Exhibit 10.8
EXECUTION COPY
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ESCROW AGREEMENT
AMONG
U.S. BANK TRUST NATIONAL ASSOCIATION
(AS "ESCROW AGENT")
U.S. BANK TRUST NATIONAL ASSOCIATION
(AS "TRUSTEE" AND "COLLATERAL AGENT")
AND
▇▇▇▇▇▇ OFFSHORE LLC
AND
▇▇▇▇▇▇ OFFSHORE FINANCE CORP.
(AS "ISSUERS")
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DATED AS OF APRIL 29, 1998
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ESCROW AGREEMENT
This ESCROW AGREEMENT ("Agreement"), dated as of April 29, 1998, by and
among U.S. BANK TRUST NATIONAL ASSOCIATION, as escrow agent ("Escrow Agent"),
and U.S. BANK TRUST NATIONAL ASSOCIATION as trustee for the benefit of the
holders of the Notes (as defined below) under the Indenture (as defined below)
and as collateral agent for the benefit of the holders of the Notes under the
Security Agreement (as defined below) (in such capacities, the "Trustee"), and
▇▇▇▇▇▇ OFFSHORE LLC, a Delaware limited liability company, and ▇▇▇▇▇▇ OFFSHORE
FINANCE CORP., a Delaware corporation (the "Issuers").
RECITALS
A. Pursuant to that certain Indenture dated as of April 29, 1998, by and
among the Issuers and the Trustee (the "Indenture"), the Issuers have issued
$110,000,000 aggregate principal amount of their 10% Senior Notes due 2008
("Notes").
B. As security for their obligations to repay the Notes, the Issuers have
executed and delivered to the Trustee, in addition to the Indenture, the Escrow
Security Agreement dated as of April 29, 1998 (the "Security Agreement"), in
which the Issuers grant to the Trustee a security interest in the Collateral (as
defined in the Security Agreement).
C. The parties have entered into this Agreement to set forth the conditions
upon which, and the manner in which, funds will be disbursed from the Interest
Escrow Account and Construction Escrow Account (both as defined herein).
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINED TERMS. Capitalized terms used herein but not defined herein
shall have the meaning given in the Indenture. In addition to any other defined
terms used herein, the following terms shall constitute defined terms for
purposes of this Agreement and shall have the meanings set forth below:
"ACCEPTABLE REPLACEMENT ESCROW AGENT" means a corporation organized and
doing business under the laws of the United States of America or of any state
thereof authorized under such laws to exercise corporate trustee power, subject
to supervision or examination by federal or state authority and having a
combined capital and surplus of at least $100 million as set forth in its most
recent published annual report of condition.
"AFFILIATES" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"AVAILABLE FUNDS" means (a) the sum of (i) the Initial Escrow Amount and
(ii) interest earned or dividends paid on the funds in the Escrow Accounts
(including holdings of Temporary Cash Investments), less (b) the aggregate
disbursements previously made pursuant to this Agreement.
"CONSTRUCTION OVERHEAD" means all costs associated with the Issuers'
personnel overseeing construction of the Rigs at the AMFELS shipyard and general
and administrative expenses (including, without limitation, expenses payable
pursuant to the Management and Administrative Services Agreement dated February
27, 1998, as in effect from time to time, between ▇▇▇▇▇▇ Offshore LLC and SEACOR
SMIT Inc.).
"INITIAL ESCROW AMOUNT" means $106.5 million.
"INTEREST PAYMENT DATES" means May 1 and November 1 of each year,
commencing on November 1, 1998 until May 1, 1999 (or if any such day is not a
Business Day the next succeeding Business Day).
"ISSUE DATE" means April 29, 1998.
"MOODY'S" means ▇▇▇▇▇'▇ Investors Services, Inc.
"OFE" means for the Rigs, the cost of owner furnished equipment, which
includes the major components of the drilling and power systems (including
engines, generators, draw works and top drives).
"PAYING AGENT" means U.S. Bank Trust National Association.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, of
even date herewith, among the Issuers and the Initial Purchasers.
"S&P" means Standard & Poors Ratings Group.
"TEMPORARY CASH INVESTMENTS" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $10 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
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equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act of 1933) or
any money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 180 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Issuers)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's or "A-1" (or higher) according to S&P, and (v) investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by S&P or "A" by Moody's.
"UCC" means the Uniform Commercial Code of the State of New York or the
State of Minnesota, as applicable.
2. INTEREST ESCROW ACCOUNT, CONSTRUCTION ESCROW ACCOUNT, ESCROW AGENT.
(a) APPOINTMENT OF ESCROW AGENT. The Issuers and the Trustee at the
direction of the Issuers, hereby appoint Escrow Agent, and Escrow Agent hereby
accepts appointment, as escrow agent under the terms and conditions of this
Agreement. The term "Escrow Agent" shall be deemed to include any substitute
escrow agent pursuant to Section 2(f).
(b) ESTABLISHMENT OF INTEREST ESCROW ACCOUNT AND CONSTRUCTION ESCROW
ACCOUNT. Concurrently with the execution and delivery hereof, Escrow Agent shall
establish the Interest Escrow Account and the Construction Escrow Account (both
as defined in the Indenture, and together the "Escrow Accounts"), each in the
name of the Trustee, at its office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇. Subject to the security interest granted therein for the benefit of the
Trustee, and subject to the other terms and conditions of this Agreement, all
funds accepted by Escrow Agent pursuant to this Agreement shall be held for the
exclusive benefit of the Trustee for the ratable benefit of the holders of the
Notes. All such funds shall be held in the Escrow Accounts until disbursed in
accordance with the terms hereof. The Escrow Accounts, the funds held therein
and any Temporary Cash Investments held by the Escrow Agent shall be under the
sole dominion and control of Escrow Agent and the Trustee for the ratable
benefit of the holders of the Notes, and all such funds shall be held by the
Escrow Agent separate and apart from all other funds of or held by the Escrow
Agent. Concurrently with the execution and delivery hereof, the Issuers shall
deliver the Initial Escrow Amount to the Escrow Agent for deposit into the
Escrow Accounts against the Escrow Agent's written acknowledgment and receipt of
the Initial Escrow Amount as follows: (i) into the Interest Escrow Account, an
amount in cash which will be sufficient to provide for payment in full of the
first two scheduled interest payments on the Notes, and (ii) into the
Construction Escrow Account by the Escrow Agent at its office, the balance, in
cash.
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(c) INSTRUCTIONS REGARDING THE ESCROW ACCOUNTS. Notwithstanding any
other provision hereof to the contrary, the Escrow Agent shall follow the
instructions of the Issuers with respect to the disposition of any and all
monies, instruments and other property deposited or accumulated in the Escrow
Accounts as directed by the Issuers unless and until the Escrow Agent shall have
received written instructions to the contrary from the Trustee ("Trustee
Instructions Notice"), in which case the Escrow Agent shall follow the Trustee
Instructions Notice.
The Escrow Agent agrees, and is hereby authorized and directed by the
Issuers to pay to the Trustee upon its demand, following delivery to the Escrow
Agent of a Trustee Instructions Notice, all funds that may hereafter be
withdrawable or payable out of the Escrow Accounts, and the Escrow Agent will
not release to the Issuers, and the Issuers will not withdraw or attempt to
withdraw any funds or other property from the Escrow Accounts following delivery
of such Trustee Instructions Notice. Following an Event of Default (as defined
in the Indenture) and delivery to the Escrow Agent of a Trustee Instructions
Notice, the Trustee is hereby authorized and fully empowered without further
authority from the Issuers to request the Escrow Agent to remit to the Trustee
any funds that may be due to the Issuers, and the Escrow Agent is hereby
authorized and directed to pay to the Trustee such sums as it shall so request
without the consent of the Issuers.
The Escrow Agent, the Issuers and the Trustee agree that (i) the
Escrow Accounts are "securities accounts" within the meaning of Article 8 of the
UCC; (ii) the Escrow Agent is acting in the capacity of a "securities
intermediary" within the meaning of Article 8 of the UCC; (iii) all assets now
or hereafter comprising the Collateral and held in either of the Escrow Accounts
are "financial assets" within the meaning of Article 8 of the UCC; and (iv) any
Trustee Instructions Notice will be deemed to be an "entitlement order" within
the meaning of Article 8 of the UCC. The Escrow Agent agrees that (x) it will
comply with all entitlement orders originated by the Trustee regarding the
disposition of any Collateral, without further consent by the Issuers, and (y)
it will not comply with any entitlement orders within the meaning of Article 8
of the UCC, except as expressly permitted or required by this Agreement.
(d) APPOINTMENT AS ATTORNEY-IN-FACT. The Issuers hereby constitute
and appoint the Trustee their true, lawful and irrevocable attorney to demand,
receive and enforce payments and to give receipts, releases, satisfactions for,
and to ▇▇▇ for all receipts, releases, satisfactions for, and to ▇▇▇ for all
monies payable to the Issuers and this may be done following delivery to the
Escrow Agent of a Trustee Instructions Notice in the name of the Trustee with
the same force and effect as the Issuers could do had the Issuers not granted a
security interest in the Escrow Accounts to the Trustee pursuant to the Security
Agreement. Any and all monies and payment which may be received by the Issuers
from the Escrow Accounts, to which the Trustee is entitled under and by reason
of such security interest, will be received by the Issuers as trustee for the
Trustee, and will be immediately delivered in kind to the Trustee without
commingling. The Trustee agrees that, except upon the occurrence and during the
continuance of any Event of Default, it will forbear from exercising the power
of attorney or any rights granted to the Trustee pursuant to this paragraph.
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(e) RIGHTS OF THE ISSUERS. Nothing herein contained shall be
construed so as to prevent the Issuers from remaining the owners, subject to the
security interest of the Trustee under the Security Agreement, of the Escrow
Accounts. Until the Trustee elects to the contrary and delivers a Trustee
Instructions Notice in writing to the Escrow Agent, subject to Sections 2(g) and
3 of this Agreement, the Issuers may make such additional transactions in the
Escrow Accounts and with respect to the securities and other instruments on
deposit therein as they shall elect. In the event the Trustee does make such
election and does deliver such Trustee Instructions Notice to the Escrow Agent,
the Issuers shall not thereafter execute any transactions in the Escrow Accounts
or with respect to the securities or other instruments on deposit therein and
the Escrow Agent shall not accept for execution any such transactions without
the concurrence of the Trustee.
Following delivery to the Escrow Agent of a Trustee Instructions
Notice, the Trustee shall be entitled without the consent or concurrence of, or
prior notice to, the Issuers, to direct the Escrow Agent to liquidate any or all
securities or other instruments held in the Escrow Accounts and to direct the
Escrow Agent to pay to the Trustee the credit balance as shall exist in the
Escrow Accounts after such liquidation and after the payment to the Escrow Agent
of all the indebtedness of the Issuers to the Escrow Agent in connection with
transactions in the Escrow Accounts.
Any sums paid by the Escrow Agent from the Escrow Accounts to the
Trustee under the Security Agreement shall be applied by the Trustee to the
payment of the Obligations, to the extent of the Obligations, as such term is
defined in the Security Agreement. The receipt or receipts of the Trustee for
such funds paid to it by the Escrow Agent after delivery to the Escrow Agent of
a Trustee Instructions Notice shall as to the Escrow Agent operate as the
receipt of the Issuers as fully and as completely as if funds had been paid to
the Issuers in person and receipted for by the Issuers.
(f) ESCROW AGENT COMPENSATION.
(i) Escrow Agent shall be compensated pursuant to a separate
agreement between the Issuers and Escrow Agent.
(ii) Escrow Agent shall be entitled to disburse from the
Construction Escrow Account all amounts due to Escrow Agent as compensation
for services to be performed by Escrow Agent under this Agreement (as
determined by agreement with the Issuers pursuant to this Section
2(c)(ii)). The final payment pursuant to this Section 2(c)(ii) shall be
prorated if for a partial month.
The Escrow Agent waives and agrees not to assert, claim or endeavor to
exercise, and by executing this Agreement bars and estops itself from asserting,
claiming or exercising any right of setoff, banker's lien, security interest or
other purported form of claim with respect to the Escrow Accounts and funds from
time to time therein. The Escrow Agent shall have no rights in the Escrow
Accounts or the funds therein until the Trustee notifies the Escrow Agent that
all Obligations (as defined in the Security Agreement) have been paid in full
and the Indenture is no longer in effect. To
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the extent the Escrow Agent may ever have any such rights, the Escrow Agent
hereby expressly subordinates all such rights to all rights of the Trustee.
(g) INVESTMENT OF FUNDS IN ESCROW ACCOUNTS. Funds deposited in the
Escrow Accounts shall be invested and reinvested by the Escrow Agent upon the
following terms and conditions:
(i) ACCEPTABLE INVESTMENTS. Funds deposited in the Escrow
Accounts shall be invested, and all interest earned thereon or other
distributions or amounts paid with respect thereto may be reinvested, as
directed in writing by the Issuers in Temporary Cash Investments which the
Issuers reasonably determine at such time will produce without reinvestment of
the funds so deposited or reinvestment of income produced by such Temporary Cash
Investments and without further deposit by the Issuers, funds sufficient to
cover, (x) in the case of the Interest Escrow Account, all interest due on the
outstanding Notes, as such interest becomes due, for the Interest Payment Dates
occurring on November 1, 1998 and May 1, 1999 and (y) in the case of the
Construction Escrow Account, for such Construction Expenses (as defined below)
as such come due. The Escrow Agent shall have no responsibility for determining
whether funds held in the Escrow Accounts shall have been invested in such a
manner so as to comply with the requirements of this clause (i).
(ii) SECURITY INTEREST IN INVESTMENTS. No investment of funds
in the Escrow Accounts shall be made unless, if requested by the Escrow Agent,
the Issuers have certified to Escrow Agent upon advice of legal counsel that,
upon such investment, the Trustee will have a perfected security interest in the
applicable investment (such advice of legal counsel relating solely to the
manner of perfecting a security interest in a particular type of investment, but
not to whether such perfection has been achieved in the instance). A certificate
as to a class of investments need not be issued with respect to individual
investments in securities in that class if the certificate applicable to the
class remains accurate with respect to such individual investments, which
continued accuracy the Escrow Agent may conclusively assume. When and if the
Indenture is qualified under the Trust Indenture Act of 1939, as amended (the
"TIA"), on such date and on each anniversary of such date until the date upon
which the balance of the Available Funds shall have been reduced to zero, each
of the Trustee and the Escrow Agent shall receive an opinion of counsel to the
Issuers, dated each such date as applicable, which opinion shall meet the
requirements of Section 314(b) of the TIA.
(iii) INTEREST AND DIVIDENDS. All interest earned and dividends
paid on funds invested in such Temporary Cash Investments shall be deposited in
the Escrow Accounts for the exclusive benefit of the Trustee for the ratable
benefit of the holders of the Notes and shall be reinvested in accordance with
the terms hereof at the Issuers' written instruction and subject to disbursement
as provided herein.
(h) LIMITATION ON ESCROW AGENT'S RESPONSIBILITIES.
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(i) Escrow Agent's duties and responsibilities shall be limited
to those expressly set forth in this Agreement and are purely ministerial in
nature. The Escrow Agent shall not be called upon to advise any party as to
selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder. Escrow Agent
shall not be subject to, or obligated to recognize, any other agreement to which
the Issuers, the Trustee, or either of them may be a party. References in this
Agreement to any such agreement are for identification and definitional purposes
only.
(ii) Escrow Agent shall have no obligation with respect to the
Escrow Accounts other than to follow faithfully instructions contained in this
Agreement or delivered to Escrow Agent in accordance with this Agreement. Escrow
Agent may rely and act upon any written notice, instruction, direction, request,
waiver, consent, receipt, or other paper or document, including any Trustee
Instructions Notice ("Instructions") that it believes in good faith to be
genuine and what it purports to be. Escrow Agent shall be subject to no
liability with respect to the form, execution, or validity of any such
Instruction. The Escrow Agent shall not be liable for verifying the accuracy of
any certifications made by the Issuers in an Officers' Certificate delivered
under Section 3.
(iii) Escrow Agent shall not be liable for any error of judgment,
or for any act done or step taken or omitted by it in good faith, or for any
mistake of fact or law, or for doing anything which, in good faith, it may do or
refrain from doing in connection with the Escrow Accounts, except in each case
in the event of Escrow Agent's gross negligence or wilful misconduct.
(i) SUBSTITUTION OF ESCROW AGENT.
(i) The Issuers shall have the right to cause Escrow Agent to
be relieved of its duties hereunder and to select a substitute escrow agent to
serve hereunder (provided such substitute escrow agent is an Acceptable
Replacement Escrow Agent), upon the expiration of 30 days following delivery of
written notice of substitution to Escrow Agent and the Trustee. Upon selection
of such substitute escrow agent, such substitute escrow agent and the parties
hereto other than the substituted escrow agent shall enter into an agreement
substantially identical to this Agreement and, thereafter, Escrow Agent shall be
relieved of its duties and obligations to perform hereunder, except that Escrow
Agent shall transfer to the substitute escrow agent upon request therefor all
assets held in the Escrow Account and copies of all books, records, plans and
other documents in Escrow Agent's possession relating to such assets or this
Agreement.
(ii) Escrow Agent, or any substitute escrow agent, may at any
time resign and be discharged of its duties and obligations under this Agreement
by giving at least 30 days' notice to the Issuers and the Trustee. The Issuers
shall appoint a substitute escrow agent (provided such substitute escrow agent
shall be an Acceptable Replacement Escrow Agent) within such 30 day period and
such substitute escrow agent and the parties hereto
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(other than the resigning Escrow Agent) shall enter into an agreement
substantially identical to this Agreement.
(iii) If the Issuers fail to appoint a substitute escrow agent as
required under paragraph (ii) above, Escrow Agent shall deliver all assets
held in the Escrow Accounts and copies of all books, records, plans and
other documents in the Escrow Agent's possession relating to such assets or
this Agreement to a substitute escrow agent (provided such substitute
escrow agent shall be an Acceptable Replacement Escrow Agent) of either its
choosing or as appointed by a court upon application therefor.
(iv) Escrow Agent shall be discharged from any further duties
under this Agreement upon its transfer of the assets held in the Escrow
Accounts and copies of all books, records, plans and other documents in the
Escrow Agent's possession relating to such assets or this Agreement to an
Acceptable Replacement Escrow Agent.
(j) INTEREST ESCROW ACCOUNT STATEMENT. At least 30 days prior to each
Interest Payment Date, the Escrow Agent shall deliver to the Issuers and the
Trustee a statement setting forth with reasonable particularity the Collateral
then held by the Escrow Agent, and the manner in which such funds are invested
(the "Interest Escrow Account Statement"). The books and records of the Escrow
Agent with respect to the Interest Escrow Account shall be available upon
written request by the Trustee and the Issuers or their respective
representatives. The parties hereto irrevocably instruct Escrow Agent that on
the first date upon which the balance in the Interest Escrow Account (including
the holdings of all Temporary Cash Investments) is reduced to zero, Escrow Agent
shall deliver to the Issuers and to the Trustee a notice that the balance in the
Interest Escrow Account has been reduced to zero.
(k) CONSTRUCTION ESCROW ACCOUNT STATEMENT. At the first Business Day
of each month, the Escrow Agent shall deliver to the Issuers and the Trustee a
statement setting forth with reasonable particularity the Collateral then held
by the Escrow Agent in the Construction Escrow Account, and the manner in which
such funds are invested (the "Construction Escrow Account Statement"). The books
and records of the Escrow Agent with respect to the Construction Escrow Account
shall be available upon written request by the Trustee and the Issuers or their
respective representatives. The parties hereto irrevocably instruct Escrow Agent
that on the first date upon which the balance in the Construction Escrow Account
(including the holdings of all Temporary Cash Investments) is reduced to zero,
Escrow Agent shall deliver to the Issuers and to the Trustee a notice that the
balance in the Construction Escrow Account has been reduced to zero.
(l) OTHER POWERS OF ESCROW AGENT.
(i) Escrow Agent may register any investments held in the
Escrow Accounts in its nominee name without increase or decrease of
liability.
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(ii) Escrow Agent may consult with and obtain advice from legal
counsel of its selection in the event of any dispute or question as to the
construction of any of the provisions of this Agreement or any of Escrow
Agent's duties under this Agreement, and Escrow Agent shall incur no
liability in acting in good faith in accordance with the advice of such
counsel. The fees and expenses for consultation with a single firm of
attorneys shall be a proper expense chargeable to the Construction Escrow
Account, provided that Escrow Agent provides the Issuers with prior written
notice of any such charge.
(m) INCUMBENCY CERTIFICATE. The Issuers and the Trustee each shall
provide a certificate to Escrow Agent as to the incumbency and signatures of
those individuals authorized to provide from time to time instructions relating
to the Escrow Accounts or to execute documents to be provided to Escrow Agent.
The Issuers and the Trustee also shall promptly notify Escrow Agent of any
changes to such a certificate. Escrow Agent may rely on the accuracy and
completeness of any such certificate unless and until it has received an
acceptable replacement certificate. All certificates provided under this Section
2(m) shall be executed by the applicable party's corporate secretary or
assistant secretary or, if the party does not have a corporate secretary or
assistant secretary, by a comparable officer.
3. DISBURSEMENTS.
(a) The Escrow Agent will make payments from the Interest Escrow
Account as follows: (i) on each of the first two Interest Payment Dates, an
amount equal to the installment then due, to be remitted to the Paying Agent for
the Notes, and (ii) in the event the Issuers are required to repurchase Notes
pursuant to the Indenture, on the repurchase date, an amount equal to the
aggregate amount of accrued interest paid to the holders whose Notes were
repurchased. A failure to pay interest on the Notes in a timely manner through
the first two scheduled Interest Payment Dates will constitute an immediate
Event of Default under the Indenture, with no grace or cure period.
(b) The Escrow Agent will make payments from the Construction Escrow
Account as follows: On the first Business Day of each calendar month beginning
after the date that the Issuers shall have paid an aggregate of at least $50
million for the following: (x) installment payments to AMFELS of the amount
specified under the related Construction Contract as the total purchase price to
be paid to AMFELS of such Rig (the "Purchase Price") PLUS (y) payments for OFE
PLUS (z) Construction Overhead (or, in the case of the first calendar month in
which the Issuers shall have so paid such amount, on any Business Day thereafter
during such calendar month), an amount equal to the sum of (i) each installment
payment of the Purchase Price of the Rigs required to be paid on each Rig
Purchase Installment Date in such calendar month pursuant to the Construction
Contracts, as adjusted for any change orders provided pursuant to the
Construction Contracts, (ii) the aggregate amount estimated in good faith by the
Issuers to be required in such calendar month to pay for the purchase price of
OFE, and Construction Overhead, up to an aggregate amount not to exceed $55.0
million and (iii) with respect to any calendar month beginning on or after the
Delivery Date of the first Rig to be completed (the "First Completed Rig") and
prior to the Delivery Date of
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the second Rig to be completed (the "Second Delivery Date"), an aggregate amount
estimated by the Issuers to be required to fund the working capital in such
calendar month for the operation of the First Completed Rig, not to exceed $10.0
million, ((i) through (iii) above collectively referred to as "Construction
Expenses"); PROVIDED, HOWEVER, that at least three Business Days prior thereto,
the Issuers shall have delivered to the Trustee and the Escrow Agent an
Officers' Certificate setting forth in reasonable detail (i) the amount,
category and purpose of each requested payment, (ii) in the case of any payments
other than installment payments of the Purchase Prices of the Rigs, the amount
available for payment, after giving effect to all previous payments, and (iii) a
reconciliation of payments made from the Construction Escrow Account to actual
expenditures, which reconciliation shall be made on a cumulative basis through
the end of the second calendar month proceeding the month in which such
Officers' Certificate is delivered. Notwithstanding the foregoing, in the event
the Issuers are required to repurchase Notes upon a Contract Termination, the
Escrow Agent will make a payment on the repurchase date, in an amount equal to
the Allocated Portion of the remaining funds in the Construction Escrow Account,
to be deposited with the Paying Agent for application to pay the purchase price
of Notes accepted for repurchase. Pending application of the Collateral so
released from the Construction Escrow Account pursuant to this Agreement, such
Collateral shall be invested in Temporary Cash Investments.
(c) Upon receipt by the Escrow Agent of an Officers' Certificate of
the Issuers that the Issuers have made the first two scheduled interest payments
on the Notes, the Collateral in the Interest Escrow Account shall be released
from the Interest Escrow Account to the order of the Issuers. Upon receipt by
the Escrow Agent of an Officers' Certificate of the Issuers that the Issuers
have made the final installment of the Purchase Price for each of the Rigs in
accordance with the related Construction Contracts, the Collateral in the
Construction Escrow Account will be released from the Construction Escrow
Account to the order of the Issuers. Upon release of all the Collateral from
the Escrow Accounts, the Notes will be unsecured.
(d) The Issuers and the Trustee each shall provide a certificate to
Escrow Agent as to the incumbency and signatures of those individuals authorized
to provide from time to time instructions relating to the Escrow Accounts or to
execute documents to be provided to Escrow Agent. The Issuers and the Trustee
also shall promptly notify the Escrow Agent of any changes to such a
certificate. Escrow Agent may rely on the accuracy and completeness of any such
certificate unless and until it has received an acceptable replacement
certificate. All certificates provided under this Section 3(d) shall be executed
by the applicable party's corporate secretary or assistant secretary or, if the
party does not have a corporate secretary or assistant secretary, by a
comparable officer.
(e) RETIRED NOTES, ETC. In the event that a portion of the Notes has
been retired by the Issuers and submitted to the Trustee for cancellation or, if
additional cash has been deposited into the Interest Escrow Account pursuant to
Section 3(g) below and, thereafter, the Registration Default (as defined in the
Registration Rights Agreement is cured, and there is no Default or Event of
Default under the Indenture, funds representing the lesser of (i) the excess of
the then Available Funds over the amount sufficient to pay interest through and
including May 1, 1999 on the Notes not so retired and (ii) the interest payments
which have not previously been made on such retired Notes
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for each Interest Payment Date through the Interest Payment Date to occur on May
1, 1999 shall, upon written request of the Trustee to the Escrow Agent. The
Trustee shall provide such notice to the Escrow Agent (A) upon receipt of notice
of similar effect from the Issuers (which notice from the Issuers shall be
accompanied by an agreed upon procedures report by a nationally recognized
independent public accounting or investment banking firm which sets forth the
calculations to determine such lesser amount and recalculates the amounts
remaining in the Interest Escrow Account as sufficient to produce without
reinvestment of the remaining funds or reinvestment of income produced by the
remaining Temporary Cash Investments and without further deposit by the Issuers,
funds sufficient to cover all interest due on the remaining outstanding Notes,
as such interest becomes due, for the Interest Payment Dates occurring on
November 1, 1998 and May 1, 1999) and (B) upon compliance with the release of
collateral provisions of the TIA to the extent required by the Indenture.
(f) EXCESS AMOUNTS. At such time as all interest due on the Notes
through and including May 1, 1999 has been paid to the Holders thereof pursuant
to the Indenture and in accordance herewith, the Escrow Agent shall disburse all
remaining funds in the Interest Escrow Account to the Issuers. The Trustee shall
provide notice to the Escrow Agent to such effect upon receipt of notice from
the Issuers after the time all interest due on the Notes through and including
May 1, 1999 has been paid to the Holders.
(g) ADDITIONAL AMOUNTS. In the event the Issuers become obligated to
pay Additional Interest (as defined in the Registration Rights Agreement) under
the circumstances described in Section 11.1 of the Indenture, the Issuers shall
deposit into the Interest Escrow Account additional cash pursuant to Section
11.1 of the Indenture.
4. ESCROW AGENT. The Escrow Agent's responsibility and liability under
this Agreement shall be limited as follows: (a) the Escrow Agent does not
represent, warrant or guaranty to the holders of the Notes from time to time the
performance of the Issuers or the Trustee; (b) the Escrow Agent shall have no
responsibility to the Issuers or the holders of the Notes or the Trustee from
time to time as a consequence of performance or nonperformance by the Escrow
Agent hereunder, except for any gross negligence or wilful misconduct of the
Escrow Agent; (c) the Issuers shall remain solely responsible for all aspects of
the Issuers' business and conduct; and (d) the Escrow Agent is not obligated to
supervise, inspect or inform the Issuers or any third party of any matter
referred to above.
No implied covenants or obligations shall be inferred from this Agreement
against the Escrow Agent, nor shall the Escrow Agent be bound by the provisions
of any agreement beyond the specific terms hereof. Specifically and without
limiting the foregoing, the Escrow Agent shall in no event have any liability in
connection with its investment, reinvestment or liquidation, in good faith and
in accordance with the terms hereof, of any funds or Temporary Cash Investments
held by it hereunder, including, without limitation any liability for any delay
not resulting from gross negligence or wilful misconduct in such investment,
reinvestment or liquidation, or for any loss of principal or income incident to
any such delay.
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The Escrow Agent shall be entitled to rely upon any judicial order or
judgment, upon any written opinion of counsel or upon any certification,
instruction, notice, or other writing delivered to it by the Issuers or the
Trustee in compliance with the provisions of this Agreement without being
required to determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of service thereof. The Escrow Agent may
act in reliance upon any instrument comporting with the provisions of this
Agreement or signature believed by it to be genuine and may assume that any
person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
The Escrow Agent may act pursuant to the advice of counsel chosen by it
with respect to any matter relating to this Agreement and (subject to clause (b)
of the first paragraph of Section 4) shall not be liable for any action taken or
omitted in accordance with such advice.
The Escrow Agent shall not be called upon to advise any party as to selling
or retaining, or taking or refraining from taking any action with respect to,
any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this Agreement with
respect to any funds or property deposited hereunder, the Escrow Agent shall be
entitled to refuse to comply with any and all claims, demands or instructions
with respect to such funds or property, and the Escrow Agent shall not be or
become liable for its failure or refusal to comply with conflicting claims,
demands or instructions. The Escrow Agent shall be entitled to refuse to act
until either any conflicting or adverse claims or demands shall have been
finally determined by a court of competent jurisdiction or settled by agreement
between the conflicting claimants as evidenced in a writing, satisfactory to the
Escrow Agent, or the Escrow Agent shall have received security or an indemnity
satisfactory to the Escrow Agent sufficient to save the Escrow Agent harmless
from and against any and all loss, liability or expense which the Escrow Agent
may incur by reason of its acting. The Escrow Agent may in addition elect in its
sole option to commence an interpleader action or seek other judicial relief or
orders as the Escrow Agent may deem necessary.
No provision of this Agreement shall require the Escrow Agent to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder.
5. INDEMNITY. Each Issuer shall jointly and severally indemnify, hold
harmless and defend Escrow Agent and the Trustee, and their respective
directors, officers, agents and employees, from and against any and all claims,
actions, obligations, liabilities and expenses, including defense costs,
investigative fees and costs, legal fees, and claims for damages, arising from
Escrow Agent's and the Trustee's respective performance under this Agreement,
except to the extent that such liability, expense or claim is directly
attributable to the gross negligence or wilful misconduct of such indemnified
person. In connection with any claim, action, obligation, liability or expense
for which indemnification is sought by the Escrow Agent hereunder, the Escrow
Agent shall be entitled to recover its costs as incurred from funds available in
the Construction Escrow Account.
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6. INSTRUCTIONS TO ESCROW AGENT.
(a) Each Issuer and the Trustee hereby irrevocably instruct the
Escrow Agent to: (i) maintain all of the Collateral free and clear of all liens,
security interests, safekeeping or other charges, demands and claims against
Escrow Agent of any nature whatsoever now or hereafter existing, in favor of
anyone other than the Trustee; (ii) promptly notify the Trustee if Escrow Agent
becomes aware that any person other than the Trustee has a lien or security
interest upon any portion of the Collateral (other than any claim which Escrow
Agent may have against the Construction Escrow Account for unpaid fees and
expenses); and (iii) immediately disburse all funds held in the Escrow Accounts
to the Trustee and transfer title to all Temporary Cash Investments held by
Escrow Agent hereunder to the Trustee upon written notice by the Trustee to
Escrow Agent that as a result of an Event of Default under the Indenture, the
indebtedness represented by the Notes has been accelerated and has become due
and payable.
(b) Any money and Temporary Cash Investments collected by the Trustee
pursuant to Section 6(a)(iii) shall be applied as provided in the Indenture.
(c) Upon demand, the Issuers will execute and deliver to the Trustee
such instruments and documents as the Trustee may reasonably deem necessary or
advisable to confirm or perfect the rights of the Trustee under this Agreement
and the Trustee's interest in the Collateral. The Trustee will take all
necessary action within its power to preserve and protect the security interest
created hereby as a lien and encumbrance upon the Collateral.
(d) Each Issuer hereby appoints the Trustee as its attorney-in-fact
with full power of substitution to do any act which such Issuer is obligated
hereto to do, except that the Trustee shall not direct the investment of any
monies on deposit in the Escrow Accounts, and the Trustee may exercise such
rights as each Issuer may exercise with respect to the Collateral and take any
action in each Issuer's name to protect the Trustee's security interest
hereunder.
7. TERMINATION. This Agreement shall terminate automatically ten (10)
days following disbursement of all funds remaining in the Escrow Accounts
(including the proceeds of any Temporary Cash Investments), unless sooner
terminated by agreement of the parties hereto (in accordance with the terms
hereof, not in violation of the Indenture), provided, however, that the
obligations of each Issuer under Section 5 of this Agreement shall survive
termination of this Agreement or the resignation or removal of the Escrow Agent;
provided, further, however, that until such tenth day, the Issuers will cause
this Agreement (or any permitted successor agreement) to remain in effect and
will cause there to be an escrow agent (including any permitted successor
thereto) acting hereunder (or under any such permitted successor agreement).
8. MISCELLANEOUS.
(a) WAIVER. Any party hereto may specifically waive any breach of
this Agreement by any other party, but no such waiver shall be deemed to have
been given unless such waiver is in
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writing, signed by the waiving party and specifically designating the breach
waived, nor shall any such waiver constitute a continuing waiver of similar or
other breaches.
(b) INVALIDITY. If, for any reason whatsoever, any one or more of the
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
(c) ASSIGNMENT. This Agreement is personal to the parties hereto, and
the rights and duties of any party hereunder shall not be assignable except with
the prior written consent of the other parties. In any event, this Agreement
shall inure to and be binding upon the parties and their successors and
permitted assigns.
(d) BENEFIT. The parties hereto, the holders of the Notes and their
permitted assigns, but no others, shall be bound hereby and entitled to the
benefits hereof.
(e) TIME. Time is of the essence in each provision of this Agreement
of which time is an element.
(f) CHOICE OF LAW. The existence, validity, construction, operation
and effect of any and all terms and provisions of this Agreement shall be
determined in accordance with and governed by the laws of the State of New York,
without giving effect to conflict of law principles thereof.
(g) ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes any and all prior agreements, understandings and commitments, whether
oral or written. This Agreement may be amended only by a writing signed by duly
authorized representatives of all parties.
(h) NOTICES. All notices and other communications required or
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been duly given and received, regardless of when and whether
received: (i) on the day of hand delivery; (ii) upon confirmation when sent by
facsimile transmission; (iii) on the next business day after the day sent when
sent by overnight mail; or (iv) three business days following the day sent, when
sent by United States certified mail, postage and certification fee prepaid,
return receipt requested, addressed as follows:
To Escrow Agent:
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U.S. Bank Trust National Association
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
To the Trustee:
U.S. Bank Trust National Association
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
To the Issuers:
▇▇▇▇▇▇ Offshore LLC
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
▇▇▇▇▇▇ Offshore Finance Corp.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
or at such other address as the specified entity most recently may have
designated in writing in accordance with this section to the others.
(i) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(j) CAPTIONS. Captions in this Agreement are for convenience only and
shall not be considered or referred to in resolving questions of interpretation
of this Agreement.
(k) AUTHORITY OF THE ISSUERS; VALID AND BINDING AGREEMENT. Each
Issuer hereby represents and warrants that this Agreement has been duly
authorized, executed and delivered on its behalf and constitutes the legal,
valid and binding obligation of such Issuer. The execution, delivery and
performance of this Agreement by such Issuer does not violate any applicable law
or regulation to which such Issuer is subject and does not require the consent
of any governmental or other regulatory body to which such Issuer is subject,
except for such consents and approvals as have been obtained and are in full
force and effect.
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(l) AUTHORITY OF THE ESCROW AGENT AND THE TRUSTEE; VALID AND BINDING
AGREEMENT. Each of the Escrow Agent and the Trustee hereby represents and
warrants that this Agreement has been duly authorized, executed and delivered on
its behalf and constitutes its legal, valid and binding obligation.
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IN WITNESS WHEREOF, the parties have executed and delivered this Escrow
Agreement as of the date first above written.
ESCROW AGENT: U.S. BANK TRUST
NATIONAL ASSOCIATION
By: /s/ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇. ▇▇▇▇▇▇▇
Title: Assistant Vice President
TRUSTEE AND COLLATERAL AGENT:
U.S. BANK TRUST NATIONAL
ASSOCIATION
By: /s/ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Assistant Vice President
ISSUERS:
▇▇▇▇▇▇ OFFSHORE LLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President, Chief
Financial Officer and Secretary
▇▇▇▇▇▇ OFFSHORE FINANCE CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President, Chief
Financial Officer and Secretary
17