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EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
BY AND AMONG
DELAVNEY-GESTAO E CONSULTADORIA LDA.
CONSTRUTORA ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ S.A.,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ PERFURACAO LTDA.
DRILTECH INC.
AND
CLIFFS DRILLING COMPANY
DECEMBER 6, 1996
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of this 6th day of December, 1996 by and between DELAVNEY-GESTAO E
CONSULTADORIA LDA., a corporation organized under the laws of the Madeira
Islands ("Seller"), CONSTRUTORA ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ S.A., a corporation organized
under the laws of Brazil ("Construtora"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ PERFURACAO LTDA., a
corporation organized under the laws of Brazil ("▇▇▇▇▇▇▇"), DRILTECH INC., a
corporation organized under the laws of the Cayman Islands ("Driltech"),
(Construtora, ▇▇▇▇▇▇▇ and Driltech being collectively referred to herein as
"Parent"), and CLIFFS DRILLING COMPANY, a corporation organized under the laws
of the State of Delaware ("Buyer").
W I T N E S S E T H:
WHEREAS, ▇▇▇▇▇▇▇ and Driltech collectively own all of the issued and
outstanding shares of capital stock of Seller; and
WHEREAS, Seller owns all of the issued and outstanding shares of
capital stock of GREENBAY DRILLING COMPANY LTD., a corporation organized under
the laws of the British Virgin Islands ("BVI"); and
WHEREAS, Seller desires to sell to Buyer the BVI Shares (as
hereinafter defined), and Buyer desires to acquire the BVI Shares on the terms
and conditions hereinafter set forth; and
WHEREAS, Construtora, ▇▇▇▇▇▇▇ and Driltech desire to take such
actions as are necessary or appropriate to cause Seller to effect the
transactions described herein, and in connection therewith, to guarantee
certain of the agreements and obligations of Seller 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:
"Affiliate" means, 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.
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"▇▇▇▇▇▇▇" 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, the following property, assets and
rights, tangible and intangible, which are to be indirectly acquired by Buyer
by way of purchase of the BVI Shares pursuant to this Agreement:
(a) (i) the following offshore drilling rig:
ATENA
(ii) the following land rigs:
REDENCAO
SOBERANA
PROMISSAO
NOVA ERA
as more particularly described in Schedule 1(a);
(b) the Inventory (as hereinafter defined);
(c) the benefit and burden, subsequent to the Closing Date, of all
right, title and interest of the lessee under that certain equipment lease
agreement more particularly described on Schedule 1(c) (the "Lease Agreement")
existing on the Closing Date;
(d) the benefit and burden, subsequent to the Closing Date, of all
right, title and interest as drilling contractor under all the drilling
contracts or other charters or arrangements and any amendments thereto for the
employment of the Drilling Rigs (the "Drilling Contracts") existing on the
Closing Date, including without limitation the Drilling Contracts identified on
Schedule 1(d) existing on the Closing Date;
(e) the benefit and burden, subsequent to the Closing Date, of all
right, title and interest of Parent (all of which benefit and burden having
been transferred to BVI), under all other contracts relating to the Drilling
Rigs 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;
(f) the following tangible and intangible assets used or held for
use by Parent (all of which benefit and burden having been transferred to BVI)
in connection with the Business, to the extent assignable by law:
(i) all patents, copyrights, trade secrets, know-how, inventions,
computer
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software (including documentation and object and source codes) and
similar rights (including all registrations, applications, licenses
and rights with respect thereto) relating to, or used in connection
with the operation of, the Drilling Rigs (collectively referred to
herein as "Intellectual Property"), including without limitation the
Intellectual Property described on Schedule 1(f)(i), and all rights to
recover for infringement thereon;
(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 the
Drilling Rigs as listed on Schedule 1(f)(ii) ("Permits");
(iii) all books, records, papers and instruments of BVI of
whatever nature and wherever located, including records which shall be
acquired by BVI from Parent as prior owners of any of the Assets, that
relate to ownership or operation of the Assets, including without
limitation all financial and accounting records, all records
physically located on the Drilling Rigs on the Closing Date and all
books and records relating to any employees of BVI, 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,
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; and
(iv) computer inventory and maintenance programs and
computer models used in connection with the maintenance and operation
of the Drilling Rigs; and
(g) any and all insurance proceeds received or receivable
associated with or attributable to damage to the Offshore Drilling Rig prior to
the Closing Date.
"BVI" has the meaning specified in the preamble.
"BVI Shares" means all of the outstanding shares, par value US $10.00
per share, of BVI.
"Benefit Plan" means any employee benefit plan, policy, agreement or
arrangement, including without limitation, pension, stock option, share saving,
deferred compensation, profit sharing, incentive, bonus or severance pay plans
or arrangements, whether legally enforceable or not.
"Best Efforts" means a party's best efforts in accordance with
reasonable commercial practice and without the incurrence of unreasonable
expense.
"Business" means the contract drilling and production related service
businesses engaged in by Parent (as assigned to BVI) prior to the Closing Date,
only insofar as it relates to the Assets, including any business relationships
between BVI and Parent.
"Business Day" means a day on which national banks are generally open
for the transaction of business in New York, New York.
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"Buyer" has the meaning specified in the preamble.
"Buyer Basket" has the meaning specified in Section 10.2(a).
"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.
"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.
"Consent Required Contract" has the meaning specified in Section
8.2(a).
"Construtora" has the meaning specified in the preamble.
"Contract Management Agreement" has the meaning specified in Section
8.2(b).
"Drilling Contracts" has the meaning specified in paragraph (d) of the
definition of Assets.
"Drilling Rigs" means the offshore drilling rig "ATENA", and the land
rigs "REDENCAO", "SOBERANA", "PROMISSAO" and "NOVA ERA", and related Inventory.
"Driltech" has the meaning specified in the preamble.
"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.
"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" has the meaning specified in paragraph (f)(i)
of the definition of Assets.
"Inventory" means any and all drilling machinery and equipment
(including without limitation, floor tools and blow-out preventers), engines,
machinery, equipment, mooring systems and equipment, riser tensioner systems
and equipment, boots, covers, anchors, chains, cables, tackle, rigging,
apparel, furniture, computers and computer equipment, computer software,
fittings and equipment, tools, pumps and pumping equipment, living quarters
located thereon, spare components and parts, tubulars, drill pipe, drill
collars, bunkers and lubricating oils, racking, supporting inventory and
stores, and all other appurtenances thereto appertaining or belonging to one of
the Drilling Rigs or, to the extent such items are owned by BVI (or Parent, in
which case same shall be transferred to BVI), appertaining or belonging to the
Leased Drilling Rig, whether
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located on the Drilling Rigs or the Leased Drilling Rig or located elsewhere;
and the top drive and related equipment owned by BVI and used in connection
with the Leased Drilling Rig; including without limitation that set forth in
Schedule 2; excluding, however, equipment and stores owned by third-party
suppliers (such as catering consumables, cement units or logging equipment)
described in Schedule 3, and equipment for which rental agreements are listed
on Schedule 1(e).
"Lease Agreement" has the meaning specified in paragraph (c) of the
definition of Assets.
"Leased Drilling Rig" means the drilling rig and related equipment
referenced in the Lease Agreement.
"Nonassigned Contract" has the meaning specified in Section 8.2(b).
"Offshore Drilling Rig" means the Drilling Rig specified in paragraph
(a)(i) of the definition of Assets.
"Other Contracts" has the meaning specified in paragraph (e) of the
definition of Assets.
"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 and maritime liens arising in the ordinary course of business
relating to obligations as to which there is no default on the part of BVI or
any prior owner of an Asset, excluding any mortgage; (iii) the Drilling
Contracts; (iv) the Other Contracts; and (v) any other Encumbrances, title
defects or imperfections or irregularities in title which in the aggregate do
not exceed $50,000; 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.
"Petrobras" means Petroleo Brasileiro S.A. - Petrobras.
"Purchase Price" has the meaning specified in Section 2.2.
"Seller" has the meaning specified in the preamble.
"Seller Basket" has the meaning specified in Section 10.1(a).
"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,
municipal, 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.
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ARTICLE II
ACQUISITION TRANSACTIONS
2.1 Stock Purchase. Upon the terms and subject to the conditions
set forth in this Agreement, on the Closing Date, Seller shall sell, assign,
transfer, deliver and convey to Buyer, and Buyer shall purchase, acquire,
accept and pay for, as hereinafter provided, all of the BVI Shares, and Seller
shall deliver to Buyer certificates representing the BVI Shares, duly endorsed
for transfer.
2.2 Purchase Price. The aggregate purchase price for the BVI
Shares shall be U.S.$28,500,000 (the "Purchase Price"). At the Closing, Buyer
shall pay the Purchase Price to Seller in immediately available funds by wire
transfer to the account designated by Seller.
2.3 ▇▇▇▇▇▇▇ Money Deposit. Within seven (7) business days of
execution and delivery of this Agreement by all parties, Buyer shall deposit
with an escrow agent designated by Seller and reasonably acceptable to Buyer,
the sum of $2,850,000 as ▇▇▇▇▇▇▇ money. At Buyer's option, the ▇▇▇▇▇▇▇ money
deposit, plus interest earned thereon, if any, may be applied toward payment of
the Purchase Price at Closing. Except as otherwise provided in Section 9.3(a)
with respect to the forfeiture of ▇▇▇▇▇▇▇ money as liquidated damages, the
▇▇▇▇▇▇▇ money deposit, plus interest earned thereon, if any, shall be refunded
to Buyer in the event of termination of this Agreement pursuant to Section 9.1
by Buyer or Seller. Buyer shall bear and pay all escrow fees and expenses
associated with the escrow arrangement described in this Section 2.3.
2.4 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 Parent, except as specifically
provided herein, it being expressly acknowledged that it is the intention of
the parties hereto that all liabilities that Seller and Parent have or may have
in the future, whether fixed or contingent, and whether known or unknown, shall
be and remain the liabilities of Seller or Parent, as applicable.
ARTICLE III
THE CLOSING
3.1 Time and Place of Closing. The Closing shall take place at
the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ P.C., ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, at 9:00 a.m., local time, or at such other place or time as the
parties may agree in writing, on a date on or before January 31, 1997 mutually
agreed upon by Buyer, Seller and Parent.
3.2 Deliveries by Seller. At the Closing, Seller shall deliver or
cause to be delivered to Buyer the following, dated as of the Closing Date:
(a) Stock certificate representing the BVI Shares, duly endorsed
for transfer.
(b) Written resignations of all officers and directors of BVI.
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(c) the certificate and opinion of counsel contemplated by
Sections 7.3 and 7.4, respectively; and
(d) 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 to
Seller the following:
(a) the Purchase Price by wire transfer of immediately available
funds to a bank account designated by Seller;
(b) the certificate and opinion of counsel contemplated by
Sections 6.3 and 6.4, respectively; and
(c) 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Parent hereby jointly and severally represent and warrant
to Buyer as follows:
4.1 Organization, Existence and Qualification.
(a) BVI 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.
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the Madeira 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. Construtora is a
corporation duly organized, validly existing and in good standing under the
laws of Brazil, 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. ▇▇▇▇▇▇▇ is a corporation duly organized,
validly existing and in good standing under the laws of Brazil, 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. Driltech is a corporation duly organized, validly
existing and in good standing under the laws of the Cayman 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) Each of BVI, Seller and Parent 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 to be
qualified or licensed, unless the failure 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.
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(c) BVI (i) has not 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 not a party to a merger, consolidation
or other amalgamation which has not become effective; (iii) has not been
declared bankrupt, and no action or request is pending to declare such company
bankrupt; or (iv) has not filed for or been granted an official moratorium.
4.2 Ownership of Shares. The BVI Shares are owned beneficially
and of record by Seller, and shall be transferred to Buyer free and clear of
all liens, mortgages, pledges, security interests, restrictions, prior
assignments, encumbrances and claims of any kind or nature whatsoever. The BVI
Shares are not subject to any restriction with respect to their
transferability.
4.3 Capitalization. The authorized capital of BVI consists solely
of 3,000,000 shares, par value US $10.00 per share, of which 2,540,000 shares
are issued and outstanding and which are owned beneficially and of record by
Seller. All of the BVI Shares have been duly authorized, validly issued (free
of all past, present and future preemptive rights), and are fully paid and
non-assessable. There are no outstanding or authorized options, warrants,
subscriptions, calls, puts, conversion or other rights, contracts, agreements,
commitments or understandings of any kind obligating either BVI or Seller to
issue, sell, purchase, return, redeem or pay any distribution or dividend with
respect to any shares of the capital of BVI or any other securities convertible
into, exchangeable for or evidencing the right to subscribe for any shares in
the capital of or other ownership interest in BVI. Seller has made available
to Buyer accurate and complete copies of the memorandum and articles of
association of BVI (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.
4.4 Authority, Etc. Each of Seller and Parent has all necessary
corporate power and authority to execute and deliver this Agreement and all
agreements, instruments and documents to be executed and delivered hereunder by
it, to consummate the transactions contemplated hereby and to perform all terms
and conditions hereof to be performed by it. The execution and delivery of
this Agreement and all agreements, instruments and documents to be executed and
delivered by Seller and Parent hereunder, the performance by Seller and Parent
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) and
shareholders of BVI, Seller and Parent, 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
Seller and Parent have been duly authorized to do so by all necessary actions
on the part of Seller or Parent, as applicable.
4.5 Enforceable Agreements. This Agreement constitutes, and each
other agreement or instrument to be executed hereunder by Seller or Parent,
when so executed and delivered, will constitute, the legal, valid and binding
obligation of Seller and Parent, 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).
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4.6 No Violations. Except as set forth on Schedule 4.6, the
execution and delivery of this Agreement by Seller and Parent, the fulfillment
of and compliance by them with the terms and conditions hereof and the
consummation of the transactions contemplated hereby will not:
(a) violate any of the terms of the memorandum and articles of
association, articles of incorporation, bylaws or other charter documents of
BVI, Seller or Parent;
(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 BVI, Seller or Parent is a party or by which BVI, Seller or Parent 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, or (ii) result in the creation of
any Encumbrance on any of the Assets, or otherwise give any person the right to
terminate any Lease Agreement, Drilling Contract, Permit or Other Contract; or
(c) to the knowledge of Seller or Parent, 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
Seller or Parent, or the assets of BVI, Seller or Parent, 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.
4.7 Ownership of Assets. As of the date of this Agreement, BVI
owns good and marketable title to the Assets, free and clear of all
Encumbrances except for Permitted Encumbrances and Encumbrances described in
Schedule 8.8. As of the Closing Date, BVI will own good and marketable title
to the Assets, free and clear of all Encumbrances except for Permitted
Encumbrances and Encumbrances, if any, created or permitted to be imposed by
Buyer.
4.8 Drilling Rig Classifications and Certifications.
(a) The classification of each Drilling Rig and, if applicable,
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
Drilling Rigs based on the most recent survey of such Drilling Rig as of the
date of this Agreement, as well as a listing of required certifications and the
expiration date for each such certification. Each of the Drilling Rigs has or
will have at Closing in full force and effect in the name of BVI 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 8.5).
(b) The Leased Drilling Rig has been maintained in, and at Closing
will be in, the same good order, condition and repair as existed upon
commencement of the Lease Agreement, ordinary wear and tear excepted. The
Leased Drilling Rig has or will have at Closing in full force and effect such
permits, class certifications and approval requirements as existed upon
commencement of the Lease Agreement and as may be required in the jurisdiction
in which the Leased Drilling Rig presently operates.
(c) Except as disclosed to Buyer in writing at or prior to the
Closing, to the knowledge of Seller, none of the Drilling Rigs or the Leased
Drilling Rig has suffered any material damage to its condition (excepting
normal wear and tear) since November 5, 1996, the date of completion of
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Buyer's inspection of the Drilling Rigs and the Leased Drilling Rig. For
purposes of the preceding sentence, material damage is defined as any item of
damage not covered by insurance that would require the expenditure of more than
$100,000 to repair.
4.9 Inventory.
(a) As of the date of this Agreement, BVI owns good and
marketable title to the Inventory, free and clear of all Encumbrances except
for Permitted Encumbrances and Encumbrances described in Schedule 8.8. As of
the Closing Date, BVI will own good and marketable title to the Inventory, 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 Drilling Rigs 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, BVI maintained Inventory with
respect to the Drilling Rigs as specified on Schedule 2, which Inventory is in
such amounts and of such quality (i) as would comply with any applicable
Drilling Contract or Other Contract and (ii) as is consistent with past
practice.
4.10 Certain Property on Drilling Rigs. Since November 5, 1996,
the date of completion of Buyer's inspection of the Drilling Rigs and the
Leased Drilling Rig, subject to normal wear and tear and consumption in the
ordinary course of business, neither Seller nor Parent has removed or permitted
to be removed any tangible property from any of the Drilling Rigs or the Leased
Drilling Rig, which tangible property has a value equal to or greater than
$50,000 in the aggregate for all the Drilling Rigs and the Leased Drilling Rig,
except for any such tangible property relocated from one Drilling Rig to
another Drilling Rig or transferred to Inventory or consumed in the operation
of the Business.
4.11 Contracts. Seller has made available to Buyer for review
complete and correct copies of the Lease Agreement, Drilling Contracts and
Other Contracts, and all assignments thereof. Except as set forth on Schedule
4.11, all consents of any person required to complete transfer to BVI of each
of the Lease Agreement, Drilling Contracts and Other Contracts have been
received by BVI. As of the Date of this Agreement, each of the Lease
Agreement, Drilling Contracts and Other Contracts is valid, binding and in full
force and effect against BVI (or, with respect to certain Consent Required
Contracts, ▇▇▇▇▇▇▇ or Driltech), and, to the knowledge of Seller and Parent, is
valid, binding and in full force and effect against the other party thereto.
As of the Closing Date, each of the Lease Agreement, Drilling Contracts and
Other Contracts will be valid, binding and in full force and effect against BVI
(or, with respect to certain Non-Assigned Contracts, ▇▇▇▇▇▇▇ or Driltech), and
to the knowledge of Seller and Parent, valid, binding and in full force and
effect against the other party thereto. Except as set forth on Schedule 4.11,
neither BVI, ▇▇▇▇▇▇▇, nor Driltech, as applicable, is in default in any
material respect, and no notice of alleged default has been received by Seller,
Parent or BVI under any of the Lease Agreement, Drilling Contracts or Other
Contracts, and no other party thereto is, to the knowledge of Seller and
Parent, in default thereunder in any material respect, and to the knowledge of
Seller and Parent, 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 Lease Agreement, Drilling Contracts or Other Contracts by Seller,
▇▇▇▇▇▇▇, Driltech or BVI or any other parties thereto, or (ii) otherwise give
any other party to such a contract the right to charge penalties to Seller,
▇▇▇▇▇▇▇, Driltech or BVI or
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reduce the rates that would otherwise be payable to Seller, ▇▇▇▇▇▇▇, Driltech
or BVI under such a contract.
4.12 Intellectual Property. Except for the Intellectual Property
set forth on Schedule 1(f)(i), Seller and BVI do not own, hold, use or have
pending any material Intellectual Property in connection with the operation of
the Assets or the Business. As of the Date of this Agreement, BVI owns or has
rights to use, and as of the Closing Date, BVI will own or have rights to use,
all Intellectual Property, free from burdensome restrictions, that are
necessary for the operation of the Assets and the Business as presently
operated. Neither Seller nor BVI 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 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, Seller, Parent or
BVI for the purpose of operating the Drilling Rigs or otherwise conducting the
Business.
4.14 Insurance. Seller, Parent and BVI, as applicable, maintain
with sound and reputable insurers, and 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 are
customary for drilling contractors of similar size engaged in similar
operations. All premiums due and payable with respect to such policies have
been timely paid. No notice of cancellation of, or indication of any intention
not to renew, any such policy has been received by Seller, Parent or BVI. Set
forth on Schedule 4.14 is a summary description of (i) the insurance maintained
by Seller, Parent and BVI covering each of the Drilling Rigs and/or the
operation of the Business and (ii) all outstanding insurance claims associated
with each of the Drilling Rigs.
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 Seller and Parent, overtly threatened against any of the Assets or
against Seller, Parent or BVI relating to the ownership of the Assets or
operation of the Business. None of such litigation, proceedings, claims, suits
or investigations (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 BVI or create an Encumbrance, or otherwise affect
the ownership or operation of, any of the Assets.
(b) Except for matters described on Schedule 4.15(b), neither
Seller, Parent, BVI nor the Assets, is subject to any judicial or
administrative judgment, order, decree or restraint in a manner that is
material and adverse to Seller, ▇▇▇▇▇▇▇, Driltech, BVI or the Business taken as
a whole, or that would create an Encumbrance, or otherwise affect the ownership
or operation of, any of the Assets. Except as referred to on Schedule 4.15(b),
neither Seller, ▇▇▇▇▇▇▇, Driltech, BVI, nor any Affiliate of Seller, Parent or
BVI, has received any notifications or charges in writing from any Governmental
Entity involving alleged violations of or alleged obligations to remediate
under
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occupational safety and health or water quality or other environmental matters
that materially and adversely affect the conduct by Seller, ▇▇▇▇▇▇▇, Driltech
or BVI of its operations or that have not been finally dismissed or otherwise
disposed of.
4.16 Governmental Approval. Except as provided in Schedule 4.16,
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 and Parent or the consummation by any Seller and Parent of the
transactions contemplated hereby.
4.17 Compliance With Laws.
(a) Except as set forth on Schedule 4.17(a), neither Seller,
Parent nor BVI 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
Offshore Drilling Rig, which violation or default materially and adversely
affects the ownership of the Assets or operation of the Business, and no claim
is pending or, to the knowledge of Seller and Parent, overtly threatened with
respect to any such matters which if determined adversely to Seller, Parent or
BVI would have such effect.
(b) Without limiting Section 4.17(a) and except as set forth on
Schedule 4.17(b), Seller, Parent and BVI, as applicable, have conducted the
Business in accordance with Applicable Environmental Laws, and neither Seller,
Parent nor BVI is subject to any pending or, to the knowledge of Seller and
Parent, overtly threatened investigation or inquiry by any Governmental Entity,
or to any remedial obligations, under any Applicable Environmental Laws.
4.18 Absence of U.S. Nexus. No sales in or into the United States
by Parent, Seller or any of their Affiliates during Parent's most recent fiscal
year were attributable to the Assets. BVI neither (i) holds assets located in
the United States having an aggregate book value of $15 million or more, nor
(ii) made aggregate sales in or into the United States of $25 million or more
during its most recent fiscal year.
4.19 Employees and Employee Benefits. Except as set forth on
Schedule 4.19, BVI has no employees and no employee Benefit Plans.
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 as a group to or by which
Seller, ▇▇▇▇▇▇▇, Driltech or BVI is a party or is bound; (ii) no employees of
Seller, ▇▇▇▇▇▇▇, Driltech or BVI 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 Seller, ▇▇▇▇▇▇▇, Driltech or BVI;
(iv) neither Seller, ▇▇▇▇▇▇▇, Driltech nor BVI has been involved with any
representational campaign by any union or other organization or group seeking
to become the collective bargaining representative of any of its employees, or
been subject to or, to the knowledge of Seller, ▇▇▇▇▇▇▇ and Driltech,
threatened with any strike or other concerted labor activity or dispute; and
(v) neither Seller, ▇▇▇▇▇▇▇, Driltech nor BVI is obligated to bargain
collectively with respect to wages, hours and other terms and conditions of
employment with any recognized or
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certified labor organization, collective bargaining representative or group of
employees.
(b) Each of Seller, ▇▇▇▇▇▇▇, Driltech and BVI 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 its
employees, and neither Seller, ▇▇▇▇▇▇▇, Driltech nor BVI is engaged in any
unfair labor practices or unlawful employment practices. There is no pending
or, to the knowledge of Seller, ▇▇▇▇▇▇▇ and Driltech, threatened action, claim,
investigation or inquiry by or before, and neither Seller, ▇▇▇▇▇▇▇, Driltech
nor BVI 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 employee.
4.21 Tax Matters. Except as disclosed on Schedule 4.21:
(a) Each of Seller, Parent and BVI 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 it 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 Seller, Parent and BVI 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 Seller, Parent or BVI that has not been resolved or paid, and no
such issues raised could reasonably be expected to result in a proposed tax
deficiency to Seller, Parent or BVI for any other period not so examined;
(d) All Taxes that are required to be withheld or collected by
Seller, Parent or BVI 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 Seller, Parent and BVI has (and as of the Closing Date
will have) made all deposits required with respect to Taxes;
(e) Neither Seller, Parent nor BVI 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.
4.22 Financial Statements. On the Closing Date, Seller will have
delivered to Buyer accurate and complete copies of BVI's unaudited balance
sheet as of the Closing Date, and the related unaudited consolidated statements
of income, stockholders' equity, and cash flows/changes in financial position
for the period of inception through the Closing Date, and the notes and
schedules thereto. The financial statements will (i) have been prepared from
the books and records of BVI in conformity with generally accepted accounting
principles applied on a basis consistent throughout the periods involved, and
(ii) accurately, completely and fairly present consolidated financial position
of BVI 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 Liabilities and Commitments.
(a) Seller was incorporated on November 4, 1996. Since the date
of its incorporation,
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Seller has conducted no business other than to acquire and hold the BVI Shares.
Seller 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 4.23(a).
(b) BVI was incorporated on November 12, 1996. Since the date of
its incorporation, BVI has conducted no business other than to acquire, own and
operate the Assets. BVI 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 4.23(b).
4.24 Ordinary Course; Absence of Material Adverse Change. Since
the date of the most recent financial statements of BVI delivered to Buyer
pursuant to Section 4.22, each of Seller and BVI has conducted its business
only in the ordinary and usual course, and there has been no material adverse
change in the Business, Assets, operations, prospects or condition (financial
or otherwise) of such Seller, Parent or BVI. There is no fact, development or
threatened development known to Seller or Parent that would materially
adversely affect the Business, Assets, operations, or prospects of Seller,
Parent or BVI other than such conditions as may affect the economy generally.
4.25 No Brokers. Except for Bassoe Offshore (whose fee in respect
of transactions contemplated hereby shall be paid solely by Seller), neither
Seller nor Parent 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 Seller or Parent in connection with such transactions. Seller and Parent
jointly and severally agree to indemnify and hold harmless BVI and Buyer from
and against any and all losses, claims, demands, damages, costs and expenses,
including, without limitation, reasonable attorneys' fees and expenses, which
BVI or 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 Seller or Parent.
4.26 Disclosure. No representation or warranty made by Seller or
Parent in this Agreement and no statement of Seller or Parent or its
representatives contained in any document, certificate or other writing
furnished or to be furnished by Seller or Parent 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. Any
information furnished in any schedule with reference to any heading or with
reference to any section of this Agreement, shall be deemed to modify,
supplement and clarify each provision of this Agreement to which such
disclosure could be applicable.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization, Existence and Qualification. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware, with all necessary corporate
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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. Buyer 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 to be qualified or licensed, unless the failure 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.
5.2 Authority; Etc. Buyer has all necessary corporate power and
authority to execute and deliver this Agreement and all agreements, instruments
and documents to be executed and delivered hereunder by it, to consummate the
transactions contemplated hereby and to perform all terms and conditions hereof
to be performed by it. The execution and delivery of this Agreement and all
agreements, instruments and documents to be executed and delivered by Buyer
hereunder, the performance by 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 Buyer, and no other corporate proceedings
of 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
Buyer hereunder, have been duly authorized to do so by all necessary actions on
the part of Buyer.
5.3 Enforceable Agreement. This Agreement constitutes, and each
other agreement or instrument to be executed by Buyer hereunder, when so
executed and delivered, will constitute, the legal, valid and binding
obligation of 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).
5.4 No Violations. The execution and delivery of this Agreement
by Buyer, 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:
(a) violate any of the terms of the certificate of incorporation
or bylaws of 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
Buyer is a party or by which 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 Buyer's business or financial condition or the results of its
operations or on its ability to perform its obligations hereunder; or
(c) to knowledge of 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 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
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ability to perform its obligations hereunder.
5.5 Governmental Approval. 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 Buyer or the consummation by Buyer of the
transactions contemplated hereby.
5.6 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, if adversely determined, would delay or
prevent the consummation of the transactions contemplated by this Agreement.
5.7 No Brokers. Buyer has not 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 Buyer in connection with such transactions.
Buyer agrees to indemnify and hold harmless Seller and Parent from and against
any and all losses, claims, demands, damages, costs and expenses, including,
without limitation, reasonable attorneys' fees and expenses, which Seller or
Parent may sustain or incur as a result of any claim for a commission or fee by
a broker or finder acting on behalf of Buyer.
5.8 Disclosure. No representation or warranty made by 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
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 and Parent 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 Seller:
6.1 Accuracy of Representations and Warranties. The
representations and warranties of 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. 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.
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 Buyer certifying as
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to the matters specified in Sections 6.1 and 6.2.
6.4 Legal Opinion. Seller shall have received from ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ P.C., counsel to 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 Seller and Parent 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. Seller and Parent 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 Certificate.
(a) Buyer shall have received a certificate in the form of Exhibit
7.3(a) hereto, dated as of the Closing Date, of the President or a Vice
President of Seller certifying as to the matters specified in Sections 7.1 and
7.2.
(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 a Vice
President of Construtora certifying on behalf of Parent as to the matters
specified in Sections 7.1 and 7.2.
7.4 Legal Opinion. Buyer shall have received from counsel to
Seller and Parent, an opinion dated the Closing Date, substantially in the form
of Exhibit 7.4 hereto.
7.5 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 generally) in the Business, Assets,
operations, prospects or condition (financial or otherwise) of Seller, Parent
or BVI, including without limitation (i) an actual, constructive, arranged or
compromised total loss (as determined by the insurance underwriter's marine
surveyor) of the Offshore Drilling Rig, or (ii) a cancellation, termination or
recision by Petrobras or Maraven of either of the currently existing Drilling
Contracts regarding the Offshore Drilling Rig or the HERCULES RIG 1.
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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. Seller and Parent will each
use its Best Efforts to obtain the satisfaction of the conditions to Closing
applicable to Seller and Parent set forth in Article VII as soon as
practicable. 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 Third Party Consents.
(a) Notwithstanding any other provision hereof, if the assignment
or attempted assignment by Parent to BVI of any Lease Agreement, Drilling
Contract, Other Contract, Permit, license or other right 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 (a "Consent Required Contract"), each of Seller and Parent
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.
(b) In the event that Seller and Parent are unable prior to the
Closing Date to obtain consents to the transfer from Parent to BVI or its
designee of any Consent Required Contract, the terms of this Section 8.2(b)
shall govern the transfer of the benefits of each such contract. Seller and
Parent shall use their Best Efforts after the Closing Date to obtain any
required consent to the assignment to, and assumption by, BVI or its designee
of each Consent Required Contract that is not transferred to BVI or its
designee on or before the Closing Date (a "Nonassigned Contract"). Parent and
BVI shall enter into an agreement on the Closing Date with respect to each
Nonassigned Contract ("Contract Management Agreement") providing that until the
rights and obligations of Parent thereunder are transferred to or assumed by
BVI or its designee, or, if earlier, until termination of such Nonassigned
Contract, Parent shall continue to perform its obligations thereunder and BVI
shall provide such assistance, at the sole expense of BVI, as Parent may
reasonably request for such purpose, including without limitation the use of
personnel and assets (by lease or otherwise) of BVI and its Affiliates of the
type and quantity that Parent 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, Parent shall, promptly after payment of any
amounts to Parent by the other party to a Nonassigned Contract, pay such
amounts to BVI or its designee after subtracting therefrom the costs and
expenses as described in the Contract Management Agreement.
(c) In the event that Seller and Parent are unable to obtain
consent of Petrobras to the transfer from Parent to BVI or its designee of any
Drilling Contract between Parent and Petrobras within three months of the
Closing Date, then notwithstanding the provisions of Section 8.2(b), (i) the
term "Assets" shall be deemed not to include such Drilling Contract(s), the
related Lease Agreement, or the top drive and related equipment associated with
the Leased Drilling Rig; (ii) Buyer shall reassign or cause BVI to reassign to
Seller or Parent all right, title and interest of lessee in and to the Lease
Agreement and the top drive and related equipment associated with the Leased
Drilling Rig; and (iii) if the inability to obtain consent of Petrobras is not
due to the absence of a
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Brazilian Affiliate of Buyer acceptable to Petrobras, then Seller and/or Parent
shall pay to Buyer liquidated damages in the amount of US $1,500,000. Any and
all receipts and disbursements associated with such Drilling Contract and the
related Lease Agreement during such three-month period shall be for the account
of Seller or Parent. Accordingly, Buyer agrees to promptly remit or cause BVI
to promptly remit to Seller or Parent, and Seller and Parent agree to promptly
remit to Buyer or BVI, as the case may be, such amounts as may be required to
cause the economic benefits and losses associated with such Drilling Contract
and the related Lease Agreement during such three-month period to be borne by
and to accrue to Seller and/or Parent.
8.3 Access; Confidentiality. Until Closing, Seller and Parent
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 all of the records, properties and personnel of
Seller, BVI and Parent; provided however that access to records of Seller and
Parent shall be limited to those records related to the Assets. Seller and
Parent will furnish the representatives of Buyer during such period with all
information as such representatives may reasonably request regarding BVI, the
Business and the Assets and shall use its Best Efforts to cause the employees,
accountants and attorneys of Seller and Parent 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 BVI, 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, Parent,
the Business or the Assets. Such confidence shall be maintained for a least
four years. 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 or Parent, as applicable. The confidentiality
obligations set forth in the preceding sentence 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 Buyer's counsel.
8.4 Conduct of Business and Preservation of Assets. Until
Closing, Seller, Parent and Buyer 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 Seller and Parent shall use their
Best Efforts to preserve, maintain and protect the Business and the Assets, and
to maintain the relationships with 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, and except as otherwise contemplated by
this Agreement, (a) Seller, Parent and BVI will conduct the Business only in
the ordinary course, and (b) without the prior express written consent of
Buyer, neither Seller nor Parent will, and neither Seller nor Parent will
permit any of its Affiliates (including BVI) 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 Drilling Rigs, unless 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 Drilling Rigs other than
in the ordinary course of business, or amend, in any respect adverse to Seller,
Parent, BVI or Buyer, any Drilling Contract or Other Contract, (iii) move any
Drilling Rig to a different geographic region, (iv) merge or consolidate with
or into another person or entity, sell all or substantially all of its assets,
liquidate or dissolve or seek protection from creditors under applicable
bankruptcy law, or (v) commit itself to do any of the foregoing.
8.5 Drilling Rig Loss. Seller and Parent agree to maintain or
cause BVI to maintain
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insurance on each of the Drilling Rigs 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 7.5 and 9.1(c)(ii):
(a) If the Offshore Drilling Rig shall become an actual,
constructive, arranged or compromised total loss (as determined by the
insurance underwriter's marine surveyor) prior to the Closing Date, Buyer shall
have the right to terminate this Agreement.
(b) If any Drilling Rig other than the Offshore Drilling Rig shall
become an actual, constructive, arranged or compromised total loss (as
determined by insurance underwriter's surveyor) prior to the Closing Date, (i)
the Purchase Price for the BVI Shares shall not be reduced by any amount, (ii)
Parent shall pay to Buyer at the Closing liquidated damages for each such lost
Drilling Rig in the amount of US $1,500,000 per unit with respect to the
REDENCAO and/or the SOBERANA and in the amount of US $2,000,000 per unit with
respect to the PROMISSAO and/or the NOVA ERA, (iii) the term "Assets" shall be
deemed not to include such Drilling Rig, 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.
(c) If any Drilling Rig sustains damage not amounting to an
actual, constructive, arranged or compromised total loss prior to the Closing
Date;
(i) Seller and Parent shall have the option but not the
obligation to repair or to cause to be repaired the damage to the
Drilling Rig and to receive the full amount of any insurance proceeds
recoverable with respect to such damage, in which event the Purchase
Price shall not be reduced and the Closing Date may be extended as
reasonably necessary for Seller and Parent to accomplish such repairs;
or
(ii) if Seller and Parent shall elect not to repair or to
cause to be repaired the damage to the Drilling Rigs, Buyer may at its
option
(A) terminate this Agreement; or
(B) require Seller and/or Parent to assign to BVI
immediately prior to Closing all rights to receive insurance
proceeds in respect of such loss or damage and to pay to Buyer
at Closing from the Purchase Price the amount of any
deductible or deductibles (not to exceed $750,000) under the
terms of the relevant policy or policies in force and effect
on the date of such damage; provided that such amount required
to be paid by Seller or Parent shall be offset by any amounts
paid through the Closing Date by Seller or Parent for such
repair; and further provided that nothing in this paragraph
(B) shall relieve Seller or Parent of the obligation to
maintain insurance coverage as provided in the first sentence
of Section 8.5.
8.6 Removal of Outstanding Recommendations. Seller and Parent
agree to remove or cause the removal at its expense of any outstanding
recommendations to class against any of the Drilling Rigs (including, without
limitation, those recommendations set forth on Schedules 1(a) or 4.8).
8.7 Maintenance of Inventory Levels. Seller and Parent agree that
through the Closing Date, Seller and Parent will maintain or cause to be
maintained Inventory with respect to each Drilling Rig, including spare
components and parts, supporting inventory and stores on board, in
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such amounts and of such quality as would be (i) in accordance with past
practice and comparable to historical levels, and (ii) sufficient to comply
with any applicable Drilling Contract or Other Contract.
8.8 Removal of Encumbrances. Seller and Parent shall cause the
Encumbrances referred to in Schedule 8.8 to be removed and terminated on or
before the Closing Date and shall furnish to Buyer at Closing evidence of such
removal and termination reasonably satisfactory to Buyer.
8.9 Litigation. Until Closing, Seller will promptly notify Buyer
of any action, suit, proceeding, claim or investigation that is threatened or
commenced against Seller, Parent or BVI 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 threatened or commenced 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.
8.10 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) neither Seller nor Parent nor any of
their Affiliates (including BVI) will hire or terminate the employment of any
employee of the Business except (A) the termination by Seller and/or Parent and
simultaneous hiring by BVI of one or more employees of the Business, (B) as
required under a Drilling Contract, or (C) in the ordinary course of business
consistent with past practice.
(b) Seller or Parent, as applicable, shall pay or cause to be paid
directly to each employee of the Business that portion of all benefits arising
under any Benefit Plan that has been accrued on behalf of that employee (or is
attributable to expenses properly incurred by that employee) as of the Closing
Date, and BVI and Buyer shall assume no liability therefor. No portion of the
assets of any Benefit Plan, written or unwritten, heretofore sponsored or
maintained by Seller or Parent (and no amount attributable to any such Benefit
Plan) shall be transferred to BVI or Buyer, and BVI and Buyer shall not 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 neither BVI nor Buyer shall 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 Seller or
Parent therefor shall be paid by Seller or Parent within thirty (30) days after
the Closing Date to the extent that such payment is not inconsistent with the
terms of such Benefit Plan.
(c) As of the Closing Date, Buyer or its Affiliates (including
BVI) shall offer, in Buyer's sole discretion, employment to certain employees
of Seller and Parent with experience in operating the Drilling Rigs, Seller and
Parent hereby consenting to same. 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 or its Affiliates (including
BVI) for any period of time or implying or creating any terms or conditions of
employment. Seller and Parent shall use their Best Efforts to assist Buyer or
its Affiliates (including BVI) in employing all
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such persons presently engaged in the Business that Buyer wishes to employ.
Seller and Parent, as applicable, shall terminate effective as of the Closing
Date the employment of all employees of the Business so employed by Buyer or
its Affiliates (including BVI). Seller and Parent shall be responsible for and
shall pay, and neither Buyer nor BVI shall have any liability for or obligation
to pay, any severance or other similar payment (including without limitation
obligations under social or labor contracts) to any employees or former
employees of Seller, Parent or BVI as a result of the transactions contemplated
by this Agreement.
8.11 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 and Parent, and for all periods following the Closing shall be the
obligation of BVI. All such Taxes relating to periods prior to the Closing
that have been assessed prior to Closing and that are not then being diligently
contested in good faith by appropriate proceedings shall be paid by Seller or
Parent, prior to the Closing. Seller and Parent shall promptly pay to Buyer
from time to time the prorated share of all such Taxes for which Seller or
Parent is responsible under this Section 8.11 upon Buyer's request accompanied
by appropriate documentation that such Taxes are due and payable. All such
Taxes relating to periods after the Closing that have been paid by Seller, BVI
or Parent prior to Closing shall be prorated and the portion related to the
time following Closing shall be paid by Buyer to Seller upon Seller's request
accompanied by appropriate documentation that such Taxes have been paid.
8.12 Other Taxes. Seller and Parent shall be liable for and shall
pay all applicable sales, use, transfer, stamp, recording, value added or
similar taxes and assessments required by applicable law to be paid by Seller
or Parent (regardless of whether such taxes are or could be assessed against
the Assets) resulting from the consummation of the transactions contemplated
hereby, including without limitation taxes payable by Seller, BVI or Parent by
reason of the transfer of the Assets from Parent to BVI and the transfer of the
BVI Shares to Buyer. Seller and Parent shall not have any responsibility for
the payment of any taxes with respect to the operations or earnings of BVI from
and after the Closing, including without limitation any taxes, fees, duties or
charges of any character related to any export or import of the Drilling Rigs
after the Closing. Seller, Parent and Buyer agree to cooperate to obtain all
available exemptions from such taxes and to reduce the amount of taxes, import
duties or other assessments imposed on or charged to as a result of the
consummation of the transactions contemplated by this Agreement; provided, that
neither party shall be obligated to take any action that it determines in its
sole discretion may subject it to additional taxes, liabilities or expenses;
and provided further that Buyer, Seller and Parent agree that the respective
values of the Drilling Rigs reported by Buyer or its Affiliates to Governmental
Entities in Venezuela upon the initial transfer of the Drilling Rigs by BVI to
Buyer or any Affiliate of Buyer shall be the same as the values of the
respective Drilling Rigs indicated on Schedule 1(f)(ii) reported to
Governmental Entities in Venezuela by Seller or its Affiliates for entrance and
clearance purposes as of the date of entry of such Drilling Rigs into the
country in which they are currently located.
8.13 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, Parent or Buyer or their
respective Affiliates, as the case may be. None of the books and records in
the possession of Seller or Parent, on the one hand, or BVI or Buyer, on the
other, shall be destroyed prior to December 31, 2001 or five years after
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generated, whichever is earlier, without the consent of the other unless first
reproduced by microfilm or any other similar process.
8.14 Post-Closing Collection, Payment and Administrative
Procedures. Subsequent to Closing, (i) Buyer and its Affiliates (including
BVI) agree to deliver to Seller, within three Business Days of the receipt
thereof by Buyer or any such Affiliate, any and all (A) monies paid to or
received by Buyer or any such Affiliate in respect of amounts due Seller or
Parent, 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 or any such
Affiliate related to such amounts; and (ii) Seller and Parent agree to deliver
to BVI, within three Business Days of Seller's or Parent's receipt of same, any
and all (A) monies paid to or received by Seller or Parent in respect of
amounts due Buyer or BVI, and (B) inquiries, correspondence or documents
received by Seller or Parent related to such amounts.
8.15 Post-Closing Use of Facilities. During the period commencing
on the Closing Date and continuing through (i) one year from the Closing Date,
or (ii) the date on which Parent sells such real property to a non- Affiliate,
whichever occurs first, Buyer and its Affiliates (including BVI) shall have the
right, without charge, to store in Parent's yard in Pajuca, Bahia, Brazil the
two Drilling Rigs currently located in Brazil; provided, however, that Buyer's
use of Parent's yard shall be at the sole risk of Buyer, and neither Seller nor
Parent shall have any obligation to provide security for such Drilling Rigs;
and provided further that Buyer shall maintain customary liability insurance
covering its use of the premises, and Buyer shall bear and pay utilities and
any and all use or other taxes associated with the premises during the period
of Buyer's use of any part of the premises.. For a one year period from and
after the Closing Date, Buyer and its Affiliates (including BVI) shall have the
first right and option to lease all or part of Parent's yard in Macae, Brazil,
upon terms acceptable to Buyer and Parent according to the terms of a rig yard
lease agreement; provided that any such lease shall terminate upon the sale of
such property by Parent to a non-Affiliate of Parent.
8.16 No Shop. Prior to the Closing Date, neither Seller, Parent,
nor any of their Affiliates, 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 Parent of any of the Assets, (b) the sale of the BVI Shares to
any other party, or (c) the merger or consolidation of BVI with any other
entity. Seller and Parent agree that the remedy at law for a breach of this
Section 8.16 is inadequate and that Buyer shall be entitled to injunctive
relief for any breach of this Section 8.16.
8.17 Continued Effectiveness of Representations and Warranties.
Each of Seller, Parent 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.
Seller, Parent 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.
8.18 Further Assurances. At and after the Closing Date, and
without further consideration, (i) Parent 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 BVI or its designee any and all right, title
and interest in, to and
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under any of the Assets, and (ii) 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 the BVI Shares.
8.19 Export Obligations. Seller and Parent agree to assist Buyer
in the export of the REDENCAO and the SOBERANA from Brazil to Venezuela and
commence such assistance immediately after execution of this Agreement;
provided however that the physical export or transportation of such Drilling
Rigs shall not occur until after the Closing. Seller and Parent shall provide
to Buyer, as soon as possible, a schedule of estimated costs to export to
Venezuela such Drilling Rigs currently located in Brazil. These estimated
costs shall include export duties, import duties, document preparation fees,
shipping costs, insurance, and other third party costs and a fixed fee to
reimburse Seller or Parent for administrative assistance in such matters.
Buyer agrees to deposit with Seller the full amount of the estimated costs and
to pay on a timely basis any additional costs reasonably incurred with respect
to such activities; provided that the administrative fee to Seller and Parent
shall not be increased without the written consent of Buyer.
8.20 Expenses. Subject to the provisions of Section 9.3, 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.
8.21. Land Rig Refurbishments and Option. Prior to the Closing,
Seller, Parent and BVI shall give Buyer and its authorized representatives full
access, upon Buyer's reasonable prior notice, to the PROMISSAO and the NOVA ERA
for purposes of conducting, and shall permit Buyer and its authorized
representatives to conduct, refurbishments and upgrades deemed necessary or
desirable by Buyer in preparation for upcoming contracts for the employment of
such drilling units. In consideration for the refurbishments and/or upgrades,
if any, which may be conducted by Buyer prior to the Closing Date, Buyer shall
have the exclusive right and option, without additional charge, to purchase the
PROMISSAO and the NOVA ERA for a purchase price of US $2,000,000 per unit, in
the event of, and for the three-month period following, termination of this
Agreement pursuant to Article IX. Any such purchase and sale upon exercise of
the option shall be pursuant to a definitive agreement to be executed by
▇▇▇▇▇▇▇, Seller and Buyer in a form substantially the same as this Agreement.
8.22 Inspection of Drilling Rigs. Until Closing, Seller and Parent
shall give the authorized representatives of Buyer full access, during normal
business hours upon Buyer's reasonable notice, to the Drilling Rigs and the
Leased Drilling Rig. In the event that Buyer's reasonable inspection of the
type conducted on November 5, 1996 of the Drilling Rigs and/or the Leased
Drilling Rig reveals any change in the maintenance, state of repair, condition
or design of the Drilling Rigs or the Leased Drilling Rig (excluding any change
due to damage sustained by such Drilling Rig upon the occurrence of a casualty,
in which event, the provisions of Section 8.5(c) shall apply) from that which
existed in November 5, 1996, then Buyer shall give written notice to Seller
identifying any such change and:
(a) if expenditures in an aggregate amount of at least $100,000
but not more than $1,000,000 would be required to restore the Drilling Rigs
and/or the Leased Drilling Rig to their condition as of November 5, 1996, then
Seller and/or Parent shall, prior to the Closing, either (i)
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restore or cause to be restored the Drilling Rigs and/or the Leased Drilling
Rig to their condition as of November 5, 1996, or (ii) pay to Buyer from the
Purchase Price at Closing cash in an amount required to complete such
restoration, or
(b) if expenditures in an aggregate amount of $1,000,000 or more
would be required to restore the Drilling Rigs and/or the Leased Drilling Rig
to their condition as of November 5, 1996, then Seller and/or Parent shall,
prior to Closing, either (i) restore or cause to be restored the Drilling Rigs
and/or the Leased Drilling Rig to a condition as close to their November 5,
1996 condition as may be accomplished with an expenditure of not more than
$1,000,000, or (i) pay to Buyer from the Purchase Price at Closing cash in an
amount equal to $1,000,000. Neither Seller nor Parent shall have any
obligation to incur expenditures in excess of $1,000,000 to restore the
Drilling Rigs and the Leased Drilling Rig to their prior condition; provided,
however, that if Seller and/or Parent fail to completely restore or make the
full restoration payment in the same manner as is specified in subsection (a)
of this Section 8.22 without regard to the $1,000,000 limitation within ten
days of Buyer's written notice to Seller, then Buyer shall have the right and
option to terminate this Agreement pursuant to Section 9.1(c)(iv).
ARTICLE IX
TERMINATION
9.1 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;
(c) by Buyer, if
(i) there has been a material breach by Seller or Parent
of any covenant or agreement, or a material inaccuracy of any
representation or warranty of Seller or Parent 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 waived by Buyer or cured by Seller or Parent within five Business
Days after receipt by Seller of notice thereof from Buyer; provided
that the five Business Day period shall be extended for a period of up
to ten additional Business Days with respect to any matter for which
Seller or Buyer have begun steps to cure but for which cure is not
practically possible within five Business Days; or
(ii) there shall have occurred a material adverse change
as described in Section 7.5;
(iii) the Closing shall not have occurred on or before
January 31, 1997 (provided
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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 sole cause thereof);
(iv) there shall have occurred a change in the
maintenance, state of repair, condition or design of the Drilling Rigs
and/or the Leased Drilling Rig from that which existed on November 5,
1996 which would require expenditures in an aggregate amount of
$1,000,000 or more to restore as described in Section 8.22(b) which
has not been restored and for which no restoration payment has been
received by Buyer; or
(v) there shall have occurred casualty damage for which
Buyer elects to terminate pursuant to Section 8.5(c)(ii);
(d) by Seller if
(i) there has been a material breach by 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 or
Parent impossible and such breach or inaccuracy has not been waived by
Seller or cured by Buyer within five Business Days after receipt by
Buyer of notice thereof from Seller; provided that the five Business
Day period shall be extended for a period of up to ten additional
Business Days with respect to any matter (other than Buyer's failure
to make available funds for payment of the Purchase Price on the
Closing Date) for which Buyer has begun steps to cure but for which
cure is not practically possible within five Business Days; or
(ii) the Closing shall not have occurred on or before
January 31, 1997 (provided that the right to terminate this Agreement
under this clause (iii) shall not be available to Seller if the
failure by either Seller or Parent to fulfill any of its obligations
under this Agreement or its misrepresentation or breach of warranty
hereunder has been the sole cause thereof).
9.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 9.1 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
Section 9.2 and in Sections 4.25, 5.7, 8.3, 8.20, 8.21, and 9.3 shall survive
the termination hereof.
9.3 Liquidated Damages and Expense Reimbursement.
(a) Notwithstanding any other provision of this Agreement, if this
Agreement is terminated by Seller pursuant to Section 9.1(d)(i), then, unless
Buyer is then entitled to terminate this Agreement pursuant to Section
9.1(c)(i), (ii), (iv) or (v), the ▇▇▇▇▇▇▇ money deposit (excluding any interest
earned thereon, which shall be for the account of Buyer) shall be forfeited to
Seller. Nothing contained in this Section 9.3(a) shall relieve Buyer from
liability for damages (excluding consequential damages) in excess of the amount
of the ▇▇▇▇▇▇▇ money deposit actually incurred as a result of any breach by
Buyer of this Agreement.
(b) In the event that this Agreement is terminated by Buyer
pursuant to Section
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9.1(c)(i), then, unless Seller is then entitled to terminate this Agreement
pursuant to Section 9.1(d)(i), Seller and Parent 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 and paid or payable by Buyer to third parties in
connection with the negotiation, execution and delivery of this Agreement.
Nothing contained in this Section 9.3(b) shall relieve Seller or Parent from
liability for damages (excluding consequential damages) actually incurred as a
result of any breach by Seller or Parent of this Agreement.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Buyer.
(a) Except as otherwise provided in Article XI, Buyer agrees to
indemnify, defend and hold Seller and Parent and their Affiliates harmless from
and against any and all Claims sustained after Closing by Seller, Parent or any
of their 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 contained in this Agreement or in any certificate,
agreement, document or instrument delivered pursuant to this Agreement, (ii)
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, Parent or any of their Affiliates after the Closing, or
(iii) any Claim of any fiscal authority relating to Taxes arising out of or
resulting from Buyer or its Affiliates reporting to any Governmental Entity in
Venezuela upon the initial transfer of the Drilling Rigs by BVI to Buyer or any
Affiliate of Buyer any value different than the values of the respective
Drilling Rigs indicated on Schedule 1(f)(ii) reported to Governmental Entities
in Venezuela by Seller or its Affiliates for entrance and clearance purposes as
of the date of entry of such Drilling Rigs into the country in which they are
currently located; provided, however, that Buyer shall have no liability
pursuant to this Section 10.1(a) for the first $50,000 of aggregate Claims in
respect of the matters described above incurred by Seller, Parent or their
Affiliates (the "Seller Basket") and Buyer shall be responsible only for such
amounts of such Claims as exceed the Seller Basket. The foregoing
indemnification is given solely for the purpose of protecting Seller, Parent
and their 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) Seller or Parent shall notify Buyer within 30 Business Days of
the assertion of any Claim or the discovery of any fact (which fact has been
brought to the attention of a responsible executive officer of Seller or
Parent) upon which Seller or Parent intends to base a claim for indemnification
hereunder; provided, however, that the failure of Seller or Parent to so notify
Buyer shall not relieve Buyer from any liability under this Agreement to Seller
or Parent with respect to such Claim unless Buyer is prejudiced or damaged by
the failure to receive timely notice. In the event of any Claim, Buyer, at its
option, may assume (with legal counsel reasonably acceptable to Seller or
Parent, as applicable) the defense of any claim, demand, lawsuit or other
proceeding, which claim, demand, lawsuit or other proceeding may give rise to
the indemnity obligation of Buyer under this Section 10.1, and may assert any
defense of Seller, Parent or Buyer; provided, however, that Seller or Parent,
as applicable, shall have the right at its own expense to participate jointly
with Buyer in the defense of any claim, demand, lawsuit or other proceeding in
connection with which Seller or Parent claims indemnification hereunder.
Notwithstanding the right of Seller
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or Parent to participate, Buyer shall have the sole right to settle or
otherwise dispose of such 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 or
Parent hereunder, or (ii) Seller or Parent, as applicable, shall have declined
to participate; provided, however, that no such Claim shall be settled by Buyer
in any manner that could reasonably be expected to have a material adverse
effect on the business of Seller or Parent taken as a whole without the prior
written consent of Seller or Parent, as applicable.
10.2 Indemnification by Seller and Parent.
(a) Except as otherwise provided in Article XI, Seller and Parent,
jointly and severally, agree to indemnify, defend and hold Buyer and its
Affiliates (including BVI) harmless from and against any and all Claims
sustained after Closing by Buyer or 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 Seller or Parent
contained in this Agreement or in any certificate, agreement, document or
instrument delivered pursuant to this Agreement, or (ii) 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 (other than BVI) prior to the Closing;
provided, however, that neither Seller nor Parent shall have any liability
pursuant to this Section 10.2(a) for the first $50,000 of aggregate Claims in
respect of the matters described above incurred by Buyer or its Affiliates (the
"Buyer Basket") and Seller and Parent 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 10.2, Seller and
Parent, jointly and severally, further agree to indemnify, defend and hold
Buyer and its Affiliates (including BVI) harmless from and against any and all
Claims sustained by Buyer or its Affiliates, irrespective of the amount of such
Claim (but subject to the Buyer Basket, except as otherwise provided in (ii)
below), based upon, arising out of or otherwise in respect of any of the
following:
(i) Any default under or breach by Seller, Parent or any
of their Affiliates of the terms, conditions or provisions of any
note, bond, mortgage, loan agreement, indenture or other instrument
evidencing borrowed money to which Seller, Parent or any such
Affiliate is a party or by which Seller, Parent or any such Affiliate
is bound or to which any of the Assets is subject;
(ii) Any Encumbrance (including any Permitted Encumbrance
and without regard to the Buyer Basket) affecting any Asset arising
from conditions existing before the Closing or resulting from the
conduct of Seller, Parent or any of their Affiliates after the
Closing;
(iii) Any termination prior to Closing by any person of any
Lease Agreement, Drilling Contract, Other Contract or Permit due to
breach of the terms thereof by Seller, Parent or any of their
Affiliates;
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(iv) Any violation by Seller, Parent or any of their
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 Seller, Parent or any such Affiliate or
the Assets which affects the ownership or operation of the Assets;
(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 of the Assets;
(vi) Any violation by Seller, Parent or any of their
Affiliates of, or default by Seller, Parent or any such Affiliate
under, any Applicable Laws, including, without limitation, Applicable
Environmental Laws, which affects the ownership or operation of the
Assets, 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 Seller,
Parent or any of their Affiliates prior to Closing that relates solely
to any employment of such employee by Seller, Parent or any of their
Affiliates prior to the Closing;
(viii) Any Claim of any fiscal authority relating to Taxes
due by Seller, Parent or Affiliates of Seller or Parent or by any
company or enterprise that belongs to the same group of companies and
enterprises to which Seller or Parent belongs, specifically including
without limitation, Taxes arising out of or resulting from any
reevaluation of Assets by any Government Authority; provided, however
that no indemnification by Seller or Parent shall be required to the
extent that any such Taxes result from Buyer or its Affiliates
reporting to any Governmental Entity in Venezuela upon the initial
transfer of the Drilling Rigs by BVI to Buyer or any Affiliate of
Buyer any value different than the values of the respective Drilling
Rigs indicated on Schedule 1(f)(ii) reported to Governmental Entities
in Venezuela by Seller or its Affiliates for entrance and clearance
purposes as of the date of entry of such Drilling Rigs into the
country in which they are currently located; or
(ix) 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, 4.19, or
4.20(a).
(c) Buyer shall notify Seller and Parent within 30 Business Days
of the assertion of any Claim or discovery of any fact (which fact has been
brought to the attention of a responsible executive officer of Buyer) upon
which Buyer or any of its Affiliates (including BVI) intends to base a claim
for indemnification hereunder; provided, however, that the failure of Buyer to
so notify Seller and Parent shall not relieve Seller or Parent from any
liability under this Agreement to Buyer or its Affiliates with respect to such
Claim unless Seller or Parent, as applicable, is prejudiced or damaged by the
failure to receive timely notice. In the event of any Claim, Seller or Parent,
at its option, may assume (with legal counsel reasonably acceptable to Buyer)
the defense of any claim, demand, lawsuit or other proceeding, which claim,
demand, lawsuit or other proceeding may give rise to the indemnity obligation
of Seller and Parent under this Section 10.2, and may assert any defense of
Seller, Parent or Buyer; provided, however, that Buyer shall have the right at
its own expense to participate jointly with Seller and Parent in the defense of
any claim, demand, lawsuit or other proceeding in connection with which Buyer
claims indemnification hereunder. Notwithstanding the right of Buyer to
participate, Seller and Parent shall have the sole right to settle or otherwise
dispose of such claim, demand, lawsuit or other proceeding on such terms as
Seller and Parent, in their sole discretion, shall deem appropriate with
respect to any issue involved in
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such claim, demand, lawsuit or other proceeding as to which (i) Seller or
Parent shall have acknowledged the obligation to indemnify Buyer hereunder or
(ii) Buyer shall have declined to participate; provided, however, that no such
Claim shall be settled by Seller or Parent in a manner that could reasonably be
expected to have a material adverse effect on the business of Buyer or its
Affiliates taken as a whole without the prior written consent of Buyer.
10.3 Limitation of Remedies. The indemnification obligations of
Seller, Parent and Buyer set forth in this Agreement, including in this Article
X, 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.
10.4 Applicability of Indemnification Obligation. EACH OF THE
AGREEMENTS TO INDEMNIFY, DEFEND OR HOLD HARMLESS CONTAINED IN SECTIONS 10.1 AND
10.2 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.
ARTICLE XI
EXTENT AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS
11.1 Scope of Representations of Seller. NOTWITHSTANDING ANYTHING
HEREIN TO THE CONTRARY, NEITHER SELLER NOR PARENT MAKES ANY REPRESENTATION OR
WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE MAINTENANCE, REPAIR, CONDITION,
DESIGN OR MARKETABILITY OF THE DRILLING RIGS, THE LEASED DRILLING RIG AND THE
INVENTORY 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 ITS AFFILIATES
(INCLUDING BVI), ON THE ONE HAND, AND SELLER AND PARENT, ON THE OTHER HAND,
THAT, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, BVI WILL HAVE OBTAINED,
AND BUYER WILL OBTAIN THROUGH ACQUISITION OF THE BVI SHARES, THE DRILLING RIGS,
THE LEASED DRILLING RIG AND THE INVENTORY 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 Drilling
Rigs, Inventory and the other tangible Assets, including the Leased Drilling
Rig. The Closing of the transaction shall serve as Buyer's final and
unconditional acceptance of the condition of the Drilling Rigs, Leased Drilling
Rig and Inventory "AS IS" and "WHERE IS" and the termination of any
responsibility whatsoever of Seller, Parent or BVI with respect to the
condition of the Drilling Rigs, Leased Drilling Rig, Inventory and other
tangible assets, including any responsibility of Seller or Parent with respect
to any claims by the owner of the Leased Drilling Rig
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or any other person for any loss, damage, deterioration or other change in
physical condition of the Leased Drilling Rig.
11.2 Survival. 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 BVI and the
transfer of the BVI Shares to Buyer hereunder for a period of three years
following the Closing Date.
ARTICLE XII
MISCELLANEOUS
12.1 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):
If to Buyer:
Cliffs Drilling Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Mr. W. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Seller or Parent:
Delavney-Gestao e Consultoria Lda.
Construtora ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Perfuracao Ltda.
Driltech Inc.
▇▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇-▇▇ ▇▇▇▇▇ - ▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇ - Rio de Janeiro - RJ - Brasil
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇ ▇▇ ▇▇▇ ▇▇▇▇
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Telefax: 55 21 262 1772
with a copy to:
Mr. U. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
12.2 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.
12.3 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
herein provided are cumulative and are not exclusive of any rights or remedies
that any party may otherwise have at law or in equity. 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.
12.4 Arbitration. Any dispute, controversy or claim arising out of
or relating to this Agreement shall be finally settled under the Commercial
Arbitration Rules of the American Arbitration Association as then in force, by
three arbitrators appointed in accordance with said rules. In rendering a
decision, the arbitrator(s) shall make specific findings of fact and take into
account all applicable judicial precedents and industry practice. All
disputes, controversies or claims, or any rights or obligations of the parties
hereto, shall be governed by and resolved in accordance with the laws,
excluding choice of law rules, of the State of Texas. The place of arbitration
shall be Houston, Texas. An award or determination of the arbitration tribunal
shall be final and conclusive upon the parties, judgment thereon may be entered
by any court of competent jurisdiction, and no appeal thereof shall be made by
the parties. The parties agree that the award of the arbitrator(s) (i) shall
provide that the prevailing party shall be entitled to recover from the other
party reasonable attorneys' fees and expenses in addition to any other relief
that may be awarded; (ii) shall be promptly payable free of any tax, deduction
or offset; (iii) shall provide that any cost, fees or taxes incident to
enforcing the award shall, to the maximum extent permitted by
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law, be charged against the party resisting such enforcement; and (iv) shall
include interest from the date of any damages incurred, and from the date of
the award until paid in full, at a rate fixed by the arbitrator(s) but in no
event less than the "prime rate" per annum quoted for the corresponding period
by Texas Commerce Bank N.A., Houston, Texas.
12.5 Binding Effect; Assignment; No Third Party Benefit. 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 for Sections 10.1 and 10.2, nothing in this Agreement, express
or implied, is intended to or shall confer upon any person other than Buyer,
Seller and Parent any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
12.6 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 9.3 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.
12.7 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.
12.8 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.
12.9 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.
12.10 Currency. All dollar amounts in this Agreement are stated in
United States
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dollars.
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.
DELAVNEY-GESTAO E CONSULTADORIA LDA.
By:/s/ TRAJANO ▇. ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Trajano ▇. ▇▇▇▇▇ ▇▇▇▇▇
Manager
CONSTRUTORA ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ S.A.
By:/s/ TRAJANO ▇. ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Trajano ▇. ▇▇▇▇▇ ▇▇▇▇▇
Attorney-in-fact
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ PERFURACAO LTDA.
By:/s/ TRAJANO ▇. ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Trajano ▇. ▇▇▇▇▇ ▇▇▇▇▇
DRILTECH INC.
By:/s/ TRAJANO ▇. ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Trajano ▇. ▇▇▇▇▇ ▇▇▇▇▇
Attorney-in-fact
CLIFFS DRILLING COMPANY
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Vice President-Finance
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