority owned or controlled (through stock or capital
ownership or otherwise) by any of the foregoing.
"Interest Period" means, with respect to each Loan, (a) the period
commencing on the Borrowing Date for such Loan and ending on the
numerically corresponding date six months thereafter, and (b) each
subsequent period beginning on the last day of the immediately preceding
Interest Period and ending on the numerically corresponding date six
months thereafter , provided that:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be
extended to the immediately following Business Day (unless
such immediately following Business Day falls in another
calendar month, in which case such Interest Period shall
end on the immediately preceding Business Day); and
(ii) any Interest Period that begins on the last Business Day
of a calendar month shall end on the last Business Day of
the corresponding sixth calendar month thereafter.
"Korean Bank" means the Bank of Seoul.
"Korean Bank Guarantee" means the Letter of Refundment Guarantee to be
issued by the Bank of Seoul, with respect to the Construction Contract.
"Lien or Liens" means any mortgage, pledge, lien, charge, encumbrance,
lease, right, security interest, libel, restriction, covenant,
assessment, rights in rem of any kind or claim of whatever nature or
description.
"Loan" means one of the Vessel Loans.
"Loan Documents" means this Agreement, the Vessel Note and the Security
Agreements.
"Loan Maturity Date" means the earlier of (i) October 10, 1997, or
(ii) the date on which Borrower has obtained Construction Financing as
contemplated by Section 2.01(c).
"Loan Termination Date" means the Loan Maturity Date or such earlier
date on which the Vessel Construction Commitment and the Capitalized
Interest Commitment with respect to the Vessel Loans shall be terminated
pursuant to Section 2.01(e), Section 2.01(g) or Section 6.01 hereof.
"Maturity Dates" means the Loan Maturity Date.
"Notice of Borrowing" means a notice, substantially in the form of
Exhibit B hereto, or, if given by telephone, specifying the matters set
forth in such Exhibit B, and followed promptly by a notice substantially
in the form of such Exhibit, delivered by the Borrower to Conoco
pursuant to Section 2.01(a) hereof.
"Obligations" means (i) the obligation of the Borrower to pay, as and
when due and payable (upon scheduled maturity, acceleration or
otherwise), all amounts from time to time owing by it in respect of any
Loan Document, whether for principal, interest, fees, expenses or
otherwise, and (ii) the obligation of the Borrower to perform or observe
all of its other obligations from time to time existing under any Loan
Document.
"Person" means an individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, limited
liability company, joint venture or governmental authority or other
regulatory body.
"Security Agreements" has the meaning specified in Section 2.04 hereof.
"Six Month LIBOR Rate" means the six month LIBOR rate as quoted in the
Wall Street Journal Money Rate Section on the date of funding or on the
date of determination thereof (or if the Wall Street Journal is not
published on that day, on the first publishing day thereafter), such
interest to be calculated for the actual number of days elapsed on the
basis of a 360 day year; provided that if no such rates are published in
the Wall Street Journal then the Borrower and Conoco shall negotiate in
good faith to agree upon an alternative note.
"Termination Date" means the Loan Termination Date.
"Vessel" means the Vessel being built pursuant to the Vessel
Construction Contract.
"Vessel Capitalized Interest Loan" has the meaning specified therefor in
Section 2.01(b)(ii) hereof.
"Vessel Construction Commitment" means the commitment of Conoco to make
Vessel Construction Loans to the Borrower pursuant to Section 2.01(a)
hereof in an aggregate principal amount at any one time outstanding not
to exceed $_____________________.
"Vessel Construction Contract" means the Contract that may or has been
entered into between Borrower and the Builder, providing for the
construction and the purchase and sale of a drillship designated as Hull
No. 1220, as amended or otherwise modified in accordance with the terms
hereof.
"Vessel Construction Loan" means any loan made by Conoco to the Borrower
pursuant to Section 2.01(a).
"Vessel Loans" means the Vessel Construction Loans and the Vessel
Capitalized Interest Loans.
"Vessel Note" means a promissory note of the Borrower, substantially in
the form of Exhibit A hereto, evidencing the obligation of the Borrower
to repay the Vessel Loans, as such promissory note may be modified or
extended from time to time, and any promissory note or notes issued in
exchange or replacement therefor.
II. THE LOANS
2.01 The Vessel Loans
(a) Making the Vessel Construction Loans
Conoco agrees, on the terms and conditions hereinafter set
forth, to make Vessel Construction Loans to the Borrower from
time to time during the period from the date hereof to but
excluding the Loan Termination Date in an aggregate principal
amount at any one time outstanding not to exceed the amount of
the Vessel Construction Commitment. Each Vessel Construction
Loan shall be in an amount which is not less than $1,000,000
and is an integral multiple of $100,000 and shall be made
pursuant to an irrevocable Notice of Borrowing delivered by the
Borrower to Conoco not later than 12 noon (New York City time)
on the third Business Day prior to the Borrowing Date of such
proposed Loan. On the Borrowing Date specified in the Notice
of Borrowing and upon fulfillment of the applicable conditions
set forth in Section III hereof, Conoco will make the requested
Vessel Construction Loan available to the Borrower in
immediately available funds in U.S. Dollars by, at the option
of Conoco, either (i) crediting the Borrower's designated
account or (ii) remitting on Borrower's behalf, and in
accordance with Borrower's written notification, amounts due
the Builder or Persons from whom the Borrower is purchasing
BFE.
(b) Interest; Vessel Capitalized Interest
(i) The Borrower will pay interest on the unpaid principal
amount of each Vessel Loan, from and including the
first day of the Interest Period for such Loan until
such principal amount shall be paid in full, at the
rate per annum at all times during each Interest
Period for such Loan equal to the six month LIBOR Rate
in effect two business days prior to the first day of
such Interest Period, plus 1% for such Interest
Period.
(ii) Interest accruing on the Vessel Loans shall be due on
the last day of each Interest Period and, subject to
the terms and conditions hereinafter set forth
(including, without limitation, Section 3.02 hereof),
prior to the Loan Termination Date shall be added
(each such addition herein a "Vessel Capitalized
Interest Loan") to the principal amount of the Vessel
Loans on the last day of each Interest Period and on
the date on which such Loan ceases to bear interest,
provided that the aggregate principal amount of the
Vessel Capitalized Interest Loans during the term of
this Agreement shall not exceed the amount of the
Capitalized Interest Commitment. Each Vessel
Capitalized Interest Loan shall constitute a Vessel
Loan and shall bear interest in accordance with
Section 2.01(b)(i) hereof. The Borrower will pay on
demand by Conoco any accrued interest on the Vessel
Loan (1) due on the date specified above if on such
date the Borrower shall not have fulfilled the
conditions precedent set forth in Section 3.02 hereof,
(2) to the extent that such accrued interest would
cause the aggregate principal amount of all Vessel
Capitalized Interest Loans to exceed the amount of the
Capitalized Interest Commitment, (3) on the Loan
Maturity Date and (4) accruing on or after the Loan
Termination Date with respect to all amounts not paid
on or before the Loan Termination Date.
(iii) Any amount of principal of and, to the extent
permitted by law, interest on a Vessel Loan that is
not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest, from
the date on which such amount is due until such amount
is paid in full, payable on demand, at a rate per
annum equal at all times to the Default Rate; provided
that the rate of interest payable pursuant to this
clause (iii) shall never exceed the rate of interest
that Conoco is permitted to charge and receive under
laws applicable to Conoco limiting rates of interest
that may be charged or collected.
(c) Construction Financing
Borrower agrees it will seek and obtain Construction Financing
prior to October 10, 1997, and through the proceeds obtained
from such Construction Financing, Borrower agrees to repay to
Conoco all amounts due hereunder, provided that the failure of
the Borrower to obtain Construction Financing will not effect
the obligation of the Borrower to repay all amounts due
hereunder no later than October 10, 1997, as provided for in
Section 2.01 (d) and Borrower's obligation to repay all amounts
due hereunder and under the Vessel Note no later than
October 10, 1997, is absolute.
(d) Repayment; Vessel Note
(i) The Borrower will repay the unpaid principal amount
of, and all accrued and unpaid interest on, and all
fees or expenses due in respect of, the Vessel Loans
on the Loan Termination Date. The obligation of the
Borrower to repay the Vessel Loans shall be evidenced
by a single Vessel Note payable to the order of Conoco
in a principal amount equal to $_________________.
(ii) Conoco shall record, and prior to any transfer of the
Vessel Note shall endorse on the schedules forming a
part thereof appropriate notations to evidence, the
date and amount of the Vessel Loans made by it and the
date and amount of each payment of principal made by
the Borrower with respect to the Vessel Loans,
provided that the failure of Conoco to make any such
recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the
Vessel Note. Conoco is hereby irrevocably authorized
by the Borrower to endorse the Vessel Note and to
attach to and make a part of the Vessel Note a
continuation of any such schedule as and when
required.
(e) Prepayments
(i) Mandatory Prepayments
The Borrower will prepay the aggregate principal
amount of the outstanding Vessel Loans in whole,
together with all accrued and unpaid interest thereon
within 60 days after any date when the Vessel
Construction Contract shall have been terminated or
rescinded.
(ii) Optional Prepayments
The Borrower may, upon at least three (3) Business
Days' prior written notice to Conoco (which notice
shall be irrevocable), prepay the Vessel Loans in
whole (but not in part), together with all accrued and
unpaid interest thereon.
(iii) In General
No amount prepaid may be reborrowed by the Borrower.
Further, there will be no premium or penalty
applicable to any prepayment.
(f) Use of Proceeds
The Borrower will use the proceeds of the Vessel Construction
Loans solely (i) to fund the First Installment payable to the
Builder as defined and described in the Vessel Construction
Contract, and (ii) to finance the acquisition of BFE.
(g) Termination of Vessel Commitment
(i) Borrower shall have the right, upon at least three
Business Days' notice to Conoco, to terminate in
whole or reduce in part the unused portion of the
Vessel Construction Commitment.
(ii) On the date a prepayment is made or required to be
made pursuant to Section 2.01 hereof, the Vessel
Construction Commitment shall be terminated.
2.02 Payments and Computations
(a) The Borrower will make each payment hereunder and under
the Vessel Note not later than 12 noon (New York City
time) on the day when due in Dollars and immediately
available funds to Conoco's Account Number
___________________, Reference _______________, maintained
by _______________________________, in _________,
___________, ABA Number _____________. Any payment made
by the Borrower hereunder or under the Vessel Note after
12 noon (New York City time) shall be deemed to have been
made on the next succeeding Business Day.
(b) All computations of interest shall be made by Conoco on
the basis of a year of 360 days for the actual number of
days (including the first day but excluding the last day)
occurring in the period for which such interest is
payable. Each determination by Conoco of an interest rate
hereunder shall be conclusive and binding for all purposes
in the absence of manifest error.
(c) Whenever any payment hereunder, under the Vessel Note or
under any other Loan Document shall be stated to be due on
a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such
extension of time shall in such case be included in the
computation of the payment of interest; provided, however,
if such extension would cause payment of principal of or
interest on a Loan to be made in the next following
calendar month, such payment shall be made on the next
preceding Business Day.
(d) All payments by the Borrower of principal of, and interest
on, the Vessel Loans and all other amounts payable
hereunder shall be made free and clear of and without
deduction for any present or future income, excise, stamp
or franchise taxes and other taxes, fees, duties,
withholdings or other charges of any nature whatsoever
imposed by any taxing authority, but excluding Conoco's
franchise taxes and taxes imposed on or measured by
Conoco's net income or receipts (such non-excluded items
being called "Taxes").
2.03 Maximum Amount of Loans
Notwithstanding anything herein to the contrary, Conoco shall have
no obligation to make a Vessel Loan if the making of such Loan
would cause the aggregate outstanding principal amount of all
Vessel Loans to exceed $85,000,000.
2.04 Grant of Security Interest
As security for the repayment of all amounts due hereunder and
under the Vessel Note, the Borrower, Reading & Bates, and CDC have
executed security agreements (the "Security Agreements") of even
date herewith granting to Conoco security interests in the
collateral described in the Security Agreements.
III. CONDITIONS OF LENDING
3.01 Conditions Precedent to the Initial Loan
The obligation of Conoco to make the initial Loan is subject to
the fulfillment, in a manner satisfactory to Conoco, of each of
the following conditions precedent.
(a) Delivery of Documents
Conoco shall have received on or before the Closing Date the
following, each in form and substance satisfactory to Conoco
and, other than in the cases of clauses (i) and (ii) of this
Section 3.01(a), dated the Closing Date:
(i) the Vessel Note duly executed by the Borrower;
(ii) such agreements, certificates, members committee and
board resolutions of the Borrower and the members,
opinions, instruments and other documents as Conoco
may reasonably require in connection with the Loan and
the giving of security interests as provided for in
Section 2.04; and
(iii) such other agreements, certificates, opinions,
instruments and other documents relating to the
transactions contemplated by this Agreement as may
have been reasonably requested by Conoco (including,
without limitation, all documents referred to herein
and not appearing as exhibits hereto) and all legal
matters in connection with such transactions shall be
satisfactory in form and substance to Conoco.
(b) Proceedings; Receipt of Documents
All proceedings in connection with the making of the initial
Loan and the other transactions contemplated by this Agreement,
and all documents incidental thereto, shall be reasonably
satisfactory to Conoco and its special counsel, and Conoco and
such special counsel shall have received all such information
and such counterpart originals or certified or other copies of
such documents as Conoco or such special counsel may reasonably
request.
3.02 Conditions Precedent to All Loans
The obligation of Conoco to make any Loan (including the initial
Loan) is subject to the fulfillment, in a manner satisfactory to
Conoco, of each of the following conditions precedent:
(a) Representations and Warranties; No Event of Default
The following statements shall be true (i) the representations
and warranties contained in Section 4.01 of this Agreement are
correct on and as of such date as though made on and as of such
date; and (ii) no Default or Event of Default has occurred and
is continuing or would result from the making of the Loan to be
made on such date.
(b) Legality
The making of such Loan shall not contravene any law, rule or
regulation applicable to Conoco or to the Borrower.
(c) Borrowing Notice
Conoco shall have received, at least three Business Days prior
to the date of each Vessel Construction Loan, a Notice of
Borrowing pursuant to Section 2.01(a) hereof, with respect to
such Loan.
(d) Delivery of Documents
Conoco shall have received such other certificates, members
committee and board resolutions of the Borrower and the
members, opinions, instruments and other documents relating to
the transactions contemplated by this Agreement as may have
been reasonably requested by Conoco (including, without
limitation, all documents referred to herein and not appearing
as exhibits hereto) and all legal matters in connection with
such transactions shall be satisfactory in form and substance
to the Conoco.
IV. REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of the Borrower
(a) Organization, Good Standing, Etc.
The Borrower (i) is a limited liability company duly organized,
validly existing and in good standing under the laws of the
State of Delaware, (ii) has all requisite power and authority
to conduct its business as now conducted and as presently
contemplated, to execute and deliver each Loan Document to
which it is a party, to make the borrowings hereunder and to
consummate the transactions contemplated hereby, and (iii) is
fully qualified to do business and is in good standing in each
of the states of Delaware and Texas.
(b) Authorization, Etc.
The execution, delivery and performance by the Borrower of each
Loan Document to which it is a party, (i) have been duly
authorized by all necessary limited liability company action,
(ii) do not and will not contravene its Certificate of
Formation or its Limited Liability Company Agreement, any law,
rule, regulation, order, decree or any contractual restriction
or otherwise affecting it or any of its properties and (iii) do
not and will not result in or require the creation of any Lien
(other than Liens permitted under Section 5.02) upon or with
respect to any of its properties.
(c) Governmental Approvals
No authorization or approval or other action by, and no notice
to or filing with, any United States governmental authority or
United States regulatory body is required in connection with
the due execution, delivery and performance by the Borrower of
any Loan Document to which it is a party except for such that
have been obtained or made.
(d) Enforceability of Loan Documents
Each of this Agreement and each other Loan Document to which
the Borrower is (or will be) a party, when delivered hereunder,
is (or will be), a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with
its terms, except as such enforcement may be subject to
bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally and to general principles
of equity (whether asserted at law or in equity).
(e) No Material Adverse Change
Since October 28, 1996, there has been no material adverse
change in the financial condition, operations, assets,
business, properties or prospects of the Borrower.
(f) Litigation, Labor Controversies, Etc.
There is no pending or, to the knowledge of the Borrower,
threatened litigation, action, proceeding, or labor controversy
affecting the Borrower or any of its properties, businesses,
assets or revenues, which may materially adversely affect the
financial condition, operations, assets, business, properties
or prospects of the Borrower or which purports to affect the
legality, validity or enforceability of this Agreement or any
other Loan Document.
(g) Subsidiaries
As of the date hereof, the Borrower has no Subsidiaries.
(h) Ownership of Assets
The Borrower owns good and marketable title to all of its
properties and assets, real and personal, tangible and
intangible, of any nature whatsoever (including patents,
trademarks, trade names, service marks and copyrights), free
and clear of all Liens (other than Liens permitted under
Section 5.02), charges or claims (including infringement claims
with respect to patents, trademarks, copyrights and the like).
The Borrower does not own, lease or operate, and has not
previously owned, leased or operated, any facilities or real
property.
V. COVENANTS OF THE BORROWER
5.01 Affirmative Covenants
So long as any principal of or interest on the Vessel Note shall
remain unpaid or Conoco shall have any Commitment hereunder, the
Borrower will, unless Conoco shall otherwise consent in writing:
(a) Reporting Requirements
Furnish to Conoco:
(i) such financial and other information as Conoco from
time to time reasonably request;
(ii) such other information available to the Borrower
concerning the Vessel or the Collateral (as defined in
Security Agreement) as Conoco from time to time may
reasonably request.
(iii) promptly and in any event within three Business Days
after the occurrence of each Default, a statement of
an authorized representative of the Borrower setting
forth details of such Default and the action which the
Borrower has taken and proposes to take with respect
thereto; and
(iv) promptly and in any event within three Business Days
after the Borrower knows or reasonably should have
known of (x) the occurrence of any adverse development
with respect to any litigation, action, proceeding,
arbitration or labor controversy which could
reasonably be expected to materially adversely affect
the Borrower's consolidated business, operations,
assets, revenues, properties or prospects or which
could reasonably be expected to affect the legality,
validity or enforceability of this Agreement or any
other Loan Document or the ability of the Borrower to
fulfill its obligations under the Loan Documents,
(y) the commencement of any labor controversy,
litigation, action, arbitration or other proceeding,
which could reasonably be expected to materially
adversely affect the Borrower's consolidated business,
operations, assets, revenues, properties or prospects
or which could reasonably be expected to affect the
legality, validity or enforceability of this Agreement
or any other Loan Document or the ability of the
Borrower to fulfill its obligations under the Loan
Documents, or (z) the occurrence of any material
adverse change in the financial condition, operations,
assets, business, properties or prospects of the
Borrower, in the Collateral or in the ability of the
Borrower to perform their Obligations under the Loan
Documents, notice thereof and copies of all
documentation relating thereto.
(b) Preservation of Existence, Etc.
Maintain and preserve its existence, rights and privileges, and
remain duly qualified and in good standing in the states of
Delaware and Texas.
(c) Obtaining of Permits, Etc.
Take all reasonable action to obtain, maintain and preserve all
permits, licenses, authorizations, approvals and accreditations
which are necessary in the United States to perform its
obligations under the Loan Documents.
(d) Keeping of Records and Books of Account
Keep adequate records and books of account, with complete
entries made in accordance with GAAP consistently applied,
reflecting all of its financial transactions.
(e) Compliance with Laws, Etc.
The Borrower will comply in all material respects with all
applicable laws, rules, regulations and orders.
(f) Insurance
The Borrower will maintain or cause to be maintained with
responsible insurance companies insurance with respect to its
properties and business against such casualties and
contingencies and of such types and in such amounts as is
customary in the case of similar businesses (and which
insurance shall name Conoco as an additional insured and loss
payee (except with respect to partial losses not exceeding
$2,000,000 per occurrence, provided Borrower uses the such
proceeds to repair the Vessel) with respect to tangible
Collateral, if applicable, and shall contain endorsements to
such policies providing that such insurer will notify Conoco
not less than 30 days prior to the expiration or termination of
such policies).
5.02 Negative Covenants
So long as any principal of or interest on the Vessel Note shall
remain unpaid or Conoco shall have any Commitment hereunder, the
Borrower will not, without the prior written consent of Conoco:
(a) Construction Contract
Amend, modify or supplement, nor agree to any amendment,
modification or supplement of, any of the provisions of the
Vessel Construction Contract (other than change orders not
exceeding $2,000,000 in any one year).
(b) Liens, Etc.
Create or assume any Lien upon or with respect to any of the
Vessel or any other property or asset of the Borrower, other
than Liens arising from the execution of the Loan Documents and
Liens for taxes, assessments or governmental charges or levies,
provided, that the Borrower is not in default with respect to
its payment obligations with respect thereto or is in good
faith and by appropriate proceedings diligently contesting such
obligations and adequate reserves for the payment thereof have
been established.
(c) Indebtedness
Create, incur, assume or suffer to exist or otherwise become or
be liable in respect of any indebtedness, other than, without
duplication, the following: (i) indebtedness in respect of the
Loans and other obligations hereunder and under the other Loan
Documents and (ii) unsecured indebtedness incurred in the
ordinary course of business (including open accounts extended
by suppliers on normal trade terms in connection with purchases
of goods and services, but excluding indebtedness incurred
through the borrowing of money).
VI. EVENTS OF DEFAULT
6.01 Events of Default
If any of the following Events of Default shall occur and be
continuing:
(a) Payment Default
Conoco shall not have received on behalf of the Borrower
sufficient funds to pay any principal of or interest on any
Vessel Loan or the Vessel Note within three (3) Business Days
after the date when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise); or
(b) Breach of Warranty
Borrower shall have breached any warranty or covenant hereunder
or in any other Loan Document and same shall not have been
cured within ten (10) Business Days following written notice
from Conoco.
(c) Judgments
Any judgment or order for the payment of money in excess of
$2,000,000 shall be rendered against the Borrower and either
any creditor shall have begun to enforce such judgment or
order, or 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.
(d) Bankruptcy, Insolvency, Etc.
The Borrower shall (i) become insolvent or generally fail to
pay or admit in writing its inability or unwillingness to pay,
debts as they become due; (ii) apply for, consent to, or
acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or any
property of any thereof, or make a general assignment for the
benefit of creditors; (iii) in the absence of such application,
consent or acquiescence, permit or suffer to exist the
appointment of a trustee, receiver, sequestrator or other
custodian for the Borrower or for a substantial part of the
property thereof, and such trustee, receiver, sequestrator or
other custodian shall not be discharged within 20 days,
provided that the Borrower hereby expressly authorizes Conoco
to appear in any court conducting any relevant proceeding
during such 20-day period to preserve, protect and defend its
rights under the Loan Documents; (iv) permit or suffer to exist
the commencement of any bankruptcy, reorganization, debt
arrangement or other case or proceeding under any bankruptcy or
insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Borrower, and, if any such case
or proceeding is not commenced by the Borrower, such case or
proceeding shall be consented to or acquiesced in by the
Borrower or shall result in the entry of an order for relief or
shall remain for 20 days undismissed, provided that the
Borrower hereby expressly authorizes Conoco to appear in any
court conducting any such case or proceeding during such 20-day
period to preserve, protect and defend its rights under the
Loan Documents; or (v) take any action authorizing, or in
furtherance of, any of the foregoing.
(e) Impairment of Security, Etc.
Any Loan Document, or any Lien granted thereunder, shall
(except in accordance with its terms), in whole or in part,
terminate, cease to be effective or cease to be the legally
valid, binding and enforceable obligation of the Borrower; the
Borrower or any other party shall, directly or indirectly,
contest in any manner such effectiveness, validity, binding
nature or enforceability; or any lien securing any obligation
to Conoco shall, in whole or in part, cease to be a perfected
lien.
then, and in any such event, Conoco may, by notice to the
Borrower, (i) declare the Commitment to be terminated, (ii)
declare the Vessel Note, plus all interest thereon and all other
amounts payable under this Agreement including all fees, costs and
expenses payable hereunder to be forthwith due and payable,
whereupon, the Vessel Note, all applicable interest and all other
applicable amounts shall become and be forthwith due and payable,
without presentment, demand, protest, notice of intent to
accelerate, or further notice of any kind, all of which are hereby
expressly waived by the Borrower and (iii) exercise any and all of
its other rights under applicable law, hereunder and under the
other Loan Documents .
6.02 Action if Bankruptcy
If any Event of Default described in Section 6.01(e) shall occur
with respect to the Borrower, the Commitment (if not theretofore
terminated) shall automatically terminate and the outstanding
principal amount of all outstanding Vessel Loans and all other
obligations shall automatically be and become immediately due and
payable, without notice or demand.
VII. MISCELLANEOUS
7.01 Notices, Etc.
All notices and other communications provided for hereunder shall
be in writing and shall be mailed, telegraphed, telecopied,
telexed or delivered:
to the Borrower at: Deepwater Drilling L.L.C.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Manager
Fax No. (713) 496-0285
to Conoco at: Conoco Inc.
600 North Dairy Ashford
Houston, Texas 77079
Attention:
Fax No. (713) 293-
or, as to each party, at such other address as shall be designated
by such party in a written notice to the other party complying as
to delivery with the terms of this Section 7.01. All such notices
and other communications shall be effective (i) if mailed, 72
hours after being mailed, (ii) if telecopied, when transmitted and
receipt is electronically confirmed, (iii) if telexed, when the
appropriate answerback is received, or (iv) if hand delivered,
upon delivery, except that notices to Conoco pursuant to
Article II hereof shall not be effective until received by Conoco.
7.02 Amendments, Etc.
No amendment of any provision of this Agreement or the Vessel Note
or any other Loan Document shall be effective unless it is in
writing and signed by the Borrower and Conoco and no waiver of any
provision of this Agreement or the Vessel Note, nor consent to any
departure by the Borrower therefrom, shall be effective unless it
is in writing and signed by Conoco.
7.03 No Waiver; Remedies, Etc.
No failure on the part of Conoco to exercise, and no delay in
exercising, any right hereunder or under any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Document preclude any other
or further exercise thereof or the exercise of any other right.
The rights and remedies of Conoco provided herein and in the other
Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights
of Conoco under any Loan Document against any party thereto are
not conditional or contingent on any attempt by Conoco to exercise
any of its rights under any other Loan Document against such
party or against any other person.
7.04 Severability
Any provision of this Agreement, or of any other Loan Document to
which the Borrower is a party, 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 portions
hereof or thereof or affecting the validity or enforceability of
such provision in any other jurisdiction.
7.05 Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of
the Borrower and Conoco and their respective successors and
assigns, except that the Borrower may not assign its rights
hereunder or any interest herein without the prior written consent
of Conoco. Conoco may freely assign to any affiliate of Conoco,
in whole or in part, its rights under this Agreement, or any of
the Loan Documents, but shall not otherwise assign such rights to
any other Person without the prior written consent of the
Borrower. To the extent of any assignment pursuant to this
Section 7.05, the assignee shall have the same rights and benefits
hereunder and under the Vessel Note as it would have if it were
Conoco hereunder (including, without limitation, the right to
receive payments under Sections 2.05 and 2.07 hereof).
7.06 Counterparts
This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
7.07 Indemnification
The Borrower hereby indemnifies and holds harmless Conoco, its
affiliates, parents, and subsidiaries and their respective
directors, officers, employees, agents and advisors, (each an
"Indemnified Party"), from and against, any and all actions,
claims, damages, losses, liabilities, fines, penalties, costs and
expenses of any kind (including, without limitation, reasonable
counsel fees and costs and expenses) INCLUDING ANY ACTIONS,
CLAIMS, DAMAGES, LOSSES, LIABILITIES, FINES, PENALTIES, COSTS OR
EXPENSES RESULTING FROM CONOCO'S NEGLIGENCE, in connection with or
arising from or relating to the execution, delivery or performance
of any of the Loan Documents or any transaction contemplated by,
or action omitted to be taken by Conoco under any Loan Document,
provided, however, that the Borrower shall have no obligation to
protect, indemnify and save harmless Conoco or any Person
otherwise entitled to indemnity hereunder with respect to any
loss, liability, action, suit, judgment, demand, damage, cost or
expense resulting solely from Conoco's or such Person's willful
misconduct as determined by final order of a court of competent
jurisdiction. If and to the extent that the foregoing undertaking
may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contributions to the payment and satisfaction of
the foregoing indemnified liabilities which is permissible under
applicable law. Without prejudice to the survival of any other
obligation of the Borrower hereunder, the indemnities and
obligations of the Borrower contained in this Section 7.07 shall
survive the payment in full of all Obligations and the termination
of the Commitments.
7.08 Submission to Jurisdiction
(a) The Borrower hereby irrevocably consents that any suit,
legal action or proceeding against it or any of its
property with respect to any of the rights or obligations
arising directly or indirectly under or relating to this
Agreement, any other Loan Document may be brought in any
Delaware State or United States Federal Court located in
the City of Wilmington, Delaware, as Conoco may elect, and
by execution and delivery of this Agreement, the Borrower
hereby irrevocably submits to and accepts with regard to
any such suit, legal action or proceeding, for itself and
in respect of its property, generally and unconditionally,
the jurisdiction of the aforesaid courts. The Borrower
agrees that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any
other manner provided by law. The Borrower further
irrevocably consents to the service of process in any such
suit, legal action or proceeding by the mailing of copies
thereof by registered mail, postage prepaid, return
receipt requested to all parties entitled to notices under
Section 7.01 hereof. The Borrower agrees that a final
judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by
law. The foregoing shall not limit the right of Conoco to
serve process in any other manner permitted by law or to
obtain execution of judgment in any other jurisdiction.
(b) The Borrower hereby irrevocably waives any objection that
it may now or hereafter have to the laying of venue of any
suit, legal action or proceeding arising directly or
indirectly under or relating to this Agreement or any
other Loan Document in any court located in the City of
Wilmington, Delaware and hereby further irrevocably waives
any claim that a court located in the City of Wilmington,
Delaware is not a convenient forum for any such suit,
legal action or proceeding.
(c) The Borrower hereby irrevocably waives any right it may
have under the laws of any jurisdiction to commence by
publication any suit, legal action or proceeding with
respect to this Agreement or any other Loan Document.
(d) The Borrower hereby irrevocably agrees that any suit,
legal action or proceeding commenced by it with respect to
any rights or obligations arising directly or indirectly
under or relating to this Agreement or any other Loan
Document shall be brought exclusively in any Delaware
State or United States Federal Court located in the City
of Wilmington, Delaware.
(e) To the extent that the Borrower has or hereafter may
acquire any immunity from jurisdiction of any court or
from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself
or its property, the Borrower hereby irrevocably waives
such immunity in respect of its obligations under this
Agreement and the other Loan Documents.
7.09 Headings
Section headings herein are included for convenience of reference
only and shall not constitute a part of this Agreement for any
other purpose.
7.10 Governing Law
THIS AGREEMENT AND THE VESSEL NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF DELAWARE
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN DELAWARE
WITHOUT CONSIDERATION AS TO CONFLICTS OF LAW PRINCIPLES.
7.11 Application of Refunds and Payments under Korean Bank Guarantees
(a) Any and all amounts received by Conoco (at an account
designated by Conoco or otherwise) on behalf of the
Borrower from the Builder as refunds under the Vessel
Construction Contract or from the Korean Bank under the
Korean Bank Guarantee shall be held by Conoco as
collateral for, and/or then or at any time thereafter
applied in whole or in part by Conoco against, all or any
part of the Obligations in such order as Conoco shall
elect. The Borrower hereby grants to Conoco a security
interest in all such amounts. Any surplus of such cash
held by Conoco and remaining after payment in full of all
of the Obligations and termination of the Commitment shall
be paid over to the Borrower.
(b) Anything herein to the contrary notwithstanding, (i) the
Borrower shall remain liable under this Agreement and the
other Loan Documents to the extent set forth herein and
therein to perform all of its obligations hereunder and
thereunder regardless of whether the Builder or the Korean
Bank do not make any refunds under the Vessel Construction
Contract or the Korean Bank Guarantee which they may
otherwise be required to make, (ii) the exercise by
Conoco of any of its rights hereunder and under the other
Loan Documents shall not release the Borrower from any of
its obligations hereunder or under the other Loan
Documents and (iii) Conoco shall not have any duty,
obligation or liability by reason of this Agreement or the
other Loan Documents under the Vessel Construction
Contract, nor shall Conoco be obligated to perform any of
the obligations or duties of the Borrower thereunder or to
take any action to collect or enforce any claim for
payment under any Loan Document.
7.12 No Recourse
(a) Except as otherwise provided herein or any other Loan
Document, no recourse shall be had for any claim based on
this Agreement or any other Loan Document or otherwise in
respect hereof or thereof against any past, present, or
future member, authorized representative or employee, as
such, of (i) the Borrower or (ii) any predecessor or
successor of the Borrower either directly or through the
Borrower or any predecessor or successor, whether such
recourse be by virtue of any constitution, statute or rule
of law or by the enforcement of any assessment or penalty
or by any legal or equitable proceedings or otherwise
howsoever; all such liability being expressly waived and
released by Conoco.
7.13 Waiver of Jury Trial
Each of the Borrower and Conoco waives any right to a trial by
jury in any action, proceeding or counterclaim concerning any
rights under this Agreement, the Vessel Note or any other Loan
Document, and agrees that any such action, proceeding or
counterclaim shall be tried before a court and not before a jury.
7.14 Payment of Costs and Expenses
The Borrower agrees to pay on demand all reasonable expenses of
Conoco (including the reasonable fees and out-of-pocket expenses
of counsel and of local counsel, if any, who may be retained by
Conoco) in connection with (i) the negotiation, preparation,
execution and delivery of this Agreement and of each other Loan
Document, including schedules and exhibits, and any amendments,
waivers, consents, supplements or other modifications to this
Agreement or any other Loan Document as may from time to time
hereafter be required, whether or not the transactions
contemplated hereby are consummated, (ii) the filing, recording,
refiling or rerecording of the Collateral Documents and/or any
Uniform Commercial Code financing statements relating thereto and
all amendments, supplements and modifications to any thereof and
any and all other documents or instruments of further assurance
required to be filed or recorded or refiled or rerecorded by the
terms hereof or of any of the Collateral Documents, and (iii) the
preparation and review of the form of any document or instrument
relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save Conoco harmless
from all liability for, any stamp or other taxes which may be
payable in connection with the execution or delivery of this
Agreement, the borrowings and credit extensions hereunder, or the
issuance of the Vessel Note or any other Loan Documents. The
Borrower also agrees to reimburse Conoco upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees and
legal expenses) incurred in connection with the enforcement of any
Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized representatives thereunto duly authorized, as of
this ________ day of October, 1996.
DEEPWATER DRILLING L.L.C. CONOCO INC.
By: By:
Name: Name:
Title: Title:
EXHIBIT A
PROMISSORY NOTE
$_______________ Dated:
[Location]
FOR VALUE RECEIVED, the undersigned, Deepwater Drilling L.L.C., a Delaware
limited liability company (the "Borrower"), HEREBY PROMISES TO PAY to the
order of Conoco Inc. ("Conoco") the principal amount of
______________________________ ________________________________
($________________) or, if less, the sum of each (i) Vessel Construction Loan
(as hereinafter defined) and (ii) Capitalized Interest Loan (as hereinafter
defined) made by Conoco to the Borrower pursuant to the Credit Agreement (as
hereinafter defined) on the Loan Maturity Date (as defined in the Credit
Agreement). The Vessel Construction Loans and the Capitalized Interest Loans
are collectively referred to herein as the "Vessel Loans."
The Borrower promises to pay interest on the unpaid principal amount of each
Vessel Loan made by the Bank to the Borrower, from the date of such Vessel
Loan until such principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.
Notwithstanding any other provision of this Promissory Note, interest paid or
becoming due hereunder shall in no event exceed the maximum rate permitted by
applicable law. Both principal and interest are payable in lawful money of
the United States of America in immediately available funds to Conoco at its
Account Number __________________, Reference __________________________,
maintained by Conoco. Each Vessel Loan made by Conoco to the Borrower
pursuant to the Credit Agreement, and all payments made on account of
principal hereof, shall be recorded by Conoco and, prior to any transfer
hereof, endorsed on the schedule attached hereto which is a part of this
Promissory Note; provided, that the failure of Conoco to make any recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This Promissory Note is the Vessel Note referred to in, and is entitled to the
benefits of, the Credit Agreement dated as of ______________________________
(as amended or otherwise modified from time to time, the "Credit Agreement"),
by and between the Borrower and Conoco. The Credit Agreement, among other
things, (i) provides for the making of (a) loans (the "Vessel Construction
Loans") by Conoco to the Borrower from time to time in an aggregate amount not
to exceed at any time outstanding the Vessel Construction Commitment (as
defined in the Credit Agreement), and (b) loans (the "Capitalized Interest
Loans") deemed made by Conoco to the Borrower to pay interest accrued on the
Vessel Construction Loans and on prior Capitalized Interest Loans in an
aggregate amount not to exceed $_____________________, the indebtedness of the
Borrower resulting from each such Vessel Loan being evidenced by this
promissory Note; and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for the prepayment
of the principal hereof (together with all accrued and unpaid interest
thereon) prior to the maturity hereof upon the terms and conditions therein
specified.
This Promissory Note shall be governed by, and construed in accordance with,
the laws of the State of Delaware.
DEEPWATER DRILLING L.L.C.
By:
Name:
Title:
EXHIBIT B
BORROWING REQUEST
Conoco Inc.
Attention: [Name]
[Title]
Ladies and Gentlemen:
This Borrowing Request is delivered to you pursuant to the Credit Agreement,
dated as of October _____, 1996 (together with all amendments, if any, from
time to time made thereto, the "Credit Agreement"), among Deepwater Drilling
LLC, a Delaware limited liability company (the "Borrower") and Conoco Inc..
Unless otherwise defined herein or the context otherwise requires, terms used
herein have the meanings provided in the Credit Agreement.
The Borrower hereby requests that a Vessel Loan be made in the aggregate
principal amount of $____________ on ____________________, 19____.
The Borrower hereby agrees that the acceptance by the Borrower of the proceeds
of the Loans requested hereby constitute a representation and warranty by the
Borrower that, on the date of such Loans, and before and after giving effect
thereto and to the application of the proceeds therefrom, all statements set
forth in Section 3.02 of the Credit Agreement are true and correct in all
material respects.
The Borrower agrees that if prior to the time of the Borrowing requested
hereby any matter certified to herein by it will not be true and correct at
such time as if then made, it will immediately so notify Conoco. Except to
the extent, if any, that prior to the time of the Borrowing requested hereby
Conoco shall receive written notice to the contrary from the Borrower, each
matter certified to herein shall be deemed once again to be certified as true
and correct at the date of such borrowing as if then made.
Please wire transfer the proceeds of the Borrowing to the accounts of the
following persons at the financial institutions indicated respectively:
Person to be Paid
Amount to be Name Account No. Name, Address, etc.
Transferred of Transferee Lender
$
Attention:
$
Attention:
Balance of The Borrower
such
Proceeds Attention:
The Borrower has caused this Borrowing Request to be executed and delivered,
and the certification and warranties contained herein to be made, by its duly
Authorized Representative this _______ day of _________________, 19_____.
DEEPWATER DRILLING L.L.C.
By:
Name:
Title:
EXHIBIT 10.163
JOINT VENTURE AGREEMENT
THIS AGREEMENT is made effective as of the 22 of February, 1996,
between INTEC Engineering, Inc., a Texas corporation having its principal
office at 15600 JFK Boulevard, Ninth Floor, Houston, Texas 77032
(hereinafter referred to as 'INTEC"), and Reading & Bates Development Co., a
Delaware corporation having its principal office at 901 Threadneedle, Suite
200, Houston, Texas 77079 (hereinafter referred to as "RBDC")
WHEREAS INTEC and RBDC wish to enter into a joint venture relationship
(herein called "joint venture") for the purpose of developing certain
business activities; and
WHEREAS the parties wish to set out the terms, conditions and
provisions pursuant to which they will develop the various business
activities of the joint venture;
THEREFORE in consideration of the various covenants and agreements of
the parties to and with each other set forth herein, INTEC and RBDC hereby
agree as follows:
ARTICLE 1
SCOPE
1.01 The joint venture hereby formed is limited to the particular purpose
of pursuing business opportunities with respect to obtaining and
performing studies, engineering and project management services and
contracts for the development of offshore reserves of oil, gas and
other hydrocarbons, which reserves are conducive to development on a
turnkey basis. Such business opportunities shall not, unless
otherwise mutually agreed in writing, include business activities or
projects related to offshore daywork contract drilling or integrated
services, marine support vessels, aircraft, shorebase facilities,
dredging, construction, pipelines, transportation or any other non-
turnkey related activities or projects, nor shall such business
opportunities include the participation of RBDC, or any of its
affiliated companies, in the Green Canyon 254 Allegheny project or in
the area of mutual interest related thereto. As regards shorebase
facilities, pipelines and other facilities, however, the parties agree
to discuss any potential activities or projects, from time to time,
for the purpose of determining whether there is mutual interest in
including the same within the scope of this joint venture.
1.02 Unless otherwise agreed in writing, the joint venture shall operate
under the name of "Total Offshore Production Systems" and shall have
its principal office at 901 Threadneedle, Suite 200, Houston, Texas
77079.
ARTICLE 2
TERM
2.01 The joint venture shall exist for a term of five (5) years from the
date hereof, unless extended or sooner terminated by mutual agreement
of the parties or in accordance with the provisions of this Article or
Article 9 hereof.
2.02 The term of the joint venture shall be automatically terminated in the
event of the bankruptcy or insolvency of either party.
2.03 The term of the joint venture shall be automatically extended for such
period of time as may be required to perform or complete any projects
or contracts entered into or undertaken by any business structure
created pursuant to Section 3.02, prior to the expiration of the
initial term.
ARTICLE 3
RELATIONSHIP OF THE PARTIES
3.01 The duties, obligations and liabilities of the parties are intended to
be separate, and not joint or collective. Each party shall be
individually responsible for its share of the costs, expenses,
obligations and liabilities of the joint venture or of any project as
herein provided.
3.02 The parties shall cause to be created an appropriate and mutually
agreed form of business structure or structures ("business structure")
for the purpose of conducting the business activities developed by the
joint venture and, if required and deemed necessary by the parties,
shall create a separate business structure for each project developed
by the joint venture, having regard to business considerations
including tax, liability, regulatory requirements and other relevant
considerations.
ARTICLE 4
INTERESTS
4.01 Each party shall have an ownership interest in the joint venture and
all equipment, property, contracts, technology or other assets,
tangible or intangible, of the joint venture in the percentage set
opposite such party's name below:
INTEC 25%
RBDC 75%
4.02 It is the understanding and intention of the parties that their
participation in individual business structures may, on occasion, be
on a basis other than as set forth in Section 4.01 above. On a
project by project basis, prior to submission of any bid or proposal,
each party shall notify the other of the extent to which it desires to
participate therein, and the parties shall then mutually agree as to
the extent to which each of them shall participate, and the basis upon
which the parties shall incur and recover their respective costs,
expenses, obligations and liabilities in connection therewith.
4.03 Each party shall first offer any and all projects within the scope of
this joint venture to the other party for participation. In the event
that a party elects not to participate in a project, it shall notify
the other party accordingly, and the other party shall be at liberty
to proceed with the project with or without participation therein by
third parties, at the sole discretion of such other party.
4.04 A party who elects not to participate in a project shall not compete
with the other party with respect to such project or any aspect
thereof.
4.05 The parties agree that, notwithstanding anything contained in this
Article 4, or elsewhere herein, no provision of this Agreement nor any
act or omission of either party shall operate to preclude the other
party from employing or operating its equipment, or that of any of its
affiliates, owned on the date of this Agreement (or hereafter) where
it would otherwise have the opportunity to do so.
4.06 INTEC acknowledges the desire of RBDC to maximize the utilization of
its drilling units and the drilling units owned or operated by its
affiliated companies, and where a project involves the potential for
utilization of an RBDC or affiliated company's drilling unit, such
drilling unit owner/operator will be given preference, subject to
being competitive in price and terms. RBDC acknowledges the desire of
INTEC to maximize the use of INTEC's engineering resources in projects
under consideration and, where a project involves the potential for
utilization of INTEC's engineering resources, such resources will be
given preference, subject to being competitive in price and terms.
4.07 It is agreed by the parties that, on a project by project basis, the
share of the total financial return (including profit, return on
investment in previously owned equipment, financial support, and
compensation for expertise), if any, that each party will or may
derive from such project shall be directly related to the contribution
of such party to that particular project.
ARTICLE 5
FINANCING OF BUSINESS STRUCTURES
5.01 The parties agree that the acquisition of assets by any business
structure will be financed by:
(i) income from business activities and projects;
(ii) third party or project financing to the extent possible
secured by the value ofcontracts, joint venture assets,
and/or loans, guarantees or other credit facilities
provided by INTEC and RBDC, as required and mutually
agreed by the parties; and
(iii) capital contributions as required and mutually agreed by
the parties, subject to Section 5.02 below.
5.02 It is agreed by the parties that their contributions to any business
structure for the purposes of creating equity and/or securing third
party or project financing, and for the purpose of completing projects
undertaken by that business structure, may include, but shall not be
limited to the following:
- - drilling or other equipment which may be sold, chartered, or otherwise
transferred or made available to the business structure;
- - marine technology;
- - subsea production and transportation technology;
- - operating expertise;
- - cash, debt guarantees or other credit facilities as may be required
and mutually agreed.
5.03 The parties shall provide operational and technical support and shall
provide bidding and contracting expertise to the joint venture. Each
such party shall bear its own costs with respect to bidding and
contracting activities of the joint venture.
5.04 The parties agree that they shall provide offshore development
expertise, floating production technology, materials, equipment and
experienced personnel for the purpose of the joint venture's business
activities.
5.05 The assets of any business structure shall be available for project
funding requirements, and security for financing undertaken by such
business structure.
5.06 Funds required by the joint venture or any business structure for its
business activities shall be supplied or made available by the parties
as may be mutually agreed from time to time.
ARTICLE 6
MANAGEMENT
6.01 The business activities of the joint venture shall be determined and
controlled by a Management Committee which shall consist of four (4)
members selected as herein provided.
6.02 INTEC shall be entitled to appoint one (1) member, and RBDC shall be
entitled to appoint three (3) members, to the Management Committee,
from time to time. In addition, each party shall be entitled to
appoint one (1) or more alternate members to its representative(s) on
the Management Committee, and shall notify the other party of such
alternate or alternates so appointed.
6.03 Except as may be provided elsewhere in this Agreement, a majority vote
of the members of the Management Committee shall be required on all
matters, including but not necessarily limited to the following:
- - all matters pertaining to third party or project financing, including
debt guarantees;
- - valuation of non-dollar contributions to any business structure by the
parties. bid preparation and submission with respect to any project;
and
- - basis of charges to and by any business structure for equipment and
manpower.
The appointment or removal of the general manager or the financial
manager of the joint venture and the appointment or removal of project
manager(s) shall be by unanimous vote of the Management Committee.
6.04 The general manager of the joint venture, appointed by the Management
Committee, shall initially be Curtis Burton, a RBDC nominee, and shall
have responsibility for management of the joint venture's day-to-day
activities and business development. The general manager shall report
and be accountable to, but shall not be a member of, the Management
Committee.
6.05 The financial manager of the joint venture, appointed by the
Management Committee, shall initially be an RBDC nominee, and shall
have responsibility for management of project finance, treasury and
accounting activities of the joint venture. The financial manager
shall report and be accountable to, but shall not be a member of, the
Management Committee.
6.06 If the parties elect to incorporate the joint venture into a corporate
entity (including a corporation or limited liability company), the
essential economic interests of the parties hereunder shall be
preserved, to the extent reasonably possible. In the event such
corporate entity is formed, it is intended that the general manager of
the joint venture shall become the president of the new entity and the
financial manager of the joint venture shall become the treasurer of
the new entity.
6.07 The joint venture shall reimburse RBDC for all wages, salary, bonus,
benefits, travel and transportation costs and other employment costs
incurred by RBDC with respect to the general manager, and the services
of the general manager shall be dedicated to conducting the business
of the joint venture as its general manager. Unless otherwise
determined by the Management Committee, the financial manager shall
contribute his or her time to the joint venture at no cost.
6.08 The Management Committee shall select and appoint a project manager
for each project undertaken by the joint venture, based solely on
experience and qualifications. The project manager shall report and
be responsible to the general manager.
6.09 The Management Committee shall, from time to time as determined by
them, cause budgets and/or forecasts of expenditures to be prepared,
revised as required, and approved for each project bid or undertaken
by any business structure. All expenditures shall be made on an
approved budget and/or A.F.E. basis.
ARTICLE 7
BASIS OF CHARGES/VALUATION
7.01 The basis upon which equipment, manpower, proprietary information or
other services, technology or assets shall be evaluated and
contributed and/or charged to any business structure shall be
determined by the Management Committee.
7.02 Equipment owned by either party may be made available to any business
structure at rates such that the business structure will make a
reasonable profit thereon.
7.03 Other considerations being equal, equipment, services and resources of
the parties or their affiliates shall have priority in the business
activities of the joint venture.
7.04 Equipment or other assets committed to any business structure by a
party may not be withdrawn for any reason for the duration of the
relevant project contract, unless otherwise mutually agreed.
7.05 The basis upon which assets of any business structure or equipment,
manpower, proprietary information, or other services, technology or
assets shall be charged to third parties for whom projects are being
conducted by any business structure, shall be determined by the
Management Committee.
ARTICLE 8
DISPOSITION OF INTERESTS
8.01 Neither party (for purposes of this Article 8, the "disposing party')
shall dispose of, sell, assign or otherwise transfer all or any
portion of its interest in this Agreement or any assets acquired by
any business structure to any third party (other than to affiliates as
provided herein) unless and until the disposing party first offers
such interest to the other party (for purposes of this Article 8, the
'receiving party") in writing on the same terms and conditions (and
encloses with such offer a copy of the offer received from such party)
in all material respects, and the receiving party either accepts such
offer or waives same in writing. If the receiving party does not
accept such offer or waive same in writing within 30 days following
receipt of the offer, the receiving party will be deemed to have
waived same in writing, and the offering party shall be free to sell,
assign or otherwise transfer such interest to the third party on the
terms contained in such offer (as provided to the receiving party).
8.02 A party hereto may dispose of an interest hereunder as described in
Section 8.01 above to an affiliate, PROVIDED that the written consent
of the other party hereto is first obtained, such consent not to be
unreasonably withheld, and PROVIDED FURTHER that the transferring
party shall guarantee performance hereunder by the assignee or
transferee and such assignee or transferee executes an addendum
agreement hereto whereby such assignee or transferee agrees to be
bound by all the terms and provisions hereof.
8.03 For the purposes of this Agreement, "affiliate" shall mean any
corporation which controls or is controlled by, whether directly or
indirectly, either party hereto.
ARTICLE 9
EARLY TERMINATION
9.01 In the event the Management Committee has been unable for a period of
thirty consecutive months or more during the term of this Agreement to
agree to pursue any business opportunities (including, without
limitation, the failure to agree to submit a proposal to a prospective
client) that otherwise would have been available to the joint venture
or any business structure due to apparent irreconcilable differences
between the parties, either party may give written notice of its
intention to terminate this Agreement to the other.
9.02 In the event either party gives notice as provided in Section 9.01,
the parties agree to meet within thirty (30) days thereafter and exert
all reasonable efforts to resolve the differences.
9.03 If the parties are not able to resolve the differences within six (6)
months following the giving of notice under Section 9.01, either party
may terminate this Agreement by written notice to the other, subject
to the performance or completion of any projects or contracts entered
into or undertaken by any business structure prior to such
termination.
ARTICLE 10
DEFAULT
10.01 In the event that either party fails, for any reason within its
reasonable control, to meet any of its obligations under this
Agreement or in connection with any business structure or project, the
other party may give written notice to the defaulting party of such
default.
l0.02 If the defaulting party does not cure any such default within thirty
(30) days following the giving of notice as provided in Section 10.01,
then, until such default is cured, the other party shall have the
following rights:
(a) to name all members of the Management Committee for the purpose
of voting concerning the performance or completion of any
projects or contracts entered into or undertaken by any business
structure with respect to which the defaulting party is in
default.
(b) to cure any such default insofar as clients or persons dealing
with the joint venture or any business structure are concerned,
without prejudice to its rights against the defaulting party for
full indemnification therefrom (including interest at a rate
equal to one (1%) percent above the prime rate in effect from
time to time during the duration of such default as quoted by The
Texas Commerce Bank, N.A., Houston).
(c) to recover any and all monies (including interest as provided
above) out of the defaulting party's share of profits from any
project or business structure, whether related to the default or
otherwise.
10.03 In the event any such default is not cured within ninety (90) days (or
such other time as may be allowed by the non-defaulting party in its
sole discretion) following the giving of notice as provided in Section
10.01, the non-defaulting party shall have the right to terminate this
Agreement, without prejudice to its rights against the defaulting
party under this Agreement or otherwise at law.
ARTICLE 11
CONFIDENTIALITY
11.01 Neither party shall be entitled to use, publish or disclose to any
third party, other than affiliates, any information obtained from the
other party, from the joint venture or any business structure, or
generated by or within the joint venture, or any business structure or
any project, without the prior written consent of the other party.
11.02 The parties respectively undertake that their executives and other
personnel, and those of their affiliates, shall observe the
confidentiality provision set forth herein. The parties shall, when
appropriate, cause their respective executives and other personnel to
execute and deliver secrecy agreements to ensure compliance with the
confidentiality obligation contained herein.
11.03 This obligation and restriction shall survive the termination of this
Agreement.
ARTICLE 12
TRANSFER OF TECHNOLOGY/PROPRIETARY INFORMATION
12.01 Technology and/or proprietary information owned by a party shall
remain the sole and exclusive property of such party unless sold or
otherwise transferred for consideration to any business structure.
12.02 Technology and/or proprietary information owned by any business
structure shall not, unless mutually agreed by the parties, be sold or
transferred to any third party.
12.03 Technology and/or proprietary information owned by the parties shall,
to the extent possible, be utilized in the best interests of the joint
venture.
12.04 Upon request by either party, the other party shall execute and
deliver a secrecy agreement restricting the release of technology
and/or proprietary information between themselves and/or third parties
in connection with the business activities of the joint venture.
12.05 This obligation shall survive the termination of this Agreement.
ARTICLE 13
BOOKS AND RECORDS/AUDIT
13.01 The Management Committee shall cause proper books and records to be
kept pertaining to all aspects of the business activities of the joint
venture. The same shall be kept and maintained at a place or places
to be designated by the Management Committee and shall be available to
either party hereto at all reasonable times for the purposes of
examination, review and audit.
13.02 The Management Committee shall supervise the preparation of Federal
income tax information returns which the joint venture may be required
to file, and shall timely provide sufficient tax information to each
party.
ARTICLE 14
ARBITRATION
14.01 ALL DISPUTES ARISING HEREUNDER SHALL BE FINALLY SETTLED BY ARBITRATION
UNDER THE RULES OF THE SOCIETY OF MARINE ARBITRATORS BY ONE OR MORE
ARBITRATORS APPOINTED IN ACCORDANCE WITH SAID RULES. THE ARBITRATION
WELL TAKE PLACE IN HOUSTON, TEXAS, UNLESS THE PARTIES OTHERWISE AGREE
IN WRITING. THE AWARD OF SUCH ARBITRATION SHALL BE BINDING UPON THE
PARTIES, WITHOUT APPEAL, WITH RESPECT TO THE DISPUTES SO SUBMITTED AND
THE COSTS OF SUCH ARBITRATION INCLUDING REASONABLE LEGAL FEES AND
EXPENSES.
ARTICLE 15
INSURANCE
15.01 The Management Committee shall, from time to time, take out or cause
to be taken out on behalf of the joint venture or any business
structure, insurance with limits and coverage acceptable to the
Management Committee, covering the business activities, projects,
contracts, equipment, personnel, or other assets or liabilities of the
joint venture or any business structure, including, without
limitation, protection against third party liability relating thereto.
ARTICLE 16
ENTIRE AGREEMENT
16.01 This Agreement supersedes all prior correspondence, communications,
agreements and understandings between the parties respecting the
subject matter hereof.
16.02 No amendments, supplements or modifications to this Agreement shall be
effective unless in writing and duly executed by both parties hereto.
16.03 INTEC and RBDC agree that each of them shall ensure that the joint
venture and all business structures perform and comply with the terms,
conditions and intent of this Agreement.
16.04 This Agreement shall be binding upon the parties hereto and their
respective successors and permitted assigns.
16.05 This Agreement shall be governed by and construed in accordance with
the substantive laws of the state of Texas.
ARTICLE 17
NOTICES
17.01 All correspondence, notices, demands or other communications which
under the terms of this Agreement are required to be served or
delivered shall be in writing and may be served or delivered
personally or by facsimile addressed to the parties as follows:
INTEC Engineering, Inc.
1600 JFK Boulevard, Ninth Floor
Houston, Texas 77032
Attention: Mr. J. Gillespie, Senior Vice President
Facsimile No. (713)987-3838
Reading & Bates Development Co.
901 Threadneedle, Suite 200
Houston, Texas, 77079
Attention: D. C. Toalson, President
Facsimile No. (713) 496-0285
17.02 Either party may change its address above by notice to the other
party.
IN WITNESS WHEREOF each party has executed this Agreement as of the day and
year first above written.
INTEC ENGINEERING, INC.
By:
Its:
READING & BATES DEVELOPMENT Co.
By:
Its:
June 1, 1996
Reference is made to the Joint Venture Agreement dated February 22, 1996
between INTEC Engineering, Inc., and Reading & Bates Development Co. which
established a joint venture under the name of "Total Offshore Production
Systems".
The subject agreement is amended to include the attached "EXHIBIT A", TAX
PARTNERSHIP PROVISIONS, retroactive to the original Agreement date of
February 22, 1996.
IN WITNESS WHEREOF, the parties hereto have caused this "EXHIBIT A" to be
approved and accepted as part of the original Joint Venture Agreement by
their duly authorized representatives in Houston. Texas effective on the
date first set out above.
INTEC ENGINEERING, INC.
By:
Its:
READING & BATES DEVELOPMENT CO.
By:
Its:
EXHIBIT "A"
Attached to and made a part of that certain Joint Venture Agreement dated as
of the 22nd day of February 1996, between Reading & Bates Development Co.
and INTEC Engineering, Inc.
TAX PARTNERSHIP PROVISIONS
1. Name. The following name shall be applied to this arrangement for
purposes of filing of income tax information returns: Total Offshore
Production Services.
2. Definition. The following definitions shall apply to this Exhibit:
a) Agreement. The Joint Venture Agreement to which this Exhibit is
attached.
b) Code. The Internal Revenue Code of 1986, as amended from time to
time.
c) Joint Operations. All activities of the Venturers conducted
pursuant to the Agreement.
3. Contract Provisions. This Exhibit shall supersede contrary provisions
of the Agreement.
4. Relationship of the Parties. The rights, duties, obligations, and
liabilities of the parties hereunder shall be several and not joint or
collective. Each party hereto shall be responsible only for its
obligations as set out in the Agreement and shall be liable only for
its share of the cost and expense of the Joint Operations. The
parties recognize the Joint Operations will be considered a
partnership for income tax purposes.
5. Subchapter K to Apply . Each party now having or hereafter acquiring
an interest under the Agreement agrees not to elect for the Joint
Operations of the parties to be excluded from the application of
Subchapter K of Chapter 1 of Subtitle A of the Code, and all
amendments thereto or similar provisions of any applicable state laws.
6. Partnership Returns. Reading & Bates Development Co. shall prepare
and file the partnership tax returns and make the partnership income
tax elections in such returns. The parties agree to furnish Reading &
Bates Development Co. the information necessary for the proper
preparation of these returns. In preparing such returns, Reading &
Bates Development Co. shall use its best efforts, but shall incur no
liability to the parties with regard to such returns.
7. Tax Matters Return, Reading & Bates Development Co. shall be treated
as the Tax Matters Partner for purposes of Section 6231 (a) (7) of the
Code. Reading & Bates Development Co. shall promptly inform other
parties of all matters coming to its attention in its capacity as Tax
Matters Partner and shall not take any action permitted by Sections
6222 through 6232 of the Code without first giving notice thereof to
all other parties.
8. Allocation of Income, Deductions and Credits - The parties agree that
for income tax purposes all terms of income, gain, deduction, loss and
credits shall be allocated among the parties as follows:
a) Gross income from the Joint Operations of the Joint venture shall
be allocated among the parties in the ratio in which they share
in the proceeds as provided in the Agreement.
b) Deductions for intangible drilling and development costs, if any,
shall be allocated among the parties in the ratio in which they
have contributed to such costs.
c) Deductions for costs of the Joint Operations shall be allocated
among the parties in the ratio in which they have contributed to
such costs.
d) Depreciation on equipment (and investment tax credit, if
applicable, on equipment) shall be allocated among the parties in
the ratio in which they have contributed to the adjusted basis of
such equipment.
e) Deductions related to any item of cost in excess of
thecontributions made by the parties toward the payment of such
cost shall be allocated in the ratio of the obligations of the
parties to pay the remaining cost of such item.
f) Gains from each sale or other disposition of property shall be
allocated to each party whose share of the proceeds from such
sale or other disposition exceeds its contribution to the
adjusted basis of the property (as adjusted for the party's share
of depreciation, depletion, amortization or other adjustments to
basis) in the proportion that such excess bears to the sum of the
excesses of all parties having such an excess.
g) Losses from each sale, abandonment or other disposition of
property shall be allocated to each party whose contribution to
the adjusted basis of the property (as adjusted for the party's
share of depreciation, depletion, amortization or other
adjustments to basis) exceeds its share of the proceeds from such
sale, abandonment or other disposition in the proportion that
such excess bears to the sum of the excesses of all parties
having such an excess.
h) Within the limits of the overall allocation of gain or proceeds
hereunder, gain treated as ordinary income by reason of Sections
1245, 1250, or 1254 of the Code, shall be allocated to the
parties in the ratio in which the deductions resulting in such
ordinary income were previously allocated to them.
i) Each other item of income, gain, loss, deduction or credit shall
be allocated to each party on the basis of and in accordance with
its interest in or its contribution to such item.
9. Allocation in Event of Transfer. Should there be a transfer of an
interest covered by the Agreement, income, and deductions shall be
allocated between the transferor and transferee based upon the actual
income and deductions before and after the date of transfer unless the
transferor, transferee, and the non-transferring joint venture party
agree to an allocation in a pro rata manner for the taxable year.
10. Maintenance
a) A Capital Account shall be established for each party hereto
which shall be credited with the amount of cash and the fair
market value of property contributed to the Joint Operations by
such party (net of liabilities assumed by the parties and
liabilities to which such contributed property is subject), such
party's distributive share of income (including income exempt
from tax) and gain (or item thereof), and which shall be charged
with the cash and the fair market value of property distributed
to such party (net of liabilities assume by such party and
liabilities to which such distributed property is subject), such
party's distributive share of loss and deduction (or item
thereof), and such party's distributive share of expenditures
which are neither deducible nor chargeable to capital, all as
determined for Federal income tax purposes pursuant to the
allocation provisions of this Exhibit and consistently with the
requirements of regulations under Section 704(b) of the Code.
b) Contributed Properties. Depreciation, depletion and gain or
loss with respect to assets contributed to the Joint operations
shall be based upon the fair market values at the time of
contribution and shall be allocated to the Capital Accounts in
accordance with each party's share of such values and interest in
the proceeds thereof even though such items as determined for
income tax purposes are allocated differently so as to eliminate,
to the extent possible, the disparity between the adjusted basis
and the fair market value.
c) Distribution in Kind. Immediately prior to any distribution of
assets in kind the Capital Accounts shall be adjusted for the
gain or loss which would be allocable to each party upon a
disposition of such assets for fair market value.
d) Fair Market Value. Fair market value for purposes of adjustments
to Capital Accounts shall be reasonably determined by Reading &
Bates Development Co. Reading & Bates Development Co. shall be
entitled to base such value on the price paid for a
contemporaneous transfer of an interest in the property. Reading
& Bates Development Co. shall be entitled to value equipment in
accordance with the accounting procedures as provided in the
Agreement. Reading & Bates Development Co.'s determination of
fair market value shall be conclusively binding as among the
parties.
e) Deemed Termination. Upon a deemed termination and reformation of
the Joint Operations as a partnership for Federal income tax
purposes under Section 708 (b) (1) (13) of the Code, the Capital
Accounts for each party shall be adjusted for each party's share
of the gain that would result if all assets were sold for fair
market value. Any party having a deficit balance shall satisfy
such deficit by contribution of cash on or before the later of
the end of the taxable year of the Joint Operations in which the
deemed termination occurs or 90 days after the deemed
termination, such payment to be credited to the account of the
party under the Agreement as an advance payment of costs. All
assets, subject to liabilities ' shall be deemed to have been
distributed to the parties in the ratio of positive Capital
Accounts and recontributed to the continuing Joint operations
under all terms of the Agreement, which shall continue in effect
without modification. New Capital Accounts shall then be
established for the parties and their successors based upon the
fair market value of the assets deemed recontributed to the
continuing Joint operations.
11. Sharing of Proceeds. Proceeds from disposition of properties and
equipment (including simulated proceeds from a deemed
disposition) shall be shared in the ratio in which the cost of
such properties and equipment was charged up to the amount deemed
undepreciated and undepleted cost as determined for purposes of
the Capital Accounts and any excess (along with the related
proceeds from any disposition of properties and equipment) shall
be shared in the ratio in which joint venture revenues are
shared.
12. Adjustments upon Termination. Upon an actual termination of the
Agreement or upon the effectiveness of an election for the Joint
Operations to be excluded from Subchapter K of Chapter I of the
Code (permitted only with the consent of all parries) :
a) The Capital Accounts shall be adjusted for the gain or
loss which would be allocable to each party from a sale of
all assets at fair market value, determined in the same
manner as provided in the provisions hereof relating to
Capital Accounts;
b) Any party having a deficit balance Capital Account shall
satisfy such deficit by contribution of cash for
distribution to the other parties on or before the later
of the end of the taxable year of the Joint operations or
90 days after termination;
c) If the credit balances of all Capital Accounts are in the
same ratio as the ratio in which assets of the Joint
Operations are then owned, no adjustment in ownership
shall be required:
d) otherwise, if (c) does not apply, each party whose Capital
Account balance is less than the fair market value of this
ownership interest in assets of the Joint Operations,
after giving effect to (a) if applicable, shall (i)
contribute cash to the Joint Operations for distribution
to other parties in an amount sufficient to eliminate such
deficiency, (ii) assign to other parties particular assets
of the Joint Operations otherwise owned by such party
having a fair market value sufficient to eliminate such
deficiency, of (iii) assign to other parties an undivided
portion of all assets of the Joint Operations otherwise
owned by such party having a fair market value sufficient
to eliminate such deficiency;
e) If (d) applies and a party with a deficiency has not made
payment or assignments under (i) or (ii) within 60 days
after notice of such deficiency by Reading & Bates
Development Co., option (iii) shall apply; and
f) All assignments made or required under this paragraph
shall be in recordable form by special warranty, free of
all liability, claims and encumbrances created by the
assigning party.
EXHIBIT 10.164
*************************************************************************
LOAN AGREEMENT
Dated as of December 14, 1996
$38,000,000
TRB CORPORATION
as Borrower,
READING & BATES (U.K.) LIMITED
and
NISSHO IWAI EUROPE PLC
as Lender
*************************************************************************
TABLE OF CONTENTS
Page
Section 1. Definitions and Accounting Matters . . . . . . . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations . . . . . . . . . . . . . . 10
Section 2. Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.01 Committed Loan . . . . . . . . . . . . . . . . . . . . . . . . 10
2.02 Changes of Commitment . . . . . . . . . . . . . . . . . . . . . 10
2.03 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.04 Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . 11
2.05 The Note . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.06 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3. Borrowings and Payments . . . . . . . . . . . . . . . . . . . . 11
3.01 Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.02 Optional Prepayments. . . . . . . . . . . . . . . . . . . . . . 11
3.04 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.05 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.06 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . 13
3.07 Set-off; Sharing of Payments . . . . . . . . . . . . . . . . . 13
Section 4. Yield Protection and Illegality . . . . . . . . . . . . . . . . 13
4.01 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . 13
4.02 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.03 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.04 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 15
5.01 Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6. Representations and Warranties . . . . . . . . . . . . . . . . 18
6.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . 18
6.02 Information; Material Adverse Change . . . . . . . . . . . . . 19
6.03 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.05 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . 19
6.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.07 ERISA and Pension Plans . . . . . . . . . . . . . . . . . . . . 20
6.08 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.09 Ownership and Use of Properties . . . . . . . . . . . . . . . . 20
6.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 20
Section 7. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.01 Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.02 Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . 24
7.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.04 Maintenance of Existence; Conduct of Business . . . . . . . . . 24
7.05 Maintenance of and Access to Properties . . . . . . . . . . . . 24
7.06 Compliance with Applicable Laws . . . . . . . . . . . . . . . . 24
7.07 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.08 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.09 Mergers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.10 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.11 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.12 Transactions with Affiliates . . . . . . . . . . . . . . . . . 25
7.13 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.14 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 26
7.15 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.16 ERISA and Pension Plan Compliance . . . . . . . . . . . . . . . 26
7.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 26
7.18 Performance of Transaction Documents . . . . . . . . . . . . . 27
7.19 Amendment of Transaction Documents . . . . . . . . . . . . . . 27
7.20 Operation of Vessel . . . . . . . . . . . . . . . . . . . . . . 27
7.21 Sale or Modification of Vessel . . . . . . . . . . . . . . . . 27
7.22 Acknowledgment of Charter Assignment . . . . . . . . . . . . . 27
Section 8. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.01 Events of Default. . . . . . . . . . . . . . . . . . . . . . 27
8.02 Application of Proceeds . . . . . . . . . . . . . . . . . . . . 30
Section 9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 31
9.04 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 31
9.05 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . 32
9.06 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 32
9.07 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.08 Captions and Final Agreement . . . . . . . . . . . . . . . . . 33
9.09 No Usury Intended . . . . . . . . . . . . . . . . . . . . . . . 33
9.10 Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.11 No Consequential Damages . . . . . . . . . . . . . . . . . . . 34
9.12 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL 34
9.13 Agent for Service of Process . . . . . . . . . . . . . . . . . 34
Exhibit 2.05 Note
Exhibit 3.01 Drawdown Notice
Exhibit 6.11 Insurance
Exhibit 7.08 Terms of Subordinated Debt
Exhibit A Form of Comfort Letter
Exhibit B Form of Opinion of Wayne K. Hillin
Exhibit C Form of Opinion of Baker & Botts, L.L.P.
Exhibit D Form of Opinion of Icaza,, Gonzalez-Ruiz & Aleman
Exhibit E Form of Opinion of Denton Hall
Exhibit F Form of Opinion of Cayman Islands Counsel
Exhibit G Form of Opinion of MacFarlanes
Exhibit H Form of Participation Letter
Exhibit I Form of Acknowledgment
Exhibit J Form of Option Agreement
Exhibit K Form of Ship Mortgage
Exhibit L Form of Assignment of Charter
Exhibit M Form of Collateral Assignment
Exhibit N Form of Amendment to Bareboat Charter Agreement
Exhibit O Form of Assignment of Insurances
Exhibit P Form of Debentures
==============================================================================
LOAN AGREEMENT
This LOAN AGREEMENT dated as of December 14, 1996 is between TRB
HOLDING CORPORATION, a Delaware corporation (the Borrower ), READING & BATES
(U.K.) LIMITED, a limited liability company organized under the laws of the
United Kingdom ( Reading & Bates (U.K.) ; the Borrower and Reading & Bates
(U.K.), individually, a Company and collectively, the Companies ) and
NISSHO IWAI EUROPE PLC, an English corporation (the Lender ).
WHEREAS, the Borrower has requested the Lender to make available to
the Borrower, subject to the terms and conditions stated herein, a term loan
facility of $38,000,000 to be secured by a first naval mortgage on the oil
production vessel Seillean , a vessel of 50,928 gross tons, Call Letters
3FPF6 and Registration No. 25519-PEXT and with the home port of Panama City,
the Republic of Panama (the Vessel ), all revenue produced by such Vessel and
all rights of the Borrower or its Affiliates (as defined below) in any charter
of the Vessel; and
WHEREAS, the Lender is willing, upon and subject to the terms and
conditions hereof, to make such loan facilities available;
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or
in other provisions of this Agreement in the singular to have the same
meanings when used in the plural and vice versa):
Advance means any advance to the Borrower comprising a portion of
the Loan made pursuant to Section 2.01 hereof.
Affiliate means, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is controlled by,
such Person. As used in this definition, control (including, with
correlative meanings, controlled by and under common control with ) shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise),
provided that, in any event, any Person which owns directly or indirectly more
than 50% of the securities having ordinary voting power for the election of
directors or other governing body of a corporation or more than 50% of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation or other Person.
Agreement means this Loan Agreement, as the same may from time to
time be amended or modified in accordance with the terms hereof.
Applicable Lending Office means the lending office of the Lender
(or of an Affiliate of the Lender) below its name on the signature pages
hereof or such other office of the Lender (or of an Affiliate of the Lender)
as Lender may from time to time specify in writing to the Borrower as the
office by which the Loan is to be made and/or issued and maintained.
Applicable Margin means 2% per annum.
Assignment and Assumption Agreement means the Novation Agreement
dated on or about the Drawdown Date among the Borrower, TRB Subsidiary and
RBDC.
Assignment of Charter means the General Assignments made by the
Borrower and Reading & Bates (U.K.) in favor of the Lender, in the form of
Exhibit L attached hereto or other collateral documents.
Assignment of Insurance Proceeds means the Assignment of Insurances
made by the Companies in favor of the Lender respecting their interest in the
Vessel, in the form of Exhibit O.
Availability Period means the period from and including the date
hereof to but excluding the Commitment Termination Date.
Bankruptcy Law means any creditors right, debtor relief or similar
laws of the United States, England or the Republic of Panama or other
applicable jurisdiction.
Bareboat Charter means the Bareboat Charter Agreement dated as of
August 30, 1996 between Reading & Bates (U.K.) and RBDC as amended by the
Bareboat Charter Amendment, as such agreement may be further amended from time
to time in accordance with the terms hereof.
Bareboat Charter Amendment means the amendment to the Bareboat
Charter dated as of December 14, 1996 between RBDC and RB (U.K.) in the form
of Exhibit N.
BP means BP Exploration Operating Company Limited, a company
organized under the laws of England.
Britoil means Britoil PLC, a company organized under the laws of
England.
Britoil (Beta) means Britoil (Beta) Limited, a company organized
under the laws of England.
Business Day means any day other than a day on which commercial
banks are authorized or required to close in New York City or London.
Capital Lease Obligations means, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board) and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
Cash Flow means, for any period, all cash received by the Companies
from any Charter Agreement, including the Donan Charter Agreement, and any
other sources in respect of its ownership or operation of the Vessel during
such period, less all the Borrower s Operating Expenses and Dry Docking
Expenses for such period.
Charter Agreement means the Donan Charter Agreement or any other
charter agreement respecting the chartering of Vessel to any other Person.
Charter Novation Agreements means collectively, the Novation
Agreement dated July 10, 1996 among BP, Britoil and Britoil (Beta) and the
Novation Agreement dated August 30, 1996 among Britoil (Beta), Britoil and
Reading & Bates (U.K.).
Closing Date means the date that this Agreement is executed and
delivered.
Code means the Internal Revenue Code of 1986, as amended, or any
successor statute and the regulations promulgated thereunder.
Collateral Assignment means the Collateral Assignment of Deposit
Account, Pledge and Security Agreement made by the Companies, the Lender and
the Lockbox Bank, in the form of Exhibit M attached hereto.
Comfort Letter means the letter from Reading & Bates to the Lender
in the form of Exhibit A attached hereto.
Commitment means the obligation, subject to the terms and
conditions of this Agreement, of the Lender to make a loan to the Borrower
hereunder up to an aggregate amount equal to $38,000,000, as such amount may
be reduced pursuant to Section 2.02 hereof.
Commitment Termination Date means January 31, 1997, unless the
Commitment is sooner terminated pursuant to Section 2.02 hereof.
Debentures means the Debentures in the form of Exhibit P hereto.
Default means an Event of Default or an event which with notice or
lapse of time or both would, unless cured or waived, become an Event of
Default.
Dollars and $ means lawful money of the United States of America.
Donan Charter Agreement means the Amended Agreement dated March 30,
1995 between Britoil for itself and on behalf of the Donan Participants and
BP, as modified pursuant to the Charter Novation Agreements under which
Reading & Bates (U.K.) has assumed the rights and obligations of BP, as the
same may from time to time be further amended or modified in accordance with
the terms hereof.
Donan Participants means Britoil, Conoco (U.K.) Limited, OMV (U.K.)
Limited, Croft Exploration Limited, Pict Petroleum plc and their successors
and assigns as parties to the Unitisation and Unit Operating Agreement dated
September 27, 1993, as amended.
Drawdown Date means the date of the drawdown of the Commitment
which shall occur no later than January 31, 1997.
Drawdown Notice means a notice of borrowing delivered by the
Borrower pursuant to Section 3.01 hereof.
Dry Docking Expense Account has the meaning assigned to such term
in the Collateral Assignment.
Dry Docking Expenses means a daily accrual of UK 1,829 per day that
the Vessel is under hire to cover drydock expenses for the Vessel; provided
that no Dry Docking Expenses shall be accrued if the aggregate amount of funds
held in the Dry Docking Expense Account exceeds UK 1,335,356.
Environmental Loss means any claim, demand, fine, penalty, cause of
action, liability, damage, forfeiture, judgment or loss, remediation, and
other clean up costs and natural resource damages respecting Hazardous
Substances or damage to the environment under applicable laws (including
without limitation, reasonable attorneys fees, defense and settlement costs,
and other reasonable costs and expenses incident thereto).
ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA Affiliate shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
Event of Default has the meaning assigned to such term in Section
8.01 hereof.
Excess Cash Flow means, for any period, Cash Flow less Working
Capital.
GAAP means United States generally accepted accounting principles
as in effect from time to time consistently applied.
Governmental Approvals has the meaning specified in Section 6.10(a)
hereof.
Governmental Authority means the United States of America, United
Kingdom, the Republic of Panama, any state thereof, and any political
subdivision of any of the foregoing, including but not limited to courts,
departments, commissions, boards, bureaus, agencies, or other
instrumentalities.
Guaranteed Obligation by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing
any Indebtedness of any other Person or any other obligation, direct or
indirect, contingent or otherwise, of any other Person (a) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Indebtedness
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise, other than
agreements to purchase goods at an arm s length price in the ordinary course
of business) or other obligation or (b) entered into for the purpose of
assuring in any other manner the holder of such Indebtedness or other
obligation of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part); provided that the term Guaranteed
Obligation shall not include endorsements for collection or deposit in the
ordinary course of business.
Hazardous Substance means waste (in any form or combination) which
is any toxic, caustic or otherwise hazardous substance, including petroleum,
its derivatives, by-products and other hydrocarbons, regulated under
applicable environmental statutes.
Indebtedness means, as to any Person (determined without
duplication): (a) indebtedness of such Person for borrowed money (whether by
loan or the issuance and sale of debt securities) or for the deferred purchase
or acquisition price of property or services, other than accounts payable and
accrued liabilities (other than for borrowed money) incurred in the ordinary
course of business of a term no longer than 120 days; (b) obligations of such
Person in respect of letters of credit or similar instruments issued or
accepted by banks and other financial institutions for the account of such
Person; (c) Capital Lease Obligations of such Person; (d) Operating Lease
Obligations of such Person; (e) obligations of such Person to redeem or
otherwise retire shares of capital stock of such Person; (f) indebtedness of
others of the type described in clause (a), (b), (c), (d) or (e) above secured
by a Lien on the property of such Person, whether or not the respective
obligation so secured has been assumed by such Person; and (f) indebtedness of
others of the type described in clause (a), (b), (c), (d), (e) or (f) above
which is a Guaranteed Obligation of such Person.
Indemnity Matters shall mean any and all actions, suits,
proceedings (including any investigations, litigation or inquiries), claims,
demands and causes of action made or threatened against a Person, and, in
connection therewith, all reasonable costs, losses, liabilities, damages or
expenses of any kind or nature whatsoever incurred by such Person.
Interest Payment Date means the last day of each Interest Period.
Interest Period means the period commencing on the date the Advance
is (a) made or (b) continued, and ending on the fifteenth (15th) calendar day
in the next month thereafter, provided that the first interest period shall
end on February 15, 1997. If such fifteenth (15th) day is not a Business day,
the Interest Period shall be extended to the next succeeding Business Day.
Investments has the meaning assigned to such term in Section 7.11
hereof.
LIBOR means, for each Interest Period, the arithmetic mean (rounded
upward, if necessary, to the nearest whole multiple of 1/16 of 1%) of the
one-month London Inter-Bank Offered Rates for deposits in United States
Dollars as quoted on Reuters monitor page LIBO at or about 11:00 a.m.,
London time on the date that is two (2) London Business Days prior to the
first day of such Interest Period. If only one such rate appears, LIBOR shall
be such rate. If no such rates appear, LIBOR shall be the rate (rounded
upwards if necessary to the nearest one sixteenth of one per cent) in respect
of any Interest Period determined by the Lender on the basis of the rates at
which deposits in Dollars are offered by the Reference Bank at or about 11:00
a.m., London time, on the day that is two (2) London Business Days prior to
the first day of such Interest Period or such other relevant period or at such
date, to prime banks in London interbank market for one (1) month period on
that Interest Payment Date and in amount equal to the outstanding Loan balance
(after giving effect to any Advance) or such other relevant amount outstanding
as of the first day of such Interest Period or such other relevant period.
Lien means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, any Person shall be deemed to own subject
to a Lien any asset which such Person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
Liquid Investments means (a) certificates of deposit maturing
within 30 days of the acquisition thereof or demand deposits, denominated in
Dollars and, in each case, issued by the Lockbox Bank or a bank or trust
company having combined capital and surplus of at least $250,000,000, and
having (or the holding company controlling such institution having) a short-
term rating of A-2 or better by Standard & Poors Corporation, or P-2 or better
by Moody s Investor Services, Inc., or a substantially equivalent rating by
any other rating agency satisfactory to the Lender; and (b) obligations issued
or guaranteed by the United States of America, with maturities not more than
one year after the date of issue.
Loan means the loan consisting of the Advance provided for by
Section 2.01 hereof.
Loan Documents means this Agreement, the Note, the Security
Instruments and any modifications, renewals or extensions thereof.
Lockbox means the account maintained at the Lockbox Bank pursuant
to the Collateral Assignment.
Lockbox Bank means Sanwa Bank Trust Company of New York, or any
other depositary selected by the Lender and approved by the Borrower, which
approval shall not be unreasonably withheld or delayed.
London Business Day means any day in which commercial banks are not
authorized or required to close in London, England.
Maturity Date means, subject to Section 8.01, February 15, 2002.
Maximum Rate means the maximum non-usurious rate of interest
permitted by applicable law, as defined in Section 9.09.
Minimum Payment means, for each Repayment Date, an amount to be
repaid by the Borrower on the Loan on such Repayment Date, that shall be equal
to the sum of: (a) the principal amount of the Loan outstanding on the prior
Repayment Date divided by the number of Repayment Dates remaining during the
period from and including such Repayment Date to and including the Maturity
Date plus (b) the accrued and unpaid interest on the Loan to such Repayment
Date.
Monthly Statement means, for any month, the bank account statement
for the Lockbox, and a report relating to the Vessel including but not limited
to the number of actual Operating Days of the Vessel for such month, the
status of operations when the Vessel is on-hire and prospectus of the next
employment of the Vessel when the Vessel is on off-hire;
Multiemployer Plan shall mean any Plan which is a multiemployer
plan (as such term is defined in section 4001(a)(3) of ERISA).
New York Business Day means any day in which commercial banks are
not authorized or required to close in New York, New York.
NIC means Nissho Iwai Corporation, a Japanese corporation.
NIC Parties means NIC and the Lender.
Note has the meaning assigned to such term in Section 2.05 hereof.
Obligations means all obligations of the Borrower now or hereafter
existing under the Loan Documents, whether for principal, interest, fees,
indemnities, costs, expenses or otherwise.
Operating Days means, for any period, the actual number of
operating days of the Vessel in that period.
Operating Expenses means, for any period, the expenses of operating
the Vessel for such period including direct payroll and employee benefits,
Vessel maintenance, catering, freight, other direct operating costs and
general and administrative expenses as allocated in a manner mutually
agreeable to the Lender and the Borrower which shall be equal to a daily
average in the aggregate of UK 18,209 (or $30,000 as determined by the
currency of the Charter Agreement in effect during such period) for each
Operating Day in such period.
Operating Lease Obligations shall mean, as to any Person, the
obligations of such person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property
which obligations are not required to be classified and accounted for as a
liability for a capital lease on a balance sheet of such Person and, for
purposes of this Agreement, the amount of such obligations shall be the
discounted present value of the lease payments, discounted in the same manner
a capital lease would be discounted according to GAAP.
Option Agreement means the Option Agreement dated as of
December 14, 1996 between the Borrower, TRB Subsidiary and NIC, substantially
in the form of Exhibit J attached hereto.
Overdue Interest Rate means, in respect of any principal of, or
interest on, the Loan or any other amount payable by the Borrower under any
Loan Document which is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum during the period commencing on
the due date until such amount is paid in full equal to the sum of LIBOR in
effect for such period plus 5% per annum.
Participation Letter means the letter from Reading & Bates to NIC
in the form of Exhibit H attached hereto.
Partnership has the meaning assigned to such term in the Option
Agreement.
Partnership Agreement means the organizational agreement entered
into pursuant to the Option Agreement to form the Partnership.
Permitted Liens means (a) liens created under the Security
Instruments or otherwise in favor of the Lender; (b) maritime liens on the
Vessel incurred and payable in the ordinary course of business and arising by
operation of law but which shall not exceed $500,000 in the aggregate
outstanding at any time and none of which shall be past due unless being
contested in good faith and by appropriate proceedings and for which adequate
reserves have been established on the books of the Borrower in accordance with
GAAP, provided provision is then made to the satisfaction of the Lender for
the eventual payment thereof in the event it is found that such is payable by
the Borrower; (c) liens for taxes, assessments or other governmental charges,
levies or claims not at the time delinquent or thereafter payable without
penalty or being contested in good faith, and for which adequate reserves in
accordance with GAAP have been made for the eventual payment thereof in the
event it is found that such is payable by the Borrower; (d) liens of carriers,
warehousemen, mechanics, materialmen, vendors or landlords incurred in the
ordinary course of business for sums not overdue or being contested in good
faith and by appropriate proceedings, provided provision is made to the
satisfaction of the Borrower for which adequate reserves in accordance with
GAAP have been made for the eventual payment thereof in the event it is found
that such is payable by the Borrower; (e) zoning restrictions, licenses,
easements, rights-of-way, and other similar charges or encumbrances or
restrictions that are not Liens against any interest in the Vessel and further
are not interfering in any material respect with the business of the Borrower
incurred in the ordinary course of business;
Person means an individual, a corporation, a company, a voluntary
association, a partnership, a trust, an unincorporated organization or a
government or any agency, instrumentality or political subdivision thereof, or
any other form of entity.
Plan means an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code.
Property means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
R&B Drilling means Reading & Bates Drilling Co., an Oklahoma
corporation.
R&B Parties means Reading & Bates, RBDC, TRB Subsidiary, Reading &
Bates (U.K.) and any other Subsidiary of Reading & Bates that is a party to,
an assignee of, or subcontractor respecting, any Transaction Document, but in
any event not the Borrower.
Reading & Bates means Reading & Bates Corporation, a Delaware
corporation.
RBDC means Reading & Bates Development Co., a Delaware corporation.
Reference Bank means Sanwa Bank Limited, London Branch.
Regulatory Change means, with respect to the Lender, any change on
or after the date of this Agreement in United States, English, Panamanian,
federal, state or foreign laws or regulations or the adoption or making on or
after such date of any interpretations, directives or written requests
applying to a class of banks including the Lender or its Applicable Lending
Office (whether or not having the force of law) of or under any United States
federal or state, English, Panamanian or any foreign, laws or regulations by
any court or governmental or monetary authority charged with the
interpretation or administration thereof.
Repayment Date means subject to Section 8.01, the last day of each
Interest Period.
Security Instruments means, collectively, the Collateral
Assignment, the Assignment of Charter, the Debenture, the Subordination
Agreement, the Ship Mortgage, the Assignment of Insurance Proceeds, the
Comfort Letter and any other agreements which may be delivered from time to
time to secure the obligations of the Borrower hereunder, and any amendments,
modifications, renewals or extensions thereof.
Ship Mortgage means the First Naval Mortgage dated December 14,
1996 made by the Borrower in favor of the Lender, as amended or modified in
accordance with this Agreement, in the form of Exhibit K attached hereto.
Subordination Agreement means the Subordination and Postponement
Letter dated December 14, 1996, among Reading & Bates (U.K.), R&B Drilling and
the Lender.
Subsidiary means, with respect to any Person (the parent ), any
corporation or other entity of which at least a majority of the outstanding
shares of stock or other ownership interests having by the terms thereof
ordinary voting power to elect a majority of the board of directors of such
corporation or other governing body of such other entity (irrespective of
whether or not at the time stock of any other class or classes of such
corporation, or another ownership interest of such other entity, shall have or
might have voting power by reason of the happening of any contingency) is at
the time directly or indirectly owned or controlled by the parent or one or
more of the Subsidiaries of the parent or by the parent and one or more of the
Subsidiaries of the parent.
Taxes means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and any interest, penalties or other
liabilities with respect thereto, excluding, in the case of the Lender, (i)
taxes imposed on its net income and (ii) franchise or similar taxes imposed on
it, by the jurisdiction (or political subdivision thereof) in which it is
organized or has an Applicable Lending Office.
Transaction Documents mean collectively, the Loan Documents, the
Vessel Sales Agreement (and any guarantee of any R&B Parties obligations
thereunder), the Option Agreement, the Partnership Agreement, Assignment and
Assumption Agreement, the Bareboat Charter, the Charter Novation Agreements,
any Charter Agreement (and any guarantee of any R&B Parties obligations
thereunder) and the Donan Charter Agreement.
TRB Subsidiary means TRB Subsidiary Corporation, a Delaware
corporation.
Uniform Commercial Code means the Uniform Commercial Code as in
effect in the state or states referred to.
Vessel Sales Agreement means the Agreement for the Sale and
Purchase of OPV Seillean dated as of May 31, 1996 between Britoil (Beta)
Limited and RB Drilling Co., as novated under the Novation Agreement dated
August 30, 1996 among Britoil (Beta), RB Drilling Co. and RBDC, and as further
amended or modified in accordance with this Agreement.
Working Capital means, for any period, ten percent (10%) of the
Cash Flow.
1.02 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with GAAP.
Section 2. Commitment.
2.01 Committed Loan. The Lender agrees, on the terms and subject
to the terms and conditions of this Agreement, from time to time during the
Availability Period, to make an Advance to the Borrower in an aggregate
principal amount up to but not exceeding the Commitment, as reduced from time
to time pursuant to Section 2.02 hereof. The Commitment is not revolving in
nature and the Borrower may not reborrow under this Section 2.01 any amount
that has been previously repaid or prepaid.
2.02 Changes of Commitment.
(a) Mandatory Reductions. Unless earlier terminated in
accordance with Section 8.01, the Commitment shall terminate on the Commitment
Termination Date. All unused portions of the Commitment not utilized on the
Commitment Termination Date shall be terminated.
(b) No Reinstatement. No portion of the Commitment once
terminated or reduced may not be reinstated.
2.03 Fees.
(a) Management Fee. The Borrower shall pay on the Drawdown Date
a management fee of 1.75% of the Loan.
(b) Commitment Fee. On the Drawdown Date, the Borrower shall
pay to the Lender a commitment fee of 0.75% per annum on the average daily
maximum amount of the Commitment calculated from the Closing Date to the
Drawdown Date.
(c) No Refund of Fees. Once paid, such fees are fully earned
and non-refundable.
2.04 Lending Offices. The Loan shall be made and maintained at
the Applicable Lending Office.
2.05 The Note. The obligation of the Borrower to repay the Loan
shall be evidenced by a single Note of the Borrower (the Note ) in
substantially the form of Exhibit 2.05 hereto, dated the date of this
Agreement, payable to the order of the Lender in a principal amount equal to
the Commitment, and otherwise duly completed. The Lender is hereby authorized
by the Borrower to endorse on the schedule (or a continuation thereof)
attached to the Note, to the extent applicable, the date and amount for the
Advance made by the Lender to the Borrower hereunder, and the amount of each
payment or prepayment of principal of such Advance received by the Lender,
provided that any failure by the Lender to make any such endorsement shall not
affect the obligations of the Borrower under the Note or hereunder in respect
of such Advance. Such records shall be deemed conclusive absent manifest
error.
2.06 Use of Proceeds. The proceeds of the Loan shall be used by
the Borrower to finance its purchase of the Vessel.
Section 3. Borrowings and Payments.
3.01 Borrowings. The Borrower shall notify the Lender in writing
of borrowing to be made hereunder at least three Business Days before the
Drawdown Date by delivery of its Drawdown Notice in the form of Exhibit 3.01
hereto, appropriately completed. Subject to the terms and conditions of this
Agreement, not later than 1:00 p.m. New York time on the Drawdown Date, the
Lender shall make available the amount of the Advance as set forth in the
Borrower s Drawdown Notice respecting such Advance, for the account of the
Borrower by transferring funds to, or for the account of, the Borrower at the
location specified in the Drawdown Notice.
3.02 Optional Prepayments. The Borrower shall have the right to
prepay the Loan, in full but not in part, on any Repayment Date after the
first anniversary of the Drawdown Date. The Borrower shall pay to the Lender
on the date of prepayment a prepayment premium of two percent (2%) of the
amount of the Loan prepaid. Such prepayment shall be accompanied by any
amounts payable under Section 4.03. The Borrower shall notify the Lender in
writing of such prepayment at least 60 days before the prepayment date. Such
notice shall be irrevocable and the amount specified in such notice shall be
due and payable on the prepayment date specified in such notice.
Notwithstanding anything to the contrary in this Section 3.02, the Borrower
shall have the right and obligation to prepay the Loan in part without a
prepayment premium or notice, pursuant to the Option Agreement.
3.03 Repayment of Loan. Subject to the terms of this Agreement
(including without limitation Section 8),
(a) The Borrower shall repay the Loan on each Repayment Date in
an amount equal to the greater of (i) Excess Cash Flow received during the
month prior to the month of each Repayment Date (the Monthly Period );
provided that the first Monthly Period shall be from the Closing Date until
January 31, 1997, and (ii) the Minimum Payment for such Repayment Date. Each
repayment shall be applied first to accrued and unpaid interest and then to
principal.
(b) In its sole discretion, the Lender may agree to an increase
of the amount of Working Capital in the event that Excess Cash Flow, as so
reduced, appears that it will be sufficient to repay the Loan in full prior to
the Maturity Date.
3.04 Interest.
(a) The Borrower shall pay to the Lender interest on the unpaid
principal amount of the Loan for the period commencing on the date the Loan is
made to but excluding the date the Loan shall be paid in full, at a rate per
annum equal to the lesser of (i) LIBOR plus the then Applicable Margin or (ii)
the Maximum Rate.
(b) Notwithstanding any of the foregoing, the Borrower will pay
to the Lender interest at a rate per annum equal to the lesser of (i) the
applicable Overdue Interest Rate or (ii) the Maximum Rate on any principal of,
or interest on, the Loan and on any other amount payable by the Borrower
hereunder to or for the account of the Lender, which shall not be paid in full
when due (whether at stated maturity, by acceleration or otherwise and whether
the failure to make such payment constitutes a Default or Event of Default,
regardless of the giving or receipt of notice or the lapse of any applicable
cure period), for the period commencing on the due date thereof until the same
is paid in full.
(c) Accrued and unpaid interest on the Loan shall be due and
payable on each Repayment Date and otherwise as set forth in Sections 3.02 and
3.03; provided that interest payable on the Loan, or other amounts payable
hereunder, accruing at the Overdue Interest Rate shall be payable from time to
time on demand of the Lender.
(d) Promptly after the determination of any interest rate
provided for herein or any change therein, the Lender shall use reasonable
efforts to notify the Borrower thereof; provided that the Lender s failure to
so notify the Borrower shall not affect the Borrower s obligation to pay the
Loan.
(e) Interest shall be computed on the basis of a year of 360
days for actual days elapsed (including the first day but excluding the last
day) occurring in the period for which such amounts are payable, unless such
calculation would exceed the Maximum Rate, in which case interest shall be
calculated on the per annum basis of a year of 365 or 366 days, as the case
may be.
3.05 Payments. Except to the extent otherwise provided herein,
all payments of principal, interest, and other amounts which are to be made by
the Borrower hereunder and under the Note shall be made in Dollars, in
immediately available funds to the Lockbox and such payments shall be
disbursed to the Lender from the Lockbox to the Lender s account number
15012511 at The Chase Manhattan Bank, London Branch, not later than 11:00 a.m.
London time on the date on which such payment shall become due hereunder (each
such payment received after such time on such due date to be deemed for
purposes of calculating interest to have been made on the next succeeding
Business Day). The amount of such payment shall be calculated by the Lender
with notice of such amount to be given to the Borrower and the Lockbox Bank at
least four (4) Business Days prior to each Repayment Date. The failure of the
Lockbox to contain at any time sufficient funds to make any payment hereunder
shall not discharge or release the Borrower or any other Person obligated
therefor from its liability to make such payment on the due date therefor. If
the due date of any payment hereunder or under the Note would otherwise fall
on a day which is not a Business Day such date shall be extended to the next
succeeding Business Day and interest shall be payable for any payment (other
than interest) so extended for the period of such extension.
3.06 Certain Notices. Notices to the Lender of terminations or
reductions of the Commitment, of borrowings, continuations and prepayments of
the Loan shall be irrevocable and shall be effective only if received by the
Lender not later than 12:00 noon London time on the date specified for such
notice.
3.07 Set-off; Sharing of Payments. The Borrower agrees that, in
addition to (and without limitation of) any right of set-off, counterclaim or
other right or remedy the Lender may otherwise have, the Lender and its
Affiliates shall be entitled, at its option, to offset, appropriate and apply
any debt owing to and any other funds held in any manner for the account of
the Borrower against any principal of, or interest on, the Loan to the
Borrower hereunder, or other obligation of the Borrower hereunder, which is
not paid when due (regardless of whether such balances are then due to the
Borrower) in which case it shall promptly notify the Borrower thereof,
provided that the Lender s failure to give such notice shall not affect the
validity thereof.
Section 4. Yield Protection and Illegality.
4.01 Additional Costs.
(a) The Borrower shall pay to the Lender from time to time, on
an after-tax basis, such amounts as the Lender may determine to be necessary
to compensate it for any additional costs incurred by the Lender, or any
reduction in any amount receivable by the Lender hereunder, which the Lender
determines are attributable to its making or maintaining of the Loan hereunder
or its obligation to make the Loan hereunder (such additional costs and
reductions in amounts receivable being herein called Additional Costs ), in
each case resulting from any Regulatory Change which:
(i) other than changes which affect taxes measured by or imposed
on the overall net income of the Lender or of its Applicable Lending
Office for any of such Loan by the jurisdiction in which the Lender has
its principal office or such Applicable Lending Office, imposes any tax
with respect to the Loan, or changes the basis of taxation of any amounts
payable to the Lender under this Agreement or the Note in respect of any
of such Loan; or
(ii) imposes or modifies any reserve, special deposit, capital
adequacy or similar rule, regulation, or treaty requirements (including
without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System, the Bank of England, the
Japanese Central Bank or other monetary authority, but excluding with
respect to any of such Loan any such requirements included in an
applicable reserve requirement) relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, the Lender
(including any of such Loan or any deposits referred to in the definition
of LIBOR in Section 1.01 hereof); or
(iii) imposes any other condition affecting this Agreement (or any
of such extensions of credit or liabilities).
(b) Without limiting the effect of the foregoing provisions of
this Section 4.01, in the event that, by reason of any Regulatory Change, the
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of the Lender which includes deposits by reference to which the
interest rate on the Loan is determined as provided in this Agreement or a
category of extensions of credit or other assets of the Lender which includes
the Loan or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if the Lender so
elects by notice to the Borrower, the obligation of the Lender to make the
Loan hereunder shall be suspended until the date such Regulatory Change ceases
to be in effect.
(c) Determinations and allocations by the Lender for purposes of
this Section 4.01 of the effect of any Regulatory Change on its costs of
maintaining its obligations to make the Loan or of making or maintaining the
Loan or on amounts receivable by it in respect of Loans, and of the additional
amounts required to compensate the Lender in respect of any Additional Costs,
shall be conclusive, provided that such determinations and allocations are
made on a reasonable basis. In connection herewith the Lender shall not be
required to prove that it actually funded the Loan, in whole or in part, with
matching deposits in Dollars acquired from a prime bank in the London
interbank market.
4.02 Illegality. Notwithstanding any other provision of this
Agreement to the contrary, in the event that it becomes unlawful for the
Lender or its Applicable Lending Office to (a) honor its obligation to make
the Loan hereunder, or (b) maintain the Loan to the Borrower hereunder, then
the Lender shall promptly notify the Borrower thereof and the Lender s
obligation to make or maintain the Loan hereunder shall be suspended until
such time as the Lender may again make and maintain the Loan to the Borrower.
4.03 Compensation. The Borrower shall promptly pay to the
Lender, upon the request of the Lender, such amount or amounts as shall be
sufficient (in the reasonable opinion of the Lender) to compensate it for any
loss, cost or expense incurred by it as a result of:
(a) any payment, prepayment of the Loan made to the Borrower for
any reason (including, without limitation, the acceleration of the Loan
pursuant to Section 8.01) on a date other than the last day of an Interest
Period for such Loan; or
(b) any failure by the Borrower for any reason (including
without limitation, the failure of any of the conditions precedent specified
in Section 5 to be satisfied) to borrow an Advance specified in a Drawdown
Notice delivered to the Lender on the date for such borrowing;
such compensation to include, without limitation, an amount equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount so paid, prepaid or not borrowed for the period from the date
of such payment, prepayment or failure to borrow to the last day of the
Interest Period for such Advance (or, in the case of a failure to borrow, the
Interest Period for such Advance which would have commenced on the date of
such failure to borrow) at the applicable rate of interest for such Advance
provided for herein over (ii) the interest component (as reasonably determined
by the Lender) of the amount (as reasonably determined by the Lender) the
Lender would have bid in the London interbank market for Dollar deposits of
leading banks in amounts comparable to such principal amount and maturities
comparable to such period.
4.04 Taxes. (a) Any and all payments by the Borrower hereunder
shall be made, in accordance with Section 3.05, free and clear of and without
deduction or withholding for any Taxes, except to the extent required by
applicable law. If the Borrower shall be required to deduct or withhold any
Taxes from or in respect of any sum payable hereunder to Lender (i) the
Borrower shall make such deductions or withholding (ii) the Borrower shall
pay the full amount deducted or withheld to the relevant taxing authority or
other governmental authority in accordance with applicable law and (iii) the
sum payable shall be increased by the amount necessary so that after making
all required deductions or withholding of Taxes (including deductions or
withholdings of Taxes applicable to additional sums payable under this
Section 4.04) the Lender shall receive an amount equal to the sum it would
have received had no such deductions been made.
(b) The Borrower agrees to indemnify and hold harmless the
Lender for any Taxes imposed on or incurred by the Lender in respect of any
sum payable hereunder to the Lender (including any Taxes on amounts payable
under this Section 4.04). Payment under this indemnification shall be made
within 30 days after the date the Lender makes written demand therefor
describing such Taxes in reasonable detail.
(c) As soon as practicable after the date of any payment by the
Borrower of Taxes under this Section 4.04, the Borrower shall furnish the
Lender the original or a certified copy of an official receipt evidencing such
payment, or such other evidence of payment as may be reasonably satisfactory
to the Lender.
(d) Lender shall repay the Borrower for any Taxes paid by the
Borrower which the Lender utilizes against its tax liability.
Section 5. Conditions Precedent.
5.01 Advance. The obligation of the Lender to make the Advance
hereunder is subject to the following conditions precedent, each of which
shall have been fulfilled to the satisfaction of the Lender:
(a) Corporate Action. The Lender shall have received certified
copies of the charter and by-laws of the Borrower, Reading & Bates (U.K.) and
TRB Subsidiary, all corporate action taken by the Borrower, Reading & Bates
(U.K.), TRB Subsidiary and R&B Drilling authorizing the execution, delivery
and performance of the Transaction Documents to which such Person is a party
(including, without limitation, a certificate of the Borrower setting forth
the resolutions of its Board of Directors authorizing the transactions
contemplated thereby).
(b) Incumbency. Each of the Borrower, Reading & Bates, TRB
Subsidiary, R&B Drilling, and Reading & Bates (U.K.) shall have delivered to
the Lender a certificate in respect of the name and signature of each of the
officers (i) who is authorized to sign on its behalf the Transaction Documents
and (ii) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection
with the Transaction Documents to which it is a party. The Lender may
conclusively rely on such certificates until it receives notice in writing
from such Person to the contrary.
(c) Loan Documents and Lien Perfection. The Lender shall have
received counterparts of this Agreement executed and delivered by or on behalf
of each of the parties hereto. The Lender shall have received the Note, duly
completed and executed. Each of Security Instruments shall have been duly
executed and delivered, and such other action (including, without limitation,
filing of the Ship Mortgage, the Assignment of Charter, and appropriately
completed and duly executed Uniform Commercial Code financing statements and
other documents in the State of Texas, the Republic of Panama, the United
Kingdom and other jurisdictions) as may be necessary or as the Lender shall
have reasonably requested to perfect the security interests created pursuant
thereto as first priority liens shall have been taken.
(d) Lien Searches. The Lender shall have received filings
searches in the name of Reading & Bates (U.K.) and the Borrower, TRB
Subsidiary and their respective predecessors in interest during the past five
years (to the extent subject to the Uniform Commercial Code) from English ship
and companies registries and Panamanian and U.S. registries showing no
filings of record except (i) those in favor of the Lender, (ii) those with
respect to Permitted Liens, or (iii) those for which releases or termination
statements are filed on or prior (or immediately subsequent) to the Closing
Date.
(e) Insurance. The Borrower and Reading & Bates (U.K.) shall
have delivered to the Lender a certificate of an insurer reasonably
satisfactory to the Lender listing the coverages maintained by the Borrower,
which coverages shall be acceptable to the Lender and stating that the Lender
has been named loss payee with first priority to receive payments (except as
otherwise provided in the Ship Mortgage) in respect of any property insurance
on the Vessel and each of the NIC Parties as an additional insured thereunder.
(f) Fees and Expenses. The Borrower shall have paid to the
Lender all amounts due under Sections 2.03 and 9.03 hereof on or before the
Drawdown Date.
(g) Legal Opinions. The Lender shall have received the opinion
of (a) Wayne K. Hillin, counsel to the Borrower, substantially in the form of
Exhibit B attached hereto, (b) Baker & Botts, L.L.P., counsel to the Lender,
substantially in the form of Exhibit C attached hereto, (c) Icaza, Gonzalez-
Ruiz & Aleman, Panamanian counsel to the Lender, substantially in the form of
Exhibit D attached hereto, (d) Denton Hall, English counsel to the Lender,
substantially in the form of Exhibit E attached hereto, and (e) Cayman Islands
counsel, substantially in the form of Exhibit F with any changes that are
reasonably satisfactory to the Lender.
(h) Environmental Matters Limitation of Liability Legal Opinion.
The Lender shall have received the opinion of MacFarlanes, counsel to the
Borrower, in the form of Exhibit G attached hereto, with respect to the
environmental condition (including conditions with respect to oil pollution)
of the properties of the Borrower and Reading & Bates (U.K.) in the form and
substance reasonable satisfactory to the Lender.
(i) Evidence of Approvals. The Lender shall have received
evidence in form and substance reasonably satisfactory to the Lender that each
R&B Party has obtained all orders, consents, approvals and authorizations and
have made all filings and other notifications (governmental or otherwise)
required in connection with this Agreement, or the transactions contemplated
hereby.
(j) Registered Agent. The Lender shall have received evidence
of the agreement by Prentice-Hall Corporation System to act as agent for
service of process in New York on behalf of the Borrower with respect to the
Transaction Documents to which it is a party and that R&B (U.K.) has agreed to
act as agent for service of process in the United Kingdom on behalf of the
Borrower with respect to the Transaction Documents to which it is a party.
(k) Transaction Documents. The Lender shall have received
executed copies of each of the Transaction Documents, in form and substance
reasonably satisfactory to the Lender.
(l) No Material Adverse Change. There shall have been no
material adverse change since December 31, 1995 in the business, financial
condition, operations or properties of the Borrower, or the ability of the
Borrower or any other R&B Party to perform its obligations under the
Transaction Documents.
(m) Britoil Acknowledgment. Britoil shall, to protect the
Lender s Lien in the Donan Charter Agreement and the amounts payable
thereunder, acknowledge the assignment of such rights under the Assignment of
Charter and agree to direct its payments under the Donan Charter Agreement to
the Lockbox Account, in the form of Exhibit I attached hereto.
(n) Advance. The advance shall occur no later than January 31,
1997.
(o) No Default. No Default shall have occurred and be
continuing.
(p) Representations. The representations and warranties made by
the Companies, and to the best of the Companies knowledge, of the R&B Parties
and Britoil in each Transaction Document to which it is a party shall be true
on and as of the date of the making of such Advance in all material respects,
with the same force and effect as if made on and as of such date (except to
the extent such representations and warranties are expressly limited to an
earlier date or the Lender may expressly consent in writing to the contrary).
(q) No Violation. The making of such Advance shall not violate
any law, rule, regulation or order applicable to the Lender or the Borrower.
(r) Other Matters. The Lender shall have received such other
documents and assurances relating to the transactions contemplated hereby as
the Lender may reasonably request.
(s) Bareboat Charter Amendment. The Lender shall have received
an executed copy of the amendment to the Bareboat Charter Amendment.
(t) Comfort Letter and Participation Letter. The Lender shall
have received an executed copy of the Comfort Letter and Participation Letter.
(u) Partnership Agreement. The Partnership shall be formed in
accordance with the terms of the Option Agreement.
(v) Excess Cash. The Companies shall have deposited Excess Cash
for the period from the Closing Date to the Drawdown Date in the Lockbox
Account and the Lender shall have to receive the details of the computation of
such amount.
(w) Drawdown Notice. The Borrower shall have executed and
delivered the Drawdown Notice which shall constitute a certification by the
Borrower to the effect set forth in the conditions to the Advance have been
and will be satisfied (both as of the date of such notice and, unless the
Borrower otherwise notifies the Lender prior to the date of such borrowing or
issuance, as of the date of such borrowing or issuance).
Section 6. Representations and Warranties. Each of the Companies
represents and warrants to the Lender with respect to itself only as follows:
6.01 Corporate Existence. The Borrower: (a) is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware; (b) has requisite corporate power, and has all material
governmental licenses, authorizations, consents and approvals necessary, to
own its assets and carry on its business as now being conducted; and (c) is
qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where failure
so to qualify would have a material adverse effect on the financial condition,
prospects, operations, properties or business of the Borrower or on its
ability to perform its obligations under each Transaction Document to which it
is a party. Reading & Bates (U.K.): (a) is a limited liability company, duly
organized, validly existing and in good standing under the laws of England;
(b) has requisite corporate power, and has all material governmental licenses,
authorizations, consents and approvals necessary, to own its assets and carry
on its business as now being conducted; and (c) is qualified to do business in
all jurisdictions in which the nature of the business conducted by it makes
such qualification necessary and where failure so to qualify would have a
material adverse effect on the financial condition, prospects, operations,
properties or business of Reading & Bates (U.K.) or on its ability to perform
its obligations under each Transaction Document to which it is a party.
6.02 Information; Material Adverse Change. (a) Each Company has,
to its best knowledge, disclosed to the Lender in writing any and all facts
(other than general economic or industry information not specific to such
Company) which are reasonably likely to materially and adversely affect the
business, financial condition, prospects, operations or properties of such
Company or the ability of any Company or any R&B Party to perform its
obligations under each Transaction Documents to which it is a party.
(b) Since the execution date of this Agreement there has been no
material adverse change in the business, financial condition, prospects,
operations or properties of either Company or in its ability or, to the best
of the Companies knowledge, any R&B Party s ability to perform its
obligations under each Transaction Document to which it is a party.
6.03 Litigation. There is no litigation, legal, administrative
or arbitral proceeding, investigation or other action of any nature pending
or, to the knowledge of each Company, threatened against such Company or
affecting its property which could reasonably be expected to have a material
adverse effect on the business, financial condition, prospects, operations or
properties of such Company or on its ability to perform its obligations under
each Transaction Document to which it is a party.
6.04 No Breach. None of the execution and delivery of the
Transaction Documents by each Company, the consummation by each Company of the
transactions therein contemplated, or compliance by each Company and to the
best of the Companies knowledge, the R&B Parties with the terms and
provisions thereof will (a) conflict with or result in a breach of, or require
any consent not already obtained under, (i) the charter or by-laws of the
Companies or (ii) any law or regulation applicable to the Companies or
(iii) any order, writ, injunction or decree of any court or governmental
authority or agency applicable to the Companies, or (iv) the Transaction
Documents or any other material agreement or instrument to which either
Company is a party or by which it is bound or to which any of its properties
is subject, or (b) constitute a default under any such material agreement or
instrument, or (c) (except for the Liens created pursuant to, or permitted by,
this Agreement and the Security Instruments) result in the creation or
imposition of any Lien upon any assets of the Companies pursuant to the terms
of any such material agreement or instrument. No Default hereunder has
occurred and is continuing.
6.05 Corporate Action. Each Company has all necessary corporate
power and authority to execute, deliver and perform its obligations under the
Transaction Documents to which it is a party; and the execution, delivery and
performance by such Person of the Transaction Documents to which it is a party
have been duly authorized by all necessary corporate action; and this
Agreement and the other Transaction Documents to which each Company is a party
have been duly and validly executed and delivered by each Company and
constitute the legal, valid and binding obligation of each Company, in each
case, enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or moratorium
or other similar laws relating to the enforcement of creditors rights
generally and by general equitable principles. The Security Instruments
create legal, valid, and binding Liens in the Properties intended to be
encumbered thereby as security for the Obligations and such Liens have been
perfected, subject only to Permitted Liens.
6.06 Approvals. Each Company has obtained all authorizations,
approvals and consents of, and have made all filings and registrations with,
any court or governmental or regulatory authority or agency necessary for the
execution, delivery or performance by each of them of the Transaction
Documents to which such Person is a party, or for the validity or
enforceability thereof.
6.07 ERISA and Pension Plans. No accumulated funding deficiency
(as defined in section 302 of ERISA and section 412 of the Code), whether or
not waived, exists with respect to any Plan (other than a Multiemployer Plan).
No liability to the Pension Benefit Guaranty Corporation has been or is
expected by the Borrower or any ERISA Affiliate to be incurred with respect to
any Plan (other than a Multiemployer Plan) by the Borrower, any Subsidiary or
any ERISA Affiliate which is or would be materially adverse to the business,
condition (financial or otherwise) or operations of the Borrower and its
Subsidiaries taken as a whole. Neither the Borrower, any Subsidiary or any
ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
is or would be materially adverse to the business, condition (financial or
otherwise) or operations of the Borrower and its Subsidiaries taken as a
whole. The execution and delivery of this Agreement and the issuance and sale
of the Notes will be exempt from, or will not involve any transaction which is
subject to, the prohibitions of section 406 of ERISA and will not involve any
transaction in connection with which a penalty could be imposed under section
502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the
Code.
6.08 Taxes. Each Company has filed all United States Federal,
Panamanian and English income tax returns and all other material tax returns
which are required to be filed by it and has paid all taxes due pursuant to
such returns or pursuant to any assessment received by it, except to the
extent the same may be contested as permitted by Section 7.02 hereof or any
failure to so file or pay which could not reasonably be expected to have a
material adverse effect on the business, financial condition, operations or
properties of such Company or on the ability of such Company to perform its
obligations under each Transaction Document to which it is a party. The
charges, accruals and reserves on the books of each Company in respect of
taxes and other governmental charges are, in the reasonable opinion of such
Company, adequate.
6.09 Ownership and Use of Properties. Each Company will have on
the date of the Advance and at all times thereafter good and marketable title
or ownership of, or the right to use pursuant to enforceable and valid
agreements or arrangements, all tangible property, both real and personal and
all franchises, licenses, copyrights, patents and know-how, other than such
property, the failure to own or otherwise hold might reasonably be expected to
have a material adverse effect on the business, financial condition,
operations or properties of such Company or the ability of such Company to
perform its obligations under each Transaction Document to which it is a
party. All of the assets and Properties of the Companies which are reasonably
necessary for the operation of their businesses are in good working condition
and are maintained in accordance with prudent business standards.
6.10 Environmental Matters.
(a) (i) Each Company is, and to the best knowledge of each
Company, each other R&B Party is, in compliance with all applicable
environmental laws respecting the Vessel and the Donan Charter Agreement
except for such noncompliance which could not reasonably be expected to have a
material adverse effect on the business, financial condition, operations or
properties or Vessel of such Company, or the ability of each Company to
perform its obligations under each Transaction Document to which it is a
party, (ii) each Company has, and to the knowledge of such Company, each other
R&B Party has, all decisions, permits, licenses, rulings, consents, agreements
and other authorizations of any applicable Governmental Authority
(collectively, the Governmental Approvals ) required to perform its
obligations respecting the Vessel and any Charter Agreement, including the
Donan Charter Agreement, (iii) each Company and to the knowledge of each
Company, each other R&B Party has not, received any written communication from
a Governmental Authority, court or third party that alleges that such Company
or such other R&B Party is not in full compliance with all applicable
environmental laws and Governmental Approvals respecting the Vessel and the
Donan Charter Agreement other than such noncompliance which could not have a
material adverse effect on the business, financial condition, operations or
properties of such Company or, to the knowledge of such Company, any R&B
Party, or the ability of such Company to perform its obligations under each
Transaction Document to which it is a party, (iv) to each Company s knowledge,
there are no circumstances that could reasonably be expected to prevent or
adversely interfere with such Company s compliance with environmental laws in
the future as far as such Company may reasonably foresee and which
noncompliance could have a material adverse effect on the business, financial
condition, operations or properties of such Company, or the ability of such
Company or any other R&B Party to perform its obligations under each
Transaction Document to which it is a party and shall keep the Lender fully
indemnified at all times against all losses, claims or demands whatsoever
arising directly or indirectly from any breach of this obligation, including
any liability in respect of such matters.
(b) To the knowledge of each Company, there are no past, present
or pending actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission, discharge,
presence or disposal of any Hazardous Substance, that could reasonably be
expected to form the basis of any Environmental Loss against either Company
or, to the knowledge of each Company, any other R&B Party which could have a
material adverse effect on the business, financial condition, operations or
properties of either Company or the ability of either Company or any other R&B
Party to perform its obligations under each Transaction Document to which it
is a party.
6.11 Insurance. Each Company maintains insurance described on
Exhibit 6.11 and all such policies are in full force and effect, and no notice
of a material cancellation or termination (which has not been withdrawn or
revoked) has been received with respect to any such policy. Such policies are
sufficient for compliance with all material requirements of law and of all
material agreements to which each Company is a party.
6.12 Operations.
The Borrower has delivered to the Lender a true and complete copy of
each of the executed Transaction Documents. There have been no amendments or
modifications of such agreements (other than, after the date of this
Agreement, amendments or modifications permitted under Section 7.19), no party
to such agreements is in default of the terms thereof and such agreements are
in full force and effect. The representations and warranties of each Company,
and to the best knowledge of each Company, the other R&B Parties contained in
such agreements are true and correct in all material respects. Transaction
Documents currently required for the ownership, operation and maintenance of
the Vessel under the Charter are in full force and effect in all material
respects. There are no material agreements, instruments and undertakings
among the Companies and any other R&B Party relating to the Companies and the
Vessel other than the Transaction Documents.
Section 7. Covenants. Unless the Lender shall agree otherwise as
contemplated by Section 9.05 hereof, each Company (with respect to all matters
in this Section 7) agrees, so long as any of the Commitment is in effect and
until payment in full of all the Loan all interest thereon and all other
amounts payable by the Borrower to the Lender hereunder, to comply in all
material respects with the covenants contained in this Section 7.
7.01 Statements. The Borrower shall deliver to Lender:
(a) as soon as available and in any event within 120 days after
the end of each fiscal year of each of the Borrower and Reading & Bates the
audited consolidated statements of operations, stockholders equity and cash
flow of the Borrower and Reading & Bates, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, and
accompanied by an opinion on such statements of an independent certified
public accounting firm of recognized national standing acceptable to the
Lender (such accountants being called herein Reporting Accountants ), which
opinion shall state that such financial statements present fairly, in all
material respects, the financial position of each of the Borrower and Reading
& Bates as of the end of, and the respective results of operations of each of
the Borrower and Reading & Bates for, such fiscal year, in conformity with
GAAP;
(b) as soon as available and in any event within 2 Business Days
after Borrower s receipt of the Lockbox bank account statement from the
Lockbox Bank, the Monthly Statement and a list of all Drydocking Expenses paid
in such month, with copies of all supporting documents, including the invoices
for Drydocking Expenses;
(c) promptly following the delivery thereof to the Borrower or
to the Board of Directors or management of the Borrower, a copy of any
management letter or written report by independent public accountants
addressed to the Board of Directors of the Borrower or any committee of any
such board with respect to the financial condition, operations or business of
the Borrower (except for such letters or reports which relate only to tax
planning for the Borrower);
(d) promptly after the Borrower knows or has reason to know that
any Default has occurred and is continuing, a notice of such Default,
describing the same in reasonable detail;
(e) promptly after delivery or receipt thereof, copies of all
notices or documents given or received by the Borrower pursuant to any of the
Transaction Documents concerning (i) any default or alleged default under,
breach or alleged breach of, or the noncompliance with, any provision of any
Transaction Document, (ii) any prospective inability to perform under any
provision of any Transaction Document, (iii) any termination or attempted
termination of any Transaction Document, (iv) any proposed amendment,
supplement or other modification of any Transaction Document that under the
Loan Documents requires the approval of Lender, or (v) any Force Majeure, in
each case, which might reasonably be expected to have a material adverse
effect on the Borrower;
(f) promptly and in any event within five Business Days after
the existence of any of the following conditions, a certificate of an
authorized officer of the Borrower specifying in reasonable detail the nature
of such condition and the Borrower s or other R&B Party s proposed response
thereto: (i) the receipt by the Borrower after the date hereof of any
communication (written or oral) from a Governmental Authority that alleges
that any R&B Party is not in compliance with applicable environmental laws or
Governmental Approvals which noncompliance could have a material adverse
effect on the business, financial condition, operations or properties of the
Borrower or the ability of the Borrower or any other R&B Party to perform its
obligations in any material respect under each Transaction Document to which
it is a party, (ii) the Borrower shall obtain actual knowledge that there
exists any Environmental Loss pending or threatened against any other R&B
Party which could have a material adverse effect on the business, financial
condition, operations or properties of the Borrower or the ability of the
Borrower or any other R&B Party to perform its obligations in any material
respect under each Transaction Document to which it is a party, or (iii) the
Borrower obtains actual knowledge of any release, emission, discharge or
disposal of any Hazardous Substance that could form the basis of any
Environmental Loss against any other R&B Party which could have a material
adverse effect on the business, financial condition, operations or properties
of the Borrower or the ability of the Borrower or any other R&B Party to
perform its obligations in any material respect under each Transaction
Document to which it is a party. The Borrower will also maintain at the
Vessel and make available for inspection by Lender and its agents and
employees, accurate and complete records of all investigations, studies,
sampling and testing conducted, and all material remedial actions taken, by
the Borrower or, to its knowledge and to the extent obtained by the Borrower,
by any Governmental Authority or other Person in respect of Hazardous
Substances on or affecting the Vessel;
(g) within 30 days after the Borrower s fiscal quarter, the
quarterly financial statements of the Borrower; and
(h) concurrently with the delivery by a Company to a charterer
under a Charter Agreement, a copy of any invoice of fees due under such
Charter Agreement (including the actual operating days in such period, the oil
volume rate for such period, and the tariffs paid for such period);
(i) within five Business Days of its execution, a copy of each
Charter Agreement; and
(j) from time to time such other information and reports
regarding the matters described above or otherwise concerning the Vessel or
the financial condition, operations, business or properties of the Borrower as
the Lender may reasonably request.
The Borrower will furnish to the Lender, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of
its chief executive officer or chief financial officer to the effect that no
Default has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail and the action taken by
or proposed to be taken by the Borrower with respect thereto).
7.02 Taxes and Claims. Each Company will pay and discharge all
material taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits, or upon any property belonging to it, prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a Lien (other than a Permitted Lien) upon the property of
such Company; provided that such Company shall not be required to pay any such
tax, assessment, charge, levy or claim which is being contested in good faith
and by appropriate proceedings if it maintains adequate reserves with respect
thereto.
7.03 Insurance. Each Company will maintain insurance with
responsible companies, in the amounts and against the risks as is set forth in
Schedule 6.11, which coverage shall be the maximum available in the market.
7.04 Maintenance of Existence; Conduct of Business. Each Company
will preserve and maintain its corporate or other legal existence and all of
its material rights, privileges and franchises necessary for the normal
conduct of its business. Except as permitted by this Agreement, each Company
will maintain in force and effect all permits, licenses, patents, patent
rights, trademarks, trademark rights, trade names, trade name rights and
copyrights, the release or termination of which would have a material adverse
effect on the business, financial condition, operations or properties of each
Company, or on the ability of each Company to perform in any material respect
its obligations under each Transaction Document to which it is a party.
7.05 Maintenance of and Access to Properties. Except with
respect to assets permitted to be disposed of pursuant to Section 7.09, each
Company will keep all of its properties necessary in its business in
reasonable working order and condition, ordinary wear and tear excepted, and
will permit representatives of the Lender during normal business hours to
inspect the Vessel, its other locations and other properties and to examine
and make such extracts and copies from the books and records of each Company
as they may reasonably request.
7.06 Compliance with Applicable Laws. Each Company will comply
with the requirements of all applicable laws, rules, regulations and orders of
any governmental body or regulatory authority, a breach of which would have a
material adverse effect on the business, financial condition, operations or
properties of such Company or on the ability of such Company to perform its
obligations in any material respect under each Transaction Document to which
it is a party, except where contested in good faith and by appropriate
proceedings.
7.07 Litigation. Each Company will promptly notify the Lender in
writing (a) of all judgments against such Company and (b) of all litigation
and of all proceedings of which it is aware before any courts, arbitrators or
governmental or regulatory agencies to which any Company or any R&B Party is a
party, affecting the Transaction Documents or making claims in excess of
$500,000 or litigation or proceedings which, individually or in the aggregate,
if adversely determined could reasonably be expected to have a material
adverse effect upon the business, financial condition, operations or
properties of either Company or on the ability of either Company to perform in
any material respect its obligations under each Transaction Document to which
it is a party.
7.08 Indebtedness. The Borrower will not create, incur or suffer
to exist any Indebtedness except:
(a) Indebtedness to the Lender hereunder;
(b) other Indebtedness owed to the R&B Parties so long as such
Indebtedness is not to be repaid prior to this Loan being paid in full,
and such Indebtedness is subordinated on terms no less favorable than the
terms set forth on Exhibit 7.08;
(c) other Indebtedness incurred with the prior written consent
of the Lender.
7.09 Mergers, Etc. Neither Company will be a party to any merger
or consolidation, or sell, lease, assign, transfer or otherwise dispose of any
assets, or acquire assets from any Person, other than in the ordinary course
of business, except:
(a) dispositions of obsolete inventory or obsolete or worn-out
equipment; or
(b) dispositions or acquisitions of Investments permitted under
Section 7.11 hereof.
7.10 Liens. The Borrower and RB (U.K.) will not create or suffer
to exist any Lien upon any of its property or assets, now owned or hereafter
acquired, securing any Indebtedness or other obligation except Permitted
Liens.
7.11 Investments. The Borrower will not make or permit to remain
outstanding any advances, loans or other extensions of credit or capital
contributions (other than prepaid expenses in the ordinary course of business)
to (by means of transfers of property or assets or otherwise), or purchase or
own any stocks, bonds, notes, debentures or other securities of, any Person,
other than itself (all such transactions being herein called Investments ),
except (a) Liquid Investments; and (b) other Investments made or outstanding
with the prior written consent of the Lender, which consent will not be
unreasonably withheld or delayed.
7.12 Transactions with Affiliates. Except as expressly permitted
by this Agreement, the Borrower will not directly or indirectly: (a) make any
Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise
dispose of any assets or provide any service to an Affiliate; (c) merge into
or consolidate with or purchase or acquire assets from an Affiliate; or (d)
enter into any other transaction directly or indirectly with or for the
benefit of an Affiliate (including, without limitation, guarantees and
assumptions of obligations of an Affiliate) other than under the Transaction
Documents; provided that the Borrower may enter into any transaction with an
Affiliate in the ordinary course of business if the terms (including, without
limitation, payment terms and monetary or business consideration) thereof are
no less advantageous to the Borrower as the terms which would be obtained in a
comparable arm s length transaction with a Person not an Affiliate.
7.13 Guarantees. The Borrower will not incur, assume or permit
to exist any Guaranteed Obligation of the Borrower, except
(a) in favor of the Lender contained in the Loan Documents;
(b) Guaranteed Obligations constituting Indebtedness permitted
by Section 7.08 hereof; and
(c) other Guaranteed Obligations entered into with the prior
written consent of Lender, which consent will not be unreasonably
withheld or delayed.
7.14 Further Assurances. At any time or from time to time upon
the request of the Lender, each Company shall execute and deliver (or cause to
be executed and delivered) such further documents and do such other acts and
things as the Lender may reasonably request in order to effect fully the
transactions contemplated by of the Transaction Documents.
7.15 Dividends. Without the prior written consent of the Lender,
the Borrower will not declare or pay any dividend, purchase, redeem or
otherwise acquire for value any of its stock now or hereafter outstanding,
return any capital to its stockholders, or make any distribution of its assets
to its stockholders.
7.16 ERISA and Pension Plan Compliance. The Borrower covenants
that it will not nor permit any Subsidiary to:
(a) terminate or withdraw from any Plan resulting in the
incurrence of any material liability to the Pension Benefit Guaranty
Corporation;
(b) engage in or permit any Person to engage in any prohibited
transaction (as defined in Section 4975 of the Code) involving any Plan
(other than a Multiemployer Plan) which would subject the Borrower or any
Subsidiary to any material tax, penalty or other liability.
(c) incur or suffer to exist any material accumulated funding
deficiency (as defined in Section 302 of ERISA and section 412 of the
Code), whether or not waived, involving any Plan (other than a
Multiemployer Plan); or
(d) allow or suffer to exist any risk or condition which
presents a risk of incurring a material liability to the Pension Benefit
Guaranty Corporation.
7.17 Environmental Matters. Except for violations, or situations
requiring remedial action, which would not have a material adverse effect on
the Vessel or the business, financial condition, operations or properties of
the Companies or on the ability of each Company to perform its obligations in
any material respect under each Transaction Document to which it is a party,
no Company will cause or permit any Property to be in violation of, or do
anything or permit anything to be done which will subject any such Property to
any remedial obligations under any applicable international, national or
European laws (including the common law) or liability under industry
agreements. Each Company will establish and implement such procedures as may
be reasonably necessary to, on a reasonably periodic basis, determine whether,
and assure that except for acts or omissions which would not have a material
adverse effect on the Vessel or the business, financial condition, operations
or properties of such Company or on the ability of such Company to perform in
all material respects its obligations under each Transaction Document to which
it is a party, each company shall not release, discharge, permit or cause the
escape or disposal of Hazardous Substances in a manner which may form the
basis of a future claim, violation or Environmental Loss, demand or action
seeking remedial action of any site, location, body of water including
international or national, coastal and inland waters or cause damages to
personal property or personal injury, disease or death, which would have a
material adverse effect on the Vessel or the operation, financial condition,
operating results or business prospects of each Company or the ability to
perform its obligations under each Transaction Document.
7.18 Performance of Transaction Documents. Each Company shall
perform all of its obligations under each Transaction Document to which it is
a party or by which it or its assets is bound except where such failure to
perform is not reasonably expected to have a material adverse effect on the
business, financial condition, operations or properties of such Company or the
ability of such Company to perform its obligations under each Transaction
Document to which it is a party.
7.19 Amendment of Transaction Documents. Without the prior
written consent of the Lender, neither Company shall (a) cancel or terminate
or agree to or permit any amendment, supplementation, or other modification
of, any Transaction Document, (b) waive timely performance or observance by
any Person (other than Lender) of any term or provision of such Transaction
Document, (c) exercise any options or remedies, make any elections under, or
give any consent under, any such Transaction Document, (d) compromise or
settle any claim against any R&B Party (other than Lender), (e) enter into any
additional Charter or other Transaction Documents, in each of the foregoing
cases, unless such action or inaction is not reasonably expected to have a
material adverse effect on the business, financial condition, operations or
properties of such Company or the ability of such Company to perform its
obligations under each Transaction Document to which it is a party.
7.20 Operation of Vessel. Neither Company nor its affiliates will
take any action that will cause the Vessel to be operated in the United
States, Mexican or Canadian waters.
7.21 Sale or Modification of Vessel. The Companies shall not
sell, transfer or otherwise encumber, the Vessel or any interest therein
without the prior written consent of the Lender, other than pursuant to the
Option Agreement, or in the case of any Lien, a Permitted Lien or upon
prepayment of the Loan in accordance with Section 3.02. Neither Company shall
modify the Vessel in any material respect without sixty (60) days prior
written notice to the Lender.
7.22 Acknowledgment of Charter Assignment. Each charterer under
each Charter Agreement shall, to protect the Lender s Lien in the Charter
Agreement and the amounts payable thereunder, acknowledge the assignment of
such rights under the Assignment of Charter and agree to direct its payments
under such Charter Agreement to the Lockbox Account.
Section 8. Defaults.
8.01 Events of Default. If one or more of the following events
(herein called Events of Default ) shall occur and be continuing:
(a) default in the payment of any Obligation when due and such
default shall continue for two Business Days thereafter (a Nonpayment ); or
(b) any Company shall default in the payment when due (including
any applicable grace period) of any principal of or interest on any
Indebtedness having an outstanding principal amount, individually or in the
aggregate, of at least $500,000 (other than the Loan or any other amount
payable hereunder); or any event or condition shall occur which results in the
acceleration of the maturity of any such Indebtedness or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of any
such Indebtedness or any Person acting on such holder s behalf to accelerate
the maturity thereof; or
(c) any representation or warranty made or deemed made by any R&
B Party herein or in any Transaction Document, or in any certificate or other
document furnished to the Lender pursuant to the provisions of any Transaction
Document, shall prove to have been false or misleading in any material respect
as of the time made or furnished and such representation and warranty
continues to be false and misleading in any material respect; or
(d) either Company shall default in any material respect in the
performance of any of its obligations or breach any of its covenants under
clause (d) of Section 7.01, or any of its obligations in Sections 7.04 or 7.08
through 7.22; Reading & Bates (U.K.) shall default in the performance of any
of its obligations under the Donan Charter Agreement or the Bareboat Charter
Agreement; either TRB Subsidiary or the Borrower shall default in any material
respect in the performance of any of its obligations or duties under the
Option Agreement; or any R&B Party shall default in any material respect in
the performance of any of its obligations or breach any of its covenants in
any Transaction Document, and such default shall continue unremedied for a
period of 30 days after notice thereof to the Borrower by the Lender; or
either Company shall default in any material respect in the performance of any
of its other obligations or breach any of its other covenants in any Loan
Document, and such default shall continue unremedied for a period of 30 days
after the earlier of (i) the date the Borrower was required to notify the
Lender of such Default pursuant to Section 7.01(d) or (ii) notice thereof to
the Borrower by the Lender; or
(e) the Borrower or any R&B Party shall admit in writing its
inability to, or be unable or be deemed for the purposes of any law to be
unable to, pay its debts generally as such debts become due; or
(f) the Borrower or any R&B Party shall (i) apply for or consent
to the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under any Bankruptcy Law (as now or hereafter
in effect), (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up, or composition
or readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under any Bankruptcy Law, or (vi) take any corporate or
partnership action for the purpose of effecting any of the foregoing; or
(g) (i) a proceeding or case shall be commenced, without the
application or consent of the Borrower or any R&B Party in any court of
competent jurisdiction, seeking (x) its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of its debts,
(y) the appointment of a trustee, receiver, custodian, liquidator,
administrative receiver, administrator or the like of such Person or of all or
any substantial part of its assets, or (z) similar relief in respect of it
under any law relating to bankruptcy, insolvency, reorganization, winding-up,
or composition or adjustment of debts, and such proceeding or case shall
continue undismissed, or an order, judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in effect, for
a period of 90 days; or (ii) an order for relief against the Borrower or any
R&B Party shall be entered in an involuntary case under any Bankruptcy Law; or
(h) a final judgment or judgments for the payment of money shall
be rendered by a court or courts against the Borrower in excess of $500,000 in
the aggregate which is not covered by insurance, subject to a customary
deductible, and the same shall not be discharged (or provision shall not be
made for such discharge), or a stay of execution thereof shall not be
procured, within 45 days from the date of entry thereof, or the Borrower shall
not, within said period of 45 days, or such longer period during which
execution of the same shall have been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal; or
(i) any of Transaction Documents shall be terminated prior to
the end of its stated term, or shall cease to be in full force and effect and
valid, binding and enforceable in accordance with its terms, for whatever
reason (other than by prepayment or with the consent of the Lender pursuant to
Section 9.05); or
(j) Reading &Bates shall fail to hold, directly or indirectly,
at least 100% of the outstanding shares of voting stock of the Borrower or
the Borrower fails to hold at least 90% of the partnership interest in the
Partnership; or
(k) any Transaction Document shall cease, for any reason, to be
in full force and effect (other than in accordance with its terms) or any
party thereto (other than (i) the Lender or (ii) an Affiliate of the Lender
not acting in good faith) shall so assert in writing; or any Security
Instrument shall cease to be effective to grant a Lien on the collateral
described therein with the priority purported to be created thereby;
(l) any R&B Party shall be in default under or shall have
breached any Transaction Document to which it is a party and any grace period
provided for therein with respect to such default or breach shall have lapsed
and such default would reasonably be expected to have a material adverse
effect on the business, financial condition, operations or properties of the
Borrower or the ability of the Borrower or any R&B Party to perform its
obligations under each Transaction Document to which it is a party; or
(m) any Person presents a petition for the winding-up of any R&B
Party (other than one which is frivolous or vexatious) and the same is not
withdrawn, dismissed or discharged within 7 Business Days; or
(n) any person presents a petition for the administration of any
R&B Party; or
(o) any order for the administration of any R&B Party is made or
an order is made or a resolution is passed (other than for the purposes of a
reconstruction or amalgamation previously approved in writing by the Lender)
for the winding-up of such R&B Party; or
(p) any Governmental Authority or any Person acting under any
Governmental Authority shall have commenced any proceedings (i) to condemn,
seize or appropriate all or any substantial part of the Vessel or (ii) to
displace the management of the Borrower or to curtail the Borrower s authority
to conduct its business; provided that no action of any Governmental Authority
or any other Person described in clause (ii) of this subsection shall
constitute an Event of Default unless and until (x) the Lender shall have
determined, in their sole discretion, that such action has had, or could
reasonably be expected to have, a material adverse effect on the business,
financial condition, operations or properties of the Borrower or the ability
of the Borrower or any R&B Party to perform its obligations under each
Transaction Document to which it is a party and (y) Borrower shall have been
given notice of such determination;
THEREUPON: the Lender may (a) declare the Commitment terminated (whereupon
the Commitment shall be terminated) and/or (b) declare the principal amount
then outstanding of and the accrued and unpaid interest on the Loan and
commitment fees and all other amounts payable hereunder and under the Note to
be forthwith due and payable, whereupon such amounts shall be and become
immediately due and payable, without notice (including, without limitation,
notice of intent to accelerate and notice of acceleration), presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by the Borrower and (c) proceed to enforce its rights under
the Security Instruments or otherwise available at law or in equity; provided
that in the case of the occurrence of an Event of Default referred to in
clauses (f) or (g) of this Section 8.01, the Commitment shall be automatically
terminated and the principal amount then outstanding of and the accrued
interest on the Loan and fees and all other amounts payable hereunder and
under the Note shall be and become automatically and immediately due and
payable, without notice (including, without limitation, notice of intent to
accelerate and notice of acceleration), presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower.
8.02 Application of Proceeds. All proceeds received after
maturity of the Note, whether by acceleration or otherwise shall be applied
first to reimbursement of reasonable expenses and indemnities provided for in
this Agreement and the Security Instruments; second to fees and other amounts
owing under this Agreement or the Loan Documents; third to accrued and unpaid
interest on the Note; fourth to principal outstanding on the Note; and, to the
extent of any excess to be paid to the Borrower or as otherwise required by
any court of competent jurisdiction.
Section 9. Miscellaneous.
9.01 Waiver. No failure on the part of the Lender to exercise
and no delay in exercising, and no course of dealing with respect to, any
right, power or privilege under any Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege thereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided in the
Loan Documents are cumulative and not exclusive of any remedies provided by
law.
9.02 Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made by telex, telegraph,
telecopy, cable or other writing and telexed, telecopied, telegraphed, cabled,
delivered or sent by certified or registered mail, return receipt requested,
to the intended recipient at the Address for Notices specified below its
name on the signature pages hereof; or, as to any party, at such other address
as shall be designated by such party in a notice to the Borrower and the
Lender given in accordance with this Section 9.02. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have
been duly given when transmitted by telex or telecopier (with receipt
confirmed by telex or telecopier), sent by the telegraph or cable office or
personally delivered or, in the case of a mailed notice, upon receipt, in each
case given or addressed as aforesaid.
9.03 Expenses, Etc. The Borrower, without duplication, agrees to
pay or reimburse the Lender for paying: (a) the reasonable fees and expenses
of counsel to the Lender in connection with (i) the preparation, execution and
delivery of this Agreement (including the Exhibits hereto) and the Security
Instruments and the making of the Loan, however such fee shall not exceed
$131,000, and (ii) any modification, supplement or waiver of any of the terms
of this Agreement, or any other Transaction Document; (b) all reasonable costs
and expenses of the Lender (including reasonable counsels fees) in connection
with the enforcement of this Agreement, or any other Transaction Document; (c)
all transfer, stamp, documentary or other similar taxes, assessments or
charges levied by any governmental or revenue authority in respect of this
Agreement, or any other Transaction Document or any other document referred to
herein or therein; and (d) all costs, expenses, taxes, assessments and other
charges incurred in connection with any filing, registration, recording or
perfection of any security interest contemplated by this Agreement or any
other Transaction Document referred to herein or therein.
9.04 Indemnification. The Borrower shall
(a) indemnify the Lender and each of their Affiliates and each
of their officers, directors, employees, representatives, agents, attorneys,
accountants and experts ( Indemnified Parties ) from, hold each of them
harmless against and promptly upon demand pay or reimburse each of them for
the Indemnity Matters which may be incurred by or asserted against or involve
any of them (whether or not any of them is designated a party thereto) as a
result of, arising out of or in any way related to (i) any actual or proposed
use by the Borrower of the proceeds of the Loan, (ii) the execution, delivery
and performance of this Agreement and the other Transaction Documents by the
R&B Parties thereto, (iii) the operations of the business of the Borrower,
(iv) the failure of the Borrower or any other R&B Party to comply with the
terms of any Transaction Documents, including this Agreement, or with any
applicable governmental requirement, (v) any inaccuracy of any representation
or any breach of any warranty of the Borrower set forth in this Agreement or
the other Transaction Documents, or (vi) any other aspect of this Agreement
and the Transaction Documents, including, without limitation, the reasonable
fees and disbursements of counsel and all other reasonable expenses incurred
in connection with investigating, defending or preparing to defend any such
action, suit, proceeding (including any investigations, litigation or
inquiries) or claim and including all Indemnity Matters arising by reason of
the ordinary negligence of any Indemnified Party, but excluding therefrom all
Indemnity Matters arising by reason of the gross negligence or wilful
misconduct of any Indemnified Party; and
(b) indemnify and hold harmless from time to time the
Indemnified Parties from and against any and all losses, claims, cost recovery
actions, administrative orders or proceedings, damages and liabilities to
which any such Person may become subject (i) under any environmental law
described in Section 6.10 hereof applicable to the Borrower or any of its
Properties, including without limitation, the treatment or disposal of
Hazardous Substances on any of its Properties, (ii) as a result of the breach
or non-compliance by the Borrower with any environmental law described in
Section 6.10 hereof applicable to the Borrower, (iii) due to past ownership by
the Borrower of any of its Properties or past activity on any of its
Properties or past activity on any of its Properties which, though lawful and
fully permissible at the time, could result in present liability, (iv) the
presence, use, release, storage, treatment or disposal of Hazardous Substances
on or at any of the Properties owned or operated by the Borrower, or (v) any
other environmental, health or safety condition in connection with this
Agreement, the Note or any other Transaction Documents, provided, however, no
indemnity shall be afforded under this Section 9.04(b) in respect of any
Property for any occurrence arising from the acts or omissions of the Lender
during the period after which such Person, its successors or assigns shall
have obtained possession of such Property (whether by foreclosure or deed in
lieu of foreclosure, as mortgagee-in-possession or otherwise).
(c) The Borrower s obligations under this Section 9.04 shall
survive any termination of this Agreement and the payment of the Note and
shall continue thereafter in full force and effect.
(d) The Borrower shall pay any amounts due under this Section
9.04 within thirty (30) days of the receipt by the Borrower of written notice
of the amount due.
9.05 Amendments, Etc. No amendment or waiver of any provision of
this Agreement or the Note, nor any consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be agreed or
consented to in writing by the Lender and the Borrower, which consent shall
not be unreasonably delayed or withheld, and each such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
9.06 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the Borrower may not assign its rights or obligations hereunder or
under the Note without the prior written consent of the Lender. Lender may
not assign its rights or obligations hereunder without the prior written
consent of the Borrower (except as otherwise provided in subparagraphs (b) and
(c) below).
(b) The Lender may assign to one or more assignees that are the
Lender s Affiliates all or a portion of its rights and obligations under this
Agreement. The Lender shall give the Borrower prompt notice thereof.
(c) The Lender may transfer, grant or assign participations in
all or any part of its interests hereunder pursuant to this subsection to any
Person that is an Affiliate of the Lender. The Lender shall give the Borrower
prompt notice thereof.
(d) The Lender may furnish any information concerning the
Borrower in its possession from time to time to assignees and participants
(including prospective assignees and participants).
9.07 Survival. The obligations of the Borrower under Sections
4.01, 4.03, 4.04, 9.03 and 9.04 hereof shall survive the repayment of the Loan
and the termination of the Commitment. The other obligations of the parties
to this Agreement not previously accrued under the terms of this Agreement
shall terminate upon repayment of the Loan and the termination of the
Commitment.
9.08 Captions and Final Agreement. Captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
This Agreement, together with the other written agreements and papers executed
herewith in connection with this Agreement, represents the final agreement
among the parties hereto with respect to the subject matter hereof. This
Agreement and such writings supersede all prior proposals, negotiations,
agreements and understandings related to such subject matter. Each of the
Borrower and the Lender 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 Agreement and such other documents. This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Agreement by signing any such counterpart.
9.09 No Usury Intended. Notwithstanding any provision of this
Agreement or the Transaction Documents, if at any time the rate of interest
contracted for, charged or received on any Advance or the Loan or any other
amount payable as interest in connection with the Transaction Documents
exceeds the maximum non-usurious interest rate permissible for commercial
borrowers under applicable law ( Maximum Rate ), the rate of interest charged
hereunder shall be limited to the Maximum Rate. In such event, if the rate of
interest chargeable under this Agreement or the Transaction Documents on any
Advance or the Loan or any other amount at any time is subsequently less than
the Maximum Rate, the principal amount of such Advance or the Loan shall bear
interest at the Maximum Rate until the total amount of interest paid or
accrued hereunder equals the amount of interest which would have been paid or
accrued hereunder if the stated rates of interest set forth in this Agreement
had at all times been in effect. In the event, upon payment in full of all
amounts payable hereunder, the total amount of interest paid or accrued under
the terms of this Agreement or the Transaction Documents is less than the
total amount of interest which would have been paid or accrued if the rates of
interest set forth in this Agreement had, at all times, been in effect, then
the Borrower shall, to the extent permitted by applicable law, pay to the
Lender an amount equal to the difference between (a) the lesser of (i) the
amount of interest which it would have been charged if the Maximum Rate had,
at all times, been in effect or (ii) the amount of interest which would have
accrued on the Advance or the Loan to the Borrower if the rates of interest
set forth in this Agreement had at all times been in effect and (b) the amount
of interest actually paid or accrued on such Advance or Loan under this
Agreement. In the event the Lender ever receives, collects, charges or
applies as interest any sum in excess of the Maximum Rate, such excess amount
shall be applied to the reduction of the principal balance of the Loan or to
other amounts (other than interest) payable hereunder or the Transaction
Documents, and if no such principal is then outstanding, such excess or part
thereof remaining shall be paid to the Borrower.
9.10 Invalidity. In the event that any one or more of the
provisions contained in the Note, this Agreement, or in any other Loan
Document 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 the Note, this Agreement or any other Loan Document.
9.11 No Consequential Damages. Except as specifically provided
for herein to the contrary, neither the Borrower nor the Lender shall be
liable to the other for any consequential, incidental, indirect or punitive
damages of any kind or character, including, but not limited to, loss of use,
loss of profit, loss of revenue, loss of product or production, whether
arising under the Loan Documents or as a result of, relating to or in
connection with, the transactions contemplated hereby (the Excluded
Damages ), and no claim for Excluded Damages shall be made by the Borrower or
the Lender against the other Person, whether based on negligence,
seaworthiness, breach of warranty, breach of agreement, statute, strict
liability or otherwise.
9.12 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL.
(a) THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
(b) THE BORROWER AND R&B (U.K.) HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY
AND THE UNITED KINGDOM FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE
BORROWER 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 SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE BORROWER, R&B (U.K.), AND THE LENDER HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
9.13 Agent for Service of Process. The Borrower and R&B (U.K.)
hereby irrevocably designate The Prentice-Hall Corporation Systems, Inc., with
offices at 500 Central Avenue, Albany, New York 12206-2290, as agent to
receive for and on behalf of the Borrower service of process in New York. In
the event that The Prentice-Hall Corporation Systems, Inc. resigns or ceases
to serve as the Borrower s or R&B (U.K.) s agent for service of process
hereunder, the Borrower and R&B (U.K.) 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 Lender of the name and address of such agent.
The Lender agrees to cause a copy of such process served on such agent to be
promptly forwarded to the Borrower and R&B (U.K.) at its address set forth
underneath its signature below, and the Borrower and R&B (U.K.) agree that the
failure of the Borrower and R&B (U.K.) 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 Borrower and R&B (U.K.) agree that the failure of
its agent for service of process to give any notice of any such service of
process to the Borrower and R&B (U.K.) 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 Borrower and
R&B (U.K.) available to be served, then the Borrower and R&B (U.K.) further
irrevocably consent to the service of process by the mailing thereof by the
Lender by registered or certified mail, postage prepaid, to the Borrower and
R&B (U.K.) at its address listed on the signature pages hereof. Nothing
(Remainder of Page Intentionally Deleted)
in this Section 9.13 shall affect the right of the Lender to serve legal
process in any other manner permitted by law or affect the right of the Lender
to bring any action or proceeding against the Borrower and R&B (U.K.) or their
property in the courts of any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
TRB HOLDING CORPORATION.
as Borrower
By:
T.W. Nagle
Executive Vice President
Finance and Administration
Address for Notices:
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: T.W. Nagle, Executive Vice President
Finance and Administration
Telecopy Number (281) 496-0285
With copies to:
Wayne K. Hillin
901 Threadneedle, Suite 200
Houston, Texas 77079
Telecopy Number: (281) 496-0285
READING & BATES (U.K.) LIMITED
By:
T.W. Nagle
Authorized Agent
Address for Notices:
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: T.W. Nagle, Executive Vice President
Finance and Administration
Telecopy Number (281) 496-0285
NISSHO IWAI EUROPE PLC,
as Lender
By:
H. Iwano
Attorney-in-Fact
Address for Notices:
Bastion House
140 London Wall
London
EC2Y 5JT
United Kingdom
Attention: Manager of Marine Department
Telecopy Number: 011-4471-588-0391
With a copy to:
Nissho Iwai Corporation
4-5, Akasaka 2-chome
Minato-ku, Tokyo 107, Japan
Attention: Manager, Marine Project Section 2
Marine & Offshore Engineering Department
Telecopy Number: 011-813-3588-4547
and
Baker & Botts, L.L.P.
One Shell Plaza
Houston, Texas 77002
Attention: Stephen Krebs
Telecopy Number: (713) 229-1522
Address for Applicable Lending Office:
See Address for Notices
EXHIBIT 2.05
Form of Note
NOTE
$38,000,000.00 New York, New York
______________, 199__
FOR VALUE RECEIVED, TRB Holding Corporation, a Delaware corporation
(together with its successors, the Borrower ), hereby promises to pay to the
order of Nissho Iwai Europe PLC (the Lender ), by disbursement from the
Lockbox maintained at the principal office of Sanwa Bank Limited, New York
Branch, New York, New York, the principal sum of $38,000,000 (or such lesser
amount as shall equal the aggregate unpaid principal amount of the Loan made
by the Lender to the Borrower under the Loan Agreement referred to below), in
lawful money of the United States of America and in immediately available
funds, on the dates and in the principal amounts provided in the Loan
Agreement (as defined below), and to pay interest on the unpaid principal
amount of each Advance, at such office, in like money and funds, for the
period commencing on the date of such Advance until such Advance shall be paid
in full, at the rates per annum and on the dates provided in the Loan
Agreement.
The Lender is hereby authorized by the Borrower to endorse on the
schedules (or a continuation thereof) attached to this Note, the amount and
date of each Advance made by the Lender to the Borrower under the Loan
Agreement, and the amount and date of each payment or prepayment of principal
of such Loan received by the Lender, provided that any failure by the Lender
to make any such endorsement shall not affect the obligations of the Borrower
under the Loan Agreement or under this Note in respect of such Advance.
This Note is the Note referred to in that certain Loan Agreement (as
modified and supplemented and in effect from time to time, the Loan
Agreement ) dated as of December 14, 1996 between the Borrower, Reading &
Bates (U.K.) Limited and the Lender, and evidences the Loan made by the Lender
thereunder. Capitalized terms used in this Note have the respective meanings
assigned to them in the Loan Agreement.
The Loan Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of the
Loan upon the terms and conditions specified therein.
The Loan Agreement further provides that this Note is secured by the
Security Instruments, as defined therein, covering the collateral described in
such Security Instruments.
This Note shall be governed by and construed in accordance with the
laws of the State of New York.
TRB HOLDING CORPORATION
By:
Name:
Title:
ADVANCE AND PAYMENTS OF PRINCIPAL AND INTEREST
Amount of Amount of
Principal Interest Unpaid
Borrowing Amount of Paid or Paid or Principal Notation
Date Loan Prepaid Prepaid Balance Made By
Exhibit 3.01
FORM
OF
DRAWDOWN NOTICE
Nissho Iwai Europe Plc (the "Lender")
Bastion House
140 London Wall
London EC2Y 5JT
England
Attention: Manager of Marine Department
Dear Sirs:
Reference is made to the Loan Agreement dated as of December 14, 1996
(the "Loan Agreement"), between TRB Holding Corporation (the "Borrower"),
Reading & Bates (U.K.) Limited and the Lender. Capitalized terms used herein
and not otherwise defined herein have the meanings assigned to such terms in
the Loan Agreement.
The Borrower, hereby requests a borrowing under the Loan Agreement in
the aggregate principal amount of $38,000,000 (the "Proposed Borrowing").
Please make the proceeds of the Proposed Borrowing available to
Account No. _____________ at ________________________________________.
By each of the delivery of this Drawdown Notice and the acceptance of
the Advance made by the Lender in response to this Drawdown Notice, the
Borrower represents and warrants that the conditions to the Borrowing
specified in the Loan Agreement have been satisfied with respect to the
Proposed Borrowing.
Very truly yours,
TRB HOLDING CORPORATION
By:
Name:
Title:
cc: Nissho Iwai American Corporation
Suite 800, Three Riverway
Houston, Texas 77056
Attention: H. Kawaguchi
EXHIBIT 6.11
COMPANIES INSURANCE
As specified in Exhibit 6.11, the Companies shall maintain the following
insurance coverage:
1. Workmen's Compensation and Employers' Liability Insurance
All of the Companies employees shall be covered for statutory benefits
as set forth and required by applicable law in the Vessel s area of
operation or such other jurisdiction under which the Companies 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 Companies. 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 with such club or under forms
of policies approved by the Lender. 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
production 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 Lender. 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 Lender.
4. Excess Liability
The Companies 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 Companies, including but not
limited to insurance required under Paragraphs 1 and 2 (oil pollution
sublimit $90 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) $105,000,000; 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 $90,000,000 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 Companies. The Companies 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 Lender 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 Lender and recommended by a reputable
independent marine insurance broker as insurance which other responsible
tanker owners carry for their benefit and the benefit of their lenders
and which it would be imprudent not to carry for the protection of the
Companies and the Lender in view of the nature of the Vessel and the
Vessel's operations. Applicable when the Vessel is attached to the
wellhead, fixed entry coverage issued by the Vessel s P&I Club or
equivalent coverage in an amount of not less than $400,000,000 per
occurrence. Applicable when the Vessel is acting as a shuttle tanker,
mutual entry coverage issued by the Vessel s P&I Club or equivalent
coverage in an amount of not less than $500,000,000 per occurrence.
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 Lender for such
operations under the Loan Documents), 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 the Loan Documents.
9. NIC Parties as Additional Insured
All coverages and other insurance policies carried by the Companies or
that the Companies are required at any time to maintain pursuant to the
Loan Documents shall name NIC Parties as additional insureds (other than
the protection and indemnity and oil pollution coverages extended by UK
P&I Club, foreign workers compensation and employer s liability
coverage) and loss payee for all risks and losses as provided in the Loan
Agreement and the Assignment of Insurance Proceeds.
10. Reporting Requirements
(a) On each anniversary of the Closing Date, and each time there is a
reduction or material change in the insurance coverage carried on the
Vessel, the Companies will furnish to the Lender a detailed report
signed by independent marine insurance brokers (who may be the
insurance brokers regularly employed by the Companies ) appointed by
the Companies and reasonably acceptable to the Lender, 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 Lender, is in compliance with the terms of Section 6.11 and is
comparable with that carried by other responsible operators of
similar production vessels. The Companies will cause such firm to
agree to advise the Lender promptly of any lapse of any such
insurance by expiration, failure to renew or otherwise and of any
default in payment of any premium and of any other act or omission on
the part of the Companies of which it has knowledge and which might,
in its opinion, invalidate or render unenforceable, in whole or in
part, any insurance on the Vessel. The Companies shall also cause
such firm to agree to mark its records and to use its best efforts to
advise the Lender, at least ten (10) business days prior to the
expiration date of any insurance carried pursuant to the Loan
Agreement, that such insurance has been renewed or replaced with new
insurance which complies with the provisions of the Loan Agreement,
and such advice shall be in the same detail in respect of such
renewed or replacement insurance as is required in respect of
insurance described in the aforesaid reports.
(b) Copies of all insurance policies required to be maintained under
Section 6.11 of the Loan Agreement or certificates evidencing the
coverage thereof, shall be delivered to and held by the Lender, and
so long as the Loan Agreement remains in effect, the Companies shall
deliver to the Lender not later than January 31 of each year,
commencing January 31, 1998, a schedule certified to be correct by a
responsible officer setting forth all insurance in force as of
January 1 of that year including but not limited to the policy
numbers, the name and address of the insurers, the amount of each
policy, and the expiry date of each policy.
(c) In the event the Vessel suffers serious damage reasonably estimated
at the time to cost more than $500,000 to repair or to require the
Vessel be withdrawn from service and placed in drydock to effect such
repairs immediately, the Companies shall notify the Lender by
telegram within twenty-four (24) hours after the event shall have
come to its knowledge and in such event the Lender shall have come to
its knowledge and in such event the Lender shall have the right to
have an independent survey of the damage at the Companies s expense
and if such survey be requested the Companies shall lend all needed
assistance.
11. Additional Provisions
All policies (other than the protection and indemnity and oil pollution
coverages extended by UK P&I Club and the foreign workers compensation
and employers liabilitly coverages) shall include the following:
(i) breach of warranty protection to the NIC Parties, (ii) waiver of
subrogation clause, (iii) at least [10] [30] (or 7, in the case of war
risk) days prior written notice of cancellation or material
modification, and (iv) provide that the interests of the Lender under the
insurance policy shall not be impaired in any way by any change in the
title of ownership of the Vessel or by any omission or neglect or by the
performance of any act in violation of any terms or conditions of the
policy or because of any false statement concerning the policy or the
subject thereof by the insured or the insured s employees, agents or
representatives whether occurring before or after the date hereof or
whether before or after any loss. The insurance (other than pollution
coverage extended by UK P&I Club and the foreign workers compensation
and employers liabilitly coverages) shall be primary, without right of
contribution from any other insurance which may be carried by the NIC
Parties, and (other than the protection and indemnity and oil pollution
coverages extended by the UK P&I Club) contain a waiver of set off of
premiums against claims proceeds and provide for no recourse for premium
payments by the NIC Parties. Each of the Companies agree that it will
not do any act, nor voluntarily suffer nor permit any act to be done,
whereby any insurance required hereunder shall or may be suspended,
impaired or defeated and will not suffer nor permit the Vessel to engage
in any voyage, nor to carry any cargo not permitted under the policies of
insurance in effect, without first covering such Vessel with insurance
reasonably satisfactory in all respects, including the amount thereof, to
the Lender for such voyage or the carriage of such cargo.
EXHIBIT 7.08
FORM OF SUBORDINATION PROVISIONS
Subordination.
(a) The indebtedness ("Subordinated Debt") evidenced by this
instrument is subordinate and junior in right of payment to all Senior Debt
(as defined in subdivision (b)) of the Companies to the extent provided
herein.
(b) For all purposes of these subordination provisions the term
"Senior Debt" shall mean all principal of and premium, if any, and interest
and expenses under the Loan Agreement, dated as of December 14, 1996, among
the Companies and Nissho Iwai Europe Plc ( NIEP ), and (ii) all other
indebtedness of the Companies or any Subsidiary for borrowed money. The
Senior Debt shall continue to be Senior Debt and entitled to the benefits of
these subordination provisions irrespective of any amendment, modification or
waiver of any term of the Senior Debt or extension or renewal of the Senior
Debt.
(c) No direct or indirect payment (in cash, property or securities or
by setoff or otherwise) shall be made on account of the principal of or
premium, if any, or interest on any Subordinated Debt, or as a sinking fund
for the Subordinated Debt, or in respect of any redemption, retirement,
purchase or other acquisition of any of the Subordinated Debt until the Senior
Debt shall be paid in full in cash.
(d) In the event of:
(i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Companies, its creditors as such or its property,
(ii) any proceeding for the liquidation, dissolution or other
winding-up of the Companies, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings,
(iii) any assignment by the Companies for the benefit of
creditors,
(iv) any other marshalling of the assets of the Companies, or
(v) any acceleration of any Senior Debt,
all Senior Debt (including any interest thereon accruing at the legal rate
after the commencement of any such proceedings and any additional interest
that would have accrued thereon but for the commencement of such proceedings)
shall first be paid in full before any payment or distribution, whether in
cash, securities or other property, shall be made to any holder of any
Subordinated Debt on account of any Subordinated Debt.
(e) So long as any Senior Debt remains outstanding, the holders of
the Subordinated Debt or any trustee or other representative acting on their
behalf may not declare all or any part of the Subordinated Debt due and
payable prior to maturity, and the holders of Subordinated Debt may take no
further action to declare such Subordinated Debt due and payable, or to
enforce obligations in respect of such Subordinated Debt, including, without
limitation, the exercise of any other remedy.
(f) If any payment or distribution of any character or any security,
whether in cash, securities or other property, shall be received by any holder
of Subordinated Debt in contravention of any of the terms hereof and before
all the Senior Debt shall have been paid in full, such payment or distribution
or security shall be received in trust for the benefit of, and shall be paid
over or delivered and transferred to, the holders of the Senior Debt at the
time outstanding in accordance with the priorities then existing among such
holders for application to the payment of all Senior Debt remaining unpaid, to
the extent necessary to pay all such Senior Debt in full. In the event of the
failure of any holder of any Subordinated Debt to endorse or assign any such
payment, distribution or security, each holder of Senior Debt is hereby
irrevocably authorized to endorse or assign the same.
(g) No present or future holder of any Senior Debt shall be
prejudiced in the right to enforce subordination of Subordinated Debt by any
act or failure to act on the part of the Companies. Nothing contained herein
shall impair, as between the Companies and the holder of this Subordinated
Debt, the obligation of the Companies to pay to the holder hereof the
principal hereof and interest hereon as and when the same shall become due and
payable in accordance with the terms hereof.
(h) Upon the payment in full of all Senior Debt, the holders of
Subordinated Debt shall be subrogated to all rights of any holders of Senior
Debt to receive any further payments or distributions applicable to the Senior
Debt until the Subordinated Debt shall have been paid in full, and, for the
purposes of such subrogation, no payment or distribution received by the
holders of Senior Debt of cash, securities or other property to which the
holders of the Subordinated Debt would have been entitled except for these
subordination provisions shall, as between the Companies and its creditors
other than the holders of Senior Debt, on the one hand, and the holders of
Subordinated Debt, on the other, be deemed to be a payment or distribution by
the Companies to or on account of Senior Debt.
(i) No Subordinate Debt may be secured or subject to credit
enhancement.
(j) The provisions in sections (a) through (i) above shall not be
amended or modified and no term or provision hereof shall be waived without
the express prior written consent of the holders of Senior Debt.
(k) The holders of this Subordinated Debt hereby (i) undertake and
agree to execute, verify, and deliver and file proofs of claim, consents,
assignments or other instruments which any holder of Senior Debt may at any
time reasonably require in order to provide and realize upon any rights or
claims pertaining to the Subordinated Debt held by such subordinated
noteholder and to effectuate the full benefit of the subordination contained
herein and (ii) authorizes each holder of Senior Debt to take any action made
in good faith as may be necessary or appropriate to effect the subordination
provided for herein and appoints each holder of Senior Debt his attorney-in-
fact for such purposes.
(l) Any holder of Senior Debt may extend, renew, modify or amend the
terms of Senior Debt or any security therefor and release, sell or exchange
such security and otherwise deal freely with the Companies or any affiliate to
the same extent as could any person, all without notice to or consent of the
holders of Subordinated Debt and without affecting the liabilities and
obligations of the holders of Subordinated Debt pursuant to the provisions
hereof.
Exhibit A
[Draft Comfort Letter]
January __, 1997
Nissho Iwai Corporation
Nissho Iwai Europe PLC
c/o Nissho Iwai Europe PLC
Bastion House
140 London Wall
London
EC2Y 5JT
United Kingdom
Re: The Loan Agreement between TRB Holding Corporation ( TRBH ), Reading
& Bates (U.K.) Limited ( R&B (U.K.) ) and Nissho Iwai Europe PLC,
dated as of December 14, 1996 (the Loan Agreement ; terms used and
not defined herein, shall have the meanings assigned in the Loan
Agreement)
Gentlemen:
This letter is provided to you in order to induce you to enter into
the above-referenced Loan Agreement and other documents in connection
therewith.
It is the intention of Reading & Bates Corporation (a) that it will
continue its ownership interest in TRBH, TRB Subsidiary Corporation ( TRBS ),
R& B (U.K.), and Reading & Bates Drilling Co. (collectively, the Companies )
as each is currently held, (b) that the Companies will continue to maintain
their corporate existence and remain financially viable, and (c) that the
TRBH, TRBS and the partnership or partnerships to be created pursuant to the
Option Agreement (the Partnership ) will perform their obligations under the
Loan Agreement and the Option Agreement dated December 14, 1996 between TRBH,
TRBS and Nissho Iwai Corporation (the Option Agreement ) and the documents
entered into in connection therewith. Reading & Bates Corporation intends,
to the extent necessary, to continue to fund or cause to be funded working
capital to the TRBH, TRBS and the Partnership by means of an intercompany
revolving credit facility(ies) in order to allow TRBH, TRBS and the
Partnership to continue to meet any shortage of daily operating expenses, any
lay-up costs during stacked periods and any conversion or upgrade costs
necessary for a new charter contract, as well as minimum debt service required
under the Loan Agreement.
Reading & Bates Corporation intends to cause (a) each of TRBH, TRBS
and the Partnership to perform its obligations, if any, under each Charter
Agreement and the Bareboat Charter, (b) R&B (U.K.) to continue performing
their obligations under the Amended Agreement dated March 30, 1995, between
Britoil PLC and BP Exploration Operating Company Limited, as amended,
supplemented and novated by Novation Agreements dated July 10, 1996 and
August 30, 1996 pursuant to which R&B (U.K.) has assumed thereunder all of the
rights, duties and obligations of Britoil (Beta) Limited and the documents
executed in connection therewith and (c) Reading & Bates Drilling Co. to
perform its obligations under the Subordination Agreement.
Sincerely,
READING & BATES CORPORATION
By:_______________________________
Name:_____________________________
Title:______________________________
Exhibit B
[Opinion of Borrower s Counsel]
December ___, 1996
Nissho Iwai Europe PLC
c/o Baker & Botts, L.L.P.
3000 One Shell Plaza
910 Louisiana
Houston, Texas 77002
Ladies and Gentlemen:
I am General Counsel to Reading & Bates Development Co., a Delaware
corporation (the "Borrower"), Reading & Bates (U.K.) Limited, a company
organized under the laws of the United Kingdom ("Reading & Bates (U.K.)"),
Reading & Bates Corporation, a Delaware corporation ( Reading & Bates Co. ),
and Reading &Bates Drilling Co., an Oklahoma corporation ("RB Drilling"; the
Borrower, Reading & Bates (U.K.), Reading & Bates Co. and RB Drilling,
collectively, the "Companies"), in connection with the execution and delivery
of the Loan Agreement dated as of December 14, 1996 (the Loan Agreement )
between the Borrower, RB Drilling and you, pursuant to which you have made a
loan to the Borrower in order for the Borrower to finance the oil production
vessel Seillean , Gross Register Tons (GRT): 50,928.00, Net Register Tons:
15,278.00, Length: 236.47 meters, Width: 37 meters, Depth: 19.80 meters,
Permanent Navigation Patent No. 23272-96, Radio Call Letters: 3FPF6, and
Registration No. 25519-PEXT, and with the home port of Panama City, the
Republic of Panama (the Vessel ). This opinion is being furnished to you
pursuant to Section 5.01(g) of the Loan Agreement. Capitalized terms not
otherwise defined herein have the meanings ascribed to them in the Loan
Agreement.
In this connection and as a basis for the opinions hereinafter expressed, I
have examined executed originals of the following documents:
(1) the Loan Agreement;
(2) the Note;
(3) the Bareboat Charter;
(4) the Donan Charter Agreement;
(5) the Collateral Assignment;
(6) the Assignment of Charter;
(7) the Ship Mortgage;
(8) the Option Agreement;
(9) the Comfort Letter;
(10) the Assignment of Insurance Proceeds;
(11) the financing statements (the "Financing Statements") executed by
the Charterer in connection with the Collateral Assignment, in favor of the
owner as the secured party;
(12) the Subordination Agreement; and
(13) the Debentures.
(collectively referred to as the "Documents").
As General Counsel to the Companies, I am familiar with the relevant corporate
proceedings and have examined such documents and records of the Companies and
have obtained such other information as I have deemed necessary to form a
basis for the opinions expressed below.
Based upon the foregoing and having regard to the legal considerations I deem
relevant, and subject to the assumptions, limitations, qualifications and
exceptions set forth herein, it is my opinion that:
1. Each of the Companies is a corporation duly organized and validly
existing in good standing under the laws of the state of its
incorporation and has the corporate power and authority (i) to own or
lease and operate its properties and carry on its business as carried on
at the date hereof, and (ii) to execute and deliver, and to consummate
the transactions contemplated by, the Documents to which it is a party.
2. Each of such Companies has taken all necessary corporate action to
authorize the execution and delivery of, and the consummation of the
transactions contemplated by, each of the Documents to which it is a
party. Such execution and delivery, and consummation of the transactions
contemplated by the Documents, will not (i) result in a violation of each
such Company's certificate of incorporation or bylaws, or to my knowledge
any law, order or governmental regulation to which each such Company is
subject, (ii) result in a violation of or constitute a breach of or
default under any agreement or order binding upon and material to such
Company, or (iii) violate any requirement of law applicable to such
Company. Each of the Documents to which each of the Companies is a party
has been duly authorized, executed and delivered by each of the
Companies.
3. Each of the Documents constitutes the legal, valid and binding obligation
of each of the Companies a party thereto.
4. If, notwithstanding the choice of New York law contained therein, Texas
law were applied to the Documents, each of the Documents would constitute
the legal, valid and binding obligations of each of the Companies a party
thereto.
5. The execution and delivery of, and the consummation of the transactions
by, each of the Companies of the Documents to which it is a party do not
require, with respect to any of such Companies, the consent or approval
of any regulatory authority or governmental body of the United States or
the State of Texas (except for the filings referred to herein) or any
regulatory authority or governmental authority in connection with any
application of the General Corporation Law of the State of Delaware.
6. 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 or any of the Companies is
required to consummate the transactions contemplated under or by the
Documents.
7. The Financing Statements are in the proper form for filing pursuant to
the Uniform Commercial Code in effect in the State of Texas (the "UCC"),
and upon filing with the Secretary of State of the State of Texas
pursuant to the UCC, will perfect your security interest in all right,
title and interest of the applicable debtor in the collateral described
in such Financing Statements.
8. No action, suit or proceeding is pending or, to my knowledge, threatened
against any of the Companies before or by any court, arbitration panel or
administrative agency which, if adversely determined, could reasonably be
expected to result in a material adverse change in the business or
condition of any of the Companies or prevent any of the Companies from
performing any of its obligations under the Documents.
My opinions are subject to the following additional qualifications,
limitations and assumptions:
(i) the effect of applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or conveyance or other laws
affecting creditors' rights generally and the general
principles of equity (regardless of whether considered in a
proceeding in equity or at law);
(ii) the due organization and existence of all parties to the
Documents other than the Companies;
(iii) the legal right and the corporate power and authority of all
parties to the Documents (other than the Companies) to execute
and deliver, and to consummate the transactions contemplated by,
the Documents to which they are parties;
(iv) the due authorization, execution and delivery of the Documents by
all parties to the Documents (other than the Companies);
(v) certain remedial, waiver and other provisions of the Documents
are or may be unenforceable in whole or in part under Texas law
or the law of the United States, but the inclusion of such
provisions will not make the rights and remedies provided for
in such Documents, taken as a whole, inadequate for the
practical realization of the rights and benefits provided thereby;
(vi) no opinion is expressed as to the enforceability of choice of
law, choice of jurisdiction and forum selection clauses contained
in the Documents; and
(vii) (a) you will comply with usury laws which may apply to the
provisions of the Loan Agreement or other Documents, (b) in
connection therewith you will take into account any
consideration, in whatsoever form, which could constitute or be
deemed to constitute interest under Texas law, (c) there is no
other consideration paid or to be paid by the Borrower in
connection with the Loan Agreement other than that reflected
therein, and (d) Alamo Lumber Company v. Gold, 661 S.W.2d 926
(Tex. 1984) would not be extended and/or applicable to the
transactions described in the Loan Agreement and other Documents.
With respect to my opinions set forth above about the corporate power and
authority, and due authorization, execution and delivery of the Documents, I
have relied on certificates of public authorities in the relevant
jurisdictions of incorporation, corporate documents relating to the formation
and maintenance of each of such Companies prepared by counsel in those
jurisdictions, and practices and procedures that I have customarily followed
(and believe to be proper) in acting as General Counsel to such Companies.
I express opinions on the matters set forth herein only insofar as they relate
to the laws of the State of Texas and the State of Oklahoma, the General
Corporation Law of the State of Delaware, and applicable federal laws
(including maritime laws) of the United States.
The opinions expressed herein are rendered solely for the benefit of you and
your counsel and may not be relied upon or used by any other person without
our prior written consent.
Very truly yours
Wayne K. Hillin
Senior Vice President
and General Counsel
Exhibit C
[Opinion of Baker & Botts, L.L.P.]
December ___, 1996
Nissho Iwai Europe PLC
c/o Baker & Botts, L.L.P.
3000 One Shell Plaza
910 Louisiana
Houston, Texas 77002
Ladies and Gentlemen:
We acted as your counsel in connection with the execution and
delivery of the Loan Agreement dated as of December 14, 1996 (the Loan
Agreement ) between TRB Holding Corporation, a Delaware corporation (the
"Borrower"), Reading & Bates (U.K.) Limited, a company organized under the
laws of the United Kingdom ("Reading & Bates (U.K.)"), and you, pursuant to
which you have made loans to the Borrower in order for the Borrower to
refinance the oil production vessel "Seillean", a vessel of 50,928 gross
registered tons, Call Letters 3FPF6 and Registration No. 25519-PEXT and with
the home port of Panama City, the Republic of Panama (the "Vessel").
Capitalized terms not otherwise defined herein have the meanings assigned to
them in the Loan Agreement.
In this connection and as a basis for the opinions hereinafter
expressed, we have examined executed originals of the following documents:
(1) the Loan Agreement;
(2) the Note;
(3) the Option Agreement; and
(4) the Assignment of Insurance Proceeds;
(collectively referred to as the "Documents").
In rendering the opinions expressed below, we have assumed, with
respect to the Documents that:
(a) the Documents constitute legal, valid, binding and enforceable
obligations of, all of the parties to such documents other than the
Borrower, Reading & Bates (U.K.) and TRB Subsidiary Corporation, a
Delaware corporation ("TRB Subsidiary"; the Borrower, Reading & Bates
(U.K.) and TRB Subsidiary, collectively, the "Loan Parties");
(b) the Documents have been duly authorized by and have been duly
executed and delivered by each of the parties thereto, and all
signatories to the Documents have been duly authorized; and
(c) all of the other parties to the Documents are duly organized and
validly existing and have the power and authority (corporate,
partnership, regulatory, fiduciary, contractual and other) to
execute, deliver and perform such documents.
Based upon the foregoing and subject to the assumptions, exclusions,
limitations and qualifications set forth below, we are of the opinion that
each of the Documents constitutes the legal, valid and binding obligations of
the Loan Party thereto, enforceable against such Person in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium or other similar laws relating to or affecting
the rights of creditors generally, and by general principles of equity
(regardless of whether considered in a proceeding in equity or at law),
including, without limitation, (i) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy, and
(ii) concepts of materiality, reasonableness, good faith and fair dealing.
The foregoing opinions are subject to the following assumptions,
exclusions, limitations and qualifications:
(a) We express no opinion as to the enforceability of (i) any provision
purporting to establish any evidentiary standard or to waive either
illegality as a defense to the performance of contract obligations or
any other defense to such performance which cannot, as a matter of
law, be effectively waived; (ii) any provision purporting to waive
notice; (iii) any severability provision or, to the extent purporting
to protect any person from the consequences of such person's
negligence or misconduct, any indemnity provisions; or (iv) any
provision purporting to irrevocably appoint any person as attorney-
in-fact for any Obligor.
(b) We express no opinion with respect to title to any property or the
perfection or priority of any Lien created under the Documents.
The foregoing opinions are limited in all respects to the existing
laws of the State of New York, and the federal laws of the United States, each
as in effect on the date hereof, and no opinion is expressed herein as to any
matters governed by the laws of any other jurisdiction. We undertake no
obligation or responsibility to update or supplement our opinions set forth
herein in response to subsequent changes in the law or future events affecting
any transaction contemplated by any Document.
This opinion letter is, pursuant to Section 5.01(g) of the Loan
Agreement and may not be relied upon by any other person.
Very truly yours,
SK
Exhibit D
_____________, 1997
Nissho Iwai Europe plc
RE: Seillean
Ladies and Gentlemen:
We have acted as your special Panamanian counsel in connection with
the transactions contemplated by Loan Agreement dated as of December 14, 1996
(the Loan Agreement ), among TRB Holding Corporation, a Delaware corporation,
Reading & Bates (U.K.) Limited, an English limited liability company, and you.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned thereto in the Loan Agreement.
In issuing this opinion, we have examined drafts or executed copies
of the following documents (the Transaction Documents ):
(a) the Loan Agreement;
(b) the Ship Mortgage; and
(c) the Assignment of Charter.
We have also examined provisions of Panamanian laws and regulations as we have
deemed relevant.
In issuing this opinion, we have assumed the following: (i) the due
organization, existence and good standing of all of the parties to the
Transaction Documents and the sufficiency of their individual, corporate or
limited liability company, as the case may be, capacity to enter into, be
bound by and perform their respective rights and obligations under such deeds
or contracts; (ii) the taking of all necessary corporate or other action by
all of the parties to the Transaction Documents to enter into said deeds or
contracts and to be bound thereby in accordance with their respective terms
other than such corporate actions required by the laws of Panama; (iii) the
conformity of all material terms with the original executed documents of all
documents submitted to us as drafts or copies; and (iv) the genuineness of all
signatures not placed before us or recognized to be authentic before a
Panamanian Notary Public or ultimately before a Panamanian Consul.
Based on the foregoing, we are of the following opinions:
1. The vessel Seillean is registered in the name of TRB
Holding Corporation.
2. The Ship Mortgage, the Assignment of Charter and the Loan
Agreement, are valid binding and enforceable as between the parties thereto in
accordance with their respective terms, subject to limitations imposed by
bankruptcy, insolvency, reorganization or other laws affecting creditors
rights generally.
3. The Ship Mortgage has been preliminary registered the Panama
Public Registry, (Microfilm) Mercantile Section, at Microjacket ___________,
Frame _____, since __________________, 1997. As a result of said preliminary
registration, the Ship Mortgage constitutes a first naval mortgage lien on the
Vessel fully effective against third parties and, except as hereinafter
provided, having priority over all other liens or privileges on the Vessel,
and it shall continue to constitute such a first naval mortgage lien as of the
date of preliminary registration so long as the Ship Mortgage is filed for
definite registration within six months of the said date of preliminary
registration and the definite registration is completed.
By statute, the following liens or privileges have priority over the
naval mortgage:
(a) Amounts due the Panamanian government for the Annual Tax of
the Vessel;
(b) Court costs incurred in the common interest of maritime
creditors;
(c) Expenses, indemnities and wages for aid and salvage due from
the last voyage;
(d) Wages, compensations and indemnities of the master and crew
due from the last voyage;
(e) Wages and stipends due to stevedores and other wharfers
engaged directly by the owner, agent or master of the vessel
for the loading and unloading of the vessel upon last
arrival;
(f) Compensation for damages incurred through fault or
negligence; and
(g) Contributions to general average.
4. Except for the aforesaid definite registrations the Ship
Mortgage, there are no further registrations, recordings, filings or similar
procedure necessary or desirable in the Republic of Panama in connection with
the Transaction Documents in order to create, perfect or preserve their
respective validity or enforceability.
5. No consents, licenses, approvals, authorizations or
exemptions of any governmental or other regulatory authority, bureau or agency
of the Republic of Panama are required for or in connection with the validity
or enforceability of the Transaction Documents.
6. No payments, deductions or withholdings must be made for
taxes in the Republic of Panama in respect to compliance with or enforcement
of the Transaction Documents.
7. Except for any preliminary and definite registration fees of
the Ship Mortgage,, which have already been paid, and except that if any of
the Transaction Documents are to be used in evidence in the courts of the
Republic of Panama, stamp taxes at the rate of US$0.10 for each US$100.00 of
face value must be adhered thereto, there are no stamps or registration or
similar taxes, fees or charges payable in respect of the execution, delivery
of enforcement of the Ship Mortgage. With regards to the Ship Mortgage, the
amounts paid in notarial paper for their respective protocolization and in
registration fees would be deducted from the applicable stamp tax. In any
event, such stamp taxes are not due unless and until the respective
Transaction Document is used in evidence as indicated in this paragraph.
8. The choice of New York Law, English law, and of the Federal
Laws of the United States, as the case may be, to govern the Loan Agreement
and the Assignment of Charter, respectively, constitute a valid choice of law
and should be recognized by the courts of the Republic of Panama.
9. Under the law of the Republic of Panama, the perfection and
effect of perfection of the Lender s security interest and lien in the
Charters and Rents (as such terms are defined in the Assignment of Charter)
shall be governed by the law of the State of New York and the jurisdiction
under which the Charters and Rents are created.
We are attorneys qualified to practice law only in the Republic of
Panama. Accordingly we express no opinion with respect to the laws of any
other jurisdiction.
Yours truly,
Exhibit E
January __, 1997
Nissho Iwai Europe plc
RE: Seillean
Ladies and Gentlemen:
We have acted as your special English counsel in connection with the
transactions contemplated by Loan Agreement dated as of December 14, 1996 (the
Loan Agreement), among TRB Holding Corporation, a Delaware corporation,
Reading & Bates (U.K.) Limited, an English limited liability company, and you.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned thereto in the Loan Agreement.
In issuing this opinion, we have examined drafts or executed copies
of the following documents (the Transaction Documents ):
(a) the Loan Agreement;
(b) the Ship Mortgage;
(c) the Assignment of Charter; and
(d) the Debentures
We have also examined provisions of English laws and regulations as we have
deemed relevant.
In issuing this opinion, we have assumed the following: (i) the due
organization, existence and good standing of all of the parties to the
Transaction Documents and the sufficiency of their individual, corporate or
limited liability company, as the case may be, capacity to enter into, be
bound by and perform their respective rights and obligations under such deeds
or contracts; (ii) the taking of all necessary corporate or other action by
all of the parties to the Transaction Documents to enter into said deeds or
contracts and to be bound thereby in accordance with their respective terms
other than such corporate actions required by English law; (iii) the
conformity of all material terms with the original executed documents of all
documents submitted to us as drafts or copies; and (iv) the genuineness of all
signatures.
Based on the foregoing, we are of the following opinions:
1. The Assignment of Charter and the Debentures are valid,
binding and enforceable against the Borrower and Reading Bates (U.K.). If
notwithstanding the express choice of law contained therein, the following
documents were to be construed in accordance with English law, the Ship
Mortgage and the Loan Agreement, are valid, binding and enforceable as between
the parties thereto in accordance with their respective terms, but the
enforceability thereof may be subject to limitations imposed by bankruptcy,
insolvency, reorganization or other laws affecting creditors rights
generally.
2. There are no further registrations, recordings, filings or
similar procedure necessary or desirable in the United Kingdom in connection
with the Transaction Documents in order to create, perfect or preserve their
respective validity or enforceability.
3. No consents, licenses, approvals, authorizations or
exemptions of any governmental or other regulatory authority, bureau or agency
of the United Kingdom are required for or in connection with the validity or
enforceability of the Transaction Documents.
4. No payments, deductions or withholdings must be made for
taxes in the United Kingdom in respect to compliance with or enforcement of
the Transaction Documents.
5. The choice of New York Law and Panamanian law, as the case
may be, to govern the Loan Agreement and the Ship Mortgages respectively,
constitute a valid choice of law and should be recognized by the courts of the
United Kingdom.
6. Under the law of the United Kingdom, the perfection and
effect of perfection of the Lender s security interest and lien in the
Earnings (as such terms are defined in the Assignment of Charter) shall be
governed by the law of the United Kingdom. Upon [describe actions] the
Lender s security interest and lien in the Earnings shall be perfected.
7. Under the law of the United Kingdom, you, as a leader under
the transactions contemplated by the Loan shall not be liable for the
pollution and other liabilities of the Borrower or Reading & Bates (U.K.).
Under the law of the United Kingdom, NIC as a [limited partner] in the
Partnership, shall not be liable for the pollution and other liabilities of
the Partnership, the Borrower or Reading & Bates (U.K.).
Yours truly,
Exhibit F
January __, 1997
Nissho Iwai Corporation
4-5, Akasaka 2-chome
Minato-Ku, Tokyo 107
Japan
Nissho Iwai Europe Plc
Bastion House
140 London Wall
London
EC2Y 5JT
Reading & Bates Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Ladies and Gentlemen:
We have acted as your special Cayman Islands counsel in connection
with the creation of RB FPSO L.P., a Cayman Islands limited partnership (the
Partnership), and the Partnership's Limited Partnership Agreement (the
Partnership Agreement) and the transactions contemplated by (a) the Loan
Agreement dated as of December 14, 1996 (the Loan Agreement ), among Nissho
Iwai Europe Plc (the Lender ), TRB Holding Corporation, a Delaware
corporation ( TRBH ), Reading & Bates (U.K.) Limited, an English limited
liability company ( RBUK ), as amended by the First Amendment to Loan
Agreement dated as of January ___, 1997, and Nissho Iwai Europe PLC, an
English corporation, and (b) the Option Agreement (the Option Agreement )
dated as of December 14, 1996, among TRBH, TRB Subsidiary Corporation, a
Delaware corporation ( TRBS ), and Nissho Iwai Corporation ( NIC ).
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned thereto in the Loan Agreement.
In issuing this opinion, we have examined drafts or executed copies
of the following documents (the Transaction Documents ):
(a) the Loan Agreement;
(b) the Option Agreement;
(c) the Partnership Agreement;
(d) the Bill of Sales made by TRBH and TRBS in favor of the Partnership;
(e) the Bareboat Charter;
(f) the Amendment to Bareboat Charter;
(g) the Ship Mortgage as amended by the First Amendment to First Naval
Mortgage dated as of __________, 1997; and the Second Amendment to
First Naval Mortgage dated as of ____________, 1997;
(h) the Novation Agreement dated as of January __, 1997 among TRBH, TRBS,
the Partnership and RBUK.
The foregoing documents are herein referred to as the Transaction
Documents.
We have also examined provisions of the Cayman Islands laws and regulations as
we have deemed relevant.
In issuing this opinion, we have assumed the following: (i) the
conformity of all material terms with the original executed documents of all
documents submitted to us as drafts or copies; and (ii) the genuineness of all
signatures.
Based on the foregoing, we are of the following opinions:
1. The Partnership is duly formed and validly existing in good
standing under the laws of the Cayman Islands. The Partnership Agreement is
the valid, binding and enforceable obligation of each of TRBH, TRBS and the
Partnership.
2. TRBH is duly qualified and in good standing as a foreign
corporation in the Cayman Islands.
3. The Transaction Documents to which the Partnership is a
party have been duly authorized, executed and delivered on behalf of the
Partnership.
4. The Option Agreement creates a valid and enforceable option
in favor of NIC to purchase TRBS 10% limited partnership interest in the
Partnership.
5. There are no registrations, recordings, filings or similar
procedure necessary or desirable under Cayman Islands law in connection with
the Transaction Documents.
6. The execution and delivery by the Partnership, TRBH, TRBS,
RBUK, NIC or the Lender of the Transaction Document to which it is a party,
and the performance of its obligations thereunder do not conflict with, or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien upon any of the properties or assets of such Obligor pursuant to, or
require any authorization, consent, approval, exception or other action by or
notice to or filing with any court, administrative or governmental body or
other Person pursuant to (a) any Cayman Islands statute, rule or regulation or
(b) the Partnership Agreement.
7. There are no taxes, fees or other governmental charges
payable under Cayman Islands law in connection with the transactions
contemplated by the Transaction Document.
8. Under the law of Cayman Islands, no limited partner in
the Partnership shall be liable or otherwise obligated for the pollution and
other liabilities or obligations of the Partnership, the general partner of
the Partnership or RBUK.
Very truly yours,
Exhibit H
[Letterhead of Reading & Bates]
December __, 1996
Nissho Iwai Corporation ( Nissho Iwai )
4-5, Akasaka 2-chome, Minato-ku
Tokyo 107 Japan
Re: The Loan Agreement dated as of December 14, 1996 between TRB
Holding Corporation, Reading & Bates (U.K.) Limited and Nissho
Iwai Europe PLC ( NIEP ) (the Loan Agreement )
Ladies and Gentlemen:
In order to induce NIEP to enter into the Loan Agreement, Reading
& Bates agrees that Nissho Iwai will have a first refusal right to arrange
future financing facilities as and when needed for upgrading and conversion of
the Seillean. Nissho Iwai will be given five business days to elect to make
the proposed financing on terms which are substantially equivalent to those
proposed or more favorable to Reading & Bates. In addition, Reading & Bates
agrees that Nissho Iwai shall be given opportunities to be involved in trading
transactions for any future upgrading and conversion work on the Seillean,
including the opportunity to provide materials, supplies and services. Nissho
Iwai will be given a reasonable time to elect to be involved in the proposed
trading transaction on terms which are substantially equivalent to those
proposed or more favorable to Reading & Bates.
Sincerely,
READING & BATES CORPORATION
OPTION AGREEMENT
OPTION AGREEMENT (this Agreement ) dated as of December ___,
1996, among RB Drilling Co., an Oklahoma corporation ( RB Drilling ) and
Nissho Iwai Corporation, a Japanese corporation (the NIC );
W I T N E S S E T H:
WHEREAS, NISSHO IWAI EUROPE PLC, an English corporation (the Lender ),
has made loans (the Loan ) to READING & BATES DEVELOPMENT CO., a Delaware
corporation (the Borrower ), pursuant to the Loan Agreement dated as of
December ___, 1996 between the Lender and the Borrower (such agreement, as it
may be amended, restated, supplemented, extended, renewed or otherwise
modified from time to time, being the Loan Agreement );
WHEREAS, the Borrower and RB Drilling have agreed to form a limited
partnership (the Partnership ) in a jurisdiction mutually agreeable to the
Lender, RB Drilling and the Borrower soon after the execution of the Loan
Agreement;
WHEREAS, the Borrower has agreed to contribute that certain vessel known
as Seillean , Gross Register Tons (GRT): 50,928.00, Net Register Tons:
15,278.00, Length: 236.47 meters, Width: 37 meters, Depth: 19.80 meters,
Permanent Navigation Patent No. 23272-96, Radio Call Letters: 3FPF6, and
Registration No. 25519-PEXT, and with the home port of Panama City, the
Republic of Panama (the Vessel ), to the Partnership as the Borrower's
initial capital contribution which shall entitle the Borrower to a ninety
percent (90%) general partnership interest in the Partnership, and which
Vessel shall be encumbered only by the mortgage lien of the Lender;
WHEREAS, RB Drilling has agreed to contribute Four Million Dollars
($4,000,000) to the Partnership as its initial capital contribution which
shall entitle RB Drilling to a ten percent (10%) limited partnership interest
in the Partnership;
WHEREAS, as a condition precedent to the Lender making the Loan to the
Borrower, RB Drilling has granted to NIC an option to purchase RB Drilling s
ten percent (10%) limited partnership interest in the Partnership;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises herein contained and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, RB Drilling and NIC hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
Authorized CAPEX shall mean the aggregate amount, on the Option
Closing Date, of capital expenditures determined in accordance with GAAP (a)
incurred by the Partnership on the Vessel during the Option Period, (b) which
are within the definition of a capital expenditure attached hereto as Exhibit
A, and (c) less $__________ per year (prorated based on a 365-day year) for
the Option Period.
GAAP means generally accepted accounting principles in the
United States of America, consistently applied.
Option Closing Date shall mean the date specified in the Option
Exercise Notice as the date on which NIC shall exercise the option.
Option Period shall mean the period of time between the date of
this Agreement and the Option Closing Date.
Reimburseable CAPEX shall mean the book value of all Authorized
CAPEX on the Option Closing Date. In no event shall Reimburseable CAPEX be a
negative number.
2. Option.
(a) Grant of Option. Subject to the terms and conditions
of this Agreement, NIC shall have the right and option (the Option ) at any
time during the term of this Agreement, but not the obligation (unless and
until NIC has delivered to RB Drilling written notice of intent to exercise
the option (the Option Exercise Notice )), to purchase and accept from RB
Drilling a ten percent (10%) limited partnership interest in the Partnership
(the Option Interest ).
(b) Option Exercise Price. The purchase price of RB
Drilling s ten percent (10%) interest in the Partnership (the Full Option
Interest ) to be paid on the Option Closing Date by NIC, upon the exercise of
the Option by NIC pursuant to, and in accordance with, Section 2(c) of this
Agreement, shall be an amount equal to Four Million Two Hundred Twenty-Five
Thousand Dollars ($4,225,000) plus ten percent (10%) of Reimbursable CAPEX.
In its sole discretion, NIC may purchase less than the Full Option Interest
(the Diluted Option Interest ) by paying on the Option Closing Date, upon the
exercise of the Option by NIC pursuant to, and in accordance with, Section
2(c) of this Agreement, an amount equal to Four Million Two Hundred Twenty-
Five Thousand Dollars ($4,225,000) (the Diluted Option Price ). The amount
of the Diluted Option Interest shall be determined by dividing Four Million
(4,000,000) by the aggregate of Forty Million (40,000,000) plus Reimbursable
CAPEX.
(c) Exercise of Option. The Option may be exercised by NIC
at any time prior to December ___, 1999. NIC shall exercise the Option by
delivering the Option Exercise Notice to RB Drilling at least thirty (30) days
prior to the Option Closing Date, stating that NIC is exercising the Option,
subject to the terms and conditions of this Agreement, to acquire the Option
Interest or the Diluted Option Interest on the Option Closing Date.
(d) Instrument of Transfer. RB Drilling shall execute and
deliver to NIC an assignment of the Option Interest on the Option Closing Date
in substantially the form of the Assignment attached hereto as Exhibit B.
(e) Repayment of Loan. RB Drilling hereby agrees that all
monies paid by NIC to purchase the Option Interest may be paid by NIC directly
to the Lender for the purpose of repaying the Loan.
3. Transfer of Interests. As long as this Agreement is in effect NIC may
assign or transfer any portion of the Option Interest to any affiliate.
4. Miscellaneous Provisions.
(a) Notices. All notices, claims, requests, demands and
other communications hereunder shall be in writing and shall be duly given
(including telegraphic, telex or telecopy communication) and telegraphed,
telexed, telecopied, delivered by hand, sent by prepaid certified or
registered mail or by overnight courier and addressed as follows:
i) If to NIC:
Nissho Iwai Corporation
4-5, Akasaka 2-chome, Minato-ku,
Tokyo 107 Japan
Telecopy No.: 81-3-3588-4547
ii) If to RB Drilling:
RB Drilling Co.
Telecopy No.:
or such other addresses as the person to whom notice is to be given may have
previously furnished to the other parties hereto in writing in the manner set
forth above. Any notice or other communication shall be deemed to have been
given, made and received (i) except as set forth in clauses (ii) and (iii)
below, upon receipt, (ii) in the case of a facsimile transmission, upon
transmission thereof by the sender and issuance by the transmitting machine of
a confirmation slip indicating that the number of pages included in the notice
have been transmitted without error or (iii) in the case of a telex, upon
receipt of an answer back. In the case of notices sent by facsimile
transmission or telex, the sender shall contemporaneously mail a copy of the
notice to the addressee at the address provided above. However, such mailing
shall in no way alter the time at which the facsimile notice or telex is
deemed received.
(b) Waiver. The waiver by any party of a breach of any
provision of this Agreement shall not be deemed a continuing waiver or a
waiver of any subsequent breach, whether of the same or of another provision
hereof.
(c) Headings. The headings of the sections of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
(d) Severability of Provisions. Any provision of this
Agreement which is illegal, invalid, prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such illegality, invalidity, prohibition or unenforceability without
invalidating or impairing the remaining provisions hereof, and any such
illegality, invalidity, prohibition or unenforceability shall not effect the
legality, validity or enforceability of such provision in any other
jurisdiction.
(e) Survival. The covenants, representations and
warranties of the parties hereto contained in this Agreement or in any
schedule or document delivered pursuant to or in connection with this
Agreement shall survive the purchases and sales and assumptions contemplated
hereby.
(f) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(g) Successors and Assigns. This Agreement shall inure to
the benefit of, and be binding upon, the parties hereto and their respective
successors and assigns.
(h) Term. The term of this Agreement shall be three (3)
years from the date of this Agreement.
(i) Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of New
York without giving effect to any conflicts of law provisions of such laws.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
RB DRILLING CO.
By:
Name:
Title:
NISSHO IWAI CORPORATION
By:
Name:
Title:
Exhibit N
AMENDMENT TO BAREBOAT CHARTER AGREEMENT
This Amendment to Bareboat Charter Agreement (this Amendment ) is
made as of December 14, 1996, by and between Reading & Bates (U.K.) Limited,
an English limited liability company with its registered office at Harmon
House, 1 George Street, Uxbridge, Middlesex, UB8 1QQ ( Charterer ), and TRB
Holding Corporation, a Delaware corporation, with its principal offices
located at 901 Threadneedle, Suite 200, Houston, Texas 77079 U.S.A. ( Owner ).
RECITALS
1. Owner is the sole owner of the whole of that certain vessel known
as Seillean , Gross Register Tons (GRT): 50,928.00; Net Register Tons:
15,278.00, Length: 236.47 meters, Width: 37 meters, Depth: 19.80 meters,
Permanent Navigation Patent No. 23272-96, Radio Call Letters: 3FPF6, and
Registration No. 25519-PEXT, and with the home port of Panama City, the
Republic of Panama (the Vessel ); and
2. Britoil PLC, a company organized under the laws of the United
Kingdom ( Britoil ), for itself and on behalf of the Donan Participants, as
defined therein, and BP Exploration Operating Company Limited, an English
limited liability company ( BP ) entered into that Amended Agreement dated
March 30, 1995, as amended, supplemented and novated by the Novation Agreement
dated July 10, 1996 among Britoil, BP and Britoil (Beta) Limited, an English
limited liability company ( Britoil (Beta) ) (the Amended Agreement ); and
3. Charterer has assumed all of the rights, duties and obligations of
Britoil (Beta) to the Amended Agreement pursuant to the Novation Agreement
dated August 30, 1996 among Britoil, Britoil (Beta) and Charterer (the Donan
Charter Agreement ); and
4. Owner bareboat chartered the Vessel to Charterer pursuant to the
Bareboat Charter Agreement between Charterer and the Owner, dated August 30,
1996 (the Original Bareboat Charter ), in order to permit Charterer to
operate the vessel and to fulfill its obligations under the Donan Charter
Agreement; and
5. Owner, Charterer and Nissho Iwai Europe PLC, an English
corporation (the "Lender") entered into the Loan Agreement (the Loan
Agreement ) dated as of December 14, 1996 whereby Lender agreed to lend Owner
certain sums (the Loans ) to be secured by the Vessel and all rights of Owner
therein; and
6. Owner and Charterer have agreed to amend the Original Bareboat
Charter in order to allow Charterer and Owner to perform their obligations
under the Loan Agreement (the Original Bareboat Charter, as amended hereby, is
hereinafter referred to as the Bareboat Charter Agreement ).
NOW THEREFORE, in consideration of the mutual promises herein
contained and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that the Bareboat
Charter Agreement shall be and hereby is amended as follows:
Section 1. Definitions. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Original
Bareboat Charter.
Section 2. Amendments to the Original Bareboat Charter. The
Original Bareboat Charter is hereby amended as follows effective as of the
date hereof:
1. Section 4. Charter Hire of the Original Bareboat Charter is hereby
amended by deleting such section in its entirety and replacing it with the
following:
4. CHARTER HIRE
A. AMOUNT
The Charter Hire payable pursuant to this Agreement, for any
period, shall be determined on a monthly basis by subtracting from
all revenues earned by Charterer in connection with the ownership
or operation of the Vessel during such period, the sum of
Predetermined Expenses during such period. Predetermined
Expenses for any period shall consist in their entirety of
UK 18,209 per day for operating expenses during such period. If
the results of the proceeding subtraction are positive, the
positive amount so determined shall be Charter Hire payable by
Charterer to Owner in accordance with Article 4B below. If the
results of the proceeding subtraction are negative, the negative
amount so determined shall be carried over to the next period and
netted with the revenues from such future period. Charterer will
be reimbursed for Dry Docking Expenses as provided in the Loan
Agreement and the Collateral Assignment.
B. PAYMENT
Charterer and Owner shall cause the charterer under the Donan
Charter Agreement to make all payments under such charter
agreement directly to the Lockbox Account (as defined in the Loan
Agreement) so long as the Loan Agreement is in effect. The amount
of Predetermined Expenses shall be disbursed to Charterer from the
Lockbox Account in accordance with the terms of the Collateral
Assignment (as defined in the Loan Agreement).
2. Sections (A) and (B) of Exhibit C to the Original Bareboat
Charter are hereby deleted in their entirety.
3. Section 9. Owner Restrictions, Part B, of the Original Bareboat
Charter is hereby amended by deleting Part B, in its entirety and replacing it
with the following:
B. Owner agrees that it shall not further mortgage or
otherwise encumber the Vessel at any time during the term hereof,
except as contemplated in the Loan Agreement.
4. The Original Bareboat Charter is hereby amended by adding the
following new subsection E. to Section 21:
E. All sums payable by Charterer hereunder shall be paid free of
and without any rights of counterclaim or set off and without deducting
or withholding on any ground whatsoever.
5. The Original Bareboat Charter is hereby amended by adding the
following new Section 24. Loan Agreement Controlling:
24. LOAN AGREEMENT CONTROLLING
To the extent that any provision of this Agreement is in conflict with
any provision of the Loan Agreement, the Loan Agreement shall control.
Nothing herein is intended to prevent the parties hereto from performing
their obligations, duties and covenants under the Loan Agreement.
Section 3. Consents. Charterer hereby consents to Owner s
mortgage, sale and transfer of the Vessel and Owner s assignment of the
Bareboat Charter Agreement, all as contemplated in the Transaction Documents.
Section 4. Original Contract Remains Effective. Except for the
amendments to the Original Bareboat Charter set forth in Section 2 hereof, the
Original Bareboat Charter remains in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.
READING & BATES (U.K.) LIMITED
By:
Name:
Title:
TRB HOLDING CORPORATION
By:
Name:
Title:
Exhibit 10.165
FIRST NAVAL MORTGAGE
The First Naval Mortgage (this Mortgage ), made as of
December 14, 1996, by TRB HOLDING CORPORATION, a Delaware corporation (the
Mortgagor ), whose address is 901 Threadneedle, Suite 200, Houston,
Texas 77079, to NISSHO IWAI EUROPE PLC, an English corporation, whose address
is Bastion House, 140 London Wall, London, EC2Y SJT, United Kingdom (the
Lender );
WHEREAS:
1. Mortgagor is the sole owner of the whole of that certain
vessel known as Seillean , Gross Register Tons (GRT): 50,928.00; Net Register
Tons: 15,278.00, Length: 236.47 meters, Width: 37 meters, Depth: 19.80 meters,
Permanent Navigation Patent No. 23272-96, Radio Call Letters: 3FPF6, and
Registration No. 25519-PEXT, and with the home port of Panama City, the
Republic of Panama (the Vessel ); and
2. Britoil PLC, a company organized under the laws of the
United Kingdom ( Britoil ), for itself and on behalf of the Donan
Participants, as defined therein, and BP Exploration Operating Company
Limited, an English limited liability company ( BP ), entered into that
Amended Agreement dated March 30, 1995, as amended, supplemented and novated
by the Novation Agreement dated July 10, 1996 among Britoil, BP and Britoil
(Beta) Limited, an English limited liability company ( Britoil (Beta) ) (the
Amended Agreement ); and
3. Reading & Bates (U.K.) Limited, an English limited liability
company (the Charterer ), has assumed all of the rights, duties and
obligations of Britoil (Beta) to the Amended Agreement pursuant to the
Novation Agreement dated August 30, 1996 among Britoil, Britoil (Beta) and
Charterer (the Donan Charter Agreement ); and
4. Reading & Bates Development Co. ( RBDC ) bareboat chartered
the Vessel to Charterer pursuant to the Bareboat Charter between Charterer and
RBDC, dated August 30, 1996 (the Bareboat Charter ), in order to permit
Charterer to operate the vessel and to fulfill its obligations under the Donan
Charter Agreement; and
5. Mortgagor, Charterer and Lender entered into the Loan
Agreement (the Loan Agreement ) dated as of December 14, 1996 whereby the
Lender agreed to lend the Mortgagor certain sums (the Loans ) to be secured
by the Vessel and all rights of the Mortgagor therein, a copy of which Loan
Agreement is attached hereto and made a part hereof, it has been also agreed
by the parties hereto that said Agreement will be deposited at the pertinent
protocol of the corresponding Notarial Instrument whereby this First Preferred
Ship Mortgage is protocoloized before the Notary Eleventh of the Circuit of
the City of Panama, Republic of Panama consequently, and in compliance of
contents of Article 1515 of the Code of Commerce of the Republic of Panama,
the principal amount secured by this mortgage is THIRTY-EIGHT MILLION AMERICAN
STATES DOLLARS (US$38,000,000.00). In addition, this Mortgage secures
interest on the principal amount and all obligations relating thereto as the
Mortgagor may be obligated to pay or perform under the covenants, terms, and
conditions in the Promissory Note, the Loan Agreement, this Mortgage and the
documents executed in connection therewith. The maturity date of the mortgage
which includes payment of principal and interest is January 15, 2002. The
corresponding interest rate is calculated in accordance with Exhibit A
attached hereto and made a part hereof. For all legal purposes, the text of
the Loan Agreement hereby referred to will constitute the final and definitive
guide for determining the exact amount of capital and interests secured by the
present mortgage; and
6. Pursuant to the Loan Agreement, the Mortgagor executed and
delivered to the Lender its Promissory Note (the Promissory Note ) dated
December 14, 1996, a copy of which is attached hereto and made a part hereof,
in the original principal amount of Thirty-Eight Million United States Dollars
(U.S. $38,000,000.00). Maturity dates on which capital and interest of the
mortgage must be paid as well as interest rate agreed to are those stipulated
in the referred Promissory Note; and
7. As a condition precedent to the Lender entering into the
Loan Agreement, the Lender has required that Mortgagor executes and delivers
this Mortgage in order to secure payment and performance of the principal
amount of the Promissory Note plus interest thereon and all obligations
relating thereto as the Mortgagor may be obligated to pay or perform under the
covenants, terms, and conditions in the Promissory Note, the Loan Agreement,
this Mortgage and the documents executed in connection therewith
(collectively, the Obligations ); and
8. Charterer will derive substantial benefit from the Mortgagor
obtaining the Loans and charterer s fulfillment of its obligations under the
Donan Charter Agreement.
NOW, THEREFORE, THIS MORTGAGE WITNESSETH:
That in consideration of the premises and of other good and
valuable considerations, the receipt of which is hereby acknowledged, to
secure and guarantee the payment on demand of the Obligations the Mortgagor
hereby executes and constitutes a first and absolute naval mortgage in
accordance with the provisions of Chapter V, Title IV of Book II of the Code
of Commerce, and the pertinent provisions of the Civil Code and other
legislation of the Republic of Panama, upon the Vessel, including all masts,
boilers, cables, engines, machinery, bowsprits, sails, rigging, boats,
anchors, chains, tackle, apparel, furniture, fittings, tools, pumps, equipment
and supplies, and all other appurtenances and accessories and additions,
improvements and replacements now or hereafter belonging thereto, whether or
not removed therefrom, property of the shipowner, of Panamanian flag and
registry;
TO HAVE AND TO HOLD all and singular the above described Vessel
unto the Lender, its successors and assigns, forever;
PROVIDED, HOWEVER, that if Mortgagor, its successors or assigns
shall perform, discharge and observe all and singular the terms, the
Obligations and the other covenants and agreements herein, then this Mortgage
shall cease, otherwise to remain in full force and affect.
The Mortgagor agrees to pay and to perform and observe the
Obligations in accordance with their terms and to hold the Vessel subject
thereto.
ARTICLE I.
Particular Covenants of the Mortgagor
The Mortgagor covenants and agrees as follows:
1. Mortgagor is and shall continue to be entitled to own the
Vessel out of the home port of Panama City, the Republic of Panama. All
action necessary for the execution, delivery and validity hereof and of the
Promissory Note and the Loan Agreement has been duly taken; and the Mortgagor
agrees to faithfully comply with the provisions hereof and thereof in all
material respects. Mortgagor is duly organized and is and shall continue in
good standing under the laws of the Delaware and authorized to do business and
in good standing.
2. Mortgagor lawfully owns and possesses the Vessel free from
all liens and encumbrances whatsoever (other than this Mortgage and the lien
of Donan Charter Agreement), except those of the Mortgagor and as otherwise
may hereinbelow be specified and shall warrant and defend title to and
possession of all and every part thereof for the benefit of the Lender against
all persons whomever. The Mortgagor shall not set up against the Lender or
any assignee of this Mortgage any claim of the Mortgagor against the Lender or
assignee under any past or future transaction.
3. INTENTIONALLY DELETED
4. Mortgagor shall comply with and not cause or permit the
Vessel to be operated contrary to any provisions of the laws, treaties,
conventions, rules, regulations and orders of the Republic of Panama, the
United States and any other jurisdiction wherein operated, except where the
failure to so comply might reasonably be expected to have a material adverse
effect on the Vessel (or the Mortgagor s financial condition, prospects, or
business). Mortgagor shall do everything necessary to establish and maintain
this Mortgage as a First Preferred Mortgage on the Vessel.
5. Neither the Mortgagor, Agent, Master nor any charterer of
the Vessel has or shall have any right, power or authority to create, incur or
permit to be placed or imposed on the Vessel or any part thereof any lien
whatsoever other than to the Lender or for crew s wages or salvage or other
Permitted Liens (as defined in the Loan Agreement).
6. A proper certified copy of this Mortgage and any supplement
thereto shall be carried with the Vessel s papers on board the Vessel and
shall be exhibited, on demand, to any person having business with the Vessel
or to any representative of the Lender, and a notice in plain writing of such
size that the paragraph of reading matter shall cover a space not less than
six inches high nor less than nine inches wide shall be placed and kept
prominently displayed in the pilot house, in the chart room, and in the
master s cabin of the Vessel. Such notice shall read substantially as
follows:
NOTICE OF MORTGAGE
This vessel is owned by TRB HOLDING CORPORATION and is subject to
a First Preferred Mortgage, dated December 14, 1996 in favor of NISSHO IWAI
EUROPE PLC. Under the term of the First Preferred Mortgage neither the owner,
any charterer, the master of the vessel, nor any other person shall have the
right, power or authority to create, incur, or permit to be placed or imposed
on the vessel any lien whatsoever, other than for crew s wages or salvage.
7. Mortgagor shall pay and discharge, or cause to be paid and
discharged, when due and payable, from time to time, all taxes, assessments,
government charges, fines and penalties lawfully imposed on the Vessel in
accordance with the Loan Agreement. If a libel shall be filed against the
Vessel, or if the Vessel shall be levied upon or taken into custody, or
detained by any proceeding in any court or tribunal, or by any government, of
any other authority, Mortgagor, within 15 days thereafter, shall cause the
Vessel to be released and any lien thereon, other than this Mortgage, to be
discharged. In the event the Vessel is levied upon, or taken into custody, or
detained by any authority whatsoever, Mortgagor agrees forthwith to notify
Lender, by telegram, confirmed by letter, at its office.
8. Lender shall have the right of any time, on reasonable
notice and without unreasonable disruption and subject to any required
governmental approvals or approvals of Britoil or other client for which the
Vessel is operating, to inspect or survey the Vessel to ascertain her
condition and to satisfy itself that the Vessel is being properly repaired and
maintained, and Mortgagor shall cause to be made all such repairs, without
expense to Lender, as such inspection or survey may show to be required.
Mortgagor shall also permit Lender to inspect the Vessel s logs and to examine
Mortgagor s accounts and records relating to the Vessel, whenever requested,
on reasonable notice, and shall furnish Lender with full information regarding
any casualty or other accident or damage to the Vessel involving an amount in
excess of U.S. $ 500,0000. Mortgagor shall certify quarterly and, if Lender
requests, monthly, that all wages and other claims whatsoever which might have
given rise to a lien upon the Vessel have been paid.
9. Mortgager shall not sell, transfer, mortgage or charter the
Vessel in any manner without the written consent of Lender first had and
obtained, and any such written consent to any such sale, mortgage, transfer or
charter, except as permitted under the Loan Agreement. Any sale, mortgage,
transfer or charter of the Vessel shall be subject to the provisions of this
Mortgage and the lien it creates. Mortgager covenants that it shall not merge
or consolidate with any other firm or corporation, or dissolve, except as
permitted under the Loan Agreement.
10. So long as this Mortgage is outstanding, the Vessel shall
remain documented under the laws of the Republic of Panama. In the event this
Mortgage or any provision thereof shall be deemed invalid, in whole or in
part, by reason of any present or future law or governmental regulation, or
any decision of any authoritative court, or, if the documents at any time held
by Lender be deemed by Lender, for any reason, insufficient to carry out the
true intent and spirit of this Mortgage, then, from time to time, Mortgagor
shall execute and deliver, on its own behalf such other and further
instruments, documents or assurances, as in the opinion of Lender may be
required, to more effectively subject the Vessel to the payment of the
principal sum of the mortgage debt, together with interest thereon, and the
performance of the terms and provisions of this Mortgage and to effectuate any
sale of the Vessel provided for in the event of default under this Mortgage as
more fully described below.
ARTICLE II
Default
1. In any one or more of the following events, herein termed
events of default :
The occurrence of an Event of Default under the Loan Agreement, or
in the due and punctual performance of any provision of Sections 4, 5, 6, 8
and 10 of Article I hereof, or an attempt to violate Sections 4 or 10 of
Article I hereof, or default continuing for thirty (30) days in the
performance of any other covenant herein, then during the continuation
thereof, Lender may:
(a) Declare all the then unpaid indebtedness hereby secured to
be due and payable immediately except that no declaration shall be necessary
in the event of either Mortgager being adjudicatedly bankrupt or the
substantial equivalent under whatever local proceedings may be applicable,
becoming insolvent, or admitting in writing its inability to pay its debts as
they fall due, having a receiver or trustee appointed of or in respect of its
property or business or any substantial part thereof or making an assignment
of creditors;
(b) Recover judgment for, and collect out of any property of
Mortgagor, any amount hereby or otherwise due hereunder; and collect all
earned charter hire and freight monies relating to services performed by the
Vessel, Mortgagor hereby assigning to Lender such earned charter hire and
freight monies then owing;
(c) Retake the Vessel without legal process at any time wherever
the same may be, and, without being responsible for loss or damage, hold and
in Lender s, Charterer s or Mortgagor s name lease, charter, operate or
otherwise use the Vessel for such time and on such terms as Lender may deem
advisable, being accountable for net profits, if any, and with the right to
dock the Vessel free of charge at Mortgagor s premises or elsewhere at
Mortgagor s expense; or sell the Vessel, free from any claim by Mortgagor of
any nature whatsoever, in the manner provided by law; to the extent permitted
by law, such sale may be public or private, without notice, without having the
Vessel present, and Lender may become the purchase;
(d) Exercise all of the rights and remedies in foreclosure and
otherwise given to the mortgagees by the provisions of the law of Panama or
any other jurisdiction where the Vessel may be found;
(e) Bring suit at law, in equity or in admiralty as may be
advised to recover the judgment for the indebtedness hereby secured and
collected the same out of any and all property of the Mortgagor whether
covered by this Mortgage or otherwise;
(f) Exercise any other right or remedy provided for in the Loan
Agreement, at law or in equity.
For such purpose Lender and its agents are hereby irrevocably
appointed the true and lawful attorneys of Mortgagor in the name and stead
either Mortgager to make all necessary transfers of the Vessel thus sold.
2. In the event that the Vessel shall be arrested or detained
by any officer of any court or by any other authority, Mortgagor hereby
authorize Lender, its officers, representatives and appointees, in the name of
Charterer, Mortgagor or Lender, to receive or to take possession thereof, and
to defend any action and discharge any lien.
3. Each and every power or remedy herein given to Lender shall
be cumulative, and in addition to all powers or remedies now or hereafter
existing in admiralty, in equity, at law or by statute, and may be exercised
as often as may be deemed expedient by Lender. No delay or omission by Lender
shall impair any right, power or remedy, and no waiver of any default shall
waive any other default. In any suit Lender shall be entitled to obtain
appointment of a receiver of the Vessel and the earnings thereof, who shall
have full rights and powers to use and operate the Vessel, and to obtain a
decree ordering and directing the sale and disposition thereof.
4. The net proceeds of any judicial or other sale, and any
lease, charter, management, operations or other use of the Vessel by Lender,
of any claim for damages, of any judgment, and any insurance received by
Lender (except to the extent paid to Mortgagor or applied in payment of
repairs or otherwise for Mortgagor s benefit) shall be applied as follows:
FIRST: To the payment of all reasonable attorneys fees, court
costs, and any other expenses, losses, charges, damages incurred or advances
made by Lender in the protection of its rights or caused by Mortgagor s
default hereunder or under the note secured hereby, with interest on all such
amounts at the Overdue Interest Rate (as defined in the Loan Agreement); and
to provide adequate indemnity against any liens for which priority over this
Mortgage is claimed;
SECOND: To the payment of all interest, to date of payment, on
the Promissory Note and any or all other sums secured hereby, and as to any
balance of such proceeds, to the payment next of any or all matured
installments of principal in the inverse order of their maturity.
Lender shall be entitled to collect any deficiency from Mortgagor.
Mortgagor shall be entitled to any surplus.
5. All advances and expenditures which Lender in its discretion
may make for repairs, insurance, payment of liens or other claims, defense of
suits, or for any other purpose whatsoever related hereto or to the note and
all damages sustained by Lender because of defaults, shall be repaid Mortgagor
on demand the Overdue Interest Rate and until so paid shall be a debt due from
Mortgagor to Lender secured by the lien hereof. Lender shall not be obligated
to make any such advances or expenditures, nor shall the making thereof
relieve Mortgagor of any obligation or default with respect thereto.
ARTICLE III
Possession Until Default
Until one or more of the events of default hereinbefore described,
Mortgagor shall be permitted to retain actual possession and use of the
Vessel.
ARTICLE IV
Sundry Provisions
1. All notices to the parties hereto shall be given at the
addresses and in the manner set forth in Section 9.02 of the Loan Agreement.
2. All covenants and agreements of Mortgagor herein contained
shall bind Mortgagor, its successors and assigns, and shall inure to the
benefit of Lender and its successors and assigns. Following any assignment
hereof, any reference herein to Lender shall be deemed to refer to the
assignee.
3. If any provision of this Mortgage be held to be invalid
under the provisions of any applicable law, such invalid provision shall be
deemed deleted from this Mortgage but the validity of the Mortgage shall not
otherwise be affected.
4. Mortgagor and Lender confer a Special Power of Attorney with
right of substitution upon Messrs. ICAZA, GONZALEZ-RUIZ & ALEMAN, a law firm
domiciled in the City of Panama, Republic of Panama to take all necessary
steps to record this instrument of mortgage in the Public Registry Office of
the Republic of Panama, and do whatsoever said law firm may consider
appropriate for the fulfillment of any and all laws and regulations governing
the ship mortgage in the Republic of Panama.
IN WITNESS WHEREOF, on the day and year first above written,
Mortgagor has caused this Mortgage to be duly executed in its name.
TRB HOLDING CORPORATION
By:
Name:
Title:
NOTARIAL CERTIFICATE
I, the undersigned, NOTARY PUBLIC, duly authorized, admitted and
sworn, residing and practicing in Houston, Harris County, Texas, U.S.A.,
DO HEREBY CERTIFY THAT:
1. ___________________________________, as _____________________ of
the above mentioned corporation did sign and deliver the above written
mortgage in my presence and that the signature appearing above is his
authentic signature.
2. Sufficient proof has been produced to me that the said
_________________________ has power to execute said mortgage on behalf of the
corporation. I further certify that the above signature of
____________________________ was set thereon in my presence and is, therefore,
authentic.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and
affixed my seal of office this _________ day of __________ in the year of Our
Lord One thousand nine hundred ninety-seven.
Notary Public
ACCEPTANCE OF MORTGAGE
I, the undersigned, as ________________________ of NISSHO IWAI
EUROPE, PLC., referred to as the Lender in the above First Preferred Ship
Mortgage on the m.v. Seillean , hereby ACCEPTS for all legal purposes said
First Preferred Ship Mortgage on behalf of the Lender .
Date: NISSHO IWAI EUROPE PLC.
By:
Name:
Title:
NOTARIAL CERTIFICATE OF ACCEPTANCE OF MORTGAGE
I, the undersigned, NOTARY PUBLIC, duly authorized, admitted and
sworn, residing and practicing in Houston, Harris County, Texas, U.S.A.,
DO HEREBY CERTIFY THAT:
1. ___________________________________, as _____________________ of
the above mentioned corporation did sign and accept the above written mortgage
in my presence and that the signature appearing above is his authentic
signature.
2. Sufficient proof has been produced to me that the said
_________________________ has power to execute said mortgage on behalf of the
corporation. I further certify that the above signature of
____________________________ was set thereon in my presence and is, therefore,
authentic.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and
affixed my seal of office this _________ day of __________ in the year of Our
Lord One thousand nine hundred ninety-seven.
Notary Public
Exhibit A
Payments; Calculation of Interest
Payments:
The Mortgagor shall repay the Loan on each Repayment Date.
Calculation of Interest:
(a) The Mortgagor shall pay to the Lender interest on the unpaid
principal amount of the Loan for the period commencing on the date the Loan is
made to but excluding the date the Loan shall be paid in full, at a rate per
annum equal to the lesser of (i) LIBOR plus the then Applicable Margin or (ii)
the Maximum Rate.
(b) Notwithstanding any of the foregoing, the Mortgagor will pay
to the Lender interest at a rate per annum equal to the lesser of (i) the
applicable Overdue Interest Rate or (ii) the Maximum Rate on any principal of,
or interest on, the Loan and on any other amount payable by the Mortgagor
under the Loan Agreement to or for the account of the Lender, which shall not
be paid in full when due (whether at stated maturity, by acceleration or
otherwise and whether the failure to make such payment constitutes a default
or event of default under the Loan Agreement, regardless of the giving or
receipt of notice or the lapse of any applicable cure period), for the period
commencing on the due date thereof until the same is paid in full.
(c) Interest shall be computed on the basis of a year of 360
days for actual days elapsed (including the first day but excluding the last
day) occurring in the period for which such amounts are payable, unless such
calculation would exceed the Maximum Rate, in which case interest shall be
calculated on the per annum basis of a year of 365 or 366 days, as the case
may be.
Applicable Margin means 2% per annum.
Interest Period means the period commencing on the date that an
advance of the Loan is (a) made or (b) continued, and ending on the fifteenth
(15th) calendar day in the next month thereafter, provided that the first
interest period shall end on February 15, 1997. If such fifteenth (15th) day
is not a business day, the Interest Period shall be extended to the next
succeeding business day.
LIBOR means, for each Interest Period, the arithmetic mean
(rounded upward, if necessary, to the nearest whole multiple of 1/16 of 1%) of
the one-month London Inter-Bank Offered Rates for deposits in United States
Dollars as quoted on Reuters monitor page LIBO at or about 11:00 a.m.,
London time on the date that is two (2) London business days prior to the
first day of such Interest Period. If only one such rate appears, LIBOR shall
be such rate. If no such rates appear, LIBOR shall be the rate (rounded
upwards if necessary to the nearest one sixteenth of one per cent) in respect
of any Interest Period determined by the Lender on the basis of the rates at
which deposits in Dollars are offered by the reference bank at or about 11:00
a.m., London time, on the day that is two (2) London business days prior to
the first day of such Interest Period or such other relevant period or at such
date, to prime banks in London interbank market for one (1) month period on
that Interest Payment Date and in amount equal to the outstanding Loan balance
(after giving effect to any advance) or such other relevant amount outstanding
as of the first day of such Interest Period or such other relevant period.
Maximum Rate means the maximum non-usurious rate of interest
permitted by applicable law.
Overdue Interest Rate means, in respect of any principal of, or
interest on, the Loan or any other amount payable by the Mortgagor under any
loan document which is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum during the period commencing on
the due date until such amount is paid in full equal to the sum of LIBOR in
effect for such period plus 5% per annum.
Repayment Date means the last day of each Interest Period, until
an event of default occurs under the Loan Agreement.
Exhibit 10.166
COLLATERAL ASSIGNMENT OF DEPOSIT ACCOUNT, PLEDGE
AND SECURITY AGREEMENT
This COLLATERAL ASSIGNMENT OF DEPOSIT ACCOUNT, PLEDGE AND SECURITY
AGREEMENT (this Agreement ) dated as of December 14, 1996 is between TRB
HOLDING CORPORATION, a Delaware corporation (the Grantor ), and NISSHO IWAI
EUROPE PLC, an English public liability company (the Secured Party ), SANWA
BANK TRUST COMPANY OF NEW YORK (the Depositary ), and READING & BATES (U.K.)
LIMITED, an English limited liability company( RB (U.K.) ).
RECITALS
WHEREAS, the Secured Party has made loans to the Grantor pursuant
to the Loan Agreement dated as of even date herewith among RB (U.K.), the
Grantor and the Secured Party (such Agreement, as it may be amended, restated,
supplemented, extended, renewed or otherwise modified from time to time, being
the Loan Agreement );
WHEREAS, it is a condition precedent to the effectiveness of the
Loan Agreement that the Grantor shall have executed and delivered this
Agreement,
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and in order to
induce the Secured Party to make the loans under the Loan Agreement, the
Grantor, the Depositary and the Secured Party hereby agree as follows:
SECTION 1. Defined Terms and Related Matters.
(a) The words hereof , herein and hereunder and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement.
(b) Unless otherwise defined herein or in the Loan Agreement,
the terms defined in Article 9 of the Uniform Commercial Code as enacted
in the State of New York (the UCC ) are used herein as therein defined.
(c) All capitalized terms used herein, unless specifically
otherwise defined, shall have the respective meanings ascribed to them
in the Loan Agreement.
SECTION 2. Grant of Security Interests. Each of the Grantor and
RB (U.K.) hereby pledges and assigns as collateral to the Secured Party and
grants to the Secured Party a security interest in all of its right, title and
interest in and to the following collateral, whether now owned or hereafter
arising or acquired (the Collateral ):
(i) that certain deposit account number 618727 in the name
of SBT-TRB Holding Corp. NIEP Escrow Account maintained at the
Depositary and which pursuant to Section 5(a) herein, is under the
exclusive direction, dominion and control of the Secured Party
(the Dollar Collateral Account ), and all certificates and
instruments, if any, from time to time representing or evidencing
the Dollar Collateral Account and all amounts deposited in the
Dollar Collateral Account from time to time and all other deposit
accounts from time to time maintained at the Depositary or at any
other institution, in connection with the Loan Agreement;
(ii) that certain deposit account number 618727 in the
name of SBT-TRB Holding Corp. NIEP Escrow Account maintained at
the Depositary and which pursuant to Section 5(a) herein, is under
the exclusive direction, dominion and control of the Secured Party
(the Sterling Collateral Account and together with the Dollar
Collateral Account, the Collateral Accounts ), and all
certificates and instruments, if any, from time to time
representing or evidencing the Sterling Collateral Account and all
amounts deposited in the Sterling Collateral Account from time to
time and all other deposit accounts from time to time maintained
at the Depositary or at any other institution, in connection with
the Loan Agreement; and
(iii) that certain deposit account number 619121 in the name
of SBT-TRB-NIEP-Dry Docking Expense Account maintained at the
Depositary in sterling pounds and which pursuant to Section 5(a)
herein, is under the exclusive direction, dominion and control of
the Secured Party (the Dry Docking Expense Account ), and all
certificates and instruments, if any, from time to time
representing or evidencing the Dry Docking Expense Account and all
amounts deposited in the Dry Docking Expense Account from time to
time and all other deposit accounts from time to time maintained
at the Depositary or at any other institution, in connection with
the Loan Agreement; and
(iv) all notes, certificates of deposit and other
instruments and amounts from time to time hereafter delivered to
or otherwise possessed by the Secured Party for or on behalf of
the Grantor in substitution for or in addition to any or all of
the then existing Collateral; and
(v) all interest, dividends, cash, instruments and other
property, if any, from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all
of the then existing Collateral; and
(vi) to the extent not covered by clauses (i) through (v)
above, all proceeds of any or all of the foregoing Collateral.
SECTION 3. Security for Obligations. This Agreement secures the
prompt and complete (a) payment of all obligations of the Grantor and RB
(U.K.) now or hereafter existing under the Note, the Loan Agreement and the
other Loan Documents, as each may be modified, amended, extended or renewed
from time to time; and (b) performance and observance by the Grantor and RB
(U.K.) of all covenants and conditions contained in the Loan Documents, as
each may be modified, amended, extended or renewed from time to time
(including, without limitation, the covenants and conditions contained herein)
(all such obligations, covenants and conditions described in the foregoing
clauses (a) and (b)), whether for principal, interest, fees, expenses or
otherwise, being hereinafter collectively referred to as the Obligations ).
SECTION 4. Representations and Warranties. Each of the Grantor
and RB (U.K.) hereby represents and warrants to the Secured Party (for itself
only) as follows:
(a) Such Person owns the Collateral free and clear of any Liens
thereon, other than the pledge, assignment and security interest
hereunder.
(b) Such Person has the legal right to pledge and assign as
collateral to the Secured Party the Collateral.
(c) This Agreement is effective to create a valid and perfected
Lien on the funds on deposit in the Collateral Accounts, the Dry Docking
Expense Account and the Collateral and constitutes the legal, valid and
binding obligation of such Person, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or moratorium or other similar
laws relating to the enforcement of creditors rights generally and by
general equitable principles.
SECTION 5. Certain Covenants of Grantor. From the date of
execution hereof until the Obligations and all other amounts due hereunder and
under the other Loan Documents are paid in full and the Commitments and all
other obligations of the Secured Party under the Loan Agreement are finally
terminated:
(a) The Grantor will maintain the Collateral Accounts and
the Dry Docking Expense Account at the Depositary and the Grantor
agrees that the Collateral Accounts and the Dry Docking Expense
Account shall at all times be maintained with, and be within the
sole dominion and control of, the Secured Party in accordance with
the terms of this Agreement.
(b) All certificates or instruments, if any, representing
or evidencing the Collateral shall be delivered to and held by or
on behalf of the Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Secured Party. Upon the
occurrence and during the continuance of a Default or Event of
Default, the Secured Party shall have the right, at any time in
its discretion and without notice to the Grantor, to transfer to
or to register in the name of the Secured Party or any of its
nominees any or all of the Collateral. In addition, the Secured
Party shall have the right at any time upon the occurrence and
during the continuance of a Default or Event of Default to
exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger
denominations.
(c) The Grantor agrees to take all additional measures
which are reasonably necessary in the opinion of the Secured Party
to protect the security interests granted herein. The Grantor
further agrees that from time to time, at the expense of the
Grantor, the Grantor will 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 may
reasonably request, in order to perfect and protect any security
interests granted or purported to be granted hereby and to perfect
any security interests granted hereby or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder
with respect to any of the Collateral.
(d) The Grantor will furnish to the Secured Party and the
Depositary from time to time statements and schedules further
identifying and describing the Collateral and such other reports
in connection with the Collateral as the Secured Party may
reasonably request, all in reasonable detail.
(e) The Grantor shall pay prior to delinquency all taxes,
charges, Liens and assessments against the Collateral or any part
thereof.
SECTION 6. Liens, Other Transfers and Transfer Instructions. (a)
Except as set forth in this Section 6, (i) none of the Grantor, RB (U.K.) or
the Depositary shall sell, assign, or otherwise dispose of any of the
Collateral, or withdraw or transfer any funds from the Collateral Accounts or
the Dry Docking Expense Account or create or suffer to exist any Lien upon or
with respect to any of the Collateral and (ii) no amount shall be paid or
released to or for the account of, or withdrawn by or for the account of, the
Grantor, RB (U.K.) or any other person or entity from the Collateral Accounts
or the Dry Docking Expense Account.
(b) Prior to the occurrence of any Event of Default and delivery
of a notice thereof to the Depositary, the Depositary shall transfer collected
funds in the Collateral Accounts on the fifteenth (15th) day of each calendar
month (unless such day is not a Business Day, in which case such funds shall
be transferred on the next succeeding Business Day) (the Transfer Date ) as
follows:
(i) To the Dollar Collateral Account from the Sterling
Collateral Account as set forth in the Collateral Account Instructions
(as defined below) delivered to the Depositary pursuant to Section 6(d)
for such month;
(ii) To the Secured Party at its account number 15012511 at The
Chase Manhattan Bank N.A., London Branch, Woolgate House, Coleman
Street, London EC2P 2HD, England or such other account of which the
Secured Party may notify the Depositary in writing, in an amount equal
to the amount set forth in the Collateral Account Instructions delivered
to the Depositary pursuant to Section 6(d) for such month that shall be
paid to the Secured Party to be applied to the Obligations;
(iii) To RB (U.K.) at its account number 00750302, account name
Reading & Bates (U.K.) Limited, SWIFT number RBOS GB 2L at the Royal
Bank of Scotland, Queens Cross Branch, 40 Albyn Place, Aberdeen,
Scotland AB1 1YN, or such other account of which RB (U.K.) may notify
the Depositary in writing (the RB (U.K.) Account ), in an amount equal
to the amount set forth in the Collateral Account Instructions delivered
to the Depositary pursuant to Section 6(d) for such month that shall be
paid to reimburse RB (U.K.) for Operating Expenses for such month;
(iv) To the Dry Docking Expense Account in an amount equal to the
amount set forth in the Collateral Account Instructions delivered to the
Depositary pursuant to Section 6(d) to be transferred to the Dry Docking
Expense Account for such month, to hold pending disbursement pursuant to
Section 6(b)(vii);
(v) Prior to NIC s exercise of the option under Option
Agreement, to the Grantor at its account number 00-132-716, account name
TRB Holding Corporation , ABA number 0210 0103 3 at Bankers Trust
Company, 130 Liberty Street, One Bankers Trust Plaza, New York, NY
10006; or such other account of which the Grantor may notify the
Depositary in writing, in an amount equal to the amount set forth in the
Collateral Account Instructions delivered to the Depositary pursuant to
Section 6(d) that shall be paid to the Grantor for the Working Capital
for such month, provided that such amount shall be $0 if the Minimum
Payment is paid under Section 6(b)(ii) hereof;
(vi) Subsequent to NIC s exercise of the option under Option
Agreement, to the partnership to be formed pursuant to the Option
Agreement (the Partnership ) at its account number ____________ at
________________________________ or such other account of which the
Partnership may notify the Depositary in writing, in an amount equal to
the amount set forth in the Collateral Account Instructions delivered to
the Depositary pursuant to Section 6(d) that shall be paid to the
Grantor for the Working Capital for such month; and
(vii) To RB (U.K.) at its account number 00-132-716, account name
Reading & Bates (U.K.) Limited , ABA number 0210 0103 3 at Bankers
Trust Company, 130 Liberty Street, One Bankers Trust Plaza, New York, NY
10006, or such other acocunt of which RB (U.K.) may notify the
Depositary in writing; an amount equal to the Dry Docking Expenses paid
by RB (U.K.) as set forth in the Collateral Account Instructions
delivered to the Depositary that shall be paid to RB (U.K.) to reimburse
RB (U.K.) for Dry Docking Expenses.
(c) After the delivery of a notice to the Grantor and the
Depositary stating that an Event of Default shall have occurred and be
continuing, all collected funds in the Collateral Accounts and the Dry Dock
Expense Account shall be paid to the Secured Party at its account
number 15012511 at The Chase Manhattan Bank N.A., London Branch, Woolgate
House, Coleman Street, London EC2P 2HD, England, or such other account of
which the Secured Party may notify the Depositary in writing, to be applied to
the Obligations in the order and amounts as the Secured Party may direct.
(d) No later than the fourth (4th) Business Day preceding each
Transfer Date of each month during which no Event of Default shall have
occurred and be continuing, the Secured Party shall deliver to the Depositary,
the Grantor and RB (U.K.) its signed certificate in the form of Exhibit A
attached hereto (the Collateral Account Instructions ), with the blanks
completed and computed in accordance with the terms of this Agreement and the
Loan Documents, stating:
(i) the amount of funds in the Sterling Collateral Account to be
converted by the Depositary to U.S. Dollars and to be transferred to the
Dollar Collateral Account;
(ii) the amount of funds to be transferred by the Depositary on
the Transfer Date from the Dollar Collateral Account to the Secured
Party to be applied to the Obligations;
(iii) the amount of funds to be transferred by the Depositary on
the Transfer Date from the Sterling Collateral Account to RB (U.K.) to
be applied to Operating Expenses;
(iv) the amount of funds to be transferred by the Depositary on
the Transfer Date from the Sterling Collateral Account to the Dry
Docking Expense Account;
(v) the amount of funds to be transferred by the Depositary on
the Transfer Date from the Dollar Collateral Account to the Partnership
as Working Capital in accordance with the terms of the Loan Agreement
and the Partnership Agreement; and
(vi) the amount of funds to be transferred by the Depositary on
the Transfer Date from the Dollar Collateral Account to the Grantor to
be applied as Working Capital in accordance with the terms of the Loan
Agreement and the Partnership Agreement.
(e) In the event that the Donan Charter is no longer in effect
and no Event of Default has occurred and is continuing, the Secured Party, the
Grantor and RB (U.K.) shall discuss and agree upon appropriate amendments to
this Section 6 and upon written notice to the Depositary delivered by the
Secured Party this Section 6 shall be amended in accordance with such
agreement.
SECTION 7. Secured Party Appointed Attorney-in-Fact. (a) Each of
the Grantor and RB (U.K.) hereby irrevocably constitutes and appoints the
Secured Party such Person s attorney-in-fact, effective upon and during the
continuance of a Default or Event of Default, with full irrevocable power and
authority in the place and stead of such Person and in the name of such
Person, the Secured Party, or otherwise, from time to time in the Secured
Party s discretion, for the sole purpose of carrying out the terms of this
Agreement and, to the extent permitted by applicable law, to take any action
and to execute any document and instrument which the Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation:
(i) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipt for moneys due or to become due under
or in respect of any of the Collateral;
(ii) to receive, endorse and collect any drafts or other
instruments or documents in connection with clause (i) above; and
(iii) to file any claim or take any action or institute any
proceeding which the Secured Party may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the
rights of the Secured Party with respect to any of the Collateral.
SECTION 8. Secured Party May Perform. If the Grantor or RB
(U.K.) fails to perform, or cause to be performed, any agreement contained
herein the Secured Party may perform, or cause performance of, such agreement,
and the reasonable expenses of the Secured Party incurred in connection
therewith shall be payable by the Grantor under Section 11(b).
SECTION 9. The Secured Party s Duties. The powers conferred on
the Secured Party hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon the Secured Party to exercise
any such powers. Beyond the use of reasonable care in the custody of the
Collateral, the Secured Party shall not have any responsibility in respect of
any of the funds on deposit with it other than to comply with the specific
duties and responsibilities herein set forth. The Secured Party shall have no
responsibility for the genuineness or validity of any document or other item
deposited with it. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder,
the Secured Party shall not have any duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral.
SECTION 10. Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Secured Party may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured
party on default under the UCC (whether or not the UCC applies to the
affected Collateral) and also may without demand or notice of any kind
to the Grantor or RB (U.K.) (i) draw or charge against the Collateral,
including any interest which shall have accrued on the Collateral
Account or which shall be payable with respect thereto, all or any part
of the Obligations, and (ii) execute and deliver such drafts,
withdrawals and other instruments and take all such other action as the
Secured Party shall deem necessary or appropriate in order to realize
upon the Collateral, and the Depositary is hereby authorized to honor
drafts drawn or withdrawals made by the Secured Party against any of the
Collateral.
(b) All cash proceeds received by the Secured Party in respect
of any sale of, collection from, or other realization upon all or any
part of the Collateral may, in the discretion of the Secured Party, be
held by the Secured Party as collateral for, and/or then or at any time
thereafter applied in whole or in part by the Secured Party against, the
Obligations in such order as the Secured Party elects. Any surplus of
such cash or cash proceeds and interest accrued thereon, if any, held by
the Secured Party and remaining after payment in full of all the
Obligations shall be paid over to the Grantor or to whoever may be
lawfully entitled to receive such surplus; provided that the Secured
Party shall have no obligation to invest or otherwise pay interest on
any amounts held by it in connection with or pursuant to this Agreement.
(c) All rights and remedies of the Secured Party herein are in
addition to all other rights and remedies possessed by the Secured Party
in the Loan Agreement, the Note, the other Loan Documents and any other
agreement or instrument related to the Obligations.
SECTION 11. Indemnity, Expenses and Interest.
(a) To the fullest extent permitted by applicable laws, each of
the Grantor and RB (U.K.) agrees to indemnify the Secured Party and its
officers, directors, employees, agents and attorneys in accordance with
Section 9.04 of the Loan Agreement.
(b) Each of the Grantor and RB (U.K.) agrees upon demand to pay
to the Secured Party the amount of any and all reasonable expenses,
including the fees and disbursements of its counsel and of any experts
and agents, which (i) the Secured Party may incur in connection with the
modification or amendment of this Agreement or (ii) the Secured Party
may incur in connection with (v) the preparation, execution, delivery,
filing, recording or administration of this Agreement; (w) the custody,
preservation, use or operation of, or the sale of, collection from, or
other realization upon, any of the Collateral; (x) the exercise or
enforcement of any of the rights of the Secured Party hereunder; or (y)
the failure by the Grantor to perform or observe any of the provisions
hereof.
(c) Each of the Grantor and RB (U.K.) agrees to pay interest on
any expenses or other sums due hereunder that are not paid when due at a
rate per annum equal to the lesser of (i) the Maximum Rate or (ii) the
Overdue Interest Rate in effect from time to time.
(d) Grantor agrees to pay any expenses to the Depository for
maintenance of the Collateral Accounts and the Dry Docking Expense
Account.
SECTION 12. Amendments, Etc. No amendment or waiver of any
provision of this Agreement nor consent to any departure by Grantor or RB
(U.K.) herefrom, shall be effective unless the same is in accordance with
Section 9.05 of the Loan Agreement.
SECTION 13. Notices. All notices and other communications
provided for herein (including, without limitation, any modifications of, or
waivers or consents under, this Agreement) shall be given or made by telex,
telegraph, telecopy, cable or other writing and telexed, telecopied,
telegraphed, cabled, delivered or sent by certified or registered mail, return
receipt requested, to the intended recipient at the address specified below
its name on the signature pages hereof; or, as to any party, at such other
address as shall be designated by such party in a notice to the Grantor and
the Secured Party given in accordance with this Section. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have
been duly given when transmitted by telex or telecopier (with receipt
confirmed by telex or telecopier), sent by the telegraph or cable office or
personally delivered or, in the case of a mailed notice, upon receipt, in each
case given or addressed as aforesaid.
SECTION 14. Continuing Security Interest. This Agreement creates
a continuing security interest in the Collateral and shall (a) remain in full
force and effect until the payment in full of Loans and all other amounts due
under the Loan Agreement and the other Loan Documents and the Commitment and
all other obligations of the Secured Party under the Loan Agreement are
finally terminated; (b) be binding upon Grantor, its successors and assigns,
provided that Grantor may not assign any of its rights or obligations under
this Agreement without the prior written consent of the Secured Party; and (c)
inure to the benefit of and be enforceable by the Secured Party and its
permitted successors, transferees and assigns under the Loan Agreement.
Without limiting the generality of the foregoing clause (c), the Secured Party
may assign or otherwise transfer any of its respective rights under this
Agreement to any other Person in accordance with the terms and provisions of
Section 9.06 of the Loan Agreement, and to the extent of such assignment or
transfer such Person shall thereupon become vested with all the benefits in
respect thereof granted herein or otherwise to the Secured Party. Upon the
termination of the obligations of the Secured Party to make loans under the
Loan Agreement and payment in full of the Obligations, Grantor and RB (U.K.)
shall be entitled to the return, upon its request and at its expense, of such
of the Collateral as shall not have been sold or otherwise applied pursuant to
the terms hereof. Upon any such termination of the security interests or
release of Collateral, the Secured Party will, at the expense of Grantor,
execute and deliver to Grantor and RB (U.K.) such documents as Grantor and RB
(U.K.) shall reasonably request to evidence the termination of the security
interests or the release of such Collateral, as the case may be. To the extent
that the Secured Party receives any payment on account of the Obligations, or
any proceeds of Collateral are applied on account of the Obligations, and any
such payment or proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, subordinated, required
to be repaid to a trustee, receiver or any other person or entity under any
debtor relief law, or recovered from the Secured Party for any other reason,
then, to the extent of such payment or proceeds received, the Obligations or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by the
Secured Party and applied on account of the Obligations, and the security
interests shall continue to secure such Obligations, and all rights of Grantor
and RB (U.K.) in the Collateral shall be subject to such security interests.
SECTION 15. Waiver of Marshalling. All rights of marshalling of
assets of Grantor and RB (U.K.), including any such right with respect to the
Collateral, are hereby waived by Grantor and RB (U.K.).
SECTION 16. Limitation by Law. All rights, remedies and powers
provided in this Agreement 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 Agreement 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 this Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
SECTION 17. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement or made in writing
by or on behalf of Grantor and RB (U.K.) in connection herewith, shall survive
the execution and delivery of this Agreement until 365 or 366 days, as the
case may be, after the date on which the commitment of the Secured Party to
make the Loan under the Loan Agreement has been terminated and the Obligations
have been paid in full. Any investigation by the Secured Party shall not
diminish in any respect whatsoever its rights to rely on such representations
and warranties.
SECTION 18. Duties of the Depositary. The acceptance by the
Depositary of its duties under this Agreement is subject to the following
terms and conditions:
(a) the Depositary s sole responsibility hereunder shall
be (i) to hold and transfer the Collateral and the proceeds
thereof as the agent of the Secured Party solely for the purpose
of perfecting the assignment, pledge and security interest of this
Agreement, (ii) to give the notices and provide the information
called for hereunder, and (iii) to disburse the Collateral,
including proceeds thereof, as provided for herein. The
Depositary shall deliver an account statement of the Collateral
Account to both the Grantor and RB (U.K.) and Secured Party within
three Business Days after the end of each month.
(b) the Depositary shall be protected in acting upon any
written notice, request, waiver, consent, receipt or other paper
or document furnished to it, not only as to its due execution and
the validity and effectiveness of its provisions, but also as to
the truth and acceptability of any information therein contained,
which it in good faith believes to be genuine.
(c) the Depositary shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in
good faith, or for any mistake of fact or law, or for anything
which it may do or refrain from doing in connection herewith,
except its own gross negligence or willful misconduct.
(d) the Depositary shall have no duties to the Secured
Party except those which are expressly set forth herein, and it
shall not be bound by any notice of a claim, or demand with
respect thereto, or any waiver, modification, amendment,
termination or rescission of this Agreement, unless in writing
received by it, and, if the Depositary s duties or liabilities as
set forth herein are altered, unless the Depositary shall have
given its prior written consent thereto.
(e) Each of the Grantor and RB (U.K.) agrees to indemnify
and hold the Depositary harmless against any and all loss,
damages, costs and expenses, including, but not limited to,
reasonable attorneys fees, that may be incurred by the Depositary
by reason of its compliance in good faith with the terms of this
Agreement, except those arising out of the gross negligence or
willful misconduct of the Depositary, it being the intention of
the Grantor and RB (U.K.) to indemnify the Depositary from the
consequences of its negligence.
(f) Depositary shall exchange to United States dollars any
funds which are to be paid out of the Collateral Accounts or the
Dry Docking Expense Account in United States dollars, on the
Transfer Date, at the four (4) Business Day forward rate in effect
on the date of receipt of the Instructions by the Depositary.
Grantor and Secured Party may mutually agree to amend this
Agreement and replace the depository if the exchange rate is
unfavorable.
SECTION 19. Severability. The invalidity of any one or more
covenants, phrases, clauses, sentences or paragraphs of this Agreement shall
not affect the remaining portions of this Agreement, or any part thereof, and
in case of any such invalidity, this Agreement shall be construed as if such
invalid covenants, phrases, clauses, sentences or paragraphs had not been
inserted.
SECTION 20. Captions. The captions in this Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this
Agreement.
SECTION 21. No Waiver; Cumulative Remedies. No failure on the
part of the Secured Party 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 such right preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
SECTION 22. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 23. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS
AGREEMENT, INCLUDING THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES
HEREUNDER, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS).
EACH OF THE GRANTOR AND RB (U.K.) HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK FOR
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE GRANTOR AND RB (U.K.)
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 SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 24. COMPLETE AGREEMENT. THIS WRITTEN AGREEMENT, THE LOAN
AGREEMENT AND THE OTHER WRITTEN AGREEMENTS ENTERED INTO AMONG THE PARTIES
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES.
SECTION 25. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR FOR ANY COUNTERCLAIM WITH
RESPECT THERETO.
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be duly executed by its respective officer thereunto duly
authorized as of the date first above written.
TRB HOLDING CORPORATION
By:
Name:
Title:
Address:
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: T. W. Nagle, Executive Vice
President, Finance and Administration
Telecopy Number: (281) 496-0285
With copies to:
Nissho Iwai Corporation
4-5, Akasaka 2-chome
Minato-ku, Tokyo 107, Japan
Attention: Manager, Marine Project
Section 2
Marine & Offshore
Engineering Department
Telecopy Number: 011-813-3588-4547
SANWA BANK TRUST COMPANY OF NEW YORK, as
Depositary
By:
Hiromasa Ogisu
Vice President
Address:
Sanwa Bank Trust Company of New York
Financial Square
32 Old Slip, 21st Floor
New York, New York 10005
Attention: Corporate Trust Department
Telecopy Number: (212) 361-2135
READING & BATES (U.K.) LIMITED
By:
By:
Name:
Title:
Address:
Reading & Bates (U.K.) Limited
% 901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: T.W. Nagle, Executive Vice
President - Finance and Administration
Telecopy Number: (281) 496-0285
With copies to:
Nissho Iwai Corporation
4-5, Akasaka 2-chome
Minato-ku, Tokyo 107, Japan
Attention: Manager, Marine Project
Section 2
Marine & Offshore
Engineering Department
Telecopy Number: 011-813-3588-4547
NISSHO IWAI EUROPE PLC
By:
Kazunori Kimura
Senior Vice President and Senior
General Manager of Houston office
Address:
London Office
Bastion House
140 London Wall
London EC2Y 5JT
England
Attention:
Telecopy Number: 011-4471-588-0391
With a copy to:
Nissho Iwai Corporation
4-5, Akasaka 2-chome
Minato-ku, Tokyo 107, Japan
Attention: Manager, Marine Project
Section 2
Marine & Offshore
Engineering Department
Telecopy Number: 011-813-3588-4547
With a copy to:
Baker & Botts, L.L.P.
One Shell Plaza
Houston, Texas 77002
Attention: Stephen Krebs
Telecopy Number: (713) 229-1522
Exhibit _____
FORM
OF
COLLATERAL ACCOUNT INSTRUCTIONS
Sanwa Bank Trust Company of New York
Financial Square
32 Old Slip, 21st Floor
New York, New York 10005
Attention: Corporate Trust Department
Dear Ladies and Gentlemen:
Reference is made to the Collateral Assignment of Deposit Account,
Pledge and Security Agreement (the Lockbox Agreement ) dated as of December
12, 1996, between you (the Depositary ), TRB Holding Corporation (the
Grantor), Nissho Iwai Europe PLC (the Secured Party ) and Reading & Bates
(U.K.) Limited ( RB (U.K.) ). Capitalized terms used herein and not otherwise
defined herein have the meanings assigned to such terms in the Lockbox
Agreement.
The Secured Party, hereby instructs you to transfer collected
funds in the Collateral Accounts on the fifteenth (15th) day of this month
(unless such day is not a Business Day, in which case such funds shall be
transferred on the next succeeding Business Day) as follows:
(i) ____________ in the that certain deposit account number
618727 in the name of SBT-TRB Holding Corp. NIEP Escrow Account
maintained at the Depositary (the Sterling Collateral Account ) should
be converted to U.S. Dollars and be transferred to that certain deposit
account number 618727 in the name of SBT-TRB Holding Corp. NIEP Escrow
Account maintained at the Depositary (the Dollar Collateral Account );
(ii) transfer _____________ from the Dollar Collateral Account to
the Secured Party at its account number 15012511 at The Chase Manhattan
Bank N.A., London Branch, Woolgate House, Coleman Street, London EC2P
2HD, England;
(iii) transfer _____________ from the Sterling Collateral Account
to RB (U.K.) at its account number 00750302, account name Reading &
Bates (U.K.) Limited, SWIFT number RBOS GB 2L at the Royal Bank of
Scotland, Queens Cross Branch, 40 Albyn Place, Aberdeen, Scotland AB1
1YN;
(iv) transfer _____________ from the Sterling Collateral Account
to that certain deposit account number 619121 in the name of
SBT-TRB-NIEP-Dry Docking Expense Account maintained at the Depositary
in sterling pounds (the Dry Docking Expense Account );
(v) transfer ____________ from the Dollar Collateral Account to
RB FPSO L.P. at its account number _____________________ at
______________________________;
(vi) transfer ______________ from the Dollar Collateral Account
to the Grantor at its account number 00-132-716, account name TRB
Holding Corporation , ABA number 0210 0103 3 at Bankers Trust Company,
130 Liberty Street, One Bankers Trust Plaza, New York, NY 10006; and
(vii) transfer ______________ from the Dry Docking Expense Account
to RB (U.K.) at its account number 00-132-716, account name Reading &
Bates (U.K.) Limited , ABA number 0210 0103 at Bankers Trust Company,
130 Liberty Street, One Bankers Trust Plaza, New York, NY 10006.
Very truly yours,
NISSHO IWAI EUROPE PLC
By:
Name:
Title:
cc:
TRB Holding Corporation
Executive Vice President
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: ___________________
Exhibit 10.167
ASSIGNMENT OF INSURANCES
This ASSIGNMENT OF INSURANCES (this Assignment ) is made as of
December 14, 1996, by TRB HOLDING CORPORATION, a Delaware corporation
( TRBH ) and READING & BATES (U.K.) LIMITED ( RB (U.K.) and together with
TRBH, Assignor ) in favor of NISSHO IWAI EUROPE PLC, an English corporation
( Lender ).
RECITALS:
1. TRBH is the sole owner of the whole of that certain vessel known as
Seillean of 50,928 gross registered tons, Call Letters 3FPF6 and
Registration No. 25519-PEXT, and with the home port of Panama City, the
Republic of Panama (the Vessel ).
2. Assignor and Lender entered into the Loan Agreement (the Loan
Agreement ) dated as of December 14, 1996 whereby Lender agreed to lend
Assignor certain sums to be secured by the Vessel and all rights of
Assignor with respect thereto. Unless otherwise defined herein, all
capitalized terms used herein have the meanings assigned to such terms
in the Loan Agreement.
3. TRBH executed and delivered to Lender its Promissory Note (the Note )
dated December 14, 1996, in the original principal amount of U.S.
$38,000,000 payable with interest to the order of Lender in monthly
installments commencing on February 15, 1997.
4. TRBH has executed and delivered to the Lender the First Preferred Ship
Mortgage (the Mortgage ) of even date herewith to secure its
obligations under the Loan Agreement and the Note and the other
documents executed in connection therewith. This Assignment is
supplemental to the Mortgage.
5. Assignor has executed and delivered to the Lender the Charter Assignment
to secure its obligations under the Loan Agreement and the Note and the
other documents executed in connection therewith this Assignment to the
Charter Assignment.
6. Lender, in order to further secure payment and performance of the
principal amount of the Note, plus interest thereon and all obligations
relating thereto as Assignor may be obligated to pay or perform under
the covenants, terms, and conditions in the Note, the Loan Agreement,
the Mortgage, the Charter Assignment, this Assignment and the other
documents executed in connection therewith (the Loan Documents )
(collectively, the Obligations ), has duly authorized the execution and
delivery of this Assignment.
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree as follows:
1. The Assignor, as beneficial owner, hereby assigns to the
Lender all of the Assignor s right, title and interest in and to all policies
and contracts of insurance (including all entries in a protection and
indemnity or war risks association) which are from time to time covering or
taken out in respect of the Vessel, its operations, freights, disbursements,
profits or otherwise and all the benefits thereof including all claims and
return of premiums and the proceeds thereof (all of which are hereinafter
called the Insurances ).
2. Anything contained herein to the contrary notwithstanding,
the Assignor shall remain liable for all obligations in connection with the
Insurances (including, without limitation, the payment of all premiums and
calls with respect thereto) and the Lender shall have no obligation or
liability whatsoever with respect to the Insurances by reason of, or arising
out of, this Assignment and shall not be required to present or file any claim
or take any other action of any kind at any time with respect to the
Insurances.
3. The Assignor agrees that it will forthwith give, or cause
its broker to give, notice, in the form attached hereto, of this Assignment to
all insurers, underwriters, clubs and associations with respect to the
Insurances. The Assignor shall cause each of the Insurances to carry a loss
payable clause endorsement substantially in the form of Exhibit A attached
hereto.
4. The Assignor does hereby constitute the Lender, 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 monies or
claims for monies due and to become due in connection with Insurances, to
settle or compromise any claim thereunder, to endorse any checks or other
instruments or orders in connection therewith and to file any claims or take
any action or institute any proceedings which to the Lender may seem necessary
or advisable. The Assignor further agrees that at any time and from time to
time, upon the written request of the Lender, the Assignor will promptly and
duly execute and deliver any and all such further instruments and documents as
the Lender may reasonably request in obtaining the full benefits of this
Assignment and the rights and powers herein granted or purported to be
granted.
5. The Assignor covenants and warrants that it has not
assigned, charged or pledged, and that it will not hereafter without the prior
written consent of the Lender, assign, charge or pledge the whole or any part
of the Insurances to anyone other than the Lender. Notwithstanding anything to
the contrary contained in any other Loan Document, in the event of a conflict
between this Agreement and any other document concerning the grant or
enforcement of any lien or security interest in the Insurances, the provisions
of this Agreement shall control.
6. Upon payment to the Lender of all monies due and to become
due to the Lender under the Note, the Loan Agreement and the Mortgage and any
other obligations secured hereby and when the Assignor is under no further
actual or contingent liability in respect thereof, the Lender will at the
request and cost of the Assignor reassign the Insurances to the Assignor or as
it shall direct, without any representation, warranty or recourse by or to the
Lender.
7. The Lender is hereby authorized, but not required, in its
own name and the Assignor s name, to demand, collect, receipt for and
prosecute all necessary actions in the courts to recover any and all insurance
monies which may become due and payable under any insurance.
8. If the Assignor shall at any time fail to pay, or cause to
be paid, when due any insurance premiums or to obtain any required insurance
or to deliver to the Lender in accordance with this Assignment and Loan
Agreement above all policies, certificates, contracts of insurance, binders
and cover notes and all renewals thereof as required by the provisions
thereof, the Lender may, but shall not be required to, procure such insurance
and pay unpaid premiums and the cost and expense thereof (with interest at the
rate provided in the Loan Agreement) shall be an additional indebtedness due
from the Assignor to the Lender and shall be paid by the Assignor on demand.
9. This Assignment shall be governed by and construed in
accordance with the laws of New York.
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment as of the day and year first above written.
ASSIGNOR:
TRB HOLDING CORPORATION
By
Name
Title
READING & BATES (U.K.) LIMITED
By
Name
Director
By
Name
Director
ASSIGNEE:
NISSHO IWAI EUROPE PLC
By
Name
Title
Notice of Assignment
Each of TRB HOLDING CORPORATION, a Delaware corporation (the Owner ), the
owner of that certain vessel known as Seillean of 50,928 gross registered
tons, Call Letters 3FPF6 and Registration No. 25519-PEXT, and with the home
port of Panama City, the Republic of Panama (the Vessel ), and READING &
BATES (U.K.) LIMITED, the charterer of the Vessel (the Charterer ) HEREBY
GIVES NOTICE that by an Assignment dated as of December 14, 1996 in favor of
NISSHO IWAI EUROPE PLC, an English corporation (the Lender ) the Owner and
the Charterer assigned to the Lender all of their, right, title and interest
in and to all insurances and the benefit of all insurances now or hereafter
taken out in respect of the Vessel. This Notice is to be endorsed on all
policies and certificates of entry evidencing such insurances.
TRB HOLDING CORPORATION
By
Name
Title
READING & BATES (U.K.) LIMITED
By
Name
Director
Acknowledged:
EXHIBIT A
Form of Loss Payable Clause and Endorsements
TRB Holding Corporation and Reading & Bates (U.K.) Limited have
assigned to Nissho Iwai Europe Plc (the Lender ) this policy and all benefits
thereof.
Until the Lender notifies the insurer to the contrary:
all claims hereunder in respect of a total or constructive
total loss of the vessel Seillean (the Vessel ) or an arranged
or agreed or compromised total loss of the Vessel shall be paid to
the Lender up to its mortgage interest without any deduction or
deductions whatsoever;
any other claim exceeding $500,000 in respect of the Vessel
shall be paid to account no. 15012511 opened in the name of the
Lender with The Chase Manhattan Bank, London, England, subject to
the prior written consent of the Lender; and
any other claim not exceeding $500,000 in respect of the
Vessel shall be paid to account no. _______________ opened in the
name of ________________________ with
______________________________ (ABA #_____________________).
The Lender shall be advised:
immediately of any material changes which are proposed to be
made in the terms of the insurances or if the insurers cease to be
insurers for any purposes connected with the insurance;
not later than thirty days prior to the expiry of any of the
insurances if instructions have not been received for the renewal
or further renewal thereof and, in the event of instructions being
received to renew or further to renew, of the details thereof;
immediately of any instructions or notices received by any
insurer with regard to the cancellation or invalidity of any of
the insurances aforesaid.
The Insurances shall contain breach of warranty protection
to the NIC Parties and waiver of subrogation clause. The
Insurances shall be primary without right of contribution from any
other insurance that may be carried by the NIC Parties and contain
a waiver of set off of premiums against claims proceeds and
provide no recourse for premium payments by the NIC Parties.
EXHIBIT 11
READING & BATES CORPORATION
AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE, PRIMARY AND
FULLY DILUTED
(in thousands except share and per share amounts)
Years ended December 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
PRIMARY NET INCOME (LOSS) PER SHARE:
Weighted average number of common
shares outstanding 64,620,205 60,207,934 56,899,715
========== ========== ==========
Income (loss) before extraordinary
gain $ 77,916 $ 18,392 $ (17,146)
Adjustments:
Less dividends paid on $1.625
Convertible Preferred Stock (3,631) (4,855) (4,859)
---------- ---------- ----------
Adjusted income (loss) before
extraordinary gain 74,285 13,537 (22,005)
Extraordinary gain - 3,430 -
---------- ---------- ----------
Adjusted net income (loss) applicable
to common shares outstanding $ 74,285 $ 16,967 $ (22,005)
========== ========== ==========
Income (loss) per common share:
Adjusted income (loss)
before extraordinary gain $ 1.15 $ .22 $ (.39)
Extraordinary gain - .06 -
---------- ---------- ----------
Net income (loss) per common share $ 1.15 $ .28 $ (.39)
========== ========== ==========
Years ended December 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
FULLY DILUTED NET INCOME PER SHARE:
Weighted average number of common
shares outstanding 64,620,205 - -
Assume conversion of (at the beginning
of the period):
$1.625 Convertible Preferred Stock 6,406,769 - -
---------- ---------- ----------
Adjusted common shares outstanding -
fully diluted 71,026,974 - -
========== ========== ==========
Adjusted net income applicable to
common shares outstanding $ 74,285 $ - $ -
Adjustments:
Dividends paid on $1.625
Convertible Preferred Stock 3,631 - -
---------- ---------- ----------
Adjusted net income applicable to
common shares outstanding -
assuming full dilution $ 77,916 $ - $ -
========== ========== ==========
Fully diluted net income per common
share (considering only dilutive
convertible securities) $ 1.10 $ - $ -
========== ========== ==========
READING & BATES CORPORATION
AND SUBSIDIARIES
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE, PRIMARY AND FULLY DILUTED
(in thousands except share and per share amounts)
Years ended December 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
FULLY DILUTED NET INCOME PER SHARE:*
Weighted average number of common
shares outstanding 64,620,205 60,207,934 56,899,715
Assume exercise of outstanding stock
options (based on the treasury
stock method) 1,225,584 401,390 -
Assume conversion of (at the beginning
of the period):
$1.625 Convertible Preferred Stock 6,406,769 8,663,125 8,668,010
8% Senior Subordinated Convertible
Debentures 823,631 783,686 743,497
8% Convertible Subordinated
Debentures - 16,661 16,661
---------- ---------- ----------
Adjusted common shares outstanding -
fully diluted 73,076,189 70,072,796 66,327,883
========== ========== ==========
Adjusted net income (loss) applicable
to common shares outstanding $ 74,285 $ 16,967 $ (22,005)
Adjustments:
Interest on 8% Senior Subordinated
Convertible Debentures 3,696 3,173 2,731
Interest on 8% Convertible
Subordinated Debentures - 2,068 2,109
Dividends paid on $1.625 Convertible
Preferred Stock 3,631 4,855 4,859
---------- ---------- ----------
Adjusted net income (loss) applicable
to common shares outstanding -
assuming full dilution $ 81,612 $ 27,063 $ (12,306)
========== ========== ==========
Net income (loss) per common share -
assuming full dilution
(antidilutive) $ 1.12 $ .39 $ (.19)
========== ========== ==========
*This calculation considers all convertible securities and is submitted in
accordance with Regulation S-K item 601(b)(11) although it is contrary to
paragraph 40 of APB Opinion No. 15.
EXHIBIT 21
READING & BATES CORPORATION
AND SUBSIDIARIES
SCHEDULE OF CONSOLIDATED SUBSIDIARIES OF THE COMPANY
AS OF DECEMBER 31, 1996
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
TRB Holding Corporation 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
Reading & Bates (Ireland) Limited Ireland
RB Deepwater Exploration Inc. Nevada
SUBSIDIARY WHOLLY OWNED BY READING & BATES DEVELOPMENT CO.
RB Drilling Co. Oklahoma
SUBSIDIARY WHOLLY OWNED BY READING & BATES ENTERPRISES CO.
Shore Services, Inc. Texas
SUBSIDIARY WHOLLY OWNED BY READING & BATES EXPLORATION CO.
Reading & Bates (A) Pty Ltd Australia
SUBSIDIARY 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
SUBSIDIARY WHOLLY OWNED BY BISMARCK COAL INC.
Certicoals, Incorporated West Virginia
SUBSIDIARY WHOLLY OWNED BY READING & BATES (U.K.) LIMITED
Reading & Bates (Caledonia) Limited United Kingdom
SUBSIDIARY WHOLLY OWNED BY TRB HOLDING CORPORATION
TRB Subsidiary Corporation Delaware
RB Deepwater Exploration Inc. owns 50% of Deepwater Drilling L.L.C.,
a limited liability company organized under the laws of the State of Delaware.
Reading & Bates Corporation owns approximately 74.4% of Arcade
Drilling AS, incorporated in Norway.
Reading & Bates Development Co. owns 75% of Total Offshore Production
Systems, a joint venture organized under the laws of the State of Texas.
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 January 27, 1997, on the consolidated financial
statements of Reading & Bates Corporation and subsidiaries as of December
31, 1996 and 1995, and for the years ended December 31, 1996, 1995 and
1994 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 17, 1997
<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, 1996 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 59,089
<SECURITIES> 0
<RECEIVABLES> 65,620
<ALLOWANCES> 1,891
<INVENTORY> 13,369
<CURRENT-ASSETS> 140,090
<PP&E> 954,249
<DEPRECIATION> 296,620
<TOTAL-ASSETS> 808,190
<CURRENT-LIABILITIES> 55,132
<BONDS> 0
0
0
<COMMON> 3,594
<OTHER-SE> 443,013
<TOTAL-LIABILITY-AND-EQUITY> 808,190
<SALES> 0
<TOTAL-REVENUES> 290,223
<CGS> 0
<TOTAL-COSTS> 126,708
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 605
<INTEREST-EXPENSE> 14,781
<INCOME-PRETAX> 92,484
<INCOME-TAX> 7,884
<INCOME-CONTINUING> 77,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,916
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.10
</TABLE>
