<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended
March 31, 1994
Commission File Number 0-16703
CLIFFS DRILLING COMPANY
(Exact name of registrant as specified in its charter)
Delaware 76-0248934
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
300 Citicorp Center 77002
Houston, Texas (Zip Code)
(Address of principal
executive offices)
(713) 651-9426
(Registrant's telephone number, including area code)
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
Number of shares of Common Stock outstanding as of April 27, 1994: 4,188,104
(Exhibit Index Located on Page 17)
Page 1 of 17 Pages
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CLIFFS DRILLING COMPANY
Form 10-Q
For the Three Months Ended March 31, 1994
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Statements of Operations (Unaudited) -
CLIFFS DRILLING COMPANY
Three Months ended March 31, 1994 and 1993 . . . . . . . . . . . . . . 3
Consolidated Balance Sheets -
CLIFFS DRILLING COMPANY
March 31, 1994 (Unaudited) and December 31, 1993 . . . . . . . . . . . 4
Consolidated Statements of Cash Flows (Unaudited) -
CLIFFS DRILLING COMPANY
Three Months ended March 31, 1994 and 1993 . . . . . . . . . . . . . . 5
Notes to Interim Consolidated Financial Statements (Unaudited). . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
2
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CLIFFS DRILLING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------
1994 1993
------- -------
(In thousands, except
per share amounts)
<S> <C> <C>
REVENUES:
Revenues . . . . . . . . . . . . . . . . . $16,480 $17,817
Income (Loss) from Equity Investment . . . (3) --
------- -------
16,477 17,817
COSTS AND EXPENSES:
Operating Expenses. . . . . . . . . . . . . 7,670 11,524
Depreciation, Depletion and Amortization. . 3,587 3,935
Contract Termination Provision. . . . . . . 1,615 --
Exploration Costs . . . . . . . . . . . . . 21 47
General and Administrative Expense. . . . . 1,251 1,133
------- -------
14,144 16,639
------- -------
OPERATING INCOME (LOSS). . . . . . . . . . . . . . . 2,333 1,178
OTHER INCOME (EXPENSE):
Gain (Loss) on Disposition of Assets . . . (54) 423
Interest Income . . . . . . . . . . . . . . 215 230
Interest Expense. . . . . . . . . . . . . . (161) (427)
Other, net. . . . . . . . . . . . . . . . . (640) (108)
------- -------
INCOME (LOSS) BEFORE INCOME TAXES. . . . . . . . . . 1,693 1,296
INCOME TAX EXPENSE (BENEFIT) . . . . . . . . . . . . 273 202
------- -------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . 1,420 1,094
DIVIDENDS APPLICABLE TO PREFERRED STOCK. . . . . . . (665) (665)
------- -------
NET INCOME (LOSS) APPLICABLE TO COMMON AND
COMMON EQUIVALENT SHARES. . . . . . . . . . $ 755 $ 429
======= =======
NET INCOME (LOSS) PER SHARE:
Primary . . . . . . . . . . . . . . . . . . $ 0.17 $ 0.10
======= =======
Assuming Full Dilution. . . . . . . . . . . $ 0.17 $ 0.10
======= =======
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING:
Primary . . . . . . . . . . . . . . . . . . 4,461 4,511
======= =======
Assuming Full Dilution. . . . . . . . . . . 4,461 4,511
======= =======
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
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CLIFFS DRILLING COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
--------- ------------
(UNAUDITED)
(In thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,708 $ 10,615
Accounts Receivable, net of allowance for doubtful accounts of $632
and $697 at March 31, 1994 and December 31, 1993, respectively . . . . . . 19,899 15,743
Other Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,280 3,812
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,107 2,478
Drilling Contracts in Progress . . . . . . . . . . . . . . . . . . . . . . . . 1,244 485
Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,160 1,098
Other Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,476 3,798
--------- ---------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . 36,874 38,029
PROPERTY AND EQUIPMENT, AT COST:
Rigs and Related Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 172,102 168,059
Oil and Gas Properties ("successful efforts" method) . . . . . . . . . . . . . 25,000 24,888
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,834 2,534
--------- ---------
199,936 195,481
Less: Accumulated Depreciation, Depletion and Amortization . . . . . . . . . . (112,564) (108,975)
--------- ---------
Net Property and Equipment . . . . . . . . . . . . . . . . . . . . . . 87,372 86,506
NOTES AND OTHER RECEIVABLES - LONG TERM . . . . . . . . . . . . . . . . . . . . . . . . 6,710 7,044
INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATE . . . . . . . . . . . . . . . . . 849 1,852
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 92
--------- ---------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133,005 $ 133,523
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,550 $ 8,679
Accrued Expenses, Including Interest . . . . . . . . . . . . . . . . . . . . . 8,144 7,248
Accrued Litigation Settlement and Expenses . . . . . . . . . . . . . . . . . . -- 1,700
--------- ---------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . 21,694 17,627
NOTES PAYABLE - LONG TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,115 13,108
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 623 659
DEFERRED INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,495 885
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK:
$2.3125 Convertible Exchangeable Preferred Stock, 3,000,000 shares
authorized; 1,150,000 shares issued and outstanding at March 31, 1994
and December 31, 1993, respectively ($28,750,000 liquidation value) . . . 28,750 28,750
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value, 15,000,000 shares authorized; 4,268,104 and
4,513,104 shares issued and outstanding at March 31, 1994 and
December 31, 1993, respectively . . . . . . . . . . . . . . . . . . . . . . 45 45
Paid in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,133 99,133
Retained Earnings (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . (25,537) (26,292)
Less: Notes Receivable from Officers for Restricted Stock . . . . . . . . . . (232) (232)
Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84) (103)
Treasury Stock, at cost, 250,000 and 5,000 shares at March 31, 1994
and December 31, 1993, respectively . . . . . . . . . . . . . . . . . . (2,997) (57)
--------- ---------
Total Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . 70,328 72,494
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . $ 133,005 $ 133,523
========= =========
</TABLE>
See accompanying notes to interim consolidated financial statements.
4
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CLIFFS DRILLING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------
1994 1993
------- -------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,420 $ 1,094
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation, Depletion and Amortization . . . . . . . . . . 3,587 3,935
Contract Termination Provision . . . . . . . . . . . . . . . 1,615 --
Mobilization Expense Amortization. . . . . . . . . . . . . . 160 540
(Gain) Loss on Disposition of Assets . . . . . . . . . . . . 54 (423)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . (205) 2
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts Receivable . . . . . . . . . . . . . . . (3,624) (3,951)
Inventories . . . . . . . . . . . . . . . . . . . (629) (175)
Drilling Contracts in Progress. . . . . . . . . . (759) 1,127
Prepaid Expenses and Other Current Assets . . . . (683) 121
Investment in and Advances to Unconsolidated
Affiliate . . . . . . . . . . . . . . . . . . 1,675 (182)
Other Assets . . . . . . . . . . . . . . . . . . (1,147) --
Accounts Payable and Other Accrued Liabilities. . 2,517 (657)
Deferred Income . . . . . . . . . . . . . . . . . -- 255
------- -------
Net Cash Provided by (Used in) Operating
Activities. . . . . . . . . . . . . . . . . . 3,981 1,686
INVESTING ACTIVITIES:
Capital Expenditures . . . . . . . . . . . . . . . . . . . . (4,769) (4,961)
Proceeds from Sale of Property and Equipment . . . . . . . . 16 5,000
Collection of Notes Receivable . . . . . . . . . . . . . . . 334 237
------- -------
Net Cash Provided by (Used in)
Investing Activities. . . . . . . . . . . . . (4,419) 276
FINANCING ACTIVITIES:
Payments on Borrowings . . . . . . . . . . . . . . . . . . . (3,993) (3,038)
Acquisition of Treasury Stock . . . . . . . . . . . . . . . (1,811) --
Preferred Stock Dividends . . . . . . . . . . . . . . . . . (665) (665)
------- -------
Net Cash Provided by (Used in)
Financing Activities . . . . . . . . . . . . (6,469) (3,703)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . (6,907) (1,741)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . 10,615 15,697
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . $ 3,708 $13,956
======= =======
</TABLE>
See accompanying notes to interim consolidated financial statements.
5
<PAGE> 6
CLIFFS DRILLING COMPANY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1994
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of normal and recurring adjustments) necessary to present a
fair statement of the results for the period included herein have been made and
the disclosures contained herein are adequate to make the information presented
not misleading. Operating results for the three months ended March 31, 1994
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1994. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1993.
2. EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per share computations are based on net income (loss)
less dividends on the Company's $2.3125 Convertible Exchangeable Preferred
Stock (the "Preferred Stock"), divided by the average number of common shares
and equivalents outstanding during the respective periods. Common stock
equivalents include the number of shares issuable upon exercise of stock
options, less the number of shares that could have been repurchased with the
exercise proceeds using the treasury stock method. The Preferred Stock is not
included in the primary earnings (loss) per share computation as it is not a
common stock equivalent. Fully diluted earnings per common share computations
are made after the assumption of conversion of the Preferred Stock when the
effect of such conversion is dilutive.
6
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CLIFFS DRILLING COMPANY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1994
3. TREASURY STOCK
The Company purchased on the open market 245,000 shares of its Common Stock at
an aggregate purchase price of $2,940,000, or $12.00 per share, during the
quarter ended March 31, 1994. During the fourth quarter of 1993, the Company
purchased on the open market 5,000 shares at an aggregate purchase price of
$57,000, or $11.40 per share. All of the acquired shares are held as Common
Stock in treasury, less shares issued to employees under certain benefit plans.
Subsequent to March 31, 1994, the Company purchased on the open market an
additional 80,000 shares of its Common Stock at an aggregate purchase price of
$980,000, or $12.25 per share.
4. NOTES PAYABLE
The Company executed the Second Restated Credit Agreement with Internationale
Nederlanden (U.S.) Capital Corporation ("INCC") during the first quarter of
1994, thereby converting its $10,000,000 working capital credit facility to a
$20,000,000 revolving line of credit subject to certain borrowing base
limitations. The revolving line of credit matures on January 1, 1996.
Subsequent to March 31, 1994, the Company drew an aggregate of $8,000,000 under
the credit facility to fund its working capital requirements.
5. CHANGE IN PRESENTATION
Certain financial statement items have been reclassified in the prior year to
make them conform with the current year presentation.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Activity in the contract drilling industry and related oil service businesses
has been severely depressed since 1982 due to volatility in oil and natural gas
prices. These conditions have resulted in an oversupply of drilling equipment,
decreased rig utilization, declining dayrates and intense competition for
drilling contracts. The financial condition and results of operations of the
Company and other drilling contractors have suffered, as demand for their
services is primarily dependent upon the level of spending by oil and gas
companies for exploration, development and production activities.
The Company has endeavored to mitigate the effect of these depressed market
conditions by diversifying its scope of operations beyond the traditional
domestic daywork contract drilling market. To achieve its strategic objective,
the Company established separate but related lines of business in turnkey
drilling and Mobile Offshore Production Unit ("MOPU") operations, and pursued
foreign drilling and production opportunities. Each of the Company's business
segments will continue to be affected, however, by the unsettled energy
markets, which are influenced by a variety of factors, including general
economic conditions, the extent of worldwide oil and gas production and demand
therefor, government regulations, and environmental concerns.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1994 Versus 1993
The Company recognized net income, before preferred dividends, of $1.4 million
during the first quarter of 1994 compared to net income of $1.1 million in the
same period in 1993. Operating income increased $1.2 million in the first
quarter of 1994 compared to the first quarter of 1993. The improvement in
operating income was due to increased foreign daywork drilling operating income
of $1.6 million and decreased domestic daywork drilling operating losses of
$1.0 million. These improvements were offset in part by decreased MOPU
operating income of $1.3 million and increased corporate overhead of $.1
million.
8
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------- Increase
1994 1993 (Decrease)
------- ------- ----------
(Unaudited)
(In thousands)
<S> <C> <C> <C>
Revenues:
Daywork Drilling:
Domestic. . . . . . . . . . . . . . $ 8 $ 23 $ (15)
Foreign . . . . . . . . . . . . . . 7,204 5,020 2,184
Turnkey Drilling . . . . . . . . . . . 2,914 6,667 (3,753)
MOPU Operations. . . . . . . . . . . . 5,779 5,148 631
Oil and Gas. . . . . . . . . . . . . . 574 959 (385)
Eliminations . . . . . . . . . . . . . (2) -- (2)
------- ------- -------
Consolidated. . . . . . . . . . . . $16,477 $17,817 $(1,340)
======= ======= =======
Operating Income (Loss):
Daywork Drilling:
Domestic. . . . . . . . . . . . . . $ (65) $(1,014) $ 949
Foreign . . . . . . . . . . . . . . 1,500 (131) 1,631
Turnkey Drilling . . . . . . . . . . . 426 393 33
MOPU Operations. . . . . . . . . . . . 2,083 3,428 (1,345)
Oil and Gas. . . . . . . . . . . . . . (336) (345) 9
Corporate Office . . . . . . . . . . . (1,275) (1,153) (122)
------- ------- -------
Consolidated. . . . . . . . . . . . $ 2,333 $ 1,178 $ 1,155
</TABLE> ======= ======= =======
Daywork Drilling
Domestic daywork drilling results in the first quarter of 1994 reflect the
Company's strategy to diversify away from this volatile market. As a result of
domestic drilling rig deployments out of the United States, domestic daywork
drilling operating losses decreased by $1.0 million from the first quarter of
1993 to the first quarter of 1994. Operating losses incurred in the first
quarter of 1993 were due primarily to stacked rig costs associated with the
Company's domestic land rigs. One of the Company's land drilling rigs, which
was stacked during the first quarter of 1993, was mobilized to Venezuela during
the first quarter of 1994 and began daywork drilling operations for Corpoven,
S.A. ("Corpoven") for a three-year term. Two of the Company's land drilling
rigs, which were stacked during all of 1993, were mobilized to Venezuela during
the first quarter of 1994 and began drilling the first of 6 turnkey wells for
Corpoven during April, 1994.
Foreign daywork drilling revenues increased $2.2 million from $5.0 million in
the first quarter of 1993 to $7.2 million in the first quarter of 1994.
Foreign daywork drilling operating income increased $1.6 million during the
same period. Foreign daywork drilling operating results reflect increased
revenues primarily due to contributions from one of the Company's jack-up
9
<PAGE> 10
drilling rigs which was mobilized to the Bay of Tampico, Mexico during the
first quarter of 1994. This jack-up drilling rig is currently drilling the
first of 2 turnkey wells for Cliffs Neddrill Central Turnkey International
("CNCTI"), a joint venture in which the Company holds a one-third ownership
interest, both of which should be completed during 1994. Also attributing to
the increased revenues were the additional land rig operations in Venezuela and
increased average dayrates for the Company's 2 jack-up drilling rigs working in
Venezuela during the first quarter of 1994 compared to the same period in 1993.
The increase in operating income was primarily due to these expanded foreign
activities and revenues coupled with various cost reductions, primarily jack-up
rig repair and maintenance and amortization of mobilization costs.
Contracts for the Company's 2 jack-up drilling rigs operating in Venezuela were
renegotiated and extended to March,1995. The new dayrates are lower than those
received during 1993 and the first quarter of 1994; however, the contract
rates are adjusted quarterly based upon fluctuations in oil prices from the
base oil price in effect at the contract renewal date. Contracts on 2 of the
land drilling rigs working in eastern Venezuela expire in September, 1995.
Turnkey Drilling
Turnkey drilling revenues decreased $3.8 million from $6.7 million in the first
quarter of 1993 to $2.9 million in the same period in 1994. One turnkey
contract was completed in the first quarter of both 1993 and 1994. Turnkey
drilling operating income in the first quarter of 1994 was approximately the
same as operating income during the same period of 1993.
The Company anticipates improved turnkey drilling operating results during the
remainder of 1994 due to the award of approximately $50 million in
international turnkey contracts to be drilled in 1994 and 1995. The Company
was awarded 2 packages with 3 turnkey wells in each package to be drilled for
Corpoven with estimated revenues of approximately $36 million. The Company
mobilized 2 land rigs to Venezuela during the first quarter of 1994 to work on
these projects. In addition, CNCTI was awarded 2 drilling packages by
Petroleos de Mexico S.A. ("PEMEX") for the drilling of a total of 4 wells.
The Company mobilized an idle jack-up drilling rig to the Bay of Tampico,
Mexico in the first quarter of 1994 to drill 2 of the 4 wells. The 2 packages
are expected to generate $42 million in revenues to CNCTI. In addition to the
turnkey wells being drilled in Mexico and Venezuela, the Company is currently
in the process of drilling 2 turnkey wells in the United States and one in
Holland.
MOPU Operations
MOPU revenues increased $.6 million from $5.2 million in the first quarter of
1993 to $5.8 million in the first quarter of 1994. MOPU operating income
decreased $1.3 million during the same period. The increase in revenues was
primarily due to contributions from MOPU No. 8 which began operations during
the third quarter of 1993. Operating income decreased primarily due to the
deferral of income recognition to the extent of potential losses that could
occur upon exercise
10
<PAGE> 11
of certain buyout options on 2 of the 3 MOPUs working in Venezuela. Partially
offsetting the impact of this $1.6 million non-cash provision was the income
contribution from MOPU No. 8. Each of the 3 MOPUs working in Venezuela has an
initial contract term of two years which concludes during 1994, subject to
certain buyout options, which if exercised, could have a material impact on
the Company's future results of operations. See "Liquidity and Capital
Resources."
The contract for MOPU No. 4, which is operating in the Gulf of Mexico,
terminates at the end of April, 1994. MOPU No. 4 contributed revenues of $.1
million and $.3 million and an operating loss of $.1 million and operating
income of $.1 million during the first quarter of 1994 and 1993, respectively.
The Company will market this MOPU upon termination of the contract. No
assurance can be given that the Company will be able to secure a contract for
the operation of MOPU No. 4. The Company has secured a bareboat charter for
one of its idle rigs from a third party for future use of the unit as a
workover rig in the U.S. Gulf of Mexico. Operations are expected to commence
during the latter part of the second quarter of 1994.
Oil and Gas
Oil and gas revenues decreased $.4 million from $1.0 million in the first
quarter of 1993 to $.6 million for the same period in 1994, primarily due to
reduced gas revenues resulting from a net revenue interest reduction due to
payout of one of its significant wells. Operating losses in the first quarter
of 1994 were consistent with operating losses in the same period in 1993,
primarily because decreased depreciation, depletion and amortization more than
offset the revenue decrease.
Corporate Overhead
Corporate overhead increased $.1 million from $1.2 million in the first quarter
of 1993 to $1.3 million in the first quarter of 1994. The increase was
primarily due to an overall increase in employment and office costs.
Other Income (Expense)
The Company recognized $.9 million of other expense during the first quarter of
1994 compared to $.1 million of other expense during the same period in 1993.
The net increase in other expenses resulted primarily from decreased gains on
disposition of assets and increased exchange rate losses, partially offset by
decreased interest expense.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased $6.9 million from $10.6
million at December 31, 1993 to $3.7 million at March 31, 1994. The decrease
resulted from $4.8 million used to fund capital expenditures and $6.5 million
used to make payments on borrowings, preferred stock dividends and purchases of
Common Stock, partially offset by $4.0 million provided by operating activities
and $.4 million of proceeds received primarily from the collection of notes
receivable.
Cash provided by operating activities of $4.0 million included $2.7 million
used for working capital and other requirements, primarily to fund the
Company's foreign daywork drilling and turnkey drilling operations. "Accounts
Receivable" increased from December 31, 1993 to March 31, 1994 due primarily
to the timing of customer payments. The increase in "Other Assets" was
primarily due to the deferral of mobilization costs associated with the
movement of 3 land drilling rigs to Venezuela during the first quarter of 1994.
"Accounts Payable" increased from December 31, 1993 to March 31, 1994 due
primarily to mobilization and start-up costs associated with the Company's
expanded foreign daywork drilling and turnkey operations.
Cash was used during the first three months of 1994 to fund $4.8 million of
capital expenditures, which primarily related to the upgrade of the 3
additional land rigs mobilized to Venezuela and one jack-up rig mobilized for
drilling operations in Mexico.
During the fourth quarter of 1992, the Company acquired 5 jack-up drilling rigs
at a cost of $6.0 million, with plans to convert them to MOPUs. The conversion
of the first unit, which replaced the MARLIN NO. 3, cost approximately $4.2
million and was funded by a portion of the insurance proceeds received in
connection with the constructive total loss of MARLIN NO. 3 in 1992. This unit,
MOPU No. 8, commenced operations on July 19, 1993 and is currently contracted
to Union Pacific Resources Company. The second of the 5 rigs acquired was
converted to a MOPU at a cost of $4.5 million. The cost of this unit was
funded by a portion of the proceeds received from the sale of 1,500,000 shares
of Common Stock of the Company which was completed during October, 1992. This
unit, MOPU No. 10, is currently being marketed. No assurance can be given that
the Company will be able to secure a contract for the operation of the second
unit. One of the acquired rigs is currently being used as a mobile offshore
supply unit to facilitate the Company's joint venture turnkey drilling
operations in Mexico. The Company upgraded and mobilized another of the
acquired rigs into Mexico during the first quarter of 1994 for turnkey drilling
operations in the Bay of Tampico. The Company has secured a bareboat charter
on the final unit from a third party for future use as a workover rig in the
U.S. Gulf of Mexico. The Company expects to spend $1.1 million to refurbish
the rig. Operations are expected to commence during the latter part of the
second quarter of 1994.
Charter hire payments commenced September, 1992 with respect to the first of 3
MOPUs contracted to work in Venezuela. Charter hire payments commenced in
February, 1993 on the other 2 MOPUs working in Venezuela. Eighty-five percent
(85%) of the cash flow attributable to
12
<PAGE> 13
the contracts for the Company's 3 MOPUs working in Venezuela is dedicated to
debt repayment under the contracts and loan agreements relating to such MOPUs.
Each of the 3 MOPUs working in Venezuela has an initial contract term of two
years expiring in 1994, subject to certain buyout options. The buyout options
can be exercised at any time during the contract term. The loss of future
operating income associated with these units, should the buyout options be
exercised or contract renewals not be obtained, could have a material adverse
effect on the Company's future results of operations. Because the Company now
believes there is a reasonable likelihood that the buyout options on 2 of the
units will be exercised in 1994, the Company has elected to defer income
recognition prospectively on these 2 units to the extent of potential losses
that could occur upon exercise of the options. At March 31, 1994, the Company
had provided an aggregate of $2.2 million of reserves to offset potential
losses on the units if the buyout options were to be exercised on 2 of the
units. The Company expects to defer additional income recognition in the
amount of $1.8 million in each of the second and third quarters of 1994. The
initial two-year term of the contract on one of the MOPUs working in Venezuela
expires on May 7, 1994. The Company's operating results subsequent to the
expiration of the initial term will not include revenues and operating income
related to this MOPU until the charterer has satisfied all contractual
obligations and the original contract extended or a new contract negotiated.
No assurance can be given that the contract will be renewed, and if renewed, at
rates comparable to those received during the original two-year term of the
contract.
Approximately 66% of the Company's revenues and a substantial portion of its
operating income were sourced from its Venezuelan operations during the first
three months of 1994. These operations are subject to customary political and
foreign currency risks in addition to operational risks. The Company has
attempted to reduce these risks through insurance and the structure of its
Venezuelan contracts.
In conjunction with the redelivery to the owner of 3 offshore drilling rigs
under long-term charters, a dispute existed as to whether or not the Company
complied with the terms of the charters regarding maintenance and repair of the
rigs during the charter period, as well as the condition of the rigs upon
redelivery. Following a trial in February, 1994, a judgment was entered in the
United States District Court, Southern District of Texas, Houston Division,
which awarded the owner $3.5 million, plus court costs, offset by a partial
summary judgment of $1.8 million. The Company paid the owner $1.7 million in
February, 1994 as a final settlement of all disputed issues.
At December 31, 1993, the Company's credit agreement with INCC, formerly
Internationale Nederlanden Bank N.V., provided for a $10.0 million working
capital credit facility which had a maturity date of January 1, 1995 and a
$30.0 million term loan which matures January 1, 1995. As of March 31, 1994,
the outstanding balance of the Company's term loan with INCC was $9.1 million,
which is scheduled to be paid in full on or before October 1, 1994. During
March, 1994, the Company amended the terms of the credit facility thereby
increasing the amount available to $20.0 million, subject to certain borrowing
base limitations, and extended the maturity date to January 1, 1996.
Subsequent to March 31, 1994, the Company drew an aggregate of $8.0 million
13
<PAGE> 14
under the amended credit facility.
The Company from time to time purchases its Common Stock in the open market.
The Company purchased 245,000 shares of its Common Stock at an aggregate
purchase price of $2.9 million, or $12.00 per share, during the quarter ended
March 31, 1994. A total of 5,000 shares, at an aggregate purchase price of $.1
million, or $11.40 per share, was acquired in the fourth quarter of 1993.
Subsequent to March 31, 1994, the Company purchased an additional 80,000 shares
of its Common Stock at an aggregate purchase price of $1.0 million, or $12.25
per share. Management of the Company believes that the Common Stock is trading
at prices which do not reflect the value of the Company and has determined that
the acquisition of such stock would be in the best interest of the Company and
its shareholders. All of the acquired shares are held as Common Stock in
treasury, less shares issued to employees under certain benefit plans.
The ability of the Company to fund working capital, capital expenditures, debt
service and dividends in excess of cash on hand will be dependent upon the
success of the Company's domestic and foreign operations. To the extent that
internal sources are insufficient to meet those cash requirements, the Company
can draw on its available credit facility or seek other debt or equity
financing; however, the Company can give no assurance that such other debt or
equity financing would be available on terms acceptable to the Company.
In any case, the satisfaction of long-term capital requirements will depend
upon successful implementation by the Company of its business strategy and
future results of operations. Management believes it has successfully
implemented the strategy to achieve results of operations commensurate with its
immediate and near-term liquidity requirements.
14
<PAGE> 15
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.14.1 - Second Restated Credit Agreement dated as of
March 28, 1994 by and among the Company, Cliffs
Oil and Gas Company, and Cliffs Drilling
International, Inc., and INCC.
(b) Reports on Form 8-K
Report on Form 8-K filed on February 17, 1994.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLIFFS DRILLING COMPANY
Date: April 27, 1994 By /s/ EDWARD A. GUTHRIE
______________________ ____________________________
Edward A. Guthrie
Vice President - Finance
Date: April 27, 1994 By /s/ CINDY B. TAYLOR
______________________ ____________________________
Cindy B. Taylor
Corporate Controller
16
<PAGE> 17
EXHIBIT INDEX
10.14.1 -- Second Restated Credit Agreement dated as of March 28, 1994 by
and among the Company, Cliffs Oil and Gas Company, and Cliffs
Drilling International, Inc., and INCC.
17
<PAGE> 1
SECOND RESTATED CREDIT AGREEMENT
AMONG
CLIFFS DRILLING COMPANY,
AS BORROWER
CLIFFS OIL AND GAS COMPANY
AND
CLIFFS DRILLING INTERNATIONAL, INC.,
AS GUARANTORS
AND
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION
AS LENDER
REVOLVING LINE OF CREDIT
OF UP TO $20,000,000
TERM LOAN
OF UP TO $30,000,000
March 24, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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----
<S> <C> <C>
ARTICLE 1 -- DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Number and Gender . . . . . . . . . . . . . . . . . . . . . 24
1.3 References. . . . . . . . . . . . . . . . . . . . . . . . . 24
1.4 Calculations and Determinations.. . . . . . . . . . . . . . 25
ARTICLE 2 -- TERMS OF FACILITY . . . . . . . . . . . . . . . . . . . . . 25
2.1 Revolving Line of Credit. . . . . . . . . . . . . . . . . . 25
2.1.1 Revolving Credit Commitment.. . . . . . . . . . . . . . . . 25
2.1.2 Reduction of Commitment . . . . . . . . . . . . . . . . . . 26
2.1.3 Extension of Commitment Termination Date. . . . . . . . . . 26
2.1.4 Allocation of Revolving Credit to Letters of Credit . . . . 26
2.1.5 Letter of Credit Fee. . . . . . . . . . . . . . . . . . . . 27
2.1.6 Advances and Payments on Revolving Credit Note. . . . . . . 27
2.1.7 Borrowing Base Determinations . . . . . . . . . . . . . . . 28
2.1.8 Mandatory Prepayment. . . . . . . . . . . . . . . . . . . . 28
2.1.9 Advances to Satisfy Obligations of Borrower . . . . . . . . 29
2.2 Term Loans. . . . . . . . . . . . . . . . . . . . . . . . . 29
2.2.1 Making The Term Loan. . . . . . . . . . . . . . . . . . . . 29
2.2.2 Loans and Payments on Term Note . . . . . . . . . . . . . . 29
2.2.3 Mandatory Prepayments on Term Note. . . . . . . . . . . . . 29
2.2.4 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 30
2.3 Provisions Relating to All Loans. . . . . . . . . . . . . . 30
2.3.1 Renewal and Extension.. . . . . . . . . . . . . . . . . . . 30
2.3.2 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.3.3 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.3.4 Rate Elections. . . . . . . . . . . . . . . . . . . . . . . 31
2.3.5 Optional Prepayments. . . . . . . . . . . . . . . . . . . . 32
2.3.6 Payments to Lender. . . . . . . . . . . . . . . . . . . . . 32
2.3.7 Capital Reimbursement . . . . . . . . . . . . . . . . . . . 33
2.3.8 Increased Cost of Fixed Rate Portions . . . . . . . . . . . 33
2.3.9 Change of Law or Conditions . . . . . . . . . . . . . . . . 34
2.3.10 Funding Losses. . . . . . . . . . . . . . . . . . . . . . . 35
2.3.11 Reimbursable Taxes. . . . . . . . . . . . . . . . . . . . . 35
2.3.12 Letter Transfer Orders. . . . . . . . . . . . . . . . . . . 36
2.3.13 Power of Attorney . . . . . . . . . . . . . . . . . . . . . 36
2.3.14 Pledge of and Security Interest in Collateral
Account and Right of Offset or Lien . . . . . . . . . . . . 36
2.3.15 Business Purpose; Margin Securities.. . . . . . . . . . . . 37
ARTICLE 3 -- CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 38
3.1 Receipt of Loan Documents and Other Items . . . . . . . . . 38
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<PAGE> 3
Page
----
3.2 Additional Conditions Precedent . . . . . . . . . . . . . . 42
3.2.1 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . 42
3.2.2 No Material Adverse Effect. . . . . . . . . . . . . . . . . 42
3.2.3 Representations and Warranties Correct. . . . . . . . . . . 42
3.2.4 Security Instruments Effective. . . . . . . . . . . . . . . 42
3.2.5 Compliance. . . . . . . . . . . . . . . . . . . . . . . . . 42
3.2.6 No Legal Impediment.. . . . . . . . . . . . . . . . . . . . 42
3.2.7 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.2.8 Additional Documents. . . . . . . . . . . . . . . . . . . . 42
3.2.9 Legal Matters.. . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . 43
4.1 Due Authorization and Corporate Existence . . . . . . . . . 43
4.2 Valid and Binding Obligations . . . . . . . . . . . . . . . 44
4.3 Title to Assets . . . . . . . . . . . . . . . . . . . . . . 44
4.4 Scope and Accuracy of Financial Statements. . . . . . . . . 44
4.5 Liabilities, Litigation and Restrictions. . . . . . . . . . 44
4.6 Authorizations and Consents . . . . . . . . . . . . . . . . 45
4.7 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 45
4.8 Proper Filing of Tax Returns and Payment of Taxes
Due . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.10 Environmental Laws. . . . . . . . . . . . . . . . . . . . . 46
4.11 Compliance with Federal Reserve Regulations . . . . . . . . 48
4.12 Investment Company Act Compliance . . . . . . . . . . . . . 48
4.13 Public Utility Holding Company Act Compliance . . . . . . . 48
4.14 Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.15 Other Regulations . . . . . . . . . . . . . . . . . . . . . 48
4.16 Gas Contracts . . . . . . . . . . . . . . . . . . . . . . . 48
4.17 Intellectual Property . . . . . . . . . . . . . . . . . . . 49
4.18 No Material Misstatements . . . . . . . . . . . . . . . . . 49
4.19 Casualties or Taking of Property. . . . . . . . . . . . . . 49
4.20 Names of Business and Locations of Business, Offices
and Property. . . . . . . . . . . . . . . . . . . . . . . . 49
4.21 Security Instruments. . . . . . . . . . . . . . . . . . . . 50
4.22 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 50
4.23 No Election to be Treated as a Utility. . . . . . . . . . . 50
4.24 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.25 Condition of Rigs . . . . . . . . . . . . . . . . . . . . . 50
4.26 Brokerage Commissions . . . . . . . . . . . . . . . . . . . 50
4.27 No Default. . . . . . . . . . . . . . . . . . . . . . . . . 51
4.28 Fleet Mortgage. . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 5 -- AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 51
5.1 Maintenance and Access to Records . . . . . . . . . . . . . 51
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<PAGE> 4
Page
----
5.2 Monthly Reports . . . . . . . . . . . . . . . . . . . . . . . . 52
5.3 Quarterly Financial Statements and Contract Reports . . . . . . 52
5.4 Annual Financial Statements and Budgets . . . . . . . . . . . . 52
5.5 Reserve Reports . . . . . . . . . . . . . . . . . . . . . . . . 52
5.6 Stockholder Communications and Securities and
Exchange Commission Filings . . . . . . . . . . . . . . . . . . 53
5.7 Notices of Certain Events . . . . . . . . . . . . . . . . . . . 53
5.8 Division Orders . . . . . . . . . . . . . . . . . . . . . . . . 55
5.9 Additional Information. . . . . . . . . . . . . . . . . . . . . 56
5.10 Compliance with Laws and Payment of Assessments and Charges . . 56
5.11 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . 56
5.12 Compliance with Environmental Laws. . . . . . . . . . . . . . . 56
5.13 Hazardous Substances Indemnification. . . . . . . . . . . . . . 57
5.14 Maintenance of Corporate Existence and Good Standing. . . . . . 58
5.15 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . 58
5.16 Agreement to Deliver Security Instruments . . . . . . . . . . . 58
5.17 Initial Fees and Expenses . . . . . . . . . . . . . . . . . . . 59
5.18 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.19 Maintenance of Rigs and Tangible Property . . . . . . . . . . . 60
5.20 Maintenance of Insurance and Evidence Thereof . . . . . . . . . 60
5.21 Inspection of Tangible Assets . . . . . . . . . . . . . . . . . 61
5.22 Payment of Notes and Performance of Obligations . . . . . . . . 61
5.23 Performance of Contracts. . . . . . . . . . . . . . . . . . . . 61
5.24 Lockbox and Lockbox Account Arrangement . . . . . . . . . . . . 62
5.25 Gas Imbalances. . . . . . . . . . . . . . . . . . . . . . . . . 62
5.26 Dresser-Rand Contracts. . . . . . . . . . . . . . . . . . . . . 62
5.27 Payment and Performance Bond. . . . . . . . . . . . . . . . . . 62
5.28 Right of Lender to Inspect Rigs . . . . . . . . . . . . . . . . 62
5.29 Correction of Defects . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 6 -- NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 63
6.1 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.2 Contingent Obligations. . . . . . . . . . . . . . . . . . . . . 63
6.3 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.4 Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . 64
6.5 Dividends and Distributions . . . . . . . . . . . . . . . . . . 64
6.6 Changes in Corporate Structure. . . . . . . . . . . . . . . . . 65
6.7 Organization or Acquisition of Subsidiaries . . . . . . . . . . 65
6.8 Transactions with Affiliates. . . . . . . . . . . . . . . . . . 65
6.9 Payment of Accounts Payable . . . . . . . . . . . . . . . . . . 65
6.10 Loans or Advances . . . . . . . . . . . . . . . . . . . . . . . 65
6.11 Investments.. . . . . . . . . . . . . . . . . . . . . . . . . . 66
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Page
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6.12 Nature of Business. . . . . . . . . . . . . . . . . . . . 66
6.13 Exploration Agreement . . . . . . . . . . . . . . . . . . 66
6.14 Current Ratio . . . . . . . . . . . . . . . . . . . . . . 66
6.15 Consolidated Adjusted Equity. . . . . . . . . . . . . . . 66
6.16 Funded Debt to Total Capitalization Ratio.. . . . . . . . 66
6.17 Hedging Contracts . . . . . . . . . . . . . . . . . . . . 66
ARTICLE 7 -- EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 68
7.1 Enumeration of Events of Default. . . . . . . . . . . . . 68
7.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE 8 -- MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 72
8.1 Transfers and Participations. . . . . . . . . . . . . . . 72
8.2 Survival of Representations, Warranties and Covenants . . 72
8.3 Notices and Other Communications. . . . . . . . . . . . . 72
8.4 Parties in Interest . . . . . . . . . . . . . . . . . . . 73
8.5 Renewals and Extensions . . . . . . . . . . . . . . . . . 73
8.6 No Waiver, Rights Cumulative. . . . . . . . . . . . . . . 73
8.7 Incorporation of Exhibits . . . . . . . . . . . . . . . . 74
8.8 Survival Upon Unenforceability. . . . . . . . . . . . . . 74
8.9 Rights of Third Parties . . . . . . . . . . . . . . . . . 74
8.10 Amendments or Modifications . . . . . . . . . . . . . . . 74
8.11 Agreement Construed as Entirety . . . . . . . . . . . . . 74
8.12 Events and Circumstances Not Reducing or Discharging
the Related Person's Liability. . . . . . . . . . . . . . 74
8.12.1 Modifications, etc. . . . . . . . . . . . . . . . . . . . 75
8.12.2 Adjustment, etc.. . . . . . . . . . . . . . . . . . . . . 75
8.12.3 Condition of any Related Person . . . . . . . . . . . . . 75
8.12.4 Release of Obligors . . . . . . . . . . . . . . . . . . . 75
8.12.5 Other Security. . . . . . . . . . . . . . . . . . . . . . 75
8.12.6 Release of Collateral, etc. . . . . . . . . . . . . . . . 75
8.12.7 Care and Diligence. . . . . . . . . . . . . . . . . . . . 75
8.12.8 Status of Liens . . . . . . . . . . . . . . . . . . . . . 76
8.12.9 Payments Rescinded. . . . . . . . . . . . . . . . . . . . 76
8.12.10 Other Actions Taken or Omitted. . . . . . . . . . . . . . 76
8.13 Time of Essence . . . . . . . . . . . . . . . . . . . . . 76
8.14 Disposition of Collateral . . . . . . . . . . . . . . . . 76
8.15 Limitation on Interest. . . . . . . . . . . . . . . . . . 76
8.16 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 77
8.17 JURISDICTION AND VENUE. . . . . . . . . . . . . . . . . . 77
8.18 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC.. . . . . . . 78
8.19 AGREEMENT SUPERSEDING . . . . . . . . . . . . . . . . . . 78
8.20 Restatement . . . . . . . . . . . . . . . . . . . . . . . 78
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<PAGE> 6
EXHIBITS
Exhibit 1.1 -- Form of Borrowing Base Certificate
Exhibit 1.4 -- Form of Letter Transfer Order
Exhibit 1.5 -- Form of Notice of Revolving Credit Borrowing;
Exhibit 1.7 -- Form of Receivables Report
Exhibit 1.8 -- Form of Revolving Credit Note
Exhibit 2.2.3 -- Maximum Term Loan Balance
Exhibit 2.3.4 -- Form of Rate Election
Exhibit 3.1.9 -- Form of Opinion of Counsel to Related Persons
Exhibit 4.3 -- Liens and Encumbrances
Exhibit 4.5 -- Liabilities, Litigation & Restrictions
Exhibit 4.16 -- Gas Contracts
Exhibit 4.20 -- Principal Places of Business and Chief Executive Offices
Exhibit 6.4 -- Sales of Assets
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<PAGE> 7
SECOND RESTATED CREDIT AGREEMENT
THIS SECOND RESTATED CREDIT AGREEMENT is made and entered into
this 28th day of March, 1994, by and among CLIFFS DRILLING COMPANY,
a Delaware corporation ("Borrower"), CLIFFS OIL AND GAS COMPANY, a
Delaware corporation ("COG"), CLIFFS DRILLING INTERNATIONAL, INC.,
a Delaware corporation ("CDI"), and INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION, a Delaware corporation ("Lender").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Second Restated Credit
Agreement, each of the following terms shall have the meaning
assigned thereto in this Section, unless the context otherwise
requires:
"Accounts" shall mean all accounts receivable, book debts,
notes, drafts, instruments, documents, acceptances and other forms
of obligations now owned or hereafter received or acquired by or
belonging or owing to any Related Persons (including, without
limitation, under any trade names, styles or divisions thereof),
whether arising from services rendered by it or from any other
transaction, whether or not the same involves the performance of
services by such Related Person (including, without limitation, any
such obligation that might be characterized as an account, general
intangible, other than contract rights under contracts containing
prohibitions against assignment of or the granting of a security
interest in the rights of a party thereunder to the extent such
prohibitions are valid under applicable law, or chattel paper under
the Uniform Commercial Code in effect in any jurisdiction) and all
of the rights of any Related Persons in, to and under all purchase
orders now owned or hereafter received or acquired by it for
services, and all of the rights of any Related Persons to any goods
represented by any of the foregoing, and all monies due or to
become due to any Related Persons under all contracts for the
performance of services by it (whether or not yet earned by
performance on the part of such Related Person) or in connection
with any other transaction, now in existence or hereafter arising,
including, without limitation, the right to receive the proceeds of
such purchase orders and contracts, and all collateral security and
guarantees of any kind given by any Person with respect to any of
the foregoing.
<PAGE> 8
"Affiliate" shall mean any Person directly or indirectly
controlling, or under common control with, any Related Persons and
includes any "affiliate" of any Related Persons or any Subsidiary
within the meaning of the regulations promulgated pursuant to the
Securities Act of 1933, as amended, with "control," as used in this
definition, meaning possession, directly or indirectly, of the
power to direct or cause the direction of management, policies or
action through ownership of voting securities, contract, voting
trust, membership in management or in the group appointing or
electing management or otherwise through formal or informal
arrangements or business relationships.
"Agreement" shall mean this Second Restated Credit Agreement,
as it may be amended, modified, supplemented or restated from time
to time.
"Applicable Lending Office" shall mean, for each type of Loan,
the lending office of Lender (or an affiliate of Lender) designated
for such type of Loan on the signature pages hereof or such other
office of Lender (or an affiliate of Lender) as Lender may from
time to time specify to Borrower as the office by which Loans of
such type are to be made and maintained.
"Available Revolving Credit Commitment" shall mean, at a
particular date, an amount equal to the remainder, if any, of (a)
the lesser of the Revolving Credit Commitment or the Borrowing Base
then in effect minus (b) the sum of (i) the Revolving Credit Loan
Balance at such date plus (ii) the L/C Exposure at such date.
"Base Rate" shall mean the per annum rate of interest equal to
the sum of the Base Rate Margin plus the higher of (a) the Federal
Funds Rate plus 1/2 of 1% per annum or (b) the arithmetic average
of the rates of interest publicly announced by The Chase Manhattan
Bank (National Association), Citibank, N.A. and Morgan Guaranty
Trust Company of New York (or their respective successors) as their
respective prime commercial lending rates (or, as to any such bank
that does not announce such a rate, such bank's "base" or other
rate determined by Lender to be the equivalent rate announced by
such bank), except that, if any such bank shall, for any period,
cease to announce publicly its prime commercial lending (or
equivalent) rate, Lender shall, during such period, determine the
"Base Rate" based upon the prime commercial lending (or equivalent)
rates announced publicly by the other such banks. The Base Rate
shall change as and when the Federal Funds Rate and such prime
commercial lending rate change, without notice to Related Persons.
As used in this definition, "Base Rate Margin" means (a) with
respect to the Term Note and to the Term Loan, 1.0% per annum, and
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(b) with respect to Revolving Credit Note and Revolving Credit
Loans, (i) .75% per annum, or (ii) during any Interest Adjustment
Period, 1.25% per annum, and "Federal Funds Rate" means, for any
day, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day, provided that (i) if the day for
which such rate is to be determined is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on
the next succeeding Business Day and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be
the average rate charged to Lender on such day on such transactions
as determined by Lender.
"Base Rate Portion" shall mean any portion of the unpaid
principal balance of the Revolving Credit Loans or any portion of
the unpaid principal balance of the Term Loans which is not made up
of Fixed Rate Portions.
"Borrower" shall mean Cliffs Drilling Company, a Delaware
corporation.
"Borrowing Base" shall mean, at a particular date and as
established pursuant to Section 2.1.7, the sum of (a) 100% of
Eligible Cash Equivalents at such date, plus (b) 80% of Eligible
Accounts at such date, plus (c) the Oil and Gas Reserves at such
date, plus (d) 80% of the Cerrito Note, plus (e) 80% of the
Eligible Turnkey Drilling Contract Amounts, plus (f) 80% of the
Dresser Rand Contract Amounts; provided, however, the amount of the
Borrowing Base derived from the Eligible Cash Equivalents, Eligible
Accounts, Oil and Gas Reserves or Eligible Turnkey Drilling
Contract Amounts owned by COG or CDI, respectively, shall not
exceed the limitation of liability in the guaranty of such Related
Person.
"Borrowing Base Certificate" shall mean each certificate, in
substantially the form attached hereto as Exhibit 1.1, furnished by
Borrower to Lender from time to time in accordance with Section
5.2.
"Borrowing Base Deficiency" shall mean, at any time, the
amount, if any, by which the sum of the Revolving Credit Loan
Balance plus the L/C Exposure at such time exceeds the lesser of
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the Revolving Credit Commitment or the Borrowing Base in effect at
such time.
"Business Day" shall mean a day other than (i) a Saturday,
Sunday or legal holiday for commercial banks under the laws of the
State of New York and (ii) a day on which significant transactions
in dollars in the interbank eurocurrency market are not carried on.
"Cash Equivalents" shall mean certificates of deposit
acceptable to Lender.
"CDI" shall mean Cliffs Drilling International, Inc., a
Delaware corporation.
"Cerrito Note" shall mean, at a particular time, the
outstanding principal amount of that certain promissory note dated
January 1, 1993 made by Cerrito Investment Corp. payable to
Borrower in the stated principal amount of $7,500,000.
"Charter Hire" shall have the meaning given that term in each
of the Charters.
"Charters" shall mean those three Bareboat Charter Agreements
in the form submitted to Lender entered into between Borrower and
Dresser-Rand dated as of December 13, 1991, pursuant to which
Dresser-Rand chartered each of the Rigs respectively.
"Closing Date" shall mean the effective date of this
Agreement.
"Code" shall mean the United States Internal Revenue Code of
1986, as amended from time to time.
"COG" shall mean Cliffs Oil and Gas Company, a Delaware
corporation.
"Collateral" shall mean, collectively, (a) the Accounts,
(b) the Cash Equivalents, (c) the Mortgaged Properties, (d) all
equipment, inventory and vessels of the Related Persons described
in the Security Instruments, (e) all rights to receive payment
under the Charters, (f) the Cerrito Note and (g) any other Property
that is subject to a Lien in favor of Lender or which, under the
terms of any Security Instrument is purported to be subject to such
a Lien, as security for payment or performance of all or any
portion of the Obligations.
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"Commitment Fee" shall mean collectively the fees payable to
Lender by Borrower pursuant to Section 2.3.3 (a) and (b).
"Commonly Controlled Entity" shall mean any Person (whether or
not incorporated) that is under common control with any Related
Persons within the meaning of Section 4001 of ERISA.
"Consolidated Adjusted Equity" shall mean, as to the
Consolidated Group and at a particular date, all amounts that
would, in accordance with GAAP, be included under consolidated
common stock and other stockholders' equity of the Consolidated
Group (including, without limitation, amounts for preferred stock,
convertible preferred stock, cumulative convertible exchangeable
preferred stock (or the convertible subordinated debentures
exchanged therefor), common stock, capital surplus and retained
earnings and other stockholders' equity so long as none of the
foregoing is subject to any mandatory redemption) less amounts
carried on the books of the Consolidated Group, to the extent not
already excluded in accordance with GAAP, for (a) intangibles,
including, without limitation, patents, patent applications,
copyrights, trademarks, trade names, experimental or organizational
expenses and other like intangibles, (b) treasury stock, and (c)
any write-up in the book value of any assets (other than the
adjustments of book value for lower of cost or market valuation of
inventories) of any Consolidated Group Member resulting from any
reevaluation thereof subsequent to December 31, 1993.
"Consolidated Current Assets" shall mean all assets that
would, in accordance with GAAP, be included as current assets on a
consolidated balance sheet of the Consolidated Group as of the date
of calculation.
"Consolidated Current Liabilities" shall mean such items as
would be included, in accordance with GAAP, as current liabilities
on a consolidated balance sheet of the Consolidated Group as of the
date of calculation, including, without limitation, the current
portion of any Indebtedness of any Consolidated Group Member
treated as long term; provided, however, the Consolidated Current
Liabilities shall not include the Obligations or any part thereof,
regardless of whether the Obligations would be classified as
current liabilities under GAAP.
"Consolidated Funded Debt" shall mean, as of any date, the sum
of the following without duplication: (a) all Indebtedness of a
Consolidated Group Member as of that date, other than Consolidated
Current Liabilities, (b) all Indebtedness that would be classified
as long-term indebtedness on a consolidated balance sheet of the
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<PAGE> 12
Consolidated Group prepared as of that date in accordance with
GAAP, (c) all Indebtedness, whether secured or unsecured, of a
Consolidated Group Member having a final maturity or which is
renewable or extendable at the option of the obligor for a period
ending more than one year after the date of creation of the
Indebtedness, notwithstanding the fact that payments with respect
to the Indebtedness, whether installment, serial maturity, or
sinking fund payments, or otherwise, are required to be made by the
obligor less than one year after the date of the creation of the
Indebtedness and notwithstanding the fact that any amount of the
Indebtedness is at the time included also in Consolidated Current
Liabilities, (d) all Indebtedness of a Consolidated Group Member
outstanding under a revolving credit or similar agreement providing
for borrowings and renewals and extensions over a period of more
than one year, notwithstanding the fact that the Indebtedness is
created within one year of the expiration of the agreement, (e) the
present value, discounted at the implicit rate, if known, or ten
percent (10%) per annum otherwise, of all obligations with respect
to capital leases of a Consolidated Group Member, and (f) all
obligations under guaranties of a Consolidated Group Member.
"Consolidated Group" shall mean the Borrower, COG, CDI and
their Subsidiaries on a consolidated basis.
"Consolidated Group Member" shall mean any member of the
Consolidated Group.
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends or other obligations (for
purposes of this definition, a "primary obligation") of any other
Person (for purposes of this definition, the "primarily liable
party") in any manner, whether directly or indirectly, or any
obligation of such Person, whether or not contingent, (a) to
purchase any primary obligation of the primarily liable party or
any Property constituting direct or indirect security therefor,
(b) to advance or supply funds (i) for the purchase or payment of
any primary obligation of the primarily liable party, or (ii) to
maintain working capital or equity capital of the primarily liable
party in respect of any primary obligation or otherwise to maintain
the net worth or solvency of the primarily liable party in respect
of any primary obligation, (c) to purchase Property, securities or
services primarily for the purpose of assuring the owner of any
primary obligation of the primarily liable party of the ability of
the primarily liable party in respect of such obligation to make
payment of such primary obligation, (d) to indemnify or reimburse
a bank in respect of drafts drawn under a letter of credit issued
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<PAGE> 13
by such bank in favor of a third party at the request of such
Person, or (e) otherwise to assure or hold harmless the owner of
any such primary obligation of the primarily liable party against
loss in respect thereof.
"Contracts" shall mean agreements between a Related Person and
any other Person for the providing of services by Related Persons
which contracts have generated or will generate, as a result of
performance of the obligations of such Related Person thereunder,
Credit Accounts.
"Contracts Report" shall mean each report executed by a
Responsible Officer of the applicable Related Person and submitted
to Lender, in form and substance satisfactory to Lender and
including, among other information, (a) the remaining term and
status of performance and progress payments due under each Contract
then in effect and (b) the usage, backlog and rates for each
drilling rig of any Related Persons, and furnished from time to
time in accordance with subsection 5.2.
"Credit Accounts" shall mean, as to any Person, any "account,"
as such term is defined in Section 9.106 of the UCC and any
"chattel paper" as such term is defined in Section 9.105(a)(2) of
the UCC, now or hereafter owned by such Person, which account is
classified as a receivable on the balance sheet of such Person.
"Default" shall mean any event or occurrence that with the
lapse of time or the giving of notice or both would become an Event
of Default.
"Default Rate" shall mean a per annum interest rate equal to
Base Rate plus 4% per annum, calculated on the basis of a year of
360 days and the actual number of days elapsed (including the first
day but excluding the last day), but limited in any case to the
highest non-usurious rate of interest permitted to be charged by
applicable law from time to time.
"Dollars" and "$" shall mean dollars in lawful currency of the
United States of America.
"Dresser-Rand" shall mean Dresser-Rand Company, a New York
general partnership whose present partners are Dresser Industries,
Inc. and Ingersoll-Rand Company.
"Dresser-Rand Contracts" shall mean (i) that certain letter
agreement dated October 3, 1991, and any amendments thereto,
between Dresser-Rand and Borrower that, among other things,
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confirms the award to Borrower of a subcontract for the charter of
Rigs and supply of certain services for the Project, (ii) those
three Maintenance, Moving and Jacking Agreements dated December 15,
1991, between Dresser-Rand and Borrower, and (iii) the Charters.
"Dresser-Rand Contract Amounts" shall mean amounts owing under
the Dresser-Rand Contracts that would properly qualify as Eligible
Accounts but for the final provision of the definition of Eligible
Accounts, except that they may include amounts outstanding more
than 90 days past the due date expressed in the related invoice.
"Earned Value" shall mean the sum of the following amounts,
each as set forth on the most current balance sheet of the
Consolidated Group (i) the amount represented as "Drilling
Contracts in Progress" and (ii) Turnkey Joint Venture Advances.
"Eligible Accounts" shall mean, at a particular date, Credit
Accounts:
(a) that are (i) payable in Dollars at a location in
the United States and arise from services rendered or goods
delivered to an account debtor residing in (if an individual),
or organized under the laws of (if an entity), any state of
the United States, or (ii) payable in Venezuelan bolivars and
arise from services rendered or goods delivered pursuant to
(x) those certain contract nos. 10-08-1616-91-0081 / Cliffs
Drill - 40 and 10-08-1616-91-0082 / Cliffs Drill - 43 by and
between Corpoven, S.A., an affiliate of Petroleos de
Venezuela, a Mercantile Partnership, and Borrower, or (y)
Drilling Contract and/or Well Workover by and between Maraven
S.A., a Mercantile Partnership domiciled in the City of
Caracas, affiliated with Petroleos de Venezuela, S.A. and
Borrower as authorized by resolution of the Board of Directors
of Borrower dated November 20, 1990, each such contract in the
form submitted to Lender, and in each case up to an amount to
be determined by Lender from time to time to be fully
guaranteed or insured, against (A) all political risks, (B)
inability to convert Venezuelan bolivars into U.S. dollars,
and (C) any governmental controls or penalties placed on the
exportation of Venezuelan bolivars, provided that such
guaranty or insurance shall be in form and scope satisfactory
to Lender, in its sole discretion; further provided, however,
Lender shall have the right to accept, in its sole discretion,
Credit Accounts that do not satisfy the requirements set out
in this subparagraph (a);
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<PAGE> 15
(b) that are not outstanding more than 90 days past the
due date expressed in the related invoice;
(c) that are not due more than 60 days after the
issuance date expressed in the related invoice;
(d) as to which the account debtor thereunder has been
sent an invoice within 30 days after such Credit Accounts have
been entered on the financial records of the appropriate
Related Person;
(e) that are not owed by an obligor that is a
Consolidated Group Member, an Affiliate or employee of a
Consolidated Group Member, or an employee stock option plan of
a Consolidated Group Member;
(f) that are not owed by an obligor that has taken any
of the actions or suffered any of the events of the kind
described in Sections 7.1.6 or 7.1.7, unless the payment
obligations of such obligor in respect of any such Credit
Account are supported by a letter of credit the terms of which
are reasonably satisfactory to Lender;
(g) that arise from the sale of Property or the
rendition of services in the ordinary course of business;
(h) as to which neither the relevant Related Person nor
(to the best of the knowledge of any Related Persons) the
other party to such Credit Account is in default or is likely
to become in default in the performance or observance of any
of the terms thereof, and as to which the relevant Related
Person has fully performed all its obligations;
(i) against which no defense, offset, counterclaim or
claim has been asserted or alleged and which are not subject
to any defense, offset, counterclaim or claim;
(j) that are solely owned by a Related Person and in
which such Related Person has (i) granted a valid and
continuing first priority Lien in favor of Lender pursuant to
the Security Instruments, subject only to other Permitted
Liens, (ii) duly taken all action necessary or desirable to
protect and perfect such Lien and (iii) good and indefeasible
title, free and clear of any and all Liens, other than
Permitted Liens, or rights of others;
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(k) as to which no amounts payable under or in
connection with are evidenced by promissory notes or other
instruments except (i) instruments that constitute a part of
chattel paper and that have been individually marked to show
the Lien created by the Security Instruments, and (ii) notes
or instruments that have been properly endorsed and delivered
to Lender;
(l) as to which no security agreement, financing
statement, equivalent security or lien instrument or
continuation statement covering all or any part thereof is on
file or of record in any public office, except such as may
have been filed in favor of Lender pursuant to the Security
Instruments;
(m) with respect to Credit Accounts generated under
Turnkey Contracts, as to which not more than 45 days have
elapsed since the issuance date expressed in the related
invoice;
(n) with respect to Credit Accounts generated under
Turnkey Contracts payable to one of the Subsidiaries of CDI,
that such Credit Accounts have been assigned to one of the
Related Persons pursuant to an assignment in form and
substance satisfactory to Lender; and
(o) that Lender has not otherwise reasonably
determined, in the exercise of its good faith discretion, to
be unacceptable in accordance with its customary practices for
working capital lines of credit based, in whole or in part, on
accounts receivable;
provided, however, that Eligible Accounts shall not include any
Dresser-Rand Contracts Amounts.
"Eligible Cash Equivalents" shall mean, at a particular date,
Cash Equivalents:
(a) that are solely owned by a Related Person;
(b) as to which such Related Person (i) has granted a
valid and continuing first priority Lien in favor of Lender
pursuant to the Security Instruments, subject only to other
Permitted Liens, and (ii) has good and indefeasible title,
free and clear of any and all Liens, other than Permitted
Liens, or rights or others;
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<PAGE> 17
(c) as to which no security agreement, financing
statement, equivalent security or lien instrument or
continuation statement covering all or any part thereof is on
file or of record in any public office, except such as may
have been filed in favor of Lender pursuant to the Security
Instruments; and
(d) as to which all action necessary or desirable to
protect and perfect the Lien of Lender pursuant to the
Security Instruments has been duly taken.
"Eligible Turnkey Drilling Contract Amounts" shall mean, at a
particular date, the aggregate amount that is the Earned Value but
that is not yet due and payable (and therefore not a Credit
Account) of each Turnkey Contract and:
(a) that are payable in Dollars and arise from services
rendered or goods delivered to an account debtor;
(b) that are not owed by an obligor that is a
Consolidated Group Member, an Affiliate or employee of a
Consolidated Group Member, or an employee stock option plan of
a Consolidated Group Member;
(c) that are not owed by an obligor that has taken any
of the actions or suffered any of the events of the kind
described in Sections 7.1.6 or 7.1.7, unless the payment
obligations of such obligor in respect of any such TurnKey
Contract are supported by a letter of credit the terms of
which are reasonably satisfactory to Lender;
(d) as to which neither the relevant Related Person nor
(to the best of the knowledge of any Related Persons) the
other party to such Turnkey Contract is in default or is
likely to become in default in the performance or observance
of any of the terms thereof, and as to which the relevant
Related Person has fully performed all its obligations;
(e) against which no defense, offset, counterclaim or
claim has been asserted or alleged and which are not subject
to any defense, offset, counterclaim or claim;
(f) that are solely owned by a Related Person and in
which such Related Person has (i) granted a valid and
continuing first priority Lien in favor of Lender pursuant to
the Security Instruments, subject only to other Permitted
Liens, (ii) duly taken all action necessary or desirable to
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protect and perfect such Lien and (iii) good and indefeasible
title, free and clear of any and all Liens, other than
Permitted Liens, or rights of others;
(g) as to which no amounts payable under or in
connection with are evidenced by promissory notes or other
instruments except (i) instruments that constitute a part of
chattel paper and that have been individually marked to show
the Lien created by the Security Instruments, and (ii) notes
or instruments that have been properly endorsed and delivered
to Lender;
(h) as to which no security agreement, financing
statement, equivalent security or lien instrument or
continuation statement covering all or any part thereof is on
file or of record in any public office, except such as may
have been filed in favor of Lender pursuant to the Security
Instruments;
(i) with respect to Turnkey Contracts payable to one of
the Subsidiaries of CDI, that such Turnkey Contract has been
assigned to one of the Related Persons pursuant to an
assignment in form and substance satisfactory to Lender; and
(j) that Lender has not otherwise reasonably
determined, in the exercise of its good faith discretion, to
be unacceptable.
"Environmental Complaint" shall mean any formal, oral or
written complaint, order, directive, claim, citation, notice of
environmental report, notice of investigation or other notice by
any Governmental Authority or any other Person with respect to
(a) air emissions, (b) spills, releases or discharges to soils or
any improvements located thereon, surface water, groundwater or the
sewer, septic system or waste treatment, storage or disposal
systems servicing any Property or any Consolidated Group Member,
(c) solid or liquid waste disposal, (d) the use, generation,
storage, transportation or disposal of any Hazardous Substance, or
(e) other environmental, health or safety matters affecting any
Property of any Consolidated Group Member, any improvements located
thereon or the business thereon conducted.
"Environmental Laws" shall mean (a) the following federal laws
as they may be cited, referenced and amended from time to time: the
Clean Air Act, the Clean Water Act, the Safe Drinking Water Act,
the Comprehensive Environmental Response, Compensation and
Liability Act, the Endangered Species Act, the Resource
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<PAGE> 19
Conservation and Recovery Act, the Occupational Safety and Health
Act, the Hazardous Materials Transportation Act, the Superfund
Amendments and Reauthorization Act, and the Toxic Substances
Control Act; (b) any and all equivalent environmental statutes of
any state in which Property of any Consolidated Group Member is
situated, as they may be cited, referenced and amended from time to
time; (c) any rules or regulations promulgated under or adopted
pursuant to the above federal and state laws; and (d) any other
equivalent federal, state or local statute or any requirement,
rule, regulation, code, ordinance or order adopted pursuant
thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling,
disposal, handling or release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations
thereunder and interpretations thereof.
"Eurodollar Rate" shall mean, with respect to each particular
Fixed Rate Portion and the related Interest Period, the rate of
interest per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%), reported, on the date two Business days prior to the
first day of such Interest Period, on Telerate Access Service Page
3750 (British Bankers Association Settlement Rate) as the London
Interbank Offered Rate for Dollar deposits having a term comparable
to such Interest Period and in an amount of $1,000,000 or more (or,
if said Page shall cease to be publicly available or if the
information contained on said Page, in Lender's sole judgment,
shall cease to accurately reflect such London Interbank Offered
Rate, as reported by any publicly available source of similar
market data selected by Lender that, in Lender's sole judgment,
accurately reflects such London Interbank Offered Rate).
"Event of Default" shall mean any of the events specified in
Section 7.1 of this Agreement.
"Exploration Agreement" shall mean the Exploration and
Development Agreement dated May 25, 1988, by and between Borrower,
COG and Mosbacher Offshore, Inc., as amended by the Letter
Agreement dated July 14, 1988, the Letter Agreement dated effective
as of November 30, 1988, the Letter Agreement dated effective as of
April 21, 1989, and the Letter Agreement dated February 15, 1991.
"Financial Statements" shall mean statements of the financial
condition and results of operation of the Consolidated Group at the
point in time and for the period indicated and consisting of at
least a balance sheet and related statements of operations,
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<PAGE> 20
statements of cash flows, and common stock and other stockholders'
equity, on a consolidated and consolidating basis for the
Consolidated Group and, when required by applicable provisions of
this Agreement to be audited, accompanied by the unqualified
certification of independent certified public accountants
acceptable to Lender and footnotes to any of the foregoing, all of
which shall be prepared in accordance with GAAP consistently
applied and in comparative form with respect to the corresponding
period of the preceding fiscal year.
"First Preferred Fleet Mortgage" shall mean that certain First
Preferred Fleet Mortgage dated October 31, 1991 by Borrower in
favor of Trustee for the benefit of Lender, as amended by First
Amendment dated December 13, 1991.
"Fixed Rate" shall mean, with respect to each particular Fixed
Rate Portion and the associated Eurodollar Rate, the rate per annum
calculated by Lender (rounded upwards, if necessary, to the next
higher 0.01%) determined on a daily basis pursuant to the following
formula:
Fixed Rate =
Eurodollar Rate + Fixed Rate Margin
----------------------------
100.0% - Reserve Percentage
where "Fixed Rate Margin" means (a) with respect to the Term Note
and Term Loans, 2.75%, or (b) with respect to the Revolving Credit
Note and Revolving Credit Loans (i) 2.50% per annum or (ii) during
any Interest Adjustment Period, 3.0% per annum.
"Fixed Rate Payment Date" shall mean, with respect to any
Fixed Rate Portion: (a) the day on which the related Interest
Period ends, and (b) any day on which past due interest or past due
principal is owed hereunder with respect to such Fixed Rate Portion
and is unpaid. If the terms hereof provide that payments of
interest or principal with respect to such Fixed Rate Portion shall
be deferred from one Fixed Rate Payment Date to another day, such
other day shall also be a Fixed Rate Payment Date.
"Fixed Rate Portion" shall mean any portion of the unpaid
principal balance of the Revolving Credit Loans or any portion of
the unpaid principal balance of the Term Loans which Borrower
designates as such in a Rate Election.
"GAAP" shall mean generally accepted accounting principles
established by the Financial Accounting Standards Board or the
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American Institute of Certified Public Accountants and in effect in
the United States from time to time.
"Governmental Authority" shall mean any nation, country,
commonwealth, territory, government, state, county, parish,
municipality or other political subdivision and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guarantors" shall mean COG and CDI and any other Subsidiary
of a Related Person that from time to time becomes a party to this
Agreement and to such other Loan Documents as may be requested by
Lender.
"Hazardous Substances" shall mean flammables, explosives,
radioactive materials, hazardous wastes, asbestos or any material
containing asbestos, polychlorinated biphenyls (PCB's), toxic
substances or related materials, petroleum and petroleum products
and associated oil or natural gas exploration, production and
development wastes or any substances defined as "hazardous
substances," "hazardous materials," "hazardous wastes" or "toxic
substances" under applicable Environmental Laws.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (a) all liabilities (excluding reserves for deferred
income taxes, deferred compensation liabilities and other deferred
liabilities and credits) that would appear on a balance sheet of
such Person, prepared in accordance with GAAP, (b) all Contingent
Obligations for (i) guarantees of borrowed money and (ii)
liabilities to indemnify or reimburse a bank in respect of drafts
drawn under a letter of credit issued by such bank in favor of a
third party at the request of such Person, (c) all obligations of
such Person evidenced by bonds, debentures, promissory notes or
such similar evidences of indebtedness, (d) all other indebtedness
of such Person for borrowed money, (e) all obligations of others,
to the extent any such obligation is secured by a lien on the
assets of such Person (whether or not such Person has assumed or
become liable for the obligation secured by such Lien).
"Insolvent" or "Insolvency" shall mean, with respect to any
Multiemployer Plan, that such Plan is insolvent within the meaning
of such term as used in Section 4245 of ERISA.
"Insolvency Proceeding" shall mean application (whether
voluntary or instituted by another Person) for or the consent to
the appointment of a receiver, trustee, conservator, custodian or
liquidator of any Person or of all or a substantial part of the
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Property of such Person, or the filing of a petition (whether
voluntary or instituted by another Person) commencing a case under
Title 11 of the United States Code, seeking liquidation,
reorganization or rearrangement or taking advantage of any
bankruptcy, insolvency, debtor's relief or other similar law of the
United States, the State of Texas or any other jurisdiction.
"Intellectual Property" shall mean patents, patent
applications, trademarks, tradenames, copyrights, technology, know-
how and processes.
"Interest Adjustment Period" shall mean any calendar quarter
immediately following the end of a calendar quarter on which (i)
the Revolving Credit Loan Balance was not reduced to an outstanding
amount less than $10,000,000 for a period of at least sixty (60)
consecutive calendar days during the immediately preceding twelve
calendar months, and (ii) annual cash flow of the Consolidated
Group for the immediately preceding twelve calendar months is less
than $20,000,000. For purposes of this definition, "cash flow"
shall mean the sum of (a) net income of the Consolidated Group
calculated in accordance with GAAP, plus (b) expenses of the
Consolidated Group that were taken into account in determining such
net income but which did not involve a current expenditure of funds
(such as depreciation, depletion and amortization).
"Interest Period" shall mean, with respect to each particular
Fixed Rate Portion, a period of 1, 2 or 3 months, as specified in
the Rate Election applicable thereto, beginning on and including
the date specified in such Rate Election (which must be a Business
Day), and ending on but not including the same day of the month as
the day on which it began (e.g., a period beginning on the third
day of one month shall end on but not include the third day of
another month), provided that each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the
next succeeding Business Day (unless such next succeeding Business
Day is the first Business Day of a calendar month, in which case
such Interest Period shall end on the immediately preceding
Business Day). No Interest Period may be elected which would
extend past the date on which a Note is due and payable in full or
which would require prepayment of a Fixed Rate Portion prior to the
end of the Interest Period for such Fixed Rate Portion. Each
Interest Period elected with respect to the Term Loans must end on
a Payment Date.
"Investment" in any Person shall mean any stock, bond, note or
other evidence of Indebtedness or any other security (other than
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current trade and customer accounts) of, investment or partnership
interest in or loan to, such Person.
"L/C Exposure" shall mean, at a particular date, the aggregate
maximum amount available to be drawn under outstanding Letters of
Credit at such date.
"Lender" shall mean Internationale Nederlanden (U.S.) Capital
Corporation (as assignee of Internationale Nederlanden Bank N.V.,
formerly known as NMB Postbank Groep N.V.) and its permitted
successors and assigns pursuant to Section 8.1.
"Lender Amounts" shall have the meaning given that term in the
Multiparty Agreement.
"Letter of Credit" shall mean each commercial or standby
letter of credit, if any, issued by Lender for the account of any
one or more Related Persons pursuant to Section 2.1.4.
"Letter of Credit Application" shall mean the standard letter
of credit application employed by Lender from time to time in
connection with Letters of Credit, as modified in connection
herewith.
"Letter of Credit Fee" shall mean each fee payable to Lender
by Borrower pursuant to Section 2.1.5 in connection with the
issuance of Letters of Credit.
"Letter Transfer Order" shall mean each of the letter transfer
orders in the form attached hereto as Exhibit 1.4 executed by one
or more the Related Persons pursuant to Section 3.1.6(n) or
otherwise upon the establishment of additional Mortgaged Properties
subsequent to the date hereof.
"Lien" shall mean (i) any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner of
such Property, whether such interest is based on common law,
statute or contract, and including, but not limited to, the lien or
security interest arising from a mortgage, ship mortgage,
encumbrance, pledge, security agreement, conditional sale or trust
receipt, or a lease, consignment or bailment for security purposes
(other than true leases or true consignments), liens of mechanics,
materialmen and artisans, maritime liens and reservations affecting
Property that secure an obligation owed to, or a claim by, a Person
other than the owner of such Property (for the purpose of this
Agreement, a Related Person shall be deemed to be the owner of any
Property that it has acquired or holds subject to a conditional
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sale agreement, financing lease or other arrangement pursuant to
which title to the Property has been retained by or vested in some
other Person for security purposes), and the filing of any
financing statement or other security instrument or (ii) any
exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions or
encumbrances that are either not standard and customary in the
industry or that could have a Material Adverse Effect.
"Loan" shall mean any Revolving Credit Loan or Term Loan and
any payment made by Lender under any Letter of Credit.
"Loan Documents" shall mean this Agreement, the Notes, the
Letter of Credit Applications, the Letters of Credit, the Security
Instruments and all other documents and instruments now or
hereafter delivered pursuant to the terms of or in connection with
this Agreement, the Notes, the Letter of Credit Applications, the
Letters of Credit or the Security Instruments, and all renewals and
extensions of, or amendments or supplements to, or restatements of
any or all of the foregoing from time to time in effect.
"Lockbox" shall mean the Post Office Boxes established by the
Related Persons pursuant to a request by Lender pursuant to Section
5.24, to which the Related Persons and Lender shall have access and
to which all account debtors under Credit Accounts of the Related
Persons and purchasers of production from the Mortgaged Property
shall be directed to make remittance to the Related Persons.
"Lockbox Account" shall mean an account or accounts
established with Lender pursuant to a request by Lender pursuant to
Section 5.24 in association with the Lockbox and to which such
Related Person and Lender shall have access by way of draft, check,
wire transfer of funds or otherwise, except as provided to the
contrary in Section 5.24.
"Material Adverse Effect" shall mean any material and adverse
effect upon the business, condition (financial or otherwise),
operations or prospects of the Consolidated Group.
"Maraven" shall mean Maraven, S.A., a mercantile society under
the laws of Venezuela.
"Mobilization Advances" shall mean the aggregate amount of
Term Loans advanced for the payment of costs for mobilization from
the United States to Venezuela for which Dresser-Rand agreed to
reimburse Borrower pursuant to Article VI of each of the Charters.
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"Mortgaged Properties" shall mean all Oil and Gas Properties
of a Related Person subject to a perfected first priority lien in
favor of Lender, subject only to other Permitted Liens, as security
for the Obligations.
"Multiemployer Plan" shall mean a Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Multiparty Agreement" shall mean that certain Multiparty
Agreement dated as of December 13, 1991, by and among Borrower,
Dresser-Rand and Lender.
"Notes" shall mean the Revolving Credit Note and the Term
Note.
"Notice of Revolving Credit Borrowing" shall mean each verbal
(confirmed promptly by facsimile of a written request or notice) or
written request or notice or facsimile of any such written request
or notice (confirmed promptly by delivery of the original written
request or notice), in substantially the form attached hereto as
Exhibit 1.5, by Borrower to Lender with respect to a borrowing
pursuant to Section 2.1, each of which shall:
(a) be signed by the Chief Financial Officer or
Controller of Borrower;
(b) state (i) that no Default or Event of Default
exists or will occur after giving effect to the requested
borrowing, (ii) the purpose of any requested borrowing, and
(iii) that Borrower is entitled to any requested borrowing
under this Agreement;
(c) specify the other information and contain the other
representations reflected in the form of such Exhibit 1.5 for
the Revolving Credit Loan requested; and
(d) constitute a remaking, as of the date of such
request rather than the date hereof, of the representations
and warranties set forth in the Loan Documents, subject only
to the matters set forth in or contemplated by this Agreement.
"Obligations" shall mean, without duplication, (a) all
Indebtedness evidenced by the Notes, (b) the Reimbursement
Obligations, (c) the undrawn, unexpired amount of all outstanding
Letters of Credit, (d) the obligation of the Related Persons for
the payment of Letter of Credit Fees and Commitment Fees, and (e)
all other obligations and liabilities of the Related Persons to
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Lender, now existing or hereafter incurred, under, arising out of
or in connection with each Loan Document, and, with respect to all
of the foregoing to the extent that any of the same includes or
refers to the payment of amounts deemed or constituting interest,
only so much thereof as shall have accrued, been earned and remain
unpaid at each relevant time of determination.
"Oil and Gas Properties" shall mean fee, leasehold or other
interests in or under mineral estates or oil, gas and other liquid
or gaseous hydrocarbon leases with respect to Properties situated
in the United States or offshore from any state of the United
States, including, without limitation, the oil and gas interests
covered by the Security Instruments described as Items 3.1.6(g),
(k), (l), (m) and (n) hereof and any other overriding royalty and
royalty interests, leasehold estate interests, net profits
interests, production payment interests and mineral fee interests,
together with contracts executed in connection therewith and all
tenements, hereditaments, appurtenances and Properties
appertaining, belonging, affixed or incidental thereto.
"Oil and Gas Reserves" shall mean the value, for loan
purposes, of the Mortgaged Properties, as determined by Lender from
time to time in its sole absolute discretion and in accordance with
Section 2.1.7.
"Original Agreement" shall mean that certain First Restated
Credit Agreement dated as of December 13, 1991, as amended by First
Amendment to First Restated Credit Agreement dated as of July 1,
1992, Second Amendment to First Restated Credit Agreement dated as
of October 8, 1992, and Third Amendment to First Restated Credit
Agreement dated as of December 23, 1993, by and among the Related
Persons and Lender.
"Payment Date" shall mean the first day of each calendar
month, provided that if such day is not a Business Day, the Payment
Date shall be the next succeeding Business Day.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean (a) Liens for taxes, assessments
or other governmental charges or levies not yet due or that
(provided foreclosure, distraint, sale or other similar proceedings
shall not have been initiated) are being contested in good faith by
appropriate proceedings, and such reserve as may be required by
GAAP shall have been made therefor; (b) Liens in connection with
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workers' compensation, unemployment insurance or other social
security (other than Liens created by Section 4068 or ERISA), old-
age pension or public liability obligations that are not yet due or
that are being contested in good faith by appropriate proceedings,
if such reserve as may be required by GAAP shall have been made
therefor; (c) Liens in favor of vendors, carriers, warehousemen,
repairmen, mechanics, workmen, materialmen, construction or similar
Liens arising by operation of law in the ordinary course of
business in respect of obligations that are not yet due or that are
being contested in good faith by appropriate proceedings, provided
such reserve as may be required by GAAP shall have been made
therefor, (d) Liens to operators and nonoperators under joint
operating agreements arising in the ordinary course of the business
of the relevant Related Person to secure amounts owing, which
amounts are not yet due or are being contested in good faith by
appropriate proceedings, if such reserve as may be required by GAAP
shall have been made therefor; (e) Liens under production sales
agreements, division orders, operating agreements and other
agreements customary in the oil and gas business for processing,
producing and selling hydrocarbons; (f) easements, rights-of-way,
restrictions and other similar encumbrances, and minor defects in
the chain of title that are customarily accepted in the oil and gas
financing industry, none of which interferes with the ordinary
conduct of the business of the relevant Related Person or
materially detracts from the value or use of the Property to which
they apply; (g) Liens of record under terms and provisions of the
leases, unit agreements, assignments and other transfer of title
documents in the chain of title under which the relevant Related
Person acquired the relevant Property and which are set forth or
referred to in the exhibits attached to the Deeds of Trust and
Mortgages comprising part of the Security Instruments; (h) legal or
equitable Liens deemed to exist by reason of the existence of any
litigation or other legal proceeding or arising out of a judgment
or award with respect to which an appeal is being prosecuted so
long as there exists an adequate bond or such reserve as may be
required by GAAP; and (i) Liens created in favor of Lender and
other Liens expressly permitted under the Security Instruments.
"Person" shall mean an individual, corporation, partnership,
trust, unincorporated organization or a government or any agency or
political subdivision thereof.
"Plan" shall mean, at a particular date, any employee benefit
plan which is covered by ERISA and in respect of which any Related
Persons or Commonly Controlled Entity of any Related Persons is
(or, if such plan were terminated at such date, would under Section
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4069 of ERISA be deemed to be) an "employer" as defined in Section
3(5) of ERISA.
"Principal Office" shall mean the principal office of Lender
in New York, New York presently located at 135 E. 57th Street, New
York, New York 10022.
"Prior Revolving Credit Note" shall mean that certain
Revolving Credit Note delivered to Lender, dated December 23, 1993,
which provided for a maximum Indebtedness of $15,000,000, executed
by Borrower.
"Prior Term Note" shall mean that certain Term Note delivered
to Lender, dated October 31, 1991, in the original amount of
$20,000,000, executed by Borrower.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible.
"Purchase Price Advances" shall mean advances of all or any
part of any Term Loans which were used by Borrower for the sole
purpose of refinancing the purchase price of the Rigs paid to
Chiles Offshore corporation or the out-of-pocket costs of legal and
accounting fees associated with such purchase or other costs for
engineering and administration or out-of-pocket costs associated
with negotiation and closing of the Memorandum of Agreement dated
October 4, 1991 between Chiles offshore Corporation and Borrower,
the Dresser-Rand Contracts and the Original Agreement (including
but not limited to fees payable to Lender).
"Rate Election" has the meaning given it in Section 2.3.4.
"Receivables Report" shall mean each schedule of the Credit
Accounts of a Related Person, in substantially the form attached
hereto as Exhibit 1.7, with appropriate insertions, provided to
Lender by such Related Person from time to time pursuant to Section
5.2.
"Refitting Advances" shall mean advances of all or any part of
any Term Loans which were used by Borrower for the sole purpose of
carrying out its duties under the Charters and which do not
otherwise constitute Purchase Price Advances or Mobilization
Advances.
"Refitting Contract" shall mean, collectively, any agreement
between Borrower and any shipyard, providing for the refitting of
the Rigs, which contract shall be in form and substance
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satisfactory to Lender and shall not be executed at a time that
would result in the imposition of a Lien on the Rigs prior to or in
parity with the Lien created by the First Preferred Fleet Mortgage
in favor of Lender to secure the Obligations.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System, as the same may be amended
or supplemented from time to time.
"Reimbursement Obligation" shall mean the obligation of the
Related Persons to provide to Lender or reimburse Lender for any
amounts payable, paid or incurred by Lender with respect to Letters
of Credit.
"Related Persons" shall mean Borrower and the Guarantors.
"Release of Hazardous Substances" shall mean any emission,
spill, release, disposal or discharge, except in accordance with a
valid permit, license, certificate or approval of the relevant
Governmental Authority or of a substance not subject to regulation
under applicable Environmental Laws, of any Hazardous Substance
into or upon (a) the air, (b) soils or any improvements located
thereon, (c) surface water or groundwater, or (d) the sewer, septic
system or waste treatment, storage or disposal system servicing any
Property of any Consolidated Group Member.
"Reorganization" shall mean, with respect to any Multiemployer
Plan, that such Plan is in reorganization within the meaning of
such term in Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in
Section 4043(b) of ERISA, other than those events as to which the
thirty-day notice period is waived under subsections .13, .14, .16,
.18, .19 or .20 of PBGC Reg. #2615.
"Requirement of Law" shall mean, as to any Person, the
certificate or articles of incorporation and by-laws or other
organizational or governing documents of such Person, and any
applicable domestic or foreign law, treaty, ordinance, order,
judgment, rule, decree or regulation or determination of an
arbitrator, court or other Governmental Authority, including,
without limitation, rules, regulations and orders and requirements
for permits, licenses, registrations, approvals or authorizations,
in each case as such now exist or may be hereafter amended and are
applicable to or binding upon such Person or any of its Property or
to which such Person or any of its Property is subject.
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"Reserve Report" shall mean each engineering report covering
the Mortgaged Properties provided to Lender pursuant to Section
5.5, and shall include, without limitation, such additional data
concerning pricing, quantities of production from the Mortgaged
Properties, and other information and engineering and geological
data with respect thereto as Lender may reasonably request.
"Responsible Officer" shall mean, as to any Person, its
President, Chief Executive Officer, Executive Vice President,
Senior Vice President, Vice President or Treasurer.
"Revolving Credit Commitment" shall mean the amount of
$20,000,000.
"Revolving Credit Commitment Period" shall mean the period
from and including the Closing Date to but not including the
Revolving Credit Commitment Termination Date.
"Revolving Credit Commitment Termination Date" shall mean
January 1, 1996 or any extension thereof pursuant to Section 2.1.3
or, if such date is not a Business Day, the Business Day next
preceding such date, or any earlier date on which the Revolving
Credit Commitment has been reduced to zero by Borrower or has been
terminated by Lender pursuant to Section 7.2.
"Revolving Credit Loan" shall mean any loan made by Lender to
Borrower pursuant to Section 2.1.1.
"Revolving Credit Loan Balance" shall mean the aggregate
outstanding principal balance of the Revolving Credit Note from
time to time.
"Revolving Credit Note" shall mean the promissory note of
Borrower, in the form attached hereto as Exhibit 1.8, together with
any and all renewals, extensions for any period, increases or
rearrangements thereof.
"Rigs" shall mean the three mobile off-shore jack-up drilling
units described as "LANGLEY", U.S. Coast Guard Number 501872,
"FRANKLIN", U.S. Coast Guard Number 518632, and "FORRESTAL", U.S.
Coast Guard Number 535419; together with all related personal
property.
"Security Instruments" shall mean the Multiparty Agreement and
the security instruments executed and delivered in satisfaction of
the condition set forth in Section 3.1.6, and all other documents
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<PAGE> 31
and instruments at any time executed as security for all or any
portion of the Obligations.
"Single Employer Plan" shall mean any Plan that is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"Subsidiary" shall mean, as to any Person, a corporation of
which shares of stock having ordinary voting power (other than
stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation are at the time owned, or the
management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person.
"Superfund Site" shall mean those sites that have been or
during the Commitment Period are listed on the Environmental
Protection Agency National Priority List (NPL) and eligible for
remedial action, or any comparable state registries or list in any
state of the United States.
"Term Loan" shall mean any loan made by Lender to Borrower
pursuant to Section 2.2.1.
"Term Note" shall mean that certain Term Note delivered to
Lender, dated December 13, 1991, in the original amount of
$30,000,000, executed by Borrower, together with any and all
renewals, extensions for any period, increases or rearrangements
thereof.
"Term Payment Month" shall mean as to each respective Payment
Date, the period from but not including the immediately preceding
Payment Date to and including the Payment Date, provided, however,
the Lender may at its sole discretion treat sums received in
immediately available funds after 3:00 p.m. New York time on any
Payment Date as being received on the next succeeding Business Day.
"Transferee" shall mean any Person to which Lender has sold,
assigned, transferred or granted a participation in any of the
Obligations, as authorized pursuant to Section 8.1, which term
shall also include any Person acquiring, by purchase, assignment,
transfer or participation, from any Transferee, any part of such
Obligations.
"Trustee" shall mean Bankers Trust Company, as Trustee under
the Trust Agreement dated October 30, 1991, or its successor
trustee.
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<PAGE> 32
"Turnkey Contract" shall mean any Contract whereby a Related
Person agrees to drill one or more gas wells or oil wells to a
specified depth for a fixed or substantially fixed amount of
compensation.
"Turnkey Joint Venture Advance" shall mean, at any time, the
aggregate amount advanced by the Related Persons into certain joint
ventures relating to Turnkey Contracts.
"UCC" shall mean the Uniform Commercial Code as from time to
time in effect in the State of New York.
1.2 Number and Gender. Whenever the context requires,
reference herein made to the single number shall be understood to
include the plural; and likewise, the plural shall be understood to
include the singular. Definitions of terms defined in the singular
or plural shall be equally applicable to the plural or singular, as
the case may be, unless otherwise indicated. Words denoting sex
shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration
shall not exclude the general but shall be construed as cumulative.
1.3 References. References in this Agreement to Exhibit,
Article or Section numbers shall be to Exhibits, Articles or
Sections of this Agreement, unless expressly stated to the
contrary. References in this Agreement to "hereby," "herein,"
"hereinafter," "hereinabove," "hereinbelow," "hereof," and
"hereunder" shall be to this Agreement in its entirety and not only
to the particular Exhibit, Article or Section in which such
reference appears. Unless the context otherwise requires or unless
otherwise provided herein the terms defined in this Agreement which
refer to a particular agreement, instrument or document also refer
to and include all renewals, extensions, modifications, amendments
and restatements of such agreement, instrument or document,
provided that nothing contained in this section shall be construed
to authorize any such renewal, extension, modification, amendment
or restatement.
1.4 Calculations and Determinations. Any determination
hereunder that is in the Lender's sole discretion or determination,
shall mean Lender's sole determination on any basis as Lender shall
determine to be appropriate without application of any implied
standard or duty. All calculations under the Loan Documents of
fees and of interest shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year
of 360 days. Each determination by Lender of amounts to be paid
under Section 2.3 or any other matters which are to be determined
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hereunder by Lender (such as any Eurodollar Rate, Fixed Rate,
Business Day, or Interest Period) shall, in the absence of manifest
error, be conclusive and binding. Unless otherwise expressly
provided herein or unless Lender otherwise consents all financial
statements and reports furnished to Lender hereunder shall be
prepared and all financial computations and determinations pursuant
hereto shall be made in accordance with GAAP.
ARTICLE 2
TERMS OF FACILITY
2.1 Revolving Line of Credit.
2.1.1 Revolving Credit Commitment. Upon the terms and
conditions (including, without limitation, the right of Lender to
decline to make any Revolving Credit Loan pursuant to this Section
so long as any Default or Event of Default exists) and relying on
the representations and warranties contained in this Agreement,
Lender agrees, during the Revolving Credit Commitment Period, to
make Revolving Credit Loans, in immediately available funds at the
Applicable Lending Office, to or for the benefit of Borrower, from
time to time following receipt of a Notice of Revolving Credit
Borrowing; provided, however, (a) Borrower shall use all funds from
the initial Revolving Credit Loan to refinance outstanding
indebtedness owing to Lender under the Prior Revolving Credit Note,
(b) Borrower shall use all funds from subsequent Revolving Credit
Loans only for capital expenditures and general working capital
purposes, including, without limitation, the issuance of Letters of
Credit, and (c) no Revolving Credit Loan pursuant to this Section
shall, when initially made, exceed the then existing Available
Revolving Credit Commitment. Subject to the terms of this
Agreement, during the Revolving Credit Commitment Period, Borrower
may borrow, repay and reborrow Revolving Credit Loans. Each
Revolving Credit Loan shall be in an amount at least equal to
$100,000. The Revolving Credit Loans shall be made available to
Borrower in immediately available funds at Morgan Guaranty Trust
Company of New York in New York, New York, shall be maintained at
the Applicable Lending Office or the Principal Office and shall be
evidenced by the Revolving Credit Note. The amount of principal
owing on the Revolving Credit Note at any given time shall be the
aggregate amount of all Revolving Credit Loans theretofore made
minus all payments of principal theretofore received by Lender on
the Revolving Credit Note. Interest on the Revolving Credit Note
shall accrue and be due and payable as provided herein and therein.
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2.1.2 Reduction of Commitment. Borrower shall have the right
to terminate at any time, or reduce in part from time to time, the
Revolving Credit Commitment, provided that (a) Borrower shall give
notice to Lender of each such termination or reduction at least one
Business Day prior to the date of the relevant termination or
reduction, and (b) each partial reduction shall be in an aggregate
amount at least equal to $500,000. Each such notice of termination
or reduction shall specify the amount of the Revolving Credit
Commitment to be terminated or reduced. The Revolving Credit
Commitment once terminated or reduced may not be reinstated.
2.1.3 Extension of Commitment Termination Date. Lender
agrees, upon written request of Borrower prior to the Revolving
Credit Commitment Termination Date, to review the financial
condition of the Related Persons and the then value of the
Collateral. At such time, Lender may, at its sole discretion, but
shall not be obligated to, extend the then Revolving Credit
Commitment Termination Date for a period selected by Lender.
Lender shall furnish Borrower with written confirmation as to its
decision with respect to any requested extension of the Revolving
Credit Commitment Termination Date. Should Lender extend the
Revolving Credit Commitment Termination Date, the newly established
date shall become the Revolving Credit Commitment Termination Date
for all purposes of this Agreement, and Borrower will execute any
amendments requested by Lender. Should Lender, in the exercise of
its sole discretion, elect not to extend the Commitment Termination
Date or fail to advise Borrower of any extension, the Revolving
Credit Commitment Termination Date shall remain unchanged.
2.1.4 Allocation of Revolving Credit to Letters of Credit.
Upon the terms and conditions (including, without limitation, the
right of Lender to decline to issue any Letter of Credit so long as
any Default or Event of Default exists) and relying on the
representations and warranties contained in this Agreement, Lender
agrees, during the Revolving Credit Commitment Period, to issue
Letters of Credit following the receipt not less than two Business
Days prior to the requested Letter of Credit issuance of a Letter
of Credit Application executed by Borrower; provided, however, (a)
no Letter of Credit shall have an expiration date that exceeds the
Revolving Credit Commitment Termination Date, and (b) Lender shall
not be obligated to issue any Letter of Credit if the face amount
thereof would exceed the Available Revolving Credit Commitment or
if, after giving effect to the issuance thereof, (i) the L/C
Exposure, when added to the Revolving Credit Loan Balance then
outstanding, would exceed the lesser of the Revolving Credit
Commitment or the Borrowing Base then in effect or (ii) the L/C
Exposure would exceed $5,000,000. Should Lender be called upon by
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the beneficiary of any Letter of Credit to honor all or any portion
of the commitment thereunder, whether upon the presentation of
drafts or otherwise, such payment by Lender on account of such
Letter of Credit shall be treated, for all purposes, as a Revolving
Credit Loan at the Base Rate and an advance against the Revolving
Credit Note.
2.1.5 Letter of Credit Fee. In addition to interest on the
Revolving Credit Note as provided herein and Commitment Fees
payable hereunder, Borrower agrees to pay to Lender a fee in
arrears equal to 2.0% per annum, on the average daily undrawn and
unexpired amount of each issued and outstanding Letter of Credit
during the period that such Letter of Credit remains outstanding.
Such fee with respect to Letters of Credit shall be payable
quarterly on the first day of each January, April, July and
October, commencing on the first of such dates to occur after the
Closing Date, and on the Revolving Credit Commitment Termination
Date. Notwithstanding the foregoing, with respect to Letters of
Credit in an amount less than $15,000, Borrower agrees to pay
Lender a fee in advance equal to $500 per annum for the entire
stated term of such Letter of Credit.
2.1.6 Advances and Payments on Revolving Credit Note. The
outstanding principal balance reflected by the notations by Lender
on its records shall be deemed rebuttably presumptive evidence of
the principal amount owing on the Revolving Credit Note. Interest
on the Revolving Credit Note shall be calculated on unpaid sums
actually advanced and outstanding pursuant to the terms of this
Section 2.1 and only for the period from the date or dates of such
advances until repayment. The liability for payment of principal
and interest evidenced by the Revolving Credit Note shall be
limited to principal amounts actually advanced and outstanding
pursuant to this Agreement and interest on such amounts calculated
in accordance with this Agreement.
2.1.7 Borrowing Base Determinations.
(a) The Borrowing Base as of the Closing Date is
acknowledged by the Related Persons and Lender to be $20,000,000.
From the date hereof through the Revolving Credit Commitment
Termination Date and subject to the further provisions of this
Section, the Borrowing Base shall be redetermined monthly on the
basis of information supplied by the Related Persons in compliance
with the provisions of this Agreement, including, without
limitation, Borrowing Base Certificates, Receivable Reports and
Reserve Reports, and all other information then available to
Lender. Notwithstanding the foregoing, Lender may, in the exercise
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of its good faith discretion, make redeterminations of the
Borrowing Base (i) at any time and from time to time on the basis
of information then available to Lender regarding Cash Equivalents,
(ii) no more frequently than monthly on the basis of information
then available to Lender regarding Credit Accounts, (iii) at any
time and from time to time on the basis of information then
available to Lender regarding Mortgaged Properties and (iv) at any
time and from time to time upon the occurrence of any event or
change having a Material Adverse Effect.
(b) The Borrowing Base at any particular date shall be
that set forth in the most recent Borrowing Base Certificate
submitted to Lender pursuant to subsection 5.2, as such figure may
be adjusted or redetermined from time to time by Lender. Lender
shall notify Borrower orally or by facsimile within five Business
Days after receipt of the Borrowing Base Certificate (confirming
such notice promptly in writing) of its determination, and the
Borrowing Base so communicated to Borrower shall become effective
upon such verbal or facsimile notification by Lender to Borrower.
Any Borrowing Base established pursuant to this Agreement shall
remain in effect until the next subsequent determination of the
Borrowing Base. The Borrowing Base shall represent the
determination by Lender, in accordance with the applicable
definitions and provisions herein contained and with consideration
for the nature of the facilities established hereunder, of the
value, for loan purposes, of the Eligible Accounts, the Eligible
Cash Equivalents, the Oil and Gas Reserves, the Cerrito Note, the
Eligible Turnkey Drilling Contracts and the Dresser Rand Contracts.
Furthermore, the Related Persons acknowledge that the determination
of the Borrowing Base contains an equity cushion (market value in
excess of loan value), which is acknowledged by the Related Persons
to be essential for the adequate protection of Lender.
Determination of the Oil and Gas Reserves shall be made by Lender
in its sole and absolute discretion.
2.1.8 Mandatory Prepayment. Borrower shall, within three
Business Days of the occurrence of any Borrowing Base Deficiency,
(a) prepay, or make arrangements acceptable to Lender for the
prepayment of, the Revolving Credit Loan Balance in the amount of
such Borrowing Base Deficiency, (b) add to the Collateral to secure
the Obligations additional Property of a Related Person acceptable
to Lender in its sole discretion as to character and amount, (c)
secure all Letters of Credit with Eligible Cash Equivalents in a
manner acceptable to Lender in its sole discretion, or (d) perform
any combination of the alternatives described in causes (a), (b)
and (c) of this Section and acceptable to Lender in its sole
discretion.
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2.1.9 Advances to Satisfy Obligations of Borrower. Upon the
occurrence of any Event of Default, Lender may, but shall not be
obligated to, make advances for the benefit of Borrower and apply
same to the satisfaction of any condition, warranty, representation
or covenant of a Related Person contained in this Agreement or any
other Loan Document. Any funds so advanced and applied shall be
part of the proceeds advanced under and evidenced by the Revolving
Credit Note and shall be Revolving Credit Loans.
2.2 Term Loans.
2.2.1 Making The Term Loan. Upon the terms and conditions
contained in the Original Agreement, Lender has heretofore made
Term Loans to Borrower. Term Loans repaid may not be reborrowed.
Term Loans are maintained at the Applicable Lending Office or the
Principal Office and are evidenced by the Term Note. The amount of
principal owing on the Term Note at any given time shall be the
aggregate amount of all Term Loans theretofore made minus all
payments of principal theretofore received by Lender on the Term
Note. Lender and Borrower agree that the aggregate outstanding
principal amount of the Term Loans as of the date hereof is
$13,109,000. Interest on the Term Note shall accrue and be due and
payable as provided herein and therein.
2.2.2 Loans and Payments on Term Note. The outstanding
principal balance reflected by the notations by Lender on its
records shall be deemed rebuttably presumptive evidence of the
principal amount owing on the Term Note. Interest provided for
herein shall be calculated on unpaid sums actually advanced and
outstanding pursuant to the terms of this Section 2.2 and only for
the period from the date or dates of such advances until repayment.
The liability for payment of principal and interest evidenced by
the Term Note shall be limited to principal amounts actually
advanced and outstanding pursuant to this Agreement and interest on
such amounts calculated in accordance with this Agreement.
2.2.3 Mandatory Prepayments on Term Note.
(a) The Multiparty Agreement provides for Dresser-Rand
to pay Lender Amounts to Lender on each Payment Date. With
the exception of reimbursements for mobilization costs (which
shall be applied to principal only), all such Lender Amounts
received on, or within the Business Day after, each Payment
Date shall be applied first to interest on the Term Note which
is accrued and unpaid on such Payment Date, and then to
principal on the Term Note.
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Any payments of Lender Amounts received by Lender at any
other time shall be applied to principal on the Term Note on
the date received.
(b) On each Payment Date, Borrower shall pay all
interest which has then accrued on the Term Notes. Borrower's
obligation to pay the accrued interest is absolute and is not
conditioned on the availability of funds to pay such interest
from Lender Amounts or otherwise.
(c) In addition to any other prepayment required on
each Payment Date in this Section 2.2.3, if the principal
amount of the Term Note on such Payment Date (after giving
effect to any prepayment otherwise made on such Payment Date
under this Section 2.2.3) exceeds the amount set out opposite
such Payment Date on Exhibit 2.2.3, Borrower shall prepay the
principal of the Term Note on such Payment Date in the amount
of such excess.
(d) Borrower shall prepay the principal amount of the
Term Note by the amount of each recovery or receipt of funds
resulting from any loss or casualty, or any taking by
Governmental Authority, of all or any portion of the Rigs
contemporaneously with the receipt thereof except where funds
are permitted to be used for repair or replacement pursuant to
the terms of the Multiparty Agreement or the First Preferred
Fleet Mortgage.
2.2.4 Use of Proceeds. Borrower used funds from the initial
Term Loan to refinance $17,300,000 of existing outstanding
indebtedness owing to Lender under the Prior Term Note, of which
$15,500,000 was used to purchase the Rigs, $715,000 was used for
additional Purchase Price Advances and $1,085,000 was used for
Refitting Advances. Borrower used all funds from subsequent Term
Loans only for such purposes as provided herein and in the Original
Agreement and for no other purposes.
2.3 Provisions Relating to All Loans.
2.3.1 Renewal and Extension. The Related Persons and Lender
have previously entered into the Original Agreement. Pursuant to
the Original Agreement, Borrower delivered to Lender the Prior
Revolving Credit Note. The Revolving Credit Note is given in
renewal and extension of the full amount of all outstanding
principal indebtedness and all accrued interest on the Prior
Revolving Credit Note, and on the date of delivery and acceptance
of the Revolving Credit Note, the Original Agreement shall be
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deemed restated and amended in its entirety by this Agreement, and
the Prior Revolving Credit Note shall be deemed so renewed,
extended and replaced by the Revolving Credit Note.
2.3.2 Interest. Interest on the Loans shall accrue and be
payable at the rate per annum equal to (a) the applicable Fixed
Rate for each Fixed Rate Portion during the applicable Interest
Period and (b) otherwise at the applicable Base Rate, as such
interest is provided for herein and in the Notes; provided,
however, the interest on past due principal and, to the extent
permitted by applicable law, past due interest, shall accrue at the
Default Rate and shall be payable upon demand by Lender at any time
as to all or any portion of such interest. Accrued interest on the
Revolving Credit Loans shall be payable on the Fixed Rate Payment
Date in the case of a Fixed Rate Portion and on the last Business
Day of each calendar quarter in the case of the Base Rate Portion.
Accrued Interest on the Term Loans shall be payable on each Payment
Date.
2.3.3 Fees. In addition to interest on the Notes as provided
herein and the Letter of Credit Fees payable hereunder and to
compensate Lender for making the commitments hereunder and
maintaining funds available, Borrower shall pay to Lender, in
immediately available funds, the following fees:
(a) a fee determined on a daily basis by applying a
rate of 1/2% per annum to the (i) Revolving Credit Commitment
minus (ii) the Revolving Credit Loan Balance and L/C Exposure
on each date commencing with April 1, 1994 through the
Revolving Credit Commitment Termination Date, which fee shall
be due and payable in arrears on the last day of each June,
September, December, and March and on the Revolving Credit
Termination Date.
(b) a fee in the amount of $150,000 payable upon the
execution of this Agreement.
2.3.4 Rate Elections. Borrower may from time to time
designate all or any portion of the Revolving Credit Loans or Term
Loans (including any yet to be made Revolving Credit Loans which
are to be made prior to or at the beginning of the designated
Interest Period but excluding any portion of the Loans which is
required to be repaid prior to the end of the designated Interest
Period) as a Fixed Rate Portion; provided that without the consent
of Lender, Borrower may make no such election during the
continuance of a Default and Borrower may make such an election
with respect to an already existing Fixed Rate Portion only if such
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election will take effect at or after the termination of the
Interest Period applicable to such already existing Fixed Rate
Portion. Each election by Borrower of a Fixed Rate Portion shall:
(a) Be made separately for Term Loans and Revolving
Credit Loans, and not as a combination of Term Loans and
Revolving Credit Loans;
(b) Be made in writing in the form and substance of the
"Rate Election" attached hereto as Exhibit 2.3.4, duly
completed;
(c) Specify the amount of the Loans which Borrower
desires to designate as a Fixed Rate Portion, the first day of
the Interest Period which is to apply thereto, and the length
of such Interest Period; and
(d) Be received by Lender not later than 10:00 a.m.,
New York time, on the second Business Day preceding the first
day of the specified Interest Period.
Each election which meets the requirements of this section (herein
called a "Rate Election") shall be irrevocable. Borrower may make
no Rate Election which does not specify an Interest Period
complying with the definition of "Interest Period" in Section 1.1,
and the amount of the Fixed Rate Portion elected in any Rate
Election must be an integral multiple of $100,000. Upon the
termination of each Interest Period the portion of the Loan
theretofore constituting the related Fixed Rate Portion shall,
unless the subject of a new Rate Election then taking effect,
automatically become a part of the Base Rate Portion and become
subject to all provisions of the Loan Documents governing the Base
Rate Portion. Borrower shall have no more than three (3) Fixed
Rate Portions in effect at any time.
2.3.5 Optional Prepayments. Borrower may, upon one Business
Day's notice to Lender, from time to time and without premium or
penalty prepay either or both Notes, in whole or in part, so long
as each partial prepayment of principal on any Note is greater than
or equal to $100,000, and so long as Borrower does not prepay any
Fixed Rate Portion. Each prepayment of principal under this
section shall be accompanied by all interest then accrued and
unpaid on the principal so prepaid. Any principal or interest
prepaid pursuant to this section shall be in addition to, and not
in lieu of, all payments otherwise required to be paid under the
Loan Documents at the time of such prepayment.
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2.3.6 Payments to Lender. Borrower will make each payment
which it owes under the Loan Documents not later than 3:00 p.m. New
York time, on the date such payment becomes due and payable, in
lawful money of the United States of America and in immediately
available funds. Any payment received by Lender after such time
will be deemed to have been made on the next following Business
Day. Should any such payment become due and payable on a day other
than a Business Day, the maturity of such payment shall be extended
to the next succeeding Business Day (unless, in the case of a Fixed
Rate Portion, such next succeeding Business Day is the first day of
a calendar month, in which case such payment shall be due on the
immediately preceding Business Day), and, in the case of a payment
of principal or past due interest, interest shall accrue and be
payable thereon for the period of such extension as provided in the
Loan Document under which such payment is due. Each payment under
a Loan Document shall be due and payable at the place provided
therein and, if no specific place of payment is provided, shall be
due and payable at the place of payment of the Notes. When Lender
collects or receives money on account of the Obligations, Lender
may apply such money as it elects to the various Obligations then
due and payable.
2.3.7 Capital Reimbursement. If either (a) the introduction
or implementation of or the compliance with or any change in or in
the interpretation of any law, rule or regulation, or (b) the
introduction or implementation of or the compliance with any
request, directive or guideline from any central bank or other
governmental authority (whether or not having the force of law)
affects or would affect the amount of capital required or expected
to be maintained by Lender or any corporation controlling Lender,
then, upon demand by Lender, Borrower will pay to Lender, from time
to time as specified by Lender, such additional amount or amounts
which Lender shall determine to be appropriate to compensate Lender
or any corporation controlling Lender in light of such
circumstances, to the extent that Lender reasonably determines that
the amount of any such capital would be increased or the rate of
return on any such capital would be reduced by or in whole or in
part based on the existence of the face amount of Lender's Loan or
commitments under this Agreement.
2.3.8 Increased Cost of Fixed Rate Portions. If any
applicable domestic or foreign law, treaty, rule or regulation
(whether now in effect or hereinafter enacted or promulgated), or
any interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof
(whether or not having the force of law):
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(a) shall change the basis of taxation of payments to
Lender of any principal, interest, or other amounts
attributable to any Fixed Rate Portion or otherwise due under
this Agreement in respect of any Fixed Rate Portion (other
than taxes imposed on the overall net income of Lender or any
Applicable Lending Office of Lender by any jurisdiction in
which Lender or any such Applicable Lending Office is
located); or
(b) shall change, impose, modify, apply or deem
applicable any reserve, special deposit or similar
requirements in respect of any Fixed Rate Portion (excluding
those for which Lender is fully compensated pursuant to
adjustments made in the definition of Fixed Rate) or against
assets of, deposits with or for the account of, or credit
extended by, Lender; or
(c) shall impose on Lender or the interbank
eurocurrency deposit market any other condition which
increases the cost to Lender of funding or maintaining any
Fixed Rate Portion or reduces the amount of any sum receivable
by Lender in respect of any Fixed Rate Portion by an amount
deemed by Lender to be material,
then Lender shall promptly notify Borrower of the happening of such
event and of the cost or loss which has resulted therefrom, and (i)
Borrower shall upon demand pay to Lender such additional amount or
amounts as will compensate Lender for such cost or loss, and (ii)
Borrower may elect, by giving to Lender not less than three
Business Days' notice, to convert all (but not less than all) of
any such Fixed Rate Portion into a part of the Base Rate Portion,
subject, however, to Section 2.3.10.
2.3.9 Change of Law or Conditions. If any change in
applicable laws, treaties, rules or regulations or in the
interpretation or administration thereof of or in any jurisdiction
whatsoever, domestic or foreign, shall make it unlawful or
impracticable for Lender to fund or maintain Fixed Rate Portions,
or shall materially restrict the authority of Lender to purchase or
take offshore deposits of dollars (i.e., "eurodollars"), or if any
change affecting the interbank eurocurrency market generally makes
it impractical for Lender to determine the Eurodollar Rate, then
Borrower's right to elect Fixed Rate Portions shall be suspended to
the extent and for the duration of such illegality,
impracticability or restriction and all Fixed Rate Portions (or
portions thereof) which are then outstanding or are then the
subject of any Rate Election and which cannot lawfully or
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practicably be maintained or funded shall immediately become or
remain part of the Base Rate Portion. Borrower agrees to indemnify
Lender and hold it harmless against all costs, expenses, claims,
penalties, liabilities and damages which may result from any such
change in law, treaty, rule, regulation, interpretation or
administration.
2.3.10 Funding Losses. In addition to its other
obligations hereunder, Borrower will indemnify Lender against, and
reimburse Lender on demand for, any loss or expense incurred or
sustained by Lender (including without limitation any loss or
expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by Lender to fund or maintain
Fixed Rate Portions or Loans), as a result of (a) any payment or
prepayment (whether authorized or required hereunder or otherwise)
of all or a portion of a Fixed Rate Portion on a day other than the
day on which the applicable Interest Period ends, (b) any payment
or prepayment, whether required hereunder or otherwise, of the Loan
made after the delivery, but before the effective date, of a Rate
Election, if such payment or prepayment prevents such Rate Election
from becoming fully effective, (c) the failure of any Loan to be
made or of any Rate Election to become effective due to any
condition precedent to a Loan not being satisfied or due to any
other action or inaction of any Related Persons, or (d) any
conversion (whether authorized or required hereunder or otherwise)
of all or any portion of any Fixed Rate Portion into the Base Rate
Portion or into a different Fixed Rate Portion on a day other than
the day on which the applicable Interest Period ends.
2.3.11 Reimbursable Taxes. Borrower covenants and agrees
that:
(a) Borrower will indemnify Lender against and
reimburse Lender for, on an after-tax basis, all present and
future income, stamp and other taxes, levies, costs and
charges whatsoever imposed, assessed, levied or collected on
or in respect of this Agreement or any Loans (whether or not
legally or correctly imposed, assessed, levied or collected),
excluding, however, any thereof imposed on or measured by the
overall net income of Lender or any Applicable Lending Office
of Lender by any jurisdiction in which Lender or any such
Applicable Lending Office is located (all such non-excluded
taxes, levies, costs and charges being collectively called
"Reimbursable Taxes" in this section).
(b) All payments on account of the principal of, and
interest on, the Loans and the Notes, and all other amounts
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payable by Borrower to Lender hereunder shall be made in full
free and clear of, without set-off or court claim and without
deductions or withholdings of any nature by reason of any
Reimbursable Taxes, all of which will be for the account of
Borrower. In the event of Borrower being compelled by law or
other regulations to make any such deduction or withholding
from any payment to Lender, Borrower shall pay on the due
date, by way of additional interest, such additional amounts
receivable by Lender after such deduction or withholding shall
equal the amount which would have been receivable in the
absence of any such deduction or withholding. If Borrower
should make any deduction or withholding as aforesaid,
Borrower shall within 60 days thereafter forward to Lender an
official receipt or other official documentation evidencing
payment of such deduction or withholding.
2.3.12 Letter Transfer Orders. Lender agrees to hold the
Letter Transfer Orders and that none of such letters shall be sent
to the addresses thereof prior to the occurrence of an Event of
Default, at which time Lender may, at its option and in addition to
the exercise of any of its other rights and remedies under the Loan
Documents and at law, send any or all of such letters, without
liability to any Related Persons except to account, as provided in
this Agreement or any other Loan Document, for funds actually
received by Lender with respect thereto.
2.3.13 Power of Attorney. Each of the Related Persons
does hereby designate Lender as the agent and attorney-in-fact of
such Related Person to act in its name, place and stead for the
purpose of completing and delivering the Letter Transfer Orders,
including, without limitation, completing any blanks contained in
such Letter Transfer Orders and attaching exhibits thereto
describing the relevant Oil and Gas Property. Each of the Related
Persons hereby ratifies and confirms all that Lender shall lawfully
do or cause to be done by virtue of such power of attorney and the
rights granted with respect to such power of attorney. This power
of attorney is coupled with the interests of Lender in the
Collateral, shall commence and be in full force and effect as of
the Closing Date and shall remain in full force and effect and
shall be irrevocable until the obligations, if any, of Lender
hereunder have terminated and the full satisfaction of all
Obligations. The powers conferred on Lender by this appointment
are solely to protect the interests of Lender under the Loan
Documents and shall not impose any duty upon Lender to exercise any
such powers. Lender shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and
shall not be responsible to any Related Persons or any other Person
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for any act or failure to act with respect to such powers,
including negligence but excluding gross negligence or willful
misconduct.
2.3.14 Pledge of and Security Interest in Collateral
Account and Right of Offset or Lien. Related Persons hereby
transfer, assign and pledge to Lender and grant to Lender a
security interest (as security for the payment and performance of
the Obligations, with such interest of Lender to be retransferred,
reassigned and released by Lender, as the case may be, at the
expense of Related Persons, upon termination of all rights to
borrow and Letters of Credit hereunder and upon payment in full and
complete performance by Related Persons of all Obligations) in all
funds of any one or more of Related Persons now or hereafter or
from time to time on deposit with Lender, including, without
limitation, the Cash Equivalents, with all remedies available to
Lender as secured party or assignee of such funds being exercisable
upon the occurrence of any Event of Default, regardless of whether
the exercise of any such remedy would result in any penalty or loss
of interest or profit with respect to any withdrawal of funds
deposited in a time deposit account prior to the maturity thereof.
Furthermore, Related Persons hereby grant to Lender (a) exercisable
upon the occurrence of any Event of Default, the right of offset or
banker's lien against all funds of any one or more of Related
Persons now or hereafter or from time to time on deposit with
Lender, including, without limitation, the Cash Equivalents, (b)
exercisable while there exists a Borrowing Base Deficiency but no
Event of Default, the right of offset or banker's lien against all
funds of any one or more of Related Persons now or hereafter or
from time to time on deposit with Lender in the form of matured
Cash Equivalents, but only to the extent not reinvested by the
relevant Related Persons in other Cash Equivalents and (c) the
right to apply any such funds received in accordance with the
provisions of clauses (a) or (b) above, as a prepayment of the
Obligations, in such order as Lender may elect, regardless of
whether the exercise of any such remedy would result in any penalty
or loss of interest or profit with respect to any withdrawal of
funds prior to the maturity thereof.
2.3.15 Business Purpose; Margin Securities. In no event
shall the funds from any Loan be used directly or indirectly by any
Person for personal, family, household or agricultural purposes or
for the purpose, whether immediate, incidental or ultimate, of
purchasing, acquiring or carrying any "margin stock" or any "margin
securities" (as such terms are defined respectively in Regulation
U and Regulation G promulgated by the Board of Governors of the
Federal Reserve System) or to extend credit to others directly or
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indirectly for the purpose of purchasing or carrying any such
margin stock or margin securities. Each Related Person represents
and warrants to Lender that such Related Person is not engaged
principally, or as one of such Related Person's important
activities, in the business of extending credit to others for the
purpose of purchasing or carrying such margin stock or margin
securities.
ARTICLE 3
CONDITIONS
The obligations of Lender to make Loans and issue Letters of
Credit are subject to the satisfaction of the following conditions
precedent:
3.1 Receipt of Loan Documents and Other Items. Lender has
no obligation to make the first Loan or issue the first Letter of
Credit unless Lender shall have received the following documents
and other items, appropriately executed when necessary and, where
applicable, acknowledged by one or more Responsible Officers of the
Related Persons, all in form and substance satisfactory to Lender
and dated, where applicable, of even date herewith or a date prior
thereto and acceptable to Lender:
3.1.1 multiple counterparts of this Agreement, as
requested by Lender;
3.1.2 the Revolving Credit Note and a First Restated
Guaranty, as amended by a First Amendment to First Restated
Guaranty by each of the Guarantors;
3.1.3 copies of the Articles of Incorporation of or
Certificate of Incorporation and all amendments thereto and the
bylaws and all amendments thereto of each of the Related Persons,
accompanied by a certificate issued by the secretary or an
assistant secretary of the relevant Related Persons to the effect
that each such copy is correct and complete;
3.1.4 certificates of incumbency and signatures of all
Responsible Officers of each of the Related Persons who are
authorized to execute Loan Documents on behalf of such entity, each
such certificate being executed by the secretary or an assistant
secretary of the relevant Related Persons;
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3.1.5 copies of corporate resolutions approving the
Loan Documents and authorizing the transactions contemplated herein
and therein, duly adopted by the board of directors of each of the
Related Persons, accompanied by certificates of the secretary or an
assistant secretary of the relevant Related Persons to the effect
that such copies are true and correct copies of resolutions duly
adopted at a meeting or by unanimous consent of the board of
directors of the relevant Related Persons, and that such
resolutions constitute all the resolutions adopted with respect to
such transactions, have not been amended, modified, or revoked in
any respect, and are in full force and effect as of the date of
such certificate;
3.1.6 the following Security Instruments creating,
evidencing, perfecting and otherwise establishing the Liens in
favor of Lender, in and to the Collateral:
(a) First Restated Security Agreement as amended by
the First Amendment to First Restated Security Agreement by
and among the Related Persons, as debtors, and Lender, as
secured party, covering the Accounts and covering all
inventory, equipment and other personal property and all
substitutions and replacements of any of the foregoing and
proceeds with respect thereto;
(b) First Restated Security Agreement as amended by
the First Amendment to First Restated Security Agreement by
and among the Related Persons, as debtors, and Lender, as
secured party, covering deposits and money market instruments
and all substitutions and replacements of any of the foregoing
and proceeds with respect thereto;
(c) Charter Hire Assignment as amended by the First
Amendment to Charter Hire Assignment by Borrower to Lender
covering Borrower's interest in and to each of the Charters;
(d) Financing Statements with Borrower as debtor,
constituent to the Security Instrument described in clause (c)
immediately above;
(e) Assignments by Borrower to Lender covering FCIA
policies;
(f) Assignment by Borrower to Lender covering
Contract Frustration policies;
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(g) Deed of Trust, Mortgage, Assignment, Security
Agreement and Financing Statement, as amended by the First
Amendment to Deed of Trust, Mortgage, Assignment, Security
Agreement and Financing Statement, as further amended by the
Second Amendment to Deed of Trust, Mortgage, Assignment,
Security Agreement and Financing Statement and the Third
Amendment to Deed of Trust, Mortgage, Assignment, Security
Agreement and Financing Statement, from COG, as mortgagor, to
Trond Rokholt, as Trustee for the benefit of Lender, as
mortgagee, covering the Oil and Gas Properties designated by
Lender located in Texas and all improvements, personal
property and fixtures related thereto;
(h) Collateral Mortgage Note in the amount of
$25,000,000 executed by COG, payable to the order of bearer on
demand;
(i) Louisiana Security Agreement, Assignment of
Production and Financing Statement, as amended by First
Amendment to Louisiana Security Agreement, Assignment of
Production and Financing Statement, as further amended by
Second Amendment to Louisiana Security Agreement, Assignment
of Production and Financing Statement and Third Amendment to
Louisiana Security Agreement, Assignment of Production and
Financing Statement by COG, as debtor, and Lender, as secured
party, covering accounts, equipment, general intangibles and
all substitutions and replacements of any of the foregoing and
proceeds with respect thereto;
(j) Financing Statements with COG, as debtor,
constituent to the Security Instrument described in clause
(i);
(k) Supplement to Act of Collateral Mortgage by COG
covering the Oil and Gas Properties referred to as "Miami Fee"
located in T14S, R14W, Cameron Parish, Louisiana; Eugene
Island Block 164, St. Mary, Iberia and Terrbonne Parishes,
Louisiana; Vermilion Blocks 61 and 62; and West Cameron Block
427; and all improvements, personal property and fixtures
related thereto, subject to that certain Partial Release dated
March ____, 1994;
(l) Act of Second Supplemental Collateral Mortgage by
COG covering the Oil and Gas Properties referred to as "Amoco
Fee", and all improvements, personal property and fixtures
related thereto;
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(m) Deed of Trust, Security Agreement, Assignment of
Security Interest and Liens, Assignment of Production and
Financing Statement, as amended by the First Amendment to Deed
of Trust, Security Agreement, Assignment of Security Interests
and Liens, Assignment of Production and Financing Statement as
further amended by Second Amendment to Deed of Trust, Security
Agreement, Assignment of Security Interests and Liens,
Assignment of Production and Financing Statement, Third
Amendment to Deed of Trust, Security Agreement, Assignment of
Security Interests and Liens, Assignment of Production and
Financing Statement and Fourth Amendment to Deed of Trust,
Security Agreement, Assignment of Security Interests and
Liens, Assignment of Production and Financing Statement from
Borrower, as mortgagor, to Trond Rokholt, as Trustee for the
benefit of Lender, as mortgagee, covering Oil and Gas
Properties designated by Lender located in Webb and Zapata
Counties, Texas;
(n) Undated letters, in form and substance
satisfactory to Lender and its legal counsel, from the
relevant Related Persons owning an interest in a particular
Oil and Gas Property to the parties presently remitting to
such Related Person proceeds from the sale of hydrocarbon
production from or attributable to the Oil and Gas Property as
to which all or any portion of the interest of such Related
Person therein constitutes Collateral, together with
additional such letters with the addresses left blank,
directing the addressees, until receipt of notice from Lender
to the contrary, to make future remittances attributable to
production from such Property to Lender for the account of the
such Related Person;
(o) First Preferred Fleet Mortgage, as amended by the
First Amendment to First Preferred Fleet Mortgage and the
Second Amendment to First Preferred Fleet Mortgage, on the
Rigs in favor of Trustee;
(p) Trust Agreement, as amended by the First
Amendment to Trust Agreement and as further amended by the
Second Amendment to Trust Agreement, with Trustee for the
benefit of Lender;
(q) Assignment and Security Agreement (Project
Documents), as amended by the First Amendment to Assignment
and Security Agreement (Project Documents), as further amended
by the Second Amendment to Assignment and Security Agreement
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(Project Documents) by Borrower to Lender covering Borrower's
interest in and to each of the Dresser-Rand Contracts; and
3.1.7 Multiparty Agreement;
3.1.8 Certificates dated as of a recent date from the
Secretary of State or other appropriate Governmental Authority
evidencing the existence or qualification and good standing of each
Related Person in the States of Delaware and Texas, and of COG in
the State of Louisiana;
3.1.9 the opinion of Griggs & Harrison, counsel to
Related Persons, in substantially the form attached hereto as
Exhibit 3.1.9;
3.1.10 opinion of Donovan, Leisure, Newton & Irvine,
special New York counsel to Lender;
3.1.11 opinion of Thompson & Knight, special counsel to
Lender, as to such matters as Lender may specify;
3.1.12 such other agreements, documents, instruments,
opinions, certificates, waivers, consents and evidence as Lender
may reasonable request; and
3.1.13 payment in immediately available funds of the fee
payable to Lender provided for in Section 2.3.3(b).
3.2 Additional Conditions Precedent. Lender has no
obligation to make any Loan (including the first) or issue any
Letter of Credit unless the following conditions precedent have
been satisfied:
3.2.1 No Defaults. No Event of Default or Default
shall exist or will occur after the requested Loan has been made or
the requested Letter of Credit has been issued.
3.2.2 No Material Adverse Effect. No event shall have
occurred which, in the reasonable opinion of Lender, could have a
Material Adverse Effect.
3.2.3 Representations and Warranties Correct. Each of
the representations and warranties contained in this Agreement
shall be true and correct and shall be deemed to be repeated by the
Related Persons as if made on the requested date for such Loan or
the issuance or extension of such Letter of Credit.
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3.2.4 Security Instruments Effective. All of the
Security Instruments shall be in full force and effect and provide
to Lender the security intended thereby.
3.2.5 Compliance. Each Related Person shall have
performed and complied with all agreements and conditions required
in the Loan Documents to be performed or complied with by it on or
prior to the date of such Loan.
3.2.6 No Legal Impediment. The making of such Loan
shall not be prohibited by any law or any regulation or order of
any court or governmental agency or authority and shall not subject
Lender to any penalty or other onerous condition under or pursuant
to any such law, regulation or order.
3.2.7 Notice. Notice of Revolving Credit Borrowing at
least the requisite time prior to the requested date for the
Revolving Credit Loan, or a Letter of Credit Application at least
one Business Day prior to the requested issuance date for the
relevant Letter of Credit, shall have been received by Lender.
3.2.8 Additional Documents. Lender shall have received
all documents and instruments which Lender has then requested, in
addition to those described in Section 3.1 (including opinions of
legal counsel for the Related Persons and Lender; corporate
documents and records; documents evidencing governmental
authorizations, consents, approvals, licenses and exemptions; and
certificates of public officials and of officers and
representatives of the Related Persons and other Persons), as to
(i) the accuracy and validity of or compliance with all
representations, warranties and covenants made by any of the
Related Persons in this Agreement and the other Loan Documents,
(ii) the satisfaction of all conditions contained herein or
therein, and (iii) all other matters pertaining hereto and thereto.
All such additional documents and instruments shall be satisfactory
to Lender in form, substance and date.
3.2.9 Legal Matters. All legal matters relating to the
Loan Documents and the consummation of the transactions
contemplated thereby shall be satisfactory to legal counsel to
Lender.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
To confirm Lender's understanding concerning Related Persons
and their business, properties and obligations, and to induce
Lender to enter into this Agreement and to make the Loans, Related
Persons jointly and severally represent and warrant to Lender
(which representations and warranties shall survive the delivery of
the Notes) that:
4.1 Due Authorization and Corporate Existence. The
execution and delivery by each Related Person of this Agreement and
the borrowings hereunder; the execution and delivery by Borrower of
the Notes; the repayment of the Notes and interest provided in the
Notes and this Agreement; the execution and delivery of the other
Loan Documents and the Dresser-Rand Contracts by each Related
Person; and the performance of all obligations of Related Persons
under the Loan Documents and the Dresser-Rand Contracts are within
the power of such Related Person, have been duly authorized by all
necessary corporate action, do not and will not require the consent
of any Governmental Authority (except as has been previously
obtained) and do not and will not (a) contravene or conflict with
any provision of law or the charter or bylaws of any Related
Person, (b) contravene or conflict in any material respect with any
material indenture, instrument or other agreement to which any
Related Person is a party or by which any Collateral or any other
material Property of any Related Person may be presently bound or
encumbered, or (c) other than as to Permitted Liens, result in or
require the creation or imposition of any Lien in, upon or on any
Collateral or any other material Property of any Related Person
under any such indenture, instrument or other agreement, other than
the Loan Documents. Borrower is duly authorized to borrow funds
hereunder; and Guarantors are duly authorized to guaranty
Borrower's Obligations. Each Related Person is a corporation duly
organized, legally existing and in good standing under the laws of
its state of incorporation and is duly qualified as a foreign
corporation and is in good standing in all jurisdictions wherein
the ownership of Property or the operation of its business
necessitates the same, other than those jurisdictions wherein the
failure to so qualify will not have a Material Adverse Effect.
4.2 Valid and Binding Obligations. This Agreement, each of
the other Loan Documents and each of the Dresser-Rand Contracts,
when duly executed and delivered by the Related Persons, will be
legal, valid and binding obligations of such Related Persons that
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are parties thereto, enforceable against such Related Person in
accordance with their respective terms.
4.3 Title to Assets. Each Related Person has good and
indefeasible title to all of its Properties in all material
respects, free and clear of all Liens except for Permitted Liens
and those set forth under the caption heading "Liens and
Encumbrances" on Exhibit 4.3 attached hereto.
4.4 Scope and Accuracy of Financial Statements. The
Financial Statements of the Consolidated Group as of December 31,
1993, present fairly the financial position and results of
operations and cash flows of the Consolidated Group in accordance
with GAAP as at the relevant points in time or for the periods
indicated, as applicable. No event or circumstance has occurred
since December 31, 1993, that could reasonably be expected to have
or result in a Material Adverse Effect.
4.5 Liabilities, Litigation and Restrictions. Other than as
listed in the Financial Statements of the Consolidated Group as of
December 31, 1993, including the notes thereto or under the heading
"Liabilities" on Exhibit 4.5 attached hereto, none of the Related
Persons has any liabilities, direct or contingent, that may
materially and adversely affect the business or operations of the
Consolidated Group, their ownership of the Collateral or the
performance by Borrower of its obligations under the Dresser-Rand
Contracts. Except as set forth under the heading "Litigation" on
Exhibit 4.5 hereto, as of the date hereof, no litigation or other
action of any nature affecting any Related Person is pending before
any Governmental Authority or, to the knowledge of any Related
Person, threatened against or affecting any Related Person that
might reasonably be expected to result in any material impairment
of its ownership of any material Collateral, any other Material
Adverse Effect or any impairment of the performance by Borrower of
its obligations under the Dresser-Rand Contracts. To the best of
the knowledge of each Related Person, after due inquiry, no unusual
or unduly burdensome restriction, restraint or hazard exists by
contract, Requirement of Law or otherwise relative to the business
or operations of any Related Person or the ownership and operation
of the Collateral other than such as relate generally to Persons
engaged in the business activities conducted by such Related Person
or that could not reasonably be expected to have a Material Adverse
Effect.
4.6 Authorizations and Consents. Except as expressly
contemplated by this Agreement or previously obtained, no
authorization, consent, approval, exemption, franchise, permit or
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license of, or filing with, any Governmental Authority or any other
Person is required to authorize or is otherwise required in
connection with the valid execution and delivery by the Related
Persons of any of the Loan Documents or any of the Dresser-Rand
Contracts or any instrument contemplated thereby, the repayment by
Related Persons of the Notes and interest and fees provided in the
Notes and this Agreement, or the performance by Related Persons of
their obligation under any of the Loan Documents or any of the
Dresser-Rand Contracts.
4.7 Compliance with Laws. Related Persons and their
Property, including, without limitation, the Mortgaged Property,
are in compliance with all applicable Requirements of Law,
including, without limitation, Environmental Laws and the Natural
Gas Policy Act of 1978, as amended, except to the extent
noncompliance could not reasonably be expected to result in a
Material Adverse Effect.
4.8 Proper Filing of Tax Returns and Payment of Taxes Due.
Each Related Person has duly and properly filed all United States
income tax returns and all other tax returns that are required to
be filed, and has paid all material taxes due except such as are
being contested in good faith and as to which adequate provisions
and disclosures have been made. The respective charges and
reserves on the books of each Related Person with respect to any
taxes or other governmental charges are adequate in all material
respects.
4.9 ERISA. Each Related Person is in compliance in all
material respects with all applicable provisions of ERISA. No
Reportable Event has occurred with respect to any Single Employer
Plan, and each Single Employer Plan has complied with and has been
administered in all material respects with applicable provisions of
ERISA and the Code. To the best knowledge of each Related Person
and each Commonly Controlled Entity, (a) no Reportable Event has
occurred with respect to any Multiemployer Plan, and (b) each
Multiemployer Plan has complied with and been administered in all
material respects with applicable provisions of ERISA and the Code.
The present value of all benefits vested under each Single Employer
Plan maintained by any Related Person or any Commonly Controlled
Entity (based on the assumptions used to fund such Plan) did not,
as of the last annual valuation date applicable thereto, exceed the
value of the assets of such Plan allocable to such vested benefits.
None of Related Persons or any Commonly Controlled Entity has had
a complete or partial withdrawal from any Multiemployer Plan for
which there is any withdrawal liability. As of the most recent
valuation date applicable thereto, none of Related Persons or any
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Commonly Controlled Entity would become subject to any liability
under ERISA if Related Persons or any Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans. None of
Related Persons or any Commonly Controlled Entity has received
notice that any Multiemployer Plan is Insolvent or in
Reorganization. To the best knowledge of Related Persons, no such
Insolvency or Reorganization is reasonably likely to occur. Based
upon GAAP existing as of the date of this Agreement and current
factual circumstances, Related Persons have no reason to believe
that the annual cost during the term of this Agreement to Related
Persons and all Commonly Controlled Entities for post-retirement
benefits to be provided to the current and former employees of
Related Persons and all Commonly Controlled Entities under Plans
that are welfare benefit plans (as defined in Section 3(1) of
ERISA) will, in the aggregate, have a Material Adverse Effect.
4.10 Environmental Laws. To the best of the knowledge and
belief of Related Persons, except as would not have a Material
Adverse Effect:
4.10.1 no Property of any Related Person is currently,
or has ever been, on any federal or state list of Superfund Sites;
4.10.2 no Hazardous Substances have in the past been
generated, transported, and or disposed of, by any Related Person
at a Superfund Site;
4.10.3 except in accordance with a valid permit,
license, certificate or approval of the relevant Governmental
Authority, no Release of Hazardous Substances by any Consolidated
Group Member or from, affecting or related to any Property of any
Consolidated Group Member has occurred;
4.10.4 no Environmental Complaint has been received by
any Related Person;
4.10.5 the Related Persons are conducting their
businesses in material compliance with all applicable Environmental
Laws, and have all permits, licenses and authorizations required in
connection with the conduct of their businesses. Each Related
Person is in compliance with the terms and conditions of all such
permits, licenses and authorizations, and is also in compliance
with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law or in any regulation,
code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder;
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4.10.6 no Related Person has any known material
contingent liability in connection with any alleged generation,
treatment, storage, recycling, transportation, disposal, or Release
of any Hazardous Substances;
4.10.7 no Related Person has handled any Hazardous
Substances, other than as a generator, on any properties now or
previously owned or leased by any Related Person to an extent that
such handling has, or may reasonably be expected to have, a
Material Adverse Effect; and
a. no PCBs are or have been present at any properties now or
previously owned or leased by any Related Person to an
extent that has, or may reasonably be expected to have,
a Material Adverse Effect;
b. no asbestos is or has been present at any properties now
or previously owned or leased by any Related Person to an
extent that has, or may reasonably be expected to have,
a Material Adverse Effect;
c. there are no underground storage tanks for Hazardous
Materials, active or abandoned, at any properties now or
previously owned or leased by any Related Person to an
extent that has, or may reasonably be expected to have,
a Material Adverse Effect;
4.10.8 no Hazardous Substance generated by any Related
Person has been recycled, treated, stored, disposed of or released
by any Related Person other than in the ordinary course of business
of such Related Person in compliance with applicable Environmental
Laws;
4.10.9 No oral or written notification of a Release of
a Hazardous Material has been filed by or on behalf of any Related
Person (and to the best knowledge of Borrower, no such notification
has been filed with respect to any Related Person by any other
Person), regarding a Release which has, or may reasonably be
expected to have, a Material Adverse Effect and no property now or
previously owned or leased by any Related Person is listed or
proposed for listing as a Superfund Site;
4.10.10 there are no Liens arising under or pursuant to
any Environmental Laws on any of the real properties or properties
owned or leased by any Related Person, and no government actions
have been taken or are in process which could subject any of such
properties to such Liens; nor would any Related Person be required
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to place any notice or restriction relating to the presence of
Hazardous Substances at any properties owned by it in any deed to
such properties.
4.10.11 There have been no environmental
investigations, studies, audits, tests, reviews or other analyses
conducted by or which are in the possession of any Related Person
in relation to any properties or facility now or previously owned
or leased by any Related Person which have not been made available
to Lender.
4.11 Compliance with Federal Reserve Regulations. No
transaction contemplated by the Loan Documents is in violation of
any regulations promulgated by the Board of Governors of the
Federal Reserve System, including, without limitation, Regulations
G, U or X.
4.12 Investment Company Act Compliance. None of Related
Persons is, nor is any Related Person either directly or indirectly
controlled by or acting on behalf of any Person that is, an
"investment company" or an "affiliated person" of any "investment
company" within the meaning of the Investment Company Act of 1940,
as amended.
4.13 Public Utility Holding Company Act Compliance. None of
Related Persons is a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
4.14 Refunds. No orders of, proceedings pending before, or
other governmental requirements of, the Federal Energy Regulatory
Commission, the Texas Railroad Commission or any Governmental
Authority exist that could reasonably be expected to result in any
Related Person being required to refund any material portion of the
proceeds received or to be received from the sale of hydrocarbons
constituting part of the Mortgaged Property.
4.15 Other Regulations. None of Related Persons is subject to
regulation under any Requirement of Law that limits its ability to
incur Indebtedness.
4.16 Gas Contracts. Except as described on Exhibit 4.16 under
the heading "Gas Contracts," none of Related Persons, as of the
date hereof, (a) is obligated in any material respect by virtue of
any prepayment made under any contract containing a "take-or-pay"
or "prepayment" provision or under any similar agreement to deliver
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hydrocarbons produced from or allocated to any of the Mortgaged
Property at some future date without receiving full payment
therefor at the time of delivery, or (b) has produced gas, in any
material amount, subject to, and none of Related Persons nor any of
the Mortgaged Property is subject to, balancing rights of third
parties or subject to balancing duties under governmental
requirements, except as to such matters for which such Related
Person has established monetary reserves adequate in amount in all
material respects to satisfy such obligations and has segregated
such reserves from other accounts.
4.17 Intellectual Property. Each Related Person owns or is
licensed to use all Intellectual Property necessary for the conduct
of its business as currently conducted that is material to its
condition (financial or other), business, or operations. No claim
has been asserted or is pending by any Person with the respect to
the use of any such Intellectual Property or challenging or
questioning the validity or effectiveness of any such Intellectual
Property, and none of Related Persons knows of any valid basis for
any such claim. The use of such Intellectual Property by such
Related Person does not infringe on the rights of any Person,
except for such claims and infringements as do not, in the
aggregate, give rise to any material liability on the part of such
Related Person.
4.18 No Material Misstatements. No information, exhibit or
report prepared by or at the direction and with the supervision of
any Related Person and furnished to Lender by or at the direction
of any Related Person in connection with the negotiation and
preparation of this Agreement, nor any information, exhibit or
report prepared by any other Person and so furnished to Lender by
or at the direction of any Related Person, contains any material
misstatement of fact or omits to state a material fact or any fact
necessary to make the statements contained therein not misleading
as of the date made or deemed made.
4.19 Casualties or Taking of Property. Since December 31,
1993, neither the business nor any Property of any Related Person
has been materially adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike
or other labor disturbance, embargo, requisition or taking of
Property or cancellation of contracts, permits or concessions of
any Governmental Authority, riot, activities of armed forces or
acts of God.
4.20 Names of Business and Locations of Business, Offices and
Property. None of Related Persons has, during the preceding five
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years had, been known by, or used any other corporate, trade or
fictitious name, except as disclosed in Exhibit 4.20. Except as
provided on Exhibit 4.20 under the heading "Principal Places of
Business; Chief Executive Offices," the principal place of business
and chief executive offices of each Related Person are located at
the respective address of Related Persons set forth in Section 8.3
or at such other location as such Related Person may have, by
proper written notice hereunder, advised Lender, provided that such
other location is within a state in which appropriate financing
statements from such Related Person in favor of Lender have been
filed.
4.21 Security Instruments. The provisions of each Security
Instrument are effective to create in favor of Lender, a legal,
valid and enforceable Lien in all right, title and interest of
Related Persons in the Collateral described therein, which Liens
constitute fully perfected first priority Liens on all right, title
and interest of Related Persons in the Collateral described
therein.
4.22 Subsidiaries. Borrower has no Subsidiaries other than
(a) Cliffs Drilling Venezuela, Inc., a Delaware corporation, (b)
Cliffs Drilling De Venezuela, S.A., a Venezuelan corporation, (c)
Guarantors and (d) any Subsidiaries organized or acquired
subsequent to the date hereof that become Guarantors; COG has no
Subsidiaries; and CDI has no Subsidiaries other than (a) Cliffs
Drilling Company N.V., a Curacao-Netherlands Antilles corporation,
(b) Cliffs Drilling International N.V., a Curacao-Netherlands
Antilles Corporation, (c) Cliffs Oil & Gas International N.V., a
Curacao-Netherlands Antilles corporation, and (d) Cliffs Drilling
De Mexico, S.A. De C.V., a Mexican corporation. All of the
representations and warranties set forth in this Article 4 are true
and correct with respect to any Subsidiary of any Related Person.
4.23 No Election to be Treated as a Utility. None of Related
Persons has elected to be treated as a utility or made a filing as
a utility pursuant to the provisions of TEX. BUS. & COM. CODE ANN.
# 35.01 et seq. (Vernon 1987).
4.24 Permits. Except approvals as have previously been
obtained, consents required in the ordinary course of operation of
each Rig, and Venezuelan licenses issued upon or after entry by a
Rig into Venezuela, no consents, licenses, approvals or
authorizations are required in connection with the execution,
delivery and performance by Borrower of its obligations under the
Loan Documents or Dresser-Rand Contracts, and the transactions
contemplated thereby.
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4.25 Condition of Rigs. The Rigs are in good condition and
are not now damaged or injured as a result of any fire, explosion,
accident, flood or other casualty.
4.26 Brokerage Commissions. Any brokerage commissions due in
connection with the transactions contemplated hereby have been paid
in full by Borrower, and any such commissions coming due in the
future will be promptly paid by Borrower. Borrower agrees to and
shall indemnify Lender from any liability, claims or losses arising
by reason of any such brokerage commissions.
4.27 No Default. No Related Person is materially in Default
under any agreement to which it is a party and no Event of Default
(or event which with the giving of notice and the lapse of the time
or both or other applicable condition might constitute an Event of
Default) has occurred and is continuing under any such agreement.
4.28 Fleet Mortgage. On the date of the first Loan, and
thereafter, each Rig will be documented under the laws of the
United States, in the name of Borrower, free and clear of all Liens
of record other than the First Preferred Fleet Mortgage in favor of
Lender and Permitted Liens, such First Preferred Fleet Mortgage has
been filed and recorded in the appropriate office of the Marine
Office (documentation), United States Coast Guard in Houston,
Texas, the designated home port of each Rig, and such First
Preferred Fleet Mortgage constitutes a "Preferred Mortgage" under
the provisions of Chapter 313 of Title 46 of the United States Code
having effect and with the priority provided in said Chapter 313,
and no other filing, recording, refiling or rerecording or other
action required in order to create, perfect and maintain a valid
Preferred Mortgage on each Rig in favor of the Trustee for the
benefit of Lender. Borrower is a citizen of the United States
within the meaning of Section 2 of the Shipping Act, 1916, as
amended, and is duly qualified to own and document each of the Rigs
under the laws and flag of the United States of America and operate
such Rigs as required by the Dresser-Rand Contracts.
ARTICLE 5
AFFIRMATIVE COVENANTS
To conform with the terms and conditions under which Lender is
willing to have credit outstanding to Borrower, and to induce
Lender to enter into this Agreement and make the Loans, each
Related Person jointly and severally warrants and covenants, so
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long as this Agreement remains in effect unless agreed in writing
by Lender to the contrary:
5.1 Maintenance and Access to Records. Each Related Person
will keep adequate records, in accordance with GAAP, of all its
material transactions so that at any time, and from time to time,
its true and complete financial condition may be readily determined
in all material respects, and promptly following the reasonable
request of Lender, make such records available for inspection by
Lender and, at the expense of Related Persons, allow Lender to make
and take away copies thereof.
5.2 Monthly Reports. Each Related Person will deliver to
Lender the following, which shall be certified by the Chief
Financial Officer of each Related Person, (a) on or before the 20th
day after the end of each calendar month, a Borrowing Base
Certificate, a Receivables Report, and a brief report on the status
and location of each Rig, and (b) on or before the 20th day after
the end of each calendar month, a Contracts Report.
5.3 Quarterly Financial Statements and Contract Reports. Each
Related Person will deliver to Lender the following, which shall be
certified by the Chief Financial Officer of each Related Person,
(a) on or before the 45th day after the close of each of the first
three quarterly periods of each fiscal year of the Consolidated
Group, a copy of the unaudited consolidated and consolidating
Financial Statements of the Consolidated Group as at the close of
such quarterly period and from the beginning of such fiscal year to
the end of such period, as applicable, such Financial Statements to
be prepared in accordance with GAAP consistently applied and as a
fair presentation of the condition of the Consolidated Group
subject to changes resulting from normal year-end audit
adjustments, and (b) on or before the 70th day after the close of
each of the first three calendar quarters in each calendar year, a
copy of the report delivered pursuant to Section 2.3 (j) of the
Assignment, Bill of Sale and Conveyance and Reservation of
Overriding Royalty Interest agreements delivered pursuant to the
terms of the Exploration Agreement.
5.4 Annual Financial Statements and Budgets. Each Related
Person will deliver to Lender, on or before the 90th day after the
close of each fiscal year of the Consolidated Group, a copy of (a)
the annual audited consolidated and unaudited consolidating
Financial Statements of the Consolidated Group and (b) the comment
letter submitted by the accountants to management in connection
with the annual report. Each Related Person will deliver to
Lender, on or before the 30th day after the close of each fiscal
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year of the Consolidated Group, a copy of the proposed annual
budget and business plan of the Consolidated Group. Each Related
Person will deliver to Lender, on or before May 1 of each year, a
copy of the annual reports delivered pursuant to Sections 2.3(j)
and 3.2 of the assignment agreements referenced in Section 5.3(c)
above.
5.5 Reserve Reports.
5.5.1 Each Related Person will deliver to Lender as
soon as available but in any event on or before each March 31
during the term hereof, (a) an engineering report in form and
substance meeting the requirements of the Securities and Exchange
Commission for financial reporting purposes, certified by
Huddleston & Co., Inc., or another nationally-recognized firm of
independent consulting petroleum engineers acceptable to Related
Persons and Lender, as fairly and accurately setting forth (i) the
proven and producing, shut in, behind pipe and undeveloped oil and
gas reserves (separately classified as such) attributable to the
Oil and Gas Properties of the Consolidated Group as of December 31
of the year for which such reserve report is furnished, (ii) the
aggregate present value, determined on the basis of assumptions, of
the future net income with respect to such Oil and Gas Properties,
discount rate, (iii) projections of the annual rate of production,
gross income and net income with respect to such proven and
producing reserves and noting thereon any Oil and Gas Properties
not constituting Mortgaged Properties and (b) a duplicate of such
engineering report by such engineer that shall utilize pricing
assumptions, discount rates and other assumptions as Lender shall,
in its sole discretion, determine to be appropriate.
5.5.2 Each Related Person will deliver to Lender from
time to time at the election of Related Persons, an engineering
report in form and substance satisfactory to Lender prepared by or
under the supervision of the chief petroleum engineer of Related
Persons evaluating the Oil and Gas Properties of the Consolidated
Group, updating the information provided in the reports previously
provided pursuant to subsection 5.5.1 of this Section and noting
thereon any Oil and Gas Properties not constituting Mortgaged
Properties.
5.5.3 Each Related Person will deliver to Lender,
promptly upon receipt thereof, the engineering report and other
reports received from time to time in connection with the
Assignments of Proceeds Production Payments executed by
TransAmerican Natural Gas Corporation and/or its affiliates
Southern States Petroleum Partnership in favor of Borrower.
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5.6 Stockholder Communications and Securities and Exchange
Commission Filings. Each Related Person will furnish to Lender
within 5 days after any material report (other than financial
statements) or other communication is sent by any Consolidated
Group Member to its stockholders, filed by any Consolidated Group
Member with the Securities and Exchange Commission or any successor
or analogous Governmental Authority, filed by any Consolidated
Group Member with any stock exchange or is issued as a press
release, copies of such report or communication, without exhibits
except as may be requested by Lender.
5.7 Notices of Certain Events. Each Related Person will
deliver to Lender, immediately upon having knowledge thereof, a
written statement with respect to the occurrence of any of the
following events or circumstances, signed by the Chief Financial
Officer of the relevant Related Person and setting forth the
relevant event or circumstances and the steps being taken by the
relevant Related Person with respect to such event or circumstance:
5.7.1 any Default or Event of Default;
5.7.2 any default or event of default under any
contractual obligation of Related Persons or any Subsidiary of
Related Persons, or any litigation, investigation or proceeding
between any Related Person or any Subsidiary of any Related Person
and any Governmental Authority that, in either case, if not cured
or if adversely determined, as the case may be, would have a
Material Adverse Effect;
5.7.3 any litigation or proceeding involving any
Related Person or any Subsidiary of any Related Person as a
defendant or in which any Property of any Related Person or any
Subsidiary of any Related Person is subject to a claim and in which
the amount involved is $500,000 or more and which is not covered by
insurance or in which injunctive or similar relief is sought;
5.7.4 any sale, transfer or other disposition of assets
owned by any Related Person or any Subsidiary of any Related Person
whether now owned or hereafter acquired (including, without
limitation, any discount or sale of Credit Accounts), the greater
of the book value or the sale price of which exceeds $2,000,000.
5.7.5 any Reportable Event or imminently expected
Reportable Event with respect to any Plan or any withdrawal from,
or the termination, Reorganization or Insolvency of, any
Multiemployer Plan, or the institution of proceedings or the taking
of any other action by PBGC, any Related Person or any Commonly
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Controlled Entity or Multiemployer Plan with respect to the
withdrawal from or the termination, Reorganization or Insolvency
of, any Single Employer Plan or Multiemployer Plan;
5.7.6 the receipt by any Related Person or any
Subsidiary of any Related Person of any Environmental Complaint or
any formal request from any Governmental Authority or other entity
for information (other than requirements for periodic reports
required by any Governmental Authority pursuant to any permit or
Requirement of Law) regarding any Release of Hazardous Substances
by any Consolidated Group Member or any Subsidiary of any
Consolidated Group Member or from, affecting or related to any
Property of any Consolidated Group Member or any Subsidiary of any
Consolidated Group Member, but only to the extent that such matter
if not cured or if adversely determined, as the case may be, would
have a Material Adverse Effect;
5.7.7 any actual, proposed or threatened testing or
other investigation by any Governmental Authority or other entity
concerning the environmental condition of, or relating to, any
Property of any Consolidated Group Member or any Subsidiary of any
Consolidated Group Member following any allegation of a violation
of any Requirement of Law, but only to the extent that such matter
if not cured or if adversely determined, as the case may be, would
have a Material Adverse Effect;
5.7.8 any Release of Hazardous Substances by any
Consolidated Group Member or any Subsidiary of any Consolidated
Group Member or from, affecting or related to any Property of any
Consolidated Group Member of any Subsidiary of any Consolidated
Group Member, except in accordance with a valid permit, license,
certificate or approval of the relevant Governmental Authority or
of a substance not subject to regulation under Environmental Laws,
or the violation of any Environmental Law or the revocation,
suspension or forfeiture of or failure to renew, any permit,
license, registration, approval or authorization that could
reasonably be expected to result in a Material Adverse Effect;
5.7.9 any material decline in the value of the
Collateral;
5.7.10 the change in identity or address of the Person
remitting to any Related Person proceeds from the sale of
hydrocarbon production from or attributable to any Oil and Gas
Property in which all or any portion of the interest of any Related
Persons therein serves as Collateral;
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5.7.11 the receipt by any Related Person of any notices
delivered pursuant to Sections 2.02(iii) or 2.03 of the Exploration
Agreement or Section II of the Letter Agreement dated effective
April 21, 1989, amending the Exploration Agreement;
5.7.12 the receipt by any Related Person of any notice
indicating that Borrower's interest in the Oil and Gas Properties
subject to the Exploration Agreement has been adjusted, or that
accrual or payment of Charter Hire under any Charter has (once
commenced) been delayed or deferred for any reason; and
5.7.13 any other event or condition which could
reasonably be expected to cause a Material Adverse Effect.
5.8 Division Orders. Each Related Person will promptly upon
request by Lender at any time and from time to time following the
occurrence of any Event of Default and without limitation on the
rights of Lender pursuant to Sections 2.3.12 and 2.3.13, execute
such division and transfer orders as are necessary or appropriate
to transfer and deliver to Lender proceeds from the sale of
hydrocarbon production from or attributable to any Oil and Gas
Property of any Related Person as to which all or any portion of
the interest of such Related Person therein constitutes Collateral.
5.9 Additional Information. Each Related Person will
furnish to Lender, promptly upon the reasonable request of Lender,
such additional financial or other information concerning the
assets, liabilities, operations and transactions of the Related
Persons or any Subsidiary of any Related Person as Lender may from
time to time reasonably request; and notify Lender not less than 10
Business Days prior to any change in its name or the location of
its principal place of business or chief executive office, and,
upon the request of Lender, execute such additional Security
Instruments as may be necessary or appropriate in connection
therewith.
5.10 Compliance with Laws and Payment of Assessments and
Charges. Each Related Person will comply, and cause each
Subsidiary of any Related Person to comply, with all Requirements
of Law, including, without limitation, the Natural Gas Policy Act
of 1978, as amended, and pay all taxes, assessments, governmental
charges, rent and other Indebtedness that, if unpaid, might become
a Lien against its Property other than a Permitted Lien, except any
of the foregoing being contested in good faith and as to which
adequate reserve in accordance with GAAP has been established or
unless failure to comply or pay could not reasonably be expected to
result in a Material Adverse Effect.
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5.11 Compliance with ERISA. To the extent, if any, ever
applicable, each Related Person will comply in all material
respects with all requirements, including, without limitation, the
minimum funding requirements, of ERISA, so as not to give rise to
any material liability thereunder or to incur any Reportable Event
thereunder, and promptly furnish to Lender (a) if requested,
promptly after the filing thereof with the United States Secretary
of Labor or the PBGC, copies of each annual and other report with
respect to each Plan or any trust created thereunder, and (b)
immediately upon becoming aware of the occurrence of any Reportable
Event or of any "prohibited transaction," as such term is defined
in Section 4975 of the Code in connection with any Plan or any
trust created thereunder, a written notice signed by a Responsible
Officer of the relevant Related Person specifying the nature
thereof, what action such Related Person is taking or proposes to
take with respect thereto, and, when known, any action taken by the
Internal Revenue Service with respect thereto.
5.12 Compliance with Environmental Laws.
(a) Each Related Person will comply, and cause each
Subsidiary of any Related Person to comply, in all material
respects with all Requirements of Law, including, without
limitation, Environmental Laws, (i) related to any natural or
environmental resource or media located on, above, within, in
the vicinity of, related to or affected by any Property of any
Related Person in which Lender has a Lien or any other
Property of any Related Person, or (ii) required for the
performance or conduct of its operations, including, without
limitation, all permits, licenses, registrations, approvals
and authorizations, and, in this regard, comply fully and in
a timely manner with, and cause all employees, crew members,
agents, contractors, subcontractors and future lessees
(pursuant to appropriate lease provisions) of each Related
Person and any subsidiary of any Related Person while such
Persons are acting within the scope of their relationship with
the relevant Related Person or any Subsidiary of any Related
Person, to so comply in all material respects with, all
Requirements of Law and other requirements with respect to the
Property of any Related Person or any Subsidiary of any
Related Person and the operation thereof necessary or
appropriate to enable any Related Person or any Subsidiary of
any Related Person to fulfill its obligations in all material
respects under all Requirements of Law applicable to the use,
generation, handling, storage, treatment, transport and
disposal of any Hazardous Substances now or hereafter located
or present on or under any such Property.
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(b) Promptly, and in any event within 30 days after the
end of each fiscal year of the Related Persons, the Related
Persons will deliver to Lender a certificate signed by the
chief executive officer of the Company stating to his
knowledge, that the Related Persons are in compliance with the
requirements of this Section 5.12 or setting forth, to his
knowledge any non-compliance with the requirements of this
Section, which certificate shall specifically cover any
matters brought to the attention of the boards of directors of
the Related Persons.
5.13 Hazardous Substances Indemnification. Each Related
Person will, jointly and severally, defend, indemnify and hold
Lender, its employees, agents, officers and directors harmless from
and against any and all claims, losses, damages, liabilities,
fines, penalties, charges, administrative and judicial proceedings
and orders, judgments, remedial actions, requirements and
enforcement actions of any kind, and all costs and expenses
incurred in connection therewith (including, without limitation,
attorneys' fees and expenses), arising directly or indirectly, in
whole or in part, from (a) the presence of any Hazardous Substances
on, under or from its Property, whether prior to or during the term
hereof, (b) any activity carried on or undertaken on or off its
Property, whether prior to or during the term hereof, and whether
by any Related Person or any predecessor in title, employee, agent,
contractor or subcontractor of any Related Person or any
predecessor in title, or any third Persons at any time occupying or
present on such Property, in connection with the handling,
treatment, removal, storage, decontamination, cleanup,
transportation or disposal of any Hazardous Substances at any time
located or present on or under such Property, or (c) any residual
contamination on or under the Property of any Related Person or any
Property of any other Person, or affecting any natural resources,
and to any contamination of any Property or natural resources
arising in connection with the generation, use, handling, storage,
transportation or disposal of any Hazardous Substances,
irrespective of whether any of such activities were or will be
undertaken in accordance with applicable Requirements of Law,
INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING ARISING FROM
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, ON THE PART OF LENDER; with
the foregoing indemnity surviving satisfaction of all Obligations
and the termination of this Agreement, provided that such indemnity
shall not extend to any act or omission by Lender with respect to
any Property subsequent to Lender becoming the owner of such
Property and with respect to which Property such claim, loss,
damage, liability, fine, penalty, charge, proceeding, order,
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judgment, action or requirement arises subsequent to the
acquisition of title thereto by Lender.
5.14 Maintenance of Corporate Existence and Good Standing.
Each Related Person will maintain its corporate existence or
qualification and good standing in its jurisdiction of
incorporation and in all jurisdictions wherein the Property now
owned or hereafter acquired or business now or hereafter conducted
necessitates same, unless the failure to do so would not have a
Material Adverse Effect.
5.15 Further Assurances. Each Related Person will promptly
cure any defects in the execution and delivery of any of the Loan
Documents and all agreements contemplated thereby, and execute,
acknowledge and deliver such other assurances and instruments as
shall, in the reasonable opinion of Lender, be necessary to fulfill
the terms of the Loan Documents.
5.16 Agreement to Deliver Security Instruments. Each Related
Person agrees to deliver, to further secure the Obligations
whenever requested by Lender in its sole and absolute discretion,
deeds of trust, mortgages, chattel mortgages, security agreements,
financing statements and other Security Instruments in form and
substance satisfactory to Lender for the purpose of granting,
confirming, and perfecting first and prior liens or security
interests in any real or personal property now owned or hereafter
acquired by any of the Related Persons. Each Related Person also
agrees to deliver, whenever requested by Lender in order to confirm
the Oil and Gas Reserves, favorable title opinions from legal
counsel acceptable to Lender with respect to such Related Person's
properties and interests designated by Lender, based upon abstract
or record examinations to dates acceptable to Lender and (a)
stating that such Related Person has good and indefeasible title to
such properties and interests, free and clear of other than
Permitted Liens, (b) confirming that such properties and interests
are subject to Security Instruments securing the Obligations that
constitute and create legal, valid and duly perfected first deed of
trust or mortgage liens in such properties and interests and first
priority assignments of and security interests in the oil and gas
attributable to such properties and interests and the proceeds
thereof, and (c) covering such other matters as Lender may
reasonably request. Within 15 days after the date of this
Agreement, the Related Persons will satisfy those requirements and
cure those defects relating to the Oil and Gas Properties that have
been specified to Borrower in writing by Lender's counsel prior to
the date of this Agreement.
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5.17 Initial Fees and Expenses. Each Related Person will
promptly pay directly, on behalf of Lender, all out of pocket costs
and expenses of Lender, including without limitation, reasonable
fees and expenses of Thompson & Knight, special counsel to Lender,
and Donovan, Leisure, Newton & Irvine, special New York counsel to
Lender, in connection with the negotiation, preparation, execution
and delivery of this Agreement and all documentation contemplated
hereby, the satisfaction of the conditions precedent set forth
herein and the consummation of the transactions contemplated in
this Agreement.
5.18 Expenses. The Related Persons, jointly and severally,
agree to pay or reimburse Lender for paying: (a) all reasonable
out-of-pocket costs and expenses of Lender (including, without
limitation, the reasonable fees and expenses of counsel,
environmental consultants, insurance consultants and other
professionals retained by Lender) in connection with (i) any
amendment, modification or waiver of any of the terms of this
Agreement or any of the other Loan Documents requested by the
Related Persons or required to preclude the Related Persons from
being in Default; (b) all reasonable costs and expenses of Lender
(including reasonable counsel fees) in connection with (i) any
Default and any enforcement or collection proceedings resulting
therefrom and (ii) the enforcement of this Section 5.18; (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 of the other Loan Documents, Dresser-Rand
Contracts or any other documents referred to herein or therein and
all costs, expenses, taxes, assessments and other charges incurred
in connection with any filing, registration, recording or
perfection of any Lien contemplated by this Agreement or any other
Loan Document or any other document referred to herein or therein;
and (d) all reasonable out-of-pocket third-party costs of
engineers, environmental or any other consultants and agents
incurred in connection with this Agreement or the Loan Documents.
In addition to the foregoing, until all Obligations to Lender have
been paid in full, the Related Persons will also pay or reimburse
Lender for paying all reasonable out-of-pocket costs and expenses
of Lender or its agents or employees in connection with the
continuing administration of the Loans and the related due
diligence of Lender, including, without limitation, travel and
miscellaneous expenses and fees and expenses of Lender's outside
counsel, reserve engineers and other consultants engaged in
connection with the Loan Documents. The Related Persons hereby
agree to indemnify Lender and its directors, officers, employees
and agents for, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses incurred by any of
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them arising out of or by reason of any investigation or litigation
or other proceedings (including any threatened investigation or
litigation or other proceedings) relating to this Agreement, the
Loan Documents or the Dresser-Rand Contracts, the extensions of
credit hereunder or any actual or proposed use by the Related
Persons of the proceeds of any of the extensions of credit
hereunder, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such
investigation or litigation or other proceedings (but excluding any
such losses, liabilities, claims, damages or expenses incurred
solely by reason of the gross negligence or willful misconduct of
the Person to be indemnified).
5.19 Maintenance of Rigs and Tangible Property. Borrower
will maintain, preserve, protect, and keep each Rig in compliance
with all applicable requirements of the Dresser-Rand Contracts, in
compliance with all applicable laws, rules and regulations, and
otherwise in good, insurable, and seaworthy condition. Each
Related Person will maintain all of its tangible Property in good
repair and condition, ordinary wear and tear excepted, and make all
necessary replacements thereof and operate such Property in a good
and workmanlike manner, except to the extent the failure to do so
would not have a Material Adverse Effect.
5.20 Maintenance of Insurance and Evidence Thereof.
(a) Each Related Person will obtain and continue to
maintain insurance as required by the Security Instruments and
such other insurance with respect to its Properties and
businesses against such liabilities, casualties, risks and
contingencies as is customary in the relevant industry and
sufficient to prevent a Material Adverse Effect (including,
without limitation, Energy, Exploration and Development
coverage, sometimes referred to as "turnkey" insurance, which
"turnkey" insurance shall be maintained in the form and at
least in the dollar amounts currently held by such Related
Person except that coverage under paragraph 1b of Section B
(which relates to drill stem or other equipment stuck in a
well) of such coverage shall be required only to the extent
such coverage is available upon terms reasonably satisfactory
to such Related Person), all such insurance to be in amounts
and from insurers acceptable to Lender, and, upon any renewal
of any such insurance and at other times upon request by
Lender, furnish to Lender evidence, satisfactory to Lender, of
the maintenance of such insurance.
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(b) At all times while the Charter of a Rig is in
effect, Borrower shall comply with the following with respect
to such Rig, and the requirements of this subsection 5.20(b)
shall supersede any conflicting requirements of clauses (i),
(ii), (iv), (v), (vi) and (ix) of Section 15(a) (but not the
other requirements of Section 15) of the First Preferred Fleet
Mortgage during such time.
(i) Borrower shall obtain and maintain all insurance
as set forth in Article XIII of the Charter to be
maintained by the Company as "Owner" and will comply
with all provisions pertaining to insurance in the
Multiparty Agreement.
(ii) Borrower will deliver to Lender promptly after
Borrower's receipt thereof copies of all certificates,
documents and other information between Borrower and
Dresser-Rand relating to insurance, casualties or
claims.
5.21 Inspection of Tangible Assets. Each Related Person will
permit any authorized representative of Lender, following
reasonable prior notice to the Related Persons and during normal
business hours, to visit and inspect any tangible asset of any
Related Person, at the sole risk of Lender, but at the expense of
the Related Persons to the extent of reasonable expenses incurred
by Lender.
5.22 Payment of Notes and Performance of Obligations.
Borrower will pay the Notes according to the reading, tenor and
effect thereof, as modified hereby, and do and perform every act
and discharge all other Obligations.
5.23 Performance of Contracts. Each Related Person will
perform and observe in all material respects each of the provisions
of the Contracts on its part to be performed or observed prior to
the termination thereof, unless and to the extent only that the
same shall be contested in good faith by appropriate action by or
on behalf of any Related Person. The Related Persons will comply
with all terms of the Dresser-Rand Contracts.
5.24 Lockbox and Lockbox Account Arrangement. Upon request
of Lender, each Related Person will execute, maintain in full force
and effect, and comply in all respects with the provisions of such
documentation as may be reasonably required by Lender to establish
the Lockbox and the Lockbox Account (including, without limitation,
a Lockbox Agreement for each Related Person with an attached
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schedule of Lockbox Standard Processing Procedures and an
associated Lockbox Setup Checklist), and direct all account debtors
under the Credit Accounts of each Related Person and all purchasers
of production from the Mortgaged Properties to make remittance to
the Lockbox; provided, however, upon the occurrence of any Default
or Event of Default, access by Related Persons to the Lockbox
Account shall terminate and funds accumulating in the Lockbox
Account shall, subject to the exercise of any remedy available to
Lender upon an Event of Default, be subject to investment, at the
direction of Related Persons and for the account of Related Persons
(with any earnings on any such investment to be deposited in and
added to the balance of the Lockbox Account), in Eligible Cash
Equivalents.
5.25 Gas Imbalances. No Related Person will have any net gas
imbalances, take-or-pay or other prepayments with respect to any
Oil and Gas Properties which would require any such Related Person
to deliver hydrocarbons produced from any Oil and Gas Property at
some future time without then or thereafter receiving full payment
therefor, which would (i) exceed $750,000 in the aggregate for all
Related Persons or (ii) with respect to any individual material
well, exceed the proved developed producing reserves attributable
to such well.
5.26 Dresser-Rand Contracts. Borrower shall not (i) permit
any default under the terms of the Dresser-Rand Contracts, (ii)
waive any of the obligations of the parties thereto, (iii) do any
act which would relieve the parties thereto from their respective
obligations thereunder, or (iv) make any amendments to, or change
orders with respect to, the Dresser-Rand Contracts without the
prior consent of Lender.
5.27 Payment and Performance Bond. Except as permitted
pursuant to Section 6.2(a) hereof, Borrower shall not (i) contract
for any payment or performance bond, nor (ii) permit any
modification, amendment or termination of any payment or
performance bond in any respect, without the prior consent of
Lender.
5.28 Right of Lender to Inspect Rigs. Borrower shall permit
Lender and its representatives and agents to enter upon the Rigs
and to inspect the Rigs and all materials to be used in the
refitting thereof and all books, records, contracts, statements,
invoices, bills, plans and specifications, shop drawings,
appraisals, title and other insurance, reports, lien waivers and
all other instruments and documents of any kind relating to the
refitting, leasing and operation of the Rigs; shall cooperate with
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Lender and its representatives and agents during such inspections
and shall maintain all of the foregoing for such inspections; shall
permit the photographing of any portions of the Rigs or any
materials thereon; and shall, if requested by Lender or its
representatives or agents, move, remove or uncover such materials
or portions of the Rigs as shall be reasonably necessary fully and
completely to inspect the Rigs; provided, however, that this
provision shall not be deemed to impose upon Lender any duty or
obligation whatsoever to undertake such inspections, to correct any
defects in the Rigs or to notify any person with respect thereto.
5.29 Correction of Defects. Borrower shall promptly correct
any structural defect in the Rigs and any violation of any
requirement of any Governmental Authority.
ARTICLE 6
NEGATIVE COVENANTS
To conform with the terms and conditions under which Lender is
willing to have credit outstanding to Borrower and to induce Lender
to enter into this Agreement and make the Loans, each Related
Person jointly and severally warrants and covenants that so long as
this Agreement remains in effect unless agreed in writing by Lender
to the contrary:
6.1 Indebtedness. No Related Person will create, incur,
assume or suffer to exist any Indebtedness other than that
reflected in the financial statements referred to in Section 4.4
above (and renewals and extensions of, but not increases to, such
Indebtedness) whether by way of loan or otherwise; provided,
however, the foregoing restriction shall not apply to (a) the
Obligations, (b) unsecured current accounts payable incurred in the
ordinary course of business, that are not unpaid in excess of 90
days beyond invoice date or are being contested in good faith and
as to which such reserve as is required by GAAP has been made, and
(c) Indebtedness owed to any other Consolidated Group Member.
6.2 Contingent Obligations. No Related Person will create,
incur, assume or suffer to exist any Contingent Obligation other
than that reflected in the financial statements referred to in
Section 4.4 above (and renewals and extensions of, but not
increases to, such Contingent Obligations) provided, however, the
foregoing restriction shall not apply to (a) performance guarantees
and performance, surety or other bonds provided in the ordinary
course of business, (b) trade credit incurred or operating leases
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entered into in the ordinary course of business, (c) guarantees by
the Borrower of the obligations of any joint venture to which any
of the Related Persons or any of their respective Subsidiaries is
a joint venturer or (d) the Obligations (with respect to COG and
CDI); provided, however, with respect to any Contingent Obligations
allowed pursuant to Section 6.2 (c), such obligations must be
related to the types of business currently being conducted by the
Related Persons and such Contingent Obligations may never exceed in
the aggregate $1,000,000.
6.3 Liens. No Related Person will create, incur, assume or
suffer to exist any Lien on any of its Property (now owned or
hereafter acquired); provided, however, the foregoing restrictions
shall not apply to (a) Permitted Liens or (b) Liens provided for in
Exhibit 4.3.
6.4 Sales of Assets. No Related Person will sell, transfer
or otherwise dispose of, in one or any series of transactions
within any 12-month period, assets, whether now owned or hereafter
acquired (including, without limitation, any discount or sale of
Credit Accounts), the higher of the aggregate book value or the
sale price of which for the Consolidated Group exceeds $2,000,000,
or enter into any agreement to do so; provided, however, the
foregoing restriction shall not apply to the sale of hydrocarbons
or inventory in the ordinary course of business, to sales of a Rig
upon exercise by Dresser-Rand of its purchase option under the
Related Charter, or to sales of assets described in Exhibit 6.4.
6.5 Dividends and Distributions. In any fiscal year of the
Consolidated Group, no Related Person will declare, pay or make,
whether in cash or Property of any Related Person or any Subsidiary
of any Related Person, any dividend or distribution on, or
purchase, redeem or otherwise acquire for value, any share of, any
class of its capital stock; provided, however, the foregoing
restriction shall not apply to (i) dividend payments not exceeding
the aggregate amount of $665,000 for any calendar quarter payable
to holders of shares of convertible exchangeable preferred stock of
Borrower outstanding on the Closing Date; provided, however, such
quarterly dividend payments shall not be distributed after the
occurrence of or during the continuance of a Default or an Event of
Default, (ii) redemptions of shares of convertible exchangeable
preferred stock of Borrower outstanding at the Closing Date,
pursuant to Section 7 of the Certificate of Designations of
Borrower dated September 20, 1988 or (iii) the purchase by Borrower
after the Closing Date of up to 80,000 shares of its common
stock $0.01 par value per share in the open market.
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6.6 Changes in Corporate Structure.
6.6.1 Borrower will not issue, sell or otherwise
dispose of any shares of the capital stock of any Guarantor issued
in the name of Borrower such that Borrower would cease to own all
of the outstanding capital stock of all the Guarantors.
6.6.2 CDI will not issue, sell or otherwise dispose of
any shares of the capital stock of any of its Subsidiaries issued
in the name of CDI such that CDI would cease to own all of the
outstanding capital stock of its Subsidiaries.
6.6.3 None of the Related Persons will enter into any
transaction of dissolution or liquidation of the Related Persons or
any Subsidiary of the Related Persons or any sale, transfer, lease
or other disposition of all or any substantial part of the
Property, assets or business of the Related Persons or any
Subsidiary of the Related Persons.
6.6.4 No Related Person will become a party to any
merger or consolidation of any Related Persons, unless any
Subsidiary of Borrower merges into or consolidates with a Related
Person.
6.7 Organization or Acquisition of Subsidiaries. No Related
Person will organize, acquire or agree to acquire in excess of 50%
of the outstanding shares of capital stock of any Person entitled
to vote for the election of directors of any Person unless,
contemporaneously with such acquisition, such Person is merged into
a Related Person in compliance with Section 6.6.4 above or such
Person shall take such actions as necessary, in the reasonable
opinion of Lender to establish itself as a Guarantor.
6.8 Transactions with Affiliates. No Related Person will
directly or indirectly, enter into any transaction (including the
sale, lease or exchange of Property or the rendering of service)
with any of its Affiliates other than the other Related Persons,
except upon fair and reasonable terms no less favorable than could
be obtained in an arm's length transaction with a Person that was
not an Affiliate.
6.9 Payment of Accounts Payable. No Related Person will
allow any account payable to be in excess of 90 days past due,
except such as are being contested in good faith and as to which
such reserve as required by GAAP has been established with respect
thereto or if the failure to pay such account payable would not
have a Material Adverse Effect.
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6.10 Loans or Advances. No Related Person will make or agree
to make or allow to remain outstanding any loans or advances to any
Person in excess of an aggregate of $250,000 at any point in time,
except (a) advances or extensions of credit in the form of accounts
receivable incurred in the ordinary course of business and upon
terms common in the industry for such accounts receivable,
(b) loans, advances or extensions of credit to suppliers or
contractors under applicable contracts or agreements in connection
with oil and gas development activities of any Related Persons, (c)
loans or advances to any other Consolidated Group Member and (d)
other loans and advances that may be approved by Lender from time
to time in its sole discretion.
6.11 Investments. No Related Person will make, agree to make
or suffer to exist any Investment other than (a) that reflected in
the financial statements referred to in Section 4.4. above, (b)
overnight investments of cash at institutions reasonably acceptable
to Lender or (c) Cash Equivalents or other investment vehicles
offered by financial institutions reasonably acceptable to Lender.
6.12 Nature of Business. No Related Person will make or
permit to occur any material change in the nature of its business.
6.13 Exploration Agreement. Except for any agreement solely
extending the term of the Exploration Agreement, notwithstanding
anything in any document to the contrary, no Related Person will
enter into any (i) operating agreement, contract or agreement with
respect to the Exploration Agreement, which has a Material Adverse
Effect or (ii) amendment or modification to the Exploration
Agreement.
6.14 Current Ratio. Related Persons will not permit, at any
time the ratio, on a consolidated basis for the Consolidated
Group, of Consolidated Current Assets to Consolidated Current
Liabilities to be less than 1.2 to 1.0.
6.15 Consolidated Adjusted Equity. Related Persons will not
permit at any time their Consolidated Adjusted Equity to be less
than $75,000,000.
6.16 Funded Debt to Total Capitalization Ratio. Borrower
shall not permit Consolidated Funded Debt as of any date to exceed
55% of Consolidated Total Capitalization. As used in this Section
6.16, "Total Capitalization" shall mean the sum of Consolidated
Funded Debt, par value of preferred stock (if any), par value of
common stock, capital in excess of par value of common and
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preferred stock and retained earnings, less treasury stock (if
any).
6.17 Hedging Contracts. No Related Person will be a party to
or in any manner be liable on any forward, future, swap or hedging
contract, except:
6.17.1 contracts entered into by Borrower with the
purpose and effect of fixing interest rates on a principal amount
of indebtedness of the Related Persons that is accruing interest at
a variable rate, provided that (i) the aggregate notional amount of
such contracts never exceeds seventy-five percent (75%) of the
anticipated outstanding principal balance of the indebtedness to be
hedged by such contracts or an average of such principal balances
calculated using a generally accepted method of matching interest
swap contracts to declining principal balances, (ii) the floating
rate index of each such contract generally matches the index used
to determine the floating rates of interest on the corresponding
indebtedness to be hedged by such contract and (iii) each such
contract is with a counterparty or has a guarantor of the
obligation of the counterparty who (unless such counterparty is
Agent, any Lender or one of their respective Affiliates) at the
time the contract is made has long-term obligations rated A or A2
or better, respectively, by Standard & Poor's Corporation or
Moody's Investors Services, Inc. (or a successor credit rating
agency).
6.17.2 contracts entered into with the purpose and
effect of fixing prices on oil and/or gas expected to be produced
by the Related Persons, provided that at all times: (i) no such
contract fixes a price for a term more than twelve (12) months;
(ii) the aggregate monthly production covered by all such contracts
settled on a monthly basis, by a monthly proration acceptable to
Lender for any single month does not in the aggregate exceed
eighty-five percent (85%) of the Related Persons' aggregate
Projected Oil and Gas Production anticipated to be sold in the
ordinary course of the Related Persons' businesses for such month,
(iii) no such contact requires any Related Person to put up money,
assets, letters of credit or other security against the event of
its nonperformance prior to actual default by such Related Person
in performing its obligations thereunder and (iv) each such
contract shall be with a counterparty or have a guarantor of the
obligation of the counterparty who (unless such counterparty is
Lender or one of its affiliates) at the time the contract is made
has long-term obligations rated AA or Aa2 or better, respectively,
by Standard & Poor's Corporation or Moody's Investors Services,
Inc. ( or a successor credit rating agency). As used herein, the
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term "Projected Oil and Gas Production" means the projected
production of oil and/or gas (measured by volume unit or BTU
equivalent, not sales price) for the term of the contracts or a
particular month, as applicable, from properties and interests
owned by any Related Person which are located in or offshore of the
United States and which have attributable to them provided oil or
gas reserves and, with respect to Borrower, as reflected in the
most recent report delivered pursuant to Section 5.5, after
deducting projected production from any properties or interests
sold or under contract for sale that had been included in such
report and after adding projected production from any properties or
interests owned by Borrower that had not been reflected in such
report but that are reflected in a separate or supplemental report
meeting the requirements of such Section 5.5 and otherwise
satisfactory to Lender.
6.17.3 contracts entered into by a Related Person with
the purpose and effect of fixing currency exchange rates between
U.S. dollars and one or more foreign currencies in which a Related
Person will be receiving or making payments, provided that (i) the
aggregate notional amount of such contracts never exceeds 85% of
the anticipated payments to be hedged by such contracts and (ii)
the obligation of the counterparty who (unless such counterparty is
Lender or one of its affiliates) at the time the contract is made
has long-term obligations rated A or A2 or better, respectively, by
Standard & Poor's Corporation or Moody's Investors Services, Inc.
(or a successor credit rating agency).
ARTICLE 7
EVENTS OF DEFAULT
7.1 Enumeration of Events of Default. Any of the following
events shall constitute an Event of Default as that term is used
herein:
7.1.1 default shall be made in the payment when due of
any installment of principal or interest under this Agreement or
the Notes or in the payment when due of any Commitment Fee or
Letter of Credit Fee or any other Obligation and, with respect to
the payment of interest on the Revolving Credit Note or principal
or interest on the Term Note, such default shall continue for one
Business Day;
7.1.2 default shall be made in the due observance or
performance of Sections 6.1, 6.4, 6.5, 6.6, 6.7, 6.10, 6.11, 6.15
and 6.16.
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7.1.3 there shall exist a default under or an Event of
Default as defined in any Loan Document or default shall be made by
any Related Persons in the due observance or performance of any
agreement contained in any of the Loan Documents (other than as
specified in Sections 7.1.1 and 7.1.2) and such default or Event of
Default shall continue for 30 days after the earlier of notice
thereof to the Related Persons by Lender or actual knowledge
thereof by a Responsible Officer of the Related Persons.
7.1.4 any representation or warranty made by any
Related Persons in any of the Loan Documents, including, without
limitation, any Notice of Revolving Credit Borrowing proves to have
been untrue in any material respect or any representation,
statement (including Financial Statements), certificate or data
furnished or made to Lender in connection herewith proves to have
been untrue in any material respect as of the date the facts
therein set forth were stated or certified;
7.1.5 default shall be made by any Related Person (as
principal or guarantor or other surety) in the payment or
performance of any bond, debenture, note or other evidence of
Indebtedness the amount of which exceeds $100,000 or under any
credit agreement, loan agreement, indenture, promissory note or
similar agreement or instrument executed in connection with any of
the foregoing, and such default shall remain unremedied for in
excess of the period of grace, if any, with respect thereto, except
such as is being contested in good faith and as to which such
reserve as is required by GAAP has been made;
7.1.6 any Related Person shall (i) apply for or consent
to the appointment of a receiver, trustee or liquidator of it or
all or a substantial part of its assets, (ii) file a voluntary
petition commencing an Insolvency Proceeding, (iii) make a general
assignment for the benefit of creditors, (iv) be unable, or admit
in writing its inability, to pay its debts generally as they become
due, or (v) file an answer admitting the material allegations of a
petition filed against it in any Insolvency Proceeding;
7.1.7 an order, judgment or decree shall be entered
against any Related Person by any court of competent jurisdiction
or by any other duly authorized authority, on the petition of a
creditor or otherwise, granting relief in any Insolvency Proceeding
or approving a petition seeking reorganization or an arrangement of
its debts or appointing a receiver, trustee, conservator, custodian
or liquidator of it or all or any substantial part of its assets
and such order, judgment or decree shall not be dismissed or stayed
within 60 days;
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7.1.8 any levy, execution, garnishment, attachment,
sequestration or other writ or similar proceeding against any
material portion of the Property of any Related Person that is not
permanently dismissed, discharged or stayed within 60 days after
the levy;
7.1.9 a final and non-appealable order, judgment or
decree shall be entered against any Related Person for money
damages and/or Indebtedness due in an amount in excess of $200,000
and such order, judgment or decree shall not be satisfied,
dismissed or stayed within 60 days;
7.1.10 any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan; any "accumulated funding deficiency"
(as defined in Section 302 of ERISA), whether or not waived, shall
exist with respect to any Plan for which an excise tax is due or
would be due in the absence of a waiver; a Reportable Event shall
occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer
or to terminate, any Single Employer Plan, which Reportable Event
or commencement of proceedings or appointment of a trustee is, in
the reasonable opinion of Lender, likely to result in the
termination of such Plan for purposes of Title IV of ERISA; any
Single Employer Plan shall terminate for purposes of Title IV of
ERISA; any Related Person or Commonly Controlled Entity shall incur
or, in the reasonable opinion of Lender, be likely to incur any
liability in connection with a withdrawal from, or the Insolvency
or Reorganization of, a Multiemployer Plan; or any other event or
condition shall occur or exist with respect to a Plan and the
result of such events or conditions referred to in this subsection
7.1.10 could subject any Related Person or Commonly Controlled
Entity to any tax (other than an excise tax under Section 4980 of
the Code), penalty or other liabilities which taken in the
aggregate would exceed $100,000 and any such circumstance shall
exist for in excess of 90 days;
7.1.11 any charges are filed or any other action or
proceeding is instituted by any Governmental Authority against any
Related Person under the Racketeering Influence and Corrupt
Organizations Statute (18 U.S.C. Section 1961 et seq.), the result of
which could be the forfeiture or transfer of any material Property
of any Related Person subject to a Lien pursuant to the Security
Instruments without (i) satisfaction or provision for satisfaction
of such Lien, or (ii) such forfeiture or transfer of such Property
being expressly made subject to such Lien;
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7.1.12 any Related Person fails to duly observe,
perform or comply with any covenant, agreement or provision of any
Dresser-Rand Contract, and such failure is not remedied within any
applicable period of grace provided for in such Dresser-Rand
Contract, or any representation or warranty made by or on behalf of
any Related Person in connection with any Dresser-Rand Contract
shall prove to have been false or incorrect in any material respect
on any date on or as of which made, or any Loan Document or
Dresser-Rand Contract at any time ceases to be valid, binding and
enforceable against the Related Persons or Dresser-Rand (to the
extent they are parties thereto) in accordance with the terms
thereof for any reason other than its release or subordination by
Lender, or any Related Person or any other party to any Dresser-
Rand Contract shall assert in writing that any Dresser-Rand
Contract is not valid, binding and enforceable;
7.1.13 any Related Person shall have (i) concealed,
removed or diverted, or permitted to be concealed, removed or
diverted, any part of its Property, with intent to hinder, delay or
defraud its creditors or any of them; (ii) made or suffered a
transfer of any of its Property that is fraudulent under any
bankruptcy, fraudulent conveyance or similar law; (iii) made any
transfer of its Property to or for the benefit of a creditor at a
time when other creditors similarly situated have not been paid; or
(iv) shall have suffered or permitted, while insolvent, any
creditor to obtain a Lien upon any of its Property through legal
proceedings or distraint that is not vacated within 90 days from
the date thereof;
7.1.14 any Security Instrument shall for any reason
(other than the failure of the title of any Related Person in the
Property covered thereby) fail or cease to create valid and
perfected first priority Lien against the Collateral purportedly
covered thereby, subject only to Permitted Liens, and such failure
shall continue for 30 days after the earlier of notice thereof to
such Related Person by Lender or knowledge thereof by any
Responsible Officer of such Related Person; or
7.1.15 the occurrence of a Material Adverse Effect and
the same shall remain unremedied for in excess of 30 days after
notice given by Lender.
7.1.16 either (i) any person (with the defined meaning
as used in Section 13(d) of the Securities Exchange Act of 1934, as
amended, or any successor provision) or group of persons acting in
concert as a partnership or other group (a "Group of Persons"),
shall become the beneficial owner (as defined in Rule 13d-3 under
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the Securities Exchange Act of 1934, as amended, or any successor
provision) of more than 50% of Borrower's common stock or (ii)
during any period of two consecutive years (A) the members of the
board of directors of the Company (the "Board") as of December 31,
1993, (B) any director elected thereafter in any annual meeting of
the stockholders of Borrower upon the recommendation of the Board,
and (C) any other member of the Board who will be recommended or
elected to succeed those Persons described in subclauses (A) and
(B) of this clause (ii) by a majority of such Persons who are then
members of the Board, cease for any reason to constitute
collectively a majority of the Board then in office, or (iii) the
direct or indirect sale, lease, exchange or other transfer of all
or substantially all of the assets of Borrower to any Person or
Group of Persons.
7.2 Remedies. Upon the occurrence with respect to Borrower
of an Event of Default specified in Sections 7.1.6 or 7.1.7, the
aggregate principal amount of all Obligations then outstanding
hereunder and the interest accrued thereon shall automatically
become immediately due and payable; upon the occurrence of any
other Event of Default, Lender may declare the aggregate principal
amount of all Obligations then outstanding hereunder and the
interest accrued thereon immediately due and payable. In either
case, the entire principal balance of the Obligations and all
accrued interest thereon shall thereupon become immediately due and
payable, without notice (including, without limitation, notice of
intent to accelerate maturity or notice of acceleration of
maturity) and without presentment, demand, protest, notice of
protest or other notice of default or dishonor of any kind, except
as provided to the contrary elsewhere herein, all of which are
hereby expressly waived by each Related Person.
ARTICLE 8
MISCELLANEOUS
8.1 Transfers and Participations. Lender may, at any time,
grant participations in, sell, transfer or assign, the Obligations
or any portion thereof; and Lender may forward to each Transferee
and prospective Transferee all documents and information relating
to such Obligations, whether furnished by the Related Persons or
otherwise obtained, as Lender determines necessary or desirable.
The Related Persons agree that each Transferee other than a
participant, regardless of the nature of any transfer to it, may
exercise all rights (including, without limitation, rights of set-
off) with respect to the portion of the Obligations held by it as
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fully as if such Transferee were the direct holder thereof, subject
to any agreements between such Transferee and the transferor to
such Transferee.
8.2 Survival of Representations, Warranties and Covenants.
All representations and warranties of the Related Persons and all
covenants and agreements herein made shall survive the execution
and delivery of the Notes and the Security Instruments and shall
remain in force and effect so long as any Obligation is
outstanding.
8.3 Notices and Other Communications. Except as to verbal
or facsimile notices expressly authorized herein, which verbal or
facsimile notices shall be confirmed in writing, all notices,
requests and communications hereunder shall be in writing
(including by facsimile). Unless otherwise expressly provided
herein, any such notice, request, demand or other communication
shall be deemed to have been duly given or made when delivered by
hand, or, in the case of delivery by mail, deposited in the mail,
certified mail, return receipt requested, postage prepaid, or, in
the case of facsimile notice, when sent and telephonic or other
confirmation received, addressed as follows:
(a) if to Lender, to:
Internationale Nederlanden (U.S.) Capital
Corporation
135 East 57th Street
New York, New York 10022-2101
Attention: Trond Rokholt
Vice President
Telecopy No: (212) 832-3616
(b) if to Related Persons, to:
Cliffs Drilling Company
Cliffs Oil and Gas Company
Cliffs Drilling International, Inc.
c/o Cliffs Drilling Company
300 Citicorp Center
1200 Smith Street
Houston, Texas 77002
Attention: Edward A. Guthrie
Vice President - Finance
Telecopy No: (713) 951-0649
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Any party may, by proper written notice hereunder to the
others, change the individuals or addresses to which such notices
to it shall thereafter be sent.
8.4 Parties in Interest. Subject to the restrictions on
changes in corporate structure set forth in Section 6.6 and other
applicable restrictions contained herein, all covenants and
agreements herein contained by or on behalf of Related Persons or
Lender shall be binding upon and inure to the benefit of Related
Persons or Lender, as the case may be, and their respective
successors and assigns.
8.5 Renewals and Extensions. All provisions of this
Agreement relating to the Notes shall apply with equal force and
effect to each promissory note hereafter executed that in whole or
in part represents a renewal or extension of any part of the
Indebtedness of Related Persons under this Agreement, the Notes or
any of the other Loan Documents.
8.6 No Waiver, Rights Cumulative. No course of dealing on
the part of Lender, its officers or employees, nor any failure or
delay by Lender with respect to exercising any of its rights under
any Loan Document shall operate as a waiver thereof. The rights of
Lender under the Loan Documents shall be cumulative and the
exercise or partial exercise of any such right shall not preclude
the exercise of any other right. No advance of a Loan or issuance
of a Letter of Credit hereunder shall constitute a waiver of any of
the covenants, warranty or conditions of Related Persons contained
herein. In the event Related Persons are unable to satisfy any
such covenant, warranty or condition, no such advance or issuance
of a Letter of Credit shall have the effect of precluding Lender
from thereafter declaring such inability to be an Event of Default
as hereinabove provided.
8.7 Incorporation of Exhibits. The Exhibits attached to
this Agreement are incorporated herein and shall be considered a
part of this Agreement for all purposes.
8.8 Survival Upon Unenforceability. In the event any one or
more of the provisions contained in any of the Loan Documents or in
any other instrument referred to herein or executed in connection
with the Obligations shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision
of any Loan Document or of any other instrument referred to herein
or executed in connection with such Obligations.
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8.9 Rights of Third Parties. All provisions herein are
imposed solely and exclusively for the benefit of Lender and
Related Persons. No other Person shall have standing to require
satisfaction of such provisions in accordance with their terms, and
any or all of such provisions may be freely waived in whole or in
part by Lender at any time if in its sole discretion it deems it
advisable to do so.
8.10 Amendments or Modifications. Neither this Agreement nor
any provision hereof may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge
or termination is sought.
8.11 Agreement Construed as Entirety. This Agreement, for
convenience only, has been divided into Articles and Sections and
it is understood that the rights and other legal relations of the
parties hereto shall be determined from this instrument as an
entirety and without regard to the aforesaid division into Articles
and Sections and without regard to headings prefixed to such
Articles or Sections.
8.12 Events and Circumstances Not Reducing or Discharging the
Related Person's Liability. Related Persons hereby consent and
agree to each of the following to the fullest extent permitted by
law, and agree that Related Persons' liability under this Agreement
and the Notes or the other Loan Documents, as the case may be,
shall not be released, diminished, impaired, reduced or adversely
affected by any of the following, and waive any rights (including
without limitation rights to notice) that Related Persons might
otherwise have as a result of or in connection with any of the
following:
8.12.1 Modifications, etc. Any renewal, extension,
modification, increase, decrease, reissuance, replacement,
alteration or rearrangement of all or any part of the Obligations,
including, without limitation, the Notes, this Agreement or any
other Loan Documents, or any contract or understanding between any
Related Person and Lender or any other Person, pertaining to the
Obligations;
8.12.2 Adjustment, etc. Any adjustment, indulgence,
forbearance or compromise that might be granted or given by Lender
to any Related Person or any other Person liable on the
Obligations;
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8.12.3 Condition of any Related Person. The
insolvency, bankruptcy arrangement, adjustment, composition,
liquidation, reorganization, disability, dissolution or lack of
power of any Related Persons or any other Person at any time liable
for the payment of all or part of the Obligations; or any
dissolution of any Related Persons or any other such Person so
liable, or any sale, lease or transfer of any or all of the assets
of any Related Person or any other such Person so liable;
8.12.4 Release of Obligors. Any full or partial
release of the liability of any Related Person on the Obligations
or any part thereof, it being recognized, acknowledged and agreed
by Related Persons that a Related Person may be required to pay the
Obligations in full without assistance or support of any other
Person;
8.12.5 Other Security. The taking or accepting of any
other security, collateral or guaranty, or other assurance of
payment, for all or any part of the Obligations;
8.12.6 Release of Collateral, etc. Any release,
surrender, exchange, subordination, deterioration, waste, loss or
impairment (including without limitation negligent, willful,
unreasonable or unjustifiable impairment) of any collateral,
property or security, at any time existing in connection with, or
assuring or securing payment of, all or any part of the
Obligations;
8.12.7 Care and Diligence. The failure of Lender or
any other Person to exercise diligence or reasonable care in the
preservation, protection, enforcement, sale or other handling or
treatment of all or any part of the Collateral;
8.12.8 Status of Liens. The fact that any collateral,
security, security interest or Lien contemplated or intended to be
given, created or granted as security for the repayment of the
Obligations shall not be properly perfected or created, or shall
prove to be unenforceable or subordinate to any other security
interest or Lien, it being recognized and agreed by the Related
Person that Related Persons are not entering into this Agreement in
reliance on, or in contemplation of the benefits of, the validity,
enforceability, collectability or value of any of the collateral
for the Obligations;
8.12.9 Payments Rescinded. Any payment by any Related
Person to Lender is held to constitute a preference under
bankruptcy laws, or for any reason Lender is required to refund
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such payment or pay such amount to any Related Person or someone
else; or
8.12.10 Other Actions Taken or Omitted. Any other
action taken or omitted to be taken with respect to this Agreement,
the Notes, the other Loan Documents, the Obligations or the
security and collateral therefor, whether or not such action or
omission prejudices any Related Person or increases the likelihood
that the Related Person will be required to pay the Obligations
pursuant to the terms hereof; it being the unambiguous and
unequivocal intention of any Related Person that each Related
Person shall be obligated to pay the Obligations when due,
notwithstanding any occurrence, circumstance, event, action, or
omission whatsoever, whether contemplated or uncontemplated, and
whether or not otherwise or particularly described herein, except
for the full and final payment and satisfaction of the Obligations.
8.13 Time of Essence. Time is of the essence of this
Agreement and of each provision hereof.
8.14 Disposition of Collateral. Notwithstanding any term or
provision, express or implied, in any of the Security Instruments,
the realization, liquidation, foreclosure or any other disposition
on or of any or all of the Collateral shall be in the order and
manner and determined in the sole discretion of Lender; provided,
however, that in no event shall Lender violate applicable law or
exercise rights and remedies other than those provided in such
Security Instruments or otherwise existing at law or in equity.
8.15 Limitation on Interest. Lender, the Related Persons and
the other parties to the Loan Documents intend to contract in
strict compliance with applicable usury law from time to time in
effect. In furtherance thereof such persons stipulate and agree
that none of the terms and provisions contained in the Loan
Documents shall ever be construed to provide for interest in excess
of the maximum amount of interest permitted to be charged by
applicable law from time to time in effect. Neither any Related
Person nor any present or future guarantors, endorsers, or other
Persons hereafter becoming liable for payment of any Obligation
shall ever be liable for unearned interest thereon or shall ever be
required to pay interest thereon in excess of the maximum amount
that may be lawfully charged under applicable law from time to time
in effect, and the provisions of this section shall control over
all other provisions of the Loan Documents which may be in conflict
or apparent conflict herewith.
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8.16 GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE OTHER
LOAN DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK (OTHER THAN THE CONFLICT OF LAW PRINCIPLES
THEREOF) AND THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT TO
THE EXTENT THAT THE LAWS OF ANOTHER JURISDICTION ARE EXPRESSLY
ELECTED IN A LOAN DOCUMENT.
8.17 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH
RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT
OF, RELATED TO OR FROM THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN
DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF
LENDER, IN COURTS HAVING SITUS IN NEW YORK CITY, NEW YORK. THE
RELATED PERSONS HEREBY SUBMIT TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURT LOCATED IN NEW YORK CITY, NEW YORK AND
HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRANSFER OR CHANGE THE
JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY
LENDER IN ACCORDANCE WITH THIS SECTION 8.20. IN FURTHERANCE
THEREOF, THE RELATED PERSONS AND LENDER EACH HEREBY ACKNOWLEDGE AND
AGREE THAT IT WILL NOT BE INCONVENIENT NOR UNFAIR TO LITIGATE OR
OTHERWISE RESOLVE ANY DISPUTES OR CLAIMS RELATING TO THIS AGREEMENT
OR ANY LOAN DOCUMENT IN ANY COURT SITTING IN NEW YORK CITY, NEW
YORK.
EACH RELATED PERSON HEREBY IRREVOCABLY DESIGNATES CT
CORPORATION SYSTEM LOCATED AT 1633 BROADWAY NEW YORK, NEW YORK,
10019, AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, FOR AND ON
ITS BEHALF, ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS. IT IS UNDERSTOOD
THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY
FORWARDED BY OVERNIGHT COURIER TO THE RELATED PERSON AT ITS ADDRESS
FOR NOTICE PURSUANT TO SECTION 8.3, BUT THE FAILURE OF THE RELATED
PERSONS TO RECEIVE SUCH COPY SHALL NOT EFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS. EACH RELATED PERSON FURTHER IRREVOCABLY
CONSENTS TO SERVICE OF PROCESS BY ANY COURTS HAVING SITUS IN NEW
YORK CITY, NEW YORK IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO IT AT SAID ADDRESS, SUCH SERVICE TO BE EFFECTIVE 30 DAYS AFTER
SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE RELATED
PERSONS, THE LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW.
8.18 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF
THE RELATED PERSONS AND LENDER HEREBY (a) IRREVOCABLY WAIVES, TO
THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN
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DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (b) IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; (c) CERTIFIES THAT NO PARTY HERETO NOR
ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS, AND (d) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS
SECTION.
8.19 AGREEMENT SUPERSEDING. THIS AGREEMENT CONSTITUTES THE
ENTIRE AGREEMENT OF THE PARTIES HERETO WITH RESPECT TO THE SUBJECT
HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES
HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF.
FURTHERMORE IN THIS REGARD, THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT, COLLECTIVELY, 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 UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
8.20 Restatement. This Agreement restates and amends the
Original Agreement in its entirety, effective as of the Closing
Date, and all of the terms and provisions hereof shall supersede
the terms and provisions thereof.
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IN WITNESS WHEREOF, this Second Restated Credit Agreement is
deemed executed effective as of the date first above written.
Borrower:
CLIFFS DRILLING COMPANY
By: /s/ EDWARD A. GUTHRIE
----------------------------
Edward A. Guthrie
Vice President - Finance
Guarantors:
CLIFFS OIL AND GAS COMPANY
By: /s/ EDWARD A. GUTHRIE
----------------------------
Edward A. Guthrie
Vice President - Finance
CLIFFS DRILLING INTERNATIONAL, INC.
By: /s/ EDWARD A. GUTHRIE
----------------------------
Edward A. Guthrie
Vice President - Finance
Lender:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/ TROND ROKHOLT
----------------------------
Trond Rokholt
Vice President
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EXHIBIT 1.8
REVOLVING CREDIT NOTE
$20,000,000 New York, New York March 28, 1994
FOR VALUE RECEIVED, the undersigned, CLIFFS DRILLING COMPANY,
a Delaware corporation (herein called "Borrower"), hereby promises
to pay to the order of INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL
CORPORATION (herein called "Lender"), the principal sum of Twenty
Million Dollars ($20,000,000) or, if less, the aggregate unpaid
principal amount of the Revolving Credit Loans outstanding under
this Note by Lender to Borrower pursuant to the terms of the Credit
Agreement (as hereinafter defined), together with interest on the
unpaid principal balance thereof as hereinafter set forth, both
principal and interest payable as herein provided in lawful money
of the United States of America at the New York Branch of Lender,
135 East 57th Street, New York, New York or at such other place as
from time to time may be designated by the holder of this Note.
This Note (a) is issued and delivered under that certain
Second Restated Credit Agreement of even date herewith among
Borrower, Cliffs Oil and Gas Company, Cliffs Drilling
International, Inc., and Lender (herein, as from time to time
supplemented, amended or restated, called the "Credit Agreement"),
and is the Revolving Credit Note as defined therein, (b) is subject
to the terms and provisions of the Credit Agreement, which contains
provisions for payments and prepayments hereunder and acceleration
of the maturity hereof upon the happening of certain stated events,
and (c) is secured by and entitled to the benefits of certain
Security Instruments (as identified and defined in the Credit
Agreement). Payments on this Note shall be made and applied as
provided herein and in the Credit Agreement. Reference is hereby
made to the Credit Agreement for a description of certain rights,
limitations of rights, obligations and duties of the parties hereto
and for the meanings assigned to terms used and not defined herein
and to the Security Instruments for a description of the nature and
extent of the security thereby provided and the rights of the
parties thereto. This Note is given in renewal, extension and
restatement of (but not in extinguishment or novation of) that
certain promissory note dated December 23, 1993, made by Borrower
payable to the order of Lender (the "Original Revolving Credit
Note") in the stated principal amount of $15,000,000 and certain
other indebtedness described therein.
For the purpose of this Note, the following terms have the
meanings assigned to them below:
"Base Rate Payment Date" means (i) the last day of each
<PAGE> 92
calendar quarter, beginning March 31, 1994, and (ii) any day on
which past due interest or principal is owed hereunder and is
unpaid. If the terms hereof or of the Credit Agreement provide -
that payments of interest or principal hereon shall be deferred
from one Base Rate Payment Date to another day, such other day
shall also be a Base Rate Payment Date.
"Maximum Rate" means at the particular time in question the
maximum rate of interest which, under applicable law, may then be
charged on this Note. If such maximum rate of interest changes
after the date hereof, the Maximum Rate shall be automatically
increased or decreased, as the case may be, without notice to
Borrower from time to time as of the effective time of each change
in such maximum rate.
The principal amount of this Note, together with all interest
accrued hereon, shall be due and payable in full on January 1,
1996.
The Base Rate Portion of the Revolving Credit Loans (exclusive
of any past due principal or interest) from time to time
outstanding shall bear interest on each day outstanding at the Base
Rate in effect on such day. On each Base Rate Payment Date
Borrower shall pay to the holder hereof all unpaid interest which
has accrued on the Base Rate Portion to but not including such Base
Rate Payment Date. Each Fixed Rate Portion of the Revolving Credit
Loan (exclusive of any past due principal or interest) from time to
time outstanding shall bear interest on each day during the related
Interest Period at the related Fixed Rate in effect on such day.
On each Fixed Rate Payment Date relating to such Fixed Rate Portion
Borrower shall pay to the holder hereof all unpaid interest which
has accrued on such Fixed Rate Portion to but not including such
Fixed Rate Payment Date. All past due principal of and past due
interest on the Revolving Credit Loan shall bear interest on each
day outstanding at the Default Rate in effect on such day, and such
interest shall be due and payable daily as it accrues. Notwithstanding
the foregoing provisions of this paragraph, if at any time the rate at
which interest is payable on this Note (considering together all portions
of the Revolving Credit Loan and the interest payable thereon) exceeds the
Maximum Rate, this Note shall bear interest at the Maximum Rate only but
shall continue to bear interest at the Maximum Rate until such time as the
total amount of interest accrued hereon equals (but does not exceed) the
total amount of interest which would have accrued hereon had there been
no Maximum Rate applicable hereto.
Notwithstanding the foregoing paragraph and all other
provisions of this Note, in no event shall the interest payable
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hereon, whether before or after maturity, exceed the maximum
interest which, under applicable law, may be charged on this Note,
and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully set out the limitations on how
interest accrues hereon.
If this Note is placed in the hands of an attorney for
collection after default, or if all or any part of the indebtedness
represented hereby is proved, established or collected in any court
or in any bankruptcy, receivership, debtor relief, probate or other
court proceedings, Borrower and all endorsers, sureties and
guarantors of this Note jointly and severally agree to pay
reasonable attorneys' fees and collection costs to the holder
hereof in addition to the principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this
Note hereby severally waive demand, presentment, notice of demand
and of dishonor and nonpayment of this Note, protest, notice of
protest, notice of intention to accelerate the maturity of this
Note, declaration or notice of acceleration of the maturity of this
Note, diligence in collecting, the bringing of any suit against any
party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this
Note or in any of its terms, provisions and covenants, or any
releases or substitutions of any security, or any delay, indulgence
or other act of any trustee or any holder hereof, whether before or
after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE
EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE FEDERAL
LAW.
CLIFFS DRILLING COMPANY
By:
------------------------------
Edward A. Guthrie
Vice President - Finance
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