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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 23, 1996
CLIFFS DRILLING COMPANY
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-16703 76-0248934
(Commission File Number) (I.R.S. Employer Identification No.)
1200 SMITH STREET, SUITE 300
HOUSTON, TEXAS 77002
(Address of Principal Executive Offices) (Zip Code)
(713) 651-9426
(Registrant's Telephone Number, Including Area Code)
(Exhibit Index Located on Page 5)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 23, 1996, Cliffs Drilling Company (the "Company") completed the
transactions associated with the Acquisition Agreement ("Agreement") dated as
of May 13, 1996 by and among Southwestern Offshore Corporation
("Southwestern"), Viking Supply Ships A.S. ("Viking"), Ocean Master III Inc.
("Ocean"), Production Partner Inc. ("Partner"), Trivium Investments Limited
("Trivium") (Southwestern, Viking, Ocean, Partner and Trivium being
collectively referred to herein as "Seller"), Helge Ringdal, the Company,
Cliffs Drilling Asset Acquisition Company ("Newco") and Cliffs Drilling Merger
Company ("Merger Sub") (the Company, Newco and Merger Sub being collectively
referred to herein as "Buyer").
Newco purchased certain of the assets of Seller, including among other things,
6 jack-up drilling rigs by direct purchase from Viking, one jack-up drilling
rig by purchase from Ocean, one jack-up drilling rig by purchase from Partner,
an interest in one jack-up drilling rig by way of the acquisition of all of the
outstanding common stock of Viking Trinidad Limited, a venturer in the
rig-owning joint venture entity, and the acquisition of certain other operating
assets of Seller. Merger Sub acquired one jack-up drilling rig from Trivium by
way of the merger of Trivium with and into Merger Sub. The assets acquired from
the Seller are hereinafter referred to as the "Southwestern Rigs." Newco has
changed its name to "Southwestern Offshore Corporation" and will acquire the
jack-up drilling rig and related assets from Merger Sub which were acquired
from Trivium.
Southwestern was established primarily to operate drilling rigs owned by Viking
and others and was engaged in domestic and international oil and gas drilling
operations. Southwestern's principal emphasis was operations in the U.S. Gulf
of Mexico. Eight of the ten rigs acquired by the Buyer are currently operating
or are expected to operate in the Gulf of Mexico and the other two rigs will
operate in Qatar and Trinidad, respectively.
The total cost of the acquisition was a cash purchase price of $103.8 million
(net of a purchase price reduction of $6.2 million for required refurbishments
to certain rigs which were not completed prior to closing) and the issuance by
the Company of 1.2 million shares of the Company's Common Stock, $0.01 par
value per share. Buyer assumed certain of the liabilities and obligations of
Seller, and the Company guaranteed the obligations and liabilities of Newco and
Merger Sub under the Agreement. The purchase price for the Southwestern Rigs
was based on the fair market value of the assets.
To fund the acquisitions, the Company issued $150 million aggregate principal
amount of 10.25% Senior Notes due 2003, Series A (the "Notes"), pursuant to
Section 4(2) of the Securities Act of 1933, as amended, which Notes were resold
to certain accredited investors and qualified institutional buyers pursuant to
Rule 144A promulgated under the Securities Act of 1933, as amended. Interest on
the Notes accrues from May 23, 1996 and will be payable semi-annually in cash in
arrears on May 15 and November 15 of each year, commencing November 15, 1996.
The net proceeds to the Company from the sale of the Notes were approximately
$144.8 million after deducting expenses of the Offering. Of the net proceeds,
the Company used $103.8 million to pay the cash portion of the purchase price
for the Southwestern Rigs. The cash portion of the purchase price was reduced
from $110 million to $103.8 million due to planned refurbishment activities on
two rigs which were the responsibility of the Seller and were not completed at
closing. The Company used $4.5 million of the proceeds of the Notes to acquire
the Diamond Rig (as defined below) and will use an additional $7.5 million to
refurbish and mobilize the rig to Venezuela. The remaining proceeds will be
used to complete planned refurbishment activities on the Southwestern Rigs and
for general corporate purposes which may include up to $15 million to acquire
land rigs for use in Venezuela.
On May 10, 1996, the Company purchased the jack-up drilling rig OCEAN
MAGALLANES (the "Diamond Rig") from Diamond Offshore Southern Company for $4.5
million. The Company intends to refurbish, upgrade and mobilize the Diamond Rig
to Venezuela at an additional cost estimated at $7.5 million. The Diamond Rig
has been renamed the Cliffs Drilling No. 155.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements and pro forma financial information are
included herein as part of this report:
(a) The Consolidated Financial Statements of Southwestern Offshore
Corporation and Subsidiaries are filed as Exhibit 99.4.
(b) The Pro Forma Consolidating Financial Statements of Cliffs Drilling
Company (Unaudited) are filed as Exhibit 99.2.
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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 hereunto duly authorized.
CLIFFS DRILLING COMPANY
Date: June 6, 1996 By: /s/ Edward A. Guthrie
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Edward A. Guthrie
Vice President - Finance
Date: June 6, 1996 By: /s/ Cindy B. Taylor
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Cindy B. Taylor
Vice President - Controller
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EXHIBIT INDEX
<TABLE>
<S> <C> <C>
*1.1 -- Purchase Agreement dated as of May 20, 1996 among the Company, Cliffs Drilling Asset Acquisition Company,
Cliffs Drilling Merger Company, Cliffs Drilling International, Inc., Cliffs Oil and Gas Company, Jefferies
& Company, Inc. and ING Barings (U.S.) Securities, Inc.
2.1 -- Reorganization and Distribution Agreement dated as of June 8, 1988 among Cleveland-Cliffs Inc, The
Cleveland-Cliffs Iron Company, Cliffs Drilling Company, now Cliffs Resources, Inc., Cliffs Exploration
Company, now Cliffs Oil and Gas Company, Cliffs Drilling International, Inc. and New Cliffs Drilling
Company, now Cliffs Drilling Company, the Registrant (the "Company") (incorporated by reference to Exhibit
2.1 to the Company's Registration Statement on Form S-1, No. 33-23508, filed under the Securities Act).
*2.2 -- Acquisition Agreement dated as of May 13, 1996 by and among Southwestern Offshore Corporation, Viking
Supply Ships A.S., Ocean Master III Inc., Production Partner Inc., Trivium Investments Limited, Helge
Ringdal and the Company, Cliffs Drilling Asset Acquisition Company and Cliffs Drilling Merger Company.
4.1 -- Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1, No. 33-23508, filed under the Securities Act).
4.2 -- By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement
on Form S-1, No. 33-23508, filed under the Securities Act).
*4.3 -- Indenture dated as of May 15, 1996 among the Company, as issuer, Cliffs Drilling Asset Acquisition Company,
Cliffs Drilling Merger Company, Cliffs Drilling International, Inc. and Cliffs Oil and Gas Company, as
Subsidiary Guarantors, and Fleet National Bank, as trustee.
*4.4 -- Registration Rights Agreement dated as of May 23, 1996 by and among the Company, Cliffs Drilling Asset
Acquisition Company, Cliffs Drilling Merger Company, Cliffs Drilling International, Inc., Cliffs Oil and
Gas Company, Jefferies & Company, Inc. and ING Barings (U.S.) Securities, Inc.
*4.5 -- Registration Rights Agreement dated as of May 23, 1996 by and among the Company, Viking Supply Ships A.S.
and Production Partner Inc.
*23.2 -- Consent of Arthur Andersen LLP.
*99.1 -- Joint Venture Agreement dated as of April 18, 1996, between Well Services (Marine) Limited and Viking Trinidad
Limited, as Partners, and Well Services (Marine) Limited, as Operator, establishing the West Indies Drilling
Joint Venture.
*99.1.1 -- First Amendment dated effective as of April 1, 1996 to Joint Venture Agreement between Well Services
(Marine) Limited and Viking Trinidad Limited, as Partners, and Well Services (Marine) Limited, as Operator.
*99.2 -- Pro Forma Consolidating Financial Statements of Cliffs Drilling Company (Unaudited).
*99.3 -- Consolidated Financial Statements of Cliffs Drilling Company.
*99.4 -- Consolidated Financial Statements of Southwestern Offshore Corporation and Subsidiaries.
</TABLE>
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* Filed herewith.
All other exhibits are omitted because they are not applicable or not required.
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EXHIBIT 1.1
$150,000,000
CLIFFS DRILLING COMPANY
10.25% SENIOR NOTES DUE 2003, SERIES A
PURCHASE AGREEMENT
May 20, 1996
JEFFERIES & COMPANY, INC.
ING BARING (U.S.) SECURITIES, INC.
c/o Jefferies & Company, Inc.
11100 Santa Monica Boulevard
Los Angeles, CA 90025
Ladies and Gentlemen:
Cliffs Drilling Company, a Delaware corporation (the "Company"),
proposes, upon the terms and conditions set forth herein, to issue and sell to
the initial purchasers set forth on Schedule I hereto (the "Initial
Purchasers"), $150,000,000 aggregate principal amount of its 10.25% Senior
Notes due 2003, Series A (the "Notes"). The Notes will be issued pursuant to
the provisions of an Indenture, to be dated as of May 15, 1996 (the
"Indenture"), among the Company, the Subsidiary Guarantors (as defined herein)
and Fleet National Bank, as Trustee (the "Trustee").
Initially, the Notes will be unconditionally guaranteed (the
"Guarantees" and, together with the Notes, the "Securities") on a joint and
several basis by Cliffs Drilling Asset Acquisition Company, Cliffs Drilling
Merger Company, Cliffs Drilling International, Inc. and Cliffs Oil and Gas
Company (collectively, the "Subsidiary Guarantors" and, together with the
Company, the "Issuers").
The Issuers wish to confirm as follows their agreement with the
Initial Purchasers in connection with the purchase and resale of the
Securities.
1. Preliminary Offering Memorandum and Offering Memorandum. The
Securities will be offered and sold to the Initial Purchasers without
registration under the Securities Act of 1933, as amended (the "Act"), in
reliance on an exemption pursuant to Section 4(2) under the Act. The Company
has prepared a preliminary Offering Memorandum, dated May 6, 1996 (the
"Preliminary Offering Memorandum"), and an Offering Memorandum, dated May 20,
1996 (the "Offering Memorandum"), setting forth information regarding the
Issuers and the Securities. Any references herein to the Preliminary Offering
Memorandum and the Offering Memorandum shall be deemed
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to include all amendments and supplements thereto. The Issuers hereby confirm
that they have authorized the use of the Preliminary Offering Memorandum and
the Offering Memorandum in connection with the offering and resale of the
Securities by the Initial Purchasers.
The Issuers understand that the Initial Purchasers propose to make
offers and sales (the "Exempt Resales") of the Securities purchased by the
Initial Purchasers hereunder only on the terms and in the manner set forth in
the Offering Memorandum and Section 2 hereof, as soon as the Initial Purchasers
deem advisable after this Agreement has been executed and delivered, (i) to
persons whom the Initial Purchasers reasonably believe to be qualified
institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A
under the Act, as such rule may be amended from time to time ("Rule 144A"), in
transactions under Rule 144A and (ii) to a limited number of other
institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3)
and (7) under Regulation D of the Act) ("Accredited Investors") in private
sales exempt from registration under the Act (such persons specified in clauses
(i) and (ii) being referred to herein as the "Eligible Purchasers").
It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act, each of the Securities (and each security issued in
exchange therefor or in substitution thereof) shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS
AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES TO FOREIGN
PURCHASERS IN OFFSHORE TRANSACTIONS MEETING THE REQUIREMENTS OF RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO
EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERM
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
RESPECTIVE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES
ACT.
It is also understood and acknowledged that holders (including
subsequent transferees) of the Securities will have the registration rights set
forth in the registration rights agreement (the "Registration Rights
Agreement") substantially in the form attached hereto as Exhibit A, to be dated
the date hereof by and among the Issuers and the Initial Purchasers.
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Capitalized terms used herein without definition have the respective
meanings specified therefor in the Indenture or in the Offering Memorandum.
2. Agreements to Sell, Purchase and Resell. (a) The Issuers
hereby agree, subject to the terms and conditions set forth herein, to issue
and sell to the Initial Purchasers and, upon the basis of the representations,
warranties and agreements of the Issuers herein contained and subject to the
terms and conditions set forth herein, each Initial Purchaser agrees to
purchase from the Issuers severally and not jointly, at a purchase price of
97.0% of the principal amount thereof, the principal amount of Notes (together
with the Guarantees) set forth opposite the name of such Initial Purchaser in
Schedule I hereto.
(b) The Initial Purchasers have advised the Issuers that
they propose to offer the Securities for sale upon the terms and conditions set
forth in this Agreement and in the Offering Memorandum. Each Initial Purchaser
hereby represents and warrants to, and agrees with, the Issuers that such
Initial Purchaser (i) is an Accredited Investor, (ii) will not solicit offers
for, or offer or sell, the Securities by means of any form of general
solicitation or general advertising within the meaning of 502(c) under the Act,
and (iii) will solicit offers for the Securities only from, and will offer,
sell or deliver the Securities, as part of their initial offering, only to (A)
persons whom such Initial Purchaser reasonably believes to be Qualified
Institutional Buyers or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to such Initial Purchasers that each such
account is a Qualified Institutional Buyer, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A and, in each case,
in transactions in reliance upon Rule 144A and (B) to a limited number of other
institutional investors who represent to the Issuers that they are Accredited
Investors, pursuant to a letter substantially in the form of Annex A to the
Preliminary Offering Memorandum. The Initial Purchasers have advised the
Issuers that they will offer the Securities at a price initially equal to 100%
of the principal amount thereof, plus accrued interest, if any, from the date
of issuance of the Securities. Such price may be changed by the Initial
Purchasers at any time thereafter without notice.
3. Delivery of the Securities and Payment Therefor. Delivery to
the Initial Purchasers of and payment for the Securities shall be made at the
office of Jefferies & Company, Inc., 650 5th Avenue, New York, New York 10019,
at 10:00 a.m., New York City time, on May 23, 1996 (the "Closing Date"). The
place of closing for the Securities and the Closing Date may be varied by
agreement between the Initial Purchasers and the Issuers.
The Securities will be delivered to the Initial Purchasers against
payment of the purchase price therefor by certified or official bank check
payable in same day funds. The Securities will be evidenced by a single global
security in definitive form (the "Global Security") and/or by additional
certificated securities, and will be registered, in the case of a Global
Security, in the name of Cede & Co. as nominee of The Depository Trust Company
("DTC"), and in the other cases, in such names and in such denominations as the
Initial Purchasers shall request prior to 9:30 a.m., New York City time, on the
second business day preceding the Closing Date. The Securities to be delivered
to the Initial Purchasers shall be made available to the Initial Purchasers in
New York City for inspection and packaging not later than 9:30 a.m., New York
City time, on the business day next preceding the Closing Date.
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4. Agreements of the Issuers. The Issuers agree with each of the
Initial Purchasers as follows:
(a) Until the completion of the distribution of the
Securities by the Initial Purchasers to Eligible Purchasers, the
Issuers will advise the Initial Purchasers promptly and, if requested
by any of them, will confirm such advice in writing, within the period
of time referred to in paragraph (e) below, of any change in the
condition (financial or other), business, properties, net worth or
results of operations of the Company and the subsidiaries taken as a
whole, or of the happening of any event or the existence of any
condition which requires any amendment or supplement to the Offering
Memorandum so that the Offering Memorandum (x) will not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading or (y) will comply with applicable law.
(b) The Issuers will furnish to the Initial Purchasers,
without charge, as of the date of the Offering Memorandum, such number
of copies of the Offering Memorandum as may then be amended or
supplemented as they may reasonably request.
(c) The Issuers will not make any amendment or supplement
to the Preliminary Offering Memorandum or to the Offering Memorandum
of which the Initial Purchasers shall not previously have been advised
or to which any of them shall reasonably object after being so
advised.
(d) Prior to the execution and delivery of this
Agreement, the Issuers have delivered or will deliver to the Initial
Purchasers, without charge, in such quantities as the Initial
Purchasers shall have requested or may hereafter reasonably request,
copies of the Preliminary Offering Memorandum. The Issuers consent to
the use, in accordance with the securities or Blue Sky laws of the
jurisdictions in which the Securities are offered by the Initial
Purchasers and by dealers, prior to the date of the Offering
Memorandum, of each Preliminary Offering Memorandum so furnished by
the Issuers. The Issuers consent to the use of the Offering
Memorandum in accordance with the securities or Blue Sky laws of the
jurisdictions in which the Securities are offered by the Initial
Purchasers and by all dealers to whom Securities may be sold, in
connection with the offering and sale of the Securities.
(e) If, at any time prior to completion of the
distribution of the Securities by the Initial Purchasers to Eligible
Purchasers, any event shall occur or otherwise exist that in the
judgment of the Issuers or in the opinion of the Initial Purchasers
should be set forth in the Offering Memorandum so that the Offering
Memorandum (x) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or (y) will
comply with applicable law, the Issuers will forthwith prepare an
appropriate supplement or amendment thereto, and will expeditiously
furnish to the Initial Purchasers that number of copies thereof as
they shall reasonably request.
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(f) The Issuers will cooperate with the Initial
Purchasers and with their counsel in connection with the qualification
of the Securities for offering and sale by the Initial Purchasers and
by dealers under the securities or Blue Sky laws of such jurisdictions
as the Initial Purchasers may designate and will file such consents to
service of process or other documents necessary or appropriate in
order to effect such qualification; provided that in no event shall
any of the Issuers be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action
which would subject it to service of process in suits, other than
those arising out of the offering or sale of the Securities, in any
jurisdiction where they are not now so subject.
(g) So long as any of the Securities are outstanding, the
Issuers will furnish to the Initial Purchasers (i) as soon as
available, a copy of each report of the Issuers mailed to stockholders
or filed with the Securities and Exchange Commission (the
"Commission") and (ii) from time to time such other information
concerning the Issuers as the Initial Purchasers may reasonably
request.
(h) The Issuers will apply the net proceeds from the sale
of the Securities substantially in accordance with the description set
forth under "Use of Proceeds" in the Offering Memorandum.
(i) Without the prior consent of the Initial Purchasers,
prior to the expiration of 180 days after the date of the Offering
Memorandum, the Company will not offer, sell, contract to sell or
otherwise dispose of any debt securities registered under the Act or
privately sold pursuant to Rule 144A under the Act except for the
registration of the 10.25% Senior Notes due 2003, Series B pursuant to
the Registration Rights Agreement.
(j) Except as stated in this Agreement and in the
Offering Memorandum, the Issuers have not taken, nor will they take,
directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or
manipulation of the price of the Securities to facilitate the sale or
resale of the Securities. Except as permitted by the Act, the Issuers
will not distribute any offering material in connection with the
Exempt Resales. The Issuers will not solicit any offers to buy and
will not offer to sell the Securities by means of any form of general
solicitation or general advertising (within the meaning of Rule 502(c)
under the Securities Act).
(k) The Issuers will use their best efforts to cause the
Securities to be eligible for trading on the Private Offerings, Resale
and Trading through Automated Linkages ("PORTAL") Market.
(l) From and after the Closing Date, so long as any of
the Securities are outstanding and are "restricted securities" within
the meaning of the Rule 144(a)(3) under the Act or, if earlier, until
three years after the Closing Date, and during any period in which the
Company is not subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Company
will furnish to holders of the Securities and prospective purchasers
of Securities designated by such holders, upon request of such holders
or such prospective purchasers, the information required to be
delivered pursuant to Rule
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144A(d)(4) under the Act to permit compliance with Rule 144A in
connection with resales of the Securities.
(m) The Issuers have complied and will comply with all
provisions of Florida Statutes Section 517.075 relating to issuers
doing business with Cuba.
(n) The Issuers agree not to sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Act) that would be integrated with the
sale of the Securities in a manner that would require the registration
under the Act of the sale by the Issuers to the Initial Purchasers or
by the Initial Purchasers to the Eligible Purchasers of the
Securities.
(o) The Issuers agree to comply with all of the terms and
conditions of the Registration Rights Agreement, and all agreements
set forth in the representation letters of the Issuers to DTC relating
to the approval of the Securities by DTC for "book entry" transfer.
(p) The Issuers agree that prior to any registration of
the Securities pursuant to the Registration Rights Agreement, or at
such earlier time as may be so required, the Indenture shall be
qualified under the Trust Indenture Act of 1939 (the "1939 Act") and
will cause to be entered into any necessary supplemental indentures in
connection therewith.
5. Representations and Warranties of the Issuers. The Issuers,
jointly and severally, represent and warrant to the Initial Purchasers that:
(a) The Preliminary Offering Memorandum and Offering
Memorandum with respect to the Securities have been prepared by the
Issuers for use by the Initial Purchasers in connection with the
Exempt Resales. No order or decree preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum, or any
order asserting that the transactions contemplated by this Agreement
are subject to the registration requirements of the Act, has been
issued and no proceeding for that purpose has commenced or is pending
or, to the knowledge of the Issuers, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering
Memorandum as of their respective dates and the Offering Memorandum as
of the Closing Date, did not or will not at any time contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
except that this representation and warranty does not apply to
statements in or omissions from the Preliminary Offering Memorandum
and Offering Memorandum made in reliance upon and in conformity with
information relating to the Initial Purchasers furnished to the
Issuers in writing by or on behalf of the Initial Purchasers expressly
for use therein.
(c) The Indenture has been duly and validly authorized by
each of the Issuers and, upon its execution, delivery and performance
by each of the Issuers and assuming due authorization, execution,
delivery and performance by the Trustee, will be a valid and
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binding agreement of each of the Issuers, enforceable in accordance
with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and subject to the applicability of general
principles of equity; the Indenture conforms in all material respects
to the description thereof in the Offering Memorandum; no
qualification of the Indenture under the 1939 Act is required in
connection with the offer and sale of the Securities contemplated
hereby or in connection with the Exempt Resales.
(d) The Notes and Guarantees have been duly authorized by
the Company and each of the Subsidiary Guarantors, respectively, and,
when executed by the Company and each of the Subsidiary Guarantors,
respectively, and, in the case of the Notes, authenticated by the
Trustee in accordance with the Indenture and delivered to the Initial
Purchasers against payment therefor in accordance with the terms
hereof, will have been validly issued and delivered, and will
constitute valid and binding obligations of the Company and each of
the Subsidiary Guarantors, respectively, entitled to the benefits of
the Indenture and enforceable in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights
generally and subject to the applicability of general principles of
equity; and the Securities conform in all material respects to the
description thereof in the Offering Memorandum.
(e) The Company is a corporation duly incorporated and
validly existing in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Offering Memorandum, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place
where the nature or location of its properties (owned or leased) or
the conduct of its business requires such registration or
qualification, except where the failure to so register or qualify does
not have a material adverse effect on the condition (financial or
other), earnings, business, properties or prospects of the Company and
its subsidiaries taken as a whole (a "Material Adverse Effect").
(f) Each Subsidiary Guarantor is a corporation duly
organized and validly existing, and in good standing in the
jurisdiction of its incorporation with all requisite corporate power
and authority to own, lease and operate its properties and to conduct
its business as described in the Offering Memorandum. Each Subsidiary
Guarantor is duly registered and qualified to conduct its business and
is in good standing in each jurisdiction or place where the nature or
location of its properties (owned or leased) or the conduct of its
business requires such registration or qualification, except where the
failure to so register or qualify does not have a Material Adverse
Effect.
(g) Each of the Company and the Subsidiary Guarantors has
all necessary authorizations, approvals, orders, licenses,
certificates and permits of and from all regulatory or governmental
officials, bodies and tribunals ("Permits"), to own or lease its
respective properties and to conduct its respective businesses
described in the Offering Memorandum, except as otherwise described in
the Offering Memorandum or where failure to have obtained the same
will not have a Material Adverse Effect, and neither the Company nor
any of the Subsidiary Guarantors has received any notice of
proceedings relating to the
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<PAGE> 8
revocation or modification of any such Permits, if the failure to be
so licensed or approved or if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect; the Company
and each of the Subsidiary Guarantors has fulfilled and performed all
its current obligations with respect to such Permits and no event has
occurred which allows, or after notice or lapse of time, or both,
would allow, revocation or termination thereof or result in any other
impairment of the rights of the holder of any such Permit, subject in
each case to such qualification as may be set forth in the Offering
Memorandum, except where the failure to do so will not have a Material
Adverse Effect; such Permits contain no restrictions that are
materially burdensome to the Company and the Subsidiary Guarantors
taken as a whole; and each of the Company and the Subsidiary
Guarantors are in compliance with all applicable statutes, laws,
rules, regulations, orders and consents, the violation of which would
have a Material Adverse Effect. The property and business of the
Company and its subsidiaries conform in all material respects to the
descriptions thereof contained in the Offering Memorandum.
(h) All of the Company's issued and outstanding capital
stock has been duly authorized, validly issued and is fully paid and
non-assessable as of the date hereof and the capitalization of the
Company conforms in all material respects to the descriptions and the
statements made with respect thereto in the Offering Memorandum.
(i) All the outstanding shares of capital stock of each
Subsidiary Guarantor have been duly authorized and validly issued and
are fully paid and non-assessable, and all outstanding shares of
capital stock of the Subsidiary Guarantors are owned by the Company,
either directly or through wholly-owned subsidiaries, free and clear
of any security interests, claims, liens or encumbrances.
(j) Each of the Company and the Subsidiary Guarantors has
good and marketable title to all real property and interests therein,
including, without limitation, leaseholds, royalty, working and other
interests with respect to real property, and good and marketable title
to all personal property, described in the Offering Memorandum as
being owned by it, free and clear of all liens, encumbrances and
defects except such as are disclosed in or contemplated by the
Offering Memorandum or such as do not materially affect the value of
such property and do not interfere with the use made and proposed to
be made of such property by the Company or such Subsidiary Guarantor,
and any real property and buildings held under lease by the Company or
a Subsidiary Guarantor are held by the Company or such Subsidiary
Guarantor under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made
and proposed to be made of such real property and buildings by the
Company or such Subsidiary Guarantor.
(k) The Company and its subsidiaries own or rightfully
possess adequate patent rights or licenses or other rights to use
patent rights, inventions, trademarks, service marks, trade names and
copyrights necessary to conduct the general business now operated by
them, the failure to own or possess which would have a Material
Adverse Effect, and the Company has not received any notice of
infringement of or conflict with asserted rights of others with
respect to any patent, patent rights, inventions, trademarks, service
marks, trade names or copyrights which, singly or in the aggregate,
will have a Material Adverse Effect.
-8-
<PAGE> 9
(l) The accountants, Ernst & Young LLP and Arthur
Andersen LLP, who have certified or shall certify the financial
statements included as part of the Offering Memorandum (or any
amendment or supplement thereto), are independent accountants with
respect to the Company and its subsidiaries as required by the Act.
(m) The Company's Annual Report on Form 10-K for the Year
Ended December 31, 1995 (the "Annual Report") at the time it was filed
with the Commission complied in all material respects with the
requirements of the Exchange Act. The Annual Report when it was filed
contained no untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(n) Except as otherwise described in the Offering
Memorandum, neither the Company nor any of the Subsidiary Guarantors
is in violation of its respective charter or by-laws or similar
organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of
the Subsidiary Guarantors, or of any franchise, license, permit,
judgment or any decree of any court or governmental agency or body
having jurisdiction over the Company or any of the Subsidiary
Guarantors which would have a Material Adverse Effect, or in default
in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease, bond, debenture, bank loan, credit
agreement or other agreement, instrument or evidence of indebtedness
to which the Company or any of the Subsidiary Guarantors is a party or
by which it is or any of them may be bound, or to which any of the
property or assets of the Company or any of the Subsidiary Guarantors
is subject, the effect of which violation or default in performance or
observance would be a Material Adverse Effect.
(o) There are no legal or governmental proceedings
pending or, to the knowledge of the Company or any Subsidiary
Guarantor, threatened, against the Company or any of the Company's
subsidiaries, or to which any of their respective properties is
subject, that are not disclosed in the Offering Memorandum and that,
if adversely decided, could reasonably be expected to have a Material
Adverse Effect or to materially affect the issuance of the Securities
or the consummation of the transactions contemplated by this
Agreement. There are no agreements, contracts, indentures, leases or
other documents or instruments of the Company or the subsidiaries that
are material to the Company and the subsidiaries, taken as a whole,
that are not described in the Offering Memorandum.
(p) To the Company's knowledge, neither the Company nor
any of its subsidiaries nor any employee or agent of the Company or
any of the subsidiaries has made any payment of funds of the Company
or any subsidiary, or has received or retained any funds, in violation
of any law or rule or regulation.
(q) Neither the Company nor any of the subsidiaries is
involved in any labor dispute or, to the knowledge of the Company, is
any such dispute threatened, other than disputes that the Company
reasonably anticipates will not have a Material Adverse Effect.
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<PAGE> 10
(r) The Company and each subsidiary of the Company has
timely filed all necessary tax returns and notices and has paid all
federal, state, county, local and foreign taxes of any nature
whatsoever for all applicable tax years to the extent such taxes have
become due. The Company has no knowledge, nor any reasonable grounds
to know, of any tax deficiencies which would have a Material Adverse
Effect; the Company and each subsidiary of the Company have paid all
taxes which have become due, whether pursuant to any assessment, or
otherwise, and there is no further liability (whether or not disclosed
on such returns) or assessments for any such taxes, and no interest or
penalties accrued or accruing with respect thereto, except as may be
set forth or adequately reserved for in the financial statements
included in the Offering Memorandum and except as will not have a
Material Adverse Effect; the amounts currently set up as provisions
for taxes or otherwise by the Company on its books and records are
sufficient for the payment of all its unpaid federal, foreign, state,
county and local taxes accrued through the dates as of which they
speak, and for which the Company may be liable in its own right, or as
a transferee of the assets of, or as successor to any other
corporation, association, partnership, joint venture or other entity.
(s) Except for the shares of capital stock of each of the
Subsidiary Guarantors, neither the Company nor any of the Subsidiary
Guarantors owns any share of stock or any other securities of any
corporation or has any equity interest in any firm, partnership,
association or other entity that would constitute a "significant
subsidiary" under Rule 1-02 of Regulation S-X under the Act.
(t) Neither the issuance, offer, sale or delivery of the
Securities by the Issuers, the execution, delivery or performance of
this Agreement or the Indenture by the Issuers or the consummation by
the Issuers of the transactions contemplated hereby or thereby (i)
requires any consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official
(except such as may have been obtained or may be required in
connection with the Registration under the Act of the Securities in
accordance with the Registration Rights Agreement, the qualification
of the Indenture under the 1939 Act and except for compliance with the
securities or Blue Sky laws of various jurisdictions), or conflicts or
will conflict with or constitutes or will constitute a breach of, or a
default under, the certificate or articles of incorporation or bylaws,
or other organizational documents, of the Company or any of the
Subsidiary Guarantors or (ii) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, any
agreement, indenture, lease or other instrument to which the Company
or any of the Subsidiary Guarantors is a party or by which any of them
or any of their respective properties may be bound, or (iii) violates
or will violate any statute, law, regulation or filing or judgment,
injunction, order or decree applicable to the Company or any of the
Subsidiary Guarantors or any of their respective properties, or (iv)
will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
Subsidiary Guarantors pursuant to the terms of any agreement or
instrument to which any of them is a party or by which any of them may
be bound.
(u) The consolidated financial statements, together with
related schedules and notes forming part of the Offering Memorandum,
present fairly the consolidated financial
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<PAGE> 11
position, results of operations and changes in stockholders' equity
and cash flows of the Company on the basis stated in the Offering
Memorandum at the respective dates or for the respective periods to
which they apply and have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods involved. The pro forma financial statements and other pro
forma financial information (including the notes thereto) included in
the Offering Memorandum (A) present fairly in all material respects
the information shown therein, (B) have been prepared in accordance
with the applicable requirements of Rule 11-02 of Regulations S-X
promulgated under the Act, (C) have been properly computed on the
basis described therein, and (D) the assumptions used in preparing the
pro forma financial statements and other pro forma financial data
included in the Offering Memorandum are reasonable and the adjustments
used therein have been properly applied to give proforma effect to the
transactions or circumstances referred to therein; and the other
financial and statistical information and data set forth in the
Offering Memorandum is accurately presented and, to the extent such
information and data is derived from the financial books and records
of the Company, is prepared on a basis consistent with such financial
statements and the books and records of the Company.
(v) Each of the Issuers has all requisite corporate power
and authority to execute, deliver and perform its obligations under
this Agreement and the Registration Rights Agreement; the execution
and delivery of this Agreement and the Registration Rights Agreement
by each of the Issuers, and the performance by each of the Issuers of
its obligations under this Agreement and the Registration Rights
Agreement, have been duly and validly authorized by each of the
Issuers, and each of this Agreement and the Registration Rights
Agreement has been duly executed and delivered by the Issuers, and
constitutes the valid and legally binding agreement of the Issuers,
enforceable against each of the Issuers in accordance with its terms.
(w) Except as disclosed in the Offering Memorandum,
subsequent to the date as of which such information is given in the
Offering Memorandum, neither the Company nor any of its subsidiaries
has incurred any liability or obligation, direct or contingent, or
entered into any transaction, not in the ordinary course of business,
that is material to the Company and its subsidiaries taken as a whole,
and there has not been any material change in the capital stock, or
material increase in the short-term or long-term debt, of the Company
or any of its subsidiaries or any material adverse change, or any
development involving or which could reasonably be expected to involve
a prospective material adverse change, in the condition (financial or
other), earnings, business, properties or prospects of the Company and
its subsidiaries taken as a whole.
(x) Except as permitted by the Act, the Issuers have not
distributed and, prior to the later to occur of the Closing Date and
completion of the distribution of the Securities, will not distribute
any offering material in connection with the offering and sale of the
Securities other than the Preliminary Offering Memorandum and the
Offering Memorandum.
(y) The Issuers are not and, upon sale of the Securities
to be issued and sold thereby in accordance herewith and the
application of the net proceeds to the Issuers of such sale as
described in the Offering Memorandum under the caption "Use of
Proceeds," will not
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<PAGE> 12
be an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act").
(z) When the Securities are issued and delivered pursuant
to this Agreement, such Securities will not be of the same class
(within the meaning of Rule 144A(d)(3) under the Act) as any security
of the Issuers that is listed on a national securities exchange
registered under Section 6 of the Exchange Act or that is quoted in a
United States automated interdealer quotation system.
(aa) Neither the Issuers nor any of their respective
affiliates (as defined in Rule 501(b) of Regulation D ("Regulation D")
under the Act) has directly, or through any agent (provided that no
representation is made as to the Initial Purchasers or any person
acting on their behalf), (i) sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any security (as defined
in the Act) which is or will be integrated with the offering and sale
of the Securities in a manner that would require the registration of
the Securities under the Act or (ii) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation
D under the Act) in connection with the offering of the Securities.
(bb) The Issuers are not required to deliver the
information specified in Rule 144A(d)(4) in connection with the
offering and resale of the Securities by the Initial Purchasers.
(cc) Assuming (i) that the representations and warranties
of the Initial Purchasers in Section 2 hereof are true and correct in
all material respects, (ii) the Initial Purchasers complied with the
covenants set forth in Section 2 hereof, (iii) compliance by the
Initial Purchasers with the offering and transfer procedures and
restrictions described in the Offering Memorandum, (iv) the accuracy
of the representations and warranties made in accordance with this
Agreement and the Offering Memorandum by Eligible Purchasers to whom
the Initial Purchasers initially resells Securities and (v) Eligible
Purchasers to whom the Initial Purchasers initially resell Securities
receive a copy of the Offering Memorandum prior to such sale, the
purchase and sale of the Securities pursuant hereto (including the
Initial Purchasers' proposed offering of the Securities on the terms
and in the manner set forth in the Offering Memorandum and Section 2
hereof) do not require registration under the Act.
(dd) The Company and its subsidiaries are in compliance
with, and not subject to any liability under, the common law and all
applicable federal, state, local and foreign laws, regulations, rules,
codes, ordinances, directives, and orders relating to pollution or to
protection of public or employee health or safety or to the
environment, including, without limitation, those that relate to any
Hazardous Material (as defined herein) ("Environmental Laws"), except,
in each case, where noncompliance or liability, individually or in the
aggregate, would not have a Material Adverse Effect. The term
"Hazardous Material" means any pollutant, contaminant or waste, or any
hazardous, dangerous, or toxic chemical, material, waste, substance or
constituent subject to regulation under any Environmental Law.
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<PAGE> 13
(ee) Neither the Company nor any of the Subsidiary
Guarantors is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended
("PUHCA").
(ff) Neither the Company nor any of the Subsidiary
Guarantors is an "investment company" or subject to regulation as an
"investment company" under the 1940 Act.
(gg) Except for holders of the Securities and the Sellers
of the Southwestern Rigs (as such term is defined in the Offering
Memorandum) no holder of any security of the Company has any right to
request or demand registration of shares of Common Stock or any other
securities of the Company because of the consummation of the
transactions contemplated by this Agreement.
Any certificate signed by any officer of the Company or any Subsidiary
Guarantor and delivered to the Initial Purchasers or to counsel for the Initial
Purchasers pursuant to the terms of this Agreement shall be deemed a
representation and warranty by the Company or such Subsidiary Guarantor to each
Initial Purchaser as to the matters covered thereby.
6. Indemnification and Contribution. (a) The Company and each
Subsidiary Guarantor agree, jointly and severally, to indemnify, defend and
hold harmless each Initial Purchaser and its respective officers, shareholders,
employees and directors and any person who controls any Initial Purchaser
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any loss, expense, liability or claim (including the
reasonable cost of investigating such claim) which, jointly or severally, any
such Initial Purchaser or any such officer, shareholder, employee, director or
controlling person may incur under the Act, the Exchange Act or otherwise, as
such expenses are incurred, insofar as such loss, expense, liability or claim
arises out of or is based upon any untrue statement of a material fact
contained in the Preliminary Offering Memorandum, as amended or supplemented,
or Offering Memorandum, or arises out of or is based upon any omission or
alleged omission to state a material fact required to be stated in the
Preliminary Offering Memorandum, as amended or supplemented, or Offering
Memorandum, or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except insofar as any
such loss, expense, liability or claim arises out of or is based upon any
untrue statement or omission or alleged untrue statement or omission which has
been made therein or omitted therefrom in reliance upon and in conformity with
the information provided in writing to the Company or the Subsidiary Guarantors
by or on behalf of such Initial Purchaser, expressly for use in the Preliminary
Offering Memorandum or Offering Memorandum, and the Company and the Subsidiary
Guarantors agree that the only such information provided in writing by or on
behalf of the Initial Purchasers, expressly for use in the Preliminary Offering
Memorandum or Offering Memorandum, is that information contained in the section
entitled "Plan of Distribution." The foregoing indemnity agreement shall be in
addition to any liability which the Company and the Subsidiary Guarantors may
otherwise have.
If any action is brought against an Initial Purchaser or its
respective officers, shareholders, employees, directors or person who controls
any Initial Purchaser (as described above) in respect of which indemnity may
be sought against the Company and the Subsidiary Guarantors pursuant to the
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<PAGE> 14
foregoing paragraph, such Initial Purchaser shall promptly notify the Company
and the Subsidiary Guarantors in writing of the institution of such action
(provided, that the failure to give such notice shall not relieve either the
Company or the Subsidiary Guarantors of any liability which they may have
pursuant to this Agreement, unless it shall have been determined by a court of
competent jurisdiction by final judgment that such failure has resulted in the
forfeiture of substantive rights or defenses by the indemnifying party) and the
Company and the Subsidiary Guarantors shall assume the defense of such action,
including the employment of counsel and payment of reasonable expenses. Such
Initial Purchaser or such officer, shareholder, employee, director or person
who controls any Initial Purchaser (as described above) shall have the right to
employ its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such Initial Purchaser or of such
persons unless the employment of such counsel shall have been authorized in
writing by the Company and the Subsidiary Guarantors in connection with the
defense of such action or the Company and the Subsidiary Guarantors shall not
have employed reasonably satisfactory counsel to take charge of the defense of
such action or such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them that are different
from or additional to those available to the Company and the Subsidiary
Guarantors (in which case the Company and the Subsidiary Guarantors shall not
have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by the Company and the Subsidiary Guarantors; provided, that the
Company and the Subsidiary Guarantors shall only be responsible for the fees
and expenses of one counsel for the Initial Purchasers hereunder. Anything in
this paragraph to the contrary notwithstanding, the Company and the Subsidiary
Guarantors shall not be liable for any settlement of any such claim or action
effected without its written consent, which consent shall not be unreasonably
withheld, and such settlement includes an unconditional release of the Company
and the Subsidiary Guarantors from all liability on claims that are the subject
matter of the claim or action.
(b) Each Initial Purchaser severally agrees to indemnify,
defend and hold harmless the Company and the Subsidiary Guarantors, each of
their respective directors, officers and employees and any person who controls
the Company or any Subsidiary Guarantor within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any loss, expense,
liability or claim (including the reasonable cost of investigation) which,
jointly or severally, the Company, any Subsidiary Guarantor, or any such person
may incur under the Act, the Exchange Act or otherwise, as such expenses are
incurred, insofar as such loss, expense, liability or claim arises out of or is
based upon any untrue statement or omission or alleged untrue statement or
omission which has been made in or omitted from the Preliminary Offering
Memorandum or Offering Memorandum in reliance upon and in conformity with the
information relating to such Initial Purchaser furnished in writing by or on
behalf of such Initial Purchaser to the Company and the Subsidiary Guarantors.
The Company and the Subsidiary Guarantors agree that the only information
provided in writing by or on behalf of the Initial Purchasers to the Company
and the Subsidiary Guarantors, expressly for use in the Preliminary Offering
Memorandum or Offering Memorandum, is that information contained in the section
entitled "Plan of Distribution."
If any action is brought against the Company, any Subsidiary Guarantor
or any such person in respect of which indemnity may be sought against any
Initial Purchaser pursuant to the foregoing paragraph, the Company, such
Subsidiary Guarantor or such person shall promptly notify such Initial
Purchaser in writing of the institution of such action and such Initial
Purchaser shall assume the
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<PAGE> 15
defense of such action, including the employment of counsel and payment of
reasonable expenses. The Company, such Subsidiary Guarantor or such person
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of the Company,
such Subsidiary Guarantor or such person unless the employment of such counsel
shall have been authorized in writing by such Initial Purchaser in connection
with the defense of such action or such Initial Purchaser shall not have
employed reasonably satisfactory counsel to take charge of the defense of such
action or such indemnified party or parties shall have reasonably concluded
that there may be defenses available to it or them that are different from or
additional to those available to such Initial Purchaser (in which case such
Initial Purchaser shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events such
fees and expenses shall be borne by such Initial Purchaser and paid as
incurred. Anything in this paragraph to the contrary notwithstanding, no
Initial Purchaser shall be liable for any settlement of any such claim or
action effected without the written consent of such Initial Purchaser, which
consent shall not be unreasonably withheld, and such settlement includes an
unconditional release of such Initial Purchaser from all liability on claims
that are the subject matter of the claim or action.
(c) If the indemnification provided for in this Section 6
is unavailable to an indemnified party under subsection (a) or (b) of this
Section 6 in respect of any losses, damages, expenses, liabilities or claims
referred to therein, then each applicable indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, expenses, liabilities or claims (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Subsidiary Guarantors on the one hand and the Initial Purchasers on the other
hand from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Subsidiary Guarantors
on the one hand and the Initial Purchasers on the other in connection with the
statements or omissions which resulted in such losses, expenses, liabilities or
claims, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Subsidiary Guarantors on the one hand
and the Initial Purchasers on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the
Company and the Subsidiary Guarantors bear to the total discounts and
commissions received by the Initial Purchasers. The relative fault of the
Company and the Subsidiary Guarantors on the one hand and of the Initial
Purchasers on the other shall be determined by reference to, among other
things, whether the untrue statement or alleged untrue statement of a material
fact or omission or alleged omission relates to information supplied by the
Company, the Subsidiary Guarantors or by the Initial Purchasers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, expenses, liabilities and claims referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any claim
or action.
(d) The Company, the Subsidiary Guarantors and the
Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 6 were determined by pro rata allocation
(even if the Initial Purchasers were treated as one entity for such purpose) or
by any other method of allocation that does not take account of the equitable
considerations referred to in
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<PAGE> 16
Section 6(c) above. Notwithstanding the provisions of this Section 6, no
Initial Purchaser shall be required to contribute any amount in excess of the
difference between the consideration paid to the Company by such Initial
Purchaser for the Securities purchased by it and the consideration received by
such Initial Purchaser upon the resale of such Securities by reason of such
untrue statement or alleged untrue statement or omission or alleged omission.
The Initial Purchasers' obligations to contribute pursuant to this Section 6
are several in proportion to their respective purchase obligations and not
joint.
(e) The indemnity and contribution agreements contained
in this Section 6 and the covenants, warranties and representations of the
Company and the Subsidiary Guarantors contained in this Agreement shall remain
in full force and effect irrespective of any investigation made by or on behalf
of any Initial Purchaser, or any of its officers, employees, directors,
shareholders or person who controls any Initial Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, or by or on behalf of
the Company, the Subsidiary Guarantors, their respective directors, officers,
employees or any person who controls the Company or any Subsidiary Guarantor
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
and shall survive any termination of this Agreement or the issuance and
delivery of the Securities. The Company, the Subsidiary Guarantors and each
Initial Purchaser agree promptly to notify the others of the commencement of
any litigation or proceeding against it and, in the case of the Company or any
Subsidiary Guarantor, against any of their respective officers and directors in
connection with the issuance and sale of the Securities, or in connection with
the Preliminary Offering Memorandum or Offering Memorandum.
7. Conditions of the Initial Purchasers' Obligations. The
obligations of the Initial Purchasers to purchase the Securities on the Closing
Date hereunder is subject to the fulfillment, in the Initial Purchasers' sole
discretion, of the following conditions:
(a) At the time of execution of this Agreement and on the
Closing Date, no order or decree preventing the use of the Offering
Memorandum or any amendment or supplement thereto, or any order
asserting that the transactions contemplated by this Agreement are
subject to the registration requirements of the Act shall have been
issued and no proceedings for that purpose shall have been commenced
or shall be pending or, to the knowledge of the Issuers, be
contemplated. No order suspending the sale of the Securities in any
jurisdiction designated by the Initial Purchasers shall have been
issued and no proceedings for that purpose shall have been commenced
or shall be pending or, to the knowledge of the Issuers, shall be
contemplated.
(b) Subsequent to the date hereof, there shall not have
occurred any change, or any development involving a prospective
change, in or affecting the condition (financial or other), earnings,
business, properties or prospects of the Company or its subsidiaries,
which in the opinion of the Initial Purchasers, would materially
adversely affect the market for the Securities.
(c) The Initial Purchasers shall not have been advised by
the Issuers or shall not have concluded and disclosed to the Company
that the Offering Memorandum contains an untrue statement of a fact
which in the opinion of the Initial Purchasers or their counsel is
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<PAGE> 17
material or omits to state a fact which in the opinion of the Initial
Purchasers or their counsel, is material and is required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(d) The Company and the Subsidiary Guarantors shall have
furnished to the Initial Purchasers the opinions of Griggs & Harrison,
P.C., counsel to the Company, dated the Closing Date, to the effect
that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware with all requisite corporate
power and authority to own its properties and conduct its
business as described in the Offering Memorandum;
(ii) each of the Subsidiary Guarantors has been
duly incorporated or organized and is validly existing as a
corporation in good standing under the laws of the
jurisdiction in which it is incorporated or organized, with
all requisite corporate or partnership power and authority to
own its properties and conduct its business as described in
the Offering Memorandum;
(iii) to the knowledge of such counsel, all the
outstanding shares of capital stock of each of the Subsidiary
Guarantors have been duly authorized and validly issued and
are fully paid and non-assessable, and, except as otherwise
set forth in the Offering Memorandum, all outstanding shares
of capital stock of such Subsidiary Guarantors are owned by
the Company, either directly or through wholly-owned
subsidiaries, free and clear of any security interests,
claims, liens or encumbrances;
(iv) to the knowledge of such counsel, there is no
pending or threatened action, suit or proceeding before any
court or governmental agency, authority or body or any
arbitrator involving the Company or any of its subsidiaries
which are not disclosed in the Offering Memorandum and which,
if adversely decided, could reasonably be expected to have a
Material Adverse Effect or materially affect the issuance of
the Securities or the consummation of the transactions
contemplated by this Agreement;
(v) all of the Company's issued and outstanding
capital stock has been duly authorized, validly issued and is
fully paid and non-assessable as of the date hereof and the
capitalization of the Company conforms in all material
respects to the descriptions thereof and the statements made
with respect thereto in the Offering Memorandum;
(vi) this Agreement has been duly authorized,
executed and delivered by the Company and the Subsidiary
Guarantors and each of the Company and the Subsidiary
Guarantors has full corporate power and authority to enter
into this Agreement;
-17-
<PAGE> 18
(vii) no consent, approval, authorization or order
of any court or governmental agency or body is required for
the consummation of the transactions contemplated hereby,
except such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and resale of the
Securities by the Initial Purchasers (as to which such counsel
need express no opinion) (assuming (A) that any Eligible
Purchaser who buys the Notes in the Exempt Resales is a
Qualified Institutional Buyer or an Accredited Investor, (B)
the accuracy of the Initial Purchasers' representations and
those of the Issuers in this Agreement regarding the absence
of general solicitation in connection with the Exempt Resales
and (C) the accuracy of the representations made by an
Accredited Investor who purchases Notes pursuant to an Exempt
Resale as set forth in the letter of representation executed
by such Accredited Investor in the form of Annex A to the
Offering Memorandum) and such other approvals (specified in
such opinion) as have been obtained;
(viii) neither the issue and sale of the Securities,
nor the consummation of any other of the transactions herein
contemplated, nor the fulfillment of the terms hereof, will
conflict with, result in a breach of, or constitute a default
under (a) the terms of any indenture or other agreement or
instrument known to such counsel to which the Company or any
of its subsidiaries is a party or bound or (b) any law,
statute, rule, order, regulation, consent or memorandum of
understanding of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction
over the Company or any of the Subsidiary Guarantors of which
such counsel is aware and known by such counsel to be
applicable to the Company or any of the Subsidiary Guarantors
(where such breach or default would have a Material Adverse
Effect);
(ix) the Notes have been duly and validly
authorized by the Company for issuance, and the Company has
full corporate power and authority to issue, sell and deliver
the Notes; the Guarantees have been duly and validly
authorized for issuance by the Subsidiary Guarantors and each
Subsidiary Guarantor has full corporate power and authority to
issue and deliver the Guarantees; the Notes and the
Guarantees, when executed by the Company and the Subsidiary
Guarantors and authenticated by the Trustee in accordance with
the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement,
will, under the law of the State of New York, constitute valid
and legally binding obligations of the Company and the
Subsidiary Guarantors enforceable against the Company and the
Subsidiary Guarantors in accordance with their terms;
(x) the Indenture has been duly and validly
authorized by the Company and each Subsidiary Guarantor and,
when duly executed and delivered by the Company and the
Subsidiary Guarantors, will, under the law of the State of New
York, constitute a valid and legally binding agreement of the
Company and each Subsidiary Guarantor, enforceable against the
Company and each Subsidiary Guarantor in accordance with its
terms;
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<PAGE> 19
(xi) the Securities, when issued, will conform in
all material respects as to legal matters to the description
thereof contained in the Offering Memorandum under the caption
"Description of the Notes";
(xii) the statements describing statutes,
regulations or legal or governmental proceedings under the
captions "Business and Properties-Government Regulation" and
"Certain Federal Income Tax Considerations" in the Offering
Memorandum are correct as to legal matters set forth therein
in all material respects;
(xiii) when the Securities are issued and delivered
to the Initial Purchasers pursuant to this Agreement, such
Securities will not be of the same class (within the meaning
of Rule 144A(d)(3) under the Act) as any security of the
Issuers that is listed on a national securities exchange
registered under Section 6 of the Exchange Act or that is
quoted in a United States automated interdealer quotation
system;
(xiv) no registration of the Securities under the
Act is required for the sale of the Securities by the Issuers
to the Initial Purchasers as contemplated in this Agreement or
for the Exempt Resales (assuming (A) that any Eligible
Purchaser who buys the Notes in the Exempt Resales is a
Qualified Institutional Buyer or an Accredited Investor, (B)
the accuracy of the Initial Purchasers' representations and
those of the Issuers in this Agreement regarding the absence
of general solicitation in connection with the Exempt Resales
and (C) the accuracy of the representations made by each
Accredited Investor who purchases Notes pursuant to an Exempt
Resale as set forth in the letter of representation executed
by such Accredited Investor in the form of Annex A to the
Offering Memorandum);
(xv) the Issuers are not required to deliver the
information specified in Rule 144A(d)(4) in connection with
the offering and resale of the Securities by the Initial
Purchasers;
(xvi) neither the Company nor any of the Subsidiary
Guarantors is an "investment company" or subject to regulation
as an "investment company" under the 1940 Act; and
(xvii) neither the Company nor any of the Subsidiary
Guarantors is a "holding company" or a "subsidiary company" of
a "holding company" or subject to regulation as such under the
PUHCA.
In addition, such counsel shall also state that such counsel
has participated in conferences with representatives of the Initial
Purchasers, officers and other representatives of the Company and its
subsidiaries and representatives of the independent certified public
accountants of the Company and the Subsidiary Guarantors, at which
conferences the contents of the Offering Memorandum and related
matters were discussed and that, although such counsel is not passing
upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Offering
Memorandum (except as set forth in clause (xii) of this Section 7(d)),
on the basis of the foregoing (relying as to
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<PAGE> 20
materiality to a large extent upon officers and other representatives
of the Company), no facts have come to the attention of such counsel
which lead such counsel to believe that the Offering Memorandum as of
its date or the Closing Date contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
provided, that such counsel need not express any comment with respect
to the financial statements and schedules contained therein, including
the notes thereto.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other
than the states of New York and Texas, the General Corporation Law of
the State of Delaware or the federal law of the United States, to the
extent they deem proper and specified in such opinion, upon the
opinions of other counsel reasonably satisfactory to the Initial
Purchasers and (B) as to matters of fact, to the extent he deems
proper, on representations or certificates of appropriate officers of
the Company and the Subsidiary Guarantors and certificates of public
officials. References to the Offering Memorandum in this Section 7(d)
include any amendments or supplements thereto at or prior to the
Closing Date.
(e) The Initial Purchasers shall have received on the
Closing Date an opinion of Vinson & Elkins L.L.P., counsel for the
Initial Purchasers, dated the Closing Date, and addressed to the
Initial Purchasers, with respect to such matters as the Initial
Purchasers may request.
(f) The Initial Purchasers shall have received letters
addressed to the Initial Purchasers, and dated the date hereof and the
Closing Date from Ernst & Young LLP and Arthur Andersen LLP,
independent auditors, substantially in the forms heretofore approved
by the Initial Purchasers.
(g) (i) There shall not have been any change in the
capital stock of the Company nor any material increase in the
short-term or long-term debt of the Company (other than in the
ordinary course of business) from that set forth or contemplated in
the Offering Memorandum (or any amendment or supplement thereto); (ii)
there shall not have been, since the respective dates as of which
information is given in the Offering Memorandum, except as may
otherwise be stated in the Offering Memorandum, any material adverse
change in the condition (financial or other), earnings, business,
properties or prospects of the Company and its subsidiaries taken as a
whole; (iii) the Company and its subsidiaries shall not have any
liabilities or obligations, direct or contingent (whether or not in
the ordinary course of business), that are material to the Company and
its subsidiaries, taken as a whole, other than those reflected in the
Offering Memorandum (or any amendment or supplement thereto); and (iv)
all the representations and warranties of the Issuers contained in
this Agreement shall be true and correct in all material respects on
and as of the date hereof and on and as of the Closing Date as if made
on and as of the Closing Date, and the Initial Purchasers shall have
received a certificate, dated the Closing Date and signed by the chief
executive officer and the chief accounting officer of each of the
Issuers (or such other officers as are acceptable to the Initial
Purchasers), to the effect set forth in this Section 7(g) and in
Section 7(h) hereof.
-20-
<PAGE> 21
(h) The Issuers shall not have failed at or prior to the
Closing Date to have performed or complied with any of their
respective agreements herein contained and required to be performed or
complied with by them hereunder at or prior to the Closing Date.
(i) The Securities shall have been approved for trading
on PORTAL.
(j) The Issuers shall have furnished or caused to be
furnished to the Initial Purchasers such further certificates and
documents as the Initial Purchasers shall have reasonably requested.
(k) The closing of the purchase by the Company of the
Southwestern Rigs (as such term is defined in the Offering Memorandum)
shall have been completed.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers and counsel for
the Initial Purchasers.
Any certificate or document signed by any officer of an Issuer and
delivered to the Initial Purchasers, or to counsel for the Initial Purchasers,
shall be deemed a representation and warranty by the Issuers to the Initial
Purchasers as to the statements made therein.
8. Expenses. (a) Whether or not the purchase and sale of the
Securities hereunder is consummated or this Agreement is terminated pursuant to
Section 9 hereof, the Issuers agree, jointly and severally, to pay the
following costs and expenses and all other costs and expenses incident to the
performance by it of its obligations hereunder: (i) the preparation, printing
or reproduction of the Preliminary Offering Memorandum and the Offering
Memorandum (including financial statements thereto), this Agreement, the
Registration Rights Agreement and the Indenture; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the Offering Memorandum and the
Preliminary Offering Memorandum as may be reasonably requested for use in
connection with the offering and sale of the Securities; (iii) the preparation,
printing (or reproduction), authentication, issuance and delivery of
certificates for the Notes including any stamp taxes in connection with the
original issuance and sale of the Notes; (iv) the printing (or reproduction)
and delivery of this Agreement, the preliminary and supplemental Blue Sky
Memoranda and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Securities; (v) the
application for quotation of the Securities on PORTAL; (vi) the qualification
of the Securities for offer and sale under the securities or Blue Sky laws of
the several states as provided in Section 4(f) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Initial Purchasers relating
to the preparation, printing or reproduction, and delivery of the preliminary
and supplemental Blue Sky Memoranda and such qualification); (vii) the
performance by the Issuers of their obligations under the Registration Rights
Agreement, and (viii) the fees and expenses of the Issuers' accountants and the
fees and expenses of counsel (including local and special counsel) for the
Issuers and the Initial Purchasers. The Issuers hereby agree that they will
pay in full on the Closing Date the fees and expenses referred to in clause
(vi) of this Section 8 by delivering to counsel for the Initial Purchasers on
such date a check payable to such counsel in the requisite amount.
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<PAGE> 22
(b) If the purchase and sale of the Securities hereunder
is not consummated because of any failure, refusal or inability on the part of
the Issuers to perform all obligations and satisfy all conditions on their part
to be performed or satisfied hereunder other than by reason of a default by the
Initial Purchasers in payment for the Securities on the Closing Date, the
Issuers shall reimburse the Initial Purchasers promptly upon demand for all
reasonable out-of-pocket expenses (including reasonable fees and disbursements
of counsel) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities and the other transactions
contemplated hereby.
9. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchasers, without
liability on the part of the Initial Purchasers to the Issuers, by notice to
the Issuers, if prior to the Closing Date (i) there shall occur any default or
breach by the Company or any Subsidiary Guarantor hereunder or the failure to
satisfy any of the conditions contained in Sections 4 or 7 hereof, (ii) if
there has been, since the date of this Agreement or since the respective dates
as of which information is provided in the Offering Memorandum and prior to the
Closing Date, any Material Adverse Change or any downgrading of any of the
Company's or any Subsidiary Guarantors' securities or the placement of any such
securities on a so-called "credit watch" or similar list by any major credit
rating agency, or (iii) if, since the date of this Agreement and prior to the
Closing Date, (A) there has occurred any material adverse change in the
financial markets of the United States or any outbreak of hostilities or other
calamity or crisis, the effect of which on the financial securities markets of
the Untied States is such as to make it, in the reasonable good faith judgment
of the Initial Purchasers, impracticable to market the Securities or to enforce
contracts for the sale of the Securities, or (B) trading in any of the
securities of the Company has been suspended by the Commission or by the
primary exchange where such securities are traded, or trading generally on the
New York Stock Exchange or the American Stock Exchange has been suspended
(other than by limitation on hours or number of days of trading), or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices for
securities have been required, by the New York Stock Exchange or the American
Stock Exchange or by order of the Commission or any other governmental
authority or (C) a banking moratorium has been declared by any of the federal,
Texas or New York authorities.
If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except
as provided in Section 8.
10. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to the Initial Purchasers, c/o Jefferies &
Company, Inc., 11100 Santa Monica Boulevard, Los Angeles, California 90025,
attention of Syndicate Department; notices to the Company and the Subsidiary
Guarantors shall be directed to 1200 Smith Street, Suite 300, Houston, Texas
77002, attention of the Secretary of the Company.
11. Parties. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, the Company, the Subsidiary Guarantors and
their respective successors, and legal representatives. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to provide any
person, firm or corporation, other than the Initial Purchasers, the Company,
the
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<PAGE> 23
Subsidiary Guarantors and their respective successors and legal representatives
and the controlling persons and officers, employees, directors and shareholders
referred to in Section 6 and their respective heirs and legal representatives,
any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision herein or therein contained. This Agreement and all
conditions and provisions hereof are intended to be for the sole and exclusive
benefit of the Initial Purchasers, the Company, the Subsidiary Guarantors and
their respective successors and legal representatives, and said controlling
persons, shareholders, officers and directors and their respective heirs and
legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any Initial Purchasers shall be
deemed to be a successor by reason merely of such purchase.
12. Governing Law and Time. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed in said State. Specified times of day
refer to New York time, unless otherwise specified.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Subsidiary Guarantors
a counterpart hereof, whereupon this instrument, along with all counterparts,
will become a binding agreement between the Initial Purchasers, the Company and
the Subsidiary Guarantors in accordance with its terms.
Please confirm that the foregoing correctly sets forth the agreement
among the Issuers and the Initial Purchasers.
Very truly yours,
CLIFFS DRILLING COMPANY
CLIFFS DRILLING ASSET ACQUISITION COMPANY
CLIFFS DRILLING MERGER COMPANY
CLIFFS DRILLING INTERNATIONAL, INC.
CLIFFS OIL AND GAS COMPANY
By: /s/ DOUGLAS E. SWANSON
----------------------
Name: Douglas E. Swanson
Title: President
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<PAGE> 24
Confirmed as of the date first
above mentioned.
JEFFERIES & COMPANY, INC.
ING BARING (U.S.) SECURITIES, INC.
By: JEFFERIES & COMPANY, INC.
By: /s/ SHAUVIK KUNDAGRAMI
--------------------------
Name: SHAUVIK KUNDAGRAMI
------------------------
Title: Sr. Vice President
-----------------------
<PAGE> 25
SCHEDULE I
CLIFFS DRILLING COMPANY
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
INITIAL PURCHASER OF NOTES
- ----------------- -------------
<S> <C>
Jefferies & Company, Inc................................ $ 127,500,000
ING Baring (U.S.) Securities, Inc....................... 22,500,000
-------------
Total.............................................. $ 150,000,000
=============
</TABLE>
<PAGE> 1
EXHIBIT 2.2
ACQUISITION AGREEMENT
BY AND AMONG
SOUTHWESTERN OFFSHORE CORPORATION
VIKING SUPPLY SHIPS A.S.
OCEAN MASTER III INC.
PRODUCTION PARTNER INC.
TRIVIUM INVESTMENTS LIMITED
HELGE RINGDAL
AND
CLIFFS DRILLING COMPANY
CLIFFS DRILLING ASSET ACQUISITION COMPANY
CLIFFS DRILLING MERGER COMPANY
MAY 13, 1996
<PAGE> 2
ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT (this "Agreement") is dated as of May 13,
1996, by and among SOUTHWESTERN OFFSHORE CORPORATION, a corporation organized
under the laws of the State of Delaware ("Southwestern"), VIKING SUPPLY SHIPS
A.S., a corporation organized under the laws of Norway ("Viking"), OCEAN MASTER
III INC., a corporation organized under the laws of Liberia ("Ocean"),
PRODUCTION PARTNER INC. a corporation organized under the laws of Liberia
("Partner"), TRIVIUM INVESTMENTS LIMITED, a corporation organized under the
laws of the British Virgin Islands ("Trivium"), (Southwestern, Viking, Ocean,
Partner and Trivium being collectively referred to herein as "Seller"), HELGE
RINGDAL, an individual residing in Norway ("Ringdal"), CLIFFS DRILLING COMPANY,
a corporation organized under the laws of the State of Delaware ("Cliffs"),
CLIFFS DRILLING ASSET ACQUISITION COMPANY, a corporation organized under the
laws of the State of Delaware ("Newco"), and CLIFFS DRILLING MERGER COMPANY, a
corporation organized under the laws of the State of Delaware ("Merger Sub")
(Cliffs, Newco and Merger Sub being collectively referred to herein as
"Buyer".)
W I T N E S S E T H:
WHEREAS, Seller and Trinidad (as hereinafter defined) collectively own
the Assets (as hereinafter defined) used in the operation of the Business (as
hereinafter defined) engaged in by Southwestern and Trinidad; and
WHEREAS, Buyer desires to acquire the Assets by purchase from Seller
(other than Trivium), by merger of Trivium with Merger Sub, and by acquisition
by Newco of the stock of Trinidad, respectively, all in consideration for the
payment by Buyer of the Cash Consideration (as hereinafter defined), the
issuance by Buyer of the Acquisition Shares (as hereinafter defined), and the
assumption by Buyer of the Assumed Liabilities (as hereinafter defined); and
WHEREAS, Viking (owner of all of the outstanding capital stock of
Southwestern, Ocean and Trivium and owner, directly and indirectly, of all of
the outstanding capital stock of Trinidad) desires to take such actions as are
necessary or appropriate to effect the transactions described herein, and to
cause Southwestern, Ocean and Trivium to effect the transactions described
herein, and in connection therewith, to guarantee the agreements and
obligations of Southwestern, Ocean and Trivium in and under this Agreement; and
WHEREAS, Ringdal (indirect owner of 82% of the outstanding capital
stock of Partner) desires to take such actions as are necessary or appropriate
to cause Partner to effect the transactions described herein, and in connection
therewith, to guarantee the agreements and obligations of Partner in and under
this Agreement; and
WHEREAS, Cliffs (owner of all of the outstanding capital stock of
Newco and Merger Sub) desires to take such actions as are necessary and
appropriate to effect the transactions
- 2 -
<PAGE> 3
described herein, and to cause Newco and Merger Sub to effect the transactions
described herein, and in connection therewith, to guarantee the agreements and
obligations of Newco and Merger Sub in and under this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual terms,
covenants and conditions herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the following
respective meanings:
"Acquisition Shares" has the meaning specified in Section 2.4.
"Affiliate" means (except as otherwise specified in Section 9.3(d)),
as to the person specified, any person controlling, controlled by or under
common control with such person, with the concept of control in such context
meaning the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of another, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" has the meaning specified in the preamble.
"Applicable Environmental Laws" means all Applicable Laws (as
hereinafter defined) pertaining to health, safety or the environment.
"Applicable Laws" means any applicable law, rule, regulation, code,
governmental determination, order, governmental certification requirement or
other public limitation.
"Assets" means, collectively, all the property, assets and rights,
tangible and intangible, (other than the Excluded Assets) of Seller or Trinidad
which are used in the Business and to be acquired by Buyer pursuant to this
Agreement, which consist of the following:
(a) (i) the following six offshore drilling rigs to be
acquired by Newco hereunder via asset purchase from
Viking:
SOUTHWESTERN 150
SOUTHWESTERN 151
SOUTHWESTERN 152
SOUTHWESTERN 153
SOUTHWESTERN 154
SOUTHWESTERN 200
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<PAGE> 4
(ii) the following offshore drilling rig to be acquired by
Newco hereunder via asset purchase from Ocean:
SOUTHWESTERN 160
(iii) the following offshore drilling rig to be acquired by
Newco hereunder via asset purchase from Partner:
SOUTHWESTERN 180
(iv) the following offshore drilling rig to be acquired by
Merger Sub hereunder by operation of law via merger
of Trivium with and into Merger Sub (together with
items specified below, the "Merger Vessel"):
SOUTHWESTERN 100
(v) a partial, indirect ownership interest, to be
acquired by Newco hereunder via purchase of the
Trinidad Common Stock (as hereinafter defined), in
the following offshore drilling rig (together with
the items specified below, the "Joint Venture
Vessel"):
SOUTHWESTERN MARINE IV f/k/a SOUTHWESTERN 110
together with all their respective drilling machinery and equipment (including
without limitation, floor tools and blow- out preventers), engines, machinery,
mooring systems and equipment, boats, covers, anchors, chains, cables, tackle,
rigging, apparel, furniture, computers and computer equipment, computer
software, fittings and equipment, tools, pumps and pumping equipment, spare
components and parts, tubulars, drill pipe, drill collars, bunkers and
lubricating oils, racking, supporting inventory and stores (the "Vessel
Inventory"), living quarters located thereon and all other appurtenances
thereto appertaining or belonging, including without limitation that set forth
in Schedule 1(a); excluding, however, equipment described in Schedule 1(a)(i),
equipment and stores owned by third-party suppliers (such as catering
consumables, cement units or logging equipment) and equipment for which rental
agreements are listed on Schedule 1(e) (collectively, the "Vessels");
(b) the shore-based stocks owned by Seller or Trinidad of all
drilling machinery and equipment (including, without limitation, floor tools
and blow-out preventers), engines, machinery, mooring systems and equipment,
boats, covers, anchors, chains, cables, tackle, rigging, apparel, furniture,
computers, computer equipment and computer software, fittings and equipment,
tools, pumps and pumping equipment, spare components and parts, tubulars, drill
pipe, drill collars, racking, supporting inventory and stores (i) that are used
or maintained in connection with the Business, or (ii) to the extent not
described in the preceding clause, that are maintained by Seller under a
Drilling Contract (as hereinafter defined) or Other Contract (as hereinafter
defined), including without limitation that set forth on Schedule 1(b)
(collectively, "Shore-Based Inventory"), as such Shore-Based Inventory may be
reduced through consumption
- 4 -
<PAGE> 5
thereof, or increased through replacement thereof or addition thereto, in the
ordinary course of the maintenance and operation of the Vessels through the
Closing Date;
(c) all of the outstanding equity interest in Trinidad, which, in
turn, owns all of the Assets of Trinidad, including without limitation, the
benefit and burden, subsequent to the Closing Date, of all right, title and
interest of Trinidad under that certain Joint Venture Agreement dated April 18,
1996 establishing the Joint Venture;
(d) the benefit and burden, subsequent to the Closing Date, of all
right, title and interest of Seller or Trinidad under all drilling contracts or
other charters or arrangements and any amendments thereto for the employment of
the Vessels (the "Drilling Contracts") existing on the Closing Date, including
without limitation the Drilling Contracts identified on Schedule 1(d) existing
on the Closing Date (it being understood that Seller's right, title and
interest in Drilling Contracts entered into by the Joint Venture constitutes
only an indirect interest);
(e) the benefit and burden, subsequent to the Closing Date, of all
right, title and interest of Seller or Trinidad under all other contracts to
which Seller, Trinidad or any of their respective subsidiaries is a party
relating to the Vessels or the Business (the "Other Contracts") existing on the
Closing Date, including without limitation the Other Contracts identified on
Schedule 1(e) existing on the Closing Date (it being understood that Seller's
right, title and interest in Other Contracts entered into by the Joint Venture
constitutes only an indirect interest);
(f) the following tangible and intangible assets used or held for
use in connection with the Business, to the extent assignable by law and Seller
has the right to assign and transfer such assets:
(i) all Intellectual Property (as hereinafter defined)
owned by Seller or Trinidad relating to, or used in connection with
the operation of, the Business, and all rights to recover for
infringement thereon; and
(ii) the certificates, licenses, permits, consents,
operating authorities, orders, exemptions, franchises, approvals,
registrations and other authorizations and applications therefor
specifically associated with the maintenance and operation of each
Vessel and listed on Schedule 1(f)(ii) ("Permits"); and
(iii) all records to be delivered to Buyer pursuant to
Section 2.9; and
(iv) Seller's computer inventory and maintenance programs
and computer models used in connection with the maintenance and
operation of the Vessels; and
(g) other assets owned and used by Seller and Trinidad in the
operation of the Business or maintenance of the Vessels, including without
limitation, the items identified on Schedule 1(g), it being understood that the
term "Assets" as used in this Agreement includes (i) the assets of Trivium to
be acquired by Merger Sub pursuant to this Agreement by operation of law as a
result of the Merger, (ii) the assets of Trinidad, which will be indirectly
acquired by
- 5 -
<PAGE> 6
Newco via stock purchase pursuant to this Agreement, but title to which will
remain with Trinidad, and (iii) the assets of the Joint Venture, an indirect
interest in which Assets will be acquired by Newco pursuant to this Agreement,
but title to which will remain with the Joint Venture.
"Assumed Liabilities" has the meaning specified in Section 2.5.
"Benefit Plan" has the meaning specified in Section 4.19.
"Best Efforts" means a party's reasonable best efforts in accordance
with reasonable commercial practice and without the incurrence of unreasonable
expense.
"Business" means the offshore contract drilling, accommodation and
other oil and gas exploration and production related service businesses engaged
in by Seller and Trinidad as conducted by Southwestern on the date of this
Agreement and through the Closing Date.
"Business Day" means a day on which national banks are generally open
for the transaction of business in New York, New York.
"Buyer" has the meaning specified in the preamble.
"Buyer Basket" has the meaning specified in Section 12.2(a).
"Cash Consideration" has the meaning specified in Section 2.4.
"Change in Control" has the meaning specified in Section 9.3(c).
"Claims" means any and all losses, liabilities, claims, demands,
damages, costs and expenses (including reasonable attorney's fees and
disbursements) of every kind, nature and description.
"Cliffs SEC Filings" has the meaning specified in Section 5.10.
"Cliffs" has the meaning specified in the preamble.
"Cliffs Common Stock" means shares of common stock, $0.01 par value
per share, of Cliffs.
"Closing" means the consummation of the transactions contemplated by
Article II of this Agreement in accordance with the terms and upon the
conditions set forth in Article II.
"Closing Date" means the date on which the Closing is required to take
place as specified in Section 3.1.
"Competitive Business" has the meaning specified in Section 9.3(d).
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"Consent Required Contract" has the meaning specified in Section
2.8(a).
"Drilling Contracts" has the meaning specified in paragraph (d) of the
definition of Assets.
"Encumbrances" means liens (including without limitation maritime
liens), charges, pledges, options, mortgages, security interests, claims and
other encumbrances of every type and description, whether imposed by law,
agreement, understanding or otherwise.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Excluded Assets" means (i) any and all claims and rights of Seller
under contracts to the extent, but only to the extent, that such claims and
rights do not relate to the conduct of the Business after the close of business
on the Closing Date, including without limitation, accounts receivable of
Seller, and (ii) the items listed on Schedule 1(h).
"Financial Statements" has the meaning specified in Section 4.22(a).
"Financing Closing Date" means the date on which Buyer consummates one
or more financings pursuant to Section 8.2, the net proceeds of which aggregate
at least the Cash Consideration.
"General Assignment" has the meaning specified in Section 3.2(a).
"Governmental Entity" means any court or tribunal in any jurisdiction
or any public, governmental, or regulatory body, agency, department,
commission, board, bureau, or other authority or instrumentality.
"Intellectual Property" means patents, trademarks, service marks,
trade names, service names, brand names, copyrights, trade secrets, know-how,
inventions, computer software (including documentation and object and source
codes) and similar rights used in the Business, including without limitation,
all right, title and interest of Seller and its Affiliates in and to the name
"SOUTHWESTERN" and any derivative thereof, including without limitation,
"SOUTHWESTERN OFFSHORE CORPORATION," and all registrations, applications,
licenses and rights with respect to any of the foregoing, specifically
excluding, however, any right, title or interest of Seller or its Affiliates in
and to the name "VIKING" or any derivative thereof.
"Inventory" means Vessel Inventory and Shore-Based Inventory.
"Joint Venture" means the West Indies Drilling Joint Venture, of which
Well Services (Marine) Limited and Trinidad are venturers.
"Joint Venture Mortgage" means that certain First Preferred Mortgage
dated May 2, 1996, granted by the Joint Venture in favor of Citibank N.A.
covering the Joint Venture Vessel.
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"Joint Venture Vessel" has the meaning specified in paragraph (a)(v)
of the definition of Assets.
"Marad Restrictions" means the restrictions on any Vessel set forth in
an Approval Notice and Agreement or Transfer Order issued by the U.S.
Department of Transportation, Maritime Administration.
"Merger" means the merger of Trivium with and into Merger Sub.
"Merger Sub" has the meaning specified in the preamble.
"Merger Vessel" has the meaning specified in paragraph (a)(iv) of the
definition of Assets.
"Newco" has the meaning specified in the preamble.
"Nonassigned Contract" has the meaning specified in Section 2.8(b).
"Ocean" has the meaning specified in the preamble.
"Other Contracts" has the meaning specified in paragraph (e) of the
definition of Assets.
"Parent Guaranty" means that certain Guaranty dated May 2, 1996,
executed by Viking in favor of Citibank N.A., guarantying the repayment of
indebtedness not to exceed $4,250,000 in principal, plus accrued but unpaid
interest thereon and costs of collection, if any, payable by the Joint Venture
to Citibank N.A.
"Partner" has the meaning specified in the preamble.
"Permits" has the meaning specified in paragraph (f)(ii) of the
definition of Assets.
"Permitted Encumbrances" means (i) Encumbrances for taxes, assessments
and governmental charges not yet due and payable or the validity of which are
being diligently contested in good faith by appropriate proceedings; (ii)
statutory or maritime liens arising in the ordinary course of business relating
to obligations as to which there is no default on the part of Seller, excluding
any mortgage; (iii) the Drilling Contracts; (iv) the Other Contracts; (v) the
Joint Venture Mortgage; (vi) the Marad Restrictions; and (vii) any other
Encumbrances, title defects or imperfections or irregularities in title which
in the aggregate do not exceed $250,000; provided, however, that at the Closing
"Permitted Encumbrances" shall not include any Encumbrances for taxes,
assessments or governmental charges filed of record against the Assets, or
statutory or maritime liens filed of record against the Assets, unless any
such Encumbrances are being diligently contested in good faith by appropriate
proceedings.
"Preliminary Closing" has the meaning specified in Section 8.2.
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"Prohibited Person" has the meaning specified in Section 9.3(d).
"Ringdal" has the meaning specified in the preamble.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Seller" has the meaning specified in the preamble.
"Seller Basket" has the meaning specified in Section 12.1(a).
"Seller's Escrow Agent" means Gardere Wynne Sewell & Riggs L.L.P.,
acting in its capacity as escrow agent for Seller pursuant to that certain
Escrow and Proceeds Distribution Agreement by and among Seller and Gardere
Wynne Sewell & Riggs L.L.P. dated May, 1996, or such other escrow agent as may
be designated by Seller.
"Shore-Based Inventory" has the meaning specified in paragraph (b) of
the definition of Assets.
"Southwestern" has the meaning specified in the preamble.
"Surviving Corporation" has the meaning specified in Section 2.3.
"Taxes" means any income taxes or similar assessments, any social
security premiums or any sales, excise, occupation, use, ad valorem, property,
production, severance, transportation, employment, payroll, franchise, value
added or other tax imposed by any taxing authority, including any interest,
penalties or additions attributable thereto.
"Tax Return" means any return or report with respect to Taxes.
"Trinidad" means Viking Trinidad Limited, a corporation organized
under the laws of the Republic of Trinidad and Tobago.
"Trinidad Common Stock" means shares of common stock, $50.00 par value
per share, of Trinidad.
"Trivium" has the meaning specified in the preamble.
"Trivium Common Stock" means shares of common stock, 1.00 par value
per share, of Trivium.
"Vessels" has the meaning specified in paragraph (a) of the definition
of Assets, and "Vessel" means any one of the Vessels.
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"Vessel Inventory" has the meaning specified in paragraph (a) of the
definition of Assets.
"Viking" has the meaning specified in the preamble.
"Voting Securities" means the shares of Cliffs Common Stock and any
other securities of Cliffs entitled to vote generally for the election of
directors or any other securities (including, without limitation, rights,
warrants and options) convertible or exchangeable into, or exercisable for, any
of the foregoing (whether or not presently exercisable, convertible or
exchangeable).
ARTICLE II
ACQUISITION TRANSACTIONS
2.1 Asset Purchase. Upon the terms and subject to the conditions
set forth in this Agreement, on the Closing Date, Seller (other than Trivium)
shall sell, assign, transfer, deliver and convey to Newco, and Newco shall
purchase, acquire, accept and pay for, as hereinafter provided, the Assets
(other than Assets of the Joint Venture, Trinidad and Trivium), free and clear
of any Encumbrances other than Permitted Encumbrances.
2.2 Stock Purchase. Upon the terms and subject to the conditions
set forth in this Agreement, on the Closing Date, (a) Viking shall sell,
assign, transfer, deliver and convey to Newco, and Newco shall purchase,
acquire, accept and pay for, as hereinafter provided, 990 shares of Trinidad
Common Stock, constituting 99% of the outstanding equity interest in Trinidad,
free and clear of any Encumbrances, and (b) Viking shall cause Viking
Management A.S. to sell, transfer, deliver and convey to Cliffs, and Cliffs
shall purchase, acquire, accept and pay for, as hereinafter provided, 10 shares
of Trinidad Common Stock, constituting 1% of the outstanding equity interest in
Trinidad, free and clear of any Encumbrances.
2.3 Merger. Upon the terms and subject to the conditions set
forth in this Agreement, on the Closing Date, Trivium shall be merged with and
into Merger Sub, whereupon the separate corporate existence of Trivium shall
cease, and Merger Sub will be the surviving corporation (the "Surviving
Corporation"). As soon as practicable after satisfaction (or waiver) of all of
the conditions to the Merger, Trivium and Merger Sub will execute and file a
Certificate of Merger substantially in the form of Exhibit 2.3 with the
Secretary of State of Delaware and the Registrar of Companies of the British
Virgin Islands and make all other filings required by the laws of the State of
Delaware and of the British Virgin Islands in connection with the Merger in
order to cause the Merger to become effective on the Closing Date. From and
after the Closing Date, the Surviving Corporation shall possess all of the
properties, rights, privileges and powers, and shall be subject to all of the
liabilities and obligations, of Trivium and Merger Sub, all in accordance with
applicable laws of the State of Delaware and of the British Virgin Islands.
2.4 Consideration. The aggregate consideration for the
transactions provided for herein shall consist of (a) cash in the amount of
$110,000,000 (subject to adjustment as provided in Sections 8.7 and 8.8 (the
"Cash Consideration"), (b) 1,200,000 shares (the "Acquisition
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Shares") of Cliffs Common Stock (of which 300,000 shares shall be issued in
consideration of the Merger), and (c) the assumption by Buyer of the Assumed
Liabilities.
2.5 Assumed Liabilities. As of and after the Closing, subject to
Section 2.8, Newco shall assume and thereafter perform the obligations of
Seller (other than Trivium) under the Drilling Contracts and the Other
Contracts, including without limitation the Parent Guaranty, (specifically
excluding, however, the obligations of the Joint Venture, Trinidad or Trivium
under any Drilling Contracts and Other Contracts entered into by the Joint
Venture, Trinidad or Trivium, which shall remain obligations of the Joint
Venture or Trinidad, as applicable, or become obligations of the Surviving
Corporation, as applicable), to the extent, but only to the extent, that such
obligations relate to the conduct of the Business after the close of business
on the Closing Date (the "Assumed Liabilities").
2.6 Earnest Money Deposit. Within five days of execution and
delivery of this Agreement by all parties, Buyer shall deposit with Griggs &
Harrison P.C., as escrow agent, the sum of $1,000,000 as earnest money,
pursuant to an Escrow Agreement between Buyer, Seller and Griggs & Harrison
P.C. substantially in the form of Exhibit 2.6. Buyer shall have the option of
depositing with the escrow agent an additional amount of $1,000,000, thereby
increasing the earnest money deposit to $2,000,000, in order to prevent Seller
from terminating this Agreement pursuant to Section 11.1(d)(ii). At Buyer's
option, the earnest money deposit, plus interest earned thereon, if any, may be
applied toward payment of the Cash Consideration at Closing. Except as
otherwise provided in Section 11.3(a) with respect to the forfeiture of earnest
money as liquidated damages, the earnest money deposit, plus interest earned
thereon, if any, shall be refunded to Buyer in the event of termination of this
Agreement pursuant to Section 11.1 by Buyer or Seller.
2.7 Limitation of Liabilities. Notwithstanding anything herein to
the contrary, Buyer shall not assume or in any way be liable or responsible for
any liabilities or obligations of Seller or its Affiliates (other than the
liabilities and obligations of Trivium, for which Merger Sub will become
responsible by operation of law upon consummation of the Merger) except as
specifically provided herein, it being expressly acknowledged that it is the
intention of the parties hereto that all liabilities that Seller (other than
Trivium) has or may have in the future, whether fixed or contingent, and
whether known or unknown, not expressly described in the definition of Assumed
Liabilities shall be and remain the liabilities of Seller. Without limiting
the generality of the foregoing, except to the extent assumed by operation of
law pursuant to the Merger or specifically provided in Sections 2.4, 2.5 and
8.13, Buyer shall not assume (a) any liability or obligation of Seller under
any note, bond or other instrument whether or not secured by the Assets, (b)
any liability or obligation of Seller in respect of any express or implied
representation, warranty, agreement or guaranty made (or claimed to have been
made) by Seller or imposed or asserted to be imposed by operation of law
(except obligations or liabilities imposed on Buyer by operation of law after
the Closing) or (c) any liability or obligation to repay inter-company advances
or to satisfy outstanding accounts payable.
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2.8 Limitation on Assignments.
(a) Notwithstanding any other provision hereof, this Agreement
shall not constitute nor require an assignment to Buyer of any Drilling
Contract, Other Contract, Permit, license or other right if an attempted
assignment of the same without the consent of any party would constitute a
breach thereof or a violation of any law or any judgment, decree, order, writ,
injunction, rule or regulation of any Governmental Entity unless and until such
consent shall have been obtained. In the case of any such Drilling Contract,
Other Contract, Permit, license or other right that cannot be effectively
transferred to Buyer without such consent (a "Consent Required Contract"),
Seller agrees that between the date hereof and the Closing Date it will use its
Best Efforts to obtain or cause to be obtained the necessary consents to the
transfer of any Consent Required Contract. In this connection, Buyer agrees to
cooperate with Seller in obtaining such consents and to enter into such
arrangement of assumption as may be reasonably requested by Seller or the other
contracting party under a Consent Required Contract.
(b) In the event that Seller shall have failed prior to the
Closing Date to obtain consents to the transfer of any Consent Required
Contract, the terms of this Section 2.8(b) shall govern the transfer of the
benefits of each such contract. Seller and Buyer shall use their Best Efforts
after the Closing Date to obtain any required consent to the assignment to, and
assumption by, Buyer of each Consent Required Contract that is not transferred
to Buyer at the Closing (a "Nonassigned Contract"). Seller and Buyer shall
enter into an agreement on the Closing Date with respect to each Nonassigned
Contract providing that until the rights and obligations of Seller thereunder
are transferred to or assumed by Buyer, or, if earlier, until termination of
such Nonassigned Contract, Seller shall continue to perform its obligations
thereunder and Buyer shall provide such assistance, at the sole expense of
Buyer, as Seller may reasonably request for such purpose, including without
limitation the use of personnel and assets (by lease or otherwise) of Buyer and
its Affiliates of the type and quantity that Seller would have used to perform
such Nonassigned Contract had the transactions contemplated by this Agreement
not been consummated. Such agreement shall also provide that in consideration
of the provision of such assistance, Seller shall, promptly after payment of
any amounts to Seller by the other party to a Nonassigned Contract, pay such
amounts to Buyer after subtracting therefrom the reasonable direct costs and
expenses actually incurred by Seller as a result of its performance of the
Nonassigned Contract. To the extent any such expenses are not theretofore
reimbursed, Buyer shall, promptly upon request of Seller, reimburse Seller for
all reasonable direct costs and expenses actually incurred by Seller as a
result of its performance of any Nonassigned Contract.
(c) Notwithstanding any other provision hereof, this Agreement
shall not constitute nor require an assignment to Buyer of any Permit to the
extent such Permit is by its terms nontransferable and valid only in the hands
of the Seller. Buyer acknowledges that ownership and operation of the Assets
by Buyer may require the issuance of new Permits in the name of Buyer.
2.9 Delivery of Records. Viking represents that to its knowledge,
it has heretofore delivered to Southwestern all material, books, records,
papers and instruments relating to the Assets or the operation of the Business.
Buyer shall be entitled to all books, records, papers and
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instruments of Seller and Trinidad of whatever nature that relate to the Assets
or the operation of the Business which are located aboard the Vessels or in the
possession of Southwestern, Ocean, Partner, Trinidad or Trivium, including
without limitation all financial and accounting records, all records physically
located on the Vessels on the Closing Date and all books and records relating
to employees, the purchase of materials, supplies and services, research and
development, engineering drawings, designs, schematics, blueprints, instruction
manuals, flowsheets, models, maintenance schedules and similar technical
records, and dealings with customers, vendors and suppliers of the Business,
and including computerized books and records and other computerized storage
media and the software (including documentation and object and source codes)
used in connection therewith; provided that Seller shall be entitled to retain
all originals of its corporate, financial, accounting, legal, tax and auditing
records, and Seller shall be entitled to retain copies at its expense of any
such other books and records that are necessary for its tax, accounting or
legal purposes; and provided further, that with respect to the Joint Venture
Vessel and the other Assets of the Joint Venture, Buyer shall be entitled only
to those books, records, papers and instruments in the possession of Seller or
Trinidad or to which Seller or Trinidad has a right of possession.
2.10 Effect of Merger. The Certificate of Incorporation and Bylaws
of Merger Sub, as in effect immediately prior to the Closing Date, shall be the
Certificate of Incorporation and Bylaws of the Surviving Corporation following
consummation of the Merger, in each case until further amended as provided
therein and in compliance with applicable law. The directors and officers of
Merger Sub immediately prior to the Closing Date shall be the directors and
officers of the Surviving Corporation following consummation of the Merger, in
each case until their respective successors are duly elected and qualified.
ARTICLE III
THE CLOSING
3.1 Time and Place of Closing. Subject to the occurrence of the
Preliminary Closing and the notice thereof required pursuant to Section 8.2,
the Closing shall take place at the offices of Griggs & Harrison P.C., 1301
McKinney, Suite 3200, Houston, Texas 77010, at 9:00 a.m., local time, or at
such other place or time as the parties may agree in writing, on the Financing
Closing Date; provided that the Closing shall occur on a date on which banks
are generally open for business in New York, New York, in London, England, and
in Oslo, Norway.
3.2 Deliveries by Seller. At the Closing, Seller (other than
Trivium) shall deliver the following to Buyer:
(a) a duly executed General Conveyance, Assignment and Bill of
Sale and Transfer and Assumption of Liabilities (the "General Assignment") in
the form of Exhibit 3.2, together with such other bills of sale, assignments
and other instruments of transfer, assignment and conveyance, including without
limitation individual instruments of transfer for each of the Vessels (other
than the Joint Venture Vessel and the Merger Vessel), as Buyer shall reasonably
request to vest in Newco good and marketable title to the Assets;
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(b) the tangible assets conveyed by the General Assignment (which
tangible assets shall be deemed to be delivered at their then current location
on the Closing Date);
(c) copies of any consents obtained as contemplated by Section
2.8;
(d) stock certificates representing all of the outstanding shares
of Trinidad Common Stock duly endorsed in blank or accompanied by stock powers
duly executed in blank and otherwise in form acceptable to Buyer for effective
and lawful transfer of all of the equity interest in Trinidad;
(e) the certificate and opinion of counsel contemplated by
Sections 7.3 and 7.4, respectively; and
(f) such other certificates, instruments and documents as may be
reasonably requested by Buyer prior to the Closing Date to carry out the intent
and purposes of this Agreement.
3.3 Deliveries by Buyer. At the Closing, Buyer shall deliver the
following to Viking, on behalf of the Seller:
(a) the Cash Consideration by wire transfer of immediately
available funds to a bank account designated by Seller's Escrow Agent in any
bank in the continental United States;
(b) a certificate or certificates representing the Acquisition
Shares registered in the name of Seller in the denominations designated in
writing by Seller no less than three Business Days prior to Closing;
(c) a duly executed General Assignment and such other instruments
of transfer and assumption as Seller shall reasonably request in order to cause
an effective assignment to and assumption by Newco of the Assumed Liabilities;
(d) the certificate and opinion of counsel contemplated by
Sections 6.3 and 6.4, respectively;
(e) a duly executed Registration Rights Agreement covering the
Acquisition Shares substantially in the form of Exhibit 3.3(e);
(f) a Guaranty Agreement duly executed by Cliffs in favor of
Viking substantially in the form of Exhibit 3.3(f);
(g) A Letter of Credit in the original amount of $4,250,000,
supporting the aforesaid Guaranty Agreement substantially in the form of
Exhibit 3.3(g); and
(h) such other certificates, instruments and documents as may be
reasonably requested by Seller prior to the Closing Date to carry out the
intent and purposes of this Agreement.
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3.4 Conversion of Shares. On the Closing Date, each share of
Trivium Common Stock issued and outstanding immediately prior to the Closing
Date shall be converted into and become 3,000 shares of Cliffs Common Stock,
and each share of Trivium Common Stock held by Trivium as treasury stock shall
be canceled and no payment shall be made with respect thereto, it being
understood that an aggregate of 300,000 shares of Cliffs Common Stock shall be
issued in connection with the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Each Seller (other than Partner) hereby jointly and severally
represents and warrants to Buyer with respect to each such Seller (other than
Partner) and as applicable with respect also to Trinidad and the Joint Venture,
and Partner severally represents and warrants to Buyer with respect only to
Partner, as follows:
4.1 Organization and Existence.
(a) Southwestern is a corporation duly organized, validly existing
and in good standing under the laws of Delaware, with all necessary corporate
power and authority to own and lease the assets it currently owns and leases
and to carry on its business as such business is currently conducted. Viking
is a corporation duly organized and validly existing under the laws of Norway,
with all necessary corporate power and authority to own and lease the Assets it
currently owns and leases and to carry on the Business as such Business is
currently conducted by it. Ocean is a corporation duly organized, validly
existing and in good standing under the laws of Liberia, with all necessary
corporate power and authority to own and lease the assets it currently owns and
leases and to carry on its business as such business is currently conducted.
Partner is a corporation duly organized, validly existing and in good standing
under the laws of Liberia, with all necessary corporate power and authority to
own and lease the assets it currently owns and leases and to carry on its
business as such business is currently conducted. Trinidad is a corporation
duly organized, validly existing and in good standing under the laws of the
Republic of Trinidad and Tobago, with all necessary corporate power and
authority to own and lease the assets it currently owns and leases and to carry
on its business as such business is currently conducted. Trivium is a
corporation duly organized, validly existing and in good standing under the
laws of the British Virgin Islands, with all necessary corporate power and
authority to own and lease the assets it currently owns and leases and to carry
on its business as such business is currently conducted.
(b) Neither Southwestern, Viking, Ocean, Partner, Trinidad nor
Trivium (i) has been dissolved, and no resolution to dissolve such company has
been adopted and there is no action or request pending to accomplish such a
dissolution; (ii) is a party to a merger, consolidation or other amalgamation
which has not become effective (other than the Merger contemplated by this
Agreement) and with respect only to Viking, that would have a material adverse
effect on its ownership of the Assets or the operation of the Business; (iii)
has been declared bankrupt,
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and to its knowledge, no action or request is pending to declare such company
bankrupt; or (iv) has filed for or been granted an official moratorium.
4.2 Qualification. To its knowledge, each Seller and Trinidad is
duly qualified or licensed to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the character of the assets
currently owned or leased by it or the nature of the business currently
conducted by it requires it so to be qualified or licensed, unless the failure
so to qualify or be licensed would not reasonably be expected to have a
material adverse effect on the Business taken as a whole or create an
Encumbrance on any of the Assets.
4.3 Articles of Association and Bylaws. Each Seller (other than
Viking) and Trinidad has made available to Buyer accurate and complete copies
of its articles of association and bylaws (certified by an appropriate official
of such entity's jurisdiction of incorporation and the secretary or an
assistant secretary of such entity, respectively) as currently in effect.
Neither any Seller nor Trinidad is in violation of any provision of its
articles of association or bylaws, other than violations which, individually or
in the aggregate, do not and will not have a material adverse effect on the
business, assets, results of operations, condition (financial or otherwise), of
such Seller or Trinidad, considered independently.
4.4 Authority, Etc. The execution and delivery of this Agreement
and all agreements, instruments and documents to be executed and delivered by
each Seller hereunder, the performance by each Seller of all the terms and
conditions hereof and thereof to be performed by it, and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action, including without limitation by all necessary
action of the board of directors (or similar body) of each Seller, and no other
corporate proceedings are necessary with respect thereto. All persons who have
executed and delivered this Agreement, and all persons who will execute and
deliver the other agreements, documents and instruments to be executed and
delivered hereunder by each Seller have been duly authorized to do so by all
necessary actions on the part of such Seller.
4.5 Enforceable Agreements. Assuming due compliance with the laws
of the State of Texas and the United States, this Agreement constitutes, and
each other agreement or instrument to be executed hereunder by any Seller, when
so executed and delivered, will constitute, the legal, valid and binding
obligation of such Seller enforceable against it in accordance with its terms,
except to the extent the enforceability hereof and thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or other laws relating to or
affecting creditors' rights generally, by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law), by provisions generally applicable under Norwegian law in
respect of invalidation or revision of unfair contract terms, or by other
Norwegian public policy considerations.
4.6 No Violations. Except as set forth on Schedule 4.6, the
execution and delivery of this Agreement by each Seller, the fulfillment of and
compliance by it with the terms and conditions hereof and the consummation by
it of the transactions contemplated hereby will not:
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(a) violate any of the terms of the articles of incorporation,
bylaws or other charter documents of any Seller or Trinidad;
(b) (i) result in a breach of or constitute a default under
(whether with notice or the lapse of time or both) any note, bond, mortgage,
loan agreement, indenture or other instrument evidencing borrowed money to
which any Seller or Trinidad is a party or by which any Seller or Trinidad is
bound or to which any of the Assets is subject, which breach or default would
reasonably be expected to have a material adverse effect on the ownership of
the Assets or the operation of the Business, taken as a whole, or (ii) result
in the creation of any Encumbrance on any of the Assets, or otherwise give any
person the right to termination any Drilling Contract, Permit or Other
Contract; or
(c) to the knowledge of any Seller, violate any national or local
law, statute, rule or administrative regulation or any judgment, order,
injunction or decree of any Governmental Entity applicable to or binding upon
any Seller or Trinidad, or the assets of any Seller or Trinidad, which
violation would reasonably be expected to have a material adverse effect on the
ownership or operation of the Assets or the operation of the Business taken as
a whole, except that no representation is made as to the application of any
United States antitrust law or regulation to the transactions contemplated by
this Agreement.
4.7 Ownership of Assets. As of the date of this Agreement, Seller
collectively owns good and marketable title to the Assets (other than the
Assets of the Joint Venture and Trinidad, good and marketable title to which is
held by the Joint Venture or Trinidad, respectively), free and clear of all
Encumbrances except for Permitted Encumbrances and Encumbrances described in
Schedule 8.11. Subject to Section 4.9, at the Closing, Seller collectively
will own, and upon execution and delivery by Seller (other than Trivium) of the
General Assignment and appropriate bills of sale, upon transfer of the shares
of Trinidad Common Stock, and by operation of law upon consummation of the
Merger, Buyer will own, good and marketable title to the Assets (other than the
Assets of the Joint Venture and Trinidad, good and marketable title to which
will be held by the Joint Venture and Trinidad), free and clear of all
Encumbrances except for Permitted Encumbrances and Encumbrances, if any,
created or permitted to be imposed by Buyer.
4.8 Vessel Classifications and Certifications. The classification
of each Vessel and the flag under which it is documented is set forth on
Schedule 1(a). Set forth on Schedule 4.8 is a summary of the recommendations
to class for each of the Vessels based on the most recent survey received by
Seller for such Vessel as of the date of this Agreement, as well as a listing
of required certifications (including Det Norske Veritas, American Bureau of
Shipping, United States Coast Guard, Lloyd's Register of Shipping and Bureau
Veritas certifications) and the expiration date for each such certification.
Except as set forth on Schedule 4.8, each of the Vessels has in full force and
effect all required certifications necessary for its present operations (with
the exception of any thereof that may be affected by any loss or damage
referred to in Section 8.8). Except as disclosed by Seller or Trinidad to
Buyer in writing at or prior to the Closing, to the knowledge of Seller and
Trinidad, none of the Vessels has suffered any material
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damage to is condition (excepting normal wear and tear) since April 23, 1996,
the date of completion of Buyer's inspection of the Vessels.
4.9 Inventory.
(a) At the Closing, Seller collectively will own, and upon
execution and delivery by Seller (other than Trivium) of the General
Assignment, and by operation of law upon consummation of the Merger, Buyer will
own, good and marketable title to the Inventory (other than the Inventory
associated with the Joint Venture Vessel, which Inventory is and will be owned
by the Joint Venture), as such Inventory may be reduced through the consumption
thereof, or increased through replacement thereof or additions thereto, in the
ordinary course of the maintenance and operation of the Vessels through the
Closing Date, free and clear of all Encumbrances except for Permitted
Encumbrances and Encumbrances, if any, created or permitted to be imposed by
Buyer.
(b) On the date of this Agreement, Seller (or the Joint Venture,
as applicable) maintained Inventory with respect to each Vessel as specified on
Schedule 1(a), which Inventory is in such amounts and of such quality (i) as
would comply in all material respects with any applicable Drilling Contract or
Other Contract and (ii) as is consistent with past practice of Southwestern.
4.10 Certain Property on Vessels. Since April 23, 1996, the date
of completion of Buyer's inspection of the Vessels, subject to normal wear and
tear and consumption in the ordinary course of business, neither Seller nor
Trinidad has removed or, to its knowledge, permitted to be removed any tangible
property from any Vessel which tangible property has a value equal to or
greater than $100,000 in the aggregate for all the Vessels, except for any such
tangible property relocated from one Vessel to another Vessel or transferred to
Inventory; provided, however, that Seller shall have the right to take ashore
(i) crockery, plates, cutlery, linens and other articles bearing the Seller's
flag or name, provided that Seller replaces same with similar unmarked items,
(ii) library items and forms exclusively for use on Seller's vessels, and (iii)
captain's, officer's and crew's personal belongings including the slop chest.
4.11 Contracts. Seller has made available to Buyer for review
complete and correct copies of all the Drilling Contracts and Other Contracts.
Except as set forth on Schedule 4.11, each of the Drilling Contracts and Other
Contracts may be transferred to Buyer without the consent of any person. Each
of the Drilling Contracts and Other Contracts is valid, binding and in full
force and effect against Seller, Trinidad or the Joint Venture, as applicable,
and, to Seller's knowledge, is valid, binding and in full force and effect
against the other party thereto. Except as set forth on Schedule 4.11, neither
Seller, Trinidad nor the Joint Venture is in default in any material respect,
and no notice of alleged default has been received by Seller under any of the
Drilling Contracts or Other Contracts, and no other party thereto is, to the
knowledge of Seller, in default thereunder in any material respect, and, to the
knowledge of Seller, there exists no condition or event which, with or without
notice or lapse of time or both, would (i) constitute a material default under
any of the Drilling Contracts or Other Contracts by Seller or any other
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parties thereto, or (ii) otherwise give any other party to such a contract the
right to charge penalties or reduce the rates that would otherwise be payable
under such a contract.
4.12 Intellectual Property. Neither Seller nor Trinidad owns,
holds, uses or has pending any material Intellectual Property in connection
with the operation of the Assets or the Business. Seller and Trinidad
collectively own or have rights to use all Intellectual Property necessary for
the operation of the Assets and the Business as presently operated. Neither
Seller nor Trinidad is infringing upon the Intellectual Property of any third
party or has received any written notice or claim of any infringement,
violation, misuse or misappropriation in connection with the operation of the
Assets or the Business by such Seller or Trinidad of any Intellectual Property
owned or purported to be owned by any other person.
4.13 Performance Bonds; Letters of Credit. Set forth on Schedule
4.13 is a listing of all performance and similar bonds and letters of credit
currently posted by, or any certificate of financial responsibility or similar
evidence of financial accountability obtained or procured by, any Seller or
Trinidad for the purpose of operating the Vessels or otherwise conducting the
Business.
4.14 Seller's Insurance. Each Seller (and Trinidad and/or the
Joint Venture, as applicable) maintains with sound and reputable insurers, and
to the knowledge of each Seller, there are currently in full force and effect,
policies of insurance with respect to the Assets and Business against such
casualties and contingencies of such types and in such amounts as Seller
considers customary and reasonable for offshore drilling contractors of similar
size engaged in similar operations. All premiums due and payable with respect
to such policies have been timely paid. No written notice of cancellation of,
or written indication of any intention not to renew, any such policy has been
received by any Seller, or to the knowledge of any Seller, by Trinidad or the
Joint Venture. Set forth on Schedule 4.14 is a summary description of (i) the
insurance maintained by each Seller (and Trinidad and/or the Joint Venture, as
applicable) covering each of the Vessels and/or the operation of the Business
and (ii) all outstanding insurance claims associated with each of the Vessels.
4.15 Litigation.
(a) Except for litigation described on Schedule 4.15(a), there is
no litigation and there are no arbitration proceedings or governmental
proceedings, claims, suits or investigations pending, instituted or, to the
knowledge of any Seller, overtly threatened against any of the Assets or
against any Seller, Trinidad or the Joint Venture, which (i) seeks permanent
injunctive relief, (ii) if adversely determined would delay or prevent the
consummation of the transactions contemplated by this Agreement, or (iii) would
reasonably be expected to have a material adverse effect on any Seller,
Trinidad or the Business taken as a whole, or create an Encumbrance on, or
otherwise affect the ownership or operation of, any of the Assets.
(b) Except for matters described on Schedule 4.15(b), neither
Seller, Trinidad, the Joint Venture, nor any of the Assets, is subject to any
judicial or administrative judgment, order or decree in a manner that is
material and adverse to the Business taken as a whole, or that
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would create an Encumbrance on, or otherwise affect the ownership or operation
of, any of the Assets. Except as referred to on Schedule 4.15(b), neither
Seller, Trinidad, the Joint Venture, nor any Affiliate of any Seller or
Trinidad has received any notifications or charges in writing from any
Governmental Entity involving alleged violations of or alleged obligations to
remediate under occupational safety and health or water quality or other
environmental matters that materially and adversely affect the conduct of the
Business by such Seller, Trinidad or the Joint Venture, or that have not been
finally dismissed or otherwise disposed of.
4.16 Governmental Approval. To the knowledge of each Seller,
except for (i) the filing by Christen Sveaas of a Notification and Report form
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the expiration or early termination of the waiting period provided
for therein, (ii) the filing by Viking, Ocean and Partner, as applicable, with
the U.S. Department of Transportation, Maritime Administration, of a Request
for Transfer of Ownership, Registry and Flag of Foreign Flag Vessel under
Maritime Administration Contract with Foreign Owner on Form MA-29B, (iii) the
issuance of a Transfer Order by the Maritime Administration authorizing the
transfer of each of the Vessels as contemplated by this Agreement, (iv) the
filing by Viking, Ocean and Partner, as applicable, of a Request for Issuance
of a Certificate of Permission for Sale for the Purpose of Reregistration and
of a Bill of Sale covering each of the Vessels (other than the Joint Venture
Vessel and the Merger Vessel) with the Liberian Ship Registry, Vessel
Registration Division, and (v) the filing by Trivium of a Certificate of Merger
with Registrar of Companies of the British Virgin Islands, respectively, no
consent, approval, waiver, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required to be obtained
or made in connection with the execution and delivery of this Agreement by
Seller or the consummation by any Seller of the transactions contemplated
hereby.
4.17 Compliance With Laws.
(a) Except as set forth on Schedule 4.17(a), to the knowledge of
each Seller, neither Seller, Trinidad nor the Joint Venture is in violation of
or in default under any Applicable Law relating to the ownership of the Assets
or operation of the Business, including, without limitation, any applicable
maritime law relating to the Vessels, which violation or default materially and
adversely affects the ownership of the Assets or operation (as presently
conducted) of the Business taken as a whole, and no claim is pending or, to the
knowledge of any Seller, overtly threatened with respect to any such matters
which if determined adversely to such Seller, Trinidad or the Joint Venture
would have such effect.
(b) Without limiting Section 4.17(a) and except as set forth on
Schedule 4.17(b), to the knowledge of each Seller, each Seller, Trinidad and
the Joint Venture has conducted the Business in accordance in all material
respects with Applicable Environmental Laws, and neither Seller, Trinidad nor
the Joint Venture is subject to any pending or, to the knowledge of any Seller,
overtly threatened investigation or inquiry by any Governmental Entity, or to
any remedial obligations, under any Applicable Environmental Laws.
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<PAGE> 21
4.18 Employees.
(a) Set forth on Schedule 4.18(a) is a list of the name, social
security number (or the equivalent), and dates of employment by any Seller of
each employee of the Business on the date hereof, together with the position
held by such employee and the total amounts of salary, bonuses and other
compensation paid or payable by such Seller to each such person for the current
fiscal year and the immediately preceding fiscal year. Each Seller has
maintained adequate and suitable records regarding each person employed by such
Seller, and has made such records available to Buyer.
(b) Except as set forth on Schedule 4.18(b), no Seller is a party
to any employment agreement with any employees of the Business, and the
employment of each employee of the Business may be terminated by such Seller on
not more than 14 days notice to such employee without liability to such Seller,
subject to the Applicable Law. The consummation of the transactions
contemplated by this Agreement will not result in the incurring of any
severance pay obligations to any employee of the Business. Except as set forth
in Schedule 4.15(a), there are no outstanding claims asserted in writing
against any Seller by any person who is or was employed by any Seller in
relation to the Business or any dispute with any material number of class of
the employees.
4.19 Employee Benefits. Set forth on Schedule 4.19 is a list
identifying each employee benefit plan, policy, agreement or arrangement,
including without limitation, pension, stock option, share saving, deferred
compensation, profit sharing, incentive, bonus and severance pay plans and
arrangements, whether legally enforceable or not, which (i) is, has been or is
proposed to be entered into, administered, maintained or contributed to by any
Seller, or (ii) covers any employee or former employee of the Business (each, a
"Benefit Plan"). Each Benefit Plan has been maintained and contributed to in
compliance with the requirements of Applicable Law. Each Seller has paid and
discharged when due all obligations and liabilities arising under such plans
and Applicable Law of a character which, if not paid or discharged, are likely
to result in the imposition of an Encumbrance or the assertion of a liability
enforceable against the Assets.
4.20 Labor Relations.
(a) Except as disclosed on Schedule 4.20(a), (i) there are no
collective bargaining agreements or other similar agreements, arrangements, or
understandings, written or oral, with employees of the Business as a group to
or by which any Seller or Trinidad is a party or is bound; (ii) no employees of
the Business are represented by any labor organization, collective bargaining
representative or group of employees; (iii) no labor organization, collective
bargaining representative or group of employees claims to represent a majority
of the employees of the Business; (iv) neither Seller nor Trinidad has been
involved with any representational campaign by any union or other organization
or group seeking to become the collective bargaining representative of any
employees of the Business, or been subject to or, to the knowledge of any
Seller, overtly threatened with any strike or other concerted labor activity or
dispute; and (v) neither Seller nor Trinidad is obligated to bargain
collectively with respect to wages, hours and other terms and conditions of
employment with any recognized or certified
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labor organization, collective bargaining representative or group of employees
with respect to employees of the Business.
(b) To the knowledge of each Seller, each Seller and Trinidad is
in compliance with all Applicable Laws pertaining to employment and employment
practices and wages, hours, and other terms and conditions of employment in
respect of all employees of the Business, and neither Seller nor Trinidad is
engaged in any unfair labor practices or unlawful employment practices with
respect to employees of the Business. There is no pending or, to the knowledge
of any Seller, overtly threatened action, claim, investigation or inquiry by or
before, and neither Seller nor Trinidad is subject to any judgment, order,
writ, injunction or decree of or inquiry from, any Governmental Entity in
connection with any current, former or prospective employees of the Business.
4.21 Tax Matters. Except as disclosed on Schedule 4.21 or as would
not have a material adverse effect on the Assets or the operations of the
Business:
(a) Each of Viking (with respect only to the Business),
Southwestern, Ocean, Partner, Trinidad and Trivium has (and as of the Closing
Date will have) duly filed all federal, state, local and foreign Tax Returns
required to be filed by or with respect to them with the applicable taxing
authority, and no extensions with respect to such Tax Returns have (or as of
the Closing Date will have) been requested or granted;
(b) Each of Viking (with respect only to the business),
Southwestern, Ocean, Partner, Trinidad and Trivium has (and as of the Closing
Date will have) paid all Taxes due, or claimed by any taxing authority to be
due, from or with respect to it, except Taxes that are being contested in good
faith by appropriate legal proceedings;
(c) There has been no issue raised or adjustment proposed (and
none is pending) by any taxing authority in connection with any of the Tax
Returns of Viking (with respect only to the Business), Southwestern, Ocean,
Partner, Trinidad or Trivium that has not been resolved or paid, and no such
issues raised could reasonably be expected to result in a proposed tax
deficiency to any such Seller or Trinidad for any other period not so examined;
(d) All Taxes that are required to be withheld or collected by
each of Viking (with respect only to the Business), Southwestern, Ocean,
Partner, Trinidad and Trivium have been duly withheld or collected and to the
extent required, have been paid or properly segregated or deposited as required
by Applicable Law. Each of Viking (with respect only to the Business),
Southwestern, Ocean, Partner, Trinidad and Trivium has (and as of the Closing
Date will have) made all deposits required with respect to Taxes;
(e) Neither Viking (with respect only to the Business),
Southwestern, Ocean, Partner, Trinidad nor Trivium has waived the statute of
limitations on the right of any taxing authority in connection with its Tax
Returns or otherwise made any special arrangements with any taxing authority.
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4.22 Financial Statements.
(a) Viking has delivered to Buyer accurate and complete copies of
its audited consolidated balance sheet as of December 31, 1994, and the related
audited consolidated statements of profit and loss and cash flows for the year
then ended, and the notes thereto, and of its unaudited preliminary balance
sheet as of December 31, 1995 and the related unaudited preliminary statements
of profit and loss and cash flows for the year then ended, and the notes
thereto; Southwestern has delivered to Buyer accurate and complete copies of
such Seller's audited consolidated balance sheet as of December 31, 1994 and
1995, and the related audited consolidated statements of income, stockholders'
equity, and cash flows/changes in financial position for the years then ended
and the year ended December 31, 1993, and the notes and schedules thereto,
together with the unqualified report thereon of independent public accountants
(collectively the "Financial Statements").
(b) The Financial Statements (i) have been prepared from the books
and records of such Seller in conformity with Norwegian generally recognized
accounting principles with respect to Viking, and United States generally
accepted accounting principles with respect to Southwestern, applied on a basis
consistent with preceding years throughout the periods involved, and (ii)
accurately, completely, and in accordance with such principles, fairly present
in all material respects such Seller's consolidated financial position as of
the respective dates thereof and its consolidated results of operations and
cash flows/changes in financial position for each of the periods then ended.
4.23 Books and Records. All of the books and records of Trivium,
Trinidad and the Joint Venture are substantially complete and correct, have
been maintained in accordance with good business practice and in material
compliance with all Applicable Laws, and, in the case of the books of account,
have been prepared and maintained in accordance with applicable generally
accepted accounting principles consistently applied. Such books and records
accurately and fairly reflect, in reasonable detail, all material transactions,
assets and liabilities of Trivium, Trinidad or the Joint Venture, as
applicable.
4.24 Liabilities and Commitments.
(a) Trivium was incorporated on April 18, 1996 for the sole
purpose of acquiring, owning and operating the Merger Vessel. Since the date
of its incorporation, Trivium has conducted no business other than to acquire,
own and operate the Merger Vessel. Trivium has no liabilities, obligations,
contracts or commitments (whether accrued, absolute, contingent, unliquidated,
or otherwise, whether or not known and whether due or to become due), except
liabilities, obligations, contracts and commitments reflected on Schedule
4.24(a).
(b) Trinidad was incorporated on March 13, 1996 for the sole
purpose of establishing and operating the Joint Venture. Since the date of its
incorporation, Trinidad has conducted no business other than to organize and
establish the Joint Venture. Trinidad has no liabilities, obligations,
contracts or commitments (whether accrued, absolute, contingent, unliquidated,
or otherwise, whether or not known and whether due or to become due), except
(i) liabilities and
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<PAGE> 24
obligations associated with its status as a general partner/venturer of the
Joint Venture, (ii) liabilities, obligations, contracts and commitments
associated with Drilling Contracts and Other Contracts entered into by
Trinidad, and (iii) liabilities, obligations, contracts and commitments
reflected on Schedule 4.24(b).
(c) The Joint Venture was established on April 18, 1996 for the
sole purpose of acquiring, owning and operating the Joint Venture Vessel.
Since its inception, the Joint Venture has conducted no business other than to
acquire, own and operate the Vessel. The Joint Venture has no liabilities,
obligations, contracts or commitments (whether accrued, absolute, contingent,
unliquidated, or otherwise, whether or not known and whether due or to become
due), except (i) liabilities, obligations, contracts and commitments associated
with Drilling Contracts and Other Contracts entered into by the Joint Venture,
and (ii) liabilities, obligations, contracts and commitments reflected on
Schedule 4.24(c)
4.25 Capitalization.
(a) The authorized capital stock of Trivium consists of 100 shares of
Trivium Common Stock, all of which shares are issued and outstanding and owned
beneficially and of record by Viking, free and clear of all Encumbrances. All
issued and outstanding shares of Trivium Common Stock are validly issued, fully
paid and nonassessable, and no holder thereof is entitled to preemptive rights.
There are no outstanding options, warrants or rights to purchase, and there are
no other outstanding securities convertible into or exchangeable for, any
shares of Trivium Common Stock.
(b) The authorized capital stock of Trinidad consists of 1,000
shares of Trinidad Common Stock, all of which shares are issued and
outstanding, 990 shares of which are owned beneficially and of record directly
by Viking, and 10 shares of which are owned beneficially and of record by
Viking Management A.S., a wholly-owned subsidiary of Viking, free and clear of
all Encumbrances. All issued and outstanding shares of Trivium Common Stock
are validly issued, fully paid and nonassessable, no holder thereof is entitled
to preemptive rights, and no such shares are subject to any restriction which
would prohibit or restrict the transfer of such shares to Newco as contemplated
by this Agreement. There are no outstanding options, warrants or rights to
purchase, and there are no other outstanding securities convertible into or
exchangeable for, any shares of Trinidad Common Stock.
4.26 Ordinary Course; Absence of Material Adverse Change. Since
April 8, 1996, the Business has been conducted only in the ordinary and usual
course, and there has been no material adverse change in the Assets,
operations, prospects or condition (financial or otherwise) of the Business,
taken as a whole. There is no fact, development or threatened development
known to any Seller that would materially adversely affect the Assets,
operations, or prospects of the Business, taken as a whole, other than such
conditions as may affect the economy or the offshore drilling business
generally.
4.27 No Brokers. Except for Simmons & Company International and
Ringdal Holding A.S. (whose fees in respect of transactions contemplated hereby
shall be paid solely by Seller),
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no Seller has employed or authorized anyone to represent it as a broker or
finder in connection with the transactions contemplated by this Agreement, and
no broker or other person is entitled to any commission or finder's fee from
any Seller in connection with such transactions. Each Seller agrees to
indemnify and hold harmless Buyer from and against any and all losses, claims,
demands, damages, costs and expenses, including, without limitation, reasonable
attorneys' fees and expenses, which Buyer may sustain or incur as a result of
any claim for a commission or fee by a broker or finder acting on behalf of
such Seller.
4.28 Disclosure. No representation or warranty made by any Seller
in this Agreement and no statement of any Seller or its representatives
contained in any document, certificate or other writing furnished or to be
furnished by any Seller pursuant hereto or in connection herewith, taken as a
whole, contains or will contain, at the time of delivery, any untrue statement
of a material fact or omits or will omit, at the time of delivery, to state any
material fact (other than those facts generally recognized to be industry risks
normally associated with the contract drilling business) necessary in order to
make the statements contained therein, in light of the circumstances under
which they are made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization and Existence. Each Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Delaware,
with all necessary corporate power and authority to own and lease the assets it
currently owns and leases and to carry on its business as such business is
currently conducted.
5.2 Qualification. Each Buyer, to its knowledge, is duly
qualified or licensed to transact business as a foreign corporation and is in
good standing in all jurisdictions in which the character of the assets
currently owned or leased by it or the nature of the business currently
conducted by it requires it so to be qualified or licensed, unless the failure
so to qualify or be licensed would not reasonably be expected to have a
material adverse effect on the business or financial condition of such Buyer
and its subsidiaries taken as a whole.
5.3 Charter and Bylaws. Each Buyer has made available to Seller
or its representatives accurate and complete copies of the Certificate of
Incorporation and Bylaws of such Buyer as currently in effect.
5.4 Authority; Etc. The execution and delivery of this Agreement
and all agreements, instruments and documents to be executed and delivered by
each Buyer hereunder, the performance by each Buyer of all the terms and
conditions hereof and thereof to be performed by it, and the consummation of
the transactions contemplated hereby and thereby have been duly authorized and
approved by all necessary corporate action, including without limitation by all
necessary action of the board of directors of each Buyer, and no other
corporate proceedings of
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any Buyer are necessary with respect thereto. All persons who have executed
and delivered this Agreement, and all persons who will execute and deliver the
other agreements, documents and instruments to be executed and delivered by
each Buyer hereunder, have been duly authorized to do so by all necessary
actions on the part of such Buyer.
5.5 Enforceable Agreement. This Agreement constitutes, and each
other agreement or instrument to be executed by any Buyer hereunder, when so
executed and delivered, will constitute, the legal, valid and binding
obligation of such Buyer, enforceable against it in accordance with its terms,
except to the extent the enforceability hereof and thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or other laws relating to or
affecting creditors' rights generally or by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
5.6 No Violations. The execution and delivery of this Agreement
by each Buyer, the fulfillment of and compliance by it with the terms and
conditions hereof and the consummation by it of the transactions contemplated
hereby (including the financing contemplated by Section 8.2) will not:
(a) violate any of the terms of the certificate of incorporation
or bylaws of any Buyer;
(b) result in a breach of or constitute a default under (whether
with notice or the lapse of time or both) any note, bond, mortgage, loan
agreement, indenture or other instrument evidencing borrowed money to which any
Buyer is a party or by which any Buyer is bound or to which any of its assets
is subject or result in the creation of any Encumbrance on any of its assets,
which breach or default would reasonably be expected to have a material adverse
effect on such Buyer's business or financial condition or the results of its
operations or on its ability to perform its obligations hereunder; or
(c) to the knowledge of any Buyer, violate any federal or state
law, statute, rule or administrative regulation or any judgment, order,
injunction or decree of any Governmental Entity applicable to or binding upon
any Buyer or any of its subsidiaries, except that no representation is made as
to the application of any United States antitrust law or regulation to the
transactions contemplated by this Agreement, which violation would reasonably
be expected to have a material adverse effect on Buyer's business or financial
condition or the results of its operations or on its ability to perform its
obligations hereunder.
5.7 Governmental Approval. Except for (i) the filing by Cliffs of
a Notification and Report Form pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the expiration or early termination
of the waiting period provided for therein, (ii) the filing by Newco of an
Application for Registration as a Foreign Maritime Entity with the Minister of
Foreign Affairs of the Republic of Liberia, (iii) the filing by Merger Sub of a
certificate of merger with the Secretary of State of Delaware, and (iv) any
securities filings which may be required in connection with the financing
contemplated by Section 8.2 and the registration rights to be granted pursuant
to Section 3.3(e), respectively, no consent approval, waiver, order or
authorization of, or registration, declaration or filing with, any Governmental
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<PAGE> 27
Entity is required to be obtained or made in connection with the execution and
delivery of this Agreement by Buyer or the consummation by Buyer of the
transactions contemplated hereby.
5.8 Insurance. Buyer maintains with sound and reputable insurers,
and there are currently in full force and effect, policies of insurance with
respect to its assets and operations, in amounts and coverages as are customary
in the oil and gas contract drilling industry.
5.9 Litigation. There is no litigation and there are no
arbitration proceedings or governmental proceedings, suits or investigations
pending, instituted or, to the knowledge of Buyer overtly threatened against
any Buyer or its subsidiaries that could reasonably be expected to have a
material adverse effect on the business or financial condition of Buyer and its
subsidiaries taken as a whole or that, if adversely determined, would delay or
prevent the consummation of the transactions contemplated by this Agreement.
5.10 SEC Filings. Cliffs has filed all reports, registration
statements and other filings, together with any amendments required to be made
with respect thereto, that it has been required to file with the SEC pursuant
to the Securities Act and the Exchange Act. Buyer has heretofore delivered to
Seller accurate and complete copies of all such reports, registration
statements and other filings filed by Cliffs with the Securities and Exchange
Commission since January 1, 1995 (the "Cliffs SEC Filings"). As of their
respective dates, the Cliffs SEC Filings did not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited consolidated interim
financial statements of Cliffs and its subsidiaries included in the Cliffs SEC
Filings present fairly, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the consolidated financial position of Cliffs as of the dates
thereof and its consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end audit adjustments in the case of
any unaudited interim financial statements).
5.11 Absence of Material Adverse Change. As of April 8, 1996,
Cliffs had conducted its business since the date of the then most current
Cliffs SEC Filings only in the ordinary and usual course, and there had been no
material change from and after the date of the then most current Cliffs SEC
Filings, in the operations, prospects or condition (financial or otherwise) of
its business, taken as a whole. As of April 8, 1996, there was no fact,
development or threatened development known to Cliffs that would materially,
adversely affect the operations or prospects of its business, taken as a whole,
other than such conditions as may affect the economy or the offshore drilling
business generally.
5.12 Capitalization. (a) The authorized capital stock of Cliffs
consists of (i) 15,000,000 shares of Cliffs Common Stock, of which 6,190,928
shares were outstanding on April 23, 1996, and (ii) 3,000,000 shares of
preferred stock, without par value, of which no shares were outstanding on
April 23, 1996. Except for stock options or deferred stock awarded pursuant to
Cliffs' Incentive Equity Plan, there are no outstanding options, warrants or
rights to purchase, and there are no other outstanding securities convertible
into or exchangeable for, any shares of
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Cliffs Common Stock on the date of this Agreement. None of the outstanding
shares of Cliffs Common Stock are covered by any agreement granting
registration rights of any kind.
5.13 Acquisition Shares. The Acquisition Shares have been duly
authorized for issuance and, if and when issued and delivered by Cliffs in
accordance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable. The issuance of the Acquisition Shares under this
Agreement is not subject to any preemptive or similar rights.
5.14 No Brokers. Except for Jefferies & Co. (whose fee in respect
of the transactions contemplated hereby shall be paid solely by Buyer), no
Buyer has employed or authorized anyone to represent it as a broker or finder
in connection with the transactions contemplated by this Agreement, and no
broker or other person is entitled to any commission or finder's fee from any
Buyer in connection with such transactions. Each Buyer agrees to indemnify and
hold harmless Seller from and against any and all losses, claims, demands,
damages, costs and expenses, including, without limitation, reasonable
attorneys' fees and expenses, which Seller may sustain or incur as a result of
any claim for a commission or fee by a broker or finder acting on behalf of
such Buyer.
5.15 Disclosure. No representation or warranty made by any Buyer
in this Agreement and no statement of Buyer or its representatives contained in
any document, certificate or other writing furnished or to be furnished by any
Buyer pursuant hereto or in connection herewith, contains or will contain, at
the time of delivery, any untrue statement of a material fact or omits or will
omit, at the time of delivery, to state any material fact (other than those
facts generally recognized to be industry risks normally associated with the
contract drilling business) necessary in order to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller to proceed with the Closing contemplated by
this Agreement are subject to the satisfaction, on or before the Closing Date,
of all the following conditions, any once or more of which may be waived, in
whole or in part, by Seller:
6.1 Accuracy of Representations and Warranties. The
representations and warranties of each Buyer contained in this Agreement shall
be true and correct in all material respects as of the Closing Date with the
same effect as though made on the Closing Date, except as otherwise
specifically contemplated by this Agreement.
6.2 Covenants and Agreements Performed. Each Buyer shall have
complied on or before the Closing Date in all material respects with each of
its covenants or agreements contained in this Agreement to be performed on or
before the Closing Date.
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6.3 Officer's Certificate. Seller shall have received a
certificate in the form of Exhibit 6.3 hereto, dated as of the Closing Date, of
the President or a Vice President of Cliffs, on behalf of each Buyer,
certifying as to the matters specified in Sections 6.1 and 6.2.
6.4 Legal Opinion. Seller shall have received from Griggs &
Harrison P.C., counsel to each Buyer, an opinion dated the Closing Date,
substantially in the form of Exhibit 6.4 hereto.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to proceed with the Closing contemplated by
this Agreement are subject to the satisfaction, on or before the Closing Date,
of all the following conditions, any one or more of which may be waived, in
whole or in part, by Buyer:
7.1 Accuracy of Representations and Warranties. The
representations and warranties of each Seller contained in this Agreement shall
be true and correct in all material respects as of the Closing Date with the
same effect as though made on the Closing Date, except as otherwise
specifically contemplated by this Agreement.
7.2 Covenants and Agreements Performed. Each Seller shall have
complied on or before the Closing Date in all material respects with each of
its covenants or agreements contained in this Agreement to be performed on or
before the Closing Date.
7.3 Officer's Certificates.
(a) Buyer shall have received a certificate in the form of Exhibit
7.3(a) hereto, dated as of the Closing Date, of the Chairman of Viking, on
behalf of Viking, Southwestern, Ocean and Trivium, certifying as to the matters
specified in Sections 7.1 and 7.2 with respect to Viking, Southwestern and
Trivium.
(b) Buyer shall have received a certificate in the form of Exhibit
7.3(b) hereto, dated as of the Closing Date, of the President or Vice President
of Partner, certifying as to the matters specified in Sections 7.1 and 7.2 with
respect to Partner.
7.4 Legal Opinion.
(a) Buyer shall have received from Gardere Wynne Sewell & Riggs,
L.L.P., Texas counsel to each Seller, Trinidad and Ringdal, an opinion dated
the Closing Date, substantially in the form of Exhibit 7.4(a) hereto.
(b) Buyer shall have received from Gram Hambro & Garman, Norwegian
counsel to Viking, an opinion dated the Closing Date, substantially in the form
of Exhibit 7.3(b) hereto.
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(c) Buyer shall have received from Thommessen Krefting Greve Lund,
Norwegian counsel to Ringdal, an opinion dated the Closing Date, substantially
in the form of Exhibit 7.3(c) hereto.
(d) Buyer shall have received from Trinidadian counsel to
Trinidad, an opinion dated the Closing Date, in such form as may be acceptable
to Buyer.
7.5 Financing by Buyer. Buyer shall have obtained net proceeds of
financing for the purchase of the Assets, on terms acceptable to Buyer, in its
sole discretion, in an amount not less than the Cash Consideration.
7.6 Absence of Material Adverse Change. Since the date of this
Agreement, there shall not have occurred a material adverse change (other than
such conditions as may affect the economy or the offshore drilling business
generally) in the Assets, operations, prospects or condition (financial or
otherwise) of the Business, taken as a whole.
ARTICLE VIII
COVENANTS AND AGREEMENTS OF THE PARTIES BEFORE,
RELATING TO AND SUBSEQUENT TO THE CLOSING
Seller and Buyer hereby covenant and agree as follows:
8.1 Actions with Respect to Closing. Each Seller will use its
Best Efforts to obtain the satisfaction of the conditions to Closing applicable
to Seller set forth in Article VII as soon as practicable. Each Buyer will use
its Best Efforts to obtain the satisfaction of the conditions to Closing
applicable to Buyer set forth in Article VI as soon as practicable.
8.2 Action of Buyer Regarding Financing. Buyer shall promptly
after the date of this Agreement exercise its Best Efforts to obtain financing
in an amount not less than the Cash Consideration. Buyer shall keep Seller
informed from time to time as to the status of such financing. Seller shall
cooperate with Buyer, in Buyer's preparation of any registration statement,
offering memorandum or prospectus of Buyer relating to such financing, by
providing such information relating to Seller, the Assets, the Business, and
the transactions contemplated by this Agreement as may be reasonably requested
by Buyer. If Buyer obtains financing through an underwritten offering and sale
or a private placement of its securities, Buyer and Seller agree that a
preliminary closing of the transactions contemplated hereby shall be held on
the date on which Buyer enters into one or more underwriting agreements or
purchase agreements with its underwriters or sales agents, as applicable, for
the issuance of Buyer's securities, which date will be approximately four
Business Days prior to the Closing Date (the "Preliminary Closing"). Buyer
agrees to furnish Seller with three Business Days prior written notice of such
Preliminary Closing. At any such Preliminary Closing, the closing documents
under this Agreement shall be presented and examined by Buyer and Seller and
all documents deemed satisfactory shall be held in escrow until the Closing.
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8.3 Certain Financial Statements. Each Seller agrees to prepare,
or cause the preparation of, and to deliver to Buyer as soon as practicable
following the date of this Agreement for inclusion in any registration
statement, prospectus or offering memorandum of Buyer in connection with the
financing contemplated by Section 8.2 or in any Form 8-K or other form of Buyer
relating to the transactions contemplated hereby required to be filed with the
SEC, such financial statements relating to Seller, the Business or the Assets
as Buyer may reasonably request in writing from Seller. Such financial
statements may consist of (i) such audited balance sheets and audited
statements of operations, cash flows and changes in equity together with the
notes thereon and the manually signed accountants' report of Seller's
independent public accountants covering such financial statements pursuant to
Regulation S-X promulgated by the SEC, and (ii) such unaudited interim balance
sheets and unaudited interim statements of operations, cash flows and changes
in equity, if any, in each case as Buyer shall reasonably deem to be required
for the registration statement, prospectus or offering memorandum used by Buyer
in connection with such financing, by Paragraph (a) of Item 7 of Form 8-K or by
such other required form. Nothing in this Section 8.3 shall require Viking to
translate to English any documents the originals of which are in a language
other than English or to restate any accounting matter so as to conform it to
any accounting standards other than generally recognized accounting principles
in Norway. Buyer shall pay the fees of independent public accountants of
Seller directly relating to the audit of such financial statements and the
participation, if any, of such independent public accountants in the
preparation of the registration statements or other reports required to be
filed by Buyer with the SEC in connection with the transactions contemplated
hereby.
8.4 Access; Confidentiality. Until Closing, each Seller shall
give the officers, attorneys, accountants and other authorized representatives
of Buyer full access, during normal business hours upon Buyer's reasonable
prior notice to such Seller, to all of the records, properties and personnel of
such Seller and its Affiliates relating to the Business and the Assets. Any
such inspection of the Assets shall be at the sole risk and expense of Buyer,
and Buyer agrees to indemnify Seller from any and all claims associated with
such inspection by Buyer. Each Seller will furnish the representatives of
Buyer during such period with all information as such representatives may
reasonably request regarding the Business and the Assets and shall use its Best
Efforts to cause the employees, accountants and attorneys of such Seller to
cooperate fully with such representatives in connection with such review and
examination and to make full disclosure to Buyer of all material facts known to
them regarding the Assets and the Business; provided, however, that Buyer will
hold in strict confidence and not use for purposes other than those
contemplated by this Agreement the documents and information furnished
concerning Seller, the Business or the Assets. Such confidence shall be
maintained at all times prior to the Closing and for so long after the
termination of this Agreement as the information remains confidential and
generally unavailable to the public or others in the industry. If the
transactions contemplated by this Agreement shall not be consummated, all such
documents and all copies thereof shall immediately thereafter be returned to
Seller. The confidentiality obligations set forth in this Section 8.4 shall
not apply to information (i) in the public domain, (ii) obtained by Buyer from
a third party source with the right to disclose such information, or (iii) with
respect to which disclosure is required by law in the opinion of counsel
reasonably acceptable to Seller.
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<PAGE> 32
8.5 Conduct of Business and Preservation of Assets. Until
Closing, Buyer and each Seller agree to cooperate with each other to effect an
orderly transition of the ongoing operation of the Assets (including jointly
contacting customers of the Business and informing them of this Agreement and
the transfer to Buyer of the Business), and each Seller shall use its Best
Efforts to preserve, maintain and protect the Business and the Assets, and to
maintain the relationships with such Seller's existing employees, customers and
suppliers relating to the Business and the Assets. From and after the date of
this Agreement and until the Closing Date, (a) each Seller will conduct its
Business, and each Seller (other than Partner) will cause Trinidad and the
Joint Venture to conduct their Business, only in the ordinary course, and (b)
without the prior express written consent of Buyer, no Seller will, and no
Seller will permit any of its Affiliates to, (i) make any material change in
the conduct of the ongoing operation of the Business, (ii) enter into any new
drilling contracts with respect to the Vessels, unless in such Seller's good
faith opinion such contracts may reasonably be expected to have a duration of
90 days or less, enter into any other contracts or agreements with respect to
the Vessels other than in the ordinary course of business, or amend, in any
respect materially adverse to Seller, Trinidad, the Joint Venture or Buyer, any
Drilling Contract, Chartered Vessel Contract or Other Contract, (iii) move the
SOUTHWESTERN 110 once it arrives in Trinidadian waters, out of Trinidadian
waters, move the SOUTHWESTERN 160 out of waters offshore Qatar, or move any
other Vessel out of the U.S. Gulf of Mexico, respectively, (iv) enter into or
permit any of its subsidiaries to enter into any joint venture, partnership or
the like pertaining in any respect to the Assets or the Business, (v) merge or
consolidate with or into another person or entity, or sell all or substantially
all of its assets, and with respect only to Viking, if such merger,
consolidation or sale would have a material adverse effect on the ownership of
the Assets or the operation of the Business, (vi) liquidate or dissolve or seek
protection from creditors under applicable bankruptcy law, or (vii) commit
itself to do any of the foregoing.
8.6 Capital Expenditures. Seller (other than Partner) has
provided to Buyer a copy of the authorization for expenditures dated February
27, 1996 specifying the anticipated costs associated with the refurbishment of
the SOUTHWESTERN 154, and Partner has provided to Buyer a copy of the
reactivation budget dated January 30, 1996 specifying the anticipated
refurbishment and reactivation costs associated with the SOUTHWESTERN 180.
Prior to Closing, each Seller shall deliver to Buyer accurate and complete
copies of such Seller's monthly reports reflecting the status of capital
expenditure payments with respect to the SOUTHWESTERN 154, the SOUTHWESTERN
160, the SOUTHWESTERN 110 and the SOUTHWESTERN 180.
8.7 Vessel Improvements.
(a) Seller (other than Partner) shall completely refurbish the
SOUTHWESTERN 160 in accordance with all specifications of, and so that said
Vessel is acceptable to, the operator in Qatar; provided, however, that in the
event that any such improvements with respect to the SOUTHWESTERN 160 have not
been completed as of the Closing Date, Buyer may complete such improvements
following the Closing Date at Seller's sole risk and expense. Buyer and Seller
agree that for purposes of this Agreement, the operator shall be deemed to have
accepted the Vessel as having been improved or modified in accordance with the
operator's specifications
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except to the extent that the operator has notified Buyer of any deficiencies
with respect to the Vessel within 60 days following commencement of drilling
operations by such Vessel. Notwithstanding the foregoing, Seller shall bear
the cost of any improvement of or modification to the SOUTHWESTERN 160 which is
expressly required pursuant to the terms of the current Drilling Contract
covering such Vessel, without regard to the date of notification of such
deficiency by the operator. Seller shall, promptly upon request of Buyer,
reimburse Buyer for all costs and expenses actually incurred by Buyer with
respect to the foregoing items.
(b) Seller (other than Partner) shall completely refurbish the
SOUTHWESTERN 154 in accordance with the authorization for expenditures dated
February 27, 1996 with respect to same, and Partner shall completely refurbish
the SOUTHWESTERN 180 in accordance with the reactivation budget dated January
30, 1996; provided, however, that in the event that any such improvements with
respect to the SOUTHWESTERN 154 or the SOUTHWESTERN 180 have not been completed
as of the Closing Date, each such Seller and Buyer agree that (i) the Cash
Consideration will be reduced (regardless of prior cost overruns with respect
to capital expenditure payments already incurred) (A) with respect to the
SOUTHWESTERN 154 by the amount allocated to the unfinished items as reflected
in the authorization for expenditures dated February 27, 1996, and (B) with
respect to the SOUTHWESTERN 180 by the amount of $4,786,150 as reflected in the
reactivation budget dated January 30, 1996, as applicable, and (ii) Seller
shall have no liability for failing to commence or complete such refurbishments
prior to the Closing Date or for the costs (including cost overruns) of
completing the unfinished refurbishments subsequent to the Closing Date. With
respect to the SOUTHWESTERN 154, Buyer and Seller (other than Partner) shall
attempt to agree, on or before three Business Days prior to the Closing Date,
on the items (or the portions thereof) which have not been completed. In the
event that Buyer and Seller (other than Partner) cannot timely reach agreement,
Seller shall engage Noble Denton & Associates, at its sole expense, to
ascertain the items (or portions thereof) which have not been completed, and
the determination of Noble Denton & Associates with respect to such items shall
be final and binding on Buyer and Seller for purposes of the aforementioned
reduction in the Cash Consideration payable by Buyer.
8.8 Vessel Loss. Each Seller (with respect to its Vessels) and
Viking (with respect to the Joint Venture Vessel) agrees to maintain, or cause
to be maintained, insurance on each such Vessel of a type and in an amount not
less than the amount set forth on Schedule 4.14 through the Closing Date.
Subject to the provisions of Sections 7.6 and 11.1(c)(ii):
(a) If any Vessel (other than the Joint Venture Vessel or the
Merger Vessel) shall become an actual, constructive, arranged or compromised
total loss (as determined by the applicable Seller's insurance underwriter's
marine surveyor) prior to the Closing Date, Newco shall not be required to
purchase such Vessel. If the Joint Venture Vessel shall become an actual,
constructive, arranged or compromised total loss (as determined by the Joint
Venture's insurance underwriter's marine surveyor) prior to the Closing Date,
Newco shall not be required to purchase the Trinidad Common Stock. If the
Merger Vessel shall become an actual, constructive, arranged or compromised
total loss (as determined by Trivium's insurance underwriter's marine surveyor)
prior to the Closing Date, Merger Sub shall not be required to consummate the
Merger. Additionally, in each case, (i) Buyer shall not be entitled to any
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proceeds of insurance associated with such loss, (ii) the Cash Consideration
shall be reduced by the amount allocated to such Vessel pursuant to Schedule
8.8(a), (iii) the term "Assets" shall be deemed not to include such Vessel, and
(iv) the other provisions of this Agreement shall continue to be in effect and
the Closing shall take place in the manner contemplated herein.
(b) If any Vessel sustains damage not amounting to an actual,
constructive, arranged or compromised total loss prior to the Closing Date,
either (i) the Seller of such Vessel (or Viking, with respect to the Joint
Venture Vessel and the Merger Vessel) shall repair or cause to be repaired the
damage to the Vessel at such Seller's own expense, or (ii) in the case of
damage to a Vessel in respect of which insurance proceeds are available, Buyer,
at its option, may require such Seller to assign to Buyer at the Closing the
rights such Seller has to receive insurance proceeds in respect of such loss or
damage and pay to Buyer the amount by which any such insurance proceeds
otherwise payable to Buyer are reduced by any deductible or deductibles under
the terms of the relevant policy or policies (offset by any amounts paid
through the Closing Date by such Seller for such repair), and, in the case of
either (i) or (ii) above, Buyer shall remain obligated to purchase the Assets
on the Closing Date and the Cash Consideration shall not be reduced; provided,
however, that if Buyer does not receive sufficient insurance proceeds as may be
reasonably necessary to restore the damaged Vessel to its prior condition, such
Seller shall restore the Vessel to its prior condition or pay to Buyer an
amount reasonably necessary to allow Buyer to restore the Vessel to its prior
condition.
8.9 Removal of Outstanding Recommendations. Prior to or promptly
following Closing, each Seller (with respect to its Vessels) and Viking (with
respect to the Joint Venture Vessel and the Merger Vessel) agrees to remove or
cause the removal at its expense of all outstanding recommendations to class
against any such Vessel (in each case including, without limitation, those
recommendations set forth on Schedule 4.8); provided, however, that outstanding
class recommendations with respect to the SOUTHWESTERN 110 and the SOUTHWESTERN
180 need not be removed by any Seller; and provided further, that with respect
to the SOUTHWESTERN 154, Seller shall not be required to furnish or bear the
cost of furnishing items which may be required to satisfy outstanding class
recommendations against the SOUTHWESTERN 154 for which a reduction in the Cash
Consideration has been taken at Closing pursuant to Section 8.7(b).
8.10 Maintenance of Inventory Levels. Each Seller (with respect to
its Vessels) and Viking (with respect to the Joint Venture Vessel) agrees that
through the Closing Date, it will maintain, or cause to be maintained,
Inventory with respect to each such Vessel, including spare components and
parts, supporting inventory and stores on board, in such amounts and of such
quality as would in all material respects be (i) in accordance with past
practice of Southwestern and comparable to historical levels, and (ii)
sufficient to comply with any applicable Drilling Contract or Other Contract.
8.11 Removal of Encumbrances. Each Seller (with respect to its
Vessels) and Viking (with respect to the Joint Venture Vessel and the Merger
Vessel) shall cause the Encumbrances referred to in Schedule 8.11 to be removed
and terminated on or before the Closing Date and
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shall furnish to Buyer at the Closing evidence of such removal and termination
reasonably satisfactory to Buyer.
8.12 Litigation. Until Closing, each Seller will promptly notify
Buyer of any action, suit, proceeding, claim or investigation that is commenced
or, to its knowledge, overtly threatened against such Seller or its Affiliates
which relates to or affects the Business, the Assets or this Agreement or the
transactions contemplated hereby, and Buyer will promptly notify Seller of any
action, suit, proceeding, claim or investigation that is commenced or, to its
knowledge, overtly threatened against Buyer which relates to and materially and
adversely affects Buyer and its business taken as a whole or affects this
Agreement or the transactions contemplated hereby.
8.13 Performance Bonds.
(a) On or before the Closing Date, (i) Buyer shall provide a bank
letter of credit or performance bond acceptable to Occidental Petroleum of
Qatar Ltd. in the format set forth in Exhibit G to that certain Offshore
Drilling Contract dated February 13, 1996, between Occidental Petroleum of
Qatar, Ltd. and Southwestern, and (ii) Buyer shall provide to the U.S.
Department of Transportation, Maritime Administration, a U.S. commercial surety
bond or other surety acceptable to the Maritime Administrator for purposes of
securing the obligations of Buyer pursuant to an Approval Notice and Agreement
issued by the U.S. Department of Transportation, Maritime Administration, and
executed by Buyer, with respect to each of the Vessels.
(b) With respect to any other performance or other similar bond or
letter of credit or any certificate of financial responsibility or similar
evidence of financial accountability described in Schedule 4.13 posted or
procured by any Seller in connection with such Seller's ownership or operation
of any of the Vessels or the performance under a Drilling Contract, Buyer and
such Seller shall cooperate with each other in order (i) for such Seller to
obtain the release of any such bond, letter of credit or certificate, and (ii)
to the extent required, for Buyer to obtain a substitute bond, letter of credit
or certificate or to assume the existing bond, letter of credit or certificate
of such Seller. Buyer shall reimburse such Seller for all out-of-pocket costs
incurred by such Seller as a result of its leaving a performance or similar
bond, letter of credit or certificate in place after the Closing Date in order
to permit Buyer to conduct the Business after the Closing Date; provided,
however, that such Seller shall not be required to maintain in force and effect
any such bond, letter of credit or certificate for more than 120 days after the
Closing Date.
8.14 Employees.
(a) Between the date of this Agreement and Closing, (i) no change
will be made in the rate of remuneration or the emoluments or pension benefits
of any employee of the Business, and (ii) no Seller will hire or terminate the
employment of any employee of the Business except in the ordinary course of
business consistent with past practice or as required under a Drilling
Contract.
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(b) No portion of the assets of any Benefit Plan, written or
unwritten, heretofore sponsored or maintained by any Seller (and no amount
attributable to any such Benefit Plan) shall be transferred to Buyer, and Buyer
shall not incur any liability in connection with, nor be required to continue,
any such Benefit Plan after the Closing Date. The amounts payable under any
Benefit Plan shall be determined with reference to the date of the event by
reason of which such amounts become payable, without regard to conditions
subsequent, and Buyer shall not be liable for any claim for insurance,
reimbursement or other benefits payable by reason of any event which occurs
prior to the Closing Date. All amounts payable directly to employees, or to
any fund, program, arrangement or plan maintained by any Seller therefor shall
be the responsibility and liability of such Seller.
(c) As of the Closing Date, Buyer will offer employment to
substantially all the employees of the Business who work on the Vessels and
substantially all of the general and administrative employees of the Business
at a salary and on other terms and conditions of employment which, when
considered in the aggregate, are not less favorable than those currently being
provided to such employees, including without limitation, plans (considered in
the aggregate) not less favorable than those listed on Schedule 4.19. To the
extent that service is relevant for purposes of eligibility, participation,
vesting, benefit contributions, benefit calculations or allowance (including
without limitation, entitlement to vacation and sick days) under any benefit
plan, program or arrangement established or maintained by Buyer for the benefit
of its employees, such plan, program or arrangement shall credit any employees
hired by Buyer pursuant to this Section for service on or prior to the Closing
Date with the Seller or any Affiliate thereof, to the extent allowed by
Applicable Law. Notwithstanding anything in this Agreement to the contrary,
nothing herein shall be construed as granting any employee of the Business any
right to employment with Buyer for any period of time or implying or creating
any terms or conditions of employment.
(d) Each Seller shall use its Best Efforts to assist Buyer in
employing as new employees of Buyer, all such persons presently engaged in the
Business that Buyer wishes to employ. Subject to Buyer's compliance with
Section 8.14(c), each Seller shall be solely responsible for and shall pay any
and all severance pay obligations due to any employees of the Business as a
result of the cessation of such Seller's employment of such employees.
8.15 Property Taxes. All ad valorem taxes, utility and other
service charges and other taxes, fees and expenses relating to the Business or
the Assets for all periods prior to the Closing shall be the obligation of
Seller, as applicable, and for all periods following the Closing shall be the
obligation of Buyer. Each Seller shall promptly pay to Buyer from time to time
the prorated share of all such taxes, fees and expenses for which such Seller
is responsible under this Section 8.15 upon Buyer's request accompanied by
appropriate documentation that such taxes, fees and expenses are due and
payable.
8.16 Other Taxes. Each Seller (with respect to its Assets) and
Viking (with respect to Assets of the Joint Venture) shall be liable for and
shall pay or cause to be paid all applicable sales, use, transfer, stamp,
recording, value added or similar taxes and assessments resulting from the
consummation of the transactions contemplated hereby which are levied by any
taxing
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authority based on the location of such Assets as of the Closing Date;
provided, that no Seller shall be liable for any such taxes or assessments
which are levied by any taxing authority into whose jurisdiction Buyer moves
the Assets subsequent to Closing. Buyer and Seller agree to cooperate to
obtain all available exemptions from such taxes. Seller and Buyer agree to
cooperate with each other in order to reduce the amount of taxes, import duties
or other assessments imposed on or charged to Seller or Buyer as a result of
the consummation of the transactions contemplated by this Agreement, including
by postponing the date of transfer of legal title to any Vessel until
completion of the Drilling Contract under which such a Vessel is operating on
the Closing Date; provided, that neither Seller nor Buyer shall be obligated to
take any action that it determines in its sole discretion may subject it to
additional taxes, liabilities or expenses.
8.17 Public Statements. Prior to issuing any news release or
otherwise making any public announcement concerning this Agreement or the
transactions contemplated hereby, Buyer and Seller shall consult with each
other regarding the proposed contents thereof (but no approval thereof shall be
required).
8.18 Books and Records. Seller and Buyer shall have the right, at
their own expense, at any time or from time to time within five years after the
Closing Date during reasonable business hours upon reasonable notice to
inspect, and make copies of or extracts from, any of the books and records
directly relating to the ownership of the Assets or operation of the Business
prior to the Closing Date in the possession of Seller or Buyer or their
respective Affiliates, as the case may be. None of the books and records in
the possession of Seller (other than Viking) or Buyer, as the case may be,
shall be destroyed prior to December 31, 2001 or five years after generated,
whichever is earlier, without the consent of the other unless first reproduced
by microfilm or any other similar process. In the event that either Seller
(other than Viking) or Buyer shall wish to destroy any of such books and
records at any time or from time to time after the Closing Date, such party
shall give not less than 60 days' notice to the other party and such other
party shall have the right, at its own expense, during reasonable business
hours to remove such books and records and to keep possession of the same.
8.19 Use of Southwestern Name. Buyer shall have the right but not
the obligation to conduct the Business acquired by it at the Closing under the
name "SOUTHWESTERN" or any derivative thereof, including without limitation
"SOUTHWESTERN OFFSHORE CORPORATION." Seller shall have the concurrent right to
use the name "SOUTHWESTERN" after the Closing only for so long as reasonably
necessary for, and solely in connection with, carrying out the winding down of
the Business and operations of Seller. Within 90 days after the Closing Date,
Buyer shall change the name of Trinidad to remove all references to "Viking" in
such name.
8.20 Post-Closing Collection, Payment and Administrative
Procedures.
(a) Buyer and Seller agree that amounts prepaid by Seller which
are attributable to periods extending beyond the Closing Date shall be prorated
between Seller and Buyer as of the Closing Date. Payment by Seller of any
obligations in connection with the Assets or the
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Business which relate in whole or in part to the period on or after the Closing
Date shall be adjusted between Seller and Buyer so that Seller shall be
reimbursed by Buyer for that portion of any obligation paid by Seller which
relates to the period from and after the Closing Date. Within ninety days of
the Closing Date, Seller shall prepare and submit to Buyer a schedule of
payments due to Seller hereunder, and Buyer shall promptly, and in any event
within fifteen days of receipt of such schedules, pay to Seller all undisputed
amounts contained in such schedule and notify Seller of any amounts contained
in the schedule which Buyer disputes, including a detailed description of the
nature of Buyers' dispute.
(b) With respect to Drilling Contracts and Other Contracts in
progress as of the Closing Date, Buyer and Seller agree that all revenues
earned and expenses incurred prior to midnight on the Closing Date shall be for
the account of Seller, and all revenues earned and expenses incurred subsequent
to the Closing Date shall be for the account of Buyer. Subsequent to Closing,
(i) Buyer agrees to deliver to Seller, within three Business Days of Buyer's
receipt of same, any and all (A) monies paid to or received by Buyer in respect
of amounts due Seller, including, but not limited to, payment of receivables,
refunds, rebates, and release of performance or similar bonds or letters of
credit, and (B) inquiries, correspondence or documents received by Buyer
related to such amounts; and (ii) Seller agrees to deliver to Buyer, within
three Business Days of Seller's receipt of same, any and all (A) monies paid to
or received by Seller in respect of amounts due Buyer, and (B) inquiries,
correspondence or documents received by Seller related to such amounts.
8.21 No Shop. Prior to the Closing Date, no Seller and no
Affiliate of any Seller, shall enter into or otherwise participate in
solicitations, negotiations or discussions either directly or through
representatives, with any other corporation, entity or person with respect to
(a) the sale by any such Seller of any of the Assets, or (b) the merger or
consolidation of any such Seller with any other entity and with respect only to
Viking, that would have a material adverse effect on its ownership of the
Assets or the operation of the Business. Each Seller agrees that the remedy at
law for a breach of this Section 8.21 is inadequate and that Buyer shall be
entitled to injunctive relief for any breach of this Section 8.21.
8.22 Continued Effectiveness of Representations and Warranties.
Each of Seller and Buyer shall use its Best Efforts to cause the
representations and warranties made by it herein to continue to be true and
correct on and as of the Closing Date as if made on and as of the Closing Date.
Each Seller and Buyer shall each advise the other promptly in writing of any
condition or circumstance, including without limitation, items which are (or
which should be) disclosed in the Schedules, occurring after the date hereof up
to and including the Closing Date that would cause the representations and
warranties made by it herein to become untrue in any material respect.
8.23 Further Assurances. At and after the Closing Date, and
without further consideration, each Seller shall execute and deliver any
certificates, instruments or agreements, and shall take and do any other
actions and things, as Buyer may reasonably request, to vest, perfect or
confirm of record or otherwise in Buyer any and all right, title and interest
in, to and under any of the Assets, and each Buyer shall execute and deliver
any certificates, instruments
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or agreements, and shall take and do any other actions and things, as Seller
may reasonably request, to perfect, confirm or otherwise assure Seller of the
assumption by Newco of the Assumed Liabilities.
8.24 Parent Guaranty. The Guaranty Agreement executed by Cliffs
pursuant to Section 3.3(e) to guarantee the obligation of Newco to pay, perform
and satisfy the obligations of Viking pursuant to the Parent Guaranty shall be
supported by a standby letter of credit procured by Cliffs, in the original
amount of $4,250,000, issued by a bank and in a form reasonably acceptable to
Viking. Such Guaranty Agreement and the supporting standby letter of credit
shall terminate and be of no further force and effect once Viking is released
by Citibank N.A. from its obligations under the Parent Guaranty. Each of Buyer
and Viking agrees to exercise its Best Efforts to promptly obtain the release
of Viking from the Parent Guaranty. When and if such release is obtained,
Viking agrees to execute and deliver any certificates, instruments or
agreements, and to take and do any other actions and things, as Cliffs may
reasonably request to terminate the Guaranty Agreement and the supporting
standby letter of credit.
8.25 Expenses. Except as otherwise specifically provided herein,
each of the parties hereto shall assume and bear all expenses, costs and fees
incurred or assumed by such party in the preparation and execution of this
Agreement and in compliance with and performance of the agreements and
covenants contained in this Agreement, regardless of whether the transactions
contemplated hereby are consummated.
ARTICLE IX
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1 Ownership of Securities. Each Seller represents and warrants
that, except as set forth on Schedule 9.1, neither it nor any of its Affiliates
has beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of any Cliffs Common Stock.
9.2 Investment Representations.
(a) Each Seller represents that it is acquiring the Acquisition
Shares for its own account for investment and not with a view to, or for sale
or other disposition in connection with, any distribution of all or any part
thereof, except (i) in an offering covered by a registration statement filed
with the SEC under the Securities Act covering the Acquisition Shares, or (ii)
pursuant to an applicable exemption under the Securities Act. In acquiring the
Acquisition Shares, no such Seller is offering or selling, or will offer or
sell, for Cliffs in connection with any distribution of the Acquisition Shares,
and no such Seller has a participation or will participate in any such
undertaking or in any underwriting of such an undertaking except in compliance
with applicable United States federal securities laws.
(b) Each Seller acknowledges that it or its representatives have
been furnished with substantially the same kind of information regarding Cliffs
and its business, assets, results of operations and financial condition as
would be contained in a registration statement prepared in
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connection with a public sale of the Acquisition Shares. Each Seller further
represents that it has had an opportunity to ask questions of and receive
answers from Cliffs regarding Cliffs and its business, assets, results of
operations and financial condition and the terms and conditions of the issuance
of the Acquisition Shares.
(c) Each Seller acknowledges that it can bear the economic risk of
its investment in the Acquisition Shares, and has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of an investment in the Acquisition Shares.
(d) Each Seller understands that the Acquisition Shares, when
issued, will not have been registered pursuant to the Securities Act, that the
Acquisition Shares will be characterized as "restricted securities" under U.S.
federal securities laws, and that under such laws and applicable regulations
the Acquisition Shares cannot be sold or otherwise disposed of without
registration under the Securities Act or an exemption therefrom. Each Seller
further understands that, following consummation of the transactions
contemplated by this Agreement, it may be an "affiliate" of Cliffs for purposes
of Rule 144 promulgated under the Securities Act. In this regard, each Seller
represents that it is familiar with Rule 144 promulgated under the Securities
Act, as currently in effect, and understands the resale limitations imposed
thereby and by the Securities Act. Stop transfer instructions may be issued to
the transfer agent for the Cliffs Common Stock in connection with shares of
Cliffs Common Stock owned by any Seller or its Affiliates.
(e) It is agreed and understood by each Seller that the
certificate representing the Acquisition Shares shall conspicuously set forth
on the face or back thereof, in addition to any legends required by applicable
law or other agreement, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SHARES MAY BE SOLD OR OTHERWISE TRANSFERRED
ONLY (1) PURSUANT TO A REGISTRATION STATEMENT FILED UNDER SUCH ACT, OR
(2) IN ACCORDANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, UNLESS
CLIFFS DRILLING COMPANY (THE "CORPORATION") RECEIVES A WRITTEN OPINION
OF COUNSEL, WHICH OPINION AND COUNSEL ARE REASONABLY SATISFACTORY TO
THE CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
THE RIGHT TO SELL, TRANSFER OR OTHERWISE DISPOSE OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SET
FORTH IN AN ACQUISITION AGREEMENT DATED MAY 13, 1996 BETWEEN THE
CORPORATION AND VIKING SUPPLY SHIPS A.S. ET. AL., A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.
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It is agreed and understood by Buyer that the first legend will be removed upon
the registration of the shares represented by such certificate under the
Securities Act or upon delivery to Buyer of a written opinion of counsel, which
opinion and counsel are reasonably satisfactory to Buyer, to the effect that
such legend is not required.
9.3 Restrictions on Certain Sales.
(a) Subject to subsections (b) and (c) below, each Seller agrees that
prior to the fifth anniversary of the Closing Date, it will not, directly or
indirectly, without the prior written consent of the Board of Directors of
Cliffs, sell, assign, transfer, pledge, encumber or otherwise dispose of shares
of Cliffs Common Stock held by it (including, without limitation, the
Acquisition Shares) in a single transaction or series of related transactions
to a transferee (including its Affiliates and any person or persons which are
to its knowledge, after due inquiry, part of any group, within the meaning of
Section 13(d) of the Exchange Act, which includes such transferee or any of its
Affiliates) which beneficially owns, or after giving effect to such sale would
beneficially own, five percent or more of the then outstanding Voting
Securities.
(b) The restrictions set forth in subsection (a) above shall not be
applicable to sales or other dispositions by any Seller of Cliffs Common Stock:
(i) Effected in the open market by a broker or market
maker;
(ii) After the date of a Change of Control of Cliffs;
(iii) Pursuant to a tender offer or an exchange offer;
(iv) As a result of or in connection with consummation of
a merger, consolidation or sale of all or substantially all the assets
of Cliffs;
(v) In connection with a bona fide lending arrangement
secured by such Cliffs Common Stock; or
(vi) To any person or entity other than a Prohibited
Person.
(c) For purposes of this Section 9.3, "Change of Control" means
the occurrence of either of the following events:
(i) A person or group (within the meaning of Section
13(d)(3) of the Exchange Act) shall attain the beneficial ownership
(within the meaning of rule 13d-3 promulgated under the Exchange Act)
of an equity interest representing at least 50 percent of the Voting
Securities, unless such attainment has been approved by the Board of
Directors of Cliffs; or
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(ii) Cliffs, directly or indirectly, consolidates or
merges with any other person or sells or leases its properties and
assets substantially in an entirety to any other person, unless
approved by the Board of Directors of Cliffs.
(d) As used in this Article IX, a "Prohibited Person" shall mean
any person or entity that (i) either (A) is engaged or is an Affiliate of a
person or entity engaged, or (B) was engaged at any time during the two year
period prior to such sale or disposition or is an Affiliate of a person or
entity that was engaged at any time during the two year period prior to such
sale or disposition, in the oilfield service or contract oil and gas drilling
business (a "Competitive Business"), and (ii) in the case of (A), at the time
of such sale or disposition of Cliffs Common Stock such entity that is engaged
in a Competitive Business has net assets in excess of $15,000,000, or, in the
case of (B), at the time such person ceased to be engaged in the Competitive
Business, such person or entity had net assets in excess of $15,000,000,
provided, however, that an entity engaged primarily in the oil and gas
exploration business shall not be considered to be engaged in a Competitive
Business. As used in this Article IX, an "Affiliate" of a person or entity
shall be limited to (i) an executive officer (as defined in Rule 3b-7 under the
Exchange Act) or director of such person or entity; (ii) a person or entity
that, directly or indirectly, beneficially owns 40% or more of such person or
entity's voting securities, or (iii) a person or entity 40% or more of whose
voting securities are, directly or indirectly, beneficially owned by such
person or entity.
9.4 Restrictions on Certain Actions. Each Seller hereby agrees
(subject to the occurrence of the Closing) that for a period of five years from
the Closing Date:
(a) No such Seller and no Affiliate of any such Seller shall
deposit any Voting Securities into a voting trust or, except as provided in
this Section, subject any Voting Securities to any agreement, arrangement or
understanding with respect to the voting of such Voting Securities or any
agreement having similar effect which entitles any Prohibited Person to
exercise any voting rights with respect to any Voting Securities.
(b) No such Seller and no Affiliate of any such Seller shall make
or in any way participate, directly or indirectly, with any Prohibited Person
in any "solicitation" of "proxies" (as such terms are defined in Regulation 14A
promulgated under the Exchange Act) to vote, or seek to advise or influence any
person with respect to the voting of, any Voting Securities in opposition to
the recommendation of the Board of Directors of Cliffs with respect to any
matter.
(c) No such Seller and no Affiliate of any such Seller shall form,
join, in any way participate in, or encourage the formation of, a partnership,
limited partnership, syndicate or other group (within the meaning of Section
13(d)(3) of the Exchange Act) which includes a Prohibited Person, or otherwise
act in concert with a Prohibited Person, for the purpose of acquiring, holding,
voting or disposing of Voting Securities.
(d) No such Seller and no Affiliate of any such Seller shall act
in concert with a Prohibited Person to seek to affect or influence the control
of management or the Board of Directors of Cliffs or the business, operations
or affairs of Cliffs; provided, however, that
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actions taken solely by exercise of the right to vote Voting Securities of
which any such Seller or any of its Affiliates are the beneficial owners
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) shall not
violate this provision.
(e) Subject to the delivery by Cliffs of proper notice of such
meetings and the absence of a preliminary or permanent injunction or other
final order by any court barring such action, each such Seller and its
Affiliates that beneficially own Voting Securities shall, as stockholders of
Cliffs, be present in person or be represented by proxy at all meetings of
stockholders of Cliffs so that all Voting Securities of which it is the
beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) may be counted for the purpose of determining the presence of a
quorum at such meetings.
ARTICLE X
ADDITIONAL REPRESENTATIONS, WARRANTIES AND GUARANTEES
10.1 Cliffs Guarantee. Cliffs irrevocably and unconditionally
guarantees as primary obligor the due and punctual performance by each other
Buyer of the agreements and obligations of each such Buyer, and the
completeness and accuracy of the representations and warranties made by each
such Buyer, under this Agreement and all agreements and instruments to be
executed by each such Buyer hereunder, including, without limitation, Article
XII INDEMNIFICATION, and the instruments of assumption referred to in Section
3.3(c) with respect to the Assumed Liabilities. This guaranty shall survive
the Closing and any liquidation of any other Buyer.
10.2 Viking Guarantee. Viking irrevocably and unconditionally
guarantees as primary obligor the due and punctual performance by each Seller
(other than Partner) of the agreements and obligations of each such Seller
(other than Partner), and the completeness and accuracy of the representations
and warranties made by each such Seller (other than Partner), including
representations and warranties with respect to Trinidad and the Joint Venture,
under this Agreement and all agreements and instruments to be executed by each
such Seller hereunder, including, without limitation, Article XII
INDEMNIFICATION, and the instruments of conveyance referred to in Section
3.2(a). This guaranty shall survive the Closing and any liquidation of any
such Seller.
10.3 Ringdal Guarantee. Ringdal irrevocably and unconditionally
guarantees as primary obligor the due and punctual performance by Partner of
the agreements and obligations of Partner, and the completeness and accuracy of
the representations and warranties made by Partner, under this Agreement and
all agreements and instruments to be executed by Partner hereunder, including
without limitation, Article XII INDEMNIFICATION, and the instruments of
conveyance referred to in Section 3.2(a); provided, however, that in no event
shall Ringdal guaranty any obligation Partner may have with respect to
refurbishment of the SOUTHWESTERN 180. This guaranty shall survive the Closing
and the liquidation of Partner.
10.4 Ringdal Representations. Ringdal represents and warrants to
Buyer as follows:
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(a) Ringdal is an individual residing in Norway, with all
necessary power and authority to own and lease the assets he currently owns and
leases and to carry on his business as such business is currently conducted.
(b) Ringdal has all necessary legal capacity, power and authority
to execute and deliver this Agreement and all agreements, instruments and
documents to be executed and delivered hereunder by him, to consummate the
transactions contemplated hereby and to perform all terms and conditions hereof
to be performed by him.
(c) This Agreement constitutes, and each other agreement or
instrument to be executed hereunder by Ringdal, when so executed and delivered,
will constitute, the legal, valid and binding obligation of Ringdal enforceable
against him in accordance with its terms, except to the extent the
enforceability hereof and thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or other laws relating to or affecting creditors'
rights generally or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(d) The execution and delivery of this Agreement by Ringdal, the
fulfillment of and compliance by him with the terms and conditions hereof and
the consummation by him of the transactions contemplated hereby will not:
(i) result in a breach of or constitute a default under
(whether with notice or the lapse of time or both) any note, bond,
mortgage, loan agreement, indenture or other instrument evidencing
borrowed money to which Ringdal is a party or by which Ringdal is
bound, or
(ii) to the knowledge of Ringdal, violate any national or
local law, statute, rule or administrative regulation or any judgment,
order, injunction or decree of any Governmental Entity applicable to
or binding upon Ringdal.
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by mutual written consent of Buyer and Seller;
(b) by either Buyer or Seller, if there shall be any statute, rule
or regulation that makes consummation of the transactions contemplated hereby
illegal or otherwise prohibited or a Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby, and such order, decree, ruling or other action shall have
become final and nonappealable;
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(c) by Buyer, if
(i) there has been a material breach by any Seller of any
covenant or agreement, or a material inaccuracy of any representation
or warranty of Seller contained in this Agreement which has rendered
the satisfaction of any condition to the obligations of Buyer
impossible and such breach or inaccuracy has not been cured by Seller
within five Business Days after receipt by Seller of notice thereof
from Buyer, or waived by Buyer; or
(ii) there shall have occurred a material adverse change
as described in Section 7.6; or
(iii) the Closing shall not have occurred on or before
August 21, 1996 (provided that the right to terminate this Agreement
under this clause (iii) shall not be available to Buyer if Buyer's
failure to fulfill any of its obligations under this Agreement or its
misrepresentation or breach of warranty hereunder has been the
principal cause thereof);
(d) by Seller if
(i) there has been a material breach by any Buyer of any
covenant or agreement, or a material inaccuracy of any representation
or warranty of Buyer contained in this Agreement which has rendered
the satisfaction of any condition to the obligations of Seller
impossible and such breach or inaccuracy has not been cured by Buyer
within five Business Days after receipt by Buyer of notice thereof
from Seller, or waived by Seller; or
(ii) the Closing shall not have occurred on or before June
22, 1996, and Buyer shall have failed to deposit additional earnest
money in an amount sufficient to increase the earnest money deposit to
$2,000,000 (provided that the right to terminate this Agreement under
this clause (ii) shall not be available to Seller if the failure by
Seller to fulfill any of its obligations under this Agreement on its
misrepresentation or breach of warranty hereunder has been the
principal cause thereof); or
(iii) the Closing shall not have occurred on or before
August 21, 1996 (provided that the right to terminate this Agreement
under this clause (iii) shall not be available to Seller if the
failure by Seller to fulfill any of its obligations under this
Agreement or its misrepresentation or breach of warranty hereunder has
been the principal cause thereof).
11.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 11.1 by Buyer or Seller, written notice
thereof shall forthwith be given to the other parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
become void and have no effect, except that the agreements contained in this
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Section 11.2 and in Sections 4.27, 5.14, 8.4, 8.25, and 11.3 shall survive the
termination hereof.
11.3 Liquidated Damages and Expense Reimbursement.
(a) Notwithstanding any other provision of this Agreement, if
Buyer has not satisfied the condition set forth in Section 7.5 and, as a result
thereof, this Agreement is terminated by Seller pursuant to Section 11.1(d)(ii)
or 11.1(d)(iii), then, unless Buyer is then entitled to terminate this
Agreement pursuant to Sections 11.1(c)(i) or 11.1(c)(ii), the earnest money
deposit shall be forfeited to Viking, on behalf of Seller, as liquidated
damages and not as a penalty. Upon payment of such liquidated damages, Buyer
shall have no other liability whatsoever to Seller under this Agreement, except
for liability based on the breach by Buyer of this Agreement, which breach is
unrelated to the inability of Buyer to obtain the financing contemplated by
Section 8.2.
(b) In the event that this Agreement is terminated by Buyer
pursuant to Section 11.1(c)(i) and Buyer is not then entitled to terminate this
Agreement pursuant to Section 11.1(c)(ii), Seller shall pay to Buyer within ten
Business Days following a request therefor, such amount as will fully reimburse
Buyer for all documented legal, accounting, consulting and investment advisory
fees and expenses incurred by Buyer in connection with the negotiation,
execution and delivery of this Agreement.
(c) In the event that this Agreement is terminated by Seller
pursuant to Section 11.1(d)(i) based on circumstances unrelated to the
inability of Buyer to obtain financing as contemplated by Section 8.2, Buyer
shall pay to Viking, on behalf of Seller, within ten Business Days following a
request therefor, such amount as will fully reimburse Seller for all documented
legal, accounting, consulting and investment advisory fees and expenses
incurred by Seller in connection with the negotiation, execution and delivery
of this Agreement.
(d) Nothing contained in this Section 11.3 shall relieve any party
from liability for damages (excluding consequential damages) actually incurred
as a result of any breach of this Agreement. Any appreciation or depreciation
in the value of the Assets and/or the Business which may occur after a breach
of the Agreement shall not constitute consequential damages for which a party
is precluded from recovering from any other party.
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification by Buyer.
(a) Each Buyer, jointly and severally, agrees to indemnify, defend
and hold Seller and its Affiliates harmless from and against any and all Claims
sustained after Closing by Seller or any of its Affiliates based upon, arising
out of or otherwise in respect of (i) the inaccuracy of any representation or
warranty, or the breach of any covenant or agreement, of Buyer
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contained in this Agreement or in any certificate, agreement, document or
instrument delivered pursuant to this Agreement, (ii) the Securities Act or any
other federal or state securities law, insofar as any such Claim is based upon,
arises out of or otherwise is in respect of the financing by Buyer contemplated
by Section 8.2, or (iii) the operation of the Business or the ownership,
management or use of the Assets after the Closing, unless and to the extent
that such Claim arises solely from any action of Seller or any of its
Affiliates after the Closing; provided, however, that Buyer shall have no
liability pursuant to this Section 12.1(a) for the first $100,000 of aggregate
Claims in respect of the matters described in clauses (i) or (iii) above
incurred by Seller or its Affiliates (the "Seller Basket") and Buyer shall be
responsible only for such amounts of such Claims as exceed the Seller Basket;
provided further, however, that Buyer shall have no liability pursuant to this
Section 12.1(a) in respect of the matters described in clause (ii) above to the
extent that any such Claim is based upon, arises out of or is otherwise in
respect of an untrue statement of material fact contained in, or an omission of
a material fact from, information prepared or furnished in writing by Seller or
its Affiliates expressly for use in any registration statement, prospectus or
offering memorandum of Buyer in connection with such financing. The foregoing
indemnification is given solely for the purpose of protecting Seller and its
Affiliates and shall not be deemed extended to, or interpreted in a manner to
confer any benefit, right or cause of action upon, any third party.
(b) Without limiting the generality of the indemnification
obligations set forth in subsection (a) of this Section 12.1, each Buyer,
jointly and severally, further agrees to indemnify, defend and hold Seller
harmless from and against any and all Claims sustained by Seller, irrespective
of the amount of such Claim (but subject to the Seller Basket, except as
otherwise provided in (ii), (iv) and (vi) below and subject to the limitations
set forth in Section 12.1(e)), based upon, arising out of or otherwise in
respect of any of the following:
(i) Any failure of Buyer to pay, perform or satisfy, or
cause to be paid, performed or satisfied, any of the Assumed
Liabilities other than the Parent Guaranty;
(ii) Any failure (without regard to the Seller Basket) of
Buyer to pay, perform or satisfy, or cause to be paid, performed or
satisfied, the Parent Guaranty;
(iii) Any Claim by any person who is an employee of Seller
or any of its Affiliates on the date of this Agreement that relates
solely to the employment of such employee by Buyer or any of its
Affiliates subsequent to the Closing;
(iv) Any failure (without regard to the Seller Basket) of
Buyer to remit funds to Seller or to reimburse Seller for costs as
required by Sections 2.8(b), 8.13(b), or 8.20;
(v) Any violation by Buyer or any of its Affiliates of,
or default by Buyer or any such Affiliate under, Applicable
Environmental Laws, or any remedial obligation under any Applicable
Environmental Laws, arising out of or related to the ownership or
operation of the Assets subsequent to Closing; and
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(vi) Any Claim (without regard to the Seller Basket) for
property taxes allocated to Buyer pursuant to Section 8.15.
(c) Seller shall notify Buyer within 45 Business Days of the
assertion of any purported third-party Claim or the discovery of any fact
(which fact has been brought to the attention of a responsible executive
officer of Seller) upon which Seller intends to base a claim for
indemnification hereunder; provided, however, that the failure of Seller to so
notify Buyer shall not relieve Buyer from any liability under this Agreement to
Seller with respect to such Claim unless Buyer is prejudiced or damaged by the
failure to receive timely notice. In the event of any purported third- party
Claim, Buyer, at its option, may assume (with legal counsel reasonably
acceptable to Seller) the defense of any claim, demand, lawsuit or other
proceeding brought against Seller, which claim, demand, lawsuit or other
proceeding may give rise to the indemnity obligation of Buyer under this
Section 12.1, and may assert any defense of Buyer or Seller; provided, however,
that Seller shall have the right at its own expense to participate jointly with
Buyer in the defense of any purported third-party Claim, demand, lawsuit or
other proceeding in connection with which Seller claims indemnification
hereunder. Notwithstanding the right of Seller so to participate, Buyer shall
have the sole right to settle or otherwise dispose of such purported
third-party Claim, demand, lawsuit or other proceeding on such terms as Buyer,
in its sole discretion, shall deem appropriate with respect to any issue
involved in such claim, demand, lawsuit or other proceeding as to which (i)
Buyer shall have acknowledged the obligation to indemnify Seller hereunder or
(ii) Seller shall have declined so to participate; provided, however, that no
such purported third-party Claim shall be settled by Buyer in any manner that
could reasonably be expected to have a material adverse effect on the business
of any Seller taken as a whole without the prior written consent of such
Seller.
(d) Notwithstanding anything herein to the contrary, except for
the obligation to indemnify set forth in Section 12.1(b)(ii) which shall
continue until all indebtedness covered by the Parent Guaranty has been paid,
Buyer shall not have any obligation to indemnify Seller or its Affiliates
pursuant to this Agreement, whether pursuant to the provisions of this Article
XII or otherwise, and such obligation of Buyer to indemnify Seller and its
Affiliates shall expire and terminate, unless Buyer shall have received written
notice of such claim for indemnity prior to the close of business on the
expiration of four (4) years after the Closing Date.
(e) Notwithstanding any provision herein to the contrary, the
indemnification obligations of Buyer hereunder shall be limited in the
aggregate to the amount of the Cash Consideration.
12.2 Indemnification by Seller.
(a) Each Seller (other than Partner), jointly and severally, with
respect to each such Seller (other than Partner), Trinidad and the Joint
Venture, respectively, and Partner severally but not jointly, with respect only
to Partner, agrees to indemnify, defend and hold Buyer and its Affiliates
harmless from and against any and all Claims sustained after Closing by Buyer
or any of its Affiliates based upon, arising out of or otherwise in respect of
(i) the inaccuracy of any representation or warranty, or the breach of any
covenant or agreement, of such Seller
- 48 -
<PAGE> 49
contained in this Agreement or in any certificate, agreement, document or
instrument delivered pursuant to this Agreement, (ii) the Securities Act or any
other federal or state securities law, insofar as any such Claim is based upon,
arises out of or otherwise is in respect of an untrue statement of material
fact contained in, or an omission of a material fact from, information prepared
or furnished in writing by such Seller or its Affiliates expressly for use in
any registration statement, prospectus or offering memorandum of Buyer in
connection with the financing by Buyer contemplated by Section 8.2, or (iii)
the operation of the Business or the ownership, management or use of the Assets
prior to the Closing unless and to the extent that such Claim shall have arisen
solely from any action of Buyer or any of its Affiliates prior to the Closing;
provided, however, that Seller shall have no liability pursuant to this Section
12.2(a) for the first $100,000 of aggregate Claims in respect of the matters
described in clauses (i) or (iii) above incurred by Buyer or its Affiliates
(the "Buyer Basket") and Seller shall be responsible only for such amounts of
such Claims as exceed the Buyer Basket. The foregoing indemnification is given
solely for the purpose of protecting Buyer and its Affiliates and shall not be
deemed extended to, or interpreted in a manner to confer any benefit, right or
cause of action upon, any third party.
(b) Without limiting the generality of the indemnification
obligations set forth in subsection (a) of this Section 12.2, each Seller
(other than Partner), jointly and severally, with respect to each such Seller
(other than Partner), Trinidad and the Joint Venture, respectively, and Partner
severally but not jointly, with respect only to Partner, further agrees to
indemnify, defend and hold Buyer harmless from and against any and all Claims
sustained by Buyer, irrespective of the amount of such Claim (but subject to
the Buyer Basket, except as otherwise provided in (ii), (ix), (xi), (xiii),
(xiv), and (xvi) below, and subject to the limitation set forth in Section
12.2(e)), based upon, arising out of or otherwise in respect of any of the
following:
(i) Any default under or breach by such Seller or any of
its Affiliates of the terms, conditions or provisions of any note,
bond, mortgage, loan agreement, indenture or other instrument
evidencing borrowed money to which such Seller or any such Affiliate
is a party or by which such Seller or any such Affiliate is bound or
to which any of the Assets is subject;
(ii) Any Encumbrance (including any Permitted Encumbrance
other than the Drilling Contracts, Other Contracts, the Joint Venture
Mortgage and the Marad Restrictions and without regard to the Buyer
Basket) affecting any Asset arising from conditions existing before
the Closing or resulting from the conduct of such Seller or any of its
Affiliates after the Closing;
(iii) Any termination prior to Closing by any person of any
Drilling Contract, Other Contract or Permit due to breach of the terms
thereof by such Seller or any of its Affiliates;
(iv) Any violation by such Seller or any of its Affiliates
of any law, statute, rule or administrative regulation or any
judgment, order, injunction or decree of any Governmental Entity
applicable to or binding upon such Seller or any such Affiliate or
- 49 -
<PAGE> 50
the Assets which affects the ownership or operation of the Assets or
results in any change in the Assumed Liabilities;
(v) Any litigation, arbitration proceedings or
governmental proceedings, suits or investigations before any
Governmental Entity relating to facts that existed before the Closing
which affects the ownership or operation by Buyer or its Affiliates of
the Assets or results in any change in the Assumed Liabilities;
(vi) Any violation by such Seller or any of its Affiliates
of or default by such Seller or any such Affiliate under any
Applicable Laws, including, without limitation, Applicable
Environmental Laws, which affects the ownership or operation of the
Assets or results in any change in the Assumed Liabilities, or any
remedial obligation under any Applicable Environmental Laws arising
out of or related to the ownership or operation of the Assets prior to
Closing;
(vii) Any Claim by any person who is an employee of such
Seller or any of its Affiliates on the date of this Agreement that
relates solely to any employment of such employee by such Seller or
any of its Affiliates prior to the Closing;
(viii) Any Claim related to the financial statements to be
delivered to Buyer by such Seller pursuant to Section 8.3 insofar as
such Claim is based upon, arises out of or otherwise is in respect of
an untrue statement of a material fact contained in, or an omission of
a material fact from, such financial statements;
(ix) With respect to each Seller (other than Partner), any
Claim (without regard to the Buyer Basket) which constitutes a
liability of Trivium (whether or not disclosed on Schedule 4.24(a)), a
liability of Trinidad other than those referred to in Section 4.24(b),
or a liability of the Joint Venture other than those referred to in
Section 4.24(c);
(x) Any Claim of any fiscal authority relating to Taxes
due by such Seller or Affiliates of such Seller or by any company or
enterprise that belongs to the same group of companies and enterprises
to which such Seller belongs;
(xi) Any Claim (without regard to the Buyer Basket) for
property taxes allocated to such Seller pursuant to Section 8.15;
(xii) Any Claim related to any of the matters set forth on
Schedules 4.11, 4.15(a), 4.15(b), 4.17(a), 4.17(b), 4.18(b), 4.19,
4.20(a), or 4.24(a);
(xiii) With respect to each Seller (other than Partner), any
Claim (without regard to the Buyer Basket) arising out of the
obligations of Viking set forth in that certain Term Sheet for
Agreements Resolving All Disputes between Viking Rigs A.S. and NR
Offshore Corporation signed November 17, 1994 and the related Plan of
Reorganization under Chapter 11 of the United States Bankruptcy Code
for NR Offshore Corporation, as amended by Amendment Nos. 1, 2 and 3,
confirmed by order of the United States
- 50 -
<PAGE> 51
Bankruptcy Court for the Southern District of Texas in Case No.
94-45723-H1-11 on April 6, 1995;
(xiv) Any failure (without regard to the Buyer Basket) of
such Seller to remit funds to Buyer or to reimburse Buyer for costs
as required by Sections 2.8(b), 8.7(a) or 8.20;
(xv) Any Claim arising out of such Seller's use of the
name "SOUTHWESTERN" or any derivative thereof after the Closing Date;
and
(xvi) Any Claim (without regard to the Buyer Basket)
arising out of any Seller's failure to timely satisfy its obligations
to remedy outstanding recommendations to class against a Vessel
pursuant to Section 8.9
(c) Buyer shall notify each Seller within 45 Business Days of the
assertion of any purported third-party Claim or discovery of any fact (which
fact has been brought to the attention of a responsible executive officer of
Buyer) upon which Buyer intends to base a claim for indemnification hereunder;
provided, however, that the failure of Buyer to so notify such Seller shall not
relieve such Seller from any liability under this Agreement to Buyer with
respect to such Claim unless such Seller is prejudiced or damaged by the
failure to receive timely notice. In the event of any purported third-party
Claim, such Seller, at its option, may assume (with legal counsel reasonably
acceptable to Buyer) the defense of any claim, demand, lawsuit or other
proceeding brought against Buyer, which claim, demand, lawsuit or other
proceeding may give rise to the indemnity obligation of such Seller under this
Section 12.2, and may assert any defense of such Seller or Buyer; provided,
however, that Buyer shall have the right at its own expense to participate
jointly with such Seller in the defense of any purported third-party Claim,
demand, lawsuit or other proceeding in connection with which Buyer claims
indemnification hereunder. Notwithstanding the right of Buyer so to
participate, such Seller shall have the sole right to settle or otherwise
dispose of such purported third-party Claim, demand, lawsuit or other
proceeding on such terms as such Seller, in its sole discretion, shall deem
appropriate with respect to any issue involved in such claim, demand, lawsuit
or other proceeding as to which (i) such Seller shall have acknowledged the
obligation to indemnify Buyer hereunder or (ii) Buyer shall have declined so to
participate; provided, however, that no such purported third-party Claim shall
be settled by such Seller in a manner that could reasonably be expected to have
a material adverse effect on the business of Buyer taken as a whole without the
prior written consent of Buyer.
(d) Notwithstanding anything herein to the contrary, except for
the obligation to indemnify set forth in Section 12.2(b)(x) which shall
continue for a period of five years after the date on which all relevant tax
returns of each Seller for 1996 are filed, no such Seller shall have any
obligation to indemnify Buyer or its Affiliates pursuant to this Agreement,
whether pursuant to the provisions of this Article XII (other than Section
12.2(b)(x)) or otherwise, and such obligation of such Seller to indemnify Buyer
and its Affiliates shall expire and terminate, unless such Seller shall have
received written notice of such claim for indemnity prior to the close of
business on the expiration of four (4) years after the Closing Date.
- 51 -
<PAGE> 52
(e) Notwithstanding any provision herein to the contrary, the
indemnification obligations of Seller hereunder shall be limited in the
aggregate to the amount of the Cash Consideration; provided, however, that the
aggregate limit may be allocated as reasonably agreed among Seller (other than
Partner), on the one hand, and Partner, on the other hand, as designated in
writing by each Seller on or before the Closing Date.
12.3 Limitation of Remedies. The indemnification obligations of
Buyer and Seller set forth in this Agreement, including in this Article XII,
shall be limited to indemnification for actual damages suffered and shall not
include incidental, consequential, special or indirect damages; provided,
however, that any such incidental, consequential, special or indirect damages
recovered by a third party against a party entitled to indemnity under this
Agreement shall be included in the damages recoverable pursuant to the
indemnities herein.
12.4 Applicability of Indemnification Obligation. EACH OF THE
AGREEMENTS TO INDEMNIFY, DEFEND OR HOLD HARMLESS CONTAINED IN SECTIONS 12.1 AND
12.2 SHALL APPLY IRRESPECTIVE OF WHETHER THE SUBJECT CLAIM IS BASED IN WHOLE OR
IN PART UPON THE SOLE OR CONTRIBUTORY NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR
GROSS), BREACH OF WARRANTY, OR BREACH OR VIOLATION OF ANY DUTY IMPOSED BY ANY
LAW OR REGULATION, ON THE PART OF THE BENEFICIARY OF THE AGREEMENT, EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT.
12.5 Indemnification Between Viking and Partner. Viking and
Partner acknowledge that certain of Seller's covenants and agreements herein
can be breached or violated by the actions or omissions of Viking or Partner
acting alone and without fault of the other. In the event that either Viking
(including, for purposes of this paragraph only, any of Viking's subsidiaries)
or Partner breaches or violates such a covenant or agreement and the other does
not contribute to such breach or violation, the party breaching or violating
such covenant or agreement shall indemnify and hold the other harmless from and
against any and all losses, costs, damages, expenses and attorneys' fees
suffered or incurred by the other as a result of such breach or violation by
such party.
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<PAGE> 53
ARTICLE XIII
EXTENT AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS
13.1 Scope of Representations of Seller. SELLER MAKES NO
REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE MAINTENANCE,
REPAIR, CONDITION, DESIGN OR MARKETABILITY OF THE VESSELS OR ANY PORTION
THEREOF OR PROPERTY THEREON, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR
EXPRESS WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IT
BEING THE EXPRESS AGREEMENT OF BUYER AND SELLER THAT, EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT, BUYER WILL OBTAIN THE VESSELS IN THEIR CONDITION AND
STATE OF REPAIR ON THE CLOSING DATE, "AS IS" AND "WHERE IS." Buyer
acknowledges and affirms that it will have had the opportunity to complete its
own independent investigation, analysis and evaluation of the Business and the
prospects of the Business and that it has been afforded the opportunity to
inspect the Vessels and the other tangible Assets.
13.2 No Other Representation on Warranty. Except as set forth in
this Agreement or in any document, certificate or other writing furnished or to
be furnished by any Seller pursuant hereto, neither Seller nor any director,
officer, employee, agent, consultant or representative of Seller or its
Affiliates has made any further representation or warranty, and Seller
disclaims all liability and responsibility for any such other information
whether or not relied upon by Buyer.
13.3 Survival. Subject to the provisions of 12.1(d) and 12.2(d),
as applicable, all representations, warranties and covenants contained in this
Agreement (except to the extent any such agreement is limited by its terms)
shall remain operative and in full force and effect and shall survive
consummation of the transactions contemplated hereby at the Closing, including,
without limitation, the delivery of the Assets to Buyer hereunder.
ARTICLE XIV
MISCELLANEOUS
14.1 Notices. All notices and other communications required or
permitted to be given or made hereunder by either party hereto shall be in
writing and shall be deemed to have been duly given if delivered personally or
transmitted by first class registered or certified mail, postage prepaid,
return receipt requested, or sent by prepaid overnight delivery service, or
sent by cable, telegram, telefax or telex, to the parties at the following
addresses (or at such other addresses as shall be specified by the parties by
like notice):
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<PAGE> 54
If to any Buyer:
Cliffs Drilling Company
1200 Smith Street, Suite 300
Houston, Texas 77002
Attention: Mr. Edward A. Guthrie
Telephone: (713) 651-9426
Telefax: (713) 951-0649
with a copy to:
Mr. W. Garney Griggs
Griggs & Harrison, P.C.
1301 McKinney, Suite 3200
Houston, Texas 77010
Telephone: (713) 651-0600
Telefax: (713) 651-1944
If to any Seller (other than Partner):
Viking Supply Ships A.S.
P.O. Box 9
N-4601 Kristiansand
Norway
Attention: Christen Sveaas
Telephone: 011-47-38-022-340
Telefax: 011-47-38-025-767
if prior to Closing, with a copy to:
Southwestern Offshore Corporation
Five Post Oak Park, Suite 1720
Houston, Texas 77027
Attention: William E. Chiles
Telephone: (713) 850-7057
Telefax: (713) 850-7433
and with a copy to:
Mr. N. L. Stevens III
Gardere Wynne Sewell & Riggs L.L.P.
333 Clay Avenue, Suite 800
Houston, Texas 77002
Telephone: (713) 308-5500
Telefax: (713) 308-5808
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<PAGE> 55
If to Partner:
Production Partner Inc.
c/o Southwestern Offshore Corporation
Five Post Oak Park, Suite 1720
Houston, Texas 77027
Attention: Mr. William E. Chiles
Telephone: (713) 850-7057
Telefax: (713) 850-7433
with a copy to:
Mr. N. L. Stevens III
Gardere Wynne Sewell & Riggs L.L.P.
333 Clay Avenue, Suite 800
Houston, Texas 77002
Telephone: (713) 308-5500
Telefax: (713) 308-5808
If to Ringdal:
Mr. Helge Ringdal
c/o Ringdal Holding A.S.
Niels Juelsgt. 14
0272 Oslo
Norway
Telephone: 011-47-22-55-7955
Telefax: 011-47-22-55-8244
with a copy to:
Mr. N. L. Stevens III
Gardere Wynne Sewell & Riggs L.L.P.
333 Clay Avenue, Suite 800
Houston, Texas 77002
Telephone: (713) 308-5500
Telefax: (713) 308-5808
14.2 Entire Agreement. This Agreement, including the Schedules,
Exhibits and other writings referred to herein or delivered pursuant hereto,
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof.
- 55 -
<PAGE> 56
14.3 Amendments and Waiver; Rights and Remedies. This Agreement
may be amended, superseded, canceled, renewed or extended, and the terms hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of
either party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of either party
of any such right, power or privilege, or any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. The rights and remedies
of either party based upon, arising out of or otherwise in respect of any
inaccuracy in or breach of any representation, warranty, covenant or agreement
contained in this Agreement shall in no way be limited by the fact that the
act, omission, occurrence or other state of facts upon which any claim of any
such inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement contained in this Agreement (or
in any other agreement between the parties) as to which there is no inaccuracy
or breach.
14.4 Jurisdiction; Venue; Governing Law. The parties agree that
all disputes in any way relating to, arising under, connected with, or incident
to this Agreement, and over which the United States federal courts have subject
matter jurisdiction, shall be litigated, if at all, exclusively in the United
States District Court for the Southern District of Texas, Houston Division,
and, if necessary, the corresponding appellate courts. The parties further
agree that all disputes in any way relating to, arising under, connected with,
or incident to this Agreement, and over which the United States federal courts
do not have subject matter jurisdiction, shall be litigated, if at all,
exclusively in the Courts of the State of Texas, in Harris County, and, if
necessary, the corresponding appellate courts. Each Seller and Ringdal
irrevocably submits itself to the personal jurisdiction of, and consents to
venue in, any such court, and hereby waives any claim it may otherwise have
that such court lacks personal jurisdiction over it or that such court is an
inconvenient forum, with respect to any matter or proceeding arising out of
this Agreement. Each Seller and Ringdal further agree to voluntarily appear
and to enter a general appearance in any proceeding arising out of this
Agreement which is brought in any such court. Each Seller and Ringdal hereby
irrevocably appoints N. L. Stevens III and/or Gardere Wynne Sewell & Riggs
L.L.P. of Houston, Texas as its agent for service of process in any matter or
proceeding arising out of this Agreement. The parties agree that Texas law
exclusively shall govern all terms of this Agreement, including this Section.
14.5 Binding Effect; Assignment; No Third Party Benefit.
(a) This Agreement and all the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns; provided, however, that neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either of the parties hereto (by operation of law or otherwise)
without the prior written consent of the other party, except that Buyer may
upon notice to Seller direct that title to all or part of the Assets be taken
in one or more of Buyer's other wholly owned subsidiaries (direct or indirect);
provided, however, that no such designation shall relieve Buyer of any of its
duties, liabilities or obligations hereunder.
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<PAGE> 57
(b) Nothing in this Agreement, express or implied, is
intended to or shall confer upon any person other than Buyer, Seller and
Ringdal any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
14.6 No Specific Performance. The parties hereto represent and
acknowledge that the remedies provided at law for any violation by either party
of its obligations set forth in this Agreement would be adequate and, as a
result, each party hereto hereby disclaims and waives any right to seek or
obtain specific performance for any violation of its rights set forth in this
Agreement. Notwithstanding the preceding sentence, the liquidated damages and
expense reimbursements provided for by Section 11.3 shall constitute the sole
remedy available to the parties with respect to the matters covered thereby,
and either party may seek specific performance of any obligation of another
party to pay such liquidated damages or expense reimbursements.
14.7 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same agreement.
14.8 References. All references in this Agreement to Articles,
Sections and other subdivisions refer to the Articles, Sections and other
subdivisions of this Agreement unless expressly provided otherwise. The words
"this Agreement," "herein," "hereof," "hereby," "hereunder" and words of
similar import refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited.
14.9 Severability of Provisions. If any provision of this
Agreement is held to be unenforceable, this Agreement shall be considered
divisible and such provision shall be deemed inoperative to the extent it is
deemed unenforceable, and in all other respects this Agreement shall remain in
full force and effect; provided, however, that if any such provision may be
made enforceable by limitation thereof, then such provision shall be deemed to
be so limited and shall be enforceable to the maximum extent permitted by
applicable law.
14.10 Gender. Pronouns in masculine, feminine, and neuter genders
shall be construed to include any other gender, and words in the singular form
shall be construed to include the plural and vice versa, unless the context
otherwise requires.
14.11 Descriptive Headings. The descriptive headings herein are
inserted or convenience of reference only, do not constitute a part of this
Agreement, and shall not affect in any manner the meaning or interpretation of
this Agreement.
14.12 Currency. All dollar amounts in this Agreement are stated in
United States dollars.
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<PAGE> 58
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers hereunto duly authorized as of the date
first above written.
SOUTHWESTERN OFFSHORE CORPORATION
By: /s/ WILLIAM E. CHILES
-----------------------------------------
William E. Chiles, President
VIKING SUPPLY SHIPS A.S.
By: /s/ CHRISTEN SVEAAS
-----------------------------------------
Christen Sveaas, Chairman
OCEAN MASTER III INC.
By: /s/ OLE GEIR HAGEN
-----------------------------------------
Name: OLE GEIR HAGEN
--------------------------------
Title: COMPANY SECRETARY
-------------------------------
PRODUCTION PARTNER INC.
By: /s/ WILLIAM E. CHILES
-----------------------------------------
William E. Chiles, President
TRIVIUM INVESTMENTS LIMITED
By: /s/ JIM R. WISE
-----------------------------------------
Jim R. Wise, President
CLIFFS DRILLING COMPANY
By: /s/ EDWARD A. GUTHRIE
-----------------------------------------
Edward A. Guthrie, Vice President-Finance
- 58 -
<PAGE> 59
CLIFFS DRILLING ASSET ACQUISITION
COMPANY
By: /s/ EDWARD A. GUTHRIE
-----------------------------------------
Edward A. Guthrie, Vice President
CLIFFS DRILLING MERGER COMPANY
By: /s/ EDWARD A. GUTHRIE
-----------------------------------------
Edward A. Guthrie, Vice President
/s/ HELGE RINGDAL
---------------------------------------------
HELGE RINGDAL
- 59 -
<PAGE> 1
EXHIBIT 4.3
- --------------------------------------------------------------------------------
CLIFFS DRILLING COMPANY,
SUBSIDIARY GUARANTORS
NAMED HEREIN
and
FLEET NATIONAL BANK
Trustee
_________________________
INDENTURE
Dated as of May 15, 1996
_________________________
$150,000,000
10.25% Senior Notes due 2003, Series A
10.25% Senior Notes due 2003, Series B
- --------------------------------------------------------------------------------
<PAGE> 2
Reconciliation and Tie between Trust Indenture Act
of 1939 and Indenture, dated as of May 15, 1996
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
<S> <C> <C>
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7,6.8, 6.9
Section 311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.12
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.12
Section 312 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
Section 313 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
Section 314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.8(a)
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1
Section 315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.13
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
Section 316 (a) (last
sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1("Outstanding")
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2,5.12
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.13
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3(d)
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3
Section 318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.10(b)
</TABLE>
Note: This reconciliation and tie shall not, for any purpose,
be deemed to be a part of the Indenture.
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 1.3 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 1.4 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE II
SECURITY FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.1 Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.2 Form of Face of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.3 Form of Reverse of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.4 Form of Notation Relating to Subsidiary Guarantee . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.5 Form of Trustee's Certificate of Authentication . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE III
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.1 Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.2 Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.3 Execution, Authentication, Delivery and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.4 Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.5 Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.6 Book-Entry Provisions for Global Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.7 Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.8 Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.9 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 3.10 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 3.11 Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IV
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 4.1 Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 4.2 Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE V
REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.2 Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
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Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . . . 50
Section 5.4 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.5 Trustee May Enforce Claims Without Possession of Securities . . . . . . . . . . . . . . . . . . . 52
Section 5.6 Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 5.7 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 5.8 Unconditional Right of Holders to Receive Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 5.9 Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 5.10 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 5.11 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 5.12 Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 5.13 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 5.14 Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE VI
THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 6.2 Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 6.3 Trustee Not Responsible for Recitals or Issuance of Securities . . . . . . . . . . . . . . . . . . 57
Section 6.4 May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 6.5 Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 6.6 Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 6.7 Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 6.8 Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 6.9 Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 6.10 Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 6.11 Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . 60
Section 6.12 Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.13 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 7.1 Holders' Lists; Holder Communications; Disclosures
Respecting Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 7.2 Reports By Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 7.3 Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 8.1 Company May Consolidate, etc., Only on Certain Terms . . . . . . . . . . . . . . . . . . . . . . . 63
Section 8.2 Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
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ARTICLE IX
SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 9.1 Supplemental Indentures Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 9.2 Supplemental Indentures with Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 9.3 Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.4 Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.5 Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.6 Reference in Securities to Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.7 Notice of Supplemental Indentures and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE X
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.1 Payment of Principal, Premium, if any, and Interest . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.3 Money for Security Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.4 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.5 Payment of Taxes; Maintenance of Properties; Insurance . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.6 Limitation on Sale-Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 10.7 Limitation on Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 10.8 Statement by Officers as to Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 10.9 Provision of Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 10.10 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 10.11 Limitation on Guarantees by Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 10.12 Limitation on Indebtedness and Disqualified Capital Stock . . . . . . . . . . . . . . . . . . . . 75
Section 10.13 Additional Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.14 Limitation on Issuances and Sales of Capital Stock by
Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.15 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.16 Purchase of Securities Upon Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.17 Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 10.18 Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 10.19 Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 10.20 Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE XI
REDEMPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 11.1 Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 11.2 Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 11.3 Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 11.4 Selection by Trustee of Securities to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 11.5 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
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Section 11.6 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 11.7 Securities Payable on Redemption Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 11.8 Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.1 Company's Option to Effect Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . 86
Section 12.2 Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.3 Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.4 Conditions to Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 12.5 Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 12.6 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
ARTICLE XIII
SUBSIDIARY GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 13.1 Unconditional Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 13.2 Subsidiary Guarantors May Consolidate, etc., on Certain Terms . . . . . . . . . . . . . . . . . . 91
Section 13.3 Release of Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 13.4 Limitation of Subsidiary Guarantors' Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 13.5 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 13.6 Execution and Delivery of Notations of Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . 93
Section 13.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
ARTICLE XIV
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 14.1 Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 14.2 Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 14.3 Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 14.4 Notices, etc. to Trustee, Company and Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . 96
Section 14.5 Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 14.6 Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 14.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 14.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 14.9 Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 14.10 Governing Law; Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 14.11 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 14.12 No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 14.13 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 14.14 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 99
</TABLE>
Exhibit A - Form of Legend for Global Securities
Exhibit B - Transfer or Exchange Certificate
Exhibit C - Transferee Certificate for Institutional Accredited Investors
Exhibit D - Transferee Certificate for Regulation S Transfers
iv
<PAGE> 7
THIS INDENTURE, dated as of May 15, 1996, is between CLIFFS DRILLING
COMPANY, a Delaware corporation (hereinafter called the "Company"), the
SUBSIDIARY GUARANTORS (as defined hereinafter) and FLEET NATIONAL BANK, a
national banking association (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 10.25%
Senior Notes due 2003, Series A and an issue of 10.25% Senior Notes due 2003,
Series B (such two issues, as amended or supplemented from time to time in
accordance with the terms hereof, being herein collectively called the
"Securities"), of substantially the tenor and in the aggregate principal amount
hereinafter set forth, and to provide therefor the Company has duly authorized
the execution and delivery of this Indenture.
The 10.25% Senior Notes due 2003, Series A are to be issued and sold
in transactions exempt from registration under the Securities Act, pursuant to
the Purchase Agreement, and the 10.25% Senior Notes due 2003, Series B are to
be issued in exchange for the 10.25% Senior Notes due 2003, Series A, pursuant
to the Registration Rights Agreement.
The Company owns, directly or indirectly, all of the equity ownership
of the outstanding Voting Stock of each initial Subsidiary Guarantor, and each
initial Subsidiary Guarantor is a member of the Company's consolidated group of
companies that are engaged in related businesses. Each initial Subsidiary
Guarantor will derive direct and indirect benefit from the issuance of the
Securities; accordingly, each initial Subsidiary Guarantor has authorized its
guarantee of the Company's obligations under this Indenture and the Securities,
and to provide therefor the initial Subsidiary Guarantors have duly authorized
the execution and delivery of this Indenture.
All things necessary have been done on the part of the Company and the
initial Subsidiary Guarantors to make the Securities, when issued and executed
by the Company and authenticated and delivered by the Trustee as herein
provided, the valid obligations of the Company, to make the Subsidiary
Guarantees, when the notations thereof on the Securities are executed by the
initial Subsidiary Guarantors, the valid obligation of the initial Subsidiary
Guarantors and to make this Indenture a valid agreement of the Company, the
initial Subsidiary Guarantors and the Trustee, in accordance with their
respective terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities (together with the related Subsidiary Guarantees) by the Holders
thereof, it is mutually covenanted and agreed, for the equal and proportionate
benefit of all Holders of the Securities (together with the related Subsidiary
Guarantees), without preference of one series of Securities over the other, as
follows:
1
<PAGE> 8
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.1 Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at
the time such Person becomes a Restricted Subsidiary or (b) assumed in
connection with acquisitions of Properties from such Person (other than any
Indebtedness incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary or such acquisition). Acquired Indebtedness
shall be deemed to be incurred on the date the acquired Person becomes a
Restricted Subsidiary or the date of the related acquisition of Properties from
such Person.
"Act," when used with respect to any Holder, has the meaning specified
in Section 14.3.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean
the amount by which the fair value of the Properties of such Subsidiary
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under its Subsidiary Guarantee, of such Subsidiary Guarantor at
such date.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of this definition, beneficial ownership of 10% or
more of the voting common equity (on a fully diluted basis) or options or
warrants to purchase such equity (but only if exercisable at the date of
determination or within 60 days thereof) of a Person shall be deemed to
constitute control of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition to any Person other than the Company or any of its Restricted
Subsidiaries (including, without limitation, by means of a Sale/Leaseback
Transaction or a merger or consolidation) (collectively, for purposes of this
definition, a "transfer"), directly or indirectly, in one or a series of
related transactions, of (a) any Capital Stock of any Restricted Subsidiary
held by the Company or any other Restricted Subsidiary, (b) all or
substantially all of the Properties of any division or line of business of the
Company or any of its Restricted Subsidiaries or (c) any other Properties of
the Company or any of its Restricted Subsidiaries other than transfers of cash,
Cash Equivalents, accounts receivable, hydrocarbons or other Properties in the
ordinary course of business or transfers in accordance with the proviso to
clause (vi) of the definition of Permitted Investments. For the purposes of
this definition, the term "Asset Sale" also shall not include any of the
following: (i) any transfer of Properties (including Capital Stock) which is
governed by, and made in accordance with, the provisions of Article VIII
hereof; (ii) any transfer of Properties to an
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Unrestricted Subsidiary, if permitted under Section 10.10 hereof; (iii) sales
of damaged, worn-out or obsolete equipment or assets that, in the Company's
reasonable judgment, are either (x) no longer used or (y) no longer useful in
the business of the Company or its Restricted Subsidiaries; (iv) any charter
(bareboat or otherwise) or other lease of any Property entered into in the
ordinary course of business and with respect to which the Company or any
Restricted Subsidiary is the lessor, except any such charter or lease that
provides for the acquisition of such Property by the lessee during or at the
end of the term thereof for an amount that is less than the fair market value
thereof at the time the right to acquire such property is granted; (v) any
trade or exchange by the Company or any Restricted Subsidiary of one or more
offshore drilling rigs for one or more other offshore drilling rigs owned or
held by another Person, provided that (x) the fair value of the offshore
drilling rig or rigs traded or exchanged by the Company or such Restricted
Subsidiary (including any cash or Cash Equivalents to be delivered by the
Company or such Restricted Subsidiary) is reasonably equivalent to the fair
value of the offshore drilling rig or rigs (together with any cash or Cash
Equivalents) to be received by the Company or such Restricted Subsidiary as
determined by written appraisal by a nationally recognized investment banking
firm or appraisal firm, in either case specializing or having a specialty in
offshore drilling rigs, and (y) such exchange is approved by a majority of the
Disinterested Directors of the Company; (vi) any transfer by the Company or any
Restricted Subsidiary to its customers of drill pipe and associated drilling
equipment utilized in connection with a drilling contract for the employment of
a drilling rig in the ordinary course of business and consistent with past
practice; and (vii) any transfers that, but for this clause (vii), would be
Asset Sales, if (A) the Company elects to designate such transfers as not
constituting Asset Sales and (B) after giving effect to such transfers, the
aggregate fair market value of the Properties transferred in such transaction
or any such series of related transactions so designated by the Company does
not exceed $500,000.
"Attributable Indebtedness" means, with respect to any particular
lease under which any Person is at the time liable and at any date as of which
the amount thereof is to be determined, the present value of the total net
amount of rent required to be paid by such Person under the lease during the
primary term thereof, without giving effect to any renewals at the option of
the lessee, discounted from the respective due dates thereof to such date of
determination at a rate of interest per annum equal to the discount rate which
would be applicable to a Capitalized Lease Obligation with a like term in
accordance with GAAP. As used in the preceding sentence, the "net amount of
rent" under any such lease for any such period shall mean the sum of rental and
other payments required to be paid with respect to such period by the lessee
thereunder, excluding any amounts required to be paid by such lessee on account
of maintenance and repairs, insurance, taxes, assessments, water rates or
similar charges. In the case of any lease which is terminable by the lessee
upon payment of a penalty, such net amount of rent shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated.
"Average Life" means, with respect to any Indebtedness, as at any date
of determination, the quotient obtained by dividing (a) the sum of the products
of (i) the number of years (and any portion thereof) from the date of
determination to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund or mandatory
redemption
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<PAGE> 10
payment requirements) of such Indebtedness multiplied by (ii) the amount of
each such principal payment by (b) the sum of all such principal payments.
"Board of Directors" means, with respect to the Company, either the
board of directors of the Company or any duly authorized committee of such
board of directors, and, with respect to any Subsidiary, either the board of
directors of such Subsidiary or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
its Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee, and with respect to a Subsidiary,
a copy of a resolution certified by the Secretary or an Assistant Secretary of
such Subsidiary to have been duly adopted by its Board of Directors and to be
in full force and effect on the date of such certification, and delivered to
the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
or Hartford, Connecticut are authorized or obligated by law or executive order
to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents in the equity
interests (however designated) in such Person, and any rights (other than debt
securities convertible into an equity interest), warrants or options
exercisable for, exchangeable for or convertible into such an equity interest
in such Person.
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
any Property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP, and, for
the purpose of this Indenture, the amount of such obligation at any date shall
be the capitalized amount thereof at such date, determined in accordance with
GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a
maturity of 180 days or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) demand and time deposits and certificates of
deposit or acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500,000,000; (iii)
commercial paper with a maturity of 180 days or less issued by a corporation
that is not an Affiliate of the Company and is organized under the laws of any
state of the United States or the District of Columbia and rated at least A-l
by S&P or at least P-l by Moody's; (iv) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with any commercial bank meeting the
specifications of clause (ii) above; (v) overnight bank deposits and bankers'
acceptances at any commercial bank meeting the qualifications specified in
clause (ii) above; (vi) deposits available for withdrawal on demand with any
commercial bank not meeting the
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<PAGE> 11
qualifications specified in clause (ii) above, provided all such deposits do
not exceed $5,000,000 in the aggregate at any one time; (vii) demand and time
deposits and certificates of deposit with any commercial bank organized in the
United States not meeting the qualifications specified in clause (ii) above,
provided that such deposits and certificates support bond, letter of credit and
other similar types of obligations incurred in the ordinary course of business;
and (viii) investments in money market or other mutual funds substantially all
of whose assets comprise securities of the types described in clauses (i)
through (v) above.
"Change of Control" means the occurrence of any event or series of
events by which: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of more than 50% of the total Voting Stock of the Company; (b) the
Company consolidates with or merges into another Person or any Person
consolidates with, or merges into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is changed
into or exchanged for cash, securities or other Property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is changed
into or exchanged for Voting Stock of the surviving or resulting Person that is
Qualified Capital Stock and (ii) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than a majority of the Voting Stock of the surviving or resulting Person
immediately after such transaction; (c) the Company, either individually or in
conjunction with one or more Restricted Subsidiaries, sells, assigns, conveys,
transfers, leases or otherwise disposes of, or the Restricted Subsidiaries
sell, assign, convey, transfer, lease or otherwise dispose of, all or
substantially all of the Properties of the Company and the Restricted
Subsidiaries, taken as a whole (either in one transaction or a series of
related transactions), including Capital Stock of the Restricted Subsidiaries,
to any Person (other than the Company or a Wholly Owned Restricted Subsidiary);
(d) during any consecutive two-year period, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with
any new directors whose election by such Board of Directors or whose nomination
for election by the stockholders of the Company was approved by a vote of a
two-thirds of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (e) the liquidation or
dissolution of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended, as
now or hereafter in effect, together with all regulations thereunder issued by
the Internal Revenue Service.
"Commission" or "SEC" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution
of assets upon any voluntary or
5
<PAGE> 12
involuntary liquidation, dissolution or winding-up of such Person, to shares of
Capital Stock of any other class of such Person.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman, its President, any Vice
President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated EBITDA Coverage Ratio" means, for any period, the ratio
on a pro forma basis of (a) the sum of Consolidated Net Income, Consolidated
Interest Expense, Consolidated Income Tax Expense and Consolidated Non-cash
Charges deducted in computing Consolidated Net Income, in each case, for such
period, of the Company and its Restricted Subsidiaries on a consolidated basis,
all determined in accordance with GAAP, to (b) the sum of such Consolidated
Interest Expense for such period; provided, however, that (i) the Consolidated
EBITDA Coverage Ratio shall be calculated on a pro forma basis assuming that
(A) the Indebtedness to be incurred (and all other Indebtedness incurred after
the first day of such period of four full fiscal quarters referred to in
Section 10.12(a) hereof through and including the date of determination), and
(if applicable) the application of the net proceeds therefrom (and from any
other such Indebtedness), including to refinance other Indebtedness, had been
incurred on the first day of such four-quarter period and, in the case of
Acquired Indebtedness, on the assumption that the related transaction (whether
by means of purchase, merger or otherwise) also had occurred on such date with
the appropriate adjustments with respect to such acquisition being included in
such pro forma calculation and (B) any acquisition or disposition by the
Company or any Restricted Subsidiary of any Properties outside the ordinary
course of business, or any repayment of any principal amount of any
Indebtedness of the Company or any Restricted Subsidiary prior to the Stated
Maturity thereof, in either case since the first day of such period of four
full fiscal quarters through and including the date of determination, had been
consummated on such first day of such four-quarter period, (ii) in making such
computation, the Consolidated Interest Expense attributable to interest on any
Indebtedness required to be computed on a pro forma basis in accordance with
Section 10.12(a) hereof and (A) bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of the Company, a fixed or floating rate of interest, shall be computed
by applying, at the option of the Company, either the fixed or floating rate,
(iii) in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness under a revolving credit facility
required to be computed on a pro forma basis in accordance with Section
10.12(a) hereof shall be computed based upon the average daily balance of such
Indebtedness during the applicable period, provided that such average daily
balance shall be reduced by the amount of any repayment of Indebtedness under a
revolving credit facility during the applicable period, which repayment
permanently reduced the commitments or amounts available to be reborrowed under
such facility, (iv) notwithstanding clauses (ii) and (iii) of this proviso,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is
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<PAGE> 13
covered by agreements relating to Interest Rate Protection Obligations, shall
be deemed to have accrued at the rate per annum resulting after giving effect
to the operation of such agreements, and (v) if after the first day of the
period referred to in clause (a) of this definition the Company has permanently
retired any Indebtedness out of the Net Cash Proceeds of the issuance and sale
of shares of Qualified Capital Stock of the Company within 30 days of such
issuance and sale, Consolidated Interest Expense shall be calculated on a pro
forma basis as if such Indebtedness had been retired on the first day of such
period.
"Consolidated Income Tax Expense" means, for any period, the provision
for federal, state, local and foreign income taxes (including state franchise
taxes accounted for as income taxes in accordance with GAAP) of the Company and
its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without
duplication, (i) the sum of (a) the interest expense of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis
in accordance with GAAP, including, without limitation, (A) any amortization of
debt discount, (B) the net cost under Interest Rate Protection Obligations
(including any amortization of discounts), (C) the interest portion of any
deferred payment obligation constituting Indebtedness, (D) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and (E) all accrued interest, in each case to the
extent attributable to such period, (b) to the extent any Indebtedness of any
Person (other than the Company or a Restricted Subsidiary) is guaranteed by the
Company or any Restricted Subsidiary, the aggregate amount of interest paid (to
the extent not accrued in a prior period) or accrued by such other Person
during such period attributable to any such Indebtedness, in each case to the
extent attributable to that period, (c) the aggregate amount of the interest
component of Capitalized Lease Obligations paid (to the extent not accrued in a
prior period), accrued or scheduled to be paid or accrued by the Company and
its Restricted Subsidiaries during such period and (d) the aggregate amount of
dividends paid (to the extent not accrued in a prior period) or accrued on
Preferred Stock or Disqualified Capital Stock of the Company and its Restricted
Subsidiaries, to the extent such Preferred Stock or Disqualified Capital Stock
is owned by Persons other than the Company or its Restricted Subsidiaries, less
(ii), to the extent included in clause (i) above, amortization of capitalized
debt issuance costs of the Company and its Restricted Subsidiaries during such
period.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
as determined in accordance with GAAP, adjusted by excluding (a) net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto),
(b) net after-tax gains or losses (less all fees and expenses relating thereto)
attributable to Asset Sales, (c) the net income (or net loss) of any Person
(other than the Company or any of its Restricted Subsidiaries), in which the
Company or any of its Restricted Subsidiaries has an ownership interest, except
to the extent of the amount of dividends or other distributions actually paid
to the Company or any of its Restricted Subsidiaries in cash by such other
Person during such period (regardless of whether such cash dividends or
distributions is attributable to net income (or net loss) of such Person during
such period or during any prior period), (d) net income (or net loss) of any
Person combined with the Company or any of its
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<PAGE> 14
Restricted Subsidiaries on a "pooling of interests" basis attributable to any
period prior to the date of combination, (e) the net income of any Restricted
Subsidiary to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of its net income is not at
the date of determination permitted, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, and (f) income resulting from transfers of
assets received by the Company or any Restricted Subsidiary from an
Unrestricted Subsidiary.
"Consolidated Net Worth" means, at any date, the consolidated
stockholders' equity of the Company less the amount of such stockholders'
equity attributable to Disqualified Capital Stock or treasury stock of the
Company and its Restricted Subsidiaries, as determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, depletion, amortization and other non-cash expenses of the
Company and its Restricted Subsidiaries reducing Consolidated Net Income for
such period, determined on a consolidated basis in accordance with GAAP
(excluding any such non-cash charge for which an accrual of or reserve for cash
charges for any future period is required).
"Corporate Trust Office" means the principal corporate trust office of
the Trustee at which at any particular time its corporate trust business shall
be administered, which office at the date of execution of this Indenture is
located at 777 Main Street, Hartford, Connecticut 06115.
"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time which were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or futures contract or other similar agreement or arrangement designed to
protect against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in foreign currency exchange rates.
"Default" means any event, act or condition that is, or after notice
or passage of time or both would become, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.8 hereof.
"Depository" means The Depository Trust Company, its nominees and
their respective successors.
"Disinterested Director" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors of the
Company is required to deliver a Board Resolution hereunder, a member of the
Board of Directors of the Company who does not have any material direct or
indirect financial interest (other than an interest arising solely from the
beneficial ownership of Capital Stock of the Company) in or with respect to
such transaction or series of transactions.
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<PAGE> 15
"Disqualified Capital Stock" means any Capital Stock that, either by
its terms, by the terms of any security into which it is convertible or
exchangeable or by contract or otherwise, is, or upon the happening of an event
or passage of time would be, required to be redeemed or repurchased prior to
the final Stated Maturity of the Securities or is redeemable at the option of
the holder thereof at any time prior to such final Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
final Stated Maturity. For purposes of Section 10.12(a) hereof, Disqualified
Capital Stock shall be valued at the greater of its voluntary or involuntary
maximum fixed redemption or repurchase price plus accrued and unpaid dividends.
For such purposes, the "maximum fixed redemption or repurchase price" of any
Disqualified Capital Stock which does not have a fixed redemption or repurchase
price shall be calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were redeemed or
repurchased on the date of determination, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such
fair market value shall be determined in good faith by the board of directors
of the issuer of such Disqualified Capital Stock; provided, however, that if
such Disqualified Capital Stock is not at the date of determination permitted
or required to be redeemed or repurchased, the "maximum fixed redemption or
repurchase price" shall be the book value of such Disqualified Capital Stock.
"Event of Default" has the meaning specified in Section 5.1 hereof.
"Event of Loss" means, with respect to any drilling rig, MOPU or
related Property of the Company or any Restricted Subsidiary, (i) any damage to
such drilling rig, MOPU or related Property which results in an insurance
settlement with respect thereto on the basis of a total loss or a constructive
or compromised total loss or (ii) the confiscation, condemnation or requisition
of title to such drilling rig, MOPU or related Property by any government or
any instrumentality or agency thereof. An Event of Loss shall be deemed to
occur as of the date of the insurance settlement, confiscation, condemnation or
requisition of title, as applicable.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor act thereto.
"Exchange Offer" means the offer by the Company, pursuant to an
effective registration statement filed with the SEC, to exchange Series B
Securities for Outstanding Series A Securities in accordance with the terms and
provisions of the Registration Rights Agreement.
"Exchange Offer Consummation Date" means the date on which the
Exchange Offer is consummated in accordance with the terms and provisions of
the Registration Rights Agreement.
"Fair Market Value" means the fair market value of a Property
(including shares of Capital Stock) as determined in good faith by the Board of
Directors of the Company and evidenced by a Board Resolution, which
determination shall be conclusive for purposes of this Indenture; provided,
however, that unless otherwise specified herein, the Board of Directors shall
be under no obligation to obtain any valuation or assessment from any
investment banker, appraiser or other third party.
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"Federal Bankruptcy Code" means the United States Bankruptcy Code of
Title 11 of the United States Code, as amended from time to time.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States of America, which are applicable as of the date of this Indenture.
The term "guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments or documents for
collection in the ordinary course of business), direct or indirect, in any
manner, of any part or all of such obligation and (ii) an agreement, direct or
indirect, contingent or otherwise, the practical effect of which is to assure
in any way the payment or performance (or payment of damages in the event of
non-performance) of all or any part of such obligation, including, without
limiting the foregoing, the payment of amounts drawn down under letters of
credit. When used as a verb, "guarantee" has a corresponding meaning.
"Holder" means a Person in whose name a Security is registered in a
Security Register.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all liabilities of such Person, contingent or otherwise, for borrowed money
or for the deferred purchase price of Property or services (excluding any trade
accounts payable and other accrued current liabilities incurred in the ordinary
course of business) and all liabilities of such Person incurred in connection
with any letters of credit, bankers' acceptances or other similar credit
transactions or any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, outstanding on the date of
this Indenture or thereafter, if, and to the extent, any of the foregoing would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, (b) all obligations of such Person evidenced by bonds,
notes, debentures or other similar instruments, if, and to the extent, any of
the foregoing would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (c) all Indebtedness of such Person created
or arising under any conditional sale or other title retention agreement with
respect to Property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited
to repossession or sale of such Property), but excluding trade accounts payable
arising in the ordinary course of business, (d) the Attributable Indebtedness
respecting all Capitalized Lease Obligations of such Person, (e) all
Indebtedness referred to in the preceding clauses of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon Property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness (the amount of such obligation being deemed to be the lesser of
the value of such Property or the amount of the obligation so secured), (f) all
guarantees by such Person of Indebtedness referred to in this definition and
(g)
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<PAGE> 17
all obligations of such Person under or in respect of Currency Hedge
Obligations and Interest Rate Protection Obligations.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Insolvency or Liquidation Proceeding" means, with respect to any
Person, (a) an insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or similar case or proceeding in
connection therewith, relative to such Person or its creditors, as such, or its
assets or (b) any liquidation, dissolution or other winding-up proceeding of
such Person, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy or (c) any assignment for the benefit of creditors or
any other marshaling of assets and liabilities of such Person.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Protection Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
Person calculated by applying a fixed or a floating rate of interest on the
same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements or arrangements designed to
protect against or manage such Person's and any of its Subsidiaries' exposure
to fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan, guarantee of Indebtedness or other extension of credit or
capital contribution to (by means of any transfer of cash or other Property to
others or any payment for Property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities (including derivatives) or
evidences of Indebtedness issued by, any other Person. In addition, the Fair
Market Value of the net assets of any Restricted Subsidiary at the time that
such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be
deemed to be an "Investment" made by the Company in such Unrestricted
Subsidiary at such time. "Investments" shall exclude (a) extensions of trade
credit or other advances to customers on commercially reasonable terms in
accordance with normal trade practices or otherwise in the ordinary course of
business, (b) Interest Rate Protection Obligations and Currency Hedge
Obligations, but only to the extent that the same constitute Permitted
Investments, and (c) endorsements of negotiable instruments and documents in
the ordinary course of business.
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"Issue Date" means the date of first issuance of the Series A
Securities under this Indenture.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or similar
type of encumbrance (including, without limitation, any agreement to give or
grant any lease, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing) upon or with
respect to any Property of any kind. A Person shall be deemed to own subject to
a Lien any Property which such Person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
"Maturity" means, with respect to any Security, the date on which any
principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, accountants and investment banks) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale, (iii)
amounts required to be paid to any Person (other than the Company or any
Restricted Subsidiary) owning a beneficial interest in the Property subject to
the Asset Sale or having a Lien thereon and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve required in accordance with GAAP consistently applied against any
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected
in an Officers' Certificate delivered to the Trustee; provided, however, that
any amounts remaining after adjustments, revaluations or liquidations of such
reserves shall constitute Net Available Proceeds. "Net Available Proceeds@
means, with respect to any Event of Loss, the proceeds to the Company or any
Restricted Subsidiary as a result thereof in the form of cash or Cash
Equivalents, including insurance proceeds paid to the Company or any Restricted
Subsidiary, and all payments received by the Company or any Restricted
Subsidiary from any government or any instrumentality or agency thereof by way
of compensation for the requisition of title to Property, net of all fees and
expenses incurred by the Company or any Restricted Subsidiary related to the
collection or receipt of such proceeds, all as reflected in an Officers'
Certificate delivered to the Trustee.
"Net Cash Proceeds," with respect to any issuance or sale of Qualified
Capital Stock or other securities, means the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and
12
<PAGE> 19
brokerage, consultant and other fees and expenses actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of the Company or any Restricted Subsidiary incurred in connection
with the acquisition by the Company or such Restricted Subsidiary of any
Property and as to which (a) the holders of such Indebtedness agree that they
will look solely to the Property so acquired and securing such Indebtedness for
payment on or in respect of such Indebtedness, and neither the Company nor any
Subsidiary (other than an Unrestricted Subsidiary) (i) provides credit support,
including any undertaking, agreement or instrument which would constitute
Indebtedness or (ii) is directly or indirectly liable for such Indebtedness,
and (b) no default with respect to such Indebtedness would permit (after notice
or passage of time or both), according to the terms thereof, any holder of any
Indebtedness of the Company or a Restricted Subsidiary to declare a default on
such Indebtedness or cause the payment thereof to be accelerated or payable
prior to its Stated Maturity.
"Offering Memorandum" means the Offering Memorandum of the Company
dated May 20, 1996, pursuant to which the Series A Securities are offered by
the Initial Purchasers to Qualified Institutional Buyers and to a limited
number of institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act).
"Officers" means, with respect to any Person, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer and the
Treasurer of such Person.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company,
and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company (or any Subsidiary Guarantor), including an employee of
the Company (or any Subsidiary Guarantor), and who shall be reasonably
acceptable to the Trustee.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the Company
(if the Company shall act as its own Paying Agent) for the Holders of
such Securities, provided that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been
made;
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<PAGE> 20
(iii) Securities, except to the extent provided in Sections
12.2 and 12.3 hereof, with respect to which the Company has effected
legal defeasance or covenant defeasance as provided in Article XII
hereof; and
(iv) Securities which have been paid pursuant to Section
3.7 hereof or in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this Indenture,
other than any such Securities in respect of which there shall have
been presented to the Trustee proof satisfactory to it that such
securities are held by a bona fide purchaser in whose hands the
Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities
owned by the Company, any Subsidiary Guarantor or any other obligor upon the
Securities or any Affiliate of the Company, any Subsidiary Guarantor or such
other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in making such
calculation or in relying upon any such request, demand, authorization,
direction, consent, notice or waiver, only Securities which the Trustee knows
to be so owned shall be so disregarded. Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect
to such Securities and that the pledgee is not the Company, any Subsidiary
Guarantor or any other obligor upon the Securities or any Affiliate of the
Company, any Subsidiary Guarantor or such other obligor.
"Paying Agent" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (and premium,
if any, on) or interest on any Securities on behalf of the Company.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness (and any guarantee thereof) under one or
more credit facilities with banks and other financial institutions in
an aggregate principal amount at any one time outstanding not to
exceed $35,000,000, less any amounts derived from Asset Sales and
applied to the permanent reduction of the Indebtedness under any such
credit facilities as contemplated by Section 10.17 hereof (the
"Maximum Bank Credit Amount"), and any renewals, amendments
extensions, supplements, modifications, deferrals, refinancings or
replacements (each, for purposes of this clause (i), a "refinancing")
thereof, including any successive refinancings thereof, so long as the
aggregate principal amount of any such new Indebtedness, together with
the aggregate principal amount of all other Indebtedness outstanding
pursuant to this clause (i), shall not at any one time exceed the
Maximum Bank Credit Amount;
(ii) Indebtedness under the Series A Securities and any
Series B Securities issued in exchange for Series A Securities of an
equal principal amount;
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<PAGE> 21
(iii) Indebtedness outstanding or in effect on the date of
this Indenture (and not repaid or defeated with the proceeds of the
offering of the Securities), including Indebtedness of a Trinidad and
Tobago joint venture being guaranteed by the Company in connection
with the Rig Acquisitions, which Indebtedness is deemed to be
outstanding on the date of this Indenture;
(iv) Indebtedness under Interest Rate Protection
Obligations, provided that (1) such Interest Rate Protection
Obligations are related to payment obligations on Permitted
Indebtedness or Indebtedness otherwise permitted by Section 10.12(a)
hereof, and (2) the notional principal amount of such Interest Rate
Protection Obligations does not exceed the principal amount of such
Indebtedness to which such Interest Rate Protection Obligations
relate;
(v) Indebtedness under Currency Hedge Obligations,
provided that (1) such Currency Hedge Obligations are related to
payment obligations on Permitted Indebtedness or Indebtedness
otherwise permitted by Section 10.12(a) hereof, or to the foreign
currency cash flows reasonably expected to be generated by the Company
and its Restricted Subsidiaries, and (2) the notional principal amount
of such Currency Hedge Obligations does not exceed the principal
amount of such Indebtedness and the amount of such foreign currency
cash flows to which such Currency Hedge Obligations relate;
(vi) the Subsidiary Guarantees of the Securities (and any
assumption of the obligations guarantees thereby);
(vii) Indebtedness of the Company to a Wholly Owned
Restricted Subsidiary and Indebtedness of any Restricted Subsidiary to
the Company or a Wholly Owned Restricted Subsidiary; provided,
however, that upon any subsequent issuance or transfer of any Capital
Stock or any other event which results in any such Wholly Owned
Restricted Subsidiary ceasing to be a Wholly Owned Restricted
Subsidiary or any other subsequent transfer of any such Indebtedness
(except to the Company or a Wholly Owned Restricted Subsidiary), such
Indebtedness shall be deemed, in each case, to be incurred and shall
be treated as an incurrence for purposes of Section 10.12(a) hereof at
the time the Wholly Owned Restricted Subsidiary in question ceased to
be a Wholly Owned Restricted Subsidiary or the time such subsequent
transfer occurred;
(viii) Indebtedness in respect of bid, performance or surety
bonds issued for the account of the Company or any Restricted
Subsidiary in the ordinary course of business, including guaranties or
obligations of the Company or any Restricted Subsidiary with respect
to letters of credit supporting such bid, performance or surety
obligations (in each case other than for an obligation for money
borrowed);
(ix) Non-Recourse Indebtedness;
(x) any renewals, substitutions, refinancings or
replacements (each, for purposes of this clause (x), a "refinancing")
by the Company or a Restricted Subsidiary
15
<PAGE> 22
of any Indebtedness incurred pursuant to clause (ii) or (iii) of this
definition, including any successive refinancings by the Company or
such Restricted Subsidiary, so long as (A) any such new Indebtedness
shall be in a principal amount that does not exceed the principal
amount (or, if such new Indebtedness being refinanced provides for an
amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration thereof, such lesser amount as of
the date of determination) so refinanced plus the amount of any
premium required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness refinanced or the amount of
any premium reasonably determined by the Company or such Restricted
Subsidiary as necessary to accomplish such refinancing, plus the
amount of expenses of the Company or such Restricted Subsidiary
incurred in connection with such refinancing, (B) in the case of any
refinancing of Indebtedness (including the Securities) that is pari
passu with or subordinated in right of payment to either the
Securities or the Subsidiary Guarantees, then such new Indebtedness is
either pari passu with or subordinated in right of payment to the
Securities or the Subsidiary Guarantees, as the case may be, at least
to the same extent as the Indebtedness being refinanced and (C) such
new Indebtedness has an Average Life equal to or longer than the
Average Life of the Indebtedness being refinanced and a final Stated
Maturity that is at lease 91 days later than the final Stated Maturity
of the Indebtedness being refinanced; and
(xi) any additional Indebtedness in an aggregate principal
amount not in excess of $75,000,000 at any one time outstanding and
any guarantee thereof.
"Permitted Investments" means any of the following: (i) Investments
in Cash Equivalents; (ii) Investments in the Company or any of its Wholly Owned
Restricted Subsidiaries; (iii) Investments by the Company or any of its
Restricted Subsidiaries in another Person, if as a result of such Investment
(A) such other Person becomes a Wholly Owned Restricted Subsidiary or (B) such
other Person is merged or consolidated with or into, or transfers or conveys
all or substantially all of its Properties to, the Company or a Wholly Owned
Restricted Subsidiary; (iv) Investments permitted under Section 10.17 or 10.18
hereof; (v) Investments made in the ordinary course of business in prepaid
expenses, lease, utility, workers' compensation, performance and other similar
deposits; (vi) Investments in stock, obligations or securities received in
settlement of debts owing to the Company or any Restricted Subsidiary as a
result of bankruptcy or insolvency proceedings or upon the foreclosure,
perfection or enforcement of any Lien in favor of the Company or any Restricted
Subsidiary, in each case as to debt owing to the Company or any Restricted
Subsidiary that arose in the ordinary course of business of the Company or any
such Restricted Subsidiary, provided that any stocks, obligations or securities
received in settlement of debts that arose in the ordinary course of business
(and received other than as a result of bankruptcy or insolvency proceedings or
upon foreclosure, perfection or enforcement of any Lien) that are, within 30
days of receipt, converted into cash or Cash Equivalents shall be treated as
having been cash or Cash Equivalents at the time received; (vii) other
Investments in joint ventures, corporations, limited liability companies or
partnerships formed with or organized by third Persons, which joint ventures,
corporations, limited liability companies or partnerships engage in a business
substantially similar, or related to the business conducted by the Company and
its Restricted Subsidiaries, provided such Investments do not, in
16
<PAGE> 23
the aggregate, exceed the sum of (1) $15,000,000 and (2) the aggregate
amount of principal repayments, interest on Indebtedness, dividends,
distributions or other return of capital received by the Company or a
Restricted Subsidiary from any Person (other than the Company or any
Restricted Subsidiary) in which the Company or any of its Restricted
Subsidiaries has an ownership interest (including any return of
capital resulting from redesignation of an Unrestricted Subsidiary as
a Restricted Subsidiary).
"Permitted Liens" means the following types of Liens:
(a) Liens existing as of the date of this Indenture;
(b) Liens securing the Securities or the Subsidiary
Guarantees;
(c) Liens in favor of the Company;
(d) Liens securing Indebtedness that constitutes
Permitted Indebtedness pursuant to clause (i) of the definition of
"Permitted Indebtedness";
(e) Liens for taxes, assessments and governmental charges
or claims either (i) not delinquent or (ii) contested in good faith by
appropriate proceedings and as to which the Company or its Restricted
Subsidiaries shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(f) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums not delinquent or being contested in good faith, if such reserve
or other appropriate provision, if any, as shall be required by GAAP
shall have been made in respect thereof;
(g) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the payment or performance of tenders, statutory or regulatory
obligations, surety and appeal bonds, bids, government contracts and
leases, performance and return of money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money);
(h) judgment Liens not giving rise to an Event of Default
so long as any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may be initiated
shall not have expired;
(i) any interest or title of a lessor under any
Capitalized Lease Obligation or operating lease;
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<PAGE> 24
(j) purchase money Liens; provided, however, that (i) the
related purchase money Indebtedness shall not be secured by any
Property of the Company or any Restricted Subsidiary other than the
Property so acquired and the proceeds thereof and (ii) the Lien
securing such Indebtedness shall be created within 90 days of such
acquisition;
(k) Liens securing obligations under or in respect of
either Currency Hedge Obligations or Interest Rate Protection
Obligations;
(l) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the account of
such Person to facilitate the purchase, shipment or storage of such
inventory or other goods;
(m) Liens securing reimbursement obligations with respect
to commercial letters of credit which encumber documents and other
Property relating to such letters of credit and products and proceeds
thereof;
(n) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and set-off;
(o) Liens on, or related to, Properties to secure all or
part of the costs incurred in the ordinary course of business for the
exploration, drilling, development or operation thereof; and
(p) Liens securing Non-Recourse Indebtedness; provided,
however, that the related Non-Recourse Indebtedness shall not be
secured by any Property of the Company or any Restricted Subsidiary
other than the Property acquired by the Company or any Restricted
Subsidiary with the proceeds of such Non-Recourse Indebtedness.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security, including any Security of a different series, evidencing all or a
portion of the same debt as that evidenced by such particular Security; and,
for the purposes of this definition, any Security authenticated and delivered
under Section 3.7 hereof in exchange for a mutilated security or in lieu of a
lost, destroyed or stolen Security shall be deemed to evidence the same debt as
the mutilated, lost, destroyed or stolen Security.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference
18
<PAGE> 25
stock, whether now outstanding or issued after the date of this Indenture,
including, without limitation, all classes and series of preferred or
preference stock of such Person.
"Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth in Section 2.2 hereof.
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock in any
other Person.
"Public Equity Offering" means an offer and sale of Common Stock of
the Company pursuant to a registration statement that has been declared
effective by the Commission pursuant to the Securities Act (other than a
registration statement on Form S-8 or otherwise relating to equity securities
issuable under any employee benefit plan of the Company).
"Purchase Agreement" means the Purchase Agreement dated May 20, 1996
among the Company, the Subsidiary Guarantors and the Purchasers.
"Purchaser" means an initial purchaser of Series A Securities named in
the Purchase Agreement.
"Qualified Capital Stock" of any Person means any and all Capital
Stock of such Person other than Disqualified Capital Stock.
"Qualified Institutional Buyer" has the meaning attributed thereto in
Rule 144A under the Securities Act.
"Record Date" means a Regular Record Date or an Additional Record
Date.
"Redemption Date," when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Default" shall have the meaning ascribed thereto in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement to be dated on or about the Issue Date, among the Company, the
Subsidiary Guarantors and the Purchasers.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the May 1 or November 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
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<PAGE> 26
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer," when used with respect to the Trustee, means
any officer in the Corporate Trust Department of the Trustee, and also means,
with respect to a particular corporate trust matter, any other officer of the
Trustee to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Investment" means (without duplication) (i) the
designation of a Subsidiary as an Unrestricted Subsidiary in the manner
described in the definition of "Unrestricted Subsidiary" and (ii) any
Investment other than a Permitted Investment or an Investment in the Trinidad
and Tobago joint venture owning one of the Southwestern Rigs.
"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the date of this Indenture, unless such Subsidiary of the
Company is an Unrestricted Subsidiary or is designated as an Unrestricted
Subsidiary pursuant to the terms of this Indenture.
"Revolving Credit Facility" means that certain Second Restated Credit
Agreement dated as of March 28, 1994 by and among the Company, Cliffs Oil and
Gas Company, Cliffs Drilling International, Inc. and Internationale Nederlanden
(U.S.) Capital Corporation, as amended by the First, Second and Third
Amendments thereto dated as of May 17, 1994, September 26, 1995 and December
19, 1995, respectively.
"Rig Acquisitions" has the meaning attributed thereto in the Offering
Memorandum.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard and Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Sale/Leaseback Transaction" means any direct or indirect arrangement
pursuant to which Properties are sold or transferred by the Company or a
Restricted Subsidiary and are thereafter leased back from the purchaser or
transferee thereof by the Company or one of its Restricted Subsidiaries.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Series A Securities or any Series B
Securities authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor act thereto.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5 hereof.
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<PAGE> 27
"Series A Securities" means the 10.25% Senior Notes due 2003, Series
A, being issued and sold pursuant to the Purchase Agreement and this Indenture.
"Series B Securities" means the 10.25% Senior Notes due 2003, Series
B, to be issued in exchange for the Series A Securities pursuant to the
Registration Rights Agreement and this Indenture.
"Southwestern Rigs" has the meaning attributed thereto in the Offering
Memorandum.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.8 hereof.
"Stated Maturity" means, when used with respect to any Indebtedness or
any installment of interest thereon, means the date specified in the instrument
evidencing or governing such Indebtedness as the fixed date an which the
principal of such Indebtedness or such installment of interest is due and
payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary Guarantor which is expressly subordinated in right of payment to the
Securities or the Subsidiary Guarantees, as the case may be.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation), including, without limitation, a joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, have at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Persons
performing similar functions).
"Subsidiary Guarantee" has the meaning specified in Section 13.1
hereof.
"Subsidiary Guarantor" means (i) Cliffs Drilling Asset Acquisition
Company, a Delaware corporation, (ii) Cliffs Drilling Merger Company, a
Delaware corporation, (iii) Cliffs Drilling International, Inc., a Delaware
corporation, (iv) Cliffs Oil and Gas Company, a Delaware corporation, (v) each
of the Company's other Restricted Subsidiaries, if any, executing a
supplemental indenture in compliance with the provisions of Section 10.13(a)
hereof and (vi) any Person that becomes a successor guarantor of the Securities
in compliance with the provisions of Section 13.2 hereof.
"Transfer Restricted Security" has the meaning attributed thereto in
the Registration Rights Agreement; provided, however, that the Trustee shall be
entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether or not any Security is a Transfer Restricted Security.
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<PAGE> 28
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
as amended and in force at the date as of which this Indenture was executed
until such time as this Indenture is qualified under the TIA, and thereafter as
in effect on the date on which this Indenture is qualified under the TIA,
except as provided in Section 9.5 hereof.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination will be designated an Unrestricted Subsidiary by
the Board of Directors of the Company as provided below and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any Subsidiary of the Company as an Unrestricted Subsidiary so long
as (a) neither the Company nor any Restricted Subsidiary is directly or
indirectly liable pursuant to the terms of any Indebtedness of such Subsidiary;
(b) no default with respect to any Indebtedness of such Subsidiary would permit
(upon notice, lapse of time or otherwise) any holder of any other Indebtedness
of the Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity; (c) such designation as an Unrestricted Subsidiary would
be permitted under Section 10.10 hereof; and (d) such designation shall not
result in the creation or imposition of any Lien on any of the Properties of
the Company or any Restricted Subsidiary (other than any Permitted Lien or any
Lien the creation or imposition of which shall have been in compliance with
Section 10.15 hereof); provided, however, that with respect to clause (a), the
Company or a Restricted Subsidiary may be liable for Indebtedness of an
Unrestricted Subsidiary if (x) such liability constituted a Permitted
Investment or a Restricted Payment permitted by Section 10.10 hereof, in each
case at the time of incurrence, or (y) the liability would be a Permitted
Investment at the time of designation of such Subsidiary as an Unrestricted
Subsidiary. Any such designation by the Board of Directors of the Company shall
be evidenced to the Trustee by filing a Board Resolution with the Trustee
giving effect to such designation. The Board of Directors of the Company may
designate any Unrestricted Subsidiary as a Restricted Subsidiary if,
immediately after giving effect to such designation, on a pro forma basis (i)
no Default or Event of Default shall have occurred and be continuing, (ii) the
Company could incur $1.00 of additional Indebtedness (not including the
incurrence of Permitted Indebtedness) under Section 10.12(a) hereof and (iii)
if any of the Properties of the Company or any of its Restricted Subsidiaries
would upon such designation become subject to any Lien (other than a Permitted
Lien), the creation or imposition of such Lien shall have been in compliance
with Section 10.15 hereof.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at
22
<PAGE> 29
the time, stock of any other class or classes shall have, or might have, voting
power by reason of the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
to the extent (i) all of the Capital Stock or other ownership interests in such
Restricted Subsidiary, other than any directors' qualifying shares mandated by
applicable law, is owned directly or indirectly by the Company or (ii) such
Restricted Subsidiary is organized in a foreign jurisdiction and is required by
the applicable laws and regulations of such foreign jurisdiction to be
partially owned by the government of such foreign jurisdiction or individual or
corporate citizens of such foreign jurisdiction in order for such Restricted
Subsidiary to transact business in such foreign jurisdiction, provided that the
Company, directly or indirectly, owns the remaining Capital Stock or ownership
interest in such Restricted Subsidiary and, by contract or otherwise, controls
the management and business of such Restricted Subsidiary and derives the
economic benefits of ownership of such Restricted Subsidiary to substantially
the same extent as if such Restricted Subsidiary were a wholly owned
Subsidiary.
Section 1.2 Other Definitions.
<TABLE>
<CAPTION>
Defined
Term in Section
---- ----------
<S> <C>
"Additional Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
"Agent Members" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
"Change of Control Notice" . . . . . . . . . . . . . . . . . . . . . . . . . 10.16(c)
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . 10.16(a)
"Change of Control Purchase Date" . . . . . . . . . . . . . . . . . . . . . . 10.16(c)
"Change of Control Purchase Price" . . . . . . . . . . . . . . . . . . . . . 10.16(a)
"Defaulted Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.17(b)
"Funding Guarantor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.5
"Global Security" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"MOPUs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.7
"Net Proceeds Deficiency" . . . . . . . . . . . . . . . . . . . . . . . . . . 10.17(c)
"Net Proceeds Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.17(c)
"Net Proceeds Payment Date" . . . . . . . . . . . . . . . . . . . . . . . . . 10.17(c)
"Offered Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.17(c)
"Payment Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.17(c
"Payment Restriction" . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.19
"Physical Securities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Purchase Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.17(c)
"Restricted Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.10(a)
"Surviving Entity" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(a)
"Trigger Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.17(c)
"U.S. Government Obligations" . . . . . . . . . . . . . . . . . . . . . . . . 12.4(a)
</TABLE>
Section 1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities,
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<PAGE> 30
"indenture security holder" means a Holder,
"indenture to be qualified" means this Indenture,
"indenture trustee" or "institutional trustee" means the
Trustee, and
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
Section 1.4 Rules of Construction.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP and all accounting
calculations will be determined in accordance with GAAP;
(c) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(d) the masculine gender includes the feminine and the neuter;
(e) a "day" means a calendar day;
(f) when used with reference to the Securities, the expression "of
like tenor" refers to Securities of the same series;
(g) the term "merger" includes a statutory share exchange and the
term "merged" has a correlative meaning; and
(h) references to agreements and other instruments include
subsequent amendments and waivers but only to the extent not prohibited by this
Indenture.
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<PAGE> 31
ARTICLE II
SECURITY FORMS
Section 2.1 Forms Generally.
The definitive Securities shall be printed, lithographed or engraved
on steel-engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities or notations of Subsidiary
Guarantees, as the case may be, as evidenced by their execution of such
Securities or notations of Subsidiary Guarantees, as the case may be.
Except as indicated in the next succeeding paragraph, Securities
(including the notations thereon relating to the Subsidiary Guarantees and the
Trustee's certificate of authentication) shall be issued initially in the form
of one or more permanent global Securities substantially in the form set forth
in Sections 2.2 through 2.5 hereof (each being herein called a "Global
Security") deposited with the Trustee, as custodian for the Depository, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided, and each shall bear the legend set forth on Exhibit A hereto. Subject
to the limitation set forth in Section 3.1, the principal amounts of the Global
Securities may be increased or decreased from time to time by adjustments made
on the records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Securities (including the notations thereon relating to the Subsidiary
Guarantees and the Trustee's certificate of authentication) originally issued
and sold in reliance on any exemption from registration under the Securities
Act other than Rule 144A shall be issued, and Securities originally offered and
sold in reliance on Rule 144A may be issued, in the form of permanent
certificated securities in registered form in substantially the form set forth
in Sections 2.2 through 2.5 hereto ("Physical Securities").
The Series A Securities and the Series B Securities, the notations
thereon relating to the Subsidiary Guarantees and the Trustee's certificate of
authentication shall be in substantially the respective forms set forth in this
Article, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, CUSIP or other numbers or other marks of identification and such
legends or endorsements placed thereon as may be required by this Section or
Section 3.12 or to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities
or notations of Subsidiary Guarantees, as the case may be, as evidenced by
their execution of the Securities or notations of Subsidiary Guarantees, as the
case may be. Any portion of the text of any Security may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the
Security. In addition to the requirements of Section 2.3, the Securities may
also have set forth on the reverse side thereof a form of assignment and forms
to elect purchase by the Company pursuant to Section 10.16 or 10.17 hereof.
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<PAGE> 32
Section 2.2 Form of Face of Security.
[If a Series A Security or a Series B Security constituting a Transfer
Restricted Security--THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL
NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED
STATES TO FOREIGN PURCHASERS IN OFFSHORE TRANSACTIONS MEETING THE REQUIREMENTS
OF RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.]
CLIFFS DRILLING COMPANY
10.25% Senior Note due 2003, Series ____
No._____ $____________
CUSIP No.18682C_ _
Cliffs Drilling Company, a Delaware corporation (herein called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
_________ or registered assigns the principal sum of _________ Dollars on May
15, 2003, at the office or agency of the Company referred to below, and to pay
interest thereon, commencing [if a Series A Security--on November 15, 1996 and
continuing semiannually thereafter, on May 15 and November 15 in each year,
from May 23,
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<PAGE> 33
1996] [if a Series B Security--on the first May 15 or November 15 following the
original issuance of the Series B Securities and continuing semiannually
thereafter, on May 15 and November 15 in each year, from the date of original
issuance of the Series B Securities], or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, at the rate of
10.25% per annum, until the principal hereof is paid or duly provided for, and
(to the extent lawful) to pay on demand interest on any overdue interest at the
rate borne by the Series ____ Securities from the date on which such overdue
interest becomes payable to the date payment of such interest has been made or
duly provided for. The Company also promises to pay any Additional Interest
required by Section 4 of the Registration Rights Agreement, upon the
conditions, at the rates and for the periods specified therein. The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person in whose name
this Series ___ Security (or one or more Predecessor Securities) is registered
on the Security Register at the close of business on the Regular Record Date
for such interest, which shall be the May 1 or November 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date, and such
Defaulted Interest, and (to the extent lawful) interest on such Defaulted
Interest at the rate borne by the Series ____ Securities, may be paid to the
Person in whose name this Series ____ Security (or one or more Predecessor
Securities) is registered on the Security Register at the close of business on
a Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Series ____ Securities
not less than 10 days prior to such Special Record Date, or may be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Series ____ Securities may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
said Indenture. Accrued but unpaid interest on any Series A Security that is
exchanged for a Series B Security pursuant to the Registration Rights Agreement
shall be paid on or before the first Interest Payment Date on the Series B
Securities.
Payment of the principal of (and premium, if any, on) and interest on
this Series ____ Security will be made at the office or agency of the Company
maintained for that purpose in The City of New York, in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of
interest may be made on Physical Securities at the option of the Company on or
before the due date (i) by check mailed to the address of the Person entitled
thereto as such address shall appear on the Security Register or (ii) with
respect to any Holder owning Series ____ Securities in the principal amount of
$500,000 or more, by wire transfer to an account maintained by the Holder
located in the United States, as specified in a written notice to the Trustee
by any such Holder requesting payment by wire transfer and specifying the
account to which transfer is requested.
Reference is hereby made to the further provisions of this Series ____
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
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<PAGE> 34
Unless the certificate of authentication hereon has been duly executed
by the trustee referred to on the reverse hereof by manual signature, this
Series ____ Security shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
CLIFFS DRILLING COMPANY
By:
---------------------------------
President
Attest:
- -----------------------------
Secretary
Section 2.3 Form of Reverse of Security.
This Series ____ Security is one of a duly authorized issue of
securities of the Company designated as its 10.25% Senior Notes due 2003,
Series ____ (herein called the "Series ____ Securities"and, together with the
Series ____ Securities, the "Securities"), limited (except as otherwise
provided in the Indenture referred to below) in aggregate principal amount to
$150,000,000, which may be issued under an indenture (herein called the
"Indenture") dated as of May 15, 1996 between the Company, the initial
Subsidiary Guarantors named therein and Fleet National Bank (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Subsidiary
Guarantors, the Trustee and the Holders of the Securities, and of the terms
upon which the Securities are, and are to be, authenticated and delivered.
The Securities are subject to redemption, at the option of the
Company, in whole or in part, at any time on or after May 15, 2000, upon not
less than 30 or more than 60 days' notice at the following Redemption Prices
(expressed as percentages of principal amount) set forth below if redeemed
during the 12-month period beginning May 15 of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2000 . . . . . . . . . . . .. . . . . . . . . . . 105.00%
2001 . . . . . . . . . . . .. . . . . . . . . . . 102.50%
2002 and thereafter . . . . .. . . . . . . . . . . 100.00%
</TABLE>
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<PAGE> 35
together in the case of any such redemption with accrued and unpaid interest,
if any, to the Redemption Date (subject to the right of Holders of record on
the relevant Record Date to receive interest due on an Interest Payment Date
that is on or prior to the Redemption Date), all as provided in the Indenture.
Notwithstanding the foregoing, at any time on or prior to May 15,
1999, up to $37,500,000 in aggregate principal amount of Securities may be
redeemed, at the option of the Company, upon not less than 30 or more than 60
days' notice, from the Net Cash Proceeds of a Public Equity Offering, at a
Redemption Price equal to 110.00% of the principal amount thereof, together
with accrued and unpaid interest to the Redemption Date, provided that at least
$112,500,000 in aggregate principal amount of Securities remains Outstanding
immediately after such redemption and that such redemption occurs within 60
days following the closing of such Public Equity Offering.
In the case of any redemption of Securities, interest installments
whose Stated Maturity is on or prior to the Redemption Date will be payable to
Holders of such Securities, or one or more Predecessor Securities, of record at
the close of business on the relevant Record Date referred to on the face
hereof. Securities (or portions thereof) for whose redemption and payment
provision is made in accordance with the Indenture shall cease to bear interest
from and after the Redemption Date. In the event of redemption or purchase of
this Series __ Security in part only, a new Series __ Security or Securities
for the unredeemed or unpurchased portion hereof shall be issued in the name of
the Holder hereof upon the cancellation hereof.
The Securities do not have the benefit of any sinking fund
obligations.
In the event of a Change of Control of the Company, and subject to
certain conditions and limitations provided in the Indenture, the Company will
be obligated to make an offer to purchase, on a Business Day not more than 60
or less than 30 days following the occurrence of a Change of Control of the
Company, all of the then Outstanding Securities at a purchase price equal to
101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the Change of Control Purchase Date, all as provided in
the Indenture.
In the event of Asset Sales, under certain circumstances, the Company
will be obligated to make a Net Proceeds Offer to purchase all or a specified
portion of each Holder's Securities at a purchase price equal to 100% of the
principal amount of the Securities, together with accrued and unpaid interest,
if any, to the Net Proceeds Payment Date.
As set forth in the Indenture, an Event of Default is generally (i)
failure to pay principal upon maturity, redemption or otherwise (including
pursuant to a Change of Control Offer or a Net Proceeds Offer); (ii) default
for 30 days in payment of interest on any of the Securities; (iii) default in
the performance of agreements relating to mergers, consolidations and sales of
all or substantially all assets or the failure to make or consummate a Change
of Control Offer or a Net Proceeds Offer; (iv) failure for 45 days after notice
to comply with any other covenants in the Indenture, any Subsidiary Guarantee
or the Securities; (v) certain payment defaults under, and the acceleration
prior to the maturity of, certain Indebtedness of the Company or any Restricted
29
<PAGE> 36
Subsidiary in an aggregate principal amount in excess of $5,000,000; (vi) the
failure of any Subsidiary Guarantee to be in full force and effect (except as
permitted by the Indenture); (vii) certain final judgments or orders against
the Company or any Restricted Subsidiary in an aggregate amount of more than
$5,000,000 over the coverage under applicable insurance policies which remain
unsatisfied and either become subject to commencement of enforcement
proceedings or remain unstayed for a period of 60 days; and (viii) certain
events of bankruptcy, insolvency or reorganization of the Company or any
Restricted Subsidiary. If any Event of Default occurs and is continuing, the
Trustee or the holders of at least 25% in aggregate principal amount of the
Outstanding Securities may declare the principal amount of all the Securities
to be due and payable immediately, except that (i) in the case of an Event of
Default arising from certain events of bankruptcy, insolvency or reorganization
of the Company or any Restricted Subsidiary, the principal amount of the
Securities will become due and payable immediately without further action or
notice, and (ii) in the case of an Event of Default which relates to certain
payment defaults or acceleration with respect to certain Indebtedness, any such
Event of Default and any consequential acceleration of the Securities will be
automatically rescinded if any such Indebtedness is repaid or if the default
relating to such Indebtedness is cured or waived and if the holders thereof
have accelerated such Indebtedness then such holders have rescinded their
declaration of acceleration. No Holder may pursue any remedy under the
Indenture unless the Trustee shall have failed to act after notice from such
Holder of an Event of Default and written request by Holders of at least 25% in
aggregate principal amount of the Outstanding Securities, and the offer to the
Trustee of indemnity reasonably satisfactory to it; however, such provision
does not affect the right to sue for enforcement of any overdue payment on a
Security by the Holder thereof. Subject to certain limitations, Holders of a
majority in aggregate principal amount of the Outstanding Securities may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders notice of any continuing default (except default in payment of
principal, premium or interest) if it determines in good faith that withholding
the notice is in the interest of the Holders. The Company is required to file
annual and quarterly reports with the Trustee as to the absence or existence of
defaults.
The Indenture contains provisions for (i) defeasance at any time of
the entire indebtedness of the Company on this Series ____ Security and (ii)
discharge from certain restrictive covenants and the related Defaults and
Events of Default, upon compliance by the Company with certain conditions set
forth therein, which provisions apply to this Series ____ Security.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the Subsidiary Guarantors and the rights of the Holders under the
Indenture at any time by the Company, the Subsidiary Guarantors and the Trustee
with the consent of the Holders of a majority in aggregate principal amount of
the Securities at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount
of the Securities at the time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by or on behalf of the Holder of this Series ____
Security shall be conclusive and binding upon such Holder and upon all future
Holders of this Series ____ Security and of any Security issued upon the
registration of transfer hereof or in
30
<PAGE> 37
exchange herefor or in lieu hereof whether or not notation of such consent or
waiver is made upon this Series ____ Security. Without the consent of any
Holder, the Company, the Subsidiary Guarantors and the Trustee may amend or
supplement the Indenture or the Securities to cure any ambiguity, defect or
inconsistency, to qualify or maintain the qualification of the Indenture under
the Trust Indenture Act, to add or release any Subsidiary Guarantor pursuant to
the Indenture and to make certain other specified changes and other changes
that do not materially adversely affect the interests of any Holder in any
material respect.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any,
on) and interest on this Series ____ Security at the times, place, and rate,
and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Series ____ Security is registerable on
the Security Register of the Company, upon surrender of this Series ____
Security for registration of transfer at the office or agency of the Company
maintained for such purpose duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized
in writing, and thereupon one or more new Series ____ Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.
The Series ____ Securities are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, the Series ____ Securities are exchangeable for a like aggregate
principal amount of Series ____ Securities of a different authorized
denomination, as requested by the Holder surrendering the same.
[If a Series A Security--At the option of the Holders thereof, the
Series A Securities may be exchanged, pursuant to the Registration Rights
Agreement, for a like aggregate principal amount of Series B Securities.]
No service charge shall be made for any registration of transfer or
exchange of Series ____ Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
A director, officer, employee, incorporator, stockholder or Affiliate
of the Company or any Subsidiary Guarantor, as such, past, present or future
shall not have any personal liability under this Series ____ Security or any
other Security or the Indenture by reason of his or its status as such
director, officer, employee, incorporator, stockholder or Affiliate, or any
liability for any obligations of the Company or any Subsidiary Guarantor under
the Securities or the Indenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. Each Holder, by accepting this
Series ____ Security with the notation of Subsidiary Guarantee endorsed hereon,
waives and releases all such liability. Such waiver and release are part of the
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<PAGE> 38
consideration for the issuance of this Series ____ Security with the notation
of Subsidiary Guarantee endorsed hereon.
Prior to the time of due presentment of this Security for registration
of transfer, the Company, the Subsidiary Guarantors, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose name this Series
____ Security is registered as the owner hereof for all purposes, whether or
not this Security is overdue, and neither the Company, the Subsidiary
Guarantors, the Trustee nor any agent shall be affected by notice to the
contrary.
All terms used in this Series ____ Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture. The
Company will furnish to any Holder upon written request and without charge a
copy of the Indenture. Requests may be made to the Company at 1200 Smith
Street, Suite 300, Houston, Texas 77002, Attention: Chief Financial Officer (or
such other address as the Company may have furnished in writing to the
Trustee).
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Series ____ Securities as a convenience to the Holders thereof.
No representation is made as to the accuracy of such numbers as printed on the
Series ____ Securities and reliance may be placed only on the other identifying
information printed hereon.
Interest on this Series ____ Security shall be computed on the basis
of a 360-day year comprised of twelve 30- day months.
This Series ____ Security shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflicts
of law principles.
Section 2.4 Form of Notation Relating to Subsidiary Guarantees.
The form of notation to be set forth on each Security relating to the
Subsidiary Guarantees shall be in substantially the following form:
SUBSIDIARY GUARANTEES
Subject to the limitations set forth in the Indenture, the initial
Subsidiary Guarantors and, if any, all additional Subsidiary Guarantors (as
defined in the Indenture referred to in the Series ____ Security upon which
this notation is endorsed and each being hereinafter referred to as a
"Subsidiary Guarantor," which term includes any additional or successor
Subsidiary Guarantor under the Indenture) have, jointly and severally,
unconditionally guaranteed (a) the due and punctual payment of the principal
(and premium, if any) of and interest on the Securities, whether at maturity,
acceleration, redemption or otherwise, (b) the due and punctual payment of
interest on the overdue principal of and interest on the Securities, if any, to
the extent lawful, (c) the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee, all in accordance
with the terms set forth in the Indenture, and (d) in case of any extension of
time of payment or renewal of any Securities or any of such other obligations,
the same will be
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<PAGE> 39
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at Stated Maturity, by acceleration or otherwise.
The obligations of each Subsidiary Guarantor are limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under its Subsidiary Guarantee or pursuant to its contribution obligations
under the Indenture, result in the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Subsidiary Guarantor that
makes a payment or distribution under a Subsidiary Guarantee shall be entitled
to a contribution from each other Subsidiary Guarantor in a pro rata amount
based on the Adjusted Net Assets of each Subsidiary Guarantor.
No stockholder, officer, director, employee, incorporator or Affiliate
as such, past, present or future, of any Subsidiary Guarantor shall have any
personal liability under its Subsidiary Guarantee by reason of his or its
status as such stockholder, officer, director, employee, incorporator or
Affiliate, or any liability for any obligations of any Subsidiary Guarantor
under the Securities or the Indenture or for any claim based on, in respect of,
or by reason of such obligations or their creation.
Any Subsidiary Guarantor may be released from its Subsidiary Guarantee
upon the terms and subject to the conditions provided in the Indenture.
All terms used in this notation of Subsidiary Guarantee which are
defined in the Indenture referred to in this Series ____ Security upon which
this notation of Subsidiary Guarantees is endorsed shall have the meanings
assigned to them in such Indenture.
The Subsidiary Guarantees shall be binding upon the Subsidiary
Guarantors and shall inure to the benefit of the Trustee and the Holders and,
in the event of any transfer or assignment of rights by any Holder or the
Trustee respecting the Series _____ Security upon which the foregoing
Subsidiary Guarantees are noted, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof and in the
Indenture.
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The Subsidiary Guarantees shall not be valid or obligatory for any
purpose until the certificate of authentication on the Series ____ Security
upon which the foregoing Subsidiary Guarantees are noted shall have been
executed by the Trustee under the Indenture by the manual signature of one of
its authorized signatories.
CLIFFS DRILLING ASSET ACQUISITION
COMPANY,
CLIFFS DRILLING MERGER COMPANY,
CLIFFS DRILLING INTERNATIONAL, INC.,
and CLIFFS OIL AND GAS COMPANY
By:
-----------------------------------
President
Section 2.5 Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially
the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series ____ Securities referred to in the within
mentioned Indenture.
Dated: __________________________ Fleet National Bank,
Trustee
By:
-----------------------------
Authorized Signatory
ARTICLE III
THE SECURITIES
Section 3.1 Title and Terms.
The aggregate principal amount of Series A Securities which may be
authenticated and delivered under this Indenture for original issue is limited
to $150,000,000, and the aggregate principal amount of Series B Securities
which may be authenticated and delivered under this Indenture for original
issue is limited to $150,000,000. The aggregate principal amount of
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<PAGE> 41
Securities Outstanding at any one time may not exceed $150,000,000 except as
provided in Section 3.7 hereof.
The Series A Securities shall be known and designated as the "10.25%
Senior Notes due 2003, Series A" of the Company. Their Stated Maturity shall be
May 15, 2003, and they shall bear interest at the rate of 10.25% per annum from
May 23, 1996, or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, payable semiannually on May 15 and November
15 in each year, commencing November 15, 1996, and at said Stated Maturity,
until the principal thereof is paid or duly provided for.
The Series B Securities shall be known and designated as the "10.25%
Senior Notes due 2003, Series B" of the Company. Their Stated Maturity shall
be May 15, 2003, and they shall bear interest at the rate of 10.25% per annum
from the date of original issuance of the Series B Securities, or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, payable semiannually on May 15 and November 15 in each year, commencing on
the first May 15 or November 15 following the original issuance of the Series B
Securities, and at said Stated Maturity, until the principal thereof is paid or
duly provided for.
Upon the occurrence of a Registration Default, the interest rate on
Transfer Restricted Securities shall increase ("Additional Interest"), with
respect to the first 90-day period immediately following the occurrence of such
Registration Default, by 0.50% per annum and shall increase by an additional
0.50% per annum with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of 2.0% per annum
with respect to all Registration Defaults. Following the cure of a
Registration Default, the accrual of Additional Interest with respect to such
Registration Default shall cease and upon the cure of all Registration Defaults
the interest rate shall revert to the original rate. Any Additional Interest
due on any Security shall be payable on the appropriate Interest Payment Date
to the Holder entitled to receive the interest payment to be made on such date.
Each obligation to pay Additional Interest shall be deemed to accrue from and
including the date of the applicable Registration Default.
Accrued but unpaid interest on any Series A Security that is exchanged
for a Series B Security pursuant to the Registration Rights Agreement shall be
paid on or before the first Interest Payment Date on the Series B Securities.
The Series A Securities and the Series B Securities shall be
considered collectively to be a single class for all purposes of this
Indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase.
The principal of (and premium, if any, on) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York; provided, however, that, at the
option of the Company, interest may be paid on Physical Securities on or before
the due date (i) by check mailed to addresses of the Persons entitled thereto
as such addresses shall appear on the Security Register, or (ii) with respect
to any Holder owning Securities in the principal amount of $500,000 or more, by
wire transfer to an account maintained
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by the Holder located in the United States, as specified in a written notice to
the Trustee by any such Holder requesting payment by wire transfer and
specifying the account to which transfer is requested.
As provided in the Registration Rights Agreement and subject to the
limitations set forth therein, at the option of the Holders, the Series A
Securities shall be exchangeable for Series B Securities of like aggregate
principal amount pursuant to the Exchange Offer.
The Securities shall be redeemable as provided in Article XI hereof.
The Securities shall be subject to defeasance at the option of the
Company as provided in Article XII hereof.
The Securities shall be guaranteed by the Subsidiary Guarantors as
provided in Article XIII hereof.
Section 3.2 Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 3.3 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or a Vice President of the Company, under
its corporate seal reproduced thereon and attested by its Secretary or an
Assistant Secretary of the Company. The signature of any of these officers on
the Securities may be manual or facsimile signatures of the present or any
future such authorized officer and may be imprinted or otherwise reproduced on
the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time after the execution and delivery of this Indenture, the
Company may deliver Series A Securities executed by the Company and having the
notations of Subsidiary Guarantees executed by the Subsidiary Guarantors to the
Trustee for authentication, together with a Company Order for the
authentication and delivery of such Series A Securities, and the Trustee in
accordance with such Company Order shall authenticate and deliver such Series A
Securities with the notations of Subsidiary Guarantees thereon as provided in
this Indenture. Such Company Order shall specify the principal amount of the
Series A Securities to be authenticated and the date on which the original
issue of Series A Securities is to be authenticated. In addition, on or prior
to the Exchange Offer Consummation Date, the Company may deliver Series B
Securities executed by the Company and having the notations of Subsidiary
Guarantees executed by the Subsidiary Guarantors to the Trustee for
authentication, together with a Company Order for the
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<PAGE> 43
authentication and delivery of such Series B Securities, and the Trustee in
accordance with such Company Order shall authenticate and deliver such Series B
Securities with the notations of Subsidiary Guarantees thereon as provided in
this Indenture. Such Company Order shall specify the principal amount of the
Series B Securities to be authenticated and the date on which the Series B
Securities are to be exchanged for an equal principal amount of Series A
Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
duly executed by the Trustee by manual signature of an authorized signatory,
and such certificate upon any Security shall be conclusive evidence, and the
only evidence, that such Security has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to and in compliance with Article VIII
hereof, shall be consolidated or merged with or into any other Person or shall
sell, convey, transfer, lease or otherwise dispose of all or substantially all
of its Properties to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a sale, conveyance,
transfer, lease or other disposition as aforesaid, shall have executed an
indenture supplemental hereto with the Trustee pursuant to Article VIII hereof,
any of the Securities authenticated or delivered prior to such sale,
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person be exchanged for
other Securities executed in the name of the successor Person with such changes
in phraseology and form as may be appropriate, but otherwise in substance of
like tenor as the Securities surrendered for such exchange and of like
principal amount; and the Trustee, upon Company Request of the successor
Person, shall authenticate and deliver Securities as specified in such request
for the purpose of such exchange. If Securities shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer
of any Securities, such successor Person, at the option of the Holders but
without expense to them, shall provide for the exchange of all Securities at
the time Outstanding for Securities authenticated and delivered in such new
name.
Section 3.4 Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and having
the notations of Subsidiary Guarantees thereon and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities and notations of Subsidiary Guarantees may determine,
as conclusively evidenced by their execution of such Securities and notations
of Subsidiary Guarantees.
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<PAGE> 44
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 10.2
hereof, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of like tenor and of authorized denominations having the
notations of Subsidiary Guarantees thereon. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
Section 3.5 Registration of Transfer and Exchange.
The Company shall cause to be kept a register (the "Security
Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Securities and of
transfers of Securities. The Security Register shall be in written form or any
other form capable of being converted into written form within a reasonable
time. At all reasonable times and during normal business hours, the Security
Register shall be open to inspection by the Trustee. The Trustee is hereby
initially appointed as security registrar (the "Security Registrar") for the
purpose of registering Securities and transfers of Securities as herein
provided.
Subject to the provisions of this Section 3.5 and Section 3.6 hereof,
upon surrender for registration of transfer of any Security at the office or
agency of the Company designated pursuant to Section 10.2 hereof, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of like
tenor and of any authorized denomination and of a like aggregate principal
amount, each such Security having the notation of Subsidiary Guarantees
thereon.
Furthermore, any Holder of a Global Security shall, by acceptance of
such Global Security, be deemed to have agreed that transfers of beneficial
interests in such Global Security may be effected only through a book-entry
system maintained by the Depository (or its agent), and that ownership of a
beneficial interest in a Global Security shall be required to be reflected in a
book entry.
At the option of any Holder, Securities may be exchanged for other
Securities of like tenor and of any authorized denomination and of a like
aggregate principal amount, upon surrender of the Securities to be exchanged at
the office or agency of the Company designated pursuant to Section 10.2 hereof.
Further, at the option of any Holder Series A Securities may be exchanged,
pursuant to the Exchange Offer and subject to the terms and conditions thereof,
for Series B Securities of like aggregate principal amount, upon surrender of
the Series A Securities to be exchanged at such office or agency. Whenever any
Securities are so surrendered for exchange, the Company shall execute, the
Subsidiary Guarantors shall execute notations of Subsidiary Guarantees on, and
the Trustee shall authenticate and deliver, the Securities which the Holder
making the exchange is entitled to receive.
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<PAGE> 45
All Securities and the Subsidiary Guarantees noted thereon issued upon
any registration of transfer or exchange of Securities shall be the valid
obligations of the Company and the respective Subsidiary Guarantors, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer, in
form satisfactory to the Company and the Security Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing. As a special
condition to registration of transfer or exchange of any Transfer Restricted
Securities involving removal of a Private Placement Legend (other than pursuant
to an effective registration statement under the Securities Act), the Holder
requesting such registration of transfer or exchange shall furnish the Opinion
of Counsel called for by Section 3.12 hereof. The following additional special
conditions shall apply to the indicated types of transfers or exchanges:
(a) Respecting any requested registration of transfer or exchange
of Transfer Restricted Securities in the form of Physical Securities, such
Physical Securities shall be accompanied, in the sole discretion of the
Company, by the following additional information and documents, as applicable:
(1) if such Physical Security is being delivered to the
Security Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect (in substantially the form of Exhibit B hereto); or
(2) if such Physical Security is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A under the
Securities Act, a certification to that effect (in substantially the
form of Exhibit B hereto); or
(3) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a certification to that
effect (in substantially the form of Exhibit B hereto), a Transferee
Certificate for Institutional Accredited Investors in the form of
Exhibit C hereto and an Opinion of Counsel to the effect that such
transfer is in compliance with the Securities Act; or
(4) if such Physical Security is being transferred in
reliance on Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit B hereto), a Transferor
Certificate for Regulation S Transfers in the form of Exhibit D hereto
and an Opinion of Counsel to the effect that such transfer is in
compliance with the Securities Act; or
(5) if such Physical Security is being transferred in
reliance on Rule 144, delivery of a certification to that effect
(substantially in the form of Exhibit B hereto) and an Opinion of
Counsel to the effect that such transfer is in compliance with the
Securities Act; or
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<PAGE> 46
(6) if such Physical Security is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect (in substantially
the form of Exhibit B hereto) and an Opinion of Counsel to the effect
that such transfer is in compliance with the Securities Act.
(b) Respecting any requested exchange of a Physical Security for a
beneficial interest in a Global Security, such Physical Security shall be
accompanied, in the sole discretion of the Company, by the following additional
information and documents:
(1) a certification, substantially in the form of Exhibit
B hereto, that such Physical Security is being transferred to a
Qualified Institutional Buyer; and
(2) written instructions directing the Security Registrar
to make, or to direct the Depository to make, an endorsement on the
Global Security to reflect an increase in the aggregate amount of the
Securities represented by the Global Security;
whereupon the Security Registrar shall cancel such Physical Security and cause,
or direct the Depository to cause, in accordance with the standing instructions
and procedures existing between the Depository and the Security Registrar, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Security is then outstanding, the
Company shall issue and the Trustee shall upon Company Order authenticate a new
Global Security in the appropriate amount.
(c) Any Person having a beneficial interest in a Global Security
may upon request to the Security Registrar exchange such beneficial interest
for a Physical Security. Upon receipt by the Security Registrar of written
instructions (or such other form of instructions as is customary for the
Depository) from the Depository or its nominee on behalf of any Person having a
beneficial interest in a Global Security and upon receipt by the Security
Registrar of a written order or such other form of instructions as is customary
for the Depository or the Person designated by the Depository as having such a
beneficial interest containing registration instructions and, in the case of
any such transfer or exchange of a beneficial interest in Transfer Restricted
Securities, the following additional information and documents:
(1) if such beneficial interest is being transferred to
the Person designated by the Depository as being the beneficial owner,
a certification from such Person to that effect (in substantially the
form of Exhibit B hereto); or
(2) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A under the
Securities Act, a certification to that effect (in substantially the
form of Exhibit B hereto); or
(3) if such beneficial interest is being transferred to
an Institutional Accredited Investor, delivery of a certification to
that effect (substantially in the form of Exhibit B hereto), a
Transferee Certificate for Institutional Accredited Investors in the
form of
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Exhibit C hereto and an Opinion of Counsel to the effect that such
transfer is in compliance with the Securities Act; or
(4) if such beneficial interest is being transferred in
reliance on Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit B hereto), a Transferor
Certificate for Regulation S Transfers in the form of Exhibit D hereto
and an Opinion of Counsel to the effect that such transfer is in
compliance with the Securities Act; or
(5) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect (substantially in the form of Exhibit B
hereto) and an Opinion of Counsel to the effect that such transfer is
in compliance with the Securities Act; or
(6) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect (in substantially
the form of Exhibit B hereto) and an Opinion of Counsel to the effect
that such transfer is in compliance with the Securities Act,
then the Security Registrar will cause, in accordance with the standing
instructions and procedures existing between the Depository and the Security
Registrar, the aggregate principal amount of the Global Security to be reduced
and, following such reduction, the Company will execute and, upon receipt of a
Company Order, the Trustee will authenticate and deliver to the transferee a
Physical Security. Securities issued in exchange for a beneficial interest in
a Global Security pursuant to this Section 3.5(c) shall be registered in such
names and in such authorized denominations as the Depository, pursuant to
instructions from Agent Members or otherwise, shall instruct the Security
Registrar in writing. The Security Registrar shall deliver such Physical
Securities to the Persons in whose names such Physical Securities are so
registered.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to the Exchange Offer or Section 3.4,
9.6 or 11.8 hereof not involving any transfer.
Neither the Trustee, the Security Registrar nor the Company shall be
required (i) to issue, register the transfer of or exchange any Physical
Security during a period beginning at the opening of business 15 days before
the mailing of a notice of redemption of Securities selected for redemption
under Section 11.4 hereof and ending at the close of business on the day of
such mailing of the relevant notice of redemption, or (ii) to register the
transfer of or exchange any Physical Security so selected for redemption in
whole or in part, except the unredeemed portion of any such Security being
redeemed in part.
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Section 3.6 Book-Entry Provisions for Global Securities.
Each Global Security shall be (i) registered in the name of the
Depository for such Global Security or the nominee of such Depository, (ii)
delivered to the Trustee as custodian for such Depository and (iii) bear the
legend set forth in Exhibit A hereto.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under such
Global Security, and the Depository may be treated by the Company, the
Subsidiary Guarantors, the Trustee and any agent of the Company, the Subsidiary
Guarantors or the Trustee as the absolute owner of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Subsidiary Guarantors, the Trustee or any agent of the
Company, the Subsidiary Guarantors or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or shall impair, as between the Depository and its Agent Members, the operation
of customary practices governing the exercise of the rights of a holder of any
Security.
Transfers of a Global Security shall be limited to transfers of such
Global Security in whole, but not in part, to the Depository, its successors or
their respective nominees. Interests of beneficial owners in a Global Security
may be transferred or exchanged for Physical Securities in accordance with the
rules and procedures of the Depository and the provisions of Section 3.5
hereof. In addition, Physical Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in a Global
Security if, and only if, either (1) the Depository notifies the Company that
it is unwilling or unable to continue as depositary for the Global Security and
a successor depositary is not appointed by the Company within 90 days of such
notice, or (2) the Company determines not to have the Securities represented by
the Global Security and notifies the Depository and the Security Registrar
thereof.
In connection with the transfer of an entire Global Security to
beneficial owners pursuant to this Section, the Global Security shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall upon Company Order authenticate and deliver, to
each beneficial owner identified by the Depository, in exchange for its
beneficial interest in the Global Security, an equal aggregate principal amount
of Physical Securities of authorized denominations.
The Holder of a Global Security may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
Section 3.7 Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee or (ii)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company, the Subsidiary Guarantors and the Trustee such security or
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indemnity as may be required by them to save each of them harmless, then, in
the absence of notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall execute, the Subsidiary
Guarantors shall execute the notation of Subsidiary Guarantees, and upon
Company Order the Trustee shall authenticate and deliver, in exchange for any
such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount, having the
notation of Subsidiary Guarantees thereon, bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company and the respective Subsidiary
Guarantors, whether or not the mutilated, destroyed, lost or stolen Security
shall be at any time enforceable by anyone, and shall be entitled to all
benefits of this Indenture equally and proportionately with any and all other
Securities of like tenor duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.8 Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest at the
office or agency of the Company maintained for such purpose pursuant to Section
10.2 hereof.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease
to be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
may be paid by the Company, at its election in each case, as provided in clause
(a) or (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the
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close of business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall
notify the Trustee in writing of the amount of Defaulted Interest proposed to
be paid on each Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, and such money when deposited shall be held
in trust for the benefit of the Persons entitled to such Defaulted Interest as
in this clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such Special
Record Date, and in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be given in the manner provided for in Section 14.5
hereof, not less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so given, such Defaulted Interest shall be paid to the
Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on such Special Record Date
and shall no longer be payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause, such manner of payment shall
be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 3.9 Persons Deemed Owners.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Subsidiary Guarantors, the Security Registrar, the
Trustee and any agent of the Company, the Subsidiary Guarantors or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and
premium, if any, on) and (subject to Section 3.8 hereof) interest on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and none of the Company, the Subsidiary Guarantors, the Security
Registrar, the Trustee or any agent of the Company, the Subsidiary Guarantors
or the Trustee shall be affected by notice to the contrary.
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Section 3.10 Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly canceled by it. The
Company may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled Securities held
by the Trustee shall be disposed of as directed by a Company Order or in
accordance with the Trustee's usual practice; provided, however, that the
Trustee shall not be required to destroy canceled Securities.
Section 3.11 Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
Section 3.12 Private Placement Legend.
(a) All Series A Securities issued hereunder on the Issue Date
shall bear the Private Placement Legend. Upon the transfer, exchange or
replacement of Securities bearing the Private Placement Legend, the Security
Registrar shall deliver only Securities that bear the Private Placement Legend
unless, and the Trustee is hereby authorized to deliver Securities without the
Private Placement Legend if, (i) there is delivered to the Trustee an Opinion
of Counsel to the effect that neither such legend nor the related restrictions
on transfer are required in order to maintain compliance with the provisions of
the Securities Act or (ii) such Security has been sold pursuant to an effective
registration statement under the Securities Act. Upon the transfer, exchange
or replacement of Securities not bearing the Private Placement Legend, the
Security Registrar shall deliver Securities that do not bear the Private
Placement Legend.
(b) By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1 Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as to surviving rights of registration of transfer or exchange
of Securities, as expressly provided for in this Indenture) as to all
Outstanding Securities, and the Trustee, at the expense of the Company,
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shall, upon payment of all amounts due the Trustee under Section 6.6 hereof,
execute proper instruments acknowledging satisfaction and discharge of this
Indenture when
(a) either
(1) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been destroyed, lost
or stolen and which have been replaced or paid as provided in Section
3.7 hereof and (ii) Securities for whose payment money or United
States governmental obligations of the type described in clause (i) of
the definition of Cash Equivalents have theretofore been deposited in
trust with the Trustee or any Paying Agent or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 10.3 hereof) have
been delivered to the Trustee for cancellation, or
(2) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company,
and the Company, in the case of clause (2)(i), (2)(ii) or (2)(iii)
above, has irrevocably deposited or caused to be deposited with the
Trustee funds in an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be, together with instructions from the Company
irrevocably directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be;
(b) the Company has paid or caused to be paid all other
sums then due and payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, which, taken together, state
that all conditions precedent herein relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.6 hereof and, if
money shall have been deposited with the Trustee pursuant to this Section, the
obligations of the Trustee under Section 4.2 hereof and the last paragraph of
Section 10.3 hereof shall survive.
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Section 4.2 Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3
hereof, all money deposited with the Trustee pursuant to Section 4.1 hereof
shall be held in trust and applied by it, in accordance with the provisions of
the Securities and this Indenture, to the payment, either directly or through
any Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money has been deposited
with the Trustee.
ARTICLE V
REMEDIES
Section 5.1 Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of the principal of or premium, if any,
on any of the Securities when the same becomes due and payable, whether such
payment is due at Stated Maturity, upon redemption, upon repurchase pursuant to
a Change of Control Offer or a Net Proceeds Offer, upon acceleration or
otherwise; or
(b) default in the payment of any installment of interest on any
of the Securities, when it becomes due and payable, and the continuance of such
default for a period of 30 days; or
(c) default in the performance or breach of the provisions of
Article VIII hereof, the failure to make or consummate a Change of Control
Offer in accordance with the provisions of Section 10.16 or the failure to make
or consummate a Net Proceeds Offer in accordance with the provisions of Section
10.17; or
(d) the Company or any Subsidiary Guarantor shall fail to perform
or observe any other term, covenant or agreement contained in the Securities,
any Subsidiary Guarantee or this Indenture (other than a default specified in
subparagraph (a), (b) or (c) above) for a period of 45 days after written
notice of such failure stating that it is a "notice of default" hereunder and
requiring the Company or such Subsidiary Guarantor, as the case may be, to
remedy the same shall have been given (x) to the Company by the Trustee or (y)
to the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Securities then Outstanding; or
(e) the occurrence and continuation beyond any applicable grace
period of any default in the payment of the principal of or premium, if any, on
or interest on any Indebtedness of the
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Company (other than the Securities) or any Subsidiary Guarantor or any other
Restricted Subsidiary for money borrowed when due, or any other default
resulting in acceleration of any Indebtedness of the Company or any Subsidiary
Guarantor or any other Restricted Subsidiary for money borrowed, provided that
the aggregate principal amount of such Indebtedness shall exceed $5,000,000; or
(f) any Subsidiary Guarantee shall for any reason cease to be, or
be asserted by the Company or any Subsidiary Guarantor, as applicable, not to
be, in full force and effect (except pursuant to the release of any such
Subsidiary Guarantee in accordance with this Indenture); or
(g) final judgments or orders rendered against the Company or any
Subsidiary Guarantor or any other Restricted Subsidiary that are unsatisfied
and that require the payment in money, either individually or in an aggregate
amount, that is more than $5,000,000 over the coverage under applicable
insurance policies and either (A) commencement by any creditor of an
enforcement proceeding upon such judgment (other than a judgment that is stayed
by reason of pending appeal or otherwise) or (B) the occurrence of a 60-day
period during which a stay of such judgment or order, by reason of pending
appeal or otherwise, was not in effect: or
(h) the entry of a decree or order by a court having jurisdiction
in the premises (A) for relief in respect of the Company or any Subsidiary
Guarantor or any other Restricted Subsidiary in an involuntary case or
proceeding under the Federal Bankruptcy Code or any other applicable federal or
state bankruptcy, insolvency, reorganization or other similar law or (B)
adjudging the Company or any Subsidiary Guarantor or any other Restricted
Subsidiary bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition of the Company or any
Subsidiary Guarantor or any other Restricted Subsidiary under the Federal
Bankruptcy Code or any applicable federal or state law, or appointing under any
such law a custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or any Subsidiary Guarantor or any other
Restricted Subsidiary or of a substantial part of its consolidated assets, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days; or
(i) the commencement by the Company or any Subsidiary Guarantor or
any other Restricted Subsidiary of a voluntary case or proceeding under the
Federal Bankruptcy Code or any other applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or any other case or proceeding
to be adjudicated bankrupt or insolvent, or the consent by the Company or any
Subsidiary Guarantor or any other Restricted Subsidiary to the entry of a
decree or order for relief in respect thereof in an involuntary case or
proceeding under the Federal Bankruptcy Code or any other applicable federal or
state bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it, or
the filing by the Company or any Subsidiary Guarantor or any other Restricted
Subsidiary of a petition or consent seeking reorganization or relief under any
applicable federal or state law, or the consent by it under any such law to the
filing of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or other
similar official) of the Company or any Subsidiary Guarantor or any other
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Restricted Subsidiary or of any substantial part of its consolidated assets, or
the making by it of an assignment for the benefit of creditors under any such
law, or the admission by it in writing of its inability to pay its debts
generally as they become due or taking of corporate action by the Company or
any Subsidiary Guarantor or any other Restricted Subsidiary in furtherance of
any such action.
Section 5.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(h) or (i) hereof) occurs and is continuing, the Trustee or the
Holders of not less than 25% in aggregate principal amount of the Securities
then Outstanding, by written notice to the Company (and to the Trustee if such
notice is given by the Holders), may, and the Trustee upon the request of the
Holders of not less than 25% in aggregate principal amount of the Outstanding
Securities shall, by a notice in writing to the Company, declare all unpaid
principal of, premium, if any, and accrued and unpaid interest on all the
Securities to be due and payable immediately, upon which declaration all
amounts payable in respect of the Securities shall be immediately due and
payable. If an Event of Default specified in Section 5.1(h) or (i) hereof
occurs and is continuing, the amounts described above shall become and be
immediately due and payable without any declaration, notice or other act on the
part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in aggregate principal amount of the Securities Outstanding, by written notice
to the Company, the Subsidiary Guarantors and the Trustee, may rescind and
annul such declaration and its consequences if
(a) the Company or any Subsidiary Guarantor has paid or deposited
with the Trustee a sum sufficient to pay,
(1) all overdue interest on all Outstanding Securities,
(2) all unpaid principal of (and premium, if any, on) any
Outstanding Securities which have become due otherwise than by such
declaration of acceleration, including any Securities required to have
been purchased on a Change of Control Date or a Net Proceeds Payment
Date pursuant to a Change of Control Offer or a Net Proceeds Offer, as
applicable, and interest on such unpaid principal at the rate borne by
the Securities,
(3) to the extent that payment of such interest is
lawful, interest on overdue interest and overdue principal at the rate
borne by the Securities (without duplication of any amount paid or
deposited pursuant to clauses (1) and (2) above), and
(4) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel;
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(b) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction as certified to the Trustee by the
Company; and
(c) all Events of Default, other than the non-payment of amounts
of principal of (or premium, if any, on) or interest on Securities which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 5.13 hereof.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Notwithstanding the foregoing, if an Event of Default specified in
Section 5.1(e) hereof shall have occurred and be continuing, such Event of
Default and any consequential acceleration shall be automatically rescinded if
the Indebtedness that is the subject of such Event of Default has been repaid,
or if the default relating to such Indebtedness is waived or cured and if such
Indebtedness has been accelerated, then the holders thereof have rescinded
their declaration of acceleration in respect of such Indebtedness (provided, in
each case, that such repayment, waiver, cure or rescission is effected within a
period of 10 days from the continuation of such default beyond the applicable
grace period or the occurrence of such acceleration), and written notice of
such repayment, or cure or waiver and rescission, as the case may be, shall
have been given to the Trustee by the Company and countersigned by the holders
of such Indebtedness or a trustee, fiduciary or agent for such holders or other
evidence satisfactory to the Trustee of such events is provided to the Trustee,
within 30 days after any such acceleration in respect of the Securities, and so
long as such rescission of any such acceleration of the Securities does not
conflict with any judgment or decree as certified to the Trustee by the
Company.
Section 5.3 Collection of Indebtedness and Suits for Enforcement
by Trustee.
The Company covenants that if
(a) default is made in the payment of any installment of interest
on any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof or with respect to
any Security required to have been purchased by the Company on the Change of
Control Purchase Date or the Net Proceeds Payment Date pursuant to a Change of
Control Offer or Net Proceeds Offer, as applicable,
then the Company will, upon demand of the Trustee, pay to the Trustee for the
benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal (and premium, if any) and interest,
and interest on any overdue principal (and premium, if any) and, to the extent
that payment of such interest shall be legally enforceable, upon any overdue
installment of interest, at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
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If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
money adjudged or decreed to be payable in the manner provided by law out of
the Property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
Section 5.4 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company, any Subsidiary Guarantor or any
other obligor upon the Securities, their creditors or the Property of the
Company, any Subsidiary Guarantor or of such other obligor, the Trustee
(irrespective of whether the principal of the Securities shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Company, the Subsidiary
Guarantors or such other obligor for the payment of overdue principal, premium,
if any, or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal
(and premium, if any) and interest owing and unpaid in respect of the
Securities and to file such other papers or documents and take any other
actions including participation as a full member of any creditor or other
committee as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of the
Holders allowed in such judicial proceeding, and
(b) to collect and receive any money or other Property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 6.6 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the Subsidiary Guarantees or the rights of any Holder
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thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
Section 5.5 Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the Securities
or the Subsidiary Guarantees may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production thereof in
any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name and as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
Section 5.6 Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in the case of the distribution of such money on account of principal (or
premium, if any) or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: to the payment of all amounts due the Trustee under
Section 6.6 hereof;
SECOND: to the payment of the amounts then due and unpaid for
principal of (and premium, if any, on) and interest on the Securities
in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively; and
THIRD: the balance, if any, to the Company.
Section 5.7 Limitation on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal amount
of the Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
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(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority or
more in aggregate principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
Section 5.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article XII
hereof) and in such Security of the principal of (and premium if any, on) and
(subject to Section 3.8 hereof) interest on, such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date) and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.
Section 5.9 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Subsidiary Guarantors, the
Trustee and the Holders shall be restored severally and respectively to their
former positions hereunder and thereunder and all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
Section 5.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 3.7 hereof, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy
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hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 5.12 Control by Holders.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee, provided that
(a) such direction shall not be in conflict with any rule of law
or with this Indenture,
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(c) the Trustee need not take any action which might involve it in
personal liability or be unduly prejudicial to the Holders not joining therein.
Section 5.13 Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities may on behalf of the Holders of all the
Securities waive any existing Default or Event of Default hereunder and its
consequences, except a Default or Event of Default
(a) in respect of the payment of the principal of (or premium, if
any, on) or interest on any Security, or
(b) in respect of a covenant or provision hereof which under
Article IX hereof cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected thereby.
Upon any such waiver, such Default or Event of Default shall cease to
exist for every purpose under this Indenture, but no such waiver shall extend
to any subsequent or other fault or Event of Default or impair any right
consequent thereon.
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Section 5.14 Waiver of Stay, Extension or Usury Laws.
Each of the Company and the Subsidiary Guarantors covenants (to the
extent that each may lawfully do so) that it will not at any time insist upon,
plead or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension, or usury law or other law wherever enacted, now or at any
time hereafter in force, which would prohibit or forgive the Company or any
Subsidiary Guarantor from paying all or any portion of the principal of
(premium, if any, on) or interest on the Securities as contemplated herein, or
which may affect the covenants or the performance of this Indenture; and (to
the extent that it may lawfully do so) each of the Company and the Subsidiary
Guarantors hereby expressly waives all benefit or advantage of any such law,
and covenant that they will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution
of every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
Section 6.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, and shall be fully protected in so relying, as to the truth
of the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; provided, however, the Trustee shall examine
the certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(i) this paragraph shall not limit the effect of Section 6.1(b);
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
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(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received by
it pursuant to Section 5.12.
Section 6.2 Certain Rights of Trustee.
Subject to the provisions of Section 6.1 hereof:
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may reasonably see fit;
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
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(h) the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it in good faith to be
authorized or within the discretion or rights or powers conferred upon it by
this Indenture; and
(i) the Trustee shall not be deemed to have notice or knowledge of
any matter unless a Responsible Officer has actual knowledge thereof or unless
written notice thereof is received by the Trustee at its Corporate Trust Office
and such notice references the Securities generally, the Company or this
Indenture.
The Trustee shall not be required to advance, expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
Section 6.3 Trustee Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities and the notations
of Subsidiary Guarantees thereon, except for the Trustee's certificates of
authentication, shall be taken as the statements of the Company or the
Subsidiary Guarantors, as the case may be, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture, the Subsidiary Guarantees or
the Securities, except that the Trustee represents that it is duly authorized
to execute and deliver this Indenture, authenticate the Securities and perform
its obligations hereunder. The Trustee shall not be accountable for the use or
application by the Company of any Securities or the proceeds thereof.
Section 6.4 May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company, the Subsidiary Guarantors or of the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to TIA Sections 310(b) and 311 in the case of the Trustee, may
otherwise deal with the Company and the Subsidiary Guarantors with the same
rights it would have if it were not the Trustee, Paying Agent, Security
Registrar or such other agent.
Section 6.5 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company or any Subsidiary Guarantor.
Section 6.6 Compensation and Reimbursement.
The Company agrees:
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(a) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to the Trustee's wilful misconduct,
negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without wilful misconduct, negligence
or bad faith on its part, (i) arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder or (ii) in connection
with enforcing this indemnification provision.
The obligations of the Company under this Section 6.6 to compensate
the Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture or any other termination under any Insolvency or
Liquidation Proceeding. As security for the performance of such obligations of
the Company, the Trustee shall have a claim and lien prior to the Securities
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for payment of principal of (and premium, if any, on) or
interest on particular Securities. Such lien shall survive the satisfaction and
discharge of this Indenture or any other termination under any Insolvency or
Liquidation Proceeding.
When the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in paragraph (h) or (i) of Section
5.1 of this Indenture, such expenses and the compensation for such services are
intended to constitute expenses of administration under any Insolvency or
Liquidation Proceeding.
Section 6.7 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section 6.7, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
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Section 6.8 Conflicting Interests.
The Trustee shall comply with the provisions of Section 310(b) of the
Trust Indenture Act; provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
Section 6.9 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.10 hereof.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 6.10 hereof shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders
of not less than a majority in aggregate principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions
of TIA Section 310(b) after written request therefor by the Company or
by any Holder who has been a bona fide Holder of a Security for at
least six months, or
(2) the Trustee shall cease to be eligible under Section
6.7 hereof and shall fail to resign after written request therefor by
the Company or by any Holder who has been a bona fide Holder of a
Security for at least six months, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
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(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in aggregate principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment,
become the successor Trustee and supersede the successor Trustee appointed by
the Company. If no successor Trustee shall have been so appointed by the
Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee. The evidence of such successorship may, but need not be, evidenced by
a supplemental indenture.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 14.5 hereof. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
Section 6.10 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on request of the Company or
the successor Trustee, such retiring Trustee shall, upon payment of all amounts
due it under Section 6.6 hereof, execute and deliver an instrument transferring
to such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor Trustee
all money and other Property held by such retiring Trustee hereunder. Upon
request of any such successor Trustee, the Company shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
Section 6.11 Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any
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successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities; and in case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee;
and in all such cases such certificates shall have the full force which it is
anywhere in the Securities of like tenor or in this Indenture provided;
provided, however, that the right to adopt the certificate of authentication of
any predecessor Trustee or to authenticate Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
Section 6.12 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor under the Securities), the Trustee shall be subject to
the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
Section 6.13 Notice of Defaults.
Within 60 days after the occurrence of any Default hereunder, the
Trustee shall transmit in the manner and to the extent provided in TIA Section
313(c), notice of such Default hereunder known to the Trustee, unless such
Default shall have been cured or waived; provided, however, that, except in the
case of a Default in the payment of the principal of (or premium, if any, on)
or interest on any Security, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interest of the
Holders.
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ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.1 Holders' Lists; Holder Communications; Disclosures
Respecting Holders.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. Neither the Company, any Subsidiary Guarantor nor the Trustee
shall be under any responsibility with regard to the accuracy of such list. If
the Trustee is not the Security Registrar, the Company shall furnish to the
Trustee semi-annually before each Regular Record Date, and at such other times
as the Trustee may reasonably request in writing, a list, in such form as the
Trustee may reasonably request, as of such date of the names and addresses of
the Holders then known to the Company. The Company and the Trustee shall also
satisfy any other requirements imposed upon each of them by TIA Section 312(a).
Holders may communicate pursuant to Section 312(b) of the TIA with
other Holders with respect to their rights under this Indenture or the
Securities. Every Holder of Securities, by receiving and holding the same,
agrees with the Company, the Subsidiary Guarantors, the Security Registrar and
the Trustee that none of the Company, the Subsidiary Guarantors, the Security
Registrar or the Trustee, or any agent of any of them, shall be held
accountable by reason of the disclosure of any information as to the names and
addresses of the Holders in accordance with TIA Section 312, regardless of the
source from which such information was derived, that each of such Persons shall
have the protection of TIA Section 312(c) and that the Trustee shall not be
held accountable by reason of mailing any material pursuant to a request made
under TIA Section 312(b).
Section 7.2 Reports By Trustee.
Within 60 days after May 15 of each year commencing with May 15, 1997,
the Trustee shall transmit by mail to the Holders, as their names and addresses
appear in the Security Register, a brief report dated as of such May 15 in
accordance with and to the extent required under TIA Section 313(a). The
Trustee shall also comply with TIA Sections 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
Commencing at the time this Indenture is qualified under the Trust
Indenture Act, a copy of each Trustee's report, at the time of its mailing to
Holders of Securities, shall be mailed to the Company and filed with the
Commission and each stock exchange, if any, on which the Securities are listed.
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Section 7.3 Reports by Company.
The Company shall:
(a) file with the Trustee, within 30 days after the Company is
required to file the same with the Commission, copies of the annual reports and
of the information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if
the Company is not required to file information, documents or reports pursuant
to either of said Sections, then the Company shall file with the Trustee such
information, documents or reports as required pursuant to Section 10.9 hereof;
(b) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by the
Company with the conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations; and
(c) transmit by mail to all Holders, in the manner and to the
extent provided in TIA Section 313(c), such summaries of any information,
documents and reports (without exhibits except to the extent required by TIA
Section 313(c)) required to be filed by the Company pursuant to paragraph (a)
or (b) of this Section as may be required by rules and regulations prescribed
from time to time by the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.1 Company May Consolidate, etc., Only on Certain Terms.
The Company shall not, in any single transaction or a series of
related transactions, merge or consolidate with or into any other Person, or
sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all the Properties of the Company and its Restricted Subsidiaries
on a consolidated basis to any Person or group of Affiliated Persons, and the
Company shall not permit any of its Restricted Subsidiaries to enter into any
such transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
Properties of the Company and its Restricted Subsidiaries on a consolidated
basis to any other Person or group of Affiliated Persons, unless at the time
and after giving affect thereto:
(a) either (i) if the transaction is a merger or consolidation,
the Company shall be the surviving Person of such merger or consolidation, or
(ii) the Person (if other than the Company) formed by such consolidation or
into which the Company is merged or to which the Properties of the Company or
its Restricted Subsidiaries, as the case may be, are sold, assigned, conveyed,
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transferred, leased or otherwise disposed of (any such surviving Person or
transferee Person being called the "Surviving Entity") shall be a corporation
organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia and shall, in either case, expressly
assume by a supplemental indenture to this Indenture executed and delivered to
the Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the Securities and this Indenture, and, in each case, this
Indenture shall remain in full force and effect;
(b) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or any of its
Restricted Subsidiaries which becomes the obligation of the Company or any of
its Restricted Subsidiaries in connection with or as a result of such
transaction or transactions as having been incurred at the time of such
transaction or transactions), no Default or Event of Default shall have
occurred and be continuing;
(c) except in the case of the consolidation or merger of any
Restricted Subsidiary with or into the Company, immediately after giving effect
to such transaction or transactions on a pro forma basis, the Consolidated Net
Worth of the Company (or the Surviving Entity if the Company is not the
continuing obligor under this Indenture) is at least equal to the Consolidated
Net Worth of the Company immediately before such transaction or transactions;
(d) except in the case of the consolidation or merger of the
Company with or into a Restricted Subsidiary or any Restricted Subsidiary with
or into the Company or another Restricted Subsidiary, immediately before and
immediately after giving effect to such transaction or transactions on a pro
forma basis (assuming that the transaction or transactions occurred on the
first day of the period of four full fiscal quarters ending immediately prior
to the consummation of such transaction or transactions, with the appropriate
adjustments with respect to the transaction or transactions being included in
such pro forma calculation), the Company (or the Surviving Entity if the
Company is not the continuing obligor under this Indenture) could incur $1.00
of additional Indebtedness (excluding Permitted Indebtedness) under Section
10.12(a) hereof;
(e) if the Company is not the continuing obligor under this
Indenture, then each Subsidiary Guarantor, unless it is the Surviving Entity,
shall have by supplemental indenture confirmed that its Subsidiary Guarantee of
the Securities shall apply to the Surviving Entity's obligations under this
Indenture and the Securities:
(f) if any of the Properties of the Company or any of its
Restricted Subsidiaries would upon such transaction or series of related
transactions become subject to any Lien (other than a Permitted Lien), the
creation or imposition of such Lien shall have been in compliance with Section
10.15 hereof; and
(g) the Company (or the Surviving Entity if the Company is not the
continuing obligor under this Indenture) shall have delivered to the Trustee,
in form and substance reasonably satisfactory to the Trustee, (i) an Officers'
Certificate stating that such consolidation, merger, conveyance, transfer,
lease or other disposition and, if a supplemental indenture is required in
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connection with such transaction, such supplemental indenture, comply with this
Indenture and (ii) an Opinion of Counsel stating that the requirements of
Section 8.1(a) have been satisfied.
Section 8.2 Successor Substituted.
Upon any consolidation of the Company with or merger of the Company
into any other corporation or any sale, assignment, lease, conveyance, transfer
or other disposition of all or substantially all of the Properties of the
Company and its Restricted Subsidiaries on a consolidated basis in accordance
with Section 8.1 hereof, the Surviving Entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such Surviving Entity had been named
as the Company herein, and in the event of any such sale, assignment, lease,
conveyance, transfer or other disposition, the Company (which term shall for
this purpose mean the Person named as the "Company" in the first paragraph of
this Indenture or any successor Person which shall theretofore become such in
the manner described in Section 8.1 hereof), except in the case of a lease,
shall be discharged of all obligations and covenants under this Indenture and
the Securities, and the Company may be dissolved and liquidated and such
dissolution and liquidation shall not cause a Change of Control under clause
(e) of the definition thereof to occur unless the sale, assignment, lease,
conveyance, transfer or other disposition of all or substantially all of the
Properties of the Company and its Restricted Subsidiaries on a consolidated
basis to any Person otherwise results in a Change of Control.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1 Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, each of the Subsidiary Guarantors, when authorized by a Board
Resolution, and the Trustee upon Company Request, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the Company
contained herein and in the Securities; or
(b) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company;
or
(c) to comply with any requirement of the SEC in connection with
qualifying this Indenture under the TIA or maintaining such qualification
thereafter; or
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(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Sections 6.9
and 6.10 hereof; or
(e) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
under this Indenture provided that such action shall not adversely affect the
interests of the Holders in any material respect; or
(f) to secure the Securities or the Subsidiary Guarantees pursuant
to the requirements of Section 10.15 hereof or otherwise; or
(g) to add any Restricted Subsidiary as an additional Subsidiary
Guarantor as provided in Section 10.13(a) hereof or to evidence the succession
of another Person to any Subsidiary Guarantor pursuant to Section 13.2(b)
hereof and the assumption by any such successor of the covenants and agreements
of such Subsidiary Guarantor contained herein, in the Securities and in the
Subsidiary Guarantee of such Subsidiary Guarantor; or
(h) to release a Subsidiary Guarantor from its Subsidiary
Guarantee pursuant to Section 13.3 hereof; or
(i) to provide for uncertified Securities in addition to or in
place of certificated Securities.
Section 9.2 Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities, by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by a Board Resolution, each of the Subsidiary Guarantors, when authorized by a
Board Resolution, and the Trustee upon Company Request may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders under
this Indenture; provided, however, that no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Security affected
thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium thereon, or change the
coin or currency in which principal of any Security or any premium or the
interest on any Security is payable, or impair the right to institute suit for
the enforcement of any such payment after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date); or
(b) reduce the percentage of aggregate principal amount of the
Outstanding Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder or the consequences of a default provided for in this
Indenture; or
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(c) modify any of the provisions of this Section or Sections 5.13
and 10.20 hereof, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected thereby;
(d) change the ranking of the Securities or the Subsidiary
Guarantees in a manner adverse to the Holders or expressly subordinate in right
of payment the Securities or the Subsidiary Guarantees to any other
Indebtedness; or
(e) amend, change or modify the obligation of the Company to make
and consummate a Change of Control Offer in the event of a Change of Control,
or to make and consummate a Net Proceeds Offer with respect to any Asset Sale,
or modify any of the provisions or definitions with respect thereto.
It shall not be necessary for any Act of the Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
Section 9.3 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
Section 9.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 9.5 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.6 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company, with the notations of Subsidiary Guarantees thereon executed by the
Subsidiary
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Guarantors, and authenticated and delivered by the Trustee in exchange for
Outstanding Securities of like tenor.
Section 9.7 Notice of Supplemental Indentures and Waivers.
Promptly after (i) the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 9.2 hereof or (ii)
a waiver under Section 5.13 or 10.20 hereof becomes effective, the Company
shall give notice thereof to the Holders of each Outstanding Security affected,
in the manner provided for in Section 14.5 hereof, setting forth in general
terms the substance of such supplemental indenture or waiver, as the case may
be.
ARTICLE X
COVENANTS
Section 10.1 Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders that
it will duly and punctually pay the principal of (and premium, if any, on) and
interest (including Additional Interest) on the Securities in accordance with
the terms of the Securities and this Indenture. The Company shall notify the
Trustee and any Paying Agent immediately upon the occurrence of any
Registration Default and, with respect to Additional Interest payments pursuant
to Section 4 of the Registration Rights Agreement, the Company shall notify the
Trustee and any Paying Agent prior to any Interest Payment Date of the amount
of Additional Interest payable to each Holder.
Section 10.2 Maintenance of Office or Agency.
The Company shall maintain an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities, the Subsidiary Guarantees and this
Indenture may be served. The Corporate Trust Office shall be such office or
agency of the Company, unless the Company shall designate and maintain some
other office or agency for one or more of such purposes. The Company will give
prompt written notice to the Trustee of any change in the location of any such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the aforementioned office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind any such
designation. Further, if at any time there shall be no such office or agency
in The City of New York where the Securities may be presented or surrendered
for payment, the Company shall forthwith designate and maintain such an office
or agency in The
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City of New York, in order that the Securities shall at all times be payable in
The City of New York. The Company will give prompt written notice to the
Trustee of any such designation or rescission and any change in the location of
any such other office or agency.
Section 10.3 Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
shall, on or before 11:00 a.m., Eastern time, on each due date of the principal
of (and premium, if any, on) or interest on any of the Securities, segregate
and hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to pay the principal (and premium, if any) or interest so becoming
due until such sum shall be paid to such Persons or otherwise disposed of as
herein provided and will promptly notify the Trustee of its action or failure
so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will on or before 11:00 a.m., Eastern time, on each due date of
the principal of (and premium, if any, on), or interest on, any Securities,
deposit with a Paying Agent immediately available funds sufficient to pay the
principal (and premium, if any) or interest so becoming due, such funds to be
held in trust for the benefit of the Persons entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the Company
shall promptly notify the Trustee of such action or any failure so to act.
The Company shall cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of
(and premium, if any, on) or interest on Securities in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of principal
(and premium, if any) or interest; and
(c) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such sums.
Subject to applicable escheat and abandoned property laws, any money
deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of (and premium, if any, on) or interest
on any Security and remaining unclaimed for two years after such principal (and
premium, if any) or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be
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discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such
trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in the Borough of Manhattan, The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.
Section 10.4 Corporate Existence.
Except as expressly permitted by Article VIII hereof, Section 10.17
hereof or other provisions of this Indenture, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each Restricted Subsidiary; provided, however, that the Company
shall not be required to preserve any such existence of its Restricted
Subsidiaries, rights or franchises, if the Board of Directors of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Restricted Subsidiaries, taken
as a whole, and that the loss thereof is not disadvantageous in any material
respect to the Holders.
Section 10.5 Payment of Taxes; Maintenance of Properties;
Insurance.
The Company shall or, as applicable, shall cause its Restricted
Subsidiaries to, pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Restricted
Subsidiary or upon the income, profits or Property of the Company or any
Restricted Subsidiary and (b) all lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a Lien upon the Property of the
Company or any Restricted Subsidiary; provided, however, that the Company shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which
appropriate provision has been made in accordance with GAAP.
The Company shall or, as applicable, shall cause its Restricted
Subsidiaries to, cause all material Properties owned by the Company or any
Restricted Subsidiary and used or held for use in the conduct of its business
or the business of any Restricted Subsidiary to be maintained and kept in good
condition, repair and working order (ordinary wear and tear excepted), all as
in the judgment of the Company or such Restricted Subsidiary may be necessary
so that its business may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company or
any Restricted Subsidiary from discontinuing the maintenance of any of such
Properties if such discontinuance is, in the judgment of the Company or such
Restricted Subsidiary, as the case may be, desirable in the conduct of the
business of the
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Company or such Restricted Subsidiary and not disadvantageous in any material
respect to the Holders. Notwithstanding the foregoing, nothing contained in
this Section 10.5 shall limit or impair in any way the right of the Company and
its Restricted Subsidiaries to sell, divest and otherwise to engage in
transactions that are otherwise permitted by this Indenture.
The Company shall at all times keep all of its, and cause its
Restricted Subsidiaries to keep their, Properties which are of an insurable
nature insured with insurers, believed by the Company to be responsible,
against loss or damage to the extent that property of similar character and in
a similar location is usually so insured by corporations similarly situated and
owning like Properties.
The Company or any Restricted Subsidiary may adopt such other plan or
method of protection, in lieu of or supplemental to insurance with insurers,
whether by the establishment of an insurance fund or reserve to be held and
applied to make good losses from casualties, or otherwise, conforming to the
systems of self-insurance maintained by corporations similarly situated and in
a similar location and owning like Properties, as may be determined by the
Board of Directors of the Company or such Restricted Subsidiary.
Section 10.6 Limitation on Sale-Leaseback Transactions.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into, assume, guarantee or otherwise become
liable with respect to any Sale/Leaseback Transaction unless (a) the Company or
such Restricted Subsidiary, as the case may be, would be able to incur
Indebtedness (not including the incurrence of Permitted Indebtedness) in an
amount equal to the Attributable Indebtedness with respect to such
Sale/Leaseback Transaction pursuant to Section 10.12(a) hereof, (b) the Company
or such Restricted Subsidiary receives proceeds from such Sale/Leaseback
Transaction at least equal to the Fair Market Value of the Property subject
thereto and (c) the Company applies an amount in cash equal to the Net
Available Proceeds of the Sale/Leaseback Transaction in accordance with the
provisions of Section 10.17 hereof as if such Sale/Leaseback Transaction were
an Asset Sale.
Section 10.7 Limitation on Conduct of Business.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in the conduct of any business other than the
businesses being conducted on the date of this Indenture (such businesses being
predominantly daywork drilling for oil and natural gas, engineering services
and the development and operation of mobile offshore production units
("MOPUs")) and such other businesses as are reasonably necessary or desirable
to facilitate the conduct and operation of such businesses.
Section 10.8 Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company and within 45 days of the end
of each of the first, second and third quarters of each fiscal year of the
Company, an Officers' Certificate stating that a review of the
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activities of the Company and its Restricted Subsidiaries during the preceding
fiscal quarter or fiscal year, as applicable, has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of such Officer's knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and no Default or Event of Default has occurred and is continuing
(or, if a Default or Event of Default shall have occurred to either such
Officer's knowledge, describing all such Defaults or Events of Default of which
such Officer may have knowledge and what action the Company is taking or
proposes to take with respect thereto). Such Officers' Certificate shall comply
with TIA Section 314(a)(4). For purposes of this Section 10.8(a), such
compliance shall be determined without regard to any period of grace or
requirement of notice under this Indenture.
(b) The Company shall, so long as any of the Securities is
outstanding, deliver to the Trustee, upon any of its Officers becoming aware of
any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company proposes to take with
respect thereto, within 10 days of its occurrence.
Section 10.9 Provision of Financial Information.
The Company shall file on a timely basis with the SEC, to the extent
such filings are accepted by the Commission and whether or not the Company has
a class of securities registered under the Exchange Act, the annual reports,
quarterly reports and other documents that the Company would be required to
file if it were subject to Section 13 or 15 of the Exchange Act. The Company
shall also file with the Trustee (with exhibits), and provide to each Holder of
Securities (without exhibits), without cost to such Holder, copies of such
reports and documents within 15 days after the date on which the Company files
such reports and documents with the Commission or the date on which the Company
would be required to file such reports and documents if the Company were so
required and, if filing such reports and documents with the Commission is not
accepted by the Commission or is prohibited under the Exchange Act, the Company
shall supply at its cost copies of such reports and documents (including any
exhibits thereto) to any Holder of Securities, securities analyst or
prospective investor promptly upon written request given in accordance with
Section 14.4 hereof.
Section 10.10 Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, take the following actions:
(i) declare or pay any dividend on, or make any other
distribution to holders of, any shares of Capital Stock of the Company
(other than dividends or distributions payable solely in shares of
Qualified Capital Stock of the Company or in options, warrants or
other rights to purchase Qualified Capital Stock of the Company);
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(ii) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or any Affiliate thereof (other
than any Restricted Subsidiary) or any options, warrants or other
rights to acquire such Capital Stock;
(iii) make any principal payment on or repurchase, redeem,
defease or otherwise acquire or retire for value, prior to any
scheduled principal payment, scheduled sinking fund payment or
maturity, any Subordinated Indebtedness, except in any case out of the
proceeds of Permitted Refinancing Indebtedness, or
(iv) make any Restricted Investment;
(such payments or other actions described in clauses (i) through (iv) being
collectively referred to as "Restricted Payments"), unless at the time of and
after giving effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the amount determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (A) no Default or Event of Default shall have
occurred and be continuing, (B) the Company could incur $1.00 of additional
Indebtedness (excluding Permitted Indebtedness) in accordance with Section
10.12(a) hereof and (C) the aggregate amount of all Restricted Payments
declared or made after the date of this Indenture shall not exceed the sum
(without duplication) of the following:
(1) 50% of the Consolidated Net Income of the Company accrued on
a cumulative basis during the period beginning on April 1, 1996 and
ending on the last day of the Company's last fiscal quarter ending
prior to the date of such proposed Restricted Payment (or, if such
Consolidated Net Income shall be a loss, minus 100% of such loss),
plus
(2) the aggregate Net Cash Proceeds received after the date of
this Indenture by the Company from the issuance or sale (other than to
any of its Restricted Subsidiaries) of shares of Qualified Capital
Stock of the Company or any options, warrants or rights to purchase
such shares of Qualified Capital Stock of the Company, plus
(3) the aggregate Net Cash Proceeds received after the date of
this Indenture by the Company (other than from any of its Restricted
Subsidiaries) upon the exercise of any options, warrants or rights to
purchase shares of Qualified Capital Stock of the Company, plus
(4) the aggregate Net Cash Proceeds received after the date of
this Indenture by the Company from the issuance or sale (other than to
any of its Restricted Subsidiaries) of Indebtedness or shares of
Disqualified Capital Stock that have been converted into or exchanged
for Qualified Capital Stock of the Company, together with the
aggregate cash received by the Company at the time of such conversion
or exchange, plus
(5) to the extent not otherwise included in Consolidated Net
Income, the net reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Company or a Restricted
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Subsidiary after the date of this Indenture from any Unrestricted
Subsidiary or from the redesignation of an Unrestricted Subsidiary as
a Restricted Subsidiary (valued in each case as provided in the
definition of Investment), not to exceed in the case of any
Unrestricted Subsidiary the total amount of Investments (other than
Permitted Investments) in such Unrestricted Subsidiary made by the
Company and its Restricted Subsidiaries in such Unrestricted
Subsidiary after the date of this Indenture, plus
(6) $10,000,000.
(b) Notwithstanding paragraph (a) above, the Company and its
Restricted Subsidiaries may take the following actions so long as (in the case
of clauses (ii) and (iii) below) no Default or Event of Default shall have
occurred and be continuing:
(i) the payment of any dividend on any Capital Stock of
the Company or any Restricted Subsidiary within 60 days after the date
of declaration thereof, if at such declaration date such declaration
complied with the provisions of paragraph (a) above (and such payment
shall be deemed to have been paid on such date of declaration for
purposes of any calculation required by the provisions of paragraph
(a) above);
(ii) the repurchase, redemption or other acquisition or
retirement of any shares of any class of Capital Stock of the Company
or any Restricted Subsidiary, in exchange for, or out of the aggregate
Net Cash Proceeds of, a substantially concurrent issue and sale (other
than to a Restricted Subsidiary) of shares of Qualified Capital Stock
of the Company; and
(iii) the repurchase, redemption, repayment, defeasance or
other acquisition or retirement for value of any Subordinated
Indebtedness in exchange for, or out of the aggregate Net Cash
Proceeds from, a substantially concurrent issue and sale (other than
to a Restricted Subsidiary) of shares of Qualified Capital Stock of
the Company.
The actions described in clauses (i), (ii) and (iii) of this paragraph (b)
shall be Restricted Payments that shall be permitted to be made in accordance
with this paragraph (b) but shall reduce the amount that would otherwise be
available for Restricted Payments under clause (C) of paragraph (a), provided
that any dividend paid pursuant to clause (i) of this paragraph (b) shall
reduce the amount that would otherwise be available under clause (C) of
paragraph (a) when declared, but not also when subsequently paid pursuant to
such clause (i).
(c) In computing Consolidated Net Income under paragraph (a)
above, (1) the Company shall use audited financial statements for the portions
of the relevant period for which audited financial statements are available on
the date of determination and unaudited financial statements and other current
financial data based on the books and records of the Company for the remaining
portion of such period and (2) the Company shall be permitted to rely in good
faith on the financial statements and other financial data derived from the
books and records of the Company that are available on the date of
determination. If the Company makes a Restricted Payment which, at the time of
the making of such Restricted Payment would in the good faith
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determination of the Company be permitted under the requirements of this
Indenture, such Restricted Payment shall be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustments made
in good faith to the Company's financial statements affecting Consolidated Net
Income of the Company for any period.
Section 10.11 Limitation on Guarantees by Subsidiary Guarantors.
The Company shall not permit any Subsidiary Guarantor to guarantee the
payment of any Subordinated Indebtedness of the Company unless such guarantee
shall be subordinated to such Subsidiary Guarantor's Subsidiary Guarantee at
least to the same extent as such Subordinated Indebtedness is subordinated to
the Securities; provided, however, that this Section 10.11 shall not be
applicable to any guarantee of any Subsidiary Guarantor that (i) existed at the
time such Person became a Subsidiary of the Company and (ii) was not incurred
in connection with, or in contemplation of, such Person's becoming a Subsidiary
of the Company.
Section 10.12 Limitation on Indebtedness and Disqualified Capital
Stock.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, create, incur, assume, guarantee or in any manner
become directly or indirectly liable for the payment of (collectively, "incur")
any Indebtedness (including any Acquired Indebtedness but excluding any
Permitted Indebtedness), or any Disqualified Common Stock, unless, on a pro
forma basis after giving effect to such incurrence and the application of the
proceeds therefrom, the Consolidated EBITDA Coverage Ratio for the four full
fiscal quarters immediately preceding such event, taken as one period, would
have been equal to or greater than 2.25 to 1.0.
(b) The Company shall not incur any Indebtedness that is expressly
subordinated to any other Indebtedness of the Company unless such Indebtedness,
by its terms or the terms of any agreement or instrument pursuant to which such
Indebtedness is issued or outstanding, is also expressly made subordinate to
the Securities at least to the extent it is subordinated to such other
Indebtedness.
(c) The amount of any guarantee by the Company or any Restricted
Subsidiary of any Indebtedness of the Company or one or more Restricted
Subsidiaries shall not be deemed to be outstanding or incurred for purposes of
this Section 10.12 hereof in addition to the amount of Indebtedness which it
guarantees.
(d) For purposes of this Section 10.12, Indebtedness of any Person
that becomes a Restricted Subsidiary by merger, consolidation or other
acquisition shall be deemed to have been incurred by the Company and the
Restricted Subsidiary at the time such Person becomes a Restricted Subsidiary.
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Section 10.13 Additional Subsidiary Guarantors.
(a) The Company shall cause each Restricted Subsidiary that
becomes, or comes into existence as, a Restricted Subsidiary after the date of
this Indenture and has assets, businesses, divisions, real property or
equipment with a Fair Market Value in excess of $1,000,000 to execute and
deliver a supplemental indenture to this Indenture agreeing to be bound by its
terms applicable to a Subsidiary Guarantor and providing for a Subsidiary
Guarantee of the Securities by such Restricted Subsidiary.
(b) Notwithstanding the foregoing and the other provisions of this
Indenture, any Subsidiary Guarantee incurred by a Restricted Subsidiary
pursuant to this Section 10.13 shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon the terms and
conditions set forth in Section 13.3 hereof.
Section 10.14 Limitation on Issuances and Sales of Capital Stock by
Restricted Subsidiaries.
The Company (a) shall not permit any Restricted Subsidiary to issue or
sell any Capital Stock to any Person other than to the Company or a Wholly
Owned Restricted Subsidiary and (b) shall not permit any Person other than
the Company or a Wholly Owned Restricted Subsidiary to own any Capital Stock of
any Restricted Subsidiary, in each case except with respect to a Wholly Owned
Restricted Subsidiary as described in clause (i) or (ii) of the definition of
"Wholly Owned Restricted Subsidiary."
Section 10.15 Limitation on Liens.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, assume, affirm or suffer to exist or
become effective any Lien of any kind, except for Permitted Liens, upon any of
their respective Properties, whether now owned or acquired after the date of
this Indenture, or any income or profits therefrom, to secure (a) any
Indebtedness of the Company or such Restricted Subsidiary (if it is not also a
Subsidiary Guarantor), unless prior to, or contemporaneously therewith, the
Securities are equally and ratably secured or (b) any Indebtedness of any
Subsidiary Guarantor, unless prior to, or contemporan-eously therewith, the
Subsidiary Guarantees are equally and ratably secured; provided, however, that
if such Indebtedness is expressly subordinated to the Securities or the
Subsidiary Guarantees, the Lien securing such Indebtedness shall be
subordinated and junior to the Lien securing the Securities or the Subsidiary
Guarantees, as the case may be, with the same relative priority as such
Indebtedness has with respect to the Securities or the Subsidiary Guarantees.
The foregoing covenant shall not apply to any Lien securing Acquired
Indebtedness, provided that any such Lien extends only to the Properties that
were subject to such Lien prior to the related acquisition by the Company or
such Restricted Subsidiary and was not created, incurred or assumed in
contemplation of such transaction.
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Section 10.16 Purchase of Securities Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall
be obligated to make an offer to purchase (a "Change of Control Offer") all of
the then Outstanding Securities, in whole or in part, from the Holders of such
Securities in integral multiples of $1,000, at a purchase price (the "Change of
Control Purchase Price") equal to 101% of the principal amount of such
Securities, plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date (as defined below), in accordance with the procedures set forth
in paragraphs (b), (c) and (d) of this Section. The Company shall, subject to
the provisions described below, be required to purchase all Securities properly
tendered into the Change of Control Offer and not withdrawn. The Company will
not be required to make a Change of Control Offer upon a Change of Control if
another Person makes the Change of Control Offer at the same purchase price, at
the same times and otherwise in substantial compliance with the requirements
applicable to a Change of Control Offer to be made by the Company and purchases
all Securities validly tendered and not withdrawn under such Change of Control
Offer.
(b) The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the fifth Business
Day prior to the Change of Control Purchase Date (as defined below).
(c) Not later than the 30th day following any Change of Control,
the Company shall give to the Trustee in the manner provided in Section 14.4
and each Holder of the Securities in the manner provided in Section 14.5, a
notice (the "Change of Control Notice") governing the terms of the Change of
Control Offer and stating:
(1) that a Change in Control has occurred and that such
Holder has the right to require the Company to repurchase such
Holder's Securities, or portion thereof, at the Change of Control
Purchase Price;
(2) any information regarding such Change of Control
required to be furnished pursuant to Rule 13e-1 under the Exchange
Act and any other securities laws and regulations thereunder;
(3) a purchase date (the "Change of Control Purchase
Date") which shall be on a Business Day and no earlier than 30 days
nor later than 60 days from the date the Change of Control occurred;
(4) that any Security, or portion thereof, not tendered
or accepted for payment will continue to accrue interest:
(5) that unless the Company defaults in depositing money
with the Paying Agent in accordance with the last paragraph of clause
(d) of this Section 10.16, or payment is otherwise prevented, any
Security, or portion thereof, accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the
Change of Control Purchase Date; and
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(6) the instructions a Holder must follow in order to
have his Securities repurchased in accordance with paragraph (d) of
this Section.
(d) Holders electing to have Securities purchased will be required
to surrender such Securities to the Paying Agent at the address specified in
the Change of Control Notice at least five Business Days prior to the Change of
Control Purchase Date. Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than three Business Days prior to the
Change of Control Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the certificate number(s) (in the
case of Physical Securities) and principal amount of the Securities delivered
for purchase by the Holder as to which his election is to be withdrawn and a
statement that such Holder is withdrawing his election to have such Securities
purchased. Holders whose Securities are purchased only in part will be issued
new Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
On the Change of Control Purchase Date, the Company shall (i) accept
for payment Securities or portions thereof validly tendered pursuant to a
Change of Control Offer, (ii) irrevocably deposit with the Paying Agent money
sufficient to pay the purchase price of all Securities or portions thereof so
tendered, and (iii) deliver or cause to be delivered to the Trustee the
Securities so accepted. The Paying Agent shall promptly mail or deliver to
Holders of the Securities so tendered payment in an amount equal to the
purchase price for the Securities, and the Company shall execute and the
Trustee shall authenticate and mail or make available for delivery to such
Holders a new Security having the notation of Subsidiary Guarantees thereon
executed by the Subsidiary Guarantors and equal in principal amount to any
unpurchased portion of the Security which any such Holder did not surrender for
purchase. The Company shall announce the results of a Change of Control Offer
on or as soon as practicable after the Change of Control Purchase Date. For
purposes of this Section 10.16, the Trustee will act as the Paying Agent.
(e) The Company shall comply with Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable, in the event that a Change of Control
occurs and the Company is required to purchase Securities as described in this
Section 10.16.
Section 10.17 Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time
of such Asset Sale at least equal to the Fair Market Value of the Properties
sold or otherwise disposed of pursuant to the Asset Sale, (ii) at least 75% of
the consideration received by the Company or the Restricted Subsidiary, as the
case may be, in respect of such Asset Sale consists of cash or Cash Equivalents
and (iii) the Company delivers to the Trustee an Officers' Certificate
certifying that such Asset Sale complies with clauses (i) and (ii) of this
Section 10.17(a). The amount (without duplication) of any Indebtedness (other
than Subordinated Indebtedness) of the Company or such Restricted Subsidiary
that is expressly assumed by the transferee in such Asset Sale and with respect
to which the Company or such
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Restricted Subsidiary, as the case may be, is unconditionally released by the
holder of such Indebtedness, shall be deemed to be cash or Cash Equivalents for
purposes of clause (ii) and shall also be deemed to constitute a repayment of,
and a permanent reduction in, the amount of such Indebtedness for purposes of
the following paragraph.
(b) If the Company or any Restricted Subsidiary engages in an
Asset Sale or incurs an Event of Loss, the Company or such Restricted
Subsidiary may either, no later than 365 days after such Asset Sale or such
Event of Loss, (i) apply all or any of the Net Available Proceeds therefrom to
repay Indebtedness (other than Subordinated Indebtedness) of the Company or
any Restricted Subsidiary, provided, in each case, that the related loan
commitment (if any) is thereby permanently reduced by the amount of such
Indebtedness so repaid, or (ii) invest all or any part of the Net Available
Proceeds thereof in Properties that replace the Properties that were the
subject of such Asset Sale or such Event of Loss, as the case may be, or in
other Properties that will be used in the business of the Company and its
Restricted Subsidiaries. The amount of such Net Available Proceeds not applied
or invested as provided in this paragraph shall constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals or exceeds
$10,000,000 (the "Trigger Date"), the Company shall make an offer to purchase,
from all Holders of the Securities, an aggregate principal amount of Securities
equal to such Excess Proceeds as follows:
(1) Not later than the 30th day following the Trigger
Date, the Company shall give to the Trustee in the manner provided in
Section 14.4 hereof and each Holder of the Securities in the manner
provided in Section 14.5 hereof, a notice (a "Purchase Notice")
offering to purchase (a "Net Proceeds Offer") from all Holders of the
Securities the maximum principal amount (expressed as a multiple of
$1,000) of Securities that may be purchased out of an amount (the
"Payment Amount") equal to such Excess Proceeds.
(2) The offer price for the Securities shall be payable
in cash in an amount equal to 100% of the principal amount of the
Securities tendered pursuant to a Net Proceeds Offer, plus accrued and
unpaid interest, if any, to the date such Net Proceeds Offer is
consummated (the "Offered Price"), in accordance with the procedures
set forth in paragraph (d) of this Section. To the extent that the
aggregate Offered Price of the Securities tendered pursuant to a Net
Proceeds Offer is less than the Payment Amount relating thereto (such
shortfall constituting a "Net Proceeds Deficiency"), the Company may
use such Net Proceeds Deficiency, or a portion thereof, for general
corporate purposes, subject to the limitations of Section 10.10
hereof.
(3) If the aggregate Offered Price of Securities validly
tendered and not withdrawn by Holders thereof exceeds the Payment
Amount, Securities to be purchased will be selected on a pro rata
basis by the Trustee based on the aggregate principal amount of
Securities so tendered. Upon completion of a Net Proceeds Offer, the
amount of Excess Proceeds shall be reset to zero.
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(4) The Purchase Notice shall set forth a purchase date
(the "Net Proceeds Payment Date"), which shall be on a Business Day no
earlier than 30 days nor later than 60 days from the Trigger Date. The
Purchase Notice shall also state (i) that a Trigger Date with respect
to one or more Asset Sales has occurred and that such Holder has the
right to require the Company to repurchase such Holder's Securities at
the Offered Price, subject to the limitations described in the
foregoing paragraph (3), (ii) any information regarding such Net
Proceeds Offer required to be furnished pursuant to Rule 13e-1 under
the Exchange Act and any other securities laws and regulations
thereunder, (iii) that any Security, or portion thereof, not tendered
or accepted for payment will continue to accrue interest, (iv) that,
unless the Company defaults in depositing money with the Paying Agent
in accordance with the last paragraph of clause (d) of this Section
10.17, or payment is otherwise prevented, any Security, or portion
thereof, accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Net Proceeds Payment Date, and (v)
the instructions a Holder must follow in order to have his Securities
repurchased in accordance with paragraph (d) of this Section.
(d) Holders electing to have Securities purchased will be required
to surrender such Securities to the Paying Agent at the address specified in
the Purchase Notice at least five Business Days prior to the Net Proceeds
Payment Date. Holders will be entitled to withdraw their election if the Paying
Agent receives, not later than three Business Days prior to the Net Proceeds
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the certificate number(s) (in the case of Physical
Securities) and principal amount of the Securities delivered for purchase by
the Holder as to which his election is to be withdrawn and a statement that
such Holder is withdrawing his election to have such Securities purchased.
Holders whose Securities are purchased only in part will be issued new
Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
On the Net Proceeds Payment Date, the Company shall (i) accept for
payment Securities or portions thereof validly tendered pursuant to a Net
Proceeds Offer in an aggregate principal amount equal to the Payment Amount or
such lesser amount of Securities as has been tendered, (ii) irrevocably deposit
with the Paying Agent money sufficient to pay the purchase price of all
Securities or portions thereof so tendered in an aggregate principal amount
equal to the Payment Amount or such lesser amount and (iii) deliver or cause to
be delivered to the Trustee the Securities so accepted. The Paying Agent shall
promptly mail or deliver to Holders of the Securities so accepted payment in an
amount equal to the purchase price, and the Company shall execute and the
Trustee shall authenticate and mail or make available for delivery to such
Holders a new Security having the notation of Subsidiary Guarantees thereon
executed by the Subsidiary Guarantors and equal in principal amount to any
unpurchased portion of the Security which any such Holder did not surrender for
purchase. Any Securities not so accepted will be promptly mailed or delivered
to the Holder thereof. The Company shall announce the results of a Net
Proceeds Offer on or as soon as practicable after the Net Proceeds Payment
Date. For purposes of this Section 10.17, the Trustee will act as the Paying
Agent.
(e) The Company shall not permit any Restricted Subsidiary to
enter into or suffer to exist any agreement that would place any restriction of
any kind (other than pursuant to law or
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regulation) on the ability of the Company to make a Net Proceeds Offer
following any Asset Sale. The Company shall comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder, if
applicable, in the event that an Asset Sale occurs and the Company is required
to purchase Securities as described in this Section 10.17.
Section 10.18 Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of Property or the rendering of any
services) with, or for the benefit of, any Affiliate of the Company (other than
the Company or a Restricted Subsidiary), unless (i) such transaction or series
of related transactions is on terms that are no less favorable to the Company
or such Restricted Subsidiary, as the case may be, than would be available in a
comparable transaction in arm's-length dealings with an unrelated third party,
(ii) with respect to any one transaction or series of related transactions
involving aggregate payments in excess of $1,000,000, the Company delivers an
Officers' Certificate to the Trustee certifying that such transaction or series
of related transactions complies with clause (i) above, (iii) with respect to a
transaction or series of related transactions involving payments in excess of
$5,000,000 but less than $15,000,000 in the aggregate, the Company delivers an
Officers' Certificate to the Trustee certifying that (A) such transaction or
series of related transactions complies with clause (i) above and (B) such
transaction or series of related transactions has been approved by a majority
of the Disinterested Directors of the Company, and (iv) with respect to any one
transaction or series of related transactions involving aggregate payments in
excess of $15,000,000, the Company delivers an Officers' Certificate to the
Trustee certifying to the two matters referred to in clause (iii) above and
that the Company has obtained a written opinion from an independent nationally
recognized investment banking firm or appraisal firm specializing or having a
speciality in the type and subject matter of the transaction or series of
related transactions at issue, which opinion shall be to the effect set forth
in clause (i) above or shall state that such transaction or series of related
transactions is fair from a financial point of view to the Company or such
Restricted Subsidiary; provided, however, that the foregoing restriction shall
not apply to (w) loans or advances to officers, directors and employees of the
Company or any Restricted Subsidiary made in the ordinary course of business
and consistent with past practices of the Company and its Restricted
Subsidiaries in an aggregate amount not to exceed $1,000,000 outstanding at any
one time, (x) indemnities of officers, directors and employees of the Company
or any Restricted Subsidiary permitted by bylaw or statutory provisions, (y)
the payment of reasonable and customary regular fees to directors of the
Company or any of its Restricted Subsidiaries who are not employees of the
Company or any Affiliate and (z) the Company's employee compensation and other
benefit arrangements.
Section 10.19 Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or suffer to exist or allow to become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary (a) to pay dividends, in cash or
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otherwise, or make any other distributions on its Capital Stock, or make
payments on any Indebtedness owed, to the Company or any other Restricted
Subsidiary, (b) to make loans or advances to the Company or any other
Restricted Subsidiary, (c) to transfer any of its Property to the Company or
any other Restricted Subsidiary or (d) to guarantee the Securities (any such
restrictions being collectively referred to herein as a "Payment Restriction"),
except in any such case for such encumbrances or restrictions existing under or
by reason of (i) this Indenture, the Revolving Credit Facility or any other
agreement in effect or entered into on the date of this Indenture, or (ii) any
agreement, instrument or charter of or in respect of a Restricted Subsidiary
entered into prior to the date on which such Restricted Subsidiary became a
Restricted Subsidiary and outstanding on such date and not entered into in
connection with or in contemplation of becoming a Restricted Subsidiary,
provided such consensual encumbrance or restriction is not applicable to any
Properties other than those owned or held by the Restricted Subsidiary at the
time it became a Restricted Subsidiary or subsequently acquired by such
Restricted Subsidiary other than the Company or any other Restricted
Subsidiary, or (iii) pursuant to an agreement effecting a modification,
renewal, refinancing, replacement or extension of any agreement, instrument or
charter (other than this Indenture) referred to in clause (i) or (ii) above,
provided, however, that the provisions relating to such encumbrance or
restriction are not materially less favorable to the Holders of the Securities
than those under or pursuant to the agreement, instrument or charter so
modified, renewed, refinanced, replaced or extended, or (iv) customary
provisions restricting the subletting or assignment of any lease or the
transfer of copyrighted or patented materials, or (v) provisions in agreements
that restrict the assignment of such agreements or rights thereunder, or (vi)
the sale or other disposition of any Properties subject to a Lien securing
Indebtedness.
Section 10.20 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 10.5 through 10.12, Sections
10.14 and 10.15 and Sections 10.18 through 10.19 hereof if, before or after the
time for such compliance, the Holders of at least a majority in aggregate
principal amount of the Outstanding Securities and the Subsidiary Guarantors,
by Act of such Holders and written agreement of the Subsidiary Guarantors,
waive such compliance in such instance with such term, provision or condition,
but no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.
Section 10.21 Qualification of Indenture.
The Company shall qualify this Indenture under the TIA in accordance
with the terms and conditions of the Registration Rights Agreement and shall
pay all costs and expenses (including attorneys' fees for the Company and the
Trustee) incurred in connection therewith. In connection with any such
qualification of this Indenture under the TIA, the Trustee shall be entitled to
receive from the Company any such Officers' Certificates, Opinions of Counsel
or other documentation as it may reasonably request.
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ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.1 Right of Redemption.
The Securities may be redeemed, at the election of the Company, as a
whole or from time to time in part, at any time on or after May 15, 2000, upon
not less than 30 or more than 60 days' notice to each Holder of Securities to
be redeemed, subject to the conditions and at the Redemption Prices (expressed
as percentages of principal amount) specified in the form of Security, together
with accrued and unpaid interest, if any, to the Redemption Date (subject to
the right of Holders on the relevant record date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
In addition, at any time on or prior to May 15, 1999, up to
$37,500,000 in aggregate principal amount of Securities may be redeemed, at the
election of the Company, upon not less than 30 or more than 60 days' notice to
each Holder of Securities to be redeemed, from the Net Cash Proceeds of a
Public Equity Offering, at the Redemption Price (expressed as a percentage of
principal amount) specified in the form of Security, together with accrued and
unpaid interest, if any, to the Redemption Date, provided that at least
$112,500,000 in aggregate principal amount of Securities remains Outstanding
immediately after such redemption and that such redemption occurs within 60
days following the closing of such Public Equity Offering.
Section 11.2 Applicability of Article.
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
Section 11.3 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 11.1 hereof shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date and of the principal amount of Securities to be redeemed and shall deliver
to the Trustee such documentation and records as shall enable the Trustee to
select the Securities to be redeemed pursuant to Section 11.4 hereof. Any
election to redeem Securities shall be revocable until the Company gives a
notice of redemption pursuant to Section 11.5 hereof to the Holders of
Securities to be redeemed.
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Section 11.4 Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not less than 30 days nor more than
60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities not previously called for redemption, pro rata, by lot or by any
other method as the Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions of the principal of
Securities; provided, however, that any such partial redemption shall be in
integral multiples of $1,000.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs of this Section 11.4
shall not apply with respect to any redemption affecting only a Global
Security, whether such Global Security is to be redeemed in whole or in part.
In the case of any such redemption in part, the unredeemed portion of the
principal amount of the Global Security shall be in an authorized denomination.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed.
Section 11.5 Notice of Redemption.
Notice of redemption shall be given in the manner provided for in
Section 14.5 hereof not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) in the case of a partial redemption of Physical Securities,
the identification of the particular Securities to be redeemed, and, if any
Global Security or Physical Security is to be redeemed in part, the portion of
the principal amount thereof to be redeemed;
(d) that on the Redemption Date the Redemption Price (together
with accrued interest, if any, to the Redemption Date payable as provided in
Section 11.7 hereof) will become due and payable upon each such Security, or
the portion thereof, to be redeemed, and that, unless the Company shall default
in the payment of the Redemption Price and any applicable accrued and unpaid
interest, interest thereon will cease to accrue on and after said date; and
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(e) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. Failure to give such
notice by mailing to any Holder of Securities or any defect therein shall not
affect the validity of any proceedings for the redemption of other Securities.
Section 11.6 Deposit of Redemption Price.
On or before 11:00 a.m., Eastern time, on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.3 hereof) immediately available funds in an amount
sufficient to pay the Redemption Price of, and accrued and unpaid interest on,
all the Securities which are to be redeemed on such Redemption Date.
Section 11.7 Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued and unpaid interest,
if any, to the Redemption Date), and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued and
unpaid interest) such Securities shall cease to bear interest. Upon surrender
of any such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price, together with
accrued and unpaid interest, if any, to the Redemption Date; provided, however,
that installments of interest whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Securities, or one or
more Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
3.8 hereof.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Securities.
Section 11.8 Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at the office or agency of the Company maintained for such purpose pursuant to
Section 10.2 hereof (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate
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principal amount equal to and in exchange for the unredeemed portion of the
principal amount of the Security so surrendered.
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
Section 12.1 Company's Option to Effect Defeasance or Covenant
Defeasance.
The Company may, at its option by Board Resolution, at any time, with
respect to the Securities, elect to have either Section 12.2 or Section 12.3
hereof be applied to all Outstanding Securities upon compliance with the
conditions set forth below in this Article XII.
Section 12.2 Defeasance and Discharge.
Upon the Company's exercise under Section 12.1 hereof of the option
applicable to this Section 12.2, the Company and the Subsidiary Guarantors
shall be deemed to have been discharged from their respective obligations with
respect to all Outstanding Securities on the date the conditions set forth in
Section 12.4 hereof are satisfied (hereinafter, "legal defeasance"). For this
purpose, such legal defeasance means that the Company and the Subsidiary
Guarantors shall be deemed (i) to have paid and discharged their respective
obligations under the Outstanding Securities, provided, however, that the
Securities shall continue to be deemed to be "Outstanding" for purposes of
Section 12.5 hereof and the other Sections of this Indenture referred to in
clauses (A) and (B) below, and (ii) to have satisfied all their other
obligations with respect to such Securities and this Indenture (and the
Trustee, at the expense and direction of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Securities to receive, solely from the trust fund
described in Section 12.4 hereof and as more fully set forth in such Section,
payments in respect of the principal of (and premium if any, on) and interest
on such Securities when such payments are due (or at such time as the
Securities would be subject to redemption at the option of the Company in
accordance with this Indenture), (B) the respective obligations of the Company
and the Subsidiary Guarantors under Sections 3.3, 3.4, 3.5, 3.6, 3.7, 5.8, 6.6,
6.9, 6.10, 10.2, 10.3, 10.21, 13.1 (to the extent it relates to the foregoing
Sections and this Article XII), 13.4 and 13.5 hereof, (C) the rights, powers,
trusts, duties and immunities of the Trustee hereunder, and (D) the obligations
of the Company and the Subsidiary Guarantors under this Article XII. Subject
to compliance with this Article XII, the Company may exercise its option under
this Section 12.2 notwithstanding the prior exercise of its option under
Section 12.3 hereof with respect to the Securities.
Section 12.3 Covenant Defeasance.
Upon the Company's exercise under Section 12.1 hereof of the option
applicable to this Section 12.3, (i) the Company and each Subsidiary Guarantor
shall be released from their respective obligations under any covenant
contained in Article VIII, in Sections 10.5 through
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10.19 and in Sections 10.21 and 13.2 hereof and (ii) the occurrence of any
event specified in Section 5.1(c) or 5.1(d) hereof (with respect to any of
Article VIII, Sections 10.5 through 10.19, Section 10.21 and Section 13.2)
shall be deemed not to be or result in an Event of Default, in each case with
respect to the Outstanding Securities on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant defeasance"), and the
Securities shall thereafter be deemed not to be "Outstanding" for the purposes
of any direction, waiver, consent or declaration or Act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the Outstanding
Securities, the Company and each Subsidiary Guarantor may omit to comply with
and shall have no liability in respect of any term, condition or limitation set
forth in any such Article or Section (to the extent so specified in the case of
Sections 5.1(c) and 5.1(d) hereof), whether directly or indirectly, by reason
of any reference elsewhere herein to any such Article or Section or by reason
of any reference in any such Article or Section to any other provision herein
or in any other document, but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby. In addition, upon
the Company's exercise under Section 12.1 hereof of the option applicable to
this Section 12.3, subject to the satisfaction of the conditions set forth in
Section 12.4 hereof, Sections 5.1(e) and 5.1(g) hereof shall not constitute
Events of Default.
Section 12.4 Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
12.2 or Section 12.3 hereof to the Outstanding Securities:
(a) The Company or any Subsidiary Guarantor shall irrevocably have
deposited or caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 6.7 hereof who shall agree to comply
with the provisions of this Article XII applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of such
Securities, (A) cash in United States dollars in an amount, or (B) U.S.
Government Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, money in an amount, or
(C) a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, and which
shall be applied by the Trustee (or other qualifying trustee) to pay and
discharge, the principal of (and premium, if any, on) and interest on the
Outstanding Securities on the Stated Maturity thereof (or Redemption Date, if
applicable), provided that the Trustee shall have been irrevocably instructed
in writing by the Company to apply such money or the proceeds of such U.S.
Government Obligations to said payments with respect to the Securities. Before
such a deposit, the Company may give to the Trustee, in accordance with Section
11.3 hereof, a notice of its election to redeem all of the Outstanding
Securities at a future date in accordance with Article XI hereof, which notice
shall be irrevocable. Such irrevocable redemption notice, if given, shall be
given effect in applying the foregoing. For this purpose, "U.S. Government
Obligations" means securities that are (x) direct obligations of the United
States of America for the timely payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or
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supervised by and acting as an agency or instrumentality of the United States
of America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by such
depository receipt.
(b) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit or, insofar
as Sections 5.1(h) and 5.1(i) are concerned, at any time during the period
ending on the 91st day after the date of such deposit.
(c) Such legal defeasance or covenant defeasance shall not cause
the Trustee to have a conflicting interest under this Indenture or the Trust
Indenture Act with respect to any securities of the Company or any Subsidiary
Guarantor.
(d) Such legal defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under, any other material
agreement or instrument to which the Company or any Subsidiary Guarantor is a
party or by which it is bound, as evidenced to the Trustee in an Officers'
Certificate delivered to the Trustee concurrently with such deposit.
(e) In the case of an election under Section 12.2 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there has
been a change in the applicable federal income tax laws, in either case
providing that the Holders of the Outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such legal
defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such legal
defeasance had not occurred (it being understood that (x) such Opinion of
Counsel shall also state that such ruling or applicable law is consistent with
the conclusions reached in such Opinion of Counsel and (y) the Trustee shall be
under no obligation to investigate the basis or correctness of such ruling).
(f) In the case of an election under Section 12.3 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Securities will not recognize income, gain
or loss for federal income tax purposes as a result of such covenant defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred.
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(g) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, which, taken together, state that all
conditions precedent provided for relating to either the legal defeasance under
Section 12.2 hereof or the covenant defeasance under Section 12.3 (as the case
may be) have been complied with.
Section 12.5 Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 10.3
hereof, all money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee--collectively
for purposes of this Section 12.5, the "Trustee") pursuant to Section 12.4
hereof in respect of the Outstanding Securities shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against all taxes,
fees or other charges imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 12.4 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the Outstanding
Securities.
Anything in this Article XII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 12.4 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent legal defeasance or
covenant defeasance, as applicable, in accordance with this Article.
Section 12.6 Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 12.5 hereof by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's and the Subsidiary Guarantors' obligations
under this Indenture and the Securities shall be revived and reinstated as
though no deposit had occurred pursuant to Section 12.2 or 12.3 hereof, as the
case may be, until such time as the Trustee or Paying Agent is permitted to
apply all such money in accordance with Section 12.5 hereof; provided, however,
that if the Company or any Subsidiary Guarantor makes any payment of principal
of (or premium, if any, on) or interest on any Security following the
reinstatement of its obligations, the Company or such Subsidiary Guarantor
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money held by the Trustee or Paying Agent.
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ARTICLE XIII
SUBSIDIARY GUARANTEES
Section 13.1 Unconditional Guarantee.
Each Subsidiary Guarantor hereby unconditionally, jointly and
severally, guarantees (each such guarantee being referred to herein as this
"Subsidiary Guarantee," with all such guarantees being referred to herein as
the "Subsidiary Guarantees") to each Holder of Securities authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns, the
full and prompt performance of the Company's obligations under this Indenture
and the Securities and that:
(a) the principal of (and premium, if any, on) and interest on the
Securities will be promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue principal of
and interest on the Securities, if any, to the extent lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and
(b) in case of any extension of time of payment or renewal of any
Securities or of any such other obligations, the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at Stated Maturity, by acceleration or otherwise;
subject, however, in the case of clauses (a) and (b) above, to the limitations
set forth in Section 13.4 hereof.
Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Subsidiary Guarantors will
be jointly and severally obligated to pay the same immediately. Each Subsidiary
Guarantor hereby agrees that its obligations hereunder shall, to the extent
permitted by law, be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder of the Securities with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Subsidiary Guarantor hereby waives, to the extent permitted by
law, diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that its Subsidiary Guarantee will not be discharged
except by complete performance of the obligations contained in the Securities,
this Indenture and in this Subsidiary Guarantee. If any Holder or the Trustee
is required by any court or otherwise to return to the Company, any Subsidiary
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or any Subsidiary Guarantor, any amount paid
by the Company or any Subsidiary Guarantor to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and
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effect. Each Subsidiary Guarantor agrees it shall not be entitled to enforce
any right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby. Each Subsidiary Guarantor further agrees that, as between
each Subsidiary Guarantor, on the one hand, and the Holders and the Trustee, on
the other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article V hereof for the purposes of this Subsidiary
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any acceleration of such obligations as provided in Article V
hereof, such obligations (whether or not due and payable) shall forthwith
become due and payable by each Subsidiary Guarantor for the purpose of this
Subsidiary Guarantee.
Section 13.2 Subsidiary Guarantors May Consolidate, etc., on
Certain Terms.
(a) Except as set forth in Article VIII hereof, nothing contained
in this Indenture or in any of the Securities shall prevent any consolidation
or merger of a Subsidiary Guarantor with or into the Company or another
Subsidiary Guarantor or shall prevent any sale, conveyance or other disposition
of all or substantially all the Properties of a Subsidiary Guarantor to the
Company or another Subsidiary Guarantor.
(b) Except as set forth in Article VIII hereof, nothing contained
in this Indenture or in any of the Securities shall prevent any consolidation
or merger of a Subsidiary Guarantor with or into a Person other than the
Company or another Subsidiary Guarantor (whether or not Affiliated with the
Subsidiary Guarantor), or successive consolidations or mergers in which a
Subsidiary Guarantor or its successor or successors shall be a party or
parties, or shall prevent any sale, conveyance or other disposition of all or
substantially all the Properties of a Subsidiary Guarantor to a Person other
than the Company or another Subsidiary Guarantor (whether or not Affiliated
with the Subsidiary Guarantor) authorized to acquire and operate the same;
provided, however, that (i) immediately after such transaction, and giving
effect thereto, no Default or Event of Default shall have occurred as a result
of such transaction and be continuing, (ii) such transaction shall not violate
any of the covenants of Sections 10.1 through 10.19 hereof, and (iii) each
Subsidiary Guarantor hereby covenants and agrees that, upon any such
consolidation, merger, sale, conveyance or other disposition, such Subsidiary
Guarantor's Subsidiary Guarantee set forth in this Article XIII and in a
notation to the Securities, and the due and punctual performance and observance
of all of the covenants and conditions of this Indenture to be performed by
such Subsidiary Guarantor, shall be expressly assumed (in the event that the
Subsidiary Guarantor is not the surviving corporation in a merger), by
supplemental indenture satisfactory in form to the Trustee, executed and
delivered to the Trustee, by such Person formed by such consolidation, or into
which the Subsidiary Guarantor shall have merged, or by the Person that shall
have acquired such Property (except to the extent the following Section 13.3
would result in the release of such Subsidiary Guarantee, in which case such
surviving Person or transferee of such Property shall not have to execute any
such supplemental indenture and shall not have to assume such Subsidiary
Guarantor's Subsidiary Guarantee). In the case of any such consolidation,
merger, sale, conveyance or other disposition and upon the assumption by the
successor Person, by supplemental indenture executed and delivered to the
Trustee and satisfactory in form to the Trustee of the due and punctual
performance of all of the covenants and
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conditions of this Indenture to be performed by the Subsidiary Guarantor, such
successor Person shall succeed to and be substituted for the Subsidiary
Guarantor with the same effect as if it had been named herein as the initial
Subsidiary Guarantor.
Section 13.3 Release of Subsidiary Guarantors.
Upon the sale or disposition (by merger or otherwise) of a Subsidiary
Guarantor (or all or substantially all of its Properties) to a Person other
than the Company or another Subsidiary Guarantor and pursuant to a transaction
that is otherwise in compliance with the terms of this Indenture, including but
not limited to the provisions of Section 13.2 hereof or pursuant to Article
VIII hereof, such Subsidiary Guarantor shall be deemed released from its
Subsidiary Guarantee and all related obligations under this Indenture;
provided, however, that any such termination shall occur only to the extent
that all obligations of such Subsidiary Guarantor under all of its guarantees
of, and under all of its pledges of assets or other security interests which
secure, other Indebtedness of the Company or any other Restricted Subsidiary
shall also terminate or be released upon such sale or other disposition. The
Trustee shall deliver an appropriate instrument evidencing such release upon
receipt of a Company Request accompanied by an Officers' Certificate and an
Opinion of Counsel certifying that such sale or other disposition was made by
the Company in accordance with the provisions of this Indenture. Each
Subsidiary Guarantor that is designated as an Unrestricted Subsidiary in
accordance with the provisions of this Indenture shall be released from its
Subsidiary Guarantee and all related obligations under this Indenture for so
long as it remains an Unrestricted Subsidiary. The Trustee shall deliver an
appropriate instrument evidencing such release upon its receipt of the Board
Resolution designating such Unrestricted Subsidiary. Any Subsidiary Guarantor
not released in accordance with this Section 13.3 shall remain liable for the
full amount of principal of (and premium, if any, on) and interest on the
Securities as provided in this Article XIII.
Section 13.4 Limitation of Subsidiary Guarantors' Liability.
Each Subsidiary Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that the guarantee
by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not
constitute a fraudulent transfer or conveyance for purposes of the Federal
Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law. To effectuate the foregoing
intention, the Holders and each Subsidiary Guarantor hereby irrevocably agree
that the obligations of such Subsidiary Guarantor under its Subsidiary
Guarantee shall be limited to the maximum amount as will, after giving effect
to all other contingent and fixed liabilities of such Subsidiary Guarantor and
after giving effect to any collections from or payments made by or on behalf of
any other Subsidiary Guarantor in respect of the obligations of such other
Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to Section 13.5
hereof, result in the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee not constituting such a fraudulent conveyance or
fraudulent transfer. This Section 13.4 is for the benefit of the creditors of
each Subsidiary Guarantor, and, for purposes of the Federal Bankruptcy Code,
the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act and
each other similar federal or state law, any Indebtedness of a Subsidiary
Guarantor that (a) constitutes Permitted Indebtedness pursuant
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to clause (i) of the definition of "Permitted Indebtedness", and (b) is secured
by Liens permitted pursuant to clause (d) of the definition of "Permitted
Liens" shall be deemed to have been incurred prior to the incurrence by such
Subsidiary Guarantor of liability under its Subsidiary Guarantee.
Section 13.5 Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under its Subsidiary Guarantee, such Funding Guarantor
shall be entitled to a contribution from each other Subsidiary Guarantor (if
any) in a pro rata amount based on the Adjusted Net Assets of each Subsidiary
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Securities or any other Subsidiary Guarantor's
obligations with respect to its Subsidiary Guarantee.
Section 13.6 Execution and Delivery of Notations of Subsidiary
Guarantees.
To evidence its Subsidiary Guarantee set forth in Section 13.1 hereof,
each Subsidiary Guarantor hereby agrees to execute the notations of Subsidiary
Guarantees in substantially the form set forth in Section 2.4 hereof to be
endorsed on all Securities ordered to be authenticated and delivered by the
Trustee, and each Subsidiary Guarantor agrees that this Indenture shall be
executed on behalf of such Subsidiary Guarantor by its President or one of its
Vice Presidents. Each Subsidiary Guarantor hereby agrees that its Subsidiary
Guarantee set forth in Section 13.1 hereof shall remain in full force and
effect notwithstanding any failure to endorse on each Security a notation of
such Subsidiary Guarantee. Each such notation of Subsidiary Guarantee shall be
signed on behalf of each Subsidiary Guarantor by its President or one of its
Vice Presidents (each of whom shall, in each case, have been duly authorized by
all requisite corporate action) prior to the authentication of the Security on
which it is endorsed, and the delivery of such Security by the Trustee, after
the authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Indenture on behalf of such Subsidiary
Guarantor. Such signatures upon the notation of Subsidiary Guarantee may be by
manual or facsimile signature of such officers and may be imprinted or
otherwise reproduced on the Subsidiary Guarantee, and in case any such officer
who shall have signed the notation of Subsidiary Guarantee shall cease to be
such officer before the Security on which such notation of Subsidiary Guarantee
is endorsed shall have been authenticated and delivered by the Trustee or
disposed of by the Company, such Security nevertheless may be authenticated and
delivered or disposed of as though the person who signed the notation of
Subsidiary Guarantee had not ceased to be such officer of the Subsidiary
Guarantor.
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Section 13.7 Severability.
In case any provision of this Subsidiary Guarantee shall be invalid,
illegal or unenforceable, that portion of such provision that is not invalid,
illegal or unenforceable shall remain in effect, and the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Compliance Certificates and Opinions.
Upon any application or request by the Company or any Subsidiary
Guarantor to the Trustee to take any action under any provision of this
Indenture, the Company or such Subsidiary Guarantor, as the case may be, shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act or this Indenture. Each such certificate and each such
opinion shall be in the form of an Officers' Certificate or an Opinion of
Counsel, as applicable, and shall comply with the requirements of this
Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each Person signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such Person,
such Person has made such examination or investigation as is necessary
to enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each
such Person, such condition or covenant has been complied with.
The certificates and opinions provided pursuant to this Section 14.1
and the statements required by this Section 14.1 shall comply in all respects
with TIA Sections 314(c) and (e).
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Section 14.2 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which his certificate or opinion is based are erroneous. Any
such Opinion of Counsel may be based, insofar as it relates to factual matters,
upon an officers' certificate, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate with respect to such matters
is erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 14.3 Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in
the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
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(c) The ownership, principal amount and serial numbers of
Securities held by any Person, and the date of holding the same, shall be
proved by the Security Register.
(d) If the Company shall solicit from the Holders of Securities
any request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, by or pursuant to a Board Resolution, fix
in advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other
Act, but the Company shall have no obligation to do so. Notwithstanding TIA
Section 316(c), such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not earlier than the
date 30 days prior to the first solicitation of Holders generally in connection
therewith and not later than the date such solicitation is completed. If such a
record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other Act may be given before or after such record date, but
only the Holders of record at the close of business on such record date shall
be deemed to be Holders for the purposes of determining whether Holders of the
requisite proportion of Outstanding Securities have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other Act, and for that purpose the Outstanding Securities shall be
computed as of such record date, provided that no such authorization, agreement
or consent by the Holders on such record date shall be deemed effective unless
it shall become effective pursuant to the provisions of this Indenture not
later than eleven months after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu
thereof, including, without limitation, any Series B Security exchanged for a
Series A Security, in respect of anything done, omitted or suffered to be done
by the Trustee or the Company in reliance thereon, whether or not notation of
such action is made upon such Security.
Section 14.4 Notices, etc. to Trustee, Company and Subsidiary
Guarantors.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to or filed with,
(1) the Trustee by any Holder, the Company or any Subsidiary
Guarantor shall be sufficient for every purpose hereunder if made,
given, furnished or filed in writing (in the English language) and
delivered in person or mailed by certified or registered mail (return
receipt requested) to the Trustee at its Corporate Trust Office; or
(2) the Company or any Subsidiary Guarantor by the Trustee or by
any Holder shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if in writing (in the English
language) and delivered in person or mailed by certified or registered
mail (return receipt requested) to the Company or such Subsidiary
Guarantor, as applicable, addressed to it at the Company's offices
located at 1200 Smith Street,
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Suite 300, Houston, Texas 77002, Attention: Chief Financial Officer,
or at any other address otherwise furnished in writing to the Trustee
by the Company.
Section 14.5 Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders by
the Company, the Trustee or any Paying Agent, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing (in the
English language) and mailed, first-class postage prepaid, to each Holder
affected by such event, at his address as it appears in the Security Register,
not later than the latest date, and not earlier than the earliest date,
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders. Any notice mailed to a Holder in the
manner herein prescribed shall be conclusively deemed to have been received by
such Holder, whether or not such Holder actually receives such notice. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
Section 14.6 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 14.7 Successors and Assigns.
All covenants and agreements in this Indenture by the Company and the
Subsidiary Guarantors shall bind their respective successors and assigns,
whether so expressed or not. All agreements of the Trustee in this Indenture
shall bind its successor.
Section 14.8 Severability.
In case any provision in this Indenture or in the Securities or the
Subsidiary Guarantees shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and a Holder shall have no claim therefor against
any party hereto.
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Section 14.9 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person (other than the parties hereto, any Paying Agent, any
Securities Registrar and their successors hereunder, the Holders and, to the
extent set forth in Section 13.4 hereof, creditors of Subsidiary Guarantors)
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
Section 14.10 Governing Law; Trust Indenture Act Controls.
(a) THIS INDENTURE, THE SUBSIDIARY GUARANTEES AND THE SECURITIES
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
NEW YORK. THE COMPANY AND EACH SUBSIDIARY GUARANTOR IRREVOCABLY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE SECURITIES OR THE
SUBSIDIARY GUARANTEES, AND THE COMPANY AND EACH SUBSIDIARY GUARANTOR
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED BY ANY SUCH COURT.
(b) Effective upon and subject to the qualification of this
Indenture pursuant to the provisions of the Trust Indenture Act, if and to the
extent that any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by operation of Section 318(c) of the Trust Indenture Act,
or conflicts with any provision (an "incorporated provision") required by or
deemed to be included in this Indenture by operation of such Trust Indenture
Act section, such imposed duties or incorporated provision shall control.
Section 14.11 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, or
Stated Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities or
the Subsidiary Guarantee) payment of interest or principal (and premium, if
any) need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, Redemption Date or at the Stated Maturity or Maturity; provided, however,
that no interest shall accrue for the period from and after such Interest
Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be.
Section 14.12 No Recourse Against Others.
A director, officer, employee, stockholder, incorporator or Affiliate,
as such, past, present or future, of the Company or any Subsidiary Guarantor
shall not have any personal liability under the Securities or this Indenture by
reason of his or its status as a director, officer, employee,
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stockholder, incorporator or Affiliate or any liability for any obligations of
the Company or any Subsidiary Guarantor under the Securities or this Indenture
or for any claim based on, in respect of or by reason of such obligations or
their creation. Each Holder, by accepting any of the Securities, waives and
releases all such liability to the extent permitted by applicable law.
Section 14.13 Duplicate Originals.
The parties may sign any number of copies or counterparts of this
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
Section 14.14 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the day and year first above written.
ISSUER:
CLIFFS DRILLING COMPANY
By: /s/ DOUGLAS E. SWANSON
-----------------------------------
Name: Douglas E. Swanson
-----------------------------
Title: President
----------------------------
SUBSIDIARY GUARANTORS:
CLIFFS DRILLING ASSET ACQUISITION
COMPANY,
CLIFFS DRILLING MERGER COMPANY,
CLIFFS DRILLING INTERNATIONAL, INC.,
AND CLIFFS OIL AND GAS COMPANY
By: /s/ DOUGLAS E. SWANSON
-----------------------------------
Name: Douglas E. Swanson
-----------------------------
Title: President
----------------------------
TRUSTEE:
FLEET NATIONAL BANK
By: /s/ SUSAN C. MERKER
-----------------------------------
Name: Susan C. Merker
-----------------------------
Title: Assistant Vice President
----------------------------
<PAGE> 107
EXHIBIT A
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend in addition to the Private Placement Legend, if required by Section 3.12
hereof, in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY.
THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE DEPOSITORY OF ITS NOMINEE EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
A-1
<PAGE> 108
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 10.25% Senior Notes due 2003, Series A, and
10.25% Senior Notes due 2003, Series B
(the "Securities"), of Cliffs Drilling Company
This Certificate relates to $_________ principal amount of Securities
held in the form of *[ ] a beneficial interest in a Global Security or *[ ]
Physical Securities by _________________ (the "Transferor").
The Transferor:*
[ ] has requested by written order that the Security Registrar
deliver in exchange for its beneficial interest in the Global Security held by
the Depository a Physical Security or Physical Securities in definitive,
registered form of authorized denominations and in an aggregate principal
amount equal to its beneficial interest in such Global Security (or the portion
thereof indicated above); or
[ ] has requested that the Security Registrar by written order
exchange or register the transfer of a Physical Security or Physical
Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 3.5 of such Indenture,
and that the transfer of these Securities does not require registration under
the Securities Act of 1933, as amended (the "Act") because *:
[ ] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of subparagraph (a)(1) or (c)(1) of Section
3.5 of the Indenture).
[ ] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
[ ] Such Security is being transferred to an institutional
"accredited investor" (within the meaning ofsubparagraphs (a)(1), (2), (3) or
(7) of Rule 501 under the Act).
[ ] Such Security is being transferred in reliance on Regulation S
under the Act.
[ ] Such Security is being transferred in reliance on Rule 144 under
the Act.
[ ] Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act
other than Rule 144A or Rule 144 or Regulation S under the Act to a person
other than an institutional "accredited investor."
---------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-----------------------------------
[Authorized Signatory]
Date:
-------------------------
*Check applicable box.
B-1
<PAGE> 109
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
____________________, __________
Fleet National Bank, Trustee
777 Main Street
Hartford, Connecticut 06115
Re: Cliffs Drilling Company Indenture (the "Indenture")
relating to 10.25% Senior Notes due 2003,
Series A, or 10.25% Senior Notes due 2003, Series B
Ladies and Gentlemen:
In connection with our proposed purchase of 10.25% Senior Notes due
2003, Series A, or 10.25% Series Notes due 2003, Series B (the "Securities"),
of Cliffs Drilling Company (the "Company"), we confirm that:
1. We have received such information as we deem necessary in
order to make our investment decision.
2. We understand that any subsequent transfer of the Securities
is subject to certain restrictions and conditions set forth in the Indenture
and the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with, such restrictions
and conditions and the Securities Act of 1933, as amended (the "Securities
Act").
3. We understand that the offer and sale of the Securities have
not been registered under the Securities Act, and that the Securities may not
be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell any Securities, we will do so
only (A) to the Company or any subsidiary thereof, (B) inside the United States
in accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined therein), (C) inside the United States to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
the Trustee a signed letter substantially in the form hereof, (D) outside the
United States in accordance with Regulation S under the Securities Act, (E)
pursuant to the exemption from registration provided by Rule 144 under the
Securities Act (if available), or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing Securities from us a notice advising such purchaser that
resales of the Securities are restricted as stated herein.
C-1
<PAGE> 110
4. We understand that, on any proposed resale of Securities, we
will be required to furnish to you and the Company, such certification, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Securities purchased by us will bear a legend to
the foregoing effect.
5. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Securities,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or their investment, as the case may be, for an indefinite
period.
6. We are acquiring the Securities purchased by us for our
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion, for investment purposes and not with a view to, or for offer or
sale in connection with, any distribution in violation of the Securities Act.
You and the Company and yours and their respective counsel are
entitled to rely upon this letter and are irrevocably authorized to produce
this letter or a copy hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the matters covered
hereby.
Very truly yours,
[Name of Transferee]
By:
-----------------------------------
[Authorized Signatory]
C-2
<PAGE> 111
EXHIBIT D
Form of Certificate to Be
Delivered in Connection
with Regulation S Transfers
____________________, ______
Fleet National Bank, Trustee
777 Main Street
Hartford, Connecticut 06115
Re: Cliffs Drilling Company ("the Company")
10.25% Senior Notes due 2003, Series A, and 10.25%
Senior Notes due 2003, Series B (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $______________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person
in the United States;
(2) either (a) at the time the buy offer was originated,
the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was
outside the United States, or (b) the transaction was executed in, on
or through the facilities of a designated off-shore securities market
and neither we nor any person acting on our behalf knew that the
transaction had been pre- arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
You and the Company and yours and their respective counsel are
entitled to rely upon this letter and are irrevocably authorized to produce
this letter or a copy hereof to any interested party
D-1
<PAGE> 112
in any administrative or legal proceeding or official inquiry with respect to
the matters covered hereby. Defined terms used herein without definition have
the respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-----------------------------------
[Authorized Signature]
D-2
<PAGE> 1
EXHIBIT 4.4
- --------------------------------------------------------------------------------
10.25% SENIOR NOTES DUE 2003
REGISTRATION RIGHTS AGREEMENT
dated May 23, 1996
by and among
CLIFFS DRILLING COMPANY,
CLIFFS DRILLING ASSET ACQUISITION COMPANY,
CLIFFS DRILLING MERGER COMPANY,
CLIFFS DRILLING INTERNATIONAL, INC. and
CLIFFS OIL AND GAS COMPANY
and
JEFFERIES & COMPANY, INC.
and
ING BARING (U.S.) SECURITIES, INC.
- --------------------------------------------------------------------------------
<PAGE> 2
This Registration Rights Agreement is made and entered into this 23rd
day of May, 1996, by and among Cliffs Drilling Company, Inc., a Delaware
corporation (the "Company"), Cliffs Drilling Asset Acquisition Company, Inc., a
Delaware corporation, Inc., Cliffs Drilling Merger Company, a Delaware
corporation, Cliffs Drilling International, Inc., a Delaware corporation,
Cliffs Oil and Gas Company, a Delaware corporation (the "Guarantors" and,
together with the Company, the "Issuers"), Jefferies & Company, Inc.
("Jefferies") and ING Baring (U.S.) Securities, Inc. ("ING" and, together with
Jefferies, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated May
20, 1996, among the Company, the Guarantors and Initial Purchasers (the
"Purchase Agreement"). In order to induce the Initial Purchasers to enter into
the Purchase Agreement, the Issuers have agreed to provide the registration
rights provided for in this Agreement to the Initial Purchasers and their
respective direct and indirect transferees. The execution and delivery of this
Agreement is a condition to the closing of the transactions contemplated by the
Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: As defined in Section 4(a) hereof.
Advice: As defined in the last paragraph of Section 5 hereof.
Affiliate: With respect to any specified person, "Affiliate"
shall mean any other person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified person. For the
purposes of this definition, "control," when used with respect to any person,
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
Agreement: This Registration Rights Agreement, as the same
may be amended, supplemented or modified from time to time in accordance with
the terms hereof.
Business Day: Any day except a Saturday, a Sunday or a day on
which banking institutions in New York, New York generally are required or
authorized by law or other government action to be closed.
Company: As defined in the preamble hereof.
<PAGE> 3
-2-
Consummate or consummate: When used to qualify the term
"Exchange Offer" shall mean validly and lawfully to issue and deliver the
Exchange Notes pursuant to the Exchange Offer for all Notes validly tendered
and not validly withdrawn pursuant thereto in accordance with the terms of this
Agreement.
Consummation Date: The date that is 30 Business Days
immediately following the date that the Exchange Registration Statement shall
have been declared effective by the SEC.
Effectiveness Period: As defined in Section 3(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC pursuant thereto.
Exchange Date: As defined in Section 2(d) hereof.
Exchange Notes: The 10.25% Senior Notes due 2003, Series B,
of the Company, guaranteed on a senior unsecured basis by each of the
Guarantors, that are identical to the Notes in all material respects, except
that the provisions regarding restrictions on transfer shall be modified, as
appropriate, and the issuance thereof pursuant to the Exchange Offer shall have
been registered pursuant to an effective Registration Statement in compliance
with the Securities Act.
Exchange Offer: An offer to issue, in exchange for any and
all of the Notes, a like aggregate principal amount of Exchange Notes, which
offer shall be made by the Company pursuant to Section 2 hereof.
Exchange Registration Statement: As defined in Section 2(a)
hereof.
Guarantors: As defined in the preamble hereof.
Indemnified Person: As defined in Section 7(a) hereof.
Indenture: The Indenture, dated as of May 15, 1996, among the
Issuers and Fleet National Bank, as trustee thereunder, pursuant to which the
Notes are issued, as amended or supplemented from time to time in accordance
with the terms thereof.
Initial Purchasers: As defined in the preamble hereof.
Issue Date: As defined in Section 2(a).
Issuers: As defined in the preamble hereof.
<PAGE> 4
-3-
Notes: The 10.25% Senior Notes due 2003, Series A, of the
Company, guaranteed on a senior unsecured basis by each of the Guarantors,
issued pursuant to the Indenture.
Participating Broker-Dealer: As defined in Section 2(e)
hereof.
Private Exchange: As defined in Section 2(c) hereof.
Private Exchange Notes: As defined in Section 2(c) hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated pursuant to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Notes, Exchange
Notes or Private Exchange Notes covered by such Registration Statement, and all
other amendments and supplements to any such prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference, if any, in such prospectus.
Registration Default: As defined in Section 4(a) hereof.
Registration Statement: Any registration statement of the
Company and the Guarantors that covers any of the Notes, Exchange Notes or
Private Exchange Notes pursuant to the provisions of this Agreement, including
the Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference, if any, in such registration statement.
Rule 144: Rule 144 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 158: Rule 158 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
<PAGE> 5
-4-
Rule 174: Rule 174 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 415: Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 424: Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
Shelf Registration: As defined in Section 3 hereof.
Shelf Registration Statement: As defined in Section 3 hereof.
Special Counsel: Vinson & Elkins L.L.P., special counsel to
the holders of Transfer Restricted Securities, or such other counsel as shall
be agreed upon by the Issuers and holders of a majority in aggregate principal
amount of Transfer Restricted Securities, the expenses of which holders of
Transfer Restricted Securities will be reimbursed by the Issuers pursuant to
Section 6.
TIA: The Trust Indenture Act of 1939, as amended.
Transfer Restricted Securities: The Notes, upon original
issuance thereof and at all times subsequent thereto, each Exchange Note as to
which Section 3(a)(ii) hereof is applicable upon original issuance and at all
times subsequent thereto and each Private Exchange Note upon original issuance
thereof and at all times subsequent thereto, until in the case of any such
Note, Exchange Note or Private Exchange Note, as the case may be, the earliest
to occur of (i) the date on which any such Note has been exchanged by a person
other than a Participating Broker-Dealer for an Exchange Note (other than with
respect to an Exchange Note as to which Section 3(a)(ii) hereof applies)
pursuant to the Exchange Offer, (ii) with respect to Exchange Notes received by
Participating Broker-Dealers in the Exchange Offer, the earlier of (x) the date
on which such Exchange Note has been sold by such Participating Broker-Dealer
by means of the Prospectus contained in the Exchange Registration Statement and
(y) the date on which the Exchange Registration Statement has been effective
under the Securities Act for a period of 180 days after the Consummation Date,
(iii) a Shelf
<PAGE> 6
-5-
Registration Statement covering such Note, Exchange Note or Private Exchange
Note has been declared effective by the SEC and such Note, Exchange Note or
Private Exchange Note, as the case may be, has been disposed of in accordance
with such effective Shelf Registration Statement, (iv) the date on which such
Note, Exchange Note or Private Exchange Note, as the case may be, is
distributed to the public pursuant to Rule 144 (or any similar provisions then
in effect) or is saleable pursuant to Rule 144(k) promulgated by the SEC
pursuant to the Securities Act or (v) the date on which such Note, Exchange
Note or Private Exchange Note, as the case may be, ceases to be outstanding for
purposes of the Indenture or any other indenture under which such Exchange Note
or Private Exchange Note was issued.
Trustee: The trustee under the Indenture.
Underwritten Registration or Underwritten Offering: A
registration in connection with which securities are sold to an underwriter for
reoffering to the public pursuant to an effective Registration Statement.
2. Exchange Offer
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the staff of the SEC, the Issuers shall (A)
prepare and, on or prior to 60 days after the date of original issuance of the
Notes (the "Issue Date"), file with the SEC a Registration Statement under the
Securities Act with respect to an offer by the Company to the holders of the
Notes to issue and deliver to such holders, in exchange for Notes, a like
principal amount of Exchange Notes, (B) use their best efforts to cause the
Registration Statement relating to the Exchange Offer to be declared effective
by the SEC under the Securities Act on or prior to 120 days after the Issue
Date, and (C) commence the Exchange Offer and use their best efforts to issue,
on or prior to the Consummation Date, the Exchange Notes. The offer and sale of
the Exchange Notes pursuant to the Exchange Offer shall be registered pursuant
to the Securities Act on the appropriate form (the "Exchange Registration
Statement") and duly registered or qualified under all applicable state
securities or Blue Sky laws and will comply with all applicable tender offer
rules and regulations under the Exchange Act and state securities or Blue Sky
laws. The Exchange Offer shall not be subject to any condition, other than that
the Exchange Offer does not violate any applicable law or interpretation of the
staff of the SEC. Upon consummation of the Exchange Offer in accordance with
this Section 2, the Issuers shall have no further registration obligations
other than with respect to (i) Private Exchange Notes, (ii) Exchange Notes held
by Participating Broker-Dealers and (iii) Notes or Exchange Notes as to which
Section 3(a)(ii) hereof applies. No securities shall be included in the
Exchange Registration Statement other than the Exchange Notes.
(b) The Issuers may require each holder of Notes as a
condition to its participation in the Exchange Offer to represent to the
Issuers and their counsel in writing (which may be
<PAGE> 7
-6-
contained in the applicable letter of transmittal) that at the time of the
consummation of the Exchange Offer (i) any Exchange Notes received by such
holder will be acquired in the ordinary course of its business, (ii) such
holder is not participating in, and it has no arrangement with any person to
participate in, the distribution (within the meaning of the Securities Act) of
the Exchange Notes and (iii) such holder is neither an Affiliate of an Issuer
nor a broker-dealer tendering Notes acquired directly from the Company for its
own account.
(c) If, prior to consummation of the Exchange Offer, any of
the Initial Purchasers holds any Notes acquired by it and having, or which are
reasonably likely to be determined to have, the status of an unsold allotment
in the initial distribution, or any other holder of Notes is not entitled to
participate in the Exchange Offer, the Company upon the request of an Initial
Purchaser or any such holder shall, simultaneously with the delivery of the
Exchange Notes in the Exchange Offer, issue and deliver to such Initial
Purchaser and any such holder, in exchange (the "Private Exchange") for such
Notes held by such Initial Purchaser and any such holder, a like principal
amount of debt securities of the Company, guaranteed by each of the Guarantors
on a senior unsecured basis, that are identical in all material respects to the
Exchange Notes except as to restrictions on transferability under applicable
securities laws (the "Private Exchange Notes") (and which are issued pursuant
to the same indenture as the Exchange Notes); provided, however, that the
Issuers shall not be required to effect a Private Exchange if in the written
opinion of counsel for the Issuers (a copy of which is delivered to the Initial
Purchasers and any holder of Notes whose request is the subject of such
opinion) such Private Exchange cannot be effected without registration under
the Securities Act. The Private Exchange Notes shall bear the same CUSIP
number as the Exchange Notes.
(d) Unless the Exchange Offer would not be permitted by any
applicable law or interpretation of the staff of the SEC, the Company shall
mail the Exchange Offer Prospectus and appropriate accompanying documents,
including appropriate letters of transmittal, to each holder of Notes
providing, in addition to such other disclosures as are required by applicable
law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Notes validly tendered will be accepted for
exchange;
(ii) the date of acceptance for exchange (the "Exchange
Date"), which date shall in no event be later than the Consummation
Date (unless otherwise required by applicable law);
(iii) that holders of Notes electing to have a Note exchanged
pursuant to the Exchange Offer will be required to surrender such
Note, together with the enclosed letters of transmittal, to the
institution and at the address (located in the continental United
States) specified in the notice prior to the close of business on the
Exchange Date; and
<PAGE> 8
-7-
(iv) that holders of Notes that do not tender all such
securities pursuant to the Exchange Offer may no longer have any
registration rights hereunder with respect to Notes not tendered.
As soon as practicable after the Exchange Date, the Company
shall:
(i) accept for exchange all Notes or portions thereof
validly tendered and not validly withdrawn pursuant to the Exchange
Offer or the Private Exchange; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for exchange by
the Company, and issue, cause the Trustee under the Indenture (or the
indenture pursuant to which the Exchange Notes are issued) to
authenticate, and mail to each holder of Notes, Exchange Notes equal
in principal amount to the principal amount of the Notes or portions
thereof surrendered by such holder.
(e) The Issuers and each Initial Purchaser acknowledge that
the staff of the SEC has taken the position that any broker-dealer that owns
Exchange Notes that were received by such broker-dealer for its own account in
the Exchange Offer (a "Participating Broker-Dealer") may be deemed to be an
"underwriter" within the meaning of the Securities Act and must deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such Exchange Notes (other than a resale of an unsold allotment
resulting from the original offering of the Notes).
The Issuers and each Initial Purchaser also acknowledge that
it is the SEC staff's position that if the Prospectus contained in the Exchange
Registration Statement includes a plan of distribution containing a statement
to the above effect and the means by which Participating Broker-Dealers may
resell the Exchange Notes, without naming the Participating Broker-Dealers or
specifying the amount of Exchange Notes owned by them, such Prospectus may be
delivered by Participating Broker-Dealers to satisfy their prospectus delivery
obligations under the Securities Act in connection with resales of Exchange
Notes for their own accounts, so long as the Prospectus otherwise meets the
requirements of the Securities Act.
In light of the foregoing, if requested by a Participating
Broker-Dealer, the Issuers agree (x) to use their best efforts to keep the
Exchange Registration Statement continuously effective for a period of up to
180 days or such earlier date as each Participating Broker-Dealer shall have
notified the Company in writing that such Participating Broker-Dealer has
resold all Exchange Notes acquired in the Exchange Offer, (y) to comply with
the provisions of Section 5 of this Agreement, as they relate to the Exchange
Offer and the Exchange Registration Statement, and (z) to deliver to such
Participating Broker-Dealer a "cold comfort" letter of the independent public
accountants of the Issuers and a legal opinion as to matters reasonably
requested by such Participating Broker-
<PAGE> 9
-8-
Dealer relating to the Exchange Registration Statement and the related
Prospectus and any amendments or supplements thereto.
(f) The Initial Purchasers shall have no liability to any
Participating Broker-Dealer with respect to any request made pursuant to
Section 2(e).
(g) Accrued but unpaid interest on any Note that is exchanged
for an Exchange Note or a Private Exchange Note pursuant to this Agreement
shall be paid on or before the first interest payment date on the Exchange
Notes and the Private Exchange Notes, as the case may be.
(h) The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture, which in either event shall provide that the
Exchange Notes shall not be subject to the transfer restrictions set forth in
the Indenture, except in any case where an Exchange Note constitutes a Transfer
Restricted Security. The Indenture or such indenture shall provide that the
Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent
together on all matters as one class and that neither the Exchange Notes, the
Private Exchange Notes nor the Notes will have the right to vote or consent as
a separate class on any matter.
3. Shelf Registration
(a) If (i) the Company is not permitted to file the Exchange
Offer Registration Statement or to consummate the Exchange Offer because the
Exchange Offer is not permitted by any applicable law or applicable
interpretation of the staff of the SEC or (ii) any holder of a Note notifies
the Company on or prior to the Exchange Date that (A) due to a change in law or
policy it is not entitled to participate in the Exchange Offer, (B) due to a
change in law or policy it may not resell the Exchange Notes acquired by it in
the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Registration Statement is not appropriate
or available for such resales by such holder or (C) it is a broker-dealer that
owns Notes (including any Initial Purchaser that holds Notes as part of an
unsold allotment from the original offering of the Notes) acquired directly
from an Issuer or an Affiliate of an Issuer or (iii) any holder of Private
Exchange Notes so requests within 120 days after the consummation of the
Private Exchange (each such event referred to in clauses (i) through (iii), a
"Shelf Filing Event"), the Issuers shall cause to be filed with the SEC
pursuant to Rule 415 a shelf registration statement (the "Shelf Registration
Statement") on or prior to the later of (x) 90 days after the Issue Date and
(y) 30 days after the occurrence of such Shelf Filing Event, relating to all
Transfer Restricted Securities (the "Shelf Registration") the holders of which
have provided the information required pursuant to Section 3(b) hereof, and
shall use their commercially reasonable best efforts to have the Shelf
Registration Statement declared effective by the SEC on or prior to 90 days
after the occurrence of such Shelf Filing Event, provided that if the Company
has not consummated the Exchange Offer within 180
<PAGE> 10
-9-
days of the Issue Date, then the Issuers shall cause the Shelf Registration
Statement to be filed with the SEC on or prior to the 181st day after the Issue
Date and shall use their best efforts to have the Shelf Registration Statement
declared effective by the SEC within 60 days of the date of filing thereof. In
such circumstances, the Issuers shall use their best efforts to keep the Shelf
Registration Statement continuously effective under the Securities Act, until
(A) the third anniversary of the Issue Date (subject to extension pursuant to
the last paragraph of Section 5 hereof) or (B) if sooner, the date immediately
following the date that all Transfer Restricted Securities covered by the Shelf
Registration Statement have been sold pursuant thereto (the "Effectiveness
Period"); provided, however, at the Effectiveness Period shall be extended to
the extent required to permit dealers to comply with the applicable prospectus
delivery requirements of Rule 174 and as otherwise provided herein.
(b) No holder of Transfer Restricted Securities may include
any of its Transfer Restricted Securities in any Shelf Registration Statement
pursuant to this Agreement unless and until such holder furnishes to the
Company in writing, within 30 days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with
any Shelf Registration Statement or Prospectus or preliminary prospectus
included therein. No holder of Transfer Restricted Securities shall be entitled
to Additional Interest pursuant to Section 4 hereof unless and until such
holder shall have provided all such reasonably requested information. Each
holder of Transfer Restricted Securities as to which any Shelf Registration
Statement is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make the information
previously furnished to the Company by such holder not materially misleading.
4. Additional Interest
(a) The parties hereto agree that the holders of Transfer
Restricted Securities will suffer damages if the Issuers fail to fulfill their
obligations pursuant to Section 2 or Section 3, as applicable, and that it
would not be feasible to ascertain the extent of such damages. Accordingly, in
the event that (i) the applicable Registration Statement is not filed with the
SEC on or prior to the date specified herein for such filing, (ii) the
applicable Registration Statement has not been declared effective by the SEC on
or prior to the date specified herein for such effectiveness after such
obligation arises, (iii) if the Exchange Offer is required to be Consummated
hereunder, the Company has not exchanged Exchange Notes for all Notes validly
tendered and not validly withdrawn in accordance with the terms of the Exchange
Offer by the Consummation Date or (iv) the applicable Registration Statement is
filed and declared effective but shall thereafter cease to be effective without
being succeeded immediately by any additional Registration Statement covering
the Notes, the Exchange Notes or the Private Exchange Notes, as the case may
be, which has been filed and declared effective (each such event referred to in
clauses (i) through (iv), a "Registration Default"), then the interest rate on
Transfer Restricted Securities will increase ("Additional Interest"), with
<PAGE> 11
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respect to the first 90-day period immediately following the occurrence of such
Registration Default, by 0.50% per annum and will increase by an additional
0.50% per annum with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of 2% per annum
with respect to all Registration Defaults. Following the cure of a Registration
Default, the accrual of Additional Interest with respect to such Registration
Default will cease and upon the cure of all Registration Defaults the interest
rate will revert to the original rate.
(b) The Company shall notify the Trustee and paying agent
under the Indenture (or the trustee and paying agent under such other indenture
under which the Transfer Restricted Securities are issued) immediately upon the
happening of each and every Registration Default. The Company shall pay the
Additional Interest due on the Transfer Restricted Securities by depositing
with the paying agent (which shall not be the Company for these purposes) for
the Transfer Restricted Securities, in trust, for the benefit of the holders
thereof, prior to 11:00 A.M. on the next interest payment date specified by the
Indenture (or such other indenture), sums sufficient to pay the Additional
Interest then due. The Additional Interest due shall be payable on each
interest payment date specified by the Indenture (or such other indenture) to
the record holder entitled to receive the interest payment to be made on such
date. Each obligation to pay Additional Interest shall be deemed to accrue from
and including the date of the applicable Registration Default.
(c) The parties hereto agree that the Additional Interest
provided for in this Section 4 constitutes a reasonable estimate of the damages
that will be suffered by holders of Transfer Restricted Securities by reason of
the happening of any Registration Default.
5. Registration Procedures
In connection with the Issuers' registration obligations
hereunder, the Issuers shall effect such registrations on the appropriate form
available for the sale of the Notes, the Exchange Notes or Private Exchange
Notes, as applicable, to (i) in the case of the Exchange Offer, permit the
exchange of Exchange Notes for Notes in the Exchange Offer and, if applicable,
resales of Exchange Notes by Participating Broker-Dealers and (ii) in the case
of a Shelf Registration, permit the sale of the applicable Transfer Restricted
Securities in accordance with the method or methods of disposition thereof
specified by the holders of such Transfer Restricted Securities, and pursuant
thereto the Issuers shall as expeditiously as practicable:
(a) In the case of a Shelf Registration, a reasonable period
of time prior to the initial filing of a Shelf Registration Statement
or Prospectus and a reasonable period of time prior to the filing of
any amendment or supplement thereto (including any document that would
be incorporated or deemed to be incorporated therein by reference),
furnish to the holders of the Transfer Restricted Securities included
in such Shelf Registration Statement, their Special Counsel and the
managing underwriters, if any, copies of all such documents proposed
to be
<PAGE> 12
-11-
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such
holders, their Special Counsel and such underwriters, if any, and
cause the officers and directors of the Issuers, counsel to the
Issuers and independent certified public accountants to the Issuers to
respond to such reasonable inquiries as shall be necessary, in the
opinion of respective counsel to such holders and such underwriters,
to conduct a reasonable investigation within the meaning of the
Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated on behalf of the Initial
Purchasers by Jefferies, and on behalf of any other persons by one
counsel designated by and on behalf of such other persons; and
provided, further, that the Issuers shall not be deemed to have kept a
Shelf Registration Statement effective during the applicable period if
any of them voluntarily takes or fails to take any reasonable action
that results in holders of the Transfer Restricted Securities covered
thereby not being able to sell such Transfer Restricted Securities
pursuant to Federal securities laws during that period (and the time
period during which such Shelf Registration Statement is required to
remain effective hereunder shall be extended by the number of days
during which such holders of Transfer Restricted Securities are
therefore not able to sell such Transfer Restricted Securities). The
Issuers shall not file any such Shelf Registration Statement or
related Prospectus or any amendments or supplements thereto to which
the holders of a majority in aggregate principal amount of the
Transfer Restricted Securities included in such Shelf Registration
Statement shall reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective
for the applicable time period required hereunder; cause the related
Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424; and comply
with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in
such Registration Statement as so amended or in such Prospectus as so
supplemented;
(c) Notify the holders of Transfer Restricted Securities to
be sold or, in the case of an Exchange Offer, tendered for, their
Special Counsel and the managing underwriters, if any, promptly, and
(if requested by any such person), confirm such notice in writing,
(i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment is proposed to be filed, and (B) with respect
to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC or any other
Federal or state governmental authority for amendments or supplements
to a Registration Statement or related Prospectus or for additional
information, (iii) of the issuance by the SEC, any state securities
commission, any other governmental agency or any court of any
<PAGE> 13
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stop order, order or injunction suspending or enjoining the use of a
Prospectus or the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Notes,
Exchange Notes or Private Exchange Notes for sale in any jurisdiction,
or the initiation or threatening of any proceeding for such purpose,
and (v) of the happening of any event or information becoming known
that makes any statement made in a Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires
the making of any changes in such Registration Statement, Prospectus
or documents so that it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading,
and that, in the case of a Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(d) Use their best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of any order enjoining or suspending the
use of a Prospectus or the effectiveness of a Registration Statement
or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the Notes, Exchange Notes or Private
Exchange Notes for sale in any jurisdiction, at the earliest
practicable moment;
(e) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof and if requested by the managing underwriters, if
any, or the holders of a majority in aggregate principal amount of the
Transfer Restricted Securities being sold pursuant to such Shelf
Registration Statement, (i) as soon as practicable incorporate in a
Prospectus supplement or post-effective amendment such information as
the managing underwriters, if any, and such holders reasonably believe
should be included therein, and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment under the
Securities Act as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; provided, however, that the
Issuers shall not be required to take any action pursuant to this
Section 5(e) that would, in the opinion of counsel for the Issuers,
violate applicable law;
(f) Upon written request to the Company, furnish to each
holder of Notes, Exchange Notes or Private Exchange Notes to be
exchanged or sold pursuant to a Registration Statement, their Special
Counsel and each managing underwriter, if any, without charge, at
least one conformed copy of such Registration Statement and each
amendment thereto, including financial statements and schedules and,
to the extent requested, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits (including
<PAGE> 14
-13-
those previously furnished or incorporated by reference) as soon as
practicable after the filing of such documents with the SEC;
(g) Deliver to each holder of Notes, Exchange Notes or
Private Exchange Notes to be exchanged or sold pursuant to a
Registration Statement, their Special Counsel, and the underwriters,
if any, without charge, as many copies of the Prospectus (including
each form of prospectus) and each amendment or supplement thereto as
such persons reasonably request; and the Issuers hereby consent to
the use of such Prospectus and each amendment or supplement thereto by
each of the selling holders of Transfer Restricted Securities and the
underwriters, if any, in connection with the offering and sale of the
Transfer Restricted Securities covered by such Prospectus and any
amendment or supplement thereto;
(h) Prior to any public offering of Notes, Exchange Notes or
Private Exchange Notes, use their best efforts to register or qualify
or cooperate with the holders of Notes, Exchange Notes or Private
Exchange Notes to be sold or tendered for, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification)
of such Notes, Exchange Notes or Private Exchange Notes for offer and
sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any such holder or underwriter reasonably
requests in writing; keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration
Statement is required to be kept effective hereunder and do any and
all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Notes, Exchange Notes or
Private Exchange Notes covered by the applicable Registration
Statement; provided, however, that the Issuers shall not be required
to (i) qualify generally to do business in any jurisdiction where they
are not then so qualified or (ii) take any action which would subject
them to general service of process or to taxation in any jurisdiction
where they are not so subject;
(i) In connection with any sale or transfer of Transfer
Restricted Securities that will result in such securities no longer
being Transfer Restricted Securities, cooperate with the holders
thereof and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold, which certificates shall not bear
any restrictive legends and shall be in a form eligible for deposit
with The Depository Trust Company and to enable such Transfer
Restricted Securities to be in such authorized denominations and
registered in such names as the managing underwriters, if any, or such
holders may request at least two Business Days prior to any sale of
Transfer Restricted Securities;
(j) Upon the occurrence of any event contemplated by Section
5(c)(v), as promptly as practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective
<PAGE> 15
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amendment, to each Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, and file any other required
document so that, as thereafter delivered, such Prospectus will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading;
(k) Prior to the effective date of the Exchange Registration
Statement, to provide a CUSIP number for the Exchange Notes (and
Private Exchange Notes if applicable);
(l) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof, enter into such agreements (including an
underwriting agreement in form, scope and substance as is customary in
underwritten offerings) and take all such other reasonable actions in
connection therewith (including those reasonably requested by the
managing underwriters, if any, or the holders of a majority in
aggregate principal amount of the Transfer Restricted Securities being
sold) in order to expedite or facilitate the disposition of such
Transfer Restricted Securities, and, whether or not an underwriting
agreement is entered into and whether or not the registration is an
underwritten registration, (i) make such representations and
warranties to the holders of such Transfer Restricted Securities and
the underwriters, if any, with respect to the business of the Company
and its subsidiaries (including with respect to businesses or assets
acquired or to be acquired by any of them), and the Shelf Registration
Statement, Prospectus and documents, if any, incorporated or deemed to
be incorporated by reference therein, in each case with respect to
such matters as are customarily addressed in representations and
warranties made by issuers to underwriters in underwritten offerings,
and confirm the same if and when requested; (ii) obtain opinions of
counsel to the Issuers and updates thereof (which counsel and opinions
(in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and Special Counsel to the holders of
the Transfer Restricted Securities being sold), addressed to each
selling holder of Transfer Restricted Securities and each of the
underwriters, if any, covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as
may be reasonably requested by such Special Counsel and underwriters;
(iii) use their best efforts to obtain customary "cold comfort"
letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements
and financial data is, or is required to be, included in the Shelf
Registration Statement), addressed (where reasonably possible) to each
selling holder of Transfer Restricted Securities and each of the
underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings; (iv) if an
underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less
<PAGE> 16
-15-
favorable to the selling holders and the underwriters, if any, than
those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to holders of a majority in aggregate principal
amount of Transfer Restricted Securities covered by such Shelf
Registration Statement and the managing underwriters, if any); and (v)
deliver such documents and certificates as may be reasonably requested
by the holders of a majority in aggregate principal amount of the
Transfer Restricted Securities being sold, their Special Counsel and
the managing underwriters, if any, to evidence the continued validity
of the representations and warranties made pursuant to clause (i)
above and to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered
into by the Issuers;
(m) In the case of a Shelf Registration, make available for
inspection by a representative of the holders of Transfer Restricted
Securities being sold, any underwriter participating in any such
disposition of Transfer Restricted Securities, and any attorney,
consultant or accountant retained by such selling holders or
underwriter, at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries
(including with respect to businesses and assets acquired or to be
acquired to the extent that such information is available to the
Company), and cause the officers, directors, agents and employees of
the Company and its subsidiaries (including with respect to businesses
and assets acquired or to be acquired to the extent that such
information is available to the Company) to supply all information in
each case reasonably requested by any such representative,
underwriter, attorney, consultant or accountant in connection with
such Shelf Registration; provided,however, that such persons shall
first agree in writing with the Company that any information that is
reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery of such information shall be kept
confidential by such persons, unless (i) disclosure of such
information is required by court or administrative order or is
necessary to respond to inquiries of regulatory authorities, (ii)
disclosure of such information is required by law (including any
disclosure requirements pursuant to Federal securities laws in
connection with the filing of the Shelf Registration Statement or the
use of any Prospectus), (iii) such information becomes generally
available to the public other than as a result of a disclosure or
failure to safeguard such information by such person or (iv) such
information becomes available to such person from a source other than
the Company and its subsidiaries and such source is not bound by a
confidentiality agreement; and provided, further, that the foregoing
inspection and information gathering shall be coordinated on behalf of
the Initial Purchasers by Jefferies and on behalf of any other
persons, by one counsel designated by and on behalf of such other
persons;
(n) Provide an indenture trustee for the Notes and/or the
Exchange Notes and Private Exchange Notes, as the case may be, and
cause an indenture to be qualified under the TIA
<PAGE> 17
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not later than the effective date of the first Registration Statement
relating to the Notes and/or the Exchange Notes and Private Exchange
Notes, as the case may be; and if such indenture shall be the
Indenture, in connection therewith, cooperate with the Trustee and the
holders of the Notes and/or the Exchange Notes and Private Exchange
Notes, to effect such changes to the Indenture as may be required for
the Indenture to be (or to remain) so qualified in accordance with the
terms of the TIA; and execute, and use their best efforts to cause the
Trustee to execute, all customary documents as may be required to
effect such changes, and all other forms and documents required to be
filed with the SEC to enable the Indenture to be (or to remain) so
qualified in a timely manner;
(o) Comply with all applicable rules and regulations of the
SEC and make generally available to their security holders earning
statements satisfying the provisions of Section ll(a) of the
Securities Act and Rule 158, no later than 45 days after the end of
any 12-month period (or 90 days after the end of any 12-month period
if such period is a fiscal year) (i) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm commitment or reasonable efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter after the
effective date of a Registration Statement, which statement shall
cover said period, consistent with the requirements of Rule 158; and
(p) Cooperate with each seller of Transfer Restricted
Securities covered by any Registration Statement and each underwriter,
if any, participating in the disposition of such Transfer Restricted
Securities and their respective counsel in connection with any filings
required to be made with the National Association of Securities
Dealers, Inc.
The Issuers may require a holder of Transfer Restricted
Securities to be included in a Registration Statement to furnish to the Issuers
such information as is required by law to be disclosed by such holder in such
Registration Statement, and the Issuers may exclude from such Registration
Statement the Transfer Restricted Securities of any holder who unreasonably
fails to furnish such information within a reasonable time after receiving such
request.
If any such Registration Statement refers to any holder by
name or otherwise as the holder of any securities of an Issuer, then such
holder shall have the right to require (i) the insertion therein of language,
in form and substance reasonably satisfactory to such holder, to the effect
that the holding by such holder of such securities is not to be construed as a
recommendation by such holder of the investment quality of the Issuers'
securities covered thereby and that such holding does not imply that such
holder will assist in meeting any future financial requirements of the Issuers,
or (ii) in the event that such reference to such holder by name or otherwise is
not required by the Securities Act, the deletion of the reference to such
holder in any amendment or supplement to the
<PAGE> 18
-17-
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
In the case of a Shelf Registration pursuant to Section 3
hereof, each holder of Transfer Restricted Securities agrees by acquisition of
such Transfer Restricted Securities that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
5(c)(ii), 5(c)(iii), 5(c)(iv) or 5(c)(v) hereof, such holder will forthwith
discontinue disposition of such Transfer Restricted Securities covered by such
Registration Statement or Prospectus until such holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 5(j) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus. If the Company shall
give any such notice, the Effectiveness Period shall be extended by the number
of days during such period from and including the date of the giving of such
notice to and including the date when each holder of Transfer Restricted
Securities covered by such Registration Statement shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(j)
hereof or (y) the Advice, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus.
6. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the Issuers
whether or not any Registration Statement is filed or becomes effective and
whether or not any Notes, Exchange Notes or Private Exchange Notes are issued
or sold pursuant to any Registration Statement. The fees and expenses referred
to in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with the National Association
of Securities Dealers, Inc. and (B) in compliance with securities or Blue Sky
laws), (ii) printing expenses (including, without limitation, expenses of
printing Prospectuses), (iii) fees and disbursements of counsel for the Issuers
and the Special Counsel, (iv) reasonable fees and disbursements of all
independent certified public accountants referred to in Section 2(e) and
Section 5(1)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (v) if required, the reasonable fees and expenses of any
"qualified independent underwriter" and its counsel, and (vi) fees and expenses
of all other persons retained by the Issuers. In addition, the Issuers shall
pay their internal expenses (including, without limitation, all salaries and
expenses of their respective officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Notes, Exchange Notes or Private
Exchange Notes to be registered on any securities exchange. Notwithstanding the
foregoing or anything in this
<PAGE> 19
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Agreement to the contrary, each holder of Transfer Restricted Securities shall
pay all underwriting discounts and commissions of any underwriters or dealers
with respect to any Notes, Exchange Notes or Private Exchange Notes sold by it.
7. Indemnification
(a) The Issuers agree, jointly and severally, to indemnify
and hold harmless (i) each of the Initial Purchasers, each holder of Notes,
Exchange Notes and Private Exchange Notes and each Participating Broker-Dealer,
(ii) each person, if any, who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) any of the foregoing (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person"), and (iii) the respective officers, directors, partners, employees,
representatives and agents of the Initial Purchasers, each holder of Notes,
Exchange Notes and Private Exchange Notes, each Participating Broker-Dealer and
any controlling person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "Indemnified Person"), from and against any
and all losses, claims, damages, liabilities and judgments arising out of or
relating to any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or preliminary prospectus
or in any amendment or supplement thereto, or arising out of or relating to any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or preliminary prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Indemnified Person furnished in writing to the
Issuers by or on behalf of such Indemnified Person expressly for use therein;
provided that the indemnity agreement contained in this Section 7(a) with
respect to any preliminary prospectus or supplemental preliminary prospectus
shall not inure to the benefit of any Indemnified Person from whom the person
asserting any such loss, claim, damage or liability purchased the securities
which is the subject thereof, if the Prospectus corrected any such alleged
untrue statement or omission and if such Indemnified Person failed to deliver
or send a copy of the Prospectus, excluding any documents incorporated by
reference, to such person at or prior to the written confirmation of the sale
of securities to such person, provided that the Issuers have delivered the
Prospectus to the Initial Purchasers in requisite quantities on a timely basis
to permit such delivery or sending
(b) In case any action shall be brought against any
Indemnified Person, based upon any Registration Statement or any such
Prospectus or preliminary prospectus or any amendment or supplement thereto and
with respect to which indemnity may be sought against the Issuers hereunder,
such Indemnified Person shall promptly notify the Issuers in writing and the
Company shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to such Indemnified Person and payment of all fees and
expenses. Any Indemnified Person shall have
<PAGE> 20
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the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person, unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Issuers, (ii) the
Company shall have failed to assume the defense and employ counsel or pay all
such fees and expenses or (iii) the named parties to any such action (including
any impleaded parties) include both such Indemnified Person and an Issuer and
such Indemnified Person shall have been advised by its counsel that there may
be one or more legal defenses available to it which are different from or
additional to those available to any such Issuer (in which case the Company
shall not have the right to direct the defense of such action on behalf of such
Indemnified Person, it being understood, however, that the Issuers shall not,
in connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all such Indemnified Persons, which firm shall be designated in writing by such
Indemnified Persons, and that all such reasonable fees and expenses shall be
reimbursed as they are incurred). The Issuers shall not be liable for any
settlement of any such action effected without their written consent but if
settled with the written consent of the Issuers, the Issuers agree, jointly and
severally, to indemnify and hold harmless each Indemnified Person from and
against any loss or liability by reason of such settlement. No Issuer shall,
without the prior written consent of each Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is a party and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement includes an unconditional
release of such Indemnified Person from all liability on claims that are the
subject matter of such proceeding.
(c) In connection with any Registration Statement pursuant to
which a holder of Transfer Restricted Securities offers or sells Transfer
Restricted Securities, such holder agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, their respective directors and
officers and any person controlling an Issuer within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, to the same extent as
the foregoing indemnity from the Issuers to each Indemnified Person but only
with respect to information relating to such holder furnished in writing by or
on behalf of such holder expressly for use in such Registration Statement. In
any such case in which any action shall be brought against an Issuer, any
director or officer of an Issuer or any person controlling an Issuer based on
such Registration Statement and in respect of which indemnity may be sought
against a holder of Transfer Restricted Securities, such holder shall have the
rights and duties given to the Issuers (except that if an Issuer shall have
assumed the defense thereof, such holder shall not be required to do so, but
may employ separate counsel therein and participate in the defense thereof but
the fees and expenses of such counsel shall be at the expense of such holder),
and the Issuers, their respective directors and officers and any person
controlling an Issuer shall have the rights and duties given to the Indemnified
Persons by Section 7(b) hereof.
<PAGE> 21
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(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to herein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by each indemnifying party on the one
hand and the indemnified party on the other hand from the offering of the
Notes, the Exchange Notes or the Private Exchange Notes, as the case may be (it
being expressly understood and agreed that the relative benefits received by
the Issuers from the offering of the Notes, Exchange Notes or Private Exchange
Notes, as the case may be, shall be the amount of the net proceeds received by
the Company from the sale of the Notes to the Initial Purchasers), or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each
indemnifying party on the one hand and the indemnified party on the other hand
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of each indemnifying party on the
one hand and the indemnified party on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by an indemnifying party or such indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Issuers and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation (even if the Indemnified Persons were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, no
Indemnified Person shall be required to contribute any amount in excess of the
amount by which the net profits received by it in connection with the sale of
the Notes, Exchange Notes or Private Exchange Notes contemplated by this
Agreement exceeds the amount of any damages which such Indemnified Person has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section ll(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Indemnified Person's obligations to
contribute pursuant to this Section 7(d) are several in proportion to the
respective amount of Notes, Exchange Notes or Private Exchange Notes included
in any such Registration Statement by each Indemnified Person and not joint.
<PAGE> 22
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8. Rules 144 and 144A
Each of the Issuers shall use its best efforts to file the
reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any holder of Transfer Restricted Securities, make
available other information as required by, and so long as necessary to permit,
sales of its Transfer Restricted Securities pursuant to Rule 144A.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require an Issuer to register any of its securities pursuant to the Exchange
Act.
9. Underwritten Registrations
If any of the Transfer Restricted Securities covered by any
Shelf Registration are to be sold in an underwritten offering, the investment
banker or investment bankers and manager or managers that will administer the
offering will be selected by the holders of a majority in aggregate principal
amount of such Transfer Restricted Securities included in such offering,
subject to the consent of the Company (which will not be unreasonably withheld
or delayed).
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and
(ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by an Issuer or
by a holder of Notes, Exchange Notes or Private Exchange Notes of any of its
obligations under this Agreement, each holder of Notes, Exchange Notes or
Private Exchange Notes and each Issuer, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. Subject to
Section 4 hereof, the Issuers and each holder of Notes, Exchange Notes and
Private Exchange Notes agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach of any of the
provisions of this Agreement and each hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuers will not
enter into any agreement with respect to their securities that is inconsistent
with the rights granted to the holders of Notes,
<PAGE> 23
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Exchange Notes and Private Exchange Notes and Indemnified Persons in this
Agreement or otherwise conflicts with the provisions hereof. Without the
written consent of the holders of a majority in aggregate principal amount of
the outstanding Transfer Restricted Securities, the Issuers shall not grant to
any person any rights which conflict with or are inconsistent with the
provisions of this Agreement.
(c) No Piggyback on Registrations. The Issuers shall not
grant to any of their security holders (other than the holders of Transfer
Restricted Securities in such capacity) the right to include any of their
securities in any Registration Statement other than Transfer Restricted
Securities.
(d) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, otherwise than with the prior written
consent of the holders of not less than a majority of the then outstanding
aggregate principal amount of Transfer Restricted Securities; provided,
however, that, for the purposes of this Agreement, Transfer Restricted
Securities that are owned, directly or indirectly, by the Issuers or any of
their Affiliates are not deemed outstanding. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of holders of Transfer Restricted
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other holders of
Transfer Restricted Securities may be given by holders of a majority in
aggregate principal amount of the Transfer Restricted Securities being sold by
such holders pursuant to such Registration Statement; and provided, further,
that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence. Notwithstanding the foregoing, no amendment, modification,
supplement, waiver or consent with respect to Section 7 shall be made or given
otherwise than with the prior written consent of each Indemnified Person
affected thereby.
(e) Notices. All notices and other communications
provided for herein shall be made in writing by hand-delivery, next-day air
courier, certified first-class mail, return receipt requested, telex or
telecopier:
(i) if to the Issuers, as provided in the Purchase
Agreement,
(ii) if to the Initial Purchasers, as provided in the
Purchase Agreement, or
(iii) if to any other person who is then the registered
holder of Notes, Exchange Notes or Private Exchange Notes, to the
address of such holder as it appears in the register therefor of the
Company.
<PAGE> 24
-23-
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each holder of Notes, Exchange
Notes and Private Exchange Notes. The Issuers may not assign any of their
rights or obligations hereunder without the prior written consent of each
holder of Transfer Restricted Securities and each Indemnified Person.
Notwithstanding the foregoing, no successor or assignee of an Issuer shall have
any of the rights granted under this Agreement until such person shall
acknowledge its rights and obligations hereunder by a signed written statement
of such person's acceptance of such rights and obligations.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement.
(h) Governing Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. THE ISSUERS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF ANY COMPETENT NEW YORK STATE COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
<PAGE> 25
-24-
(j) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All references made in this Agreement to "Section" and
"paragraph" refer to such Section or paragraph of this Agreement, unless
expressly stated otherwise.
<PAGE> 26
-25-
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
CLIFFS DRILLING COMPANY
By: /s/ DOUGLAS E. SWANSON
--------------------------------------
Name: Douglas E. Swanson
------------------------------
Title: President
-----------------------------
CLIFFS DRILLING ASSET ACQUISITION COMPANY,
CLIFFS DRILLING MERGER COMPANY,
CLIFFS DRILLING INTERNATIONAL, INC. and
CLIFFS OIL AND GAS COMPANY
By: /s/ DOUGLAS E. SWANSON
--------------------------------------
Name: Douglas E. Swanson
------------------------------
Title: President
-----------------------------
JEFFERIES & COMPANY, INC.
ING BARING (U.S.) SECURITIES, INC.
BY: JEFFERIES & COMPANY, INC.
By: /s/ SHAUVIK KUNDAGRAMI
-------------------------------
Name: Shauvik Kundagrami
-------------------------
Title: Sr. Vice President
----------------------
<PAGE> 1
EXHIBIT 4.5
CLIFFS DRILLING COMPANY
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is dated as of May 23, 1996 (this
"Agreement"), by and among CLIFFS DRILLING COMPANY, a Delaware corporation (the
"Company"), and VIKING SUPPLY SHIPS A.S., a corporation organized under the
laws of Norway, and PRODUCTION PARTNER INC., a corporation organized under the
laws of Liberia (referred to individually as a "Stockholder" and collectively
as the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Company and the Stockholders, among others, are parties to
the Acquisition Agreement (as hereinafter defined), pursuant to which the
Company will acquire the Assets (as defined in the Acquisition Agreement), and
in consideration thereof, will issue to the Stockholders an aggregate of
1,200,000 shares of Common Stock (as hereinafter defined) of the Company; and
WHEREAS, the Company has agreed to provide to the Stockholders the limited
registration rights set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual terms,
covenants and conditions herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
terms have the meanings specified as follows:
(a) The term "Acquisition Agreement" means that certain Acquisition
Agreement dated as of May 13, 1996 by and among the Company, the Stockholders,
Cliffs Drilling Asset Acquisition Company, Cliffs Drilling Merger Company,
Southwestern Offshore Corporation, Ocean Master III Inc., Trivium Investments
Limited and Helge Ringdal, respectively.
(b) The term "Commission" means the Securities and Exchange Commission.
(c) The term "Common Stock" means the common stock, par value $0.01 per
share, of the Company.
(d) The term "Company" has the meaning specified in the preamble to this
Agreement.
<PAGE> 2
(e) The term "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission issued under such Act,
as they each may, from time to time, be in effect.
(f) The term "Person" means an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or political
subdivision thereof.
(g) The term "Qualified Transferee" means any shareholder of a
Stockholder (specifically excluding, however, shareholders of Viking Supply
Ships A.S. but specifically including Christen Sveaas) to whom the Registrable
Securities and the rights hereunder have been transferred in liquidation and/or
dissolution of such Stockholder, if and only if such transferee shall have
executed and delivered to the Company, prior to the transfer, a written
agreement pursuant to which such transferee (i) makes the representations set
forth in Section 9.2 of the Acquisition Agreement, and (ii) agrees to be bound
by the restrictions set forth in Sections 9.3 and 9.4 of the Acquisition
Agreement and the obligations imposed on the Stockholders by this Agreement.
(h) The terms "register," "registered" and "registration" refer to a
registration of securities effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act (as defined
below), and the declaration or ordering of effectiveness of such registration
statement or document.
(i) The term "Registrable Securities" means (i) the shares of Common
Stock received by the Stockholders pursuant to the Acquisition Agreement, and
(ii) any other shares of Common Stock issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
shares of Common Stock; provided, however, that such shares of Common Stock
shall cease to be Registrable Securities when (i) such shares have been
effectively registered under the Securities Act and disposed of in accordance
with a registration statement, (ii) such shares are sold pursuant to Rule 144
(or any similar provision then in force) under the Securities Act, or (iii)
such shares are otherwise transferred by a Stockholder to a Person other than a
Qualified Transferee.
(j) The term "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission issued under such Act,
as they each may, from time to time, be in effect.
(k) The term "Stockholders" means the persons defined as such in the
preamble to this Agreement to whom registration rights are hereby granted, and
any Qualified Transferee to whom the rights granted under this Agreement are
assigned in accordance with Section 11 hereof.
2. Securities Subject to this Agreement. The securities entitled to the
benefits of this Agreement are the Registrable Securities.
2
<PAGE> 3
3. Shelf Registration. The Company shall file a "shelf" registration
statement on any appropriate form pursuant to Rule 415 (or any similar rule
that may be adopted by the Commission) under the Securities Act, as promptly as
practicable and in no event later than sixteen (16) calendar days from the date
of this Agreement. The Company agrees to use its best efforts to cause such
shelf registration statement to become effective as promptly as practicable
after the filing thereof but in any event within three months after the closing
of the transactions contemplated by the Acquisition Agreement and thereafter to
keep it continuously effective, for a period of two years from the date on
which the Commission declares the shelf registration statement effective, plus
an additional period equal to the lesser of (i) one year or (ii) such period
that the Registrable Securities remain subject to Rule 144(e). Notwithstanding
anything herein to the contrary, the period during which the Company is
obligated to maintain the effectiveness of a registration statement hereunder
will terminate when all the Registrable Securities covered by the shelf
registration statement have been sold.
4. Registration Procedures. In connection with the Company's shelf
registration obligations pursuant to Section 3 hereof, the Company shall as
expeditiously as reasonably practicable:
(a) Prepare and file with the Commission a registration statement on an
appropriate form under the Securities Act and use its best efforts to cause
such registration statement to become effective; provided, that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the Stockholders and the underwriters, if any, as
soon as practicable, copies of all such documents proposed to be filed, which
documents will be subject to the review of the Stockholders and the
underwriters, and the Company will not file any registration statement or
amendment thereto, or any prospectus or any supplement thereto, to which the
underwriters, if any, or the holders of a majority of the Registrable
Securities shall reasonably object in light of the requirements of the
Securities Act and any other applicable laws and regulations.
(b) Prepare and file with the Commission such amendments and
post-effective amendments to a registration statement as may be necessary to
keep such registration statement effective for the applicable period; cause the
related prospectus to be filed pursuant to Rule 424(b) under the Securities
Act; cause such prospectus to be supplemented by any required prospectus
supplement and, as so supplemented, to be filed pursuant to Rule 424(b) under
the Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during the applicable period in accordance with the intended methods
of disposition set forth in such registration statement or supplement to such
prospectus.
(c) Notify the Stockholders and the managing underwriters, if any,
promptly, and (if requested by any such Person) confirm such advice in writing,
(i) when a prospectus or any prospectus supplement or post-effective amendment
has been filed, and, with respect to a registration statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission for amendments or supplements to a registration
statement
3
<PAGE> 4
or related prospectus or for additional information, (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of a registration
statement or the initiation of any proceeding for that purpose, (iv) if at my
time the representations and warranties of the Company contemplated by Section
4(l) cease to be true and correct, (v) of the receipt by the Company of any
notification with respect to the suspension or qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (vi) of the happening of any event which requires
the making of any changes in a registration statement or related prospectus so
that such documents will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (vii) of the Company's
reasonable determination that a post-effective amendment to a registration
statement would be appropriate or that there exist circumstances not yet
disclosed to the public which make further sales under such registration
statement inadvisable pending such disclosures and post-effective amendment.
(d) Exercise its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification of any of the Registrable Securities for sale
in any jurisdiction, at the earliest possible moment.
(e) If requested by the managing underwriters or the holders of a
majority of the Registrable Securities in connection with an underwritten
offering, promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriters and the holders of a
majority of the Registrable Securities agree should be included therein
relating to such sale and distribution of Registrable Securities, including,
without limitation, information with respect to the number of shares of
Registrable Securities being sold to such underwriters and the purchase price
being paid therefor by such underwriters and with respect to any other terms of
the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and supplement or make amendments to any registration statement if
requested by the holders of a majority of the Registrable Securities or any
underwriter of such Registrable Securities.
(f) Furnish to the Stockholders and each managing underwriter, if any,
without charge, at least one signed copy of the registration statement, any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits (including
those incorporated by reference).
(g) Deliver without charge to the Stockholders and the underwriters, if
any, as many copies of the prospectus or prospectuses (including each
preliminary prospectus) and any amendment or supplement thereto as such Persons
may reasonably request; and the Company consents to the use of such prospectus
or any amendment or supplement thereto by the Stockholders and the
underwriters, if any, in connection with the offer and sale of the Registrable
Securities covered by such prospectus or any amendment or supplement thereto.
4
<PAGE> 5
(h) Prior to any public offering of Registrable Securities, register or
qualify or cooperate with the Stockholders, the underwriters, if any, and
respective counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions as the Stockholders or an underwriter reasonably requests
in writing; keep each such registration or qualification effective during the
period such registration statement is required to be kept effective and do any
and all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by the applicable
registration statement; provided, however, that the Company will not be
required in connection therewith or as a condition thereto to qualify generally
to do business or subject itself to general service of process in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the Stockholders and the managing underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends; and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters may request at least two
business days prior to any sale of Registrable Securities to the underwriters.
(j) Use its best efforts to cause the Registrable Securities covered by
the applicable registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary if any, to
consummate the disposition of such Registrable Securities.
(k) Upon the occurrence of any event contemplated by Section 4(c) (ii) -
(vii) above, prepare a supplement or post-effective amendment to the applicable
registration statement or related prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchaser of the Registrable Securities being sold thereunder,
such prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading.
(l) Enter into such agreements (including an underwriting agreement) and
take all such other actions in connection therewith in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and
whether or not the Registrable Securities to be covered by such registration
are to be offered in an underwritten offering: (i) make such representations
and warranties to the Stockholders with respect to the registration statement,
prospectus and documents incorporated by reference, if any, in form, substance
and scope as are customarily made by issuers to underwriters in underwritten
offerings and confirm the same if and when requested; (ii) obtain opinions of
counsel to the Company and updates thereof with respect to the registration
statement and the prospectus in the form, scope and substance which are
customarily delivered in underwritten offerings; (iii) in the case of an
underwritten offering, enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings and obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to the managing
underwriters and
5
<PAGE> 6
not reasonably objected to by the holders of a majority of the Registrable
Securities) addressed to the Stockholders and the underwriters, if any,
covering the matters customarily covered in opinions delivered in underwritten
offerings and such other matters as may be reasonably requested by the holders
of a majority of the Registrable Securities and such underwriters; (iv) obtain
"cold comfort" letters and updates thereof from the Company's independent
certified public accountants addressed to the Stockholders and the
underwriters, if any, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters by accountants in
connection with underwritten offerings; (v) if any underwriting agreement is
entered into, set forth in full in such underwriting agreement the
indemnification provisions and procedures customarily included in underwriting
agreements in underwritten offerings; and (vi) deliver such documents and
certificates as may be requested by the managing underwriters, if any, and the
holders of a majority of the Registrable Securities to evidence compliance with
clause (k) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
(m) Make available for inspection by a representative of the
Stockholders, any underwriter participating in any disposition pursuant to such
registration, and any attorney or accountant retained by the Stockholders or
such underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in connection with
such registration; provided that any records, information or documents that are
designated by the Company in writing as confidential shall be kept confidential
by such Persons unless disclosure of such records, information or documents is
required by applicable law or court or administrative order.
(n) Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and make generally available to its security
holders earnings statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder.
5. Contents of Registration Statement. In connection with any
registration of Registrable Securities, the Company may require each
Stockholder to furnish to the Company such information regarding itself and the
distribution of such securities as the Company may from time to time reasonably
request in writing. If the Company, in the exercise of its reasonable
judgment, objects to any information relating to the Company requested by the
Stockholders or the underwriters, if any, to be included in any registration
statement or prospectus or any amendments or supplements thereto, the Company
shall not be obligated to include such objectionable information, and the
Stockholders may withdraw the Registrable Securities from such registration, in
which event the shelf registration statement or amendment thereto shall be
filed as soon as agreement with respect to any proposed change shall be reached
among the Company, the holders of a majority of the Registrable Securities, and
the managing underwriter, if any.
6
<PAGE> 7
6. Stand-off Agreement. Each Stockholder agrees by acquisition of
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(c)(ii)-(vii) hereof,
such Stockholder will forthwith discontinue disposition of Registrable
Securities covered by such registration statement or prospectus until the
Stockholder's receipt of copies of the supplemented or amended prospectus
contemplated by Section 4(k) hereof, or until it is advised in writing by the
Company that the use of the applicable prospectus may be resumed, and has
received copies of any additional or supplemental filings which are
incorporated by reference in such prospectus, and, if so directed by the
Company, each such Stockholder will deliver to the Company all copies, other
than permanent file copies then in such Stockholder's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice. In the event the Company shall give any such notice, the time
period regarding maintaining the effectiveness of such registration statement
set forth in Section 3 shall be extended by the number of days during the time
period from and including the date of the giving of such notice pursuant to
Section 4(c) hereof to and including the date when the Stockholders shall have
(i) received the copies of the supplemented or amended prospectus contemplated
by Section 4(k) hereof, or (ii) been advised in writing by the Company that use
of the prospectus may be resumed.
7. Expenses of Registration. All expenses incurred in connection with a
registration, filing or qualification pursuant to Section 3 hereof (other than
fees and expenses of counsel for the Stockholders), including, without
limitation, registration, filing and qualification fees, printers' and
accounting fees, and the fees and disbursements of counsel for the Company,
shall be borne and paid by the Company; provided, however, that the
Stockholders shall bear and pay all underwriting discounts and selling
commissions attributable to sales of Registrable Securities.
8. Underwritten Registrations.
If any of the Registrable Securities covered by any registration under
Section 3 are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will administer the offering
may be selected by the Stockholders; provided, that such investment bankers and
managers must be reasonably satisfactory to the Company.
9. Indemnification. In the event any Registrable Securities are included
in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Stockholder, the officers and directors of such Stockholder, each
underwriter of Registrable Securities and each other Person, if any, who
controls such Stockholder or such underwriter within the meaning of Section 15
of the Securities Act, against any losses, claims, damages, liabilities or
expenses, joint or several, to which any such Person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in any registration statement under which such Registrable
Securities were registered under the Securities Act pursuant hereto, or any
7
<PAGE> 8
post-effective amendment thereof, or any omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus, if
used prior to the effective date of the registration statement and not
corrected in the final prospectus, or contained in the final prospectus (as
amended or supplemented, if the Company shall have filed with the Commission
any amendment thereof or supplement thereto), or any omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse any
such Person for any legal or other expenses reasonably incurred by such Person
in connection with investigating or defending any such loss, claim, damage,
liability or expense; provided, however, that the indemnity agreement contained
in this Section 9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or expense if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld); and provided further that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon any such untrue statement or omission or alleged
untrue statement or omission which has been made in said registration
statement, preliminary prospectus, prospectus or amendment or supplement or
omitted therefrom in reliance upon and in conformity with information furnished
in writing to the Company by the Stockholders or such underwriter specifically
for use in the preparation thereof.
(b) To the extent permitted by law, each Stockholder will indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each Person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act, each
underwriter and each Person who controls any underwriter within the meaning of
Section 15 of the Securities Act, against any losses, claims, damages,
liabilities or expenses, joint or several, to which the Company or any such
Person, may become subject under the Securities Act or otherwise, and will
reimburse the Company or any such Person for any legal or other expenses
reasonably incurred by the Company or such Person in connection with
investigating or defending any such loss, claim, damage, liability or expense,
but only insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or omission or alleged untrue statement or omission of a material fact referred
to in clause (i) or (ii) of Section 9(a) hereof, in each case to the extent
(and only to the extent) that such untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
information furnished in writing by or on behalf of such Stockholder
specifically for use in connection with such registration; provided, however,
that the indemnity agreement contained in this Section 9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
expense if such settlement is effected without the consent of such Stockholder,
which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section 9
of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party under this Section
8
<PAGE> 9
9, notify the indemnifying party in writing of the commencement thereof;
provided, however, that the failure to so notify the indemnifying party shall
not relieve the indemnifying party from any liability hereunder except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. The indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if representation
of such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in such
proceeding.
(d) If the indemnification provided for in this Section 9 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to herein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party and the indemnified parties, the relative fault of the
indemnifying party and indemnified parties in connection with the actions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 9(c) hereof, any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding. The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section 9(d) were
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to in the
immediately preceding paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
10. Reports Under Exchange Act. With a view to making available to the
Stockholders the benefits of Rule 144 under the Securities Act and any other
rule or regulation of the Commission that may at any time permit the
Stockholders to sell securities of the Company to the public without
registration, the Company agrees, for so long as any Stockholder holds shares
of Common Stock acquired by it pursuant to the Acquisition Agreement, to:
(a) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act, and the rules and regulations adopted by the Commission thereunder; and
9
<PAGE> 10
(b) furnish to the Stockholders forthwith upon request (i) a written
statement by the Company as to whether it has complied with the reporting
requirements of Rule 144, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents filed by the Company
pursuant to the Exchange Act, and (iii) such other information as may be
reasonably requested in availing the Stockholders of any rule or regulation of
the Commission which permits the sale of any securities without registration.
11. Assignment of Registration Rights. The right to cause the Company to
register Registrable Securities pursuant to this Agreement may not be
transferred or assigned, in whole or in part, by any Stockholder without the
prior written consent of the Company, except to a Qualified Transferee of such
Stockholder. Any such transferring Stockholder shall notify the Company in
writing at least five business days prior to effecting any such transfer or
assignment, specifying the name and address of the Qualified Transferee(s) and
identifying the securities with respect to which such rights are being
assigned.
12. Miscellaneous.
(a) Successors and Assigns; No Third Party Benefit. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
permitted successors and assigns. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto and
their respective permitted successors and assigns any rights or remedies under
or by reason of this Agreement, except as expressly provided in this Agreement.
(b) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the substantive laws of the State of Texas,
without giving effect to the principles of conflicts of law thereof.
(c) Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts shall together constitute one and
the same instrument. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all, the parties hereto.
(d) Titles and Subtitles. The titles and subtitles used in this Agreement
are inserted for convenience only and are not to be considered in construing or
interpreting this Agreement.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing and shall be delivered by (i)
personal delivery, (ii) expedited delivery service, (iii) certified or
registered mail, postage prepaid, or (iv) confirmed facsimile transmission. Any
such notice shall be deemed given upon its receipt at the following address (or
such other address as may be specified by such party upon written notice to the
others in accordance with this Section 12(e)):
10
<PAGE> 11
If to the Company:
Cliffs Drilling Company
1200 Smith Street, Suite 300
Houston, Texas 77002
Attention: Mr. Edward A. Guthrie
Telephone: (713) 651-9426
Telefax: (713) 951-0649
with a copy to:
Mr. W. Garney Griggs
Griggs & Harrison, P.C.
1301 McKinney, Suite 3200
Houston, Texas 77010
Telephone: (713) 651-0600
Telefax: (713) 651-1944
If to Viking Supply Ships A.S.:
Viking Supply Ships A.S.
P.O. Box 9
N-4601 Kristiansand
Norway
Attention: Christen Sveaas
Telephone: 011-47-38-022-340
Telefax: 011-47-38-025-767
with a copy to:
Mr. N. L. Stevens III
Gardere Wynne Sewell & Riggs L.L.P.
333 Clay Avenue, Suite 800
Houston, Texas 77002
Telephone: (713) 308-5500
Telefax: (713) 308-5808
If to Production Partner, Inc.:
Mr. Helge Ringdal
c/o Ringdal Holding A.S.
Niels Juelsgt. 14
0272 Oslo
Norway
Telephone: 011-47-22-55-7955
Telefax: 011-47-22-55-8244
11
<PAGE> 12
with a copy to:
Mr. N. L. Stevens III
Gardere Wynne Sewell & Riggs L.L.P.
333 Clay Avenue, Suite 800
Houston, Texas 77002
Telephone: (713) 308-5500
Telefax: (713) 308-5808
(f) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof (which may be
generally or in a particular instance and either retroactively or
prospectively) may not be given, unless the Company has obtained the written
consent of the holders of a majority of the Registrable Securities; provided,
however, that in the event any such amendment, modification, supplement, waiver
or consent shall materially and adversely affect the rights of a single
Stockholder or a similarly situated group of Stockholders (as opposed to the
Stockholders generally), such amendment, modification, supplement, waiver or
consent shall not be effective as against such Stockholder or group of
Stockholders unless approved by such Stockholder or group of Stockholders.
(g) Severability. If any provision or any portion of any provision of
this Agreement or the application of such provision or any portion thereof to
any Person or circumstance shall be held invalid or unenforceable, the
remaining portion of such provision, as it applies to other Persons or
circumstances and the remaining provisions, shall not be affected or impaired
thereby.
(h) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter herein contained. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the securities received by the Stockholders pursuant to the Acquisition. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
CLIFFS DRILLING COMPANY
By: /s/ EDWARD A. GUTHRIE
-------------------------------------------
Edward A. Guthrie, Vice President-Finance
VIKING SUPPLY SHIPS A.S.
By: /s/ CHRISTEN SVEAAS
-------------------------------------------
Christen Sveaas, Chairman
PRODUCTION PARTNER INC.
By: /s/ WILLIAM E. CHILES
-------------------------------------------
William E. Chiles, Vice President
13
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 16, 1996 included in this Form 8-K. It should be noted that we
have not audited any financial statements of Southwestern Offshore Corporation
subsequent to December 31, 1995 or performed any audit procedures subsequent to
the date of our report.
/s/ Arthur Andersen LLP
Houston, Texas
June 3, 1996
<PAGE> 1
EXHIBIT 99.1
JOINT VENTURE AGREEMENT
BETWEEN
WELL SERVICES (MARINE) LIMITED
VIKING TRINIDAD LIMITED
(AS PARTNERS)
AND
WELL SERVICES (MARINE) LIMITED
(AS OPERATOR)
April 18, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1. ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Conditions to Formation of Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2. CAPITAL CONTRIBUTIONS AND LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Initial Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Additional Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Default in Payment of Additional Capital Contributions . . . . . . . . . . . . . . . . . . 5
2.4 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Advances by Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3. ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Other Tax Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Transferor-Transferee Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 4. DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Commencement Date Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Priority Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Distributions During the Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 5. MANAGEMENT AND OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1 Management of Firm Affairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Management Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Deadlock; Put and Call . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Firm Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Rights of the Firm Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.6 Limitations on Firm Manager's Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.7 Fees and Reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.8 Relationship of Firm Manager and Rig Management Agreement . . . . . . . . . . . . . . . . . 19
5.9 Standard of Care and Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.11 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 6. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Firm Tax Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 7. BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.1 Maintenance of Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.2 Reports and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.3 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4 Statutory Examiner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.5 Audit Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 8. DISSOLUTION, LIQUIDATION, AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Liquidation and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 9. RESTRICTIONS ON TRANSFER AND WITHDRAWAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.3 Permitted Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.4 Withdrawal of Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 10. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.1 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.2 Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.5 Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.6 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.7 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.8 Complete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.9 Power to Sue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.10 Governing Law and Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.11 Counterpart Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
ii
<PAGE> 4
LIST OF EXHIBITS
EXHIBIT "A" - Rig Description
EXHIBIT "B" - Rig Management Agreement
EXHIBIT "C" - Rig Financing Terms and Conditions
EXHIBIT "D" - Southwestern Refurbishment Costs
EXHIBIT "D-1" - Well Services Refurbishment Costs
EXHIBIT "E" - Technical Services Agreement
EXHIBIT "F" - Trinmar Drilling Contract
EXHIBIT "G" - Property and Equipment Contributed by Well Services to the Firm
EXHIBIT "G-1" - Well Services Cash Equivalent
i
<PAGE> 5
JOINT VENTURE AGREEMENT
This Joint Venture Agreement (the "Agreement") is made and entered
into as of the 18th day of April, 1996, by and between Well Services (Marine)
Limited, a corporation organized under the laws of the Republic of Trinidad and
Tobago and having its registered office situated at Otaheite Industrial park,
South Oropouche in the Republic of Trinidad and Tobago (hereinafter referred to
"Well Services" which shall include its permitted successors and assigns) of
the One Part and Viking Trinidad, Limited, a corporation organized under the
laws of the Republic of Trinidad and Tobago, and having its Registered Office
situated at Otaheite Industrial Park, South Oropouche in the Republic of
Trinidad and Tobago (hereinafter referred to as "Viking" which shall include
its permitted successors and assigns) of the Other Part which is a wholly-owned
subsidiary of Viking Supply Ships, A.S., a corporation organized under the laws
of Norway ("Viking Supply"). Well Services and Viking are sometimes
collectively referred to as "Partners" and in the singular as a "Partner."
ARTICLE 1. ORGANIZATION
1.1 Formation. The Partners hereby form a Joint Venture (the
"Firm") for the purposes hereinafter set forth under and pursuant to the laws
of Trinidad and Tobago. The rights and duties of the Partners shall be as
provided in this Agreement.
1.2 Name. The name of the Firm shall be "West Indies Drilling
Joint Venture," and all Firm business shall be conducted in such name, unless
the law of a location in which the Firm does business requires that the
business be conducted in some other name. In such case, the business may be
conducted under such other name or names as the Management Committee may
determine.
1.3 Principal Place of Business. The principal place of business
of the Firm shall be at the Well Services office at Otaheite Industrial Park,
South Oropouche, Trinidad and Tobago, or such other place as may be determined
by the Management Committee (as hereinafter defined). In the event the
Management Committee designates a new place of business, it shall so advise the
Partners within ten days of the effective date of such change.
<PAGE> 6
1.4 Purpose. The purpose of the Firm shall be, and the Firm shall
have the power, to acquire, mortgage, own, operate, maintain, improve, lease,
charter, sell, convey and dispose of that certain Liberian Flag jackup drilling
unit known as SOUTHWESTERN MARINE IV (f/k/a SOUTHWESTERN 110), Official No.
8531 as more particularly described on Exhibit "A" hereto (the "Rig"), and
without limiting the foregoing, to:
(a) acquire the Rig from Viking or Viking Supply;
(b) obtain the Rig Loan (as hereinafter defined);
(c) repair, refurbish, renovate, and re-equip the Rig as
the Partners shall agree may be necessary to permit the Rig to
perform the drilling operations required under the Trinmar Drilling
Contract (as hereinafter defined);
(d) mobilize the Rig from its current location to such
location offshore Trinidad as may be required under the Trinmar
Drilling Contract;
(e) enter into the Rig Management Agreement (as
hereinafter defined) with Well Services or such other manager of the
Rig as may be selected by the Management Committee, from time to time;
(f) enter into the Technical Services Agreement (as
hereinafter defined) with Southwestern Offshore Corporation or such
other provider of technical and drilling services as may be selected
by the Management Committee, from time to time;
(g) employ personnel, and obtain legal, accounting,
engineering and other professional services and advice;
(h) enter into any other necessary arrangements relating
to the Rig or its operations;
(i) borrow money for the purposes of the Firm and/or the
acquisition and operation of the Rig and/or the performance of the
Trinmar Drilling Contract and charge, mortgage or otherwise pledge the
Rig for the repayment of such debt;
(j) establish and operate such bank or other accounts as
may be necessary for the Firm purposes;
(k) sell, lease or otherwise dispose of the Rig or
interests therein; and
(l) execute such other documents or instruments of any
kind to carry out the purposes of the Firm.
1.5 Term. The Firm shall be formed as of the Commencement Date
(as hereinafter defined) and shall continue in existence until the close of
Firm business on December 31, 2005, or until the earlier termination of the
Firm in accordance with any provision of this Agreement
2
<PAGE> 7
or applicable law; provided, however, that the Partners may, by mutual
agreement, otherwise extend the existence hereof.
1.6 Definitions. As used in this Agreement, the terms
"Agreement," "Rig," "Partner," "Partners," "Firm," "Viking," "Viking Supply"
and "Well Services" shall have the meanings set forth hereinabove. In
addition, the following terms shall have the following respective meanings:
"Available Cash" shall be measured at the end of each calendar
quarter and shall mean the excess of total gross receipts of the Firm
from operating the Rig plus any working capital lines available under
the Rig Loan or any other loan to the Firm over the sum of (i) the
reasonable costs of operating the Rig for the next succeeding calendar
quarter plus (ii) a working capital reserve of $150,000.
"Cash Equivalent" shall mean the amount of labor, services,
materials and equipment (other than the Equipment described on Exhibit
"G" hereto), at such values as shall be approved in writing by Viking
in its sole discretion, as may be paid or provided by Well Services on
or prior to the Commencement Date in connection with the refurbishment
of the Rig and as to which Well Services has elected by written notice
to Viking on or before Commencement Date to have the Firm consider as
a part of the Capital Contribution of Well Services to the Firm.
"Commencement Date" shall mean the date both of the Partners
have executed this Agreement and the conditions set forth in Section
1.7 hereof have been satisfied.
"Firm Manager" shall mean one of the Partners or such other
person or entity chosen, from time to time, to act as such under the
terms of this Agreement.
"Percentage Interest" shall mean the respective interest of
each Partner in the income and losses of the Firm and when used in
connection with the transfer of all or a portion of a Partner's
interest in the Firm shall include each and every right and obligation
associated with a Partner's ownership interest in the Firm. The
initial Percentage Interests of the Partners shall be as follows:
<TABLE>
<CAPTION>
Percentage
Partner Interest
------- --------
<S> <C>
Viking 50%
Well Services 50%
</TABLE>
"Person" shall mean an individual, partnership, corporation,
trust, venture unincorporated association, or other entity or
association.
"Rig Loan" shall mean a loan from CitiBank, N.A., or such
other commercial lender acceptable to the Management Committee, on the
general terms and conditions described on Exhibit "C" (which shall
under all circumstances provide that the Partners
3
<PAGE> 8
shall be responsible to the lender only for their pro rata shares, and
not joint and several shares, of the loan) except as such terms and
conditions may be modified by the Management Committee.
"Rig Management Agreement" shall mean the agreement pursuant
to which the Firm Manager shall manage the operation of the Rig on
behalf of the Firm in the form attached hereto as Exhibit "B" with
such changes as the Firm and the Firm Manager may agree, from time to
time.
"Southwestern" shall mean Southwestern Offshore Corporation, a
Delaware Corporation which is a wholly owned subsidiary of Viking
Supply.
"Southwestern Refurbishment Costs" shall mean the costs and
expenses incurred and to be incurred by Southwestern to refurbish the
Rig prior to the Commencement Date as more particularly described in
detail on Exhibit "D" hereto.
"Technical Services Agreement" shall mean the agreement
between Southwestern and the Firm pursuant to which Southwestern will
provide certain personnel and technical advice in connection with the
operation of the Rig by the Firm pursuant to the Trinmar Drilling
Contract in the form attached hereto as Exhibit "E" with such changes
as Southwestern and the Firm may agree, from time to time.
"Trinmar Drilling Contract" shall mean that certain drilling
contract entered into between the Firm and Trinmar Limited, in the
form attached hereto as Exhibit "F."
"Well Services Refurbishment Costs" shall mean the costs and
expenses incurred and to be incurred by Well Services to refurbish the
Rig prior to the Commencement Date (other than Cash Equivalent) as
more particularly described in detail on Exhibit "D-1" hereto.
1.7 Conditions to Formation of Firm: Formation of the Firm is
hereby conditioned on the following:
(a) Delivery by Well Services to the Firm of a copy of
the Trinmar Drilling Contract, properly assigned to the Firm, and a
representation by Well Services to the Firm that the Trinmar Drilling
Contract is a binding obligation of Trinmar Limited, enforceable
against Trinmar Limited in accordance with its terms;
(b) Delivery by Viking of title to the Rig to the Firm,
free and clear of all liens, claims and encumbrances and with all
proper consents and acknowledgements of the Office of the Deputy
Commissioner of Maritime Affairs of the Republic of Liberia;
(c) Delivery by Viking of any necessary consents of the
United States Maritime Administration to the transfer of the Rig to
the Firm;
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<PAGE> 9
(d) Execution and delivery of the Rig Management
Agreement by the Firm and Well Services;
(e) Execution and delivery of the Technical Services
Agreement by the Firm and Southwestern;
(f) Delivery by Viking and Well Services of the Capital
Contributions (as defined in Section 2.1 hereof);
(g) Execution, delivery and funding of the Rig Loan by
CitiBank, N.A. or such other commercial lender acceptable to the
Management Committee;
(h) Payment to Southwestern for the Southwestern
Refurbishment Costs; and
(i) Except as otherwise provided in Section 2.1 below,
payment to Well Services for the Well Services Refurbishment Costs.
PROVIDED, ALWAYS that the Partners shall have the right, by unanimous
agreement, to waive or delay all or any of the foregoing conditions to
formation of the Firm. Notwithstanding the foregoing, if Commencement Date has
not occurred on or before April 1, 1996, this Agreement shall terminate and the
parties hereto shall have no further obligations to each other.
ARTICLE 2. CAPITAL CONTRIBUTIONS AND LOANS
2.1 Initial Capital Contributions. On or before the Commencement
Date, Viking shall contribute the Rig to the Firm free and clear of all liens,
claims and encumbrances at an agreed fair market value of U.S.$3,000,000 and
Well Services shall contribute U.S.$2,000,000.00 (the "Capital Contributions)
in: (i) cash; and (ii) property and equipment, as more particularly described
on Exhibit "G," at the agreed fair market values described thereon; and (iii)
Cash Equivalent, as more particularly described on Exhibit "G-1," at the agreed
fair market values described thereon; provided, however the Partners may agree
that Well Services shall not be required to contribute the entire amount of
cash or Cash Equivalent reflected on Exhibit "G" hereto to the Firm on or prior
to the Commencement Date. Unless and until the aggregate of (i) cash
contributions and Cash Equivalent made by Well Services to the Firm on or
before April 30, 1996 and (ii) priority distributions of cash to Viking
pursuant to Section 4.2 below equal the amount of cash contributions and Cash
Equivalent required of Well Services as reflected on Exhibit "G" hereto, no
amount of the Well Services Refurbishment Costs shall be paid by the Firm to
Well Services.
2.2 Additional Capital Contributions. In addition to the Capital
Contributions, each Partner shall be obligated to make additional capital
contributions ("Additional Capital Contributions") at the request of the Firm
Manager. All Additional Capital Contributions shall be made in accordance with
the Partners' respective Percentage Interests and within thirty (30)
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<PAGE> 10
days after the Partners have received notice of a request therefor from the Firm
Manager, which notice shall state in reasonable detail the purpose for which the
request is being made. The Firm Manager shall request Additional Capital
Contributions, from time to time, based upon the Firm Manager's estimate of all
costs, expenses or charges incurred or anticipated with respect to the operation
of the Firm, less the expected revenues from such operations.
2.3 Default in Payment of Additional Capital Contributions. In
the event that a Partner fails to timely make an Additional Capital
Contribution (a "Default"), in addition to any other remedies available at law
or in equity, the other Partner, provided such other Partner is not then in
Default (the "Non-Defaulting Partner") may exercise any one or more of the
following remedies:
(a) Take such action as the Non-Defaulting
Partner may deem appropriate to obtain payment of the unpaid
Additional Capital Contribution together with interest thereon
at the maximum rate of interest permitted by applicable law
from the date that the unpaid Additional Capital Contribution
was due until the date that it is paid, all at the expense of
the Partner who is in Default (the "Defaulting Partner");
(b) Contribute an additional amount to the Firm
equal to the unpaid Additional Capital Contribution which
amount, if the Non-Defaulting Partner shall, in its sole
discretion, determine to make to the Firm, shall be deemed a
loan by such Non-Defaulting Partner to the Defaulting Partner
(as the Defaulting Partner hereby acknowledges), such loan
(the "Default Loan") to bear interest at the lesser of (i) the
Prime Rate as published from time to time in the Wall Street
Journal plus 10% or (ii) the maximum rate of interest
permitted by applicable law (the "Default Interest Rate") from
the date that the unpaid Additional Capital Contribution was
due until it is paid. Thereafter, until the unpaid Additional
Capital Contribution is paid, together with interest thereon,
if any, as herein provided, the Firm Manager shall withhold
any distributions to which the Defaulting Partner would
otherwise be entitled and pay such distributions, including
any interest thereon, to the Non-Defaulting Partner until the
Default Loan is paid in full before making any further
distributions in accordance with the respective Percentage
Interests of the Partners;
(c) Exercise the rights and remedies of a secured
party under the applicable law. Each Partner hereby grants to
the other and to a Non-Defaulting Partner who elects to make
an Additional Capital Contribution pursuant to the terms of
Section 2.3(b) above, as security, equally and ratably, for
the payment of such Additional Capital Contribution, a
security interest in and a general lien on its Percentage
Interest and the proceeds thereof. In the event that a
Partner defaults as described in this Section 2.3, the
Non-Defaulting Partner, shall be entitled to all of the rights
and remedies of a secured party with respect to such security
interest. Each Partner shall execute and deliver to the Firm
and the other Partners all financing statements and other
instruments that the Firm Manager, or the Non-Defaulting
Partner, as applicable, may request to effectuate and carry
out the purposes of this Section 2.3(c). This Agreement, or a
photographic or other copy hereof, may serve as a financing
statement, at the election of the Firm Manager or the
Non-Defaulting Partner, as shall be applicable;
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<PAGE> 11
(d) In the event that the Firm Manager either (i)
fails to request Additional Capital Contributions when a
reasonable, prudent manager of a firm under similar
circumstances would make such a request of the Partners or
(ii) fails to timely make its Percentage Interest share of any
Additional Capital Contribution requested by the Firm Manager,
the remaining Non-Defaulting Partner may upon five days prior
written notice to the Firm Manager remove the Firm Manager
(hereinafter referred to as the "Removed Firm Manager") and
designate a successor Firm Manager and the Removed Firm
Manager shall promptly tender to the successor Firm Manager
all business records, accounts, funds, agreements and
contracts relating to the Firm.
(e) In the event that a Partner shall become a
Defaulting Partner and the amount owed to the Firm by the
Defaulting Partner shall exceed U.S.$250,000 for more than 90
days and the Non-Defaulting Partner has failed to advance the
entire amount of the Defaulting Partner's Additional Capital
Contribution pursuant to Section 2.3(b) above, upon written
notice from the Non-Defaulting Partner to the Defaulting
Partner and the Defaulting Partner's failure to pay the entire
amount of the Default to the Firm within 60 days of the
Defaulting Partner's receipt of such notice, the entire
Percentage Interest of the Defaulting Partner shall be
forfeited to the Non-Defaulting Partner and the Defaulting
Partner shall have no further rights to its Percentage
Interest in the Firm.
2.4 Capital Accounts.
(a) A separate capital account (a "Capital Account")
shall be established and maintained for each Partner.
(b) A transferee of a Partner's Percentage Interest shall
succeed to the Capital Account of the transferor.
(c) If any Partner's Capital Account has a deficit
balance following liquidation of its interest in the Firm or upon
actual termination of the Firm (after taking into account all Capital
Account adjustments for the taxable year of the Firm in which such
liquidation occurs) such Partner shall, by the end of such taxable
year (or, if later, within 90 days after the date of such
liquidation), contribute to the Firm the amount necessary to increase
the balance in its Capital Account to zero.
(d) Subject only to Section 8.2, no Partner is entitled
to a return of any cash or property that it has contributed to the
capital of the Firm, but shall look solely to distributions from the
Firm. No unrepaid capital contribution shall be deemed or considered
to be a liability of the Firm.
2.5 Advances by Partners. In the event that the Firm lacks
sufficient funds to pay its obligations and a call for Additional Capital
Contributions is deemed impracticable or inadvisable, any Partner may advance
all or any part of the needed funds to the Firm, such advance constituting a
loan from the Partner making such advance to the Firm, such loan to bear
interest, at the Prime Rate as published from time to time in the Wall Street
Journal plus 10%, from the date of its making until the date of its payment.
Such loan is not a Capital Contribution.
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<PAGE> 12
Payment by a Partner on account of its general liability for Firm obligations is
deemed to be an advance under this Section 2.5. The Firm Manager, on behalf of
the Firm, shall repay all advances made pursuant to this Section 2.5 before any
distributions are otherwise made to the Partners pursuant to Section 4.3 below.
ARTICLE 3. ALLOCATIONS
3.1 Allocations. Except as otherwise provided in this Article 3,
for accounting and income tax purposes all items of Firm income, gain, loss,
and deduction shall be allocated among the Partners in the ratios of their
Percentage Interests.
3.2 Other Tax Allocations. Income, gain, loss, and deduction with
respect to any property contributed to the Firm shall be allocated, solely for
income tax purposes, among the Partners so as to take into account any
difference between the value of such property and its adjusted basis on the
date of such contribution. No allocations pursuant to this Section shall be
reflected as an adjustment in any Partner's capital account.
3.3 Transferor-Transferee Allocations. If an interest in the Firm
is transferred during any year, the income, gains, losses, and deductions
allocable in respect to that interest shall be prorated between the transferor
and the transferee on the basis of the number of days in the year that each was
the holder of that interest without regard to the results of the Firm
operations during the period before and after the transfer (unless either the
transferor or the transferee elects to use an allocation based on the results
as of the record date of transfer and agrees to reimburse the Firm for the cost
of making and recording such allocation).
ARTICLE 4. DISTRIBUTIONS
4.1 Commencement Date Distribution. On the Commencement Date, the
Firm shall distribute U.S.$1,000,000 to Viking.
4.2 Priority Distributions. In the event that Well Services fails
to contribute the aggregate amount of cash and Cash Equivalent reflected on
Exhibit "G" hereto to the Firm on or prior to April 30, 1996, the Firm shall
promptly thereafter, and any event on or before May 15, 1996, distribute in
cash to Viking an amount equal to the difference between the entire amount of
cash and/or Cash Equivalent required of Well Services as reflected on Exhibit
"G" hereto and the amount of cash and Cash Equivalent actually contributed by
Well Services to the Firm on or before April 30, 1996.
4.3 Distributions During the Term.
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<PAGE> 13
(a) Except as otherwise provided in Sections 2.3(b) and
2.5 above, on the 20th day following the close of each calendar
quarter, the Firm Manager shall distribute the Available Cash to the
Partners; and
(b) The Firm Manager shall distribute such additional
cash of the Firm to the Partners, from time to time, as the Management
Committee may determine is available for distribution.
Cash distributed prior to liquidation of the Firm shall be distributed to the
Partners (other than a Defaulting Partner as provided in Section 2.3(b) hereof)
in accordance with their Percentage Interests. Upon liquidation of the Firm,
distributions shall be made in accordance with the Partners' Capital Accounts.
ARTICLE 5. MANAGEMENT AND OPERATION
5.1 Management of Firm Affairs. Except as otherwise required by
law or this Agreement, responsibility for the management, direction and control
of the Firm shall be vested by the Partners in its Management Committee. The
Management Committee may delegate authority for the management of the Firm to
the Firm Manager in accordance with this Agreement.
5.2 Management Committee.
(a) The Management Committee shall be composed of four
(4) members. Viking hereby elects the following two (2) members and
Well Services hereby elects two (2) members to serve as the initial
Management Committee:
<TABLE>
<CAPTION>
MANAGEMENT COMMITTEE
PARTNER MEMBERS
------- --------------------
<S> <C>
Viking Odd Brevik
William E. Chiles
Well Services Charles A. Brash
Kenneth Sammy
</TABLE>
(b) All Management Committee members designated and
elected pursuant to paragraph (a) above shall serve on the Management
Committee until their respective successors are duly elected and
qualified in accordance with this Agreement.
(c) Any Partner may change any of its elected Management
Committee members with or without cause by written notice to the other
Partner designating the
9
<PAGE> 14
replacement Management Committee member and the effective date of his
election; provided, that if such dismissal is without cause, the
party proposing the dismissal shall indemnify and hold the other
parties harmless for any and all damages and other expenses that may
arise from such action.
(d) Any vacancy on the Management Committee occurring by
reason of death, resignation, removal or other termination of a
Management Committee member shall be filed promptly by a new
Management Committee member designated by the Partner that was
entitled to designate the previous incumbent whose death, resignation,
removal or other termination created the vacancy.
(e) The Management Committee shall meet quarterly unless
the Partners decide otherwise from time to time. In any event, the
Management Committee shall meet at least once a year. The Management
Committee meetings shall be presided over by its Chairman, who will be
elected from among the Management Committee members at the Management
Committee meeting. In the absence of the Chairman, the Management
Committee will be presided over by the person chosen by the meeting.
The Chairman of the Management Committee shall not be vested with a
casting vote. The Management Committee meetings will be held in
Trinidad and Tobago, Houston, Texas, or at such other location as the
Management Committee members may determine, from time to time. The
Secretary of the Management Committee need not be a member of the
Management Committee, and will be elected at the Management Committee
meeting. The activities of the Secretary shall include, but not be
limited to, keeping records of the Management Committee in English, a
copy of which shall be distributed to all the Management Committee
members within three (3) weeks following the relevant meeting. The
Secretary shall attend all Management Committee meetings but shall not
be entitled to comment or vote on any matter presented at said
meetings except when he is a member of the Management Committee.
(f) Meetings of the Management Committee may be called by
its Chairman, its Secretary, or by two (2) Management Committee
members, in writing, at least fifteen (15) days prior to the date of
the meeting. Management Committee meetings may be held without prior
notice when all Management Committee members present either in person
or telephone conference, at the moment of voting. Each notice of a
Management Committee meeting shall specify the date, time and place of
the meeting and the matters to be discussed at such meeting.
(g) Meetings of the Management Committee shall require
the presence of all four (4) Management Committee members. Except as
otherwise provided in this Agreement, resolutions shall be valid if
taken by a majority vote of the Management Committee members present
at the meeting in person. If a quorum is not present at a duly called
meeting, the meeting shall be adjourned and reconvened to a date ten
(10) days subsequent to the date first chosen, at which time a quorum
may consist of at least three (3) Management Committee members. For
the purpose of this Agreement, a Management Committee member will be
deemed present at a meeting if an alternate is sent in his place, or
if the member or alternative participates in the meeting by telephone,
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<PAGE> 15
video conference or similar communications equipment. Any Management
Committee member shall have the right to designate, by written notice
to the other Management Committee members, an alternate, in such
Management Committee member's place, to attend any meeting and vote on
any matter raised in a Management Committee meeting with the same
effect as if the duly appointed Management Committee member had
attended the meeting in question and voted on all matters raised at
such meeting.
(h) Resolutions may be adopted outside of Management
Committee meetings, with the unanimous consent of its members, which
resolutions shall be valid for whatsoever legal effects that might
ensue, as if such resolutions would have been duly adopted through a
Management Committee meeting, provided a written confirmation of such
action is signed by all members confirming such resolutions.
(i) The following matters shall require the approval by
the unanimous vote of all four (4) members except as to matters
involving a deadlock in which a Deadlock Notice is provided pursuant
to Section 5.3:
(i) the entering into business other than the
ownership and operation of the Rig in Trinidad and Tobago;
(ii) approval of the Budget (as described in
Section 7.2(a)) and any resolutions regarding an increase to
the total Budget of more than fifteen percent (15%);
(iii) any investment in the capital, securities,
business operations, assets or other interests of other
companies by the Firm, or the entering into any financial
affiliation with third parties in excess of fifty thousand
U.S. dollars (U.S.$50,000);
(iv) the sale or transfer of the Rig, or other
substantial part of the Firm's assets, including a sale or
transfer made with the intention of taking back in any form a
property previously sold or transferred;
(v) the entering into, any agreements involving
an amount exceeding fifty thousand U.S. dollars
(U.S.$50,000), material modifications or termination of such
agreements or material transactions between the Firm and a
Partner or an affiliate thereof (other than entering into the
agreements referred to in Sections 1.7(d) and 1.7(e) hereof
and other than purchases and sale of products and services in
the normal course of business and at arms-length commercial
terms);
(vi) the undertaking by the Firm of business
outside Trinidad and/or Tobago;
(vii) the entering into a contract or arrangement
by the Firm to carry out business activities with any person
or entity whose business competes with that carried on by the
parties hereto or their respective affiliates if said party
can
11
<PAGE> 16
demonstrate that the same can prejudice relations with its
clients or those of its affiliates;
(viii) any substantial change in accounting policy
for the Firm, other than changes resulting from a change in
general accepted accounting principles in Trinidad and/or
Tobago;
(ix) any amendment or modification to the Rig
Management Agreement and the entering into, renewal or
amendment to any charter or drilling contract for the Rig;
(x) loans to any affiliates, directors, officers,
employees of the Partners or the Firm;
(xi) the establishment of policies for handling
salaries for employee of the Firm and establishment of pension
plans, health and other benefit plans for the Partner's
employees;
(xii) decisions on instituting court proceedings or
proposals or settlement involving in excess of fifty thousand
U.S. dollars (U.S.$50,000);
(xiii) any merger, consolidation, split or
combination of the Firm with, or into any other company;
(xiv) the establishment of pricing policies or
transfer pricing to or from any affiliate, shareholder,
director, officer or employee of a Partner;
(xv) the entering into any contract or agreement
by the Firm with, relating to, otherwise involving any
affiliate, shareholder, director, officer or employee
Partner.
5.3 Deadlock; Put and Call.
(a) Either Partner may give notice in writing (the
"Deadlock Notice") to the other Partner of the existence of a deadlock
with regard to a matter described in Section 5.2(i) or the failure of
a Partner to cause its Management Committee members to attend a
reconvened meeting of the Management Committee under Section 5.2(g).
The Deadlock Notice shall specify in reasonable detail the nature of
the issue giving rise thereto. Representatives of the Partner
receiving the Deadlock Notice shall promptly arrange for a conference
with the representatives of the other Partner in order to call for a
Management Committee meeting for the purpose of resolving the
deadlock. The conference shall be held within fifteen (15) days from
the date the Deadlock Notice is given. If either Partner fails to
attend such conference or the deadlock is not resolved within sixty
(60) days from the date the Deadlock Notice is given, then the
provision of subsections (b) through (e) below shall apply.
12
<PAGE> 17
(b) Either Partner shall be entitled to give written
notice to the other offering to sell to the other all of its
Percentage Interest (the "Proposing Partner Notice"). The Proposing
Partner Notice shall clearly and unequivocally fix an amount (the
"Value") as the total value of the Percentage Interests of the Firm
for purposes of this Section 5.3. The Partner giving notice under
this Section 5.3 offering to sell its Percentage Interest is referred
to as the Proposing Partner and the Partner receiving such notice is
herein referred to as the "Other Partner." The giving of such notice
by the Proposing Partner shall preclude the giving of such a notice in
respect of its Percentage Interest by the other Partner.
(c) Within sixty (60) days of the date of the Proposing
Partner Notice, the Other Partner shall, by counter notice, inform the
Proposing Partner in writing that:
(i) it is willing to purchase all of the
Proposing Partner's Percentage Interest at a price equal to
the Value in accordance with the Proposing Partner's
Percentage Interest; or
(ii) it elects to sell its Percentage Interest in
the Firm to the Proposing Partner at a price equal to the
Value in accordance with the Proposing Partner's Percentage
Interest.
Failure of the Other Partner to respond timely hereunder shall be
deemed to be the Other Partner's agreement to sell its Percentage
Interest to the Proposing Partner.
(d) The notices and counter notices given under this
Section shall constitute a contract binding upon the Partners.
(e) The sale and purchase of the Percentage Interests
under this Section 5.3, if any, shall be completed on a date chosen by
the Proposing Partner no earlier than ninety (90) days or more than
one hundred twenty (120) days after the date of the Proposing Partner
Notice, and both Partners shall take such steps and execute such
documents and take all actions necessary to perfect the sale by that
date.
5.4 Firm Manager. If so delegated by the Management Committee as
provided in Section 5.1 hereof, the Firm Manager shall be responsible for the
management of the Firm, its business and properties. The Firm Manager shall be
elected by the Management Committee on each anniversary of the Commencement
Date to serve a term of one year. The initial Firm Manager shall be Well
Services. Upon each anniversary of the Commencement Date, the Management
Committee shall elect the Firm Manager to serve for the next annual period and
the Management Committee may elect Well Services, Viking or any other qualified
operator to serve as Firm Manager for each successive one-year term.
Notwithstanding any provision of Section 5.3 to the contrary, if at any time
the Management Committee cannot agree on who will serve as Firm Manager for the
next succeeding one-year term, the Partner who is not then serving as Firm
Manager (or in the case where neither Partner is serving as Firm Manager, the
Partner who has not most recently served as Firm Manager) shall have the right
to designate the Firm Manager for the next succeeding one-year term. Persons
dealing with the Firm shall be entitled to rely
13
<PAGE> 18
conclusively on the authority and power of the Firm Manager as set
forth in this Agreement. The Firm Manager shall use its best efforts
to undertake the following on behalf of the Firm:
(a) to manage the Rig in accordance with sound management
practices within the offshore industry, in accordance with applicable
laws, the laws and regulations of the countries having jurisdiction
over the Rig, its areas of operation, and in accordance with
classification society requirements;
(b) to protect and promote the best interests of the Firm
in all matters relating to the efficient operation and management of
the Rig;
(c) to protect the title, ownership of, and all property
interests of the Firm in such Rig and the associated property,
equipment, stores and spare parts;
(d) to arrange for and supervise the daily operations,
maintenance, survey and repair of the Rig, supply necessary spare
parts thereto, and enter into contracts with any person, firm or
company on behalf of the Firm in connection therewith on commercial
terms and conditions;
(e) engage and provision of a crew for the Rig (masters,
officers, engineers, ratings, etc.) and attend to all matters
pertaining to training, transport, insurance, discipline, labor
relations, welfare and amenities of the crew. All crew for the Rig
shall be employed in the name of the Firm Manager;
(f) to enter into the Technical Services Agreement;
(g) arrange for victualling and storing of the Rig and
placing of contracts relating thereto;
(h) appoint and instruct agents as the Rig may require;
(i) arrange, in consultation with representatives of
Southwestern, all insurance in connection with the Rig which are
necessary or advisable in relation to the employment of the Rig which
insurance coverage shall be as satisfactory to both Partners;
(j) arrange for the entry of the Rig with such insurance
companies, mutual clubs or associations or such brokers as the
arrangement of the insurance from time to time requires;
(k) handle and settle insurance, average, salvage,
charter party, contractual and other claims and disputes arising in
connection with the Rig;
(l) upon the expiration or termination of the Trinmar
Drilling Contract, seek, negotiate and secure employment for the Rig
(including marketing of the Rig) on behalf of the Firm and negotiate,
enter into and perform drilling contracts, charter parties and/or
other contracts relating to the employment of the Rig. Except as
provided in the Trinmar
14
<PAGE> 19
Drilling Contract for employment in excess of three (3) months, the
Firm Manager shall confer with the Management Committee in deciding on
the terms and conditions of the possible employment;
(m) propose modifications to the Rig and review and
approve all design drawings prior to carrying out necessary or
desirable structural changes or modifications and plan and supervise
all work related to the carrying out of such work;
(n) arrange for bunker fuel, lubricating oil and paint
contracts for the Rig;
(o) arrange for loading and discharging cargoes and
equipment of all kinds and for such other related services as are
required in connection therewith in relation to the operation of the
Rig;
(p) calculate and receive on behalf of the Firm of all
hire or other payments of whatsoever kind to which the Firm may, from
time to time, be entitled arising out of the employment of or
otherwise in connection with the Rig;
(q) pay on behalf of the Firm all expenses incurred in
and about provision of the foregoing services or otherwise in relation
to the proper and efficient management of the Rig;
(r) negotiate and, subject to the approval of all
Partners, enter into and perform loan agreements and other financial
obligations as well as purchase and/or sale agreements concerning the
Rig;
(s) inform the Partners as soon as possible of any event
and other matters which may have substantial consequence for the
proper, efficient and profitable management of the Rig;
(t) maintain in the existing documentation and registry
of the Rig in the jurisdiction in which the Rig is flagged;
(u) maintain and preserve, or cause to be maintained and
preserved, the Rig in good running order and repair so that its
equipment shall be strong and well and sufficiently tackled,
apparelled, furnished, equipped and in every respect seaworthy; each
part thereof shall be in first class condition, subject only to
reasonable wear and tear; and the condition in which such were
received upon commencement of this Agreement;
(v) keep accurate and up-to-date records of all
inspections; maintenance and repairs performed in such form and with
such detail as may be reasonably required;
(w) conduct hull surveys and dry docking inspections
required to satisfy applicable laws and regulations and to maintain
the current classification of the Rig with the applicable
classification society;
15
<PAGE> 20
(x) effect such repairs and make such modifications to
the Rig and their equipment as may, at any time, and from time to
time, during the term, be required to comply with all applicable laws;
(y) arrange for all inspections required by insurers of
the Rig and, subject to any other provisions of this Agreement, obtain
and maintain in good standing all licenses, permits and approvals
required with respect to the Rig and the associated equipment;
(z) not do any act or thing which shall cause to become
void or result in breach of:
(i) any insurance policy relating thereto; or
(ii) any of the policy warranties; or
(iii) whereby the classification of any component
of the Rig may be forfeited or imperilled;
(aa) perform or have performed work necessary to make the
repairs to the Rig, provided such repairs
(i) are required under the terms of any
applicable contract; or
(ii) are required by the applicable class or
regulatory body; or
(iii) are costs which are reimbursable under the
terms of any applicable contract;
(bb) ensure that the wages of the master and crew of the
Rig are paid in accordance with their agreements, and ensure that all
disbursements incurred by them are paid promptly;
(cc) use its best efforts to prevent any capture, seizure,
arrest, detention, confiscation or repossession of the Rig provided if
any such event should occur, the Firm Manager shall take immediate
steps and make or cause to be made all reasonable payments necessary
to obtain release of the Rig; and
PROVIDED, HOWEVER, that the Firm Manager shall not undertake any single capital
investment which has not been previously budgeted or approved by the Partners
which in its reasonable opinion will exceed the total amount of Fifty Thousand
United States dollars (U.S.$50,000) without the consent of all Partners unless
(i) there exists a state of emergency in which case the Firm Manager shall
notify the Partners of the emergency and the actions taken as soon as possible,
or (ii) the costs of such capital investment is paid by Trinmar Limited or a
lease operator, charterer or hirer of the Rig in lump sum or, on a daily basis
(either separately or as part of the agreed day rate) payable over the term of
the contract.
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<PAGE> 21
5.5 Rights of the Firm Manager. The Firm Manager shall (without
prejudice to the generality of the powers vested in it) be entitled in relation
to the proper and efficient management of the Rig:
(a) to employ any such agents, ship or offshore brokers,
customs agents, or insurance brokers as it may deem fit and to
subdelegate such of the powers conferred on the Firm Manager by this
Agreement as it may deem fit;
(b) to subcontract catering services and other services
as part of any contract or charter party as the Firm Manager deems
fit;
(c) to the extent it does not conflict with the
provisions of the Technical Services Agreement, to employ
superintendents, surveyors, consultants and other experts to supervise
or advise in relation to the operation and maintenance of the Rig or
the operation or administration thereof;
(d) subject to the provisions of Section 7.3 below, to
open, continue and operate such banking account or accounts in the
Firm's name and in accordance with the Management Committee's
instructions;
(e) in accordance with the Management Committee's
instructions, make, adjust, apportion, or settle all average, salvage,
charter party, contract and other claims in respect of the Rig or
refer the same to arbitration or legal suit;
(f) to bring or defend on behalf of the Firm actions,
suits or proceedings in connection with all matters hereby entrusted
to the Firm Manager, and the Firm Manager shall keep the Management
Committee informed of any such actions, suits or proceedings; and
(g) to obtain legal advice in relation to disputes or
other matters affecting the interests of the Firm in respect of the
Rig or the operation thereof.
5.6 Limitations on Firm Manager's Powers. Notwithstanding any
other provisions of this Agreement to the contrary, the Firm Manager shall not
have the power or authority to, and shall not do, perform, or authorize any of
the following for the Firm without the approval of all of the Partners:
(a) borrow funds for any purpose in excess of U.S.$50,000
in the aggregate (other than the Rig Loan, the borrowing for which is
hereby approved in all respects by the Partners);
(b) mortgage, pledge, grant a security interest or ship
mortgage in, or otherwise encumber Rig, except to secure the Rig Loan
or a borrowing pursuant to (a) above;
(c) sell, exchange, or otherwise dispose of the Rig or of
any other asset of the Firm having a value in excess of U.S.$50,000;
17
<PAGE> 22
(d) settle or commence any litigation involving claims by
or against the Firm in excess of U.S.$50,000;
(e) pay any amounts of Firm funds in excess of $5,000 to
any person; or
(f) make any drawdown on the Rig Loan or any other loan
to the Firm.
The Firm Manager shall not have the power or authority to amend this Agreement
except with the consent of all of the Partners.
5.7 Fees and Reimbursements. The Firm Manager shall be paid a
general manager's fee equal to $684 per day for acting as the Firm Manager;
provided, however, such fee shall be reduced to $184 per day so long as the Rig
Management Agreement or a rig management agreement with a party other than Well
Services but otherwise on similar terms and conditions as the Rig Management
Agreement shall remain in effect (the "Firm Manager's Fee"). The Firm Manager
may be reimbursed by the Firm for its reasonable direct out-of-pocket expenses
incurred on behalf of the Firm with the prior written consent of the Management
Committee. However, the Firm Manager's Fee shall compensate the Firm Manager
for the following indirect cost items:
(a) The salaries and incidental payroll expenses of all
employees of the Firm Manager performing the following supervisory and
administrative functions: day-to-day operations supervision, hiring,
safety and training of personnel, corporate, financial, accounting,
including payroll and accounts payable, and executive management
functions currently performed in Trinidad (all employees of the Firm
Manager performing such functions are hereinafter referred to as the
"Administrative Employees");
(b) The rent and associated charges attributable to the
operation of the executive offices of the Firm Manager, including
office furnishings and equipment, property taxes, utilities and
parking rentals;
(c) All expenses of the Firm Manager for outside contract
services, such as bookkeeping, janitorial services and temporary
office personnel incurred in connection with the operation of the
executive offices of the Firm Manager;
(d) Any maintenance costs attributable to office
machines, furniture and fixtures, whether periodical or on a contract
basis, incurred by the executive offices of the Firm Manager;
(e) All customary and usual transportation expenses for
Administrative Employees, including the expenses of all vehicles used
by Administrative Employees (e.g., registration, maintenance, fuel,
depreciation and supplies). Transportation expenses include all
mileage allowances paid by the Firm Manager and any applicable lease
payments;
(f) Customary and usual travel expenses of the
Administrative Employees, including domestic commercial air fares,
lodging and dining expenses, car rental and
18
<PAGE> 23
parking fees, tips and toll charges incurred during business travel;
(g) The expense of the Firm Manager's maintenance of
normal insurance coverage for Administrative Employees and normal
insurance coverage on the contents of the executive offices of the
Firm Manager;
(h) All legal fees incurred in connection with the normal
operations of the Firm Manager;
(i) All accounting and auditing fees relating to the
normal operations of the Firm Manager;
(j) All (i) administrative expenses attributable to the
bank accounts of the Firm Manager, (ii) advertising and promotional
expenses of the Firm Manager, (iii) membership fees for technical
societies, industry organizations and civic associations, (iv)
technical books, maps and periodical subscriptions required to operate
a contract drilling business in the areas in which the Rig operates,
and (v) business license required by the Firm Manager; and
(k) Any (i) charitable contributions or donations as may
be deemed prudent, and (ii) entertainment and customer relations
expenses.
5.8 Relationship of Firm Manager and Rig Management Agreement.
The Partners hereto contemplate that the Management Committee will designate
Well Services or an employee of Well Services as the initial Firm Manager and
that the Firm will enter into the Rig Management Agreement with Well Services
pursuant to which Well Services will perform certain of the duties of the Firm
Manager related, directly or indirectly, to the operation of the Rig in
accordance with the provisions of the Rig Management Agreement. In the event
there is a conflict between the provisions of this Article 5 and the provisions
of the Rig Management Agreement, the provisions of the Rig Management Agreement
shall prevail and notwithstanding the provisions of this Agreement, in no event
shall Well Services receive an aggregate of more than $684 per day for its
services as Firm Manager under this Agreement and Manager under the Rig
Management Agreement.
5.9 Standard of Care and Conflicts.
(a) The Firm Manager shall conduct the affairs of the
Firm in good faith and with regard to the best interests of the Firm.
The Firm Manager is liable for errors and omissions in performing its
duties with respect to the Firm only in the case of bad faith, gross
negligence, willful misconduct or breach of this Agreement. The Firm
Manager shall devote such time to the Firm's business as a reasonable,
prudent rig owner and operator would deem necessary to manage and
supervise the Firm business and affairs in an efficient and profitable
manner; provided, however, that the Firm Manager is not required to
devote full time to Firm business. Nothing in this Agreement shall
preclude the employment, at the expense of the Firm, of any agent or
third party to provide services with respect to the Firm's property or
administrative business, subject to the
19
<PAGE> 24
discretion and control of the Firm Manager.
(b) Each Partner may have other business interests and
may engage in other activities in addition to and in competition with
those of the Firm. Neither the Firm nor any Partner shall have any
right by virtue of this Agreement, or the relationship created hereby,
in or to such other ventures or activities of; provided, however, the
Partners hereby agree, and agree to cause their Affiliates, not to
compete, directly or indirectly, with the Firm or the Rig in the
territorial waters of Trinidad and Tobago, any Partner or to the
income or proceeds derived therefrom.
(c) In addition to the Rig Management Agreement and the
Technical Services Agreement, the Firm may transact business with any
Partner or affiliate of a Partner, provided the terms of the
transaction with that Partner or affiliate are no less favorable than
those the Firm could obtain from third parties.
5.10 Indemnification. The Firm shall indemnify and hold harmless
the Firm Manager from and against any loss, expense, damage, or injury suffered
or sustained by it by reason of any acts, omissions, or alleged acts or
omissions arising out of its activities on behalf of the Firm or in furtherance
of the interests of the Firm, including, but not limited to, any judgment,
award, settlement, reasonable attorneys' fees, and other costs or expenses
incurred in connection with the defense of any actual or threatened action,
proceeding, or claim, if the acts, omissions, or alleged acts or omissions upon
which the actual or threatened action, proceeding, or claims are based were for
a purpose reasonably believed to be in the best interests of the Firm and were
not performed or omitted fraudulently or in bad faith or as a result of
negligence by the Firm Manager and were not in violation of the Firm Manager's
fiduciary obligations to the Firm. Any such indemnification shall be limited
to the assets of the Firm.
5.11 Power of Attorney. Each Partner hereby appoints the Firm
Manager (and any liquidator pursuant to Section 8.2) as such Partner's
attorney-in-fact for the purpose of executing, swearing to, acknowledging, and
delivering all certificates, documents and other instruments as may be
necessary, appropriate or advisable in the judgment of the Firm Manager (or the
liquidator) in furtherance of the business of the Firm or complying with
applicable law. Such power of attorney is irrevocable and is coupled with an
interest. On request by the Firm Manager (or the liquidator), a Partner shall
confirm its grant of this power of attorney or any use of it by the Firm Manager
(or the liquidator) and shall execute, swear to, acknowledge and deliver any
such certificate, document or other instrument.
ARTICLE 6. TAXES
6.1 Tax Returns. The Firm Manager, at the expense of the Firm,
shall cause to be prepared and filed the necessary tax and other returns for
the Firm as well as any additional
20
<PAGE> 25
information as may be necessary to permit the Partners to properly report their
Percentage Interest shares of the results of Firm Operations. In addition, the
Firm Manager shall prepare and file properly such income tax returns, including
making the elections described below.
6.2 Firm Tax Audits. The Firm Manager shall be the tax matters
partner of the Firm. The Firm Manager shall inform the other Partners of all
matters that may come to its attention in its capacity as tax matters partner
by giving notice thereof within five business days after receiving actual
notice, and the Firm Manager shall not take any action unless the Firm Manager
first shall have given the other Partners notice of the contemplated action and
the other Partners shall not have objected to the same within seven business
days of their receipt of such notice.
ARTICLE 7. BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
7.1 Maintenance of Books. The Firm Manager shall keep books of
account for the Firm in accordance with the terms of this Agreement at the
principal place of business of the Firm. The calendar year shall be selected
as the accounting year of the Firm and the books of account shall be maintained
on an accrual or cash basis for income tax purposes as the Firm Manager may
deem advisable, and on an accrual basis for financial reporting purposes.
7.2 Reports and Information. From time to time, the Firm Manager
shall furnish the other Partners such reports and information as any Partner
may reasonably request, and the costs of all such reports shall be borne by the
Firm; provided, however, the Firm Manager shall provide the following reports
to the Partners at the indicated times:
(a) on or before November 30 of each year during the term
of the Firm, an annual budget for the approval of the Partners in
sufficient detail to permit the Partners to evaluate the Firm's
anticipated financial performance for the succeeding year (the
"Budget"); and
(b) on or before the 20th day of each month during the
term of the Firm, an unaudited financial report for the prior month
and year-to-date containing an income statement, variance from budget
statement, balance sheet, changes in capital balances and statements
of cash flow, all prepared in accordance with generally accepted
accounting principles consistently applied; and
(c) on or before the 20th day of the month following the
end of each calendar quarter during the term of the Firm, a detailed
report on the Rig's technical condition and operational performance
during such calendar quarter; and
(d) during any period in which the Rig is not operating
under a charter agreement or drilling contract, a weekly marketing
report with a detailed description of the Firm Manager's ongoing
marketing efforts and prospects for employment of the Rig.
21
<PAGE> 26
Each Partner shall at all times have access to all books, records, and
materials in the Firm's offices regarding the Firm or its activities.
7.3 Bank Accounts. The Firm Manager shall establish and maintain
a separate interest-bearing account for all Firm funds in the Firm name at such
bank or banks as may be agreed by the Partners, from time to time (the "Firm
Bank Account"). The Firm Manager may not commingle the Firm funds with funds
of the Firm Manager or those of any other Person. The Firm Manager shall
deposit all Firm funds, gross receipts from operations, Capital Contributions,
advances and loan proceeds in the Firm Bank Account. All Firm expenses, loan
repayments and distributions to Partners shall be made from the Firm Bank
Account and any such payments of expenses, loan repayments and distributions to
Partners pursuant to Section 4.3(b) hereof in excess of $5,000 shall require
the authorization of both Partners.
7.4 Statutory Examiner. The Partners agree initially to appoint a
partner of the accounting firm of Ernst & Young as the Statutory Examiner of
the Firm. The Statutory Examiner shall prepare all reports and accounting
documents in English, copies of which shall be distributed to the Partners.
The costs of such representation shall be borne by the Firm. The Partners may
change the Statutory Examiner from time to time upon approval of the Management
Committee.
7.5 Audit Rights. Upon five days prior written notice, either
Partner shall have the right to conduct an audit of the financial books and
records of the Firm by engaging an independent certified public accountant to
perform such audit. The Firm Manager shall fully cooperate and provide access
to the books and records of the Firm to such accountant. The results of such
audit shall be binding on the Firm and the Partners and the cost of such audit
shall be considered a Firm expense.
ARTICLE 8. DISSOLUTION, LIQUIDATION, AND TERMINATION
8.1 Dissolution. The Firm shall dissolve and its affairs shall be
wound up on the first to occur of the following:
(a) The unanimous vote for dissolution of the Firm by all
Partners;
(b) The sale or other disposition of all or substantially
all of the assets of the Firm, including the Rig; or
(c) The expiration of the term of the Firm.
8.2 Liquidation and Termination. On liquidation of the Firm, the
Firm Manager shall act as liquidator and may appoint one or more other persons
as liquidator. The liquidator shall proceed diligently to wind up the affairs
of the Firm and make final distributions as provided herein. The costs of
liquidation shall be borne as a Firm expense. Until final distribution, the
22
<PAGE> 27
liquidator shall continue to operate the Firm properties with all of the power
and authority of the Firm Manager. The steps to be accomplished by the
liquidator are as follows:
(a) As promptly as possible after dissolution and again
after final liquidation, the liquidator shall cause a proper
accounting to be made by a recognized firm of certified public
accountants of the Firm's assets, liabilities, and operations through
the last day of the calendar month in which the dissolution occurs or
the final liquidation is completed, as applicable;
(b) The liquidator shall pay from Firm funds all of the
debts and liabilities of the Firm (including, without limitation, all
expenses incurred in liquidation and any advances described in Section
2.5) or otherwise make adequate provision therefor (including, without
limitation, the establishment of a cash escrow fund for contingent
liabilities in such amount and for such term as the liquidator may
reasonably determine); and
(c) all remaining assets of the Firm shall be distributed
to the Partners as follows:
(i) The liquidator may sell any or all Firm
property, including the Rig, and any resulting gain or loss
from each sale shall be computed and allocated to the
Partners' respective Capital Accounts;
(ii) With respect to all Firm property that has
not been sold, the fair market value of that property shall be
determined and the Partners' respective Capital Accounts shall
be adjusted to reflect the manner in which the unrealized
income, gain, loss or deduction inherent in property that has
not been reflected therein previously would be allocated among
the Partners if there were a taxable disposition of that
property for the fair market value of that property on the
date of distribution; and
(iii) Firm property shall be distributed among the
Partners in accordance with their positive respective Capital
Account balances, as determined after taking into account all
Capital Account adjustments for the taxable year of the Firm
during which the liquidation of the Firm occurs (other than
those made by reason of this clause (iii)); and those
distributions shall be made by the end of the taxable year of
the Firm during which the liquidation of the Firm occurs (or,
if later, ninety (90) days after the date of the liquidation).
All distributions in kind to the Partners shall be made
subject to the liability of each distributee for costs, expenses and
liabilities theretofore incurred or for which the Firm has committed
prior to the date of termination and these costs, expenses and
liabilities shall be allocated to the distributee pursuant to this
Section 8.2. The distribution of cash and/or property to a Partner in
accordance with the provisions of this Section 8.2 constitutes a
complete distribution to the Partner of its interest in the Firm and
all the Firm's property. To the extent that a Partner returns funds
to the Firm, it has no
23
<PAGE> 28
claim against any other Partner for such funds.
ARTICLE 9. RESTRICTIONS ON TRANSFER AND WITHDRAWAL
9.1 Restrictions. If a Partner desires to offer for sale its
interest in the Firm (or all of the issued and outstanding shares of the
Partner in the case of Viking) (the "Firm Interest"), such Partner (the
"Selling Partner") shall give written notice of all material terms and
conditions of the offer to the other Partner. Within thirty (30) days after
receipt of notice, the Partner who elects to buy the Firm Interest of the
Selling Partner (the "Buying Partner") shall notify the Selling Partner of its
intent to purchase the Firm Interest of the Selling Partner upon the terms and
conditions contained in the offer (the "Contract Price"). If the Buying
Partner fails to notify the Selling Partner that it elects to purchase its Firm
Interest within said thirty (30) day period, the Selling Partner shall have the
right (a) to sell its Firm Interest within ninety (90) days to a third party on
the same terms offered to the Buying Partner, if the Buying Partner consents to
the specific sale pursuant to Section 9.2 below; or (b) if such consent is
withheld, to withdraw from the Firm. If the Selling Partner withdraws from the
Firm pursuant to the terms of the immediately preceding sentence, such Partner
shall be entitled to an immediate payment from the Firm equal to the Contract
Price. Any amounts received pursuant to this Section 9.1 shall constitute
complete and full discharge of all amounts owing to the withdrawing Partner on
account of its Firm Interest.
9.2 Assignment. Subject to the right of first refusal contained
in Section 9.1 above, a Partner may assign, transfer or pledge all or a portion
of its Firm Interest, provided that the other Partners unanimously consent in
writing to such assignment, transfer or pledge (which consent may be withheld
in their absolute discretion). Any assignment shall confer upon the assignee
the right to become a substituted Partner, in the following manner and subject
to the following conditions:
(a) each assignment shall be effective as of the day on
which all Partners accept the transfer; and
(b) no assignment shall be effective if the assignment
would, in the opinion of counsel to the Firm, result in the
termination of the Firm.
Unless an assignee becomes a substituted Partner, the assignee shall
have no right to interfere in the management or administration of the Firm's
business or affairs, or to require any information or account of Firm
transactions, or to inspect the Firm's books. The assignment merely entitles
the assignee to receive the share of distributions, income and losses to which
the assigning Partner would otherwise be entitled.
Any assignee and any person admitted to the Firm as a substituted
Partner shall be subject to and bound by all the provisions of this Agreement
as if originally a party to this Agreement.
24
<PAGE> 29
If a Partner withdraws pursuant to Section 9.1 the Firm Interests of
the remaining Partners shall immediately be recalculated so that each Partner's
Interest is equal to its Capital Contribution divided by the aggregate Capital
Contributions of all remaining Partners. If the Partners or a third party
purchases a Firm Interest pursuant to Section 9.1 above, the Firm Interest of
the Selling Partner shall be added to that of the Buying Partner, or shall
become the Firm Interest of the third-party purchaser, as the case may be.
9.3 Permitted Assignments. Notwithstanding any provision of
Section 9.1 or 9.2 to the contrary, (i) Viking may transfer its Percentage
Interest to any entity (the "Viking Transferee") which is controlled, directly
or indirectly, by Christen Sveaas, the principal shareholder of Viking Supply,
so long as Viking shall continue to remain liable for the obligations of the
Viking Transferee to the Firm and the Viking Transferee shall thereafter be
bound by the restrictions contained in Sections 9.1 and 9.2 hereof and (ii)
Well Services may transfer its Percentage Interest to any entity (the "Well
Services Transferee") which is controlled, directly or indirectly, by Charles
Brash, the principal shareholder of Well Services so long as Well Services
shall continue to remain liable for all of the obligations of the Well Services
Transferee to the Firm and the Well Services Transfer shall thereafter be bound
by the restrictions contained in Sections 9.1 and 9.2 hereof.
9.4 Withdrawal of Partner. A Partner may not, and each Partner
agrees that it will not, withdraw from the Firm without the consent of all the
Partners. If a Partner withdraws from the Firm in violation of this covenant,
the Firm may (i) recover damages from the withdrawing Partner; (ii) pursue any
other remedies available under applicable law, if any; and (iii) effect
recovery of damages by offsetting those damages against the amount(s) otherwise
distributable to that Partner.
ARTICLE 10. GENERAL PROVISIONS
10.1 No Third-Party Beneficiaries. Nothing in this Agreement
(express or implied) is intended or shall be construed to confer upon any
Person not a party hereto any right, remedy, or claim under or by reason of
this Agreement.
10.2 Partial Invalidity. In case any one or more of the covenants,
agreements, or provisions hereof shall be invalid, illegal, or unenforceable in
any respect, the validity of the remaining covenants, agreements, or provisions
hereof shall be in no way affected, prejudiced, or disturbed thereby.
10.3 Notices. All notices, consents, approvals, requests, demands,
or other communications required or permitted to be given hereunder shall be in
writing, shall be given by mail, return receipt requested, postage prepaid,
facsimile transmission with confirmation of delivery obtained, or personally
delivered with confirmation of delivery obtained, and shall be deemed to have
been duly given when received at the last known address of the party to whom
such notice is sent as follows:
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<PAGE> 30
If to Well Services:
Well Services (Marine) Limited
Otaheite Industrial Park
South Oropouche, Trinidad, W.I.
P.O. Box 152 San Fernando,
Trinidad, W.I.
Telephone: 809/677-7475
Facsimile: 809/677-7003
Attention: Charles A. Brash
If to Viking:
Viking Trinidad Limited
P.O. Box 9
Henrik Wergelandsgt 4
N-4601 Kristiansand S.
Norway
Telephone: 011-4738-022-340
Facsimile: 011-4738-025-767
Attention: Odd Brevik
With a copy to:
Southwestern Offshore Corporation
Five Post Oak Park, Suite 1720
Houston, Texas 77027-3416
Telephone: 713/850-7057
Facsimile 713/850-7433
Attention: William E. Chiles
Any party may change its address above by written notice to the other party.
10.4 Further Assurances. Each Partner hereto from time to time
shall do and perform such further acts and execute and deliver such further
instruments, assignments, and documents as may be required or reasonably
requested by any other Partner to establish, maintain, or protect the
respective rights and remedies of the parties hereto and to carry out and
effect the intentions and purposes of this Agreement.
10.5 Rights Cumulative. The rights and remedies granted to the
Partners under this Agreement shall not be exclusive rights and remedies but
shall be in addition to all other rights and remedies available at law or in
equity.
10.6 Amendment. This Agreement may be modified or amended at any
time by a writing signed by all Partners.
26
<PAGE> 31
10.7 No Waiver. The failure of any party hereto to insist upon
strict performance of any provision hereof shall not constitute a waiver of, or
estoppel against, asserting the right to require such performance in the
future, nor shall a waiver or estoppel in any one instance constitute a waiver
or estoppel with respect to a later breach of a similar nature or otherwise.
10.8 Complete Agreement. This Agreement constitutes the entire
Agreement of the Partners with respect to the subject matter hereof.
10.9 Power to Sue. The Firm shall have the power to own and
operate the Rig in its own name, West Indies Drilling Joint Venture, and the
power to bring any legal action for the benefit of the Firm or have any legal
action brought against it in such name and the Firm shall act in such cases
through the Management Committee unless such power is delegated to the Firm
Manager pursuant to the terms of this Agreement.
10.10 Governing Law and Arbitration. This Agreement shall be
governed by and construed in accordance with the internal laws of the Republic
of Trinidad and Tobago. If any dispute should arise in connection with the
interpretation and fulfillment of this Agreement which cannot be resolved by
agreement of the Partners, the same shall be decided by arbitration in the City
of London, England. The procedural aspects of the arbitration shall be
governed and controlled by the terms of the London Maritime Arbitrators
Association (the "LMAA") and the matter shall be referred to three arbitrators,
each Partner appointing one arbitrator, the third being appointed by the LMAA.
If any of the Partner-appointed arbitrators refuses or is incapable of acting,
the Partner who appointed him, shall appoint a new arbitrator in his place. If
one of the Partners fails to appoint an arbitrator, either originally or by way
of substitution, for two weeks after the other Partner having appointed its
arbitrator has sent the Partner making default notice by mail, telex or
facsimile to make the appointment, the LMAA shall appoint an arbitrator on
behalf of the Partner making default. Each arbitrator shall be a member of the
LMAA who is also a commercial businessman experienced in the offshore drilling
industry and fluent in the English language. All arbitration proceedings shall
be conducted in the English language. The award rendered by the arbitration
court shall be final and binding upon the Partners and may, if necessary, be
enforced by the court or any other competent authority in the same manner as
any judgment in the court of justice.
10.11 Counterpart Execution. This Agreement may be executed in a
number of counterparts, each of which shall have the force and effect of an
original although constituting but one instrument for all purposes.
IN WITNESS WHEREOF, the Partners have executed this Agreement as of
the date first written above.
WELL SERVICES (MARINE) LIMITED
BY: /s/ CHARLES A. BRASH
------------------------------------
NAME: Charles A. Brash
-------------------------------
TITLE: Chairman
--------------------------------
27
<PAGE> 32
VIKING TRINIDAD LIMITED
BY: /s/ JIM R. WISE
------------------------------------
NAME: Jim R. Wise
-------------------------------
TITLE: General Manager
------------------------------
28
<PAGE> 1
EXHIBIT 99.1.1
FIRST AMENDMENT
TO
JOINT VENTURE AGREEMENT
BETWEEN WELL SERVICES (MARINE) LIMITED
AND VIKING TRINIDAD LIMITED
(AS PARTNERS)
AND
WELL SERVICES (MARINE) LIMITED
(AS OPERATOR)
APRIL 1, 1996
This First Amendment to Joint Venture Agreement is made and entered
into by and between Well Services (Marine) Limited, a corporation organized
under the laws of the Republic of Trinidad and Tobago ("Well Services"), and
Viking Trinidad Limited, a corporation organized under the laws of the Republic
of Trinidad and Tobago ("Viking Trinidad") as an amendment to that certain
Joint Venture Agreement between Well Services and Viking Trinidad as Partners,
and Well Services as Operator (the "Joint Venture Agreement"). (Well Services
and Viking Trinidad are sometimes hereinafter referred to collectively as the
"Parties.")
WHEREAS, the Parties have entered into the Joint Venture
Agreement for the purposes of owning and operating an offshore jackup
drilling rig;
WHEREAS, the Joint Venture Agreement provides, among other
things, in Section 1.7 that notwithstanding any other provision of
Section 1.7, if the Commencement Date has not occurred on or before
April 1, 1996, the Joint Venture Agreement shall terminate and the
Parties hereto shall have no further obligations to each other (the
"Drop Dead Provision").
WHEREAS, the Parties wish to amend the Agreement to delete the
Drop Dead Provision in its entirety and ratify all actions taken by or
on behalf of the Joint Venture from its original formation to the date
of this Amendment.
NOW, THEREFORE, the Parties hereto agree as follows:
1. Amendment to Section 1.7. Section 1.7 of the Joint
Venture Agreement is hereby amended effective April 1, 1996, to delete
the following sentence in its entirety:
"Notwithstanding the foregoing, if Commencement Date has not
occurred on or before April 1, 1996, this Agreement shall
terminate and the Parties hereto shall have no further
obligations to each other."
<PAGE> 2
2. Ratification of Prior Actions. Notwithstanding the
foregoing provision of Section 1.7 prior to its amendment, the Parties
hereby ratify, approve and confirm all actions taken by or on behalf
of the Joint Venture from the date of its formation through the date
hereof.
3. Effective Date of Amendment. This First Amendment
shall be effective as of April 1, 1996, notwithstanding the fact that
it has been adopted by the Parties on the date hereof.
4. Counterpart Execution. This First Amendment may be
executed in a number of counterparts, each of which shall have the
force and effect of an original although constituting one instrument
for all purposes.
IN WITNESS WHEREOF, the Parties have executed this First Amendment to
Joint Venture Agreement on this 1st day of May, 1996, effective as of April
1, 1996.
WELL SERVICES (MARINE) LIMITED
BY: /s/ CHARLES BRASH
------------------------------------
NAME: Charles Brash
TITLE: Chairman
VIKING TRINIDAD LIMITED
BY: WILLIAM CHILES
------------------------------------
NAME: William Chiles
TITLE: Director
2
<PAGE> 1
EXHIBIT 99.2
CLIFFS DRILLING COMPANY
PRO FORMA CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
The unaudited pro forma consolidating statements of operations and
unaudited pro forma consolidating balance sheet (collectively, the "Pro Forma
Consolidating Financial Statements") give effect to i) the acquisition of the
Southwestern Rigs using the purchase method of accounting given the related
assumptions and adjustments described in the accompanying Note to Pro Forma
Consolidating Financial Statements, (ii) the offering of $150 million Senior
Notes due 2003 at an assumed interest rate of 10.25%, and (iii) the issuance of
1.2 million shares of the Company's Common Stock valued at an average price of
$18.51 per share in connection with the Southwestern Rigs acquisition.
The unaudited Pro Forma Consolidating Financial Statements are based upon
(i) the historical audited consolidated financial statements of the Company and
Southwestern included elsewhere in this Memorandum and should be read in
conjunction with those consolidated financial statements and the notes thereto
and (ii) the unaudited historical financial statements of the Company and
Southwestern at March 31, 1996 and for the three months ended March 31, 1996 and
1995. The historical consolidated financial statements of Southwestern include
the operating results of the Southwestern Rigs during the periods indicated.
However, the financial statements of Southwestern exclude rig carrying values,
accumulated depreciation, and associated depreciation expense related to the
Southwestern Rigs because it managed, rather than owned, the rigs.
The unaudited Pro Forma Consolidating Statements of Operations for the
three months ended March 31, 1996 and 1995 and the year ended December 31, 1995
were prepared assuming that the transactions described above were consummated as
of January 1, 1995. The unaudited Pro Forma Consolidating Balance Sheet as of
March 31, 1996 was prepared assuming that the transactions described above were
consummated at March 31, 1996.
The unaudited Pro Forma Consolidating Financial Statements have been
prepared based upon assumptions deemed appropriate by the Company and may not be
indicative of actual results. The Company has not completed the final purchase
price allocation related to the Southwestern Rigs; accordingly, actual
adjustments that reflect the purchased assets may differ from the unaudited pro
forma adjustments. The results of Southwestern's operations will be included
with the Company's results of operations only from the date on which the
acquisition of the Southwestern Rigs is consummated.
<PAGE> 2
CLIFFS DRILLING COMPANY
PRO FORMA CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
MARCH 31, 1996 MARCH 31, 1995
---------------------------------------------- ---------------------------------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------------------- --------------------- ---------------------- --------------------------
CLIFFS SOUTHWESTERN ADJUSTMENTS COMBINED CLIFFS SOUTHWESTERN ADJUSTMENTS COMBINED
------- ------------ ----------- ------- ------- ------------ ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES............... $29,078 $8,819 $ (144)(a) $38,504 $14,282 $ 4,464 $ (78)(a) $ 18,668
751(b)
------- --------- ------- ------- ------- -------- ------------ --------
29,078 8,819 607 38,504 14,282 4,464 (78) 18,668
COSTS AND EXPENSES:
Operating Expenses... 21,846 7,669 (1,870)(c) 28,396 9,439 5,116 (728)(c) 13,827
751(b)
Depreciation,
Depletion and
Amortization....... 1,503 86 (86)(d) 2,845 2,073 425 (425)(d) 3,263
1,342(d) 1,190(d)
General and
Administrative
Expense............ 1,398 454 -- 1,852 1,352 438 -- 1,790
------- --------- ------- ------- ------- --------- ------------ --------
24,747 8,209 137 33,093 12,864 5,979 37 18,880
------- --------- ------- ------- ------- --------- ------------ --------
OPERATING INCOME
(LOSS)............... 4,331 610 470 5,411 1,418 (1,515) (115) (212)
OTHER INCOME (EXPENSE):
Gain (Loss) on
Disposition of
Assets............. (23) -- -- (23) 7 -- -- 7
Interest Income...... 360 -- -- 360 294 -- -- 294
Interest Expense..... (26) (139) (3,843)(e) (4,194) (32) (70) (3,843)(e) (4,131)
(186)(f) (186)(f)
Exchange Rate Gain
(Loss)............. 1,133 -- -- 1,133 (126) -- -- (126)
Other, net........... (83) -- -- (83) (68) -- -- (68)
------- --------- ------- -------- ------- --------- ------------ --------
INCOME (LOSS) BEFORE
INCOME TAXES......... 5,692 471 (3,559) 2,604 1,493 (1,585) (4,144) (4,236)
INCOME TAX EXPENSE
(BENEFIT)............ 1,992 -- (1,081)(g) 911 373 -- (1,856)(g) (1,483)
------- --------- ------- -------- ------- -------- ------------ --------
NET INCOME (LOSS)...... 3,700 471 (2,478) 1,693 1,120 (1,585) (2,288) (2,753)
DIVIDENDS APPLICABLE TO
PREFERRED
STOCK................ (31) -- -- (31) (665) -- -- (665)
------- --------- ------- ------- ------- --------- ------------ --------
NET INCOME (LOSS)
APPLICABLE TO COMMON
AND COMMON EQUIVALENT
SHARES............... $ 3,669 $ 471 $(2,478) $ 1,662 $ 455 $ (1,585) $ (2,288) $ (3,418)
======= ========= ======= ======= ======= ======== ============ ========
NET INCOME (LOSS) PER
SHARE:
Primary.............. $ 0.62 $ 0.23 (h) $ 0.11 $ (0.65)(h)
======= ======= ======= ========
WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING:
Primary.............. 5,876 1,200 7,076 (h) 4,092 1,200 5,292 (h)
======= ======= ======= ======= ============ ========
</TABLE>
See accompanying note to unaudited pro forma consolidating financial statements.
<PAGE> 3
CLIFFS DRILLING COMPANY
PRO FORMA CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------- -----------------------------
CLIFFS SOUTHWESTERN ADJUSTMENTS COMBINED
------- ------------ ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
REVENUES........................................ $83,289 $ 24,487 $ (449)(a) $ 108,854
1,527(b)
------- -------- ---------- ----------
83,289 24,487 1,078 108,854
COSTS AND EXPENSES:
Operating Expenses............................ 67,713 24,850 (4,290)(c) 89,800
1,527(b)
Depreciation, Depletion and Amortization...... 7,271 1,619 (1,619)(d) 12,556
5,285(d)
General and Administrative Expense............ 5,289 1,800 -- 7,089
------- -------- ---------- ----------
80,273 28,269 903 109,445
------- -------- ---------- ----------
OPERATING INCOME (LOSS)......................... 3,016 (3,782) 175 (591)
OTHER INCOME (EXPENSE):
Gain (Loss) on Disposition of Assets.......... 2,666 -- -- 2,666
Interest Income............................... 1,065 -- -- 1,065
Interest Expense.............................. (199) (338) (15,375)(e) (16,655)
(743)(f)
Exchange Rate Gain............................ 2,554 -- -- 2,554
Other, net.................................... (1,250) -- -- (1,250)
------- -------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES............... 7,852 (4,120) (15,943) (12,211)
INCOME TAX EXPENSE (BENEFIT).................... 2,406 -- (6,680)(g) (4,274)
------- -------- ---------- ----------
NET INCOME (LOSS)............................... 5,446 (4,120) (9,263) (7,937)
DIVIDENDS APPLICABLE TO PREFERRED STOCK......... (2,659) -- -- (2,659)
------- -------- ---------- ----------
NET INCOME (LOSS) APPLICABLE TO COMMON AND
COMMON EQUIVALENT SHARES...................... $ 2,787 $ (4,120) $ (9,263) $ (10,596)
======= ======== ========== ==========
NET INCOME (LOSS) PER SHARE:
Primary....................................... $ 0.68 $ (2.00)(h)
======= ==========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Primary....................................... 4,108 1,200 5,308(h)
======= ========== ==========
</TABLE>
See accompanying note to unaudited pro forma consolidating financial statements.
<PAGE> 4
CLIFFS DRILLING COMPANY
PRO FORMA CONSOLIDATING BALANCE SHEET (UNAUDITED)
MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- ----------------------------
CLIFFS SOUTHWESTERN ADJUSTMENTS CONSOLIDATED
-------- ------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents.................................... $ 21,936 $ 222 $ (222)(i) $ 56,536
34,600(j)
Accounts Receivable, net of allowance for doubtful accounts
of $842 at March 31, 1996.................................. 16,108 6,812 (6,812)(i) 16,108
Notes and Other Receivables, Current......................... 6,840 -- -- 6,840
Inventories.................................................. 4,793 -- -- 4,793
Drilling Contracts in Progress............................... 3,267 -- -- 3,267
Prepaid Insurance............................................ 694 -- -- 694
Other Prepaid Expenses....................................... 3,303 430 (430)(i) 3,303
-------- -------- --------- --------
Total Current Assets................................... 56,941 7,464 27,136 91,541
PROPERTY AND EQUIPMENT, AT COST:
Rigs and Related Equipment................................... 124,698 5,348 (5,348)(i) 253,942
129,244(k)
Oil and Gas Properties ("successful efforts" method)......... 23,673 -- -- 23,673
Other........................................................ 3,491 216 (216)(i) 3,491
-------- -------- --------- --------
151,862 5,564 123,680 281,106
Less: Accumulated Depreciation, Depletion and Amortization... (84,852) (103) 103(i) (84,852)
-------- -------- --------- --------
Net Property and Equipment............................. 67,010 5,461 123,783 196,254
NOTES AND OTHER RECEIVABLES, LONG-TERM......................... 4,224 -- -- 4,224
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES....... 286 -- 7,471(l) 3,457
(4,300)(m)
OTHER ASSETS................................................... 79 8 (8)(i) 5,279
5,200(n)
-------- -------- --------- --------
TOTAL ASSETS........................................... $128,540 $ 12,933 $ 159,282 $300,755
======== ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable............................................. $ 15,036 $ 4,432 $ (4,432)(i) $ 15,036
Accrued Expenses, Including Interest......................... 6,636 2,798 (2,798)(i) 6,636
Short-Term Debt.............................................. -- 2,318 (2,318)(i) --
-------- -------- --------- --------
Total Current Liabilities.............................. 21,672 9,548 (9,548) 21,672
SENIOR NOTES DUE 2003.......................................... -- -- 150,000(o) 150,000
DEFERRED INCOME TAXES.......................................... 1,447 -- -- 1,447
DEFERRED INCOME AND OTHER...................................... 401 -- -- 401
AMOUNTS DUE TO VIKING, NET..................................... -- 5,571 (5,571)(i) --
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value, 15,000,000 shares authorized;
7,831,661 shares issued and 7,389,930 shares outstanding at
March 31, 1996............................................. 66 1 (1)(i) 78
12(p)
Paid-in Capital.............................................. 127,085 3,253 (3,253)(i) 149,288
22,203(p)
Retained Earnings (Deficit).................................. (16,439) (5,440) 5,440(i) (16,439)
Less: Notes Receivable from Officers for Restricted Stock.... (232) -- -- (232)
Restricted Stock........................................ (27) -- -- (27)
Treasury Stock, at cost, 441,731 shares at March 31,
1996....................................................... (5,433) -- -- (5,433)
-------- -------- --------- --------
Total Shareholders' Equity............................. 105,020 (2,186) 24,401 127,235
-------- -------- --------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY................................. $128,540 $ 12,933 $ 159,282 $300,755
======== ======== ========= ========
</TABLE>
See accompanying note to unaudited pro forma consolidating financial statements.
<PAGE> 5
CLIFFS DRILLING COMPANY
NOTE TO PRO FORMA CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 -- PRO FORMA ADJUSTMENTS
The unaudited Pro Forma Consolidating Financial Statements reflect the
following adjustments:
(a) To reverse management fee revenue applicable to activities of
Southwestern which are not part of the acquisition.
(b) To reclassify mobilization expense to operating expenses.
(c) To reverse charter hire expense applicable to activities of
Southwestern which are not part of the acquisition.
(d) To adjust depreciation expense for the Southwestern Rigs using the
estimated purchase price to be allocated to each rig. Depreciation is
calculated over a 15 year life with an estimated salvage value of 10%. To
provide for any deterioration that may occur while the rigs are not
operating for an extended period of time, a minimum depreciation charge is
provided at a reduced rate of 25% of the normal depreciation rate.
Depreciation has been suspended during refurbishment periods.
(e) To record interest expense related to the $150 million Notes,
assuming a rate of 10.25%.
(f) To record the non-cash amortization of debt issue costs.
(g) To adjust income taxes as a result of pre-tax pro forma
adjustments to reflect a 35% effective tax rate.
(h) Earnings per share has been calculated based on the Company's
weighted average number of common and common equivalent shares outstanding
plus the number of shares of Common Stock to be issued in connection with
the acquisition of the Southwestern Rigs.
(i) To reverse Southwestern's balance sheet accounts, which are not a
part of the Southwestern Rigs acquisitions.
(j) To record cash to be received from the Offering of $150 million
Notes in excess of the cash portion of the purchase price of the
Southwestern Rigs.
(k) To record the estimated purchase price allocation to 9
Southwestern Rigs which will be wholly owned by the Company subsequent to
the acquisition. Details of the purchase price allocation are as follows
(in thousands):
<TABLE>
<S> <C>
Cash.............................................................. $110,000
1.2 Million Shares of the Company's Common Stock.................. 22,215
Guaranteed Debt................................................... 4,300
Allocation of Fees and Expenses................................... 200
--------
Total................................................... $136,715
========
Purchase Price Allocation:
Nine Southwestern Rigs.......................................... $129,244
Southwestern Marine IV.......................................... 7,471
--------
Total................................................... $136,715
========
</TABLE>
(l) To record the estimated purchase price allocation to the
Southwestern Marine IV which will be owned by a joint venture in which the
Company will have a 50% ownership interest subsequent to the acquisition.
(m) To record the debt assumed by the Company related to the
refurbishment of the Southwestern Marine IV which will be owned by a joint
venture in which the Company will have a 50% ownership interest subsequent
to the acquisition.
(n) To record debt issue costs.
(o) To record the $150 million of Senior Notes due 2003.
(p) To record the issuance of 1.2 million shares of the Company's
Common Stock at $18.51 per share to be paid as partial consideration for
the acquisition of the Southwestern Rigs.
<PAGE> 1
EXHIBIT 99.3
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Cliffs Drilling Company
We have audited the accompanying consolidated balance sheets of Cliffs
Drilling Company as of December 31, 1995 and 1994, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Cliffs Drilling Company at December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1995
the Company adopted a new method of accounting for impairment of long-lived
assets.
We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets as of December 31, 1993,
1992 and 1991 and the related consolidated statements of operations, changes in
shareholder's equity, and cash flows for the years ended December 31, 1993,
1992, and 1991, (none of which are presented separately herein); we expressed
unqualified opinions on those consolidated financial statements. In our opinion
the information set forth in the selected consolidated financial information for
each of the five years in the period ended December 31, 1995, is fairly stated
in all material respects in relation to the consolidated financial statements
from which it has been derived.
/s/ ERNST & YOUNG LLP
Houston, Texas
February 22, 1996
<PAGE> 2
CLIFFS DRILLING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- ---------------------------
1996 1995 1995 1994 1993
------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
REVENUES:
Revenues....................................... $29,061 $14,278 $84,156 $81,508 $64,936
Income (Loss) from Equity Investments.......... 17 4 (867) 2,185 602
------- ------- ------- ------- -------
29,078 14,282 83,289 83,693 65,538
COSTS AND EXPENSES:
Operating Expenses............................. 21,846 9,439 67,713 50,907 35,171
Depreciation, Depletion and Amortization....... 1,503 2,073 7,271 14,008 17,438
Contract Termination Provision................. -- -- -- 5,193 577
General and Administrative Expense............. 1,398 1,352 5,289 5,114 4,807
------- ------- ------- ------- -------
24,747 12,864 80,273 75,222 57,993
------- ------- ------- ------- -------
OPERATING INCOME................................. 4,331 1,418 3,016 8,471 7,545
OTHER INCOME (EXPENSE):
Gain (Loss) on Disposition of Assets........... (23) 7 2,666 665 2,016
Interest Income................................ 360 294 1,065 815 858
Interest Expense............................... (26) (32) (199) (826) (1,356)
Exchange Rate Gain (Loss)...................... 1,133 (126) 2,554 (1,168) (443)
Litigation Settlement and Expenses............. -- -- -- -- (3,703)
Other, net..................................... (83) (68) (1,250) (1,111) (606)
------- ------- ------- ------- -------
INCOME BEFORE INCOME TAXES....................... 5,692 1,493 7,852 6,846 4,311
INCOME TAX EXPENSE............................... 1,992 373 2,406 790 685
------- ------- ------- ------- -------
NET INCOME....................................... 3,700 1,120 5,446 6,056 3,626
DIVIDENDS APPLICABLE TO PREFERRED STOCK.......... (31) (665) (2,659) (2,659) (2,659)
------- ------- ------- ------- -------
NET INCOME APPLICABLE TO COMMON AND COMMON
EQUIVALENT SHARES.............................. $ 3,669 $ 455 $ 2,787 $ 3,397 $ 967
======= ======= ======= ======= =======
NET INCOME PER SHARE:
Primary........................................ $ 0.62 $ 0.11 $ 0.68 $ 0.80 $ 0.21
======= ======= ======= ======= =======
Assuming Full Dilution......................... $ 0.11 $ 0.68 $ 0.80 $ 0.21
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Primary........................................ 5,876 4,092 4,108 4,223 4,514
======= ======= ======= ======= =======
Assuming Full Dilution......................... 4,092 4,108 4,223 4,514
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
CLIFFS DRILLING COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, --------------------
1996 1995 1994
----------- -------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE
INFORMATION)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents........................................... $ 21,936 $ 26,405 $ 11,320
Accounts Receivable, net of allowance for doubtful accounts of $797
at March 31, 1996 and December 31, 1995, respectively, and $408 at
December 31, 1994................................................. 16,108 11,170 8,499
Notes and Other Receivables, Current................................ 6,840 1,812 2,366
Inventories......................................................... 4,793 4,114 5,726
Drilling Contracts in Progress...................................... 3,267 11,339 5,074
Prepaid Insurance................................................... 694 957 577
Other Prepaid Expenses.............................................. 3,303 2,400 5,486
--------- --------- ---------
Total Current Assets......................................... 56,941 58,197 39,048
PROPERTY AND EQUIPMENT, AT COST:
Rigs and Related Equipment.......................................... 124,698 122,777 148,085
Oil and Gas Properties ("successful efforts" method)................ 23,673 23,497 22,699
Other............................................................... 3,491 3,201 3,079
--------- --------- ---------
151,862 149,475 173,863
Less: Accumulated Depreciation, Depletion and Amortization.......... (84,852) (83,525) (102,615)
--------- --------- ---------
Net Property and Equipment................................... 67,010 65,950 71,248
NOTES AND OTHER RECEIVABLES, LONG-TERM................................ 4,224 4,441 5,017
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES.............. 286 269 4,036
OTHER ASSETS.......................................................... 79 105 818
--------- --------- ---------
TOTAL ASSETS................................................. $ 128,540 $ 128,962 $ 120,167
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable.................................................... $ 15,036 $ 20,392 $ 14,808
Accrued Expenses, Including Interest................................ 6,636 3,946 4,909
--------- --------- ---------
Total Current Liabilities.................................... 21,672 24,338 19,717
DEFERRED INCOME TAXES................................................. 1,447 1,447 --
DEFERRED INCOME AND OTHER............................................. 401 412 819
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 December
31, 1995 and 1994, respectively ($28,750 liquidation value)....... -- 28,750 28,750
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value, 15,000,000 shares authorized;
6,631,661 shares issued at March 31, 1996 and 4,518,104 shares
issued at December 31, 1995 and 1994, respectively, and 6,189,930,
4,113,067 and 4,089,447 shares outstanding at March 31, 1996,
December 31, 1995 and 1994, respectively.......................... 66 45 45
Paid-in Capital..................................................... 127,085 99,186 99,135
Retained Earnings (Deficit)......................................... (16,439) (20,108) (22,895)
Less: Notes Receivable from Officers for Restricted Stock........... (232) (232) (232)
Restricted Stock............................................... (27) (32) (57)
Treasury Stock, at cost, 441,731, 405,037 and 428,657 shares at
March 31, 1996, December 31, 1995 and 1994, respectively....... (5,433) (4,844) (5,115)
--------- --------- ---------
Total Shareholders' Equity................................... 105,020 74,015 70,881
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................... $ 128,540 $ 128,962 $ 120,167
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
CLIFFS DRILLING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- ------------------------------
1996 1995 1995 1994 1993
------- ------- -------- -------- --------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income............................................ $ 3,700 $ 1,120 $ 5,446 $ 6,056 $ 3,626
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation, Depletion and Amortization............ 1,503 2,073 7,271 14,008 17,438
Contract Termination Provision...................... -- -- -- 5,193 577
Mobilization Expense Amortization................... 130 127 519 544 1,930
Litigation Settlement and Expenses.................. -- -- -- -- 3,703
(Gain) Loss on Disposition of Assets................ 23 (7) (2,666) (665) (2,016)
Other............................................... (59) 50 71 (829) (232)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts Receivable............................... (10,258) (7,062) (3,728) 9,690 (853)
Inventories....................................... (679) 442 1,612 (3,597) (487)
Drilling Contracts in Progress.................... 8,072 (1,568) (6,261) (4,722) 682
Prepaid Insurance and Other Prepaid Expenses...... (744) 1,695 2,500 (1,583) (1,472)
Investments in and Advances to Unconsolidated
Affiliates..................................... (17) 1,396 3,767 (2,184) (1,852)
Other Assets...................................... -- (1) -- (854) (13)
Accounts Payable and Other Accrued Liabilities.... (2,524) (2,760) 6,394 2,667 (3,810)
------- ------- -------- -------- --------
Net Cash Provided By (Used In) Operating
Activities................................... (853) (4,495) 14,925 23,724 17,221
INVESTING ACTIVITIES:
Capital Expenditures.................................. (2,810) (2,881) (13,437) (9,100) (12,668)
Proceeds from Sale of Property and Equipment.......... 227 63 372 5,917 6,847
Insurance Proceeds from Loss of Rig and Related
Equipment........................................... 292 -- 14,308 -- --
Collection of Notes Receivable........................ 217 1,128 1,576 1,027 1,456
------- ------- -------- -------- --------
Net Cash Provided By (Used In) Investing
Activities................................... (2,074) (1,690) 2,819 (2,156) (4,365)
FINANCING ACTIVITIES:
Proceeds from Borrowings.............................. -- -- 7,000 17,000 --
Payments on Borrowings................................ -- -- (7,000) (30,108) (15,240)
Acquisition of Treasury Stock......................... (661) -- -- (5,096) (57)
Proceeds from Issuance of Common Stock................ -- -- -- -- 18
Payments for Redemption of Preferred Stock............ (850) -- -- -- --
Preferred Stock Dividends............................. (31) (665) (2,659) (2,659) (2,659)
------- ------- -------- -------- --------
Net Cash Used In Financing Activities.......... (31) (665) (2,659) (20,863) (17,938)
------- ------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.... (4,469) (6,850) 15,085 705 (5,082)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........ 26,405 11,320 11,320 10,615 15,697
------- ------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD............................................. $21,936 $ 4,470 $ 26,405 $ 11,320 $ 10,615
======= ======= ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
CLIFFS DRILLING COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTES
RECEIVABLE
RETAINED FROM OFFICERS
COMMON PAID-IN EARNINGS FOR RESTRICTED RESTRICTED TREASURY
STOCK CAPITAL (DEFICIT) STOCK STOCK STOCK
------ -------- -------- -------------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992........ $ 45 $ 99,042 $(27,259) $ (232) $ (150) $ --
Net Income........................ -- -- 3,626 -- -- --
Stock Options Exercised........... -- 18 -- -- -- --
Restricted Stock Issuance......... -- 73 -- -- (73) --
Treasury Stock Acquired........... -- -- -- -- -- (57)
Preferred Stock Dividends
Declared....................... -- -- (2,659) -- -- --
Amortization of Restricted
Stock.......................... -- -- -- -- 120 --
------ -------- -------- ---------- ---------- --------
BALANCE AT DECEMBER 31, 1993........ $ 45 $ 99,133 $(26,292) $ (232) $ (103) $ (57)
====== ======== ======== ========== ========== ========
Net Income........................ -- -- 6,056 -- -- --
Treasury Stock Acquired........... -- -- -- -- -- (5,096)
Preferred Stock Dividends
Declared....................... -- -- (2,659) -- -- --
Amortization of Restricted
Stock.......................... -- -- -- -- 46 --
Employer Contributions to 401(k)
Savings Plan................... -- 2 -- -- -- 38
------ -------- -------- ---------- ---------- --------
BALANCE AT DECEMBER 31, 1994........ $ 45 $ 99,135 $(22,895) $ (232) $ (57) $ (5,115)
====== ======== ======== ========== ========== ========
Net Income........................ -- -- 5,446 -- -- --
Preferred Stock Dividends
Declared....................... -- -- (2,659) -- -- --
Amortization of Restricted
Stock.......................... -- -- -- -- 25 --
Employer Contributions to 401(k)
Savings Plan................... -- 51 -- -- -- 271
------ -------- -------- ---------- ---------- --------
BALANCE AT DECEMBER 31, 1995........ $ 45 $ 99,186 $(20,108) $ (232) $ (32) $ (4,844)
====== ======== ======== ========== ========== ========
(unaudited)
Net Income........................ -- -- 3,700 -- -- --
Treasury Stock Acquired........... -- -- -- -- -- (661)
Conversion of Preferred Stock..... 21 27,879 -- -- -- --
Preferred Stock Dividends
Declared....................... -- -- (31) -- -- --
Amortization of Restricted
Stock.......................... -- -- -- -- 5 --
Employer Contributions to 401(k)
Savings Plan................... -- 20 -- -- -- 72
------ -------- -------- ---------- ---------- --------
BALANCE AT MARCH 31, 1996........... $ 66 $127,085 $(16,439) $ (232) $ (27) $ (5,433)
====== ======== ======== ========== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERIM FINANCIAL INFORMATION
The unaudited consolidated financial statements as of and for the three
months ended March 31, 1996 and 1995 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 Company's
financial position and results of operations for the interim periods 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, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Corporate Structure
These statements include the activities of Cliffs Drilling Company (the
"Company"), the Company's wholly-owned subsidiaries, Cliffs Oil and Gas Company
("COGC") and Cliffs Drilling International, Inc. ("International"), and the
Company's Venezuelan activities, which are organized as a foreign branch.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. Activities of the Venezuelan
branch are also recorded in the accounts of the Company. The Company's one-third
( 1/3) interest in the operations of Cliffs Neddrill Central Turnkey
International ("CNCTI"), a joint venture consisting of International, Neddrill
Turnkey Drilling B.V. ("Neddrill") and Perforadora Central, S.A. de C.V., has
been accounted for under the equity method. The Company's interest in the
operations of Cliffs-Neddrill Turnkey International ("CNTI"), a 50/50 joint
venture between the Company and Neddrill, has been accounted for under the
equity method. All significant intercompany transactions and balances are
eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company's policy is to invest cash in short-term investments.
Uninvested cash balances are kept at minimum levels. Investments are valued at
cost, which approximates market. The Company considers all highly liquid cash
investments with a maturity date of three months or less when purchased to be
cash equivalents.
Inventories
Inventories, consisting principally of tubular goods consumed in turnkey
drilling operations and spare drilling parts, are carried at cost, specific
identification method.
<PAGE> 7
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Drilling Contracts in Progress
The Company recognizes revenues and expenses related to its turnkey
drilling contracts when all terms and conditions of the contract have been
fulfilled. Consequently, the costs related to in-progress turnkey drilling
contracts are deferred as drilling contracts in progress until the contract is
completed and revenue is realized. The amount of drilling contracts in progress
is dependent on the volume of contracts, the duration of the contract at the end
of the reporting period and the contract amount. Provision for losses on
incomplete contracts is made when such losses are anticipated.
Rig Mobilization Costs
The Company defers costs of moving a drilling unit to a new area of
operation. The deferred mobilization costs are amortized on a straight-line
basis over the term of the applicable drilling contract. Unamortized
mobilization costs were $338,000 and $858,000 at December 31, 1995 and 1994,
respectively.
Revenue Recognition
The Company recognizes revenues from its daywork drilling and MOPU
operations based upon the contracted daily rate multiplied by the number of
operating days in the period. Turnkey drilling contract revenues are recognized
when all terms and conditions of the contract have been fulfilled. The Company
recognizes oil and gas revenues from its interests in producing wells based upon
the sales method.
Each of the 3 MOPUs which worked in Venezuela had an initial contract term
of two years expiring in 1994, subject to certain buyout options. The buyout
options could have been exercised at any time during the contract term. Because
the Company believed there was a reasonable likelihood that the buyout options
on 2 of the units would be exercised in 1994, the Company deferred income
recognition on these 2 units to the extent of potential losses that could occur
upon exercise of the options. The deferral of income recognition is reflected as
"Contract Termination Provision" in the Consolidated Statements of Operations.
Property and Equipment
Property and equipment are carried at original cost or at adjusted net
realizable value, as applicable. Major renewals and betterments are capitalized
in the property accounts, while the cost of repairs and maintenance is charged
to operating expenses in the period incurred.
The Company records expenditures made on significant projects as
construction in progress ("CIP") until the assets are ready for their intended
use. No depreciation expense is recorded on amounts included in CIP.
Interest on funds borrowed for construction of qualifying assets is
capitalized during the construction period. Amortization of capitalized interest
is included in "Depreciation, Depletion and Amortization" in the Consolidated
Statements of Operations.
Cost and accumulated depreciation, depletion and amortization are removed
from the accounts when assets are sold or retired, and the resulting gains or
losses are included in the Consolidated Statements of Operations.
Depreciation of property and equipment is provided on the straight-line
basis at rates based upon expected useful lives of the various classes of
assets.
To provide for any deterioration that may occur while the rigs are not
operating for an extended period of time, a minimum depreciation charge is
provided at a reduced rate of 25% of the normal depreciation rate.
Costs related to the exploration and development of oil and gas properties
are accounted for under the "Successful Efforts" method of accounting. Lease
acquisition costs related to oil, gas and mineral properties
<PAGE> 8
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are capitalized when incurred. The acquisition costs of unproved properties,
which are individually significant, are assessed on a property-by-property
basis, and a loss is recognized by provision of a valuation allowance when the
assessment indicates an impairment in value. Exploration costs, excluding
exploratory wells, are charged to expense as incurred. Costs of drilling
exploratory wells are capitalized pending determination as to whether the wells
have proved reserves which justify commercial development. If commercial
reserves are not found, the drilling costs are charged to dry hole expense.
Tangible and intangible drilling costs applicable to productive exploratory
wells and to the development of oil and gas reserves are capitalized.
The cost of productive leaseholds is amortized by field on the unit of
production basis by applying the ratio of produced oil and gas to estimated
proved reserves. Lease and well equipment and intangible drilling costs
associated with productive wells are amortized based on proved developed
reserves.
Impairment of Long-Lived Assets
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
that certain long-lived assets be reviewed for impairment whenever events
indicate that the carrying amount of an asset may not be recoverable, and that
an impairment loss be recognized under certain circumstances in the amount by
which the carrying value exceeds the fair value of the asset. The adoption of
SFAS No. 121 resulted in a write down of oil and gas properties by $737,000
based upon the belief that remaining property reserves would be uneconomic to
produce. The impairment loss is included in "Depreciation, Depletion and
Amortization" in the Consolidated Statements of Operations.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes." Deferred
income taxes are provided on items recognized in different periods for financial
and tax reporting purposes. See Note 6 of Notes to Consolidated Financial
Statements.
Earnings Per Share
Primary earnings per share computations are based on net income less
dividends on the Company's $2.3125 Convertible Exchangeable Preferred Stock
("Preferred Stock"), divided by the average number of common shares and
equivalents outstanding during the respective years. 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 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.
The Company converted 1,115,988 shares of its 1,150,000 issued and
outstanding shares of Preferred Stock on January 17, 1996. The Company issued
2,113,557 shares of Common Stock upon conversion of the Preferred Stock. See
Note 10 of Notes to Consolidated Financial Statements. Primary earnings per
share in 1995 would have been $0.88 if the conversions had taken place at the
beginning of 1995.
Foreign Currency Translation
The U.S. dollar is the functional currency for all of the Company's
operations. Foreign currency gains and losses are included in the Consolidated
Statements of Operations during the period incurred.
<PAGE> 9
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Concentration of Credit Risk
The market for the Company's services is the oil and gas industry, and the
Company's customers consist primarily of integrated and government-owned
international oil companies and independent oil and gas producers. Financial
instruments which potentially subject the Company to concentrations of credit
risk consist primarily of trade receivables. The Company provides allowances for
potential credit losses when necessary. Accordingly, management considers such
credit risk to be limited.
Change in Presentation
Certain financial statement items have been reclassified in prior years to
conform with the current year presentation.
2. NOTES AND OTHER RECEIVABLES, LONG-TERM
Effective January 1, 1993, the Company sold its 4 inland posted barge
drilling rigs and rights to certain oil and gas production payment proceeds
generated from a proceeds-of-production drilling program for an aggregate sales
price of $13,500,000, consisting of $5,000,000 in cash and $8,500,000 in notes.
The first note had a face amount of $1,000,000, with interest calculated at the
base rate on corporate loans as quoted by the Wall Street Journal, and was
repaid in March, 1995. Interest was due and payable semi-annually and commenced
June 30, 1993. The second note has a face amount of $7,500,000, bears interest
at the base rate on corporate loans as quoted by the Wall Street Journal plus
one and one-half percent (1 1/2%), and matures on January 1, 1998. Principal and
interest on the $7,500,000 note is payable on a monthly basis solely from the
proceeds of the oil and gas production payment which secures the note. At
December 31, 1995, the remaining note receivable balance was $4,441,000.
3. PROPERTY AND EQUIPMENT
During 1995, the Company purchased and renovated a 3000 HP land rig, Cliffs
Drilling No. 54, for $9,101,000. The unit is currently operating in Venezuela
under an initial contract to drill 2 wells on a daywork basis.
On July 2, 1995, the jack-up drilling rig MARQUETTE suffered hull damage
during demobilization from Venezuela to the U.S. Gulf of Mexico. During an
inspection of the hull damage by the Company and its insurance adjuster, other
damage was discovered which was attributed to an earthquake in Venezuela in May,
1994. The rig was declared a compromised total loss by the Company's insurance
underwriters. The Company received $14,600,000 from its insurance underwriters
for damages to the MARQUETTE. The Company has scrapped the rig and salvaged
various rig equipment for use on other rigs or to sell. The Company recognized a
$2,715,000 pre-tax gain on the disposition of the unit.
Buyout options on 2 MOPUs which previously worked in Venezuela were
exercised by the charterer during the fourth quarter of 1994. The Company
received total proceeds of $4,000,000 for the 2 units in December, 1994. No net
gain or loss on sale was recognized for financial reporting purposes.
Effective January 1, 1993, the Company sold its 4 inland posted barge
drilling rigs and rights to certain oil and gas production payment proceeds for
an aggregate sales price of $13,500,000. See Note 2 of Notes to Consolidated
Financial Statements.
4. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
CNCTI was awarded a contract for one turnkey bid package to drill 4 turnkey
wells in the Bay of Campeche, Mexico. Drilling operations commenced in February,
1993. CNCTI was subsequently awarded 2 turnkey bid packages for 2 wells each in
the Bay of Campeche and the Bay of Tampico, Mexico. One, 5 and
<PAGE> 10
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2 turnkey contracts were completed by CNCTI during the years ended December 31,
1995, 1994 and 1993, respectively. The Company's one-third interest in CNCTI is
recorded under the equity method. CNCTI completed drilling operations in Mexico
during 1995. The following information summarizes the unaudited Statements of
Operations and Balance Sheets of CNCTI:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER
31,
---------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
Revenues.................................................. $24,052 $66,717 $23,718
Operating expenses........................................ 26,638 58,338 21,518
------- ------- -------
Operating income (loss)................................. (2,586) 8,379 2,200
Other, net................................................ 433 (1,525) (395)
------- ------- -------
Net income (loss)....................................... $(2,153) $ 6,854 $ 1,805
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1994
------ -------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Current assets...................................................... $3,819 $31,148
Noncurrent assets................................................... 16 225
------ -------
Total assets...................................................... $3,835 $31,373
====== =======
Current liabilities................................................. $2,580 $17,532
Noncurrent liabilities.............................................. -- 1,433
Equity.............................................................. 1,255 12,408
------ -------
Total liabilities and equity...................................... $3,835 $31,373
====== =======
</TABLE>
5. NOTES PAYABLE
The Company executed the Second Restated Credit Agreement with
International Nederlanden (U.S.) Capital Corporation ("ING") 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. All advances to the Company from the $20,000,000 revolving
line of credit bear interest at three-quarters of one percent ( 3/4%) per annum
plus the greater of the prevailing Federal Funds Rate plus one-half percent
( 1/2%) or a referenced average prime rate; or at the adjusted LlBOR rate plus
two and one-half percent (2 1/2%) per annum. The foregoing rates are subject to
an increase of one-half percent ( 1/2%) in the event certain financial
thresholds are exceeded. The Company is also obligated to pay ING (i) a
commitment fee equal to one-half percent ( 1/2%) per annum on the average daily
unadvanced portion of the commitments and (ii) a letter of credit fee of two
percent (2%) per annum on the average daily undrawn and unexpired amount of each
letter of credit during the period that sum remains outstanding. The revolving
line of credit was scheduled to expire on January 1, 1996.
The Company executed the Third Amendment to the Second Restated Credit
Agreement on December 19, 1995. The revolving line of credit matures on January
1, 1998. At December 31, 1995, the Company had no outstanding borrowings on the
$20,000,000 revolving line of credit. The revolving line of credit note is
secured by accounts receivable, rig inventory, equipment and certain oil and gas
properties. Under the Second Restated Credit Agreement with ING, as amended, the
Company is required to comply with various covenants including, but not limited
to, the maintenance of various financial ratios, and is restricted from
declaring, making, or paying any dividends on the Common Stock.
<PAGE> 11
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Availability and borrowings under the revolving line of credit are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Line of credit available........................................... $19,460 $20,000
Letters of credit outstanding...................................... 540 --
</TABLE>
Interest payments on all indebtedness amounted to $198,000, $919,000 and
$1,536,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
6. INCOME TAXES
The Company incurred net operating losses in prior years resulting in tax
net operating loss carryforwards. The total carryforward is available to offset
taxable income in future years. At December 31, 1995, the net operating loss
carryforward is $4,479,000 for regular tax purposes. The Company also has a
percentage depletion carryover of approximately $1,937,000. In addition, the
Company has $482,000 of unused investment tax credit carryforwards and
$2,450,000 of foreign tax credit carryforwards at December 31, 1995. For
financial reporting purposes, a valuation allowance of $2,309,000 and $2,677,000
at December 31, 1995 and 1994, respectively, is provided to reduce the deferred
tax assets related to these tax carryforward and credit items to a level which,
more likely than not, will be realized. The valuation allowance was reduced by
$368,000 from December 31, 1994 to December 31, 1995 to reflect the expiration
of a portion of the investment tax credits which were provided for in prior
years, partially offset by foreign taxes paid during 1995 which were not
benefited in the provision for income taxes. These carryforwards are available
for use by the Company through the following expiration dates:
<TABLE>
<CAPTION>
ALTERNATIVE
UNUSED REGULAR TAX MINIMUM TAX
FOREIGN INVESTMENT NET OPERATING NET OPERATING
TAX TAX LOSS LOSS
CREDITS CREDITS(1) CARRYFORWARDS CARRYFORWARDS
------- ---------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1996....................................... $ $ -- $ 482 $ --
1997....................................... -- -- -- --
1998-2009.................................. 2,450 -- 4,479 6,215
------- ------- --------- ---------
Total............................ $ 2,450 $ 482 $4,479 $ 6,215
======= ======= ========= =========
</TABLE>
- ---------------
(1) The investment tax credits reflect the 35% reduction required by the Tax
Reform Act of 1986.
The Company provided for $2,406,000 of income taxes for the year ended
December 31, 1995. This amount is comprised of a current provision of $558,000
for U.S. alternative minimum taxes and taxes paid in foreign jurisdictions and
deferred income taxes of $1,848,000. Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes
<PAGE> 12
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and amounts used for income tax purposes. The significant components of deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation..................................... $ 5,434 $ 9,575
Safe harbor lease income....................................... -- 1,868
------- -------
Total deferred tax liabilities......................... 5,434 11,443
Deferred tax assets:
Net operating loss carryforwards............................... 1,568 3,012
Safe harbor lease expense...................................... -- 6,591
Unused investment tax credits.................................. 482 1,394
Percentage depletion carryforward.............................. 678 678
Minimum tax credits............................................ 500 400
Foreign tax credits............................................ 2,450 2,186
Accounts receivable reserves................................... 279 --
Other, net..................................................... 339 259
------- -------
Total deferred tax assets.............................. 6,296 14,520
Valuation allowance for deferred tax assets...................... (2,309) (2,677)
------- -------
Net deferred tax assets................................ 3,987 11,843
------- -------
Net deferred tax liabilities (assets).................. $ 1,447 $ (400)
======= =======
</TABLE>
For financial reporting purposes, income (loss) before income taxes
includes the following components:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------
1995 1994 1993
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) before income taxes:
United States............................................. $ 125 $ 807 $(6,348)
Foreign................................................... 7,727 6,039 10,659
------ ------ -------
Total............................................. $7,852 $6,846 $ 4,311
====== ====== =======
</TABLE>
<PAGE> 13
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the provision for income taxes attributable to
continuing operations are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------
1995 1994 1993
------ ------ ----
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal...................................................... $ 100 $ -- $475
Foreign...................................................... 458 1,190 210
------ ------ ----
Total Current........................................ 558 1,190 685
Deferred:
Federal...................................................... 1,848 (400) --
Foreign...................................................... -- -- --
------ ------ ----
Total Deferred....................................... 1,848 (400) --
------ ------ ----
$2,406 $ 790 $685
====== ====== ====
</TABLE>
The reconciliation of income tax attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------
1995 1994 1993
------ ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax at U.S. statutory rates................................. $2,748 $ 2,396 $1,466
Tax benefits not recognized due to net operating loss
carryforwards............................................. -- -- (610)
Foreign tax provision....................................... 458 1,190 210
Foreign tax credits available............................... -- (1,190) --
Foreign tax credits available from equity investments....... -- (537) --
Alternative minimum tax provision........................... 100 -- 475
Alternative minimum credits available....................... (100) -- --
Percentage depletion available.............................. -- (506) --
Change in valuation allowance............................... (368) (466) (912)
Safe harbor lease termination............................... (897) -- --
Other, net.................................................. 465 (97) 56
------ ------- ------
Income tax expense................................ $2,406 $ 790 $ 685
====== ======= ======
</TABLE>
Income tax payments amounted to $531,000, $982,000 and $685,000 for the
years ended December 31, 1995, 1994 and 1993.
7. TAX LEASES
The Company contracted for the construction of 2 jack-up drilling rigs in
the period 1980-1982 at a cost of $65,575,000. For tax purposes, both rigs were
sold in 1982 to third parties under lease back terms pursuant to Section
168(f)(8) of the Internal Revenue Code ("Safe Harbor Lease"). The Company's
former parent received a payment in the aggregate of $16,685,000 which
represented the investment tax credit and depreciation benefits attributable to
the rigs. The interest income and principal due the Company from the third
parties was equal to the lease payments by the Company to the third parties
throughout the lease term. The Company's obligations to indemnify the tax
lessors against loss of tax benefits throughout the lease term, which was
scheduled to expire in 1997, are guaranteed by its former parent.
<PAGE> 14
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Safe Harbor Lease for the MARQUETTE terminated with the loss of the
MARQUETTE, as described in Note 3 of Notes to Consolidated Financial Statements.
The Company has recorded a $431,000 liability at December 31, 1995 to provide
for potential tax lease termination exposure.
8. DEFINED CONTRIBUTION PLAN
The Company has a defined contribution plan ("401(k) Plan"). Under the
401(k) Plan, an employee who has reached age 21 and completed 90 days of service
is eligible to participate in the plan through contributions that range in one
percent multiples up to 16% of salary, with a 1995 dollar maximum of $9,240. In
addition, the Company contributes (or "matches") on behalf of each participant
an amount equal to 100% of the portion of each participant's contribution which
does not exceed 6% of the participant's annual salary. Employer contributions
for certain highly compensated employees may be further limited through the
operation of the non-discrimination requirements found in Sections 401(k) and
401(m) of the Internal Revenue Code.
Employee contributions can be invested in any or all of 6 investment
options in multiples of 5%. Employer contributions are invested in the Company's
Common Stock. Employee contributions are 100% vested and non-forfeitable.
Employer contributions are subject to a graded vesting schedule, with
participants becoming fully vested upon completion of five years employment
service with the Company. Distributions from the 401(k) Plan are made upon
retirement, death, disability or separation of service. Participants may borrow
up to one-half ( 1/2) of their vested interest in the plan, limited to a maximum
of $50,000. Contributions to the 401(k) Plan and earnings on contributions are
not included in a participant's gross income until distributed to the
participant. Contributions to the 401(k) Plan by the Company were $365,000,
$302,000 and $233,000 for the years 1995, 1994 and 1993, respectively.
9. CAPITAL STOCK
Changes in the number of issued and outstanding shares of the Company's
Common Stock are summarized as follows:
<TABLE>
<S> <C>
Outstanding Shares at December 31, 1992................................... 4,510,604
Stock options exercised................................................. 1,500
Restricted Stock grants................................................. 6,000
Treasury Stock acquired................................................. (5,000)
---------
Outstanding Shares at December 31, 1993................................... 4,513,104
Treasury Stock contributed to employee savings plan..................... 3,343
Treasury Stock acquired................................................. (427,000)
---------
Outstanding Shares at December 31, 1994................................... 4,089,447
Treasury Stock contributed to employee savings plan..................... 23,620
---------
Outstanding Shares at December 31, 1995................................... 4,113,067
=========
</TABLE>
The Company has an Incentive Equity Plan under which stock options, stock
appreciation rights and restricted and deferred stock awards relating to the
Company's Common Stock may be awarded to officers, directors and key employees.
The Company's Incentive Equity Plan is designed to attract and reward key
executive personnel. The stock options granted under this plan expire not more
than ten years from the date of grant.
<PAGE> 15
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1995, the following options were outstanding and
exercisable:
<TABLE>
<CAPTION>
SHARES SHARES EXERCISE
OUTSTANDING EXERCISABLE PRICE (PER SHARE)
----------- ----------- -----------------
<S> <C> <C>
5,000 5,000 $11.00-$11.99
84,000 61,625 $12.00-$12.99
120,900 120,900 $13.00-$13.99
50,100 50,100 $14.00-$14.99
------- -------
260,000 237,625
======= =======
</TABLE>
Options for 1,500 shares were exercised during 1993 while no options were
exercised in 1995 or 1994.
In October, 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123 is effective for
fiscal years beginning after December 15, 1995. The Company will adopt the
disclosure provisions of SFAS No. 123 at the beginning of fiscal year 1996. It
is anticipated that the impact of adopting SFAS No. 123 will not have a material
effect on the consolidated financial statements.
The Company's Board of Directors awarded restricted stock to the Company's
officers and key employees as follows:
<TABLE>
<CAPTION>
SHARES SHARES
YEAR AWARDED OUTSTANDING
---- ------- -----------
<S> <C> <C>
1988 34,600 34,600
1989 41,300 38,675
1990 30,400 30,400
1991 2,000 2,000
1992 -- --
1993 6,000 6,000
</TABLE>
Restrictions on the 1988 award lapsed with respect to 20% of the entire
award after one year and after each of the succeeding 4 years. Restrictions
lapse with respect to 25% of the entire award after one year and after each of
the succeeding 3 years for all other awards. The Company's Board of Directors
has not awarded any restricted stock since the 1993 award. Expense related to
amortization of the restricted stock was $25,000, $46,000 and $120,000 for the
years 1995, 1994 and 1993, respectively.
Deferred compensation expense relative to non-vested shares of restricted
stock, measured by the market value of the stock on the date of grant, is being
amortized on a straight-line basis over the restriction period. The unamortized
deferred compensation expense, which has been deducted from equity in the
Consolidated Balance Sheets, amounted to $32,000 and $57,000 at December 31,
1995 and 1994, respectively.
Effective December 31, 1992, the Company's Board of Directors approved the
sale of 17,500 shares of restricted Common Stock to certain key executives. The
price paid for the restricted stock was $13.25 per share. The Company extended
full recourse, interest-bearing loans to the key executives in the aggregate
amount of $232,000. The promissory notes bear interest at seven and one-half
percent (7 1/2%) per annum payable quarterly as it accrues on the last day of
March, June, September and December until the notes are due on December 31,
1997. Additional shares of deferred stock will be awarded on December 31, 1997
if certain performance criteria are attained by the Company. Compensation
expense related to the deferred stock awards will be accrued in future years if
it becomes probable the Company performance criteria will be met. No such
compensation expense was accrued during the years ended December 31, 1995, 1994
and 1993.
<PAGE> 16
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. REDEEMABLE PREFERRED STOCK
The Company converted 1,115,988 shares of its 1,150,000 issued and
outstanding shares of $2.3125 Convertible Exchangeable Preferred Stock
("Preferred Stock") on January 17, 1996. The Company issued 2,113,557 shares of
Common Stock upon conversion of the Preferred Stock. The remaining 34,012 shares
were redeemed for cash in the amount of $25.69 per share plus $.22 per share in
accrued and unpaid dividends thereon through the redemption date at a cost to
the Company of approximately $881,000. Holders of shares of the Preferred Stock
had the option to convert any or all of such shares of Preferred Stock into
fully paid and nonassessable shares of Common Stock of the Company prior to the
redemption date at a rate of 1.89394 shares of Common Stock for each full share
of Preferred Stock. No payment or adjustment was made upon any conversion of
shares of Preferred Stock on account of any dividends on the shares surrendered
for conversion, and the holder lost any right to payment of dividends on the
shares surrendered for conversion. No fractional shares of Common Stock were
issued upon conversion but, in lieu thereof, an appropriate amount was paid in
cash by the Company based upon the reported last sales price for the shares of
Common Stock on the date of conversion. The right of holders of Preferred Stock
to convert shares of Preferred Stock into Common Stock terminated on the
redemption date.
The Preferred Stock was redeemable at the option of the Company, in whole
or in part, at $25.93 per share if redeemed prior to September 15, 1995, and at
prices decreasing ratably annually to $25.00 per share from and after September
15, 1998, plus accrued and unpaid dividends to the redemption date. Dividends on
the Preferred Stock were cumulative from the date of first issuance and were
payable quarterly at the rate of $2.3125 per share per annum. Pursuant to the
Second Restated Credit Agreement, dividends on Preferred Stock could not exceed
the current dividend rate per share without the consent of ING.
11. COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases its headquarters office, office equipment and other
items under operating leases expiring at various dates during the next five
years. Management expects that, in the normal course of business, leases that
expire will be renewed or replaced by other leases. Total rent expense under
operating leases was $560,000, $583,000 and $656,000 for the years ended 1995,
1994 and 1993, respectively. Minimum future obligations under non-cancelable
operating leases at December 31, 1995 for the following five years are $625,000,
$509,000, $516,000, $523,000 and $516,000, respectively, and $128,000
thereafter.
In conjunction with the return to Loews San Antonio Hotel Corporation, now
known as Diamond Offshore Drilling Inc. ("Diamond Offshore"), 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. Diamond Offshore withheld payment of $1,700,000 in notes
payable to the Company, representing a part of the purchase price for the
subject rigs. Diamond Offshore also claimed additional damages associated with
repairs to the drilling rigs. In June, 1993, a partial summary judgment awarded
the Company $1,800,000, together with interest and attorneys fees, for the notes
payable owed by Diamond Offshore to the Company, offset by certain charter hire
payments due Diamond Offshore. Following a trial in February, 1994, a judgment
was entered in the United States District Court, Southern District of Texas,
Houston Division, awarding Diamond Offshore $3,500,000, plus court costs, offset
by the partial summary judgment of $1,800,000. The Company reported this
litigation settlement and expenses in the Consolidated Statements of Operations
during the fourth quarter of 1993. The Company paid Diamond Offshore $1,700,000
in February, 1994, as a final settlement of all disputed issues.
The Company has other contingent liabilities resulting from litigation,
claims and commitments incidental to the ordinary course of business. Management
believes that the probable resolution of such contingencies will not materially
affect the financial position or results of operations of the Company.
<PAGE> 17
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. BUSINESS SEGMENTS
During the three years ended December 31, 1995, the Company conducted the
following business activities:
Daywork Drilling -- domestic and foreign drilling of oil and gas wells
on a dayrate basis for major and independent oil and gas companies on land,
inland waters and offshore.
Engineering Services -- domestic and foreign drilling of oil and gas
wells on a turnkey basis for major and independent oil and gas companies on
land, inland waters and offshore and foreign well engineering and
management services.
MOPU Operations -- domestic and foreign operation of mobile offshore
production units on a dayrate basis for major and independent oil and gas
companies.
Oil and Gas -- domestic exploration, development and production of
hydrocarbon reserves.
<TABLE>
<CAPTION>
OPERATING DEPRECIATION,
INCOME IDENTIFIABLE CAPITAL DEPLETION AND
REVENUES (LOSS) ASSETS EXPENDITURES AMORTIZATION
-------- --------- ------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
December 31, 1995
Daywork Drilling................. $ 26,363 $ 2,761 $ 56,639 $ 11,814 $ 4,193
Engineering Services............. 56,970 2,609 37,302 -- 30
MOPU Operations.................. 4,920 2,492 30,017 825 1,360
Oil and Gas...................... 2,788 541 5,004 798 1,732
Corporate Office................. -- (5,387) -- -- 98
Eliminations..................... (7,752) -- -- -- (142)
-------- ------- -------- -------- -------
Consolidated..................... $ 83,289 $ 3,016 $128,962 $ 13,437 $ 7,271
======== ======= ======== ======== =======
December 31, 1994
Daywork Drilling................. $ 32,481 $ 7,100 $ 64,004 $ 5,692 $ 6,535
Engineering Services............. 36,079 3,581 19,195 -- 18
MOPU Operations.................. 16,020 4,415 31,854 3,263 4,617
Oil and Gas...................... 2,470 (1,439) 5,115 146 2,785
Corporate Office................. -- (5,184) -- -- 70
Eliminations..................... (3,357) (2) (1) (1) (17)
-------- ------- -------- -------- -------
Consolidated..................... $ 83,693 $ 8,471 $120,167 $ 9,100 $14,008
======== ======= ======== ======== =======
December 31, 1993
Daywork Drilling................. $ 22,218 $ (515) $ 63,360 $ 1,576 $ 6,304
Engineering Services............. 16,961 1,685 10,625 -- 1
MOPU Operations.................. 21,673 13,566 49,487 9,494 5,523
Oil and Gas...................... 4,686 (2,303) 10,051 1,598 5,529
Corporate Office................. -- (4,888) -- -- 81
-------- ------- -------- -------- -------
Consolidated..................... $ 65,538 $ 7,545 $133,523 $ 12,668 $17,438
======== ======= ======== ======== =======
</TABLE>
Intersegment sales were $7,752,000, $3,357,000 and $147,000 for the years
ended December 31, 1995, 1994 and 1993, respectively. Such intersegment sales
were accounted for at prices comparable to unaffiliated customer sales.
Identifiable assets by industry segment include assets directly identified
with those operations.
<PAGE> 18
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company derived a significant amount of its revenues from a few
customers in each of the three years ended December 31, 1995. The following
table summarizes information with respect to these major customers.
<TABLE>
<CAPTION>
% OF
CONSOLIDATED
CUSTOMER REPORTING STATEMENT REVENUES
-------- ------------------- ------------
<S> <C> <C>
December 31, 1995
Corpoven, S.A. ....................... Daywork Drilling and Engineering 35%
Services
Maraven, S.A. ........................ Daywork Drilling and Engineering 19%
Services
Texaco Exploration & Production, Engineering Services
Inc. .............................. 12%
December 31, 1994
Corpoven, S.A. ....................... Daywork Drilling and Engineering 32%
Services
Maraven, S.A. ........................ Daywork Drilling 18%
Dresser-Rand.......................... MOPU Operations 14%
CNCTI................................. Daywork Drilling and Engineering 14%
Services
December 31, 1993
Dresser-Rand.......................... MOPU Operations 29%
Maraven, S.A. ........................ Daywork Drilling 24%
Marathon Oil Company.................. Engineering Services 10%
</TABLE>
The Company settled its contractual dispute with Columbia Gas during 1995.
The Company received $1,377,000 related to the settlement, which is included in
oil and gas revenues.
13. DISTRIBUTION OF EARNINGS AND ASSETS
The following table sets forth financial information with respect to the
Company and its subsidiaries on a consolidated basis by geographical area.
<TABLE>
<CAPTION>
MEXICO
UNITED SOUTH AND
STATES AMERICA OTHER TOTAL
------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31 , 1995
Revenues............................................... $30,783 $51,930 $ 576 $ 83,289
======= ======= ======= ========
Operating Income....................................... $ 2,178 $ 6,081 $ 46 $ 8,305
======= ======= =======
General and Administrative Expense.................. (5,289)
--------
$ 3,016
========
Identifiable Assets at December 31, 1995............... $82,934 $45,434 $ 594 $128,962
======= ======= ======= ========
December 31, 1994
Revenues............................................... $18,092 $53,816 $11,785 $ 83,693
======= ======= ======= ========
Operating Income....................................... $ 1,523 $ 4,417 $ 7,645 $ 13,585
======= ======= =======
General and Administrative Expense.................. (5,114)
--------
$ 8,471
========
Identifiable Assets at December 31, 1994............... $55,034 $53,623 $11,510 $120,167
======= ======= ======= ========
</TABLE>
<PAGE> 19
CLIFFS DRILLING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
MEXICO
UNITED SOUTH AND
STATES AMERICA OTHER TOTAL
------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1993
Revenues............................................... $23,579 $40,361 $ 1,598 $ 65,538
======= ======= ======= ========
Operating Income (Loss)................................ $(3,062) $13,965 $ 1,449 $ 12,352
======= ======= =======
General and Administrative Expense.................. (4,807)
--------
$ 7,545
========
Identifiable Assets at December 31, 1993............... $55,797 $73,657 $ 4,069 $133,523
======= ======= ======= ========
</TABLE>
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly operating results for the years ended December 31, 1995 and 1994
are summarized as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE QUARTER ENDED
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------- -------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1995:
Revenues................................... $14,282 $ 13,953 $20,036 $ 35,018(1)
Operating Income (Loss).................... 1,418 (1,010) 917 1,691(1)(2)
Net Income (Loss).......................... 1,120 (785) 1,646 3,465(1)(2)
Net Income (Loss) Applicable to Common and
Common Equivalent Shares................. 455 (1,450) 981 2,801(1)(2)
Net Income (Loss) per Share:
Primary.................................. $ 0.11 $ (0.35) $ 0.24 $ 0.68(1)(2)
Assuming Full Dilution................... $ 0.11 $ (0.35) $ 0.24 $ 0.55(1)(2)
1994:
Revenues................................... $16,477 $ 16,547 $25,550 $ 25,119
Operating Income........................... 2,333 2,545 2,003 1,590
Net Income................................. 1,420 1,518 2,004 1,114
Net Income Applicable to Common and Common
Equivalent Shares........................ 755 853 1,339 450
Net Income per Share:
Primary.................................. $ 0.17 $ 0.20 $ 0.32 $ 0.11
Assuming Full Dilution................... $ 0.17 $ 0.20 $ 0.32 $ 0.11
</TABLE>
- ---------------
(1) Fourth quarter 1995 results include oil and gas revenues of $1,377,000
related to the Columbia Gas settlement.
(2) Fourth quarter 1995 results include net exchange rate gains of $1,169,000,
net gains on disposition of assets of $2,713,000, primarily related to the
compromised total loss of the jack-up drilling rig MARQUETTE and impairment
expenses of $737,000 related to oil and gas property write-downs.
15. SUBSEQUENT EVENTS (UNAUDITED)
On May 23, 1996, the Company completed the acquisition of 9 jack-up
drilling rigs and a 50% interest in a joint venture which owns an additional
jack-up drilling rig and their related assets (collectively referred to as the
"Southwestern Rigs"), all of which were operated by Southwestern Offshore
Corporation. Pursuant to an Acquisition Agreement dated May 13, 1996, the
Southwestern Rigs were acquired from Viking Supply Ships A.S. and its
affiliates and Production Partner Inc. The purchase price of the Southwestern
Rigs was (a) $103.8 million in cash (after reductions of $6.2 million for
required refurbishment of certain Southwestern Rigs not made prior to closing)
plus (b) issuance of 1.2 million shares of the Company's Common Stock and
(c) assumption of certain contractual liabilities, including the Company's
guarantee of $4.25 million in indebtedness related to the refurbishment of the
jack-up rig contracted to work in Trinidad.
In part to finance the acquisition of the Southwestern Rigs, the Company
sold $150 million of 10.25% Senior Notes due 2003 (the "Notes") in a private
placement. Of the $144.8 million net proceeds received by the Company in
connection with the sale of the Notes, $103.8 million was used to fund the cash
portion of the purchase price for the Southwestern Rigs and $6.2 million has
been reserved to complete refurbishment of 2 rigs not completed prior to
closing.
In addition, on May 10, 1996, the Company acquired the jack-up drilling
rig OCEAN MAGALLANES (the "Diamond Rig") from Diamond Offshore Southern Company
for $4.5 million. The Company has renamed the Diamond Rig the Cliffs Drilling
No. 155 and intends to refurbish, upgrade and mobilize the Diamond Rig to
Venezuela at an additional cost estimated at $7.5 million. The Company has
allocated $12 million of the net proceeds from the sale of the Notes for the
acquisition and refurbishment of the Diamond Rig. The Company signed a letter
of intent with Maraven for the Diamond Rig and expects to sign an initial
eight-month contract with Maraven for use of the Diamond Rig in Lake Maracaibo,
Venezuela.
<PAGE> 1
EXHIBIT 99.4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Southwestern Offshore Corporation:
We have audited the accompanying consolidated balance sheets of
Southwestern Offshore Corporation (a Delaware corporation) and subsidiaries as
of December 31, 1995 and 1994, and the related consolidated statements of
operations, shareholder's equity and cash flows for the years ended December 31,
1995 and 1994, and the period from inception (July 19, 1993) through December
31, 1993. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Southwestern
Offshore Corporation and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for the years ended December
31, 1995 and 1994, and the period from inception (July 19, 1993) through
December 31, 1993, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
February 16, 1996
<PAGE> 2
SOUTHWESTERN OFFSHORE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JULY 19, 1993)
THREE MONTHS YEAR ENDED THROUGH
ENDED MARCH 31, DECEMBER 31, DECEMBER 31,
---------------- ----------------- ---------------
1996 1995 1995 1994 1993
------ ------- ------- ------- ---------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
REVENUES:
Dayrate revenue............................. $8,675 $ 4,286 $23,867 $17,584 $ 2,571
Bareboat revenue............................ -- 100 171 664 158
Management fee revenue and other revenue.... 144 78 449 403 55
------ ------- ------- ------- -------
8,819 4,464 24,487 18,651 2,784
OPERATING EXPENSES:
Rig operating expense....................... 5,799 4,388 20,560 13,380 1,505
General and administrative expense.......... 454 438 1,800 1,962 339
Charter hire expense........................ 1,870 728 4,290 3,864 741
Depreciation and amortization expense....... 86 425 1,619 1,252 51
------ ------- ------- ------- -------
Operating income (loss)............. 610 (1,515) (3,782) (1,807) 148
INTEREST EXPENSE, net of interest income...... 139 70 338 133 (1)
------ ------- ------- ------- -------
INCOME (LOSS) BEFORE TAXES.................... 471 (1,585) (4,120) (1,940) 149
PROVISION (BENEFIT) FOR INCOME TAXES.......... -- -- -- (51) 51
------ ------- ------- ------- -------
NET INCOME (LOSS)............................. $ 471 $(1,585) $(4,120) $(1,889) $ 98
====== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 3
SOUTHWESTERN OFFSHORE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------- ----------------
1996 1995 1994
--------- ------ -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................ $ 222 $ 143 $ 174
Accounts receivable, trade, net of allowance for doubtful
receivables of $45 at March 31, 1996 and December 31, 1995 and
$17 at December 31, 1994...................................... 5,365 4,559 3,224
Accounts receivable, joint venture............................... 1,447 -- --
Prepaid expenses................................................. 430 351 166
------- ------ -------
Total current assets..................................... 7,464 5,053 3,564
PROPERTY AND EQUIPMENT:
Rig equipment.................................................... 5,348 1,219 7,879
Other equipment.................................................. 216 209 182
Less-Accumulated depreciation.................................... (103) (777) (1,210)
------- ------ -------
Net property and equipment............................... 5,461 651 6,851
OTHER ASSETS....................................................... 8 115 316
------- ------ -------
$12,933 $5,819 $10,731
======= ====== =======
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable................................................. $ 4,432 $2,385 $ 1,904
Accrued liabilities.............................................. 2,798 2,397 1,275
Short-term debt.................................................. 2,318 1,368 811
------- ------ -------
Total current liabilities................................ 9,548 6,150 3,990
AMOUNTS DUE TO VIKING, net......................................... 5,571 2,326 8,531
SHAREHOLDER'S EQUITY:
Common stock, $.01 par value, 1,500 shares authorized and one
share issued and outstanding.................................. 1 1 1
Additional paid-in capital....................................... 3,253 3,253 --
Retained deficit................................................. (5,440) (5,911) (1,791)
------- ------ -------
Total shareholder's equity............................... (2,186) (2,657) (1,790)
------- ------ -------
$12,933 $5,819 $10,731
======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 4
SOUTHWESTERN OFFSHORE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JULY 19,
THREE MONTHS YEAR ENDED 1993) THROUGH
ENDED MARCH 31, DECEMBER 31, DECEMBER 31,
----------------- ----------------- -------------
1996 1995 1995 1994 1993
------- ------- ------- ------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................... $ 471 $(1,585) $(4,120) $(1,889) $ 98
Adjustments to reconcile net income (loss)
to net cash provided by (required by)
operations --
Depreciation and amortization........... 86 425 1,619 1,252 51
Increase (decrease) in operating cash
flows resulting from --
Accounts receivable, net.............. (2,253) 482 (1,335) (1,838) (1,386)
Accounts payable...................... 2,047 (445) 481 1,404 500
Accrued liabilities................... 401 424 1,122 877 398
Deferred income taxes................. -- -- -- (51) 51
Prepaid expenses and other............ 28 60 16 (136) (439)
------- ------- ------- ------- -------
Net cash provided by (required by)
operating activities............. 780 (639) (2,217) (381) (727)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in rig equipment and other
equipment............................... (6,343) (885) (3,666) (5,517) (2,544)
Proceeds from sale of assets............... 1,447 -- -- -- --
------- ------- ------- ------- -------
Net cash required by investing
activities....................... (4,896) (885) (3,666) (5,517) (2,544)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term debt................ 950 27 557 811 --
Proceeds for issuance of common stock...... -- -- -- -- 1
Increase (decrease) in amount due to
Viking.................................. 3,245 1,716 5,295 4,709 3,822
------- ------- ------- ------- -------
Net cash provided by financing
activities....................... 4,195 1,743 5,852 5,520 3,823
------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH.............. 79 219 (31) (378) 552
CASH AND CASH EQUIVALENTS, beginning of
period..................................... 143 174 174 552 --
------- ------- ------- ------- -------
CASH AND CASH EQUIVALENTS, end of period..... $ 222 $ 393 $ 143 $ 174 $ 552
======= ======= ======= ======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Noncash investing activities --
Carrying value of assets sold to
Viking................................ -- -- $ 8,247 -- --
Gain on sale of assets to Viking treated
as capital contribution............... -- -- $ 3,253 -- --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 5
SOUTHWESTERN OFFSHORE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TOTAL
--------------- PAID-IN EARNINGS SHAREHOLDER'S
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
------ ------ ---------- ---------- ------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE AT INCEPTION (JULY 19, 1993)............. -- $ -- $ -- $ -- $ --
INITIAL CAPITALIZATION........................... 1 1 -- -- 1
NET INCOME....................................... -- -- -- 98 98
---- ---- ------ -------- -------
BALANCE AT DECEMBER 31, 1993..................... 1 1 -- 98 99
NET LOSS......................................... -- -- -- (1,889) (1,889)
---- ---- ------ -------- -------
BALANCE AT DECEMBER 31, 1994..................... 1 1 -- (1,791) (1,790)
NET LOSS......................................... -- -- -- (4,120) (4,120)
GAIN ON SALE OF ASSETS TO VIKING TREATED AS
CAPITAL CONTRIBUTION........................... -- -- 3,253 -- 3,253
---- ---- ------ -------- -------
BALANCE AT DECEMBER 31, 1995..................... 1 1 3,253 (5,911) (2,657)
NET INCOME (UNAUDITED)........................... -- -- -- 471 471
---- ---- ------ -------- -------
BALANCE AT MARCH 31, 1996 (UNAUDITED)............ 1 $ 1 $3,253 $ (5,440) $(2,186)
==== ==== ====== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 6
SOUTHWESTERN OFFSHORE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERIM FINANCIAL INFORMATION
The unaudited consolidated financial statements as of and for the three
months ended March 31, 1996 and 1995 have been prepared in accordance with
generally accepted accounting principles for interim financial information.
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 Company's
financial position and results of operations for the interim periods 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, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BUSINESS
Southwestern Offshore Corporation and subsidiaries (the Company) was formed
under the laws of the state of Delaware on July 19, 1993. The Company is a 100
percent owned subsidiary of Viking Supply Ships, A.S. (Viking), which is
incorporated under the laws of Norway. The Company was established primarily to
operate drilling rigs owned by Viking and others. The Company is primarily
engaged in domestic and international oil and gas drilling operations. The
Company's principal emphasis is operations in the U.S. Gulf of Mexico, and the
Company's international operations are conducted through its subsidiary,
Southwestern Offshore International Two, Inc., in the Middle East.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
REVENUE RECOGNITION
Drilling contracts are on a dayrate basis, and revenues and expenses are
recognized as the work progresses. Charter payments received for rigs chartered
to unaffiliated third parties are recorded as earned during the charter period.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, all liquid investments with
maturities at the date of purchase of three months or less are considered cash
equivalents.
FACTORING OF ACCOUNTS RECEIVABLE
In the normal course of business, the Company sells its trade accounts
receivable on a pre-approved basis. The Company pays a factoring fee as
compensation for the interest cost and other services provided by the factoring
company.
CONCENTRATION OF CREDIT RISK
The market for the Company's services is the offshore oil and gas industry,
and the Company's customers consist primarily of major and independent oil and
gas producers. The Company performs ongoing credit evaluations of its customers
and generally does not require material collateral. The Company provides
allowances for potential credit losses when necessary. For the year ended
December 31, 1995, two customers each accounted for 15 percent of the Company's
total revenues, for the year ended December 31, 1994, three
<PAGE> 7
SOUTHWESTERN OFFSHORE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
customers accounted for 24 percent, 16 percent and 10 percent, respectively, of
the Company's total revenues, and for the period ended December 31, 1993, two
customers accounted for 77 percent and 15 percent, respectively, of the
Company's total revenues.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment include refurbishments and improvements made to
chartered rigs and are stated at cost. Depreciation of refurbishments and
improvements made to rigs chartered from Viking and all other equipment is
provided on a straight-line method over the remaining estimated useful life of
five to seven years from the date the property or equipment is placed in service
by the Company. During 1995, the Company sold to Viking property and equipment
for $11,500,000 and reduced its obligation to Viking by $8,247,000. The
resulting gain of $3,253,000 was treated as a contribution of capital for
financial reporting purposes. Amortization of improvements made to rigs
chartered from others is provided on a straight-line basis over the term of the
initial charter period plus any charter period extensions. Repairs and
maintenance expenditures are charged to expense as incurred.
In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," was issued. SFAS No. 121, which becomes effective in 1996,
requires that certain long-lived assets be reviewed for impairment whenever
events indicate that the carrying amount of an asset may not be recoverable and
that an impairment loss be recognized under certain circumstances in the amount
by which the carrying value exceeds the fair value of the asset. The Company
will adopt SFAS No. 121 in 1996, as required, and believes the adoption will
have no effect on the Company's consolidated results of operations or financial
position.
INCOME TAXES
Deferred taxes are recognized for revenues and expenses reported in
different years for financial statement purposes and income tax purposes in
accordance with SFAS No. 109, "Accounting for Income Taxes." The statement
requires, among other things, the liability method of computing deferred income
taxes. The liability method is based on the amount of current and future taxes
payable using tax rates and laws in effect at the balance sheet date.
FOREIGN CURRENCY TRANSLATION
The Company follows a translation policy in accordance with SFAS No. 52,
"Foreign Currency Translation." The U.S. dollar has been designated as the
functional currency for the Company's foreign operations. Foreign currency
exchange gains and losses are included in other income and expenses as incurred.
Foreign currency gains and losses were not significant in 1995 or 1994, and the
Company did not have any foreign operations in 1993.
INDUSTRY CONDITIONS
Results of operations and financial condition of the Company should be
considered in light of the significant fluctuations in demand experienced by
drilling contractors as rapid changes in oil and gas
<PAGE> 8
SOUTHWESTERN OFFSHORE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
producers' expectations, budgets and drilling plans occur. The fluctuations can
rapidly impact the Company's results of operations and financial condition as
supply and demand factors directly affect utilization and dayrates, which are
the primary determinants of cash flow from the Company's operations. Viking has
provided financial support to the Company including, but not limited to, amounts
necessary for refurbishments and improvements of rigs and working capital. The
amounts reported in the consolidated financial statements provided through this
arrangement are $2,326,000 and $8,531,000 as of December 31, 1995 and 1994,
respectively. Viking has agreed to provide financial support, if necessary,
during 1996 which should allow the Company to continue its operations, realizing
its assets and discharging its liabilities.
RECLASSIFICATION
Certain prior-period amounts in the consolidated financial statements have
been reclassified for comparable purposes. Such reclassifications had no effect
on the net loss or the overall financial condition of the Company.
2. FINANCING AGREEMENT:
At times, the Company sells certain of its trade accounts receivable to a
commercial factoring company (factor). Under the terms of the factoring
agreement, the factor ultimately remits to the Company the factor amounts less a
1.5 percent factoring fee. Amounts are factored without recourse as to credit
losses but with recourse as to disputes and discounts. The Company also pays, as
an additional fee to the factor, interest on the uncollected balance from the
time trade accounts receivable are sold to the factor until payment is received,
at a rate equal to the factor's bank borrowing rate plus 1.5 percent. Factoring
fees and the interest charges are included in interest expense in the
consolidated statements and totaled $351,000 in 1995 and $146,000 in 1994.
Viking and an officer of the Company have agreed to guarantee payment of any
losses incurred by the factor under this arrangement.
3. RELATED-PARTY TRANSACTIONS:
The Company charters eight rigs owned or controlled by Viking at
approximately market rates. Charter expenses to Viking included in the
consolidated statements were $4,026,000, $3,636,000 and $741,000 for periods
ending December 31, 1995, 1994 and 1993, respectively. Property and equipment
included $458,000 and $6,861,000 on December 31, 1995 and 1994, respectively,
relating to refurbishments and improvements to rigs which are owned by Viking
and chartered to the Company. The charter agreements were established for an
initial two-year period which expired in November 1995; and have been extended
through August 1996; and, among other things, include options to purchase the
rig under charter.
4. FEDERAL INCOME TAXES:
As a result of tax losses generated, the Company made no current provisions
for U.S. federal income taxes during the years ended December 31, 1995 and 1994,
respectively. However, as the 1993 tax loss resulted from certain timing
differences which offset book income, a deferred provision was recorded in 1993
and reversed in 1994 due to losses in 1994 offsetting the reversal of the timing
differences. Components of the benefit for income taxes reflected in the
statements of operations consist of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current............................................ $ -- $ -- $ --
Deferred........................................... -- (51,000) 51,000
-------- -------- --------
$ -- $(51,000) $ 51,000
======== ======== ========
</TABLE>
<PAGE> 9
SOUTHWESTERN OFFSHORE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The timing differences between book and tax bases include depreciation,
accrued liabilities and prepaid expenses. In addition, the Company had generated
a net operating loss carry forward of approximately $550,000 and $830,000 as of
December 31, 1995 and 1994, respectively, which begins to expire in 2008. The
Company had deferred tax assets, including net operating loss (NOL) carry
forwards and other timing differences, of $870,000 and $400,000 as of December
31, 1995 and 1994, respectively. The Company has established a full valuation
allowance against these assets due to the uncertainty of future taxable income.
The gain of $3,253,000, discussed in Note 1 above, which was treated as a
contribution of capital for financial reporting purposes, was treated as taxable
income for federal income tax purposes, thus reducing the otherwise available
NOL.
5. COMMITMENTS AND CONTINGENCIES:
The Company occupies administrative offices and leases certain equipment
under operating leases from unaffiliated third parties. Lease terms range in
length from one to five years. Aggregate minimum future annual rental
commitments under the operating leases with lease terms in excess of one year as
of December 31, 1995, are as follows:
<TABLE>
<S> <C>
1996............................................................. $67,000
1997............................................................. 67,000
1998............................................................. 67,000
1999............................................................. 61,000
</TABLE>
During 1994 and 1995, the Company chartered a rig from an unaffiliated
third party for a period of one year plus extension options to the Company. The
charter agreement, among other things, provides the Company an option to
purchase the rig at any time during the term of the charter.
The Company has employment agreements with certain officers. These
arrangements provide, among other things, for severance payments of such
officers' annual salary in the event of termination after a change in control,
as defined, of the Company. The Company has an incentive arrangement which
provides for compensation to certain officers upon sale of any or all of the
chartered rigs.
The Company is a defendant in certain claims or contingencies arising out
of operations in the normal course of business. In the opinion of management,
uninsured losses, if any, in excess of those accrued will not have a material
adverse effect on the Company's financial statements. The Company is
self-insured for the deductible portion of its insurance coverage. Future events
or claims may increase the Company's costs for such insurance. In the opinion of
management, adequate accruals have been made based on known and estimated
exposures.
6. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT (UNAUDITED)
On May 23, 1996, Cliffs Drilling Company ("Cliffs") completed the
acquisition of 9 jack-up drilling rigs and a 50% interest in a joint venture
which owns an additional jack-up drilling rig and their related assets, all of
which were operated by the Company. Pursuant to an Acquisition Agreement dated
May 13, 1996, the jack-up rigs were acquired from Viking and its affiliates and
Production Partner Inc. The purchase price of the jack-up rigs was (a) $103.8
million in cash (after reductions of $6.2 million for required refurbishment
of certain rigs not made prior to closing) plus (b) issuance of 1.2 million
shares of Cliffs' common stock and (c) assumption of certain contractual
liabilities, including the Cliffs' guarantee of $4.25 million in indebtedness
related to the refurbishment of the jack-up rig contracted to work in Trinidad.
