Exhibit 10.162
LIMITED LIABILITY COMPANY AGREEMENT
TABLE OF CONTENTS
I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
II. FORMATION OF COMPANY; FILINGS . . . . . . . . . . . . . . . . . . . . 6
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Registered Office and Registered Agent. . . . . . . . . . . 6
2.3 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Relationship of the Parties . . . . . . . . . . . . . . . . 6
III. NAME; PURPOSE; PLACE OF BUSINESS; TERM . . . . . . . . . . . . . . . 7
3.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Place of Business . . . . . . . . . . . . . . . . . . . . . 8
3.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
IV. MEMBERS; RESTRICTION ON DISPOSITION OF INTEREST;PREFERENTIAL RIGHT OF
PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Members . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Restrictions on the Disposition of an Interest . . . . . . . 8
4.3 Preferential Right of Purchase . . . . . . . . . . . . . . . 9
4.4 Disposition Documents . . . . . . . . . . . . . . . . . . . 11
4.5 Legality . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 Status After Disposition . . . . . . . . . . . . . . . . . . 12
4.7 Disposition Costs . . . . . . . . . . . . . . . . . . . . . 12
4.8 Limitation on Transfer . . . . . . . . . . . . . . . . . . . 13
V. CONTRIBUTIONS; DISTRIBUTIONS; FAILURETO MAKE CONTRIBUTIONS TIMELY;
SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Initial Contributions . . . . . . . . . . . . . . . . . . . 14
5.2 Cost Overrun Contributions. . . . . . . . . . . . . . . . . 14
5.3 Additional Contributions . . . . . . . . . . . . . . . . . . 15
5.4 Distributable Cash . . . . . . . . . . . . . . . . . . . . . 15
5.5 Failure to Make Contributions . . . . . . . . . . . . . . . 16
5.6 Grant of Security Interest . . . . . . . . . . . . . . . . . 17
5.7 Secured Party. . . . . . . . . . . . . . . . . . . . . . . . 18
VI. TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1.1 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1.2 Information Request by TMP . . . . . . . . . . . . 19
6.1.3 TMP Agreements with IRS . . . . . . . . . . . . . . 19
6.1.4 Inconsistent Treatment of Company Item . . . . . . 20
6.1.5 Communication of Proceedings to Members . . . . . . 20
6.1.6 Requests for Administrative Adjustment . . . . . . 20
6.1.7 Judicial Proceedings . . . . . . . . . . . . . . . 20
6.2 Income Tax Compliance and Capital Accounts . . . . . . . . . 21
6.2.1 Tax Returns . . . . . . . . . . . . . . . . . . . . 21
6.2.2 Fair Market Value Capital Accounts . . . . . . . . 21
6.2.3 Information Request . . . . . . . . . . . . . . . . 21
6.3 Elections . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3.1 General Elections . . . . . . . . . . . . . . . . . 21
6.3.2 Other Elections or Consents . . . . . . . . . . . . 21
6.4 Capital Contributions and FMV Capital Accounts . . . . . . . 22
6.4.1 Capital Contributions . . . . . . . . . . . . . . . 22
6.4.2 FMV Capital Accounts . . . . . . . . . . . . . . . 22
6.5 Company Allocations . . . . . . . . . . . . . . . . . . . . 23
6.5.1 FMV Capital Account Allocations . . . . . . . . . . 23
6.5.2 Tax Returns and Tax Basis Capital Account
Allocation. . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Termination and Liquidating Distributions . . . . . . . . . 24
6.6.1 Termination . . . . . . . . . . . . . . . . . . . . 24
6.6.2 Section 708(b)(1)(A) Termination . . . . . . . . . 25
6.6.3 Balancing . . . . . . . . . . . . . . . . . . . . . 25
6.6.4 Final Distribution . . . . . . . . . . . . . . . . 26
6.7 Transfers, Indemnification, and Correspondence . . . . . . . 26
6.7.1 Transfers of Company Interests . . . . . . . . . . 26
6.7.2 Indemnification . . . . . . . . . . . . . . . . . . 26
6.7.3 Correspondence . . . . . . . . . . . . . . . . . . 27
6.8 No Interest . . . . . . . . . . . . . . . . . . . . . . . . 27
6.9 Return of Capital . . . . . . . . . . . . . . . . . . . . . 27
VII. ADMINISTRATIVE MATTERS . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 Books and Records . . . . . . . . . . . . . . . . . . . . . 27
7.2 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3 Bank Accounts; Investments . . . . . . . . . . . . . . . . . 28
7.4 Monthly Progress Reports . . . . . . . . . . . . . . . . . . 29
▇▇▇▇.▇▇▇▇▇▇▇▇▇▇; MEMBERS COMMITTEE; MANAGER;
STANDARD OF CARE; INDEMNIFICATION . . . . . . . . . . . . . . . . . . 29
8.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.2 Members Committee . . . . . . . . . . . . . . . . . . . . . 29
8.3 Manager . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.4 Standard of Care . . . . . . . . . . . . . . . . . . . . . . 35
8.5 Indemnification of the Representatives and the Manager . . . 35
IX. VOLUNTARY WITHDRAWAL . . . . . . . . . . . . . . . . . . . . . . . . 36
9.1 Resignation by Member . . . . . . . . . . . . . . . . . . . 36
9.2 Wrongful Withdrawal . . . . . . . . . . . . . . . . . . . . 37
X. [DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
XI. DISSOLUTION; RECONSTITUTION; WINDING UP . . . . . . . . . . . . . . . 37
11.1 Events Deemed to Cause Dissolution . . . . . . . . . . . . . 38
11.2 Distribution of Assets . . . . . . . . . . . . . . . . . . . 39
11.3 Termination . . . . . . . . . . . . . . . . . . . . . . . . 39
XII. [DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
▇▇▇▇.▇▇▇▇▇▇▇▇▇ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.1 Insurance Coverage . . . . . . . . . . . . . . . . . . . . . 40
13.2 Certain Requirements . . . . . . . . . . . . . . . . . . . . 41
XIV. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.1 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.2 Choice of Law; Submission to Jurisdiction . . . . . . . . . 42
14.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 42
14.5 Effect of Waiver or Consent . . . . . . . . . . . . . . . . 43
14.6 Amendment or Modification . . . . . . . . . . . . . . . . . 43
14.7 Binding Effect; Joinder of Additional Parties . . . . . . . 43
14.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 43
14.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . 43
14.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.11 Gender; Articles and Sections . . . . . . . . . . . . . . . 44
14.12 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.13 Further Assurances . . . . . . . . . . . . . . . . . . . . . 44
14.14 Independent Conduct . . . . . . . . . . . . . . . . . . . . 45
14.15 Deemed Assent . . . . . . . . . . . . . . . . . . . . . . . 45
14.16 Signing Members; Certificate of Authority . . . . . . . . . 45
14.17 Withholding or Granting of Consent . . . . . . . . . . . . . 46
14.18 Waiver of Certain Rights . . . . . . . . . . . . . . . . . . 46
14.19 U.S. Currency . . . . . . . . . . . . . . . . . . . . . . . 46
14.20 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . 46
14.21 Proprietary Information . . . . . . . . . . . . . . . . . . 46
14.22 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . 46
XV. DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . 47
15.2 Ancillary Agreements . . . . . . . . . . . . . . . . . . . . 47
Exhibit "A" - Description of Drillship
Exhibit "B" - Indemnification Agreements
Exhibit "C" - Sharing Ratios
Exhibit "D" - Certificate of Formation
Exhibit "E" - Form of Demand Promissory Note (Section 5.1)
Exhibit "F" - Marine Services Agreement
Exhibit "G" - Drilling Services Agreement
Exhibit "H" - Construction Financing Credit Agreement
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LIMITED LIABILITY COMPANY AGREEMENT
This Limited Liability Company Agreement is made and entered into on
October 28, 1996 by and between Conoco Development Company, a Delaware
corporation having its principal office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ (sometimes referred to as "Conoco") and RB Deepwater Exploration
Inc., a Nevada corporation having its principal office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (sometimes referred to as "Reading & ▇▇▇▇▇").
FOR AND IN CONSIDERATION of the mutual covenants, rights, and
obligations contained herein, the benefits to be derived therefrom, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Members hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms
shall have the respective meanings indicated:
"Act" means the Delaware Limited Liability Company Act, 6 Del.
C. Sections 18-101, et seq., as amended, from time to time.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited
to all directors and officers of such Person), controlled by, or under
direct or indirect common control with such Person.
"Assets" shall mean the Drillship and all other assets of the
Company of every kind whatsoever, real or personal, tangible or
intangible.
"Agreement" shall mean this Limited Liability Company Agreement.
"Bankrupt" or "Bankruptcy" shall mean any of the events set out
in 18-304 of the Act happening with respect to a Member.
"Base Term" shall mean the period of time commencing on the date
of this Agreement and ending on the date one day after the later of
(i) the completion of the Drilling Contract, including any extensions
or renewals thereof, or (ii) the complete discharge of the Purchase
Note, including all interest accrued thereon.
"Builder" shall mean the shipbuilder selected by the Company to
construct and deliver the Drillship.
"Company" shall mean Deepwater Drilling L.L.C.
"Control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under direct or indirect common
control") shall mean, with respect to a Person that is a corporation,
the right to the exercise, directly or indirectly, more than 50% of
the voting rights attributable to the shares of the controlled Person
normally entitled to vote for the election of directors and, with
respect to a Person that is not a corporation, the possession,
directly or indirectly, of the power to direct or cause the direction
of the management or policies of the controlled Person.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the regulations issued thereunder.
"Default Interest Rate" shall mean a rate equal to the lesser of
(i) five (5) percentage points in excess of a varying rate per annum
that is equal to the interest rate publicly quoted by Texas Commerce
Bank, N.A., Houston, Texas, from time to time, as its prime commercial
rate, with adjustments in such varying rate to be made on the same
date as any change in the aforesaid prime rate, or (ii) the maximum
non-usurious rate permitted by applicable law.
"Delinquent Member" shall have the meaning attributed to it in
Section 5.5.
"Designated Representative" shall mean (a) when used with
respect to Reading & ▇▇▇▇▇, or any successor or permitted assign, the
chief executive officer of the ultimate parent of Reading & ▇▇▇▇▇ or
any successor or permitted assign of Reading & ▇▇▇▇▇; and (b) when
used with respect to Conoco, or any successor or permitted assign, a
person who is at least a Vice President of Conoco Inc., or the
President of the successor or permitted assign of Conoco.
"Dispose" (or "Disposition") shall mean to sell or otherwise
transfer legal or beneficial ownership to any property or interest in
property, real or personal (or the act of such sale or transfer).
"Distributable Cash" means all cash of the Company in excess of
the amount which the Members Committee determines is required to meet
the Company's obligations (including reserves for projected
expenditures, working capital and contingencies).
"Disposition Notice" shall have the meaning attributed to it in
Section 4.3.
"Drilling Contract" shall mean the minimum five (5) year fixed
term (with ten extension options of one year each) drilling contract
contemplated to be awarded by Conoco Drilling Inc. to the Company for
the Drillship, such drilling contract to be on terms and conditions
satisfactory to the Members.
"Drillship" shall mean the shipshape self-propelled offshore
drilling vessel described in Exhibit "A" hereto, together with all of
her machinery and equipment, including without limitation all marine,
drilling and production equipment, drill string, risers, blowout
prevention equipment, spare and repair parts, inventory, whether
located on the vessel or on shore, belonging to the vessel (excluding,
however, equipment to be leased from third parties).
"First Member" shall have the meaning attributed to it in
Section 4.3.
"Indemnification Agreement" shall mean, with respect to Reading
& ▇▇▇▇▇, the indemnification agreement to be executed by Reading &
▇▇▇▇▇ Corporation, and with respect to Conoco the indemnification
agreement to be executed by Conoco Inc., each such indemnification
agreement to be in the form attached as Exhibit "C".
"Independent Accountants" shall mean Price Waterhouse LLP,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or such other firm of certified public
accountants, as may from time to time be designated by the Members
Committee.
"Manager" shall mean such Person as may be designated as Manager
from time to time by the Members Committee.
"Member " or "Members" shall mean the Persons named in Section
4.1 or any Member who is admitted as a substitute Member pursuant
hereto.
"Members Committee" shall mean the committee described in and
functioning according to Section 8.2.
"Membership Interest" shall mean the ownership interest of a
Member in the Company (which shall be considered personal property for
all purposes) consisting of (i) such Member's Sharing Ratio of the
entire ownership interests of the Company, (ii) such Member's right to
vote or grant or withhold consent with respect to Company matters as
provided herein or in the Act, and (iii) such Member's other rights
and privileges as herein provided or as provided in the Act or
otherwise at law.
"Non-Delinquent Member" shall have the meaning attributed to it
in Section 5.5(b).
"Person" shall mean an individual, corporation, trust,
unincorporated association, or other entity or association.
"Permitted Security Interest" means the security interest given
under Section 5.6 of the Agreement, any security interests given under
the Construction Financing Credit Agreement attached as Exhibit H, and
any other security interest in a Membership Interest given by one or
more Members which is consented to in writing by all other Members.
"Proprietary Information" means patents, trade secrets,
proprietary systems, designs, and processes, and technical or business
know-how, which is not in the public domain.
"Purchase Note" shall mean the promissory note or notes
constituting the permanent financing by the Company of the purchase of
the Drillship, such note or notes not to have a term greater than five
years from delivery of the Drillship by the Builder, or to be in a
principal amount to exceed eighty percent (80%) of the acquisition
cost of the Drillship, without the prior written approval of the
Members (such financing to be on a basis of recourse limited to the
Drillship, her earnings and insurances); Conoco or an Affiliate has
the option to provide such permanent financing for the Company
provided: (i) the interest rate is no greater than 25 basis points in
excess of that interest rate and on such other terms as are comparable
to any other permanent financing available to the Company, and (ii)
such option is exercised in writing by Conoco to the Company no later
than ninety (90) days prior to the scheduled delivery of the Drillship
by the Builder to the Company .
"Representatives" shall have the meaning attributed to it in
Section 8.2(c).
"Second Member" shall have the meaning attributed to it in
Section 4.3.
"Sharing Ratio" shall mean, with respect to each Member, as of
the date of this Agreement, the percentage set forth beside such
Member's name on Exhibit "C" to this Agreement.
"TMP" shall have the meaning attributed to it in Section 6.1.
ARTICLE II
FORMATION OF COMPANY; FILINGS
2.1 Formation. The Company shall be organized by the Members upon
execution and delivery of this Agreement and the execution and filing of the
Certificate of Formation of the Company to the Delaware Secretary of State in
accordance with and pursuant to the Act, substantially in the form attached as
Exhibit "D" to this Agreement. Conoco or Reading & ▇▇▇▇▇ shall be an
"authorized person" within the meaning of the Act for purposes of executing
the Certificate of Formation. The Manager may provide the Members with
written evidence of their Membership Interest in such form as the Members
Committee may from time to time determine, provided that, if issued, such
written evidence shall always indicate that a Member shall not transfer its
Membership Interest except in accordance with the terms of this Agreement.
Except as provided to the contrary in this Agreement, the rights and
obligations of the Members shall be governed by the provisions of the Act.
2.2 Registered Office and Registered Agent. The Company's initial
registered office shall be at the office of its registered agent at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the name of its initial
registered agent at such address shall be The Corporation Trust Company.
The registered office and registered agent may be changed from time to
time by filing the address of the new registered office and/or the name of the
new registered agent with the Delaware Secretary of State pursuant to the Act.
2.3 Filings. The Members, the Members Committee and/or the Manager,
as applicable, shall execute, deliver and file such additional documents and
perform such additional acts consistent with the terms of this Agreement as
may be necessary to comply with the requirements of law for the formation,
qualification, and operation of a limited liability company in each
jurisdiction in which the Company shall conduct business.
2.4 Relationship of the Parties. The Members understand and agree
that the arrangement and undertakings evidenced by the Agreement result in a
partnership for purposes of federal income taxation and certain state income
tax laws which incorporate or follow federal income tax principles. For every
other purpose of the Agreement, the Members understand and agree that their
legal relationship to each other and to any third parties under applicable
state law is that of members of a limited liability company and not as a
partnership.
ARTICLE III
NAME; PURPOSE; PLACE OF BUSINESS; TERM
3.1 Name. The name of the Company shall be "Deepwater Drilling
L.L.C.", and the business of the Company shall be conducted under such name or
under any other name or names as the Members Committee may from time to time
elect, or as may be necessary to comply with the laws of each jurisdiction in
which the Company conducts, or proposes to conduct, business.
3.2 Purposes. The purposes of the Company are (a) to cause the
Drillship to be built and equipped, as described in Exhibit "A", to take
delivery of the Drillship from the Builder, to operate the Drillship and
perform the Drilling Contract and other drilling and related contracts
obtained by the Company for the Drillship, and to carry out any and all
modifications to the Drillship deemed necessary or appropriate by the Members
Committee (including modifications to the Drillship which might change the
overall use of same from a mobile offshore drilling unit to a floating
production, storage and offloading vessel), (b) to obtain the necessary
permanent and construction financing [it being understood and agreed that with
respect to the construction financing Conoco or an Affiliate of Conoco shall
provide the necessary cost overrun guaranties in a form acceptable to Conoco
or its Affiliate and the Company (such construction financing meeting such
other conditions as Conoco or its Affiliate and the Company may require) to
support such financing for the Company from third parties (without any
obligation of Reading & ▇▇▇▇▇ to provide any such guaranties) to enable the
Company to acquire the Drillship (including entering into the Purchase Note)],
and to enter into from time to time such other financing arrangements as may
be necessary, appropriate, or advisable to enable the Company to accomplish
its purposes and to mortgage, pledge, assign, grant a security interest in, or
otherwise encumber the Drillship, its earnings and insurances, and any or all
of the other Company assets to secure the Purchase Note and such other
financing arrangements, (c) to sell, assign, lease, exchange, or otherwise
Dispose of, or refinance or additionally finance, all or substantially all of
the Company's interest in one or more or all of its assets, (d) to maximize
the profits of the Company, and (e) to engage in all activities and to enter
into, exercise the rights and enjoy the benefits under, and discharge the
obligations of the Company pursuant to, all contracts, agreements, and
documents that may be necessary, appropriate, or advisable to enable the
Company to accomplish the purposes set forth in clauses (a), (b), (c) and (d)
of this sentence, and (f) any other lawful business purpose or activity that
may be legally exercised by a limited liability company under the Act, as the
Members may agree.
3.3 Place of Business. The principal place of business of the
Company shall be at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. The
Company may establish offices at such other places within or outside the State
of Texas as the Members Committee may from time to time designate.
3.4 Term. The Company shall be deemed to have commenced effective
as of the date the Certificate of Formation of the Company is filed with the
Delaware Secretary of State. The Company shall continue until the close of
Company business on December 31, 2026 unless sooner terminated as provided in
this Agreement.
ARTICLE IV
MEMBERS; RESTRICTION ON DISPOSITION OF INTEREST;
PREFERENTIAL RIGHT OF PURCHASE
4.1 Members. Simultaneously with the execution of this Agreement,
Conoco and Reading & ▇▇▇▇▇ are hereby admitted as Members of the Company.
4.2 Restrictions on the Disposition of an Interest. Each Member
shall be entitled from time to time, without the prior consent of the Members
Committee, but subject to the provisions of Sections 4.4, 4.5, 4.6, and 4.7,
to Dispose of all of its Membership Interest in the Company to an Affiliate of
such Member. Except as set forth in the immediately preceding sentence, no
Member shall have the right to effect a Disposition of all or any part of its
Membership Interest in the Company unless and until (i) the consent of the
Members Committee has been obtained and (ii) there has been compliance with
the provisions of Section 4.3, 4.4, 4.5, 4.6, and 4.7. If the Members
Committee consents to the Disposition of a Membership Interest in the Company,
the provisions of Section 4.3 shall then become applicable to the Disposition
in question. Any attempted Disposition by a Person of a Membership Interest
or right, or any part thereof, in or in respect of the Company in
contravention of this Section 4.2 shall be, and is hereby declared, null and
void ab initio.
4.3 Preferential Right of Purchase. (a) Subject to Section 4.2
should any Member at any time desire to Dispose of all or a portion of its
Membership Interest in the Company pursuant to a bona fide offer from another
Person (other than an Affiliate), such Member (the "First Member") shall
promptly give notice (the "Disposition Notice") thereof to the other Member
(hereinafter referred to as the "Second Member"). The Disposition Notice
shall set forth all relevant information in respect of the proposed
Disposition, including, without limitation, the name and address of the
prospective acquirer and each Person that Controls the prospective acquirer,
the purchase price (all of which must be payable in cash), and the terms of
any delayed payment of the purchase price. The Second Member shall have the
optional preferential right (to be exercised by notice to the First Member
given no later than ninety days after the Second Member's receipt of the
Disposition Notice) to acquire, for the same purchase price and on the same
terms of any delayed payment that are set forth in the Disposition Notice, the
Membership Interest that the First Member proposes to Dispose. If the Second
Member does not elect to exercise the optional right set forth in the
immediately preceding sentence within the time period set forth therein, the
First Member shall have the right, subject to compliance with the provisions
of Sections 4.2, 4.4, 4.5, 4.6 and 4.7, to Dispose of the Membership Interest
described in the Disposition Notice strictly in accordance with the terms of
the Disposition Notice for a period of sixty-five days after the expiration of
the above described ninety day preferential right period. If the First Member
fails so to Dispose of the Membership Interest within such sixty-five day
period, the proposed Disposition shall again become subject to the
preferential right set forth in this Section 4.3.
(b) If the Second Member exercises the preferential right set forth
in Section 4.3(a), the closing of the acquisition by the Second Member of the
First Member's Membership Interest shall be held at the principal place of
business of the Company on a date mutually acceptable to the First Member and
the Second Member, but in no event more than sixty days after receipt by the
First Member of notice of the Second Member's election to acquire the First
Member's Membership Interest. At such closing the following transactions
shall occur:
(i) The First Member shall convey and assign by assignment with
general warranty of title to the Second Member, free and clear of all liens,
claims, and encumbrances (other than any lien, claim, or encumbrance created
pursuant to Section 5.6, set forth in the Disposition Notice, or otherwise
expressly permitted by the Second Member), the Membership Interest in the
Company described in the Disposition Notice and shall execute and deliver to
the Second Member all documents that may be required to give effect to the
Disposition and acquisition of such interest; and
(ii) The Second Member shall pay to the First Member, in
accordance with the terms of payment set forth in the Disposition Notice (that
is, in cash, payable either 100% at the closing or in installments over time,
whichever is set forth in the Disposition Notice), the purchase price
specified in the Disposition Notice for the Membership Interest described in
the Disposition Notice whereupon such Second Member (or its designee) shall be
admitted as a substitute Member in respect of the Membership Interest so
purchased.
(c) If the Second Member exercises the preferential right set forth
in Section 4.3(a), in the notice to the First Member exercising such right the
Second Member shall be entitled to designate an Affiliate of the Second Member
to acquire the Membership Interest of the First Member. Upon such
designation, the designated Affiliate will be substituted in the place and
stead of the Second Member for purposes of the Disposition provided for in
Section 4.3(b)(i), but the Second Member will remain fully liable for making
any and all payments due under Section 4.3(b)(ii).
(d) It is expressly agreed that the remedy at law for breach of any
of the obligations set forth in this Section 4.3 is inadequate in view of (i)
the complexities and uncertainties in measuring the actual damages that would
be sustained by reason of the failure of a Member to comply fully with each of
said obligations, and (ii) the uniqueness of the Company business and the
relationship between the Members. Accordingly, each of the aforesaid
obligations shall be, and is hereby expressly made, enforceable by specific
performance.
4.4 Disposition Documents. Except as a result of the foreclosure of
a Permitted Security Interest in a Membership Interest, the Company shall not
recognize for any purpose any purported Disposition of all or any portion of a
Member's Membership Interest in the Company unless and until the provisions of
this Article have been satisfied and there shall have been delivered to the
Manager a dated notification of such Disposition (i) executed and acknowledged
by both the Member effecting such Disposition and the Person to whom such
Membership Interest is Disposed, (ii) if the Person to whom such Membership
Interest is Disposed is to become a Member in the Company, containing the
acceptance by such Person of all the terms and provisions of this Agreement
and an agreement by such Person to perform and discharge timely all of the
obligations and liabilities in respect of the Membership Interest Disposed of
that are attributable to the period on and subsequent to the date of the
Disposition, and (iii) containing a representation that such Disposition was
made in accordance with all applicable laws and regulations. Any Disposition
shall be effective as of the first day of the calendar month immediately
succeeding the month in which the Manager actually receives the aforesaid
notification of Disposition.
4.5 Legality. Notwithstanding any provision of this Agreement to
the contrary, no Disposition by a Member shall be effective unless (i) either
(aa) the Membership Interest in the Company subject to such Disposition shall
have been registered under the Securities Act of 1933, as amended, and any
applicable state securities laws or (bb) the Company shall have received a
favorable opinion of the Company's legal counsel or of other legal counsel
acceptable to the Members Committee to the effect that such Disposition is
exempt from registration under such laws, and (ii) unless waived by all of the
other Members the Company shall have received a favorable opinion of the
Company's legal counsel or of other legal counsel acceptable to the Members
Committee, to the effect that such Disposition would not (aa) when added to
the total of all other sales, assignments, or other Dispositions within the
preceding twelve months, result in the Company being considered to have
terminated within the meaning of section 708 of the Code, or (bb) cause the
Company to jeopardize its classification as a partnership for federal income
tax purposes.
4.6 Status After Disposition. Each Member shall have the right to
constitute the Person to whom its Membership Interest in the Company is
Disposed as a substituted Member if (i) the Disposition in question has been
effected in compliance with the provisions of this Article IV and (ii) the
preferential right of purchase set forth in Section 4.3 has not been
exercised. Each Member that Disposes of a Membership Interest in the Company
to a Member or to a Person that is admitted to the Company as a Member
contemporaneously with such Disposition shall, as between itself and the other
Members, remain responsible for the timely performance and discharge of all
obligations and liabilities in respect of the Membership Interest Disposed of
that are attributable to the period prior to the date of its Disposition but
shall, as between itself and the other Members, be released from all other
Company obligations and liabilities. Each Member that Disposes of a
Membership Interest in the Company to a Person that is not a Member or that is
not admitted to the Company as a Member contemporaneously with such
Disposition shall remain responsible for the timely performance and discharge
of all obligations and liabilities in respect of the Membership Interest
Disposed of, whether attributable to the period prior or subsequent to the
date of its Disposition.
4.7 Disposition Costs. All costs incurred by the Company in
connection with the Disposition of a Membership Interest in the Company
(including, without limitation, the legal fees incurred in connection with the
obtaining of the legal opinions referred to in Section 4.5) shall be borne and
paid by the Member effecting the Disposition within ten days after the receipt
by such Member of the Company's invoice for the amount due.
4.8 Limitation on Transfer. Except as otherwise specifically
provided in this Agreement, no Member shall have the right without the prior
written consent of the other Member, to:
(i) other than through a Permitted Security Interest, dispose of,
assign, pledge, hypothecate, transfer, exchange or otherwise
transfer for consideration all or any part of its Membership
Interest in the Company; or
(ii) Give or otherwise transfer for no consideration (whether or not
by operation of law) all or part of its Membership Interest in
the Company.
In any agreement granting a Permitted Security Interest (including
this Agreement), provided all other Members agree in writing, a Member may
provide in such agreement that in the event of the foreclosure of such
Permitted Security Interest, the party foreclosing on same may become a
substituted Member of the Company. In addition, if and only if, the
foreclosing party is a Member, such Member may designate an Affiliate to
exercise its rights so as to avoid a single-Member limited liability company.
Each Member covenants and agrees that it will not engage directly or
indirectly in any business other than the business arising out of its being a
Member of the Company; however, this provision is not intended in any manner
to prohibit an Affiliate of a Member from engaging in any business whatsoever
as further set out in Section 14.14.
If after the expiration of the Base Term a Member resigns (the
"Resigning Member"), the remaining Member (the "Non-Resigning Member") shall
have the option to purchase the Membership of the Resigning Member at the then
fair market value of the Resigning Member's Membership Interest. The Non-
Resigning Member shall have the right to designate an Affiliate to exercise
the rights provided in this Section. If a Non-Resigning Member exercises the
rights given in this Section, the Resigning Member and the Non-Resigning
Member shall close the sale of the Resigning Member's Membership Interest to
the Non-Resigning Member within twenty (20) days after the 365 days written
notice provided in Section 11.1(b), and the Members shall follow the
procedures set out in Section 4.3(b) in connection with the sale of the
Resigning Member's Membership Interest.
ARTICLE V
CONTRIBUTIONS; DISTRIBUTIONS; FAILURE
TO MAKE CONTRIBUTIONS TIMELY; SECURITY INTEREST
5.1 Initial Contributions. Each Member agrees that it will make an
equal initial equity contribution to the Company of $22,000,000 ($44,000,000
in the aggregate by Conoco and Reading & ▇▇▇▇▇). The equal initial equity
contributions represent the Sharing Ratios of Conoco and Reading & ▇▇▇▇▇, and
payment shall be made to the Company by such Members on the earlier of (i) on
August 31, 1998, (ii) with the prior written approval of the Member's
Committee, on demand, in whole or in part, or (iii) as provided in the
promissory notes referred to in the next succeeding sentence. In order to
secure its obligation to make such initial equity contribution, each Member
agrees upon execution of the Drilling Contract it will deliver to the Company
a demand promissory note in favor of the Company for $22,000,000, each such
demand promissory note to allow the Company to make demands contemporaneously
to each of the Members for equal payments of such notes on the Payment Date.
Such promissory notes shall be in the form attached as Exhibit "E" to this
Agreement and shall be payable as provided therein. It is understood and
agreed by the Members that any and all payments of such initial equity
contribution by a Member shall contemporaneously reduce the principal of that
Member's promissory note referred to in this Section 5.1 by the same amounts,
and likewise any and all payments made by a Member with respect to any demands
made with respect to such Member's promissory note shall contemporaneously be
credited against such Member's obligation to make its initial equity
contribution under this Section 5.1.
5.2 Cost Overrun Contributions. The Members acknowledge that Conoco,
in its individual capacity and not as a Member, or an Affiliate of Conoco,
will enter into cost overrun guaranties (or other similar type guaranties) in
favor of commercial lenders and in a form acceptable to Conoco (or an
Affiliate of Conoco), pursuant to which Conoco (or an Affiliate of Conoco)
would be obliged to guarantee that the Company will be able to fund the amount
of any cost overruns incurred by Company under the Shipbuilding Contract to be
entered into between the Company and Builder with respect to the Drillship, in
order for the Company to take delivery of the Drillship under such
Shipbuilding Contract. Accordingly, the Members also agree, within three
business days after demand by Conoco (or an Affiliate of Conoco), or any such
commercial lender, to contribute to the Company in cash, their respective
Member's Sharing Ratio of any and all such additional monies necessary in
order to enable Company to take delivery of the Drillship under such
Shipbuilding Contract (including owner furnished equipment) in compliance with
the terms of any such cost overrun guaranties (over and above the amount of
the promissory notes made by the Members referred to in Section 5.1 and the
amount of the Purchase Note). In the event the Shipbuilding Contract is
terminated, rescinded or otherwise cancelled for any reason whatsoever and as
a result demand for payment is made of Conoco Inc. or its Affiliate under any
such cost overrun guaranty, the Members agree to contribute their respective
Sharing Ratios of the amount necessary to enable the Company to reimburse
Conoco Inc. or its Affiliate for any such payment made by Conoco Inc. or its
Affiliate within 45 days after receipt by the Company of written notice of
same from Conoco Inc. or its Affiliate.
5.3 Additional Contributions. Except for initial working capital
for the Company to commence operations, the Members intend for the Company
operations to be self-sustaining, and after the Drillship goes into service,
for the Company to pay its costs and expenses from operating revenues.
However, without creating any rights, remedies, or claims in favor of or
enforceable by any third party, if at any time the Company, as determined by
the Members Committee, requires funds in excess of operating revenues which
are necessary to allow the Company to accomplish its objectives and purposes,
each Member shall, and hereby agrees to, contribute to the Company, in cash,
within ten days after receiving a request therefor from the Manager, such
Member's Sharing Ratio of all such additional monies that are necessary to
enable the Company to cause the Assets to be properly operated and maintained
and to discharge its costs, expenses, obligations, and liabilities.
5.4 Distributable Cash. The Distributable Cash of the Company shall
be determined on a quarterly basis and the amount thereof shall be distributed
to the Members pro rata according to their Sharing Ratios (except as otherwise
required to effect and carry out the provisions of Section 5.5(b)(iv), 14.1
and 14.12), provided however, that no distribution will be made to the extent
any such distribution will result in the minimum equity capital of the Company
falling below 3% of the total assets. Amounts payable to any Member other
than in its capacity as a Member, such as for services rendered, goods
purchased or money borrowed, shall not be treated as distributions for
purposes of this Section 5.4.
5.5 Failure to Make Contributions. If either Member fails to
contribute timely all or any portion of any monetary sum that it has agreed to
contribute to the Company pursuant to the provisions of Section 5.1, 5.2 or
5.3 the Company may exercise, by notice to such Member (the "Delinquent
Member") any one or more of the following rights or remedies:
(a) Taking such action (including, without limitation, the
filing of a lawsuit) as the Members Committee deems appropriate to
obtain payment by the Delinquent Member of that portion of its agreed
contribution that is in default, together with interest thereon at the
Default Interest Rate from the date that such contribution was due
until the date that such contribution is made, at the cost and expense
of the Delinquent Member;
(b) Permitting the other Members that desire to do so (the "Non-
Delinquent Members") to advance that portion of the contribution that is
in default, with the following results:
(i) The sum thus advanced shall be deemed to be a loan
from the Non-Delinquent Member to the Delinquent Member and a
contribution of such sum to the Company by the Delinquent Member
pursuant to Section 5.1, 5.2 or 5.3, as appropriate;
(ii) The principal balance of such loan and all accrued
unpaid interest thereon shall be due and payable in whole within
thirty days after written demand therefor has been given to the
Delinquent Member by the Non-Delinquent Member;
(iii) The loan shall bear interest at the Default Interest
Rate, from the date that the loan was made until the date that
such loan, together with all interest accrued thereon, is repaid
to the Non-Delinquent Member;
(iv) All distributions from the Company that would
otherwise be made to the Delinquent Member (whether before or
after dissolution of the Company) shall, instead, be paid to the
Non-Delinquent Member until the loan and all interest accrued
thereon have been repaid in full to the Non-Delinquent Member
(with all such payments being applied first to interest earned and
unpaid and then to principal); provided however, that for
purposes of Section 6.4, any amounts paid by the Company to the
Non-Delinquent Member shall nevertheless be treated as adjustments
to the Delinquent Member's Capital Account;
(v) The repayment of the loan and all interest accrued
thereon shall be secured by a security interest in the Delinquent
Member's interest in the Company, as more fully set forth in
Section 5.6, and
(vi) The Non-Delinquent Member shall have the right, in
addition to the other rights and remedies granted to it pursuant
to this Agreement or available to it at law or in equity, to take
such action (including, without limitation, the filing of a
lawsuit) as the Non-Delinquent Member deem appropriate to obtain
payment by the Delinquent Member of the principal balance of such
loan and all accrued and unpaid interest thereon, at the cost and
expense of the Delinquent Member;
(c) Exercising the rights of a secured party under the Uniform
Commercial Code of the State of Delaware, as more fully set forth in
Section 5.6;
(d) Dissolving the Company; or
(e) Exercising any other rights and remedies available at law or
in equity.
5.6 Grant of Security Interest. Each Member hereby grants to the
Company and to the Non-Delinquent Member, in respect of any loans made by the
Non-Delinquent Member to the Delinquent Member pursuant to Section 5.5(b), as
security for (i) the payment of all contributions to be made by such Member
pursuant to this Agreement and (ii) the repayment of any loans and all
interest accrued thereon made by the Non-Delinquent Member to a Delinquent
Member pursuant to Section 5.5(b), a security interest in and to its
Membership Interest in the Company, all pursuant to and in accordance with the
provisions of the Uniform Commercial Code of the State of Delaware, and agrees
that in the event of any default in the payment of such contributions or in
the repayment of such loans and all interest accrued thereon, the Company or
the Non-Delinquent Member, as applicable, shall have and are hereby granted
all the rights and remedies of a secured party under the Uniform Commercial
Code of the State of Delaware with respect to the security interest granted
herein. Each Member further agrees to execute and deliver to the other
Members all such financing statements and other instruments as may be required
by the Members Committee or the Non-Delinquent Members, as applicable, to
effect and carry out the provisions of the immediately preceding sentence and
agrees that this Agreement may serve as the necessary security agreement and
financing statement. The Company shall register on its books the security
interests given pursuant to this Section 5.6. The Members agree that the
security interests granted under this Section 5.6 shall be subordinate to
security interests granted to Conoco Inc. under the construction financing
agreement referred to in Exhibit "H".
5.7 Secured Party. A secured party of a Permitted Security Interest
with respect to any Member's Membership Interest shall not as the result of
the exercise of any of its rights as a secured party become liable for any of
the obligations of such Member under this Agreement.
ARTICLE VI
TAX MATTERS
6.1.1 Tax Matters Partner. The Members intend that the Company shall be
taxed as a partnership for federal, state, local and foreign income tax
purposes, and have agreed to certain provisions of this Agreement with that
intention in mind. The Members agree to take all reasonable actions,
including the amendment of this Agreement and the execution of such other
documents as may be reasonably required in order for the Company to qualify
and receive partnership treatment for federal, state, local and foreign income
tax purposes. At such time, if ever, as final regulations are promulgated as
heretofore proposed (61 F.R. Section 21989) under Section 7701 of the Code
with respect to classification of an entity as a partnership for federal
income tax purposes, the Members shall elect in compliance with such
regulations that the Company be treated, for federal income tax purposes, as a
partnership and take such other actions as may be reasonably necessary or
desirable in connection therewith. The Member from which the Manager is
selected by the Members Committee is designated as the Tax Matters Partner
("TMP"), as such term is defined in Section 6231(a)(7) of the Internal Revenue
Code of 1986, as amended, ("Code"). In the event of any change in the TMP,
the Member serving as TMP at the beginning of a given taxable year shall
continue as TMP with respect to all matters concerning such year. The TMP and
other Members shall use their best efforts to comply with responsibilities
outlined in this section and in Code Sections 6222 and 6233 and 6050K (and the
Treasury Regulations thereunder) and in doing so shall incur no liability to
any other Member. Notwithstanding the TMP's obligation to use its best
efforts in the fulfillment of its responsibilities, the TMP shall not be
required to incur any expenses for the preparation for, or pursuance of
administrative, or judicial proceedings, unless the Members agree on a method
for sharing such expenses.
6.1.2 Information Request by TMP. The Members shall furnish the TMP
within two weeks from the receipt of the request with such information
(including information specified in Code Sections 6230(e) on Member
identification and 6050K for transfers of Membership Interests) as the TMP may
reasonably request to permit it to provide the Internal Revenue Service with
sufficient information for purposes of Code Sections 6223(c) and 650K.
6.1.3 TMP Agreements with IRS.
6.1.3.1 The TMP shall not agree to any extension of the statute of
limitations for making assessments on behalf of the Company without
first obtaining the written consent of all Members. The TMP shall not
bind any other Member to a settlement agreement in tax audits without
obtaining the written concurrence of any such Member.
6.1.3.2 Any other Member who enters into a settlement agreement with
the Secretary of the Treasury with respect to any Company items, as
defined in Code Section 6231(a)(3), shall notify the other Members of
the terms within ninety (90) days from the date of such settlement.
6.1.4 Inconsistent Treatment of Company Item. If any Member intends to
file a notice of inconsistent treatment under Code Section 6222(b), such
Member shall, prior to the filing of such notice, notify the TMP of the
(actual or potential) inconsistency of the Member's intended treatment of a
Company item with the treatment of that item by the Company. Within one week
of receipt the TMP shall remit copies of such notification to other Members to
the Company. If an inconsistency notice is filed solely because a Member has
not received a Schedule K-1 in time for filing of its income tax return, the
TMP need not be notified.
6.1.5 Communication of Proceedings to Members. The TMP shall to the
extent and in the manner provided by regulations issued pursuant to Section
6223(g) of the Code, keep all Members informed of all administrative and
judicial proceedings for the adjustment at the Company level of Company items.
6.1.6 Requests for Administrative Adjustment. No Member shall file a
request pursuant to Code Section 6227 for an administrative adjustment of
Company items without first notifying all other Members. If all other Members
agree with the requested adjustment, the TMP shall file the request on behalf
of the Company. If unanimous consent is not obtained within thirty (30) days
from such notice, or within the period required to timely file the request for
administrative adjustment, if shorter, any Member, including the TMP, may file
a request for administrative adjustment on its own behalf.
6.1.7 Judicial Proceedings. Any Member intending to file a petition
under Code Sections 6226, 6228, or any other Code Section with respect to any
Company item, or other tax matters involving the Company, shall notify the
other Members, prior to such filing, of the nature of the contemplated
proceeding. In the case where the TMP is the Member intending to file such
petition, such notice shall be given within a reasonable time to allow the
other Members to participate in the choice of the forum for such petition. If
the Members do not agree on the appropriate forum, then the forum shall be
decided by majority vote. Each Member shall have a vote in accordance with
its percentage interest in the Company for the year under audit. If a
majority cannot agree, the TMP shall choose the forum. If a Member intends to
seek review of any court decision rendered as a result of such a proceeding
such Member shall notify the other Members, prior to seeking such review.
6.2 Income Tax Compliance and Capital Accounts
6.2.1 Tax Returns. The TMP shall prepare and file all required federal,
state, and local partnership income tax returns, as well as all sales, use and
other excise tax returns. In preparing such returns the TMP shall use its
best efforts and in doing so shall incur no liability to any other Member with
regard to such returns. Not less than thirty (30) days prior to the due date
(including extensions) the TMP shall submit to each Member a copy of the
income tax returns and/or franchise tax returns as proposed for review.
6.2.2 Fair Market Value Capital Accounts. The TMP shall establish and
maintain fair market value ("FMV") capital accounts and tax basis capital
accounts for each Member. Upon request, the TMP shall submit to each Member
along with a copy of any proposed partnership income tax return an accounting
of its respective FMV capital accounts as of the end of the tax return period.
6.2.3 Information Request. Each Member agrees to furnish to the TMP not
later than sixty (60) days before the return due date (including extensions)
such information relating to the operations conducted under this Agreement as
may be required for the proper preparation of all such tax returns and capital
accounts.
6.3 Elections
6.3.1 General Elections. For both income tax return and capital account
purposes, the Company shall elect: (a) to use the maximum allowable
accelerated tax method and the shortest permissible tax life for depreciation
purposes, (b) the accrual method of accounting, (c) to treat all
organizational costs of the Company as deferred expenses amortizable over a
sixty (60) month period pursuant to Section 709(b) of the Code and comparable
provisions of state law, (d) to amortize start-up expenditures over a sixty
(60) month period pursuant to Section 195(d) of the Code and comparable
provisions of state law, and (e) to report income on a calendar year basis.
6.3.2 Other Elections or Consents. In connection with any permitted
transfer of a Membership Interest in the Company under Article IV, the TMP
shall cause the Company, at the written request of a transferee or the
transferor, on behalf of the Company and at the time and manner provided under
Code Section 754 to adjust the basis of Company property with the adjustments
provided in Code Sections 734 for a distribution of property and 743 for a
transfer of a Membership Interest. In case of a distribution of property, the
TMP shall adjust all tax basis capital accounts. In case of a transfer of an
interest in the Company, the transferee shall, no later than sixty (60) days
prior to the due date of the Company tax return (including extensions),
cooperate with the TMP in the filing of tax returns by providing the TMP with
all reconciliations necessary to reflect such basis adjustments on the tax
return. Any election other than those referred to above must be approved by
the Members Committee.
6.4 Capital Contributions and FMV Capital Accounts
6.4.1 Capital Contributions. The respective capital contributions of
each Member to the Company shall be (a) any properties contributed to the
Company (net of liabilities that the Company assumes or takes the properties
subject to), and (b) all amounts paid by each Member characterized as
contributions to the Company or Company expenses borne and paid by such Member
on behalf of the Company.
6.4.2 FMV Capital Accounts. The FMV capital accounts shall be increased
and decreased as follows:
(a) The FMV capital accounts shall be increased by: (i) the amount of
money and the fair market value of any property contributed by each
Member, respectively, to the Company (net of liabilities assumed by the
Company or to which the contributed property is subject); (ii) that
Member's [Section 6.5.1] allocated share of Company income and gains, or
items thereof; and, (iii) that Member's share of Code Section
705(a)(1)(B) items.
(b) The FMV capital accounts shall be decreased by: (i) the amount of
money and the fair market value of property distributed to each Member
(net of liabilities assumed by such Member or to which the property is
subject); (ii) that Member's [Section 6.5.1] allocated share of Company
loss and deductions, or items thereof; and, (iii) that Member's share of
Code Section 705(a)(2)(B) items and Code Section 709 nondeductible and
nonamortizable items.
(c) "Fair market value" when it applies to property contributed by or
distributed to a Member or other Company property shall be determined by
the Members Committee.
6.5 Company Allocations
6.5.1 FMV Capital Account Allocations. Each item of income, gain, loss
or deduction shall be allocated to each Member as follows:
(a) Operating and maintenance cost shall be allocated to each
Member in accordance with its respective contribution, or
obligation to contribute, to such cost;
(b) Depreciation shall be allocated to each Member in accordance
with its contribution, or obligation to contribute, to the cost of
the underlying asset;
(c) Loss (or simulated loss) upon the sale, exchange,
distribution, abandonment or other disposition of depreciable
property, shall be allocated to the Members in the ratio of their
respective FMV capital account adjusted basis in the depreciable
property;
(d) Gain (or simulated gain) upon the sale, exchange,
distribution, or other disposition of depreciable or depletable
property shall be allocated to the Members so that the FMV capital
account balances of the Members will most closely reflect their
respective percentage or fractional interests under the Agreement;
(e) Costs or expenses of any other kind shall be allocated to
each Member in accordance with its respective contribution, or
obligation to contribute, to such costs or expenses; and,
(f) Any other income item shall be allocated to the Members in
accordance with the manner in which such income is realized by
each Member.
6.5.2 Tax Returns and Tax Basis Capital Account Allocation.
(a) Unless otherwise expressly provided herein the allocations of
Company items of income, gain, loss or deduction for tax return
and tax basis capital account purposes shall follow the principles
of allocation under Section 6.5.1. However, the Company's gain or
loss on the taxable disposition of any Company property in excess
of the gain or loss under Section 6.5.1, if any, is allocated to
the contributing Member to the extent of such Member's pre-
contribution gain or loss;
(b) Depreciation shall be allocated to each Member in accordance
with its contribution to the adjusted tax basis of the depreciable
asset;
(c) Any recapture of depreciation or any other item of deduction
or credit shall, to the extent possible, be allocated among the
Members in accordance with their sharing of the depreciation or
other item or deduction or credit which is recaptured;
(d) For Company properties with values different from their
adjusted tax bases, the Members intend that allocations described
in this Section 6.5.2 constitute a "reasonable method" of
allocating gain or loss under Treasury Regulations Section 1.704-
3(a)(1).
6.6 Termination and Liquidating Distributions
6.6.1 Termination. Termination shall occur on the earlier of the events
described in Code Sections 708(b)(1)(B) or 708 (b)(1)(A).
(a) Termination Under Code Section 708(b)(1)(B). Upon
termination under Code Section 708(b)(1)(B), each Member's FMV
capital account shall be adjusted as provided for in the
regulations, Section 1.704-1(b)(2)(iv)(1), and Section 6.6.3. The
distributions provided for in Sections 6.6.2 through 6.6.4 shall
be deemed to have occurred, with the Company cash and properties
deemed contributed to a new limited liability company, the terms
of which are identical to those contained in this Agreement.
(b) Termination Under Code Section 708(b)(1)(A). Upon
termination under Code Section 708(b)(1)(A), the business shall be
wound-up and concluded, and the assets shall be distributed to the
Members as described below by the end of such calendar year (or,
if later, within ninety (90) days after the date of such
termination). The assets shall be valued and distributed to the
creditors of the Company, if any, and to the Members in the order
provided in Sections 6.6.2 through 6.6.4.
6.6.2 Section 708(b)(1)(A) Termination. In the event of a Code Section
708(b)(1)(A) termination, the assets shall be valued, and the Company
shall first comply with Section 18-804(a)(1) of the Act, and second, all
cash representing unexpended contributions by any Member shall be
returned to the contributor.
6.6.3 Balancing. Third, the FMV capital accounts of the Members shall
be determined under this Section 6.6.3. The TMP shall take the actions
specified under this Section 6.6.3 in order to cause the ratio of the
Members' FMV capital accounts to reflect as closely as possible their
Sharing Ratios under the Agreement. The ratio of a Member's FMV capital
account is represented by a fraction, the numerator of which is the
Member's FMV capital account balance and the denominator of which is the
sum of all Members' FMV capital account balances. This is hereafter
referred to as "balancing of the FMV capital accounts", and when
completed, the FMV capital accounts of the Members shall be referred to
as being "balanced". The manner in which the FMV capital accounts of
the Members are to be balanced under this Section 6.6.3 shall be
determined as follows:
(a) The fair market value of all Company properties shall be
determined and the gain or loss for each property which would have
resulted if a sale thereof at such fair market value had occurred
shall be allocated in accordance with Section 6.5.1. If
thereafter any Member has a negative FMV capital account balance,
that is, a balance less than zero, in accordance with Treas. Reg.
Section 1.704-1(b)(2)(ii)(b)(3) such Member is obligated to
contribute an amount of cash to the Company to facilitate the
balancing of the FMV capital accounts. If after these adjustments
the FMV capital accounts are not balanced, Article 6.6.3(b) shall
apply; or
(b) If all the Members consent, any cash or an undivided interest
in certain selected properties shall be distributed to one or more
Members as necessary for the purpose of balancing the FMV capital
accounts;
(c) Unless (b) above applies, an undivided interest in each and
every property shall be distributed to one or more Members in
accordance with the ratios of their FMV capital accounts;
(d) If a property is to be valued under (a) above or distributed
pursuant to (b) or (c) above, the fair market value of the
property shall be agreed to by the Members. In the event all of
the Members do not reach agreement as to the fair market value of
property, the TMP shall cause a nationally recognized independent
engineering firm to prepare an evaluation of fair market value of
such property.
6.6.4 Final Distribution. Fourth, after the FMV capital accounts of the
Members have been adjusted, pursuant to Section 6.6.3 above, all other
or remaining property and interest then held by the Company shall be
distributed to the Members in accordance with their positive FMV capital
account balances.
6.7 Transfers, Indemnification, and Correspondence.
6.7.1 Transfers of Company Interests. Transfers of Membership Interests
shall be governed by the Agreement. A Member transferring its
Membership Interest, or any part thereof, shall notify the TMP in
writing within two weeks of such transfer.
6.7.2 Indemnification. This Agreement does not provide for any
indemnification provisions to protect Members against any harm caused by
a Code Section 708(b)(1)(B) termination. However, the Members agree
that if any of them makes a sale or assignment of its Membership
Interest under this Agreement, such sale or assignment shall be
structured, if reasonably possible, to avoid causing an Code Section
708(b)(1)(B) termination.
6.7.3 Correspondence. All correspondence relating to the preparation
and filing of the Company's income tax returns and capital accounts
shall be forwarded to the TMP.
6.8 No Interest. No Member shall be entitled to be paid interest in
respect of either its capital account or any contributions made by it to the
Company.
6.9 Return of Capital. Except as set forth in Section 6.6.2 hereof
and notwithstanding anything in this Agreement to the contrary, no Member is
entitled to a return on any cash or property that it has contributed to the
capital of the Company, but shall look solely to distributions from the
Company. No unrepaid capital contribution shall be deemed or considered to be
a liability of the Company or of any Member. No Member shall be required to
contribute any cash or property to the Company to enable the Company to return
any Member's capital contribution.
ARTICLE VII
ADMINISTRATIVE MATTERS
7.1 Books and Records. The books and records of the Company shall be
kept, at the expense of the Company, by the Member from which the Manager is
appointed in accordance with this Agreement, following that Member's normal
accounting systems, procedures and practices, consistent with generally
accepted accounting principles, on a calendar year basis for all purposes, and
shall reflect all Company transactions and be appropriate and adequate for
recording and reporting the financial condition of the Company. Within forty-
five days following the end of each calendar quarter, the Manager shall cause
to be prepared and submitted to the Members Committee and each Member an
unaudited balance sheet and an unaudited income statement of the Company and a
comparison to budgets in respect of such calendar quarter. In addition, on or
before March 31 (or as soon thereafter as may be practicable) of each year the
Manager shall cause to be delivered to each Member, in respect of the
immediately preceding year, an audited balance sheet, an audited income
statement, an audited annual statement of changes in financial position of the
Company together with a report by the Company's Independent Accountants to the
effect that such financial statements have been prepared in accordance with
generally accepted accounting principles and present fairly the Company's
financial position, results of operation, and changes in financial position,
and a report indicating each Member's share for federal income tax purposes of
the Company income, gain, credits, losses, and deductions prepared, in each
case, by the Company's Independent Accountants. A copy of each Company tax
return required to be filed with any governmental authority shall be delivered
to each Member at least ten days before such return is filed.
7.2 Inspection. Each Member, at its sole cost and expense, shall have
the right to inspect, copy, and audit the books and records of the Company
during reasonable business hours at the principal place of business of the
Company. No Person other than a Member (or its duly authorized
representative) and the Company's Independent Accountants shall have any right
to inspect the books and records of the Company for any purpose whatsoever.
Each Person that inspects the books and records of the Company shall maintain
the confidentiality of the information received pursuant to or in connection
with such inspection.
7.3 Bank Accounts; Investments. All funds of the Company shall be
deposited in its name in an account or accounts maintained in one or more
national or state bank or banks designated from time to time by the Members
Committee. The funds of the Company shall not be commingled with the funds of
any other Person. Checks shall be drawn upon the Company account or accounts
only for the purposes of the Company and shall be signed by such signatory
party or parties as may be designated by the Members Committee. The Manager
shall have the obligation from time to time to deposit Company funds that (i)
are not required for the operation of the business of the Company and (ii)
should not, in the Manager's opinion, be used to repay Company debt, in
interest bearing bank accounts or to purchase commercial paper, treasury
bills, or other high grade short term instruments following guidelines
approved by the Members Committee.
7.4 Monthly Progress Reports. At least once a month, the Manager, at
Company expense, shall furnish to the Members a progress report regarding the
operations of the Company.
ARTICLE VIII
MANAGEMENT; MEMBERS COMMITTEE; MANAGER;
STANDARD OF CARE; INDEMNIFICATION
8.1 Management. (a) The management and control of the Company
business shall be vested in the Members, who shall exercise such management
and control through and by virtue of their selection of the Members Committee
in accordance with the succeeding provisions of this Article VIII and their
participation in the making of the decisions accorded to them pursuant to this
Agreement.
(b) The Members shall be entitled to delegate any powers and authority
required for the management of the Company to the Members Committee, save that
the Members reserve the following powers and authority exclusively to
themselves, namely:
(i) to amend the purposes of the Company, as set out in Section 3.2;
(ii) to liquidate or otherwise dissolve the Company;
(iii) to approve the merger or consolidation of the Company with or into
an "other business entity," as such term is defined in 18-209(a)
of the Act, or the sale, exchange, or other disposition of all, or
substantially all of the Company's assets which is to occur as
part of a single transaction or plan;
(iv) to designate from time to time the Company's Independent
Accountants; and
(v) to amend this Agreement.
8.2 Members Committee.
(a) The Members Committee (herein referred to as the "Members
Committee") shall be responsible for the making of decisions with respect to
the Company business that are not accorded to the Members or the Manager
pursuant to this Agreement.
(b) Without limiting the generality of paragraph (a) of this Section
and subject always to the provisions of Section 8.1(b), the Members Committee
shall have the power to delegate to the Manager of the Company any powers and
authority necessary for the day-to-day operation of the business of the
Company, except that the Members Committee reserves the following powers and
authority exclusively to itself, namely:
(i) to set the overall policy and vision of the Company in
accordance with the purposes set out in Section 3.2;
(ii) to recommend to the annual meeting of the Members the
distribution policy of the Company and the level of
distribution to be declared;
(iii) to elect or appoint the Manager;
(iv) to approve capital expenditures of the Company in such amount
as the Members may from time to time determine;
(v) to approve the business and strategic plans and the annual
operating plans of the Company;
(vi) to recommend approval by the Members of any of the matters
referred to in Section 8.1(b);
(vii) to approve from time to time the location of the Company's
principal executive office;
(viii) to determine the banking policy of the Company and further in
that regard: to grant financial authorization (including the
opening and closing of bank accounts and to designate
signatories for such accounts) to the Manager; to approve all
borrowings by the Company of sums of money within the
limitations regarding amount as the Members may from time to
time determine, from banks, other lending institutions, the
Members or Affiliates of the Members, on such terms as the
Members Committee deems appropriate, and, in connection
therewith, to hypothecate, encumber, and grant security
interests in the assets of the Company to secure repayment of
the borrowed sums. No debt shall be contracted or liability
incurred by or on behalf of the Company except to the extent
permitted under the Act by the Manager or authorized agents of
the Company expressly authorized by the Members Committee to
contract such debt or incur such liability;
(ix) to approve the purchase of liability and other insurance to
protect the Company's property and business;
(x) to establish guidelines for the Manager in connection with the
temporary investment of Company funds;
(xi) to approve the execution on behalf of the Company of all
instruments and documents with a value in excess of such amount
as the Members may from time to time determine, including,
without limitation: checks; drafts; notes and other negotiable
instruments; mortgages or deeds of trust; security agreements;
financing statements; documents providing for the acquisition,
mortgage or disposition of the Company's property; assignments;
bills of sale; leases; partnership agreements; operating
agreements of other limited liability companies; agreements
between the Company and either of the Members or their
Affiliates; and any other instruments or documents necessary,
in the opinion of the Members Committee to the business of the
Company;
(xii) to assess the performance of the Manager of the Company;
(xiii) to approve the commencement or settlement of litigation
directly or indirectly involving the Company, where the claim
or potential liability of the Company or the amount of such
settlement is in excess of such amount as the Members may from
time to time determine;
(xiv) to determine the accounting policies of the Company and to
recommend to the Members the appointment of the Company's
Independent Accountants;
(xv) to approve the ethics, safety and health and environmental
policies of the Company; and
(xvi) to review and approve the terms of any public announcement
proposed to be made by the Company, as determined from time to
time by the Members Committee.
(c) The Members Committee shall be comprised of six individuals, three
of whom shall be named by each Member (individually a "Representative" and
collectively "Representatives"). These Representative(s) may be changed at
any time by the Members appointing such Representative(s) by written notice to
the other Member.
(d) Meetings of the Members Committee may be held at such regular
times as may be specified by the Members Committee and, in addition, may be
called by any Representative by giving at least ten days prior notice thereof
to each of the other Representatives. Notice of each meeting shall be in
writing and shall state the date, time, and place at which such meeting is to
be held and the purposes for which such meeting is called. Prior notice of a
meeting need not be given, however, if such notice is waived in writing by all
of the Representatives or if the action in question is taken pursuant to the
provisions of the second succeeding sentence. In addition, the attendance in
person or by a Person having the written proxy of a Representative at a
meeting shall constitute a waiver of notice of such meeting, except where the
Representative attends the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.) Any action required or permitted to be taken at a
meeting of the Members Committee may be taken (i) by means of a telephone
conference (notice of which shall be given to each of the Representatives) in
which all Representatives participating in the meeting in person or by a
Person having the written proxy and constituting a quorum can hear and speak
to each other (with the action taken during such telephone conference to be
reduced to writing and filed in the records of the Members Committee), or (ii)
by means of one Representative submitting to the other Representatives in
accordance with the provisions of Section 14.3 a statement of the matter to be
voted on, the purposes thereof, and the period within which the
Representatives must respond either in the affirmative or in the negative to
the matter in respect of which the vote is requested (which response period
shall not be less than seven business days nor more than twenty business days
from the date on which the Representative in question is deemed to have
received such request pursuant to Section 14.3). All action taken pursuant to
the immediately preceding sentence shall be deemed for all purposes to have
been taken at a meeting of the Members Committee. The Members Committee shall
conduct its proceedings in accordance with such rules as it may from time to
time establish and shall keep appropriate records of the action taken by it.
(e) At all meetings of the Members Committee, at least one
Representative representing each Member shall constitute a quorum for the
transaction of business, and subject to this Section 8.2, the unanimous act of
all of the Member Representatives present at any meeting at which there is a
quorum shall be the act of the Members Committee, except as set forth in
Section 8.2(f). If a quorum shall not be present at any meeting of the
Members Committee, the meeting may be rescheduled by any Representative by
giving seven days prior notice thereof to each of the other Representatives.
(f) Notwithstanding any provision of this Agreement to the contrary:
(i) neither a Member nor a Representative appointed by any Member that is the
subject of a vote with respect to the exercise of remedies relating to such
Member's delinquency or default under this Agreement, in the case of a vote
with respect to such matters; (ii) neither a Member nor a Representative
appointed by any Member that attempts to effect a Disposition of an interest
or right, or any part thereof, in or in respect of the Company in willful
contravention of Article IV, or in the case of any vote with respect to any
matter whatsoever subsequent to such attempted Disposition; or (iii) neither a
Delinquent Member nor the Representative appointed by any Delinquent Member,
in the case of any vote occurring during the period in which such Delinquent
Member is a Delinquent Member; will be entitled to vote on the issue in
question, and such Representative shall not be counted for voting or quorum
purposes in respect of the vote in question or the Members Committee meeting
at which the vote is taken. Instead, a quorum in respect of the vote in
question shall be comprised of one or more of all Representatives other than
those that are not entitled to vote on such issue, and the decisions in
respect of such issue shall be made by the unanimous vote of all
Representatives present that are entitled to vote on such issue.
8.3 Manager. The Manager (who shall be an employee of a Member or of
an Affiliate of a Member) shall be appointed by, and shall serve at the
pleasure of, the Members Committee, subject to the direction of the Members
Committee, and shall be responsible for the general supervision and management
of the business, affairs, and property of the Company and for the
implementation of the decisions of the Members Committee, and shall have, as
may be delegated by the Members Committee, the authority to conduct the day-
to-day affairs of the Company. Without limitation of the generality of the
preceding provisions of this Section, the Manager shall have (subject to the
limitations of Sections 8.1 and 8.2 and to budgetary limitations and such
other limitations as may be imposed from time to time by the Members
Committee) the authority, the right, and the power, on behalf of the Company:
(a) to enter into, make, and perform all contracts, agreements, and
other undertakings binding the Company as may be necessary, appropriate, or
advisable in furtherance of the purposes of the Company as the Manager may
determine in his or her discretion;
(b) to open, maintain, and close bank accounts, to designate and
change signatories on such accounts, and to draw checks and other orders for
the payment of monies;
(c) to maintain the assets of the Company in good order and repair;
(d) to collect all sums due the Company;
(e) to prepare and file all Company tax returns and to make all
elections for the Company thereunder in accordance with the instructions of
the TMP and the Members Committee;
(f) to the extent that funds of the Company are available therefor, to
pay as they become due all debts and obligations of the Company (including,
without limitation, the Purchase Note); and
(g) within any limitations as may be imposed from time to time by the
Members Committee, to take any and all other action that may be necessary,
appropriate, or advisable in furtherance of the purposes of the Company.
In addition, the Company shall reimburse the Manager, on a monthly
basis, for all reasonable out-of-pocket transportation, lodging and
entertainment expenses, incurred in connection with the business of the
Company, consistent with the normal reimbursement policies of the Member which
is providing the individual to be Manager of the Company.
8.4 Standard of Care. In the performance of their respective duties
under this Agreement, the Representatives and the Manager shall use reasonable
efforts to conduct the business of the Company in a good and businesslike
manner and in accordance with good practice within the industry.
Notwithstanding any provision of this Agreement to the contrary, however,
neither any Representative nor the Manager shall be held liable or responsible
to any Member or to the Company for any losses sustained, or liabilities
incurred, in connection with, or attributable to, errors in judgment,
negligence, or other fault of such individual, except that which is caused by
such Person's bad faith or willful misconduct.
8.5 Indemnification of the Representatives and the Manager. The
Company hereby agrees to defend, indemnify and hold harmless the
Representatives and the Manager from and against any and all claims, damages,
liabilities, costs (including, without limitation, the costs of litigation and
reasonable attorneys' fees), damages, and causes of action arising out of,
resulting from, or attributable to the Representatives' and the Manager's
management of the Company affairs, except where the claim at issue is based
upon the bad faith or willful misconduct of the Representative in question or
the Manager. The indemnification rights herein contained shall be (i)
cumulative of, and in addition to, any and all rights, remedies, and recourses
to which the Representatives and the Manager shall be entitled at law or in
equity, and (ii) shall only be for the benefit of the Company, the
Representatives, and the Manager, to the exclusion of all other purported
third party beneficiaries.
ARTICLE IX
VOLUNTARY WITHDRAWAL
9.1 Resignation by Member.
Each of the Members acknowledges:
(i) the unique nature of the business the Company will engage in
and the expertise and skills each of the Members brings to the
business and management of the Company;
(ii) the commitment of the Company to fully perform the terms and
conditions of the Drilling Contract and the Purchase Note; and
(iii) the need for the Company to enter into the Purchase Note and to
assure any lenders of the Company's commitment to the business
of the Company.
In furtherance of those objectives, the Members agree that no Member will have
the right to, and each Member agrees that it will not, resign or withdraw from
the Company prior to the expiration of the Base Term. In the event any
Member, prior to the expiration of the Base Term, resigns from the Company, or
otherwise takes any action having the effect of a withdrawal or termination of
its participation as a Member of the Company (a "Wrongful Withdrawal"), such
withdrawal shall be null and void and such Member shall remain fully liable as
a Member hereunder. In the event the Company is required by law to recognize
a Wrongful Withdrawal, the withdrawing Member will:
(w) pay to the Company the withdrawing Member's Sharing Ratio of
the Company's then known, outstanding and due obligations and
liabilities, including amounts then due and owing under the
Purchase Note, at the time of such Wrongful Withdrawal;
(x) as they thereafter become known, pay to the Company its Sharing
Ratio of the Company's liabilities that arose, or resulted from
activities of the Company, prior to the Wrongful Withdrawal;
(y) forfeit its Membership Interest in the Company to the other
Members on a pro-rata basis based on their respective Sharing
Ratios; and
(z) be liable for all damages attributable to the withdrawing
Member's breach of this Agreement.
Pursuant to Section 18-603 of the Act, the Members agree that no Member may
resign from the Company prior to the expiration of the Base Term, and
thereafter any Member may resign from the Company in accordance with this
Agreement.
9.2 Wrongful Withdrawal. If a Wrongful Withdrawal occurs, then within
a reasonable time after the expiration of the Base Term, there will be a
winding up of the Company and a distribution of the assets in accordance with
Section 11.2 of this Agreement, provided that, (i) the non-withdrawing Member
will act as the liquidating trustee under Section 11.2, (ii) no adjustment
will be made to the capital account of the Member who wrongfully withdrew, and
(iii) the wrongfully withdrawing Member's Membership Interest in the Company
to be forfeited to the other Members will be valued to the non-withdrawing
Member at the amount of such withdrawing Member's contributions to the Company
pursuant to Sections 5.1 and 5.2 hereof.
ARTICLE X
[INTENTIONALLY DELETED]
ARTICLE XI
DISSOLUTION; RECONSTITUTION; WINDING UP
11.1 Events Deemed to Cause Dissolution. Unless the business of the
Company is continued either by the consent of all remaining Members within 90
days following the occurrence of any such event or pursuant to a right to
continue provided under this Agreement, the Company shall be dissolved upon
the first to occur of the following:
(a) The expiration of the term provided in Section 3.4;
(b) The resignation of a Member upon 365 days prior written
notice given after the expiration of the Base Term,
provided however, the Company shall not be dissolved if
the Non-Resigning Member exercises its rights under
Section 4.8;
(c) the Bankruptcy of a Member;
(d) The sale of all or substantially all of the assets of the
Company;
(e) The unanimous vote of the Members to dissolve the Company;
(f) Unless the Members otherwise agree in writing, the failure
of one or more of the events set out in Section 15.1 to
occur on or before November 10, 1996;
(g) By order of a court of competent jurisdiction pursuant to
Section 18-802 of the Act, at such time as specified in
such order; or
(h) Upon the dissolution of either Member or any other event
that terminates the membership of a Member in the Company.
or otherwise as provided in Section 9.1 with respect to a Wrongful
Withdrawal. Subject to the provisions of Section 9.1 with respect to
Wrongful Withdrawal, dissolution of the Company shall be effective on
the day on which the event occurs giving rise to such dissolution, but
the Company shall not terminate until the assets of the Company have
been distributed as provided in Section 11.2.
11.2 Distribution of Assets. If the Company is dissolved pursuant to
this Article XI, an accounting of the Company assets, liabilities, and
operations through the last day of the month in which the dissolution occurs
shall be made by the Company's Independent Accountants, and the affairs of the
Company shall be wound up and terminated. The Members Committee shall serve
as the liquidating trustee. The liquidating trustee shall be responsible for
winding up and terminating the affairs of the Company and shall determine all
matters in connection therewith (including, without limitation, the
arrangements to be made with creditors, whether and to what extent and under
what terms of assets of the Company are to be sold or distributed in kind to
the Members, and, after consultation with the Company's Independent
Accountants, the amount or necessity of cash reserves to cover contingent
liabilities) as the liquidating trustee deems advisable and proper; provided,
however, that all decisions of the liquidating trustee shall be made in
accordance with the fiduciary duty owed by the liquidating trustee to the
Company and to each of the Members.
All assets remaining after the payment (or provision for payment) of
Company obligations to third parties shall be distributed to the Members (i)
first, in such amounts and proportions as may be necessary to effect and carry
out the provisions of Sections 5.5(b)(iv), 14.1 and 14.12, (ii) second, in
such amounts and proportions as may be necessary to cause the ratios of the
Members' respective capital accounts to be equal to the Members' respective
Sharing Ratios, and (iii) third, in the proportion of the Members' respective
Sharing Ratios then in effect.
The distribution (if any) to the Members of an interest in the Company
assets may be subject to such liens, encumbrances, and restrictions, and to
such leases, contracts, and agreements as in effect on the date of such
distribution.
11.3 Termination. After all of the assets of the Company have been
distributed, the Company shall terminate, and the Members shall (i) cause a
certificate of cancellation to be filed with the Delaware Secretary of State,
and (ii) file appropriate documentation reflecting such termination in all
other jurisdictions in which the Company may be qualified to do business.
ARTICLE XII
[INTENTIONALLY DELETED]
ARTICLE XIII
INSURANCE
13.1 Insurance Coverage. The Company shall carry the following
insurance or such other insurance as the Members Committee may deem
appropriate (to the extent in each case that same is obtainable on reasonably
commercial terms) for the protection of the Company and the Members:
(a) Insurance which shall comply with all applicable worker's
compensation and occupational disease laws and which shall cover all
employees of the Company engaged in operations under this Agreement; if
applicable, such insurance shall include coverage for claims under the
United States Longshoremen's and Harbor Worker's Act;
(b) Employer's liability insurance with a limit of not less
than $500,000 per occurrence , including maritime employer's liability
coverage with respect to the ▇▇▇▇▇ Act, and general maritime liability
(if not covered by the protection & indemnity coverage referred to in
Section 13.1(f) below);
(c) Comprehensive general liability insurance with a combined
single limit of not less than $1,000,000 per occurrence;
(d) Automobile liability insurance with a combined single
limit of not less than $1,000,000 per occurrence;
(e) Marine "all risk" hull and machinery insurance (including
war risks, confiscation, nationalization and deprivation coverage for
operations outside the United States of America) to the full value of
the Drillship;
(f) Marine protection and indemnity insurance, or equivalent
coverage, including war risk protection and indemnity insurance for
operations outside the United States of America, to the full value of
the Drillship;
(g) Excess liability insurance (over the insurances set forth
in subparagraphs (b), (c), (d) and (f) above) with limits of not less
than $50,000,000 per occurrence;
(h) Contingent Operators Extra Expense Energy Exploration and
Development (well control and blowout) insurance including costs to
regain control of a well including underground blowout; costs to restore
or redrill a well as a result of a blowout, crater, or fire; costs to
remove, clean up, or contain pollution and contaminating substances
emanating from a well; legal liability costs for bodily injury and/or
loss of life, damage to, or loss to use of property caused by
contaminating substances from a well; with limits of not less than
$50,000,000; and
(i) Such other insurance as the Members Committee may deem
necessary, appropriate, or advisable in furtherance of the purposes of
the Company.
13.2 Certain Requirements. All insurance shall be placed through
underwriters and/or insurance companies which are financially sound and
responsible, and licensed to do business in all jurisdictions where such
licensing is required. Each policy of insurance [except that policy referred
to in Section 13.1(a)] shall, to the extent that the Members Committee deems
same practicable, either on its face or by appropriate endorsement, (i) name
the Company as a named insured and each Member as an additional named assured,
(ii) provide for reasonable deductibles acceptable to the Members Committee,
(iii) provide that it shall not be cancelled or amended or its coverage
reduced except upon thirty days prior notice to the Company (seven (7) days in
the case of war risk coverages), and (iv) contain waiver of subrogation
provisions pursuant to which each underwriter and/or insurer waives all
express and implies rights of subrogation against the Company and each Member.
13.3 The types, limits and terms of insurance coverages set out in this
Article may be modified as deemed appropriate by the Members Committee.
ARTICLE XIV
MISCELLANEOUS
14.1 Offset. In the event that any sum is payable to any Member
pursuant to this Agreement, any amounts owed by said Member to the Company
shall be deducted from said sum before payment to said Member.
14.2 Choice of Law; Submission to Jurisdiction. This Agreement shall
be subject to and governed by the laws of the State of Delaware, excluding any
conflicts-of-law rule or principle that might refer to the construction or
interpretation of this Agreement to the laws of another state. Each Member
hereby submits to the jurisdiction of the state and federal courts in the
State of Delaware and to venue in Wilmington, New Castle County, Delaware.
14.3 Notices. All notices or requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and must
be given by depositing same in the United States mail, addressed to the Person
to be notified, postpaid, and registered or certified with return receipt
requested or by delivering such notice in person to such party. Notices given
or served pursuant hereto shall be effective upon receipt by the Person to be
notified. All notices to be sent to the Members shall be sent to or made at
the addresses given under the respective parties' signatures below, or such
other addresses as such parties may stipulate to the other parties in the
manner provided in this Section 14.3.
14.4 Entire Agreement. This Agreement constitutes the entire agreement
of the Members relating to the matters contained herein, superseding all prior
contracts or agreements, whether oral or written.
14.5 Effect of Waiver or Consent. No waiver or consent, express or
implied, by any Member to or of any breach or default by any Person in the
performance by such Person of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in
the performance by such Person of the same or any other obligations of such
Person hereunder. Failure on the part of a Member to complain of any act of
any Person or to declare any Person in default, irrespective of how long such
failure continues, shall not constitute a waiver by such Member of its rights
hereunder until the applicable statute of limitation period has run.
14.6 Amendment or Modification. This Agreement may be amended or
modified from time to time only by the unanimous vote of all the Members.
Each such instrument shall be reduced to writing and shall be designated on
its face an "Amendment" or an "Addendum" to this Agreement.
14.7 Binding Effect; Joinder of Additional Parties. Subject to the
restrictions on Dispositions set forth herein, this Agreement shall be binding
upon and shall inure to the benefit of the Members and their respective
successors and assigns.
14.8 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed the
same document. All counterparts shall be construed together and shall
constitute one and the same instrument.
14.9 Severability. It is the express intention of the Members that,
except to the extent a provision of this Agreement expressly incorporates
federal income tax rules by reference to the Code or is expressly prohibited
or ineffective under the Act, this Agreement shall govern the relations among
the Members in their capacities as such. If any provision of this Agreement
or the application thereof to any Member or circumstance shall be held invalid
or unenforceable to any extent, (a) such provision shall be ineffective to the
extent, and only to the extent, of such unenforceability or prohibition and
shall be enforced to the extent permitted by law; (b) such unenforceability
or prohibition in any jurisdiction shall not invalidate or render
unenforceable such provision as applied (i) to any other Member or
circumstance or (ii) in any other jurisdiction; and (c) such unenforceability
or prohibition shall not affect or invalidate any other provision of this
Agreement. To the extent any provision of this Agreement is prohibited or
ineffective under the Act, this Agreement shall be considered amended to the
least degree possible in order to make this Agreement effective under the Act.
In the event the Act is subsequently amended or interpreted in such a way as
to make valid any provision of this Agreement that was formerly invalid, such
provision shall be considered to be valid from the effective date of such
interpretation or amendment. To the extent any provision of this Agreement is
held invalid or unenforceable, the Members shall negotiate, in good faith,
concerning an amendment to the Agreement that will achieve, to the extent
possible consistent with applicable law, the intended effect of the invalid or
unenforceable provision.
14.10 Headings. The headings in this Agreement are inserted for
convenience and identification only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
14.11 Gender; Articles and Sections. Whenever the context requires, the
gender of all words used in this Agreement shall include the masculine,
feminine, and neuter, and the number of all words shall include the singular
and the plural. All references to article and section numbers refer to
articles and sections of this Agreement.
14.12 Indemnity. Each Member hereby agrees to defend, indemnify, and
hold harmless the Company and the other Members from and against any and all
losses, costs (including, without limitation, the costs of litigation and
attorneys' fees), claims, causes of action, damages, and liabilities that are
attributable to the breach by the indemnifying Member of any of the provisions
of this Agreement (including, without limitation, the provisions of Section
9.1 hereof); provided however, the indemnity provided in this Section 14.12
shall be only for the benefit of the Company and other Members, to the
exclusion of all other purported third party beneficiaries.
14.13 Further Assurances. In connection with this Agreement, as well as
all transactions contemplated by this Agreement, each signatory party hereto
agrees to execute and deliver such additional documents and instruments and to
perform such additional acts as may be necessary or appropriate to effect,
carry out, and perform all of the terms, provisions, and conditions of this
Agreement and all such transactions.
14.14 Independent Conduct. The Representatives and the Manager shall
not be required to manage the Company as their sole and exclusive function and
such Manager and Representatives and Affiliates of any Member may have other
business interests and may engage in other investments or activities in
addition to those relating to the Company, irrespective of whether some may be
in competition with the business and activities of the Company. Neither the
Company nor any Member shall have any right, by virtue of this Agreement, to
share or participate in such other business interests, investments or
activities of a Manager or a Representative or an Affiliate of a Member, or to
the income or proceeds derived therefrom. No Manager or Representative shall
incur liability to the Company or to any Member solely by reason of engaging
in any such other business, investment or activity. Nothing in this Agreement
shall affect any obligations and liabilities of a Member Representative to the
Member that selected such Member Representative.
14.15 Deemed Assent. The failure of a Representative to respond, within
the response period set forth in the request in question (which response
period shall not be less than seven (7) business days nor more than twenty
(20) business days for from the date on which the Representative in question
is deemed to have received such request pursuant to Section 14.3) either in
the affirmative or in the negative, to any request it receives from another
Representative relating to a proposed act in respect of which such
Representative is entitled to vote pursuant to this Agreement, shall
conclusively be deemed for all purposes to be a vote by such Representative in
favor of any act set forth in such request.
14.16 Signing Members; Certificate of Authority. The Members Committee
shall designate from time to time one or more of the Members to execute (when
requested to do so by the Manager) documents on behalf of the Company. Each
Member agrees to execute (and acknowledge, if requested) and deliver such
documents and instruments as the Members Committee may request to evidence and
confirm to third parties the power, authority, and right of the Members
Committee, the Manager, and the Members designated pursuant to the immediately
preceding sentence to act on behalf of and bind the Company (but only to the
extent, in each case, that the action in question is one that the Members
Committee or Manager or Member in question is entitled to take pursuant to,
and not in violation of, this Agreement).
14.17 Withholding or Granting of Consent. Each Member and the Members
Committee may, with respect to any consent or approval that it is entitled to
grant pursuant to this Agreement, grant or withhold such consent or approval
in its sole and uncontrolled discretion, with or without cause, and subject to
such conditions as it shall deem appropriate.
14.18 Waiver of Certain Rights. Each Member irrevocably waives the
right it might have to maintain any action for partition of the property of
the Company.
14.19 U.S. Currency. All sums and amounts payable or to be payable
pursuant to the provisions of this Agreement shall be payable in coin or
currency of the United States of America that, at the time of payment, is
legal tender for the payment of public and private debts in the United States
of America.
14.20 Dispute Resolution. In the event the Members Committee cannot
reach a decision as to any matter concerning the business of the Company and
remains unable to do so with respect to any such matter for a period of not
less than 30 days, it shall refer such matter to the Designated Representative
of each of the Members for resolution.
14.21 Proprietary Information. Each of the Members acknowledges and
agrees that, to the extent in the performance of this Agreement and the
conduct of the business and operations of the Company, it receives Proprietary
Information from the other Partner, it will exert reasonable efforts to hold
such Proprietary Information confidential and not disclose the same to any
third party without the prior written consent of the other Member hereto.
Neither Member shall by virtue of this Agreement acquire any right, title or
interest in the Proprietary Information belonging to the other Member.
14.22 Publicity. Except as otherwise required by applicable
federal or state securities laws, regulations or rules or the rules of any
national stock exchange, neither of the Members will issue any press release
or other form of publicity without the prior written consent of the other
Member, such consent not to be unreasonably withheld.
ARTICLE XV
DISSOLUTION
15.1 Dissolution. Unless the Members otherwise agree in writing,
and as provided in Section 11.1(f) the Company shall be dissolved if on or
before November 10, 1996 all of the following events have not occurred:
a. The execution and delivery of this Agreement have been ratified by
the board of directors of Conoco, and Conoco shall have notified
Reading & ▇▇▇▇▇ in writing of such ratification;
b. The execution and delivery of this Agreement have been ratified by
the board of directors of Reading & ▇▇▇▇▇, and Reading & ▇▇▇▇▇
shall have notified Conoco in writing of such ratification; and
c. Conoco Drilling Inc. shall have entered into the Drilling Contract
with the Company.
15.2 Ancillary Agreements. Upon the last to occur of the events set
out in Sections 15.1.a, 15.1.b and 15.1.c above, the Company shall enter into
negotiation as to those agreements referenced in paragraphs (a) and (b)
hereof, and enter into the agreement in paragraph (c), all as follows:
a. the Marine Services Agreement with Conoco or one of its Affiliates
in draft form attached as Exhibit "F" to this Agreement;
b. the Drilling Services Agreement with Reading & ▇▇▇▇▇ Drilling Co.
or one of its Affiliates in draft form attached as Exhibit "G" to
this Agreement; and
c. the construction financing credit agreement between the Company
and Conoco Inc. substantially in the form attached as Exhibit "H"
to this Agreement.
EXECUTED on this day of October, 1996.
MEMBERS
CONOCO DEVELOPMENT COMPANY
By:
Its:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: __________________
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
RB DEEPWATER EXPLORATION INC.
By:
Its:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
STATE OF TEXAS )
) SS
COUNTY OF ▇▇▇▇▇▇ )
BEFORE me, , a Notary Public, on this day personally
appeared , , of
Conoco Development Company, a corporation, known to me to be the person whose
name is subscribed to the foregoing instrument, and acknowledged to me that he
executed said instrument for the purposes and consideration therein expressed.
Given under my hand and seal of office this day of ,
1996 in .
My commission expires:
Notary Public
STATE OF TEXAS )
) SS
COUNTY OF ▇▇▇▇▇▇ )
BEFORE me, , a Notary Public, on this day personally
appeared , , of RB
Deepwater Exploration Inc., a corporation, known to me to be the person whose
name is subscribed to the foregoing instrument, and acknowledged to me that he
executed said instrument for the purposes and consideration therein expressed.
Given under my hand and seal of office this day of ,
1996 in .
My commission expires:
Notary Public
EXHIBIT "A" - DESCRIPTION OF DRILLSHIP
EXHIBIT "B" - INDEMNIFICATION AGREEMENTS
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") dated as of
October , 1996, is made by CONOCO INC., a Delaware corporation ("Conoco")
in favor of RB DEEPWATER EXPLORATION INC., a Nevada corporation ("RB").
WHEREAS, RB and Conoco Development Company, a Delaware corporation
("CDC") have entered into a Limited Liability Company Agreement (the "LLC
Agreement") dated of even date with respect to the formation of Deepwater
Drilling L.L.C. (the "Company") herewith;
WHEREAS, RB has requested Conoco execute and deliver this
Indemnification Agreement as partial consideration for RB's entering into the
LLC Agreement.
NOW THEREFORE, in consideration of the premises and in order to
induce RB to enter into the LLC Agreement, Conoco hereby agrees as follows:
SECTION 1. Indemnification. Conoco hereby agrees to pay,
protect, indemnify, hold harmless and defend RB from any failure of CDC to
make any equity contribution to the Company, as and when required under
Sections 5.1 and 5.2 of the LLC Agreement, and agrees that in the event of
such failure, Conoco will promptly pay on behalf of CDC any such amounts due
under Sections 5.1 or 5.2 of the LLC Agreement. No payment required to be
made by Conoco under this Section 1 shall be subject to any right of set off,
counterclaim, defense, abatement, suspension, deferment or reduction.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings ascribed to them in the LLC Agreement.
SECTION 2. Representations and Warranties. Conoco represents and
warrants to RB as follows:
(a) Conoco (i) is a corporation duly organized, validly
existing and in good standing under the law of its jurisdiction of
incorporation and is in good standing in all jurisdictions in which
failure to be or remain in good standing would have a material adverse
effect upon its ability to perform its duties, obligations or
liabilities hereunder and (ii) has all requisite corporate power to
conduct its business and to execute and deliver and perform its
obligations under this Indemnification Agreement.
(b) The execution, delivery and performance by Conoco of this
Indemnification Agreement has been duly authorized and approved by all
necessary corporate action on the part of Conoco. This Indemnification
Agreement constitutes the legal, valid and binding obligation of Conoco
and is enforceable against Conoco in accordance with its terms, except
insofar as enforceability may be limited by applicable debtor relief
laws or subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(c) No order, consent, approval, license, permit, franchise,
waiver, exemption, authorization of or validation of, or filing,
recording or registration with (except those that have been heretofore
obtained or made and of which RB has heretofore been given written
notice) or exemption by, any person or tribunal is required to
authorize, or is required in connection with, the execution, delivery,
performance, legality, validity, binding effect or enforceability of
this Indemnification Agreement.
(d) No bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
with respect to Conoco or any of its subsidiaries has been commenced in
any jurisdiction.
(e) There are no actions, suits or proceedings pending or to
Conoco's knowledge, threatened against or affecting Conoco or any of its
subsidiaries before any court or arbitrator which is reasonably likely
to have a material adverse effect on the financial condition, business
or operations of Conoco and its subsidiaries, taken as a whole, or would
impair the validity or enforceability of this Agreement.
SECTION 3. Amendments, Etc. No amendment or waiver of any
provision of this Indemnification Agreement nor consent to any departure by
Conoco therefrom shall in any event be effective unless the same shall be in
writing and signed by RB, and each such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 4. Notices, Etc. All notices and other communications
provided for herein shall be given or made in writing and addressed, if to
Conoco, at its address set forth under its signature below, or if to RB, at
its address set forth under its signature below, such notice or notices to be
effective only upon receipt by the party to which such notice is addressed.
SECTION 5. No Waiver; Remedies. No failure on the part of RB to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of
any other right. No course of dealing between Conoco and RB shall operate as
a waiver of any right of RB. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law, admiralty, equity or otherwise.
SECTION 6. Separability. Should any clause, sentence, paragraph,
sub-section or Section of this Indemnification Agreement be judicially
declared to be invalid, unenforceable or void, such decision will not have the
effect of invalidating or voiding the remainder of this Indemnification
Agreement, and Conoco agrees that the part or parts of the Indemnification
Agreement so held to be invalid, unenforceable or void will be deemed to have
been stricken herefrom and the remainder will have the same force and
effectiveness as if such part or parts had never been included herein.
SECTION 7. Captions. The captions in this Indemnification
Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Indemnification Agreement.
SECTION 8. Successors and Assigns; Assignment. This
Indemnification Agreement shall (a) remain in full force and effect until CDC
has met its obligations under Sections 5.1 and 5.2 of the LLC Agreement; (b)
be binding upon Conoco, its successors and assigns; provided that Conoco's
rights and obligations hereunder may not be assigned without the prior written
consent of RB; and (c) inure to the benefit of and be enforceable only by RB
and its successors and assigns.
SECTION 9. Limitation by Law. All rights, remedies and powers
provided in this Indemnification Agreement may be exercised only to the extent
that the exercise thereof does not violate any applicable provision of law,
and all the provisions of this Indemnification Agreement are intended to be
subject to all applicable mandatory provisions of law which may be controlling
and to be limited to the extent necessary so that they will not render the
Indemnification Agreement invalid, unenforceable, in whole or in part, or not
entitled to be recorded, registered or filed under the provisions of any
applicable law.
SECTION 10. Survival of Covenants, Representations and
Warranties. All covenants, representations and warranties contained in this
Indemnification Agreement shall survive the execution and delivery of this
Indemnification Agreement and shall continue until CDC has met all of its
obligations under Sections 5.1 and 5.2 of the LLC Agreement. Any
investigation by RB shall not diminish in any respect whatsoever its right to
rely on such covenants, representations and warranties.
SECTION 11. Fees and Expenses. Conoco shall pay all costs, fees
and expenses (including, but not limited to, reasonable attorneys' fees and
disbursements) incurred by RB in collecting or enforcing Conoco's obligations
or RB's rights or remedies under this Indemnification Agreement.
SECTION 12. Governing Law. This Indemnification Agreement shall
be governed by and construed in accordance with the laws of the state of
Delaware, without regard to principles of conflict of laws.
SECTION 13. Final Agreement. This Indemnification Agreement
represents the final agreement between RB and Conoco with respect to the
subject matter hereof. Each of Conoco and RB hereby represents and warrants
that it is not relying on any statement, representation, warranty, covenant or
agreement of any kind except for those set forth in this Indemnification
Agreement.
IN WITNESS WHEREOF, Conoco has caused this Indemnification
Agreement to be duly executed by its officer thereunto duly authorized, as of
the date first above written.
CONOCO INC.
By:
Name:
Title:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention:
Telecopier No. (713)
ACCEPTED THIS DAY
OF OCTOBER 1996.
RB DEEPWATER EXPLORATION INC.
By:
Name:
Title:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") dated as of
October , 1996, is made by READING & ▇▇▇▇▇ CORPORATION, a Delaware
corporation ("RB") in favor of CONOCO DEVELOPMENT COMPANY, a Delaware
corporation ("Conoco").
WHEREAS, Conoco and RB Deepwater Exploration, Inc., a Nevada
corporation ("Reading & ▇▇▇▇▇") have entered into a Limited Liability Company
Agreement (the "LLC Agreement") dated of even date herewith with respect to
the formation of Deepwater Drilling L.L.C. (the "Company");
WHEREAS, Conoco has requested RB execute and deliver this
Indemnification Agreement as partial consideration for Conoco's entering into
the LLC Agreement.
NOW THEREFORE, in consideration of the premises and in order to
induce Conoco to enter into the LLC Agreement, RB hereby agrees as follows:
SECTION 1. Indemnification. RB hereby agrees to pay, protect,
indemnify, hold harmless and defend Conoco from any failure of Reading & ▇▇▇▇▇
to make any equity contribution to the Company, as and when required under
Sections 5.1 and 5.2 of the LLC Agreement, and agrees that in the event of
such failure, RB will promptly pay on behalf of Reading & ▇▇▇▇▇ any such
amounts due under Sections 5.1 or 5.2 of the LLC Agreement. No payment
required to be made by RB under this Section 1 shall be subject to any right
of set off, counterclaim, defense, abatement, suspension, deferment or
reduction. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the LLC Agreement.
SECTION 2. Representations and Warranties. RB represents and
warrants to Conoco as follows:
(a) RB (i) is a corporation duly organized, validly existing
and in good standing under the law of its jurisdiction of incorporation
and is in good standing in all jurisdictions in which failure to be or
remain in good standing would have a material adverse effect upon its
ability to perform its duties, obligations or liabilities hereunder and
(ii) has all requisite corporate power to conduct its business and to
execute and deliver and perform its obligations under this
Indemnification Agreement.
(b) The execution, delivery and performance by RB of this
Indemnification Agreement has been duly authorized and approved by all
necessary corporate action on the part of RB. This Indemnification
Agreement constitutes the legal, valid and binding obligation of RB and
is enforceable against RB in accordance with its terms, except insofar
as enforceability may be limited by applicable debtor relief laws or
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) No order, consent, approval, license, permit, franchise,
waiver, exemption, authorization of or validation of, or filing,
recording or registration with (except those that have been heretofore
obtained or made and of which Conoco has heretofore been given written
notice) or exemption by, any person or tribunal is required to
authorize, or is required in connection with, the execution, delivery,
performance, legality, validity, binding effect or enforceability of
this Indemnification Agreement.
(d) No bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
with respect to RB or any of its subsidiaries has been commenced in any
jurisdiction.
(e) There are no actions, suits or proceedings pending or to
RB's knowledge, threatened against or affecting RB or any of its
subsidiaries before any court or arbitrator which is reasonably likely
to have a material adverse effect on the financial condition, business
or operations of RB and its subsidiaries, taken as a whole, or would
impair the validity or enforceability of this Agreement.
SECTION 3. Amendments, Etc. No amendment or waiver of any
provision of this Indemnification Agreement nor consent to any departure by RB
therefrom shall in any event be effective unless the same shall be in writing
and signed by Conoco, and each such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 4. Notices, Etc. All notices and other communications
provided for herein shall be given or made in writing and addressed, if to RB,
at its address set forth under its signature below, or if to Conoco, at its
address set forth under its signature below, such notice or notices to be
effective only upon receipt by the party to which such notice is addressed.
SECTION 5. No Waiver; Remedies. No failure on the part of Conoco
to exercise, and no delay in exercising, any right hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of
any other right. No course of dealing between RB and Conoco shall operate as
a waiver of any right of Conoco. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law, admiralty, equity or
otherwise.
SECTION 6. Separability. Should any clause, sentence, paragraph,
sub-section or Section of this Indemnification Agreement be judicially
declared to be invalid, unenforceable or void, such decision will not have the
effect of invalidating or voiding the remainder of this Indemnification
Agreement, and RB agrees that the part or parts of the Indemnification
Agreement so held to be invalid, unenforceable or void will be deemed to have
been stricken herefrom and the remainder will have the same force and
effectiveness as if such part or parts had never been included herein.
SECTION 7. Captions. The captions in this Indemnification
Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Indemnification Agreement.
SECTION 8. Successors and Assigns; Assignment. This
Indemnification Agreement shall (a) remain in full force and effect until
Reading & ▇▇▇▇▇ has met its obligations under Sections 5.1 and 5.2 of the LLC
Agreement; (b) be binding upon RB, its successors and assigns; provided that
RB's rights and obligations hereunder may not be assigned without the prior
written consent of Conoco; and (c) inure to the benefit of and be enforceable
only by Conoco and its successors and assigns.
SECTION 9. Limitation by Law. All rights, remedies and powers
provided in this Indemnification Agreement may be exercised only to the extent
that the exercise thereof does not violate any applicable provision of law,
and all the provisions of this Indemnification Agreement are intended to be
subject to all applicable mandatory provisions of law which may be controlling
and to be limited to the extent necessary so that they will not render the
Indemnification Agreement invalid, unenforceable, in whole or in part, or not
entitled to be recorded, registered or filed under the provisions of any
applicable law.
SECTION 10. Survival of Covenants, Representations and
Warranties. All covenants, representations and warranties contained in this
Indemnification Agreement shall survive the execution and delivery of this
Indemnification Agreement and shall continue until Reading & ▇▇▇▇▇ has met all
of its obligations under Sections 5.1 and 5.2 of the LLC Agreement. Any
investigation by Conoco shall not diminish in any respect whatsoever its right
to rely on such covenants, representations and warranties.
SECTION 11. Fees and Expenses. RB shall pay all costs, fees and
expenses (including, but not limited to, reasonable attorneys' fees and
disbursements) incurred by Conoco in collecting or enforcing RB's obligations
or Conoco's rights or remedies under this Indemnification Agreement.
SECTION 11. Governing Law. This Indemnification Agreement shall
be governed by and construed in accordance with the laws of the state of
Delaware, without regard to principles of conflict of laws.
SECTION 12. Final Agreement. This Indemnification Agreement
represents the final agreement between Conoco and RB with respect to the
subject matter hereof. Each of RB and Conoco hereby represents and warrants
that it is not relying on any statement, representation, warranty, covenant or
agreement of any kind except for those set forth in this Indemnification
Agreement.
IN WITNESS WHEREOF, RB has caused this Indemnification Agreement
to be duly executed by its officer thereunto duly authorized, as of the date
first above written.
READING & ▇▇▇▇▇ CORPORATION
By:
Name:
Title:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
ACCEPTED THIS DAY
OF OCTOBER 1996.
CONOCO DEVELOPMENT COMPANY
By:
Name:
Title:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention:
Telecopier No. (713)
EXHIBIT "C" - SHARING RATIOS
Conoco Development Company 0.50 (50%)
RB Deepwater Exploration Inc. 0.50 (50%)
EXHIBIT "D" - CERTIFICATE OF FORMATION
CERTIFICATE OF FORMATION
OF
DEEPWATER DRILLING L.L.C.
The Certificate of Formation of Deepwater Drilling L.L.C. (the "Company") is
being executed by the undersigned for the purpose of forming a limited
liability company pursuant to the Delaware Limited Liability Company Act.
(a) The name of the Company is Deepwater Drilling L.L.C.
(b) The address of the registered office of the Company in Delaware is ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Company's registered
agent at that address is The Corporation Trust Company.
(c) Any rights of indemnification or guaranties provided for or referred to
in the Company's Limited Liability Company Agreement shall only be for
the benefit of the Company, the Members, the Members' Representatives or
the Manager, as applicable, to the exclusion of all other purported
third party beneficiaries.
IN WITNESS WHEREOF, the undersigned, each an authorized person of the Company,
have caused this Certificate of Formation to be duly executed as of the
day of , 1996.
RB DEEPWATER EXPLORATION INC., CONOCO DEVELOPMENT COMPANY,
An Authorized Person An Authorized Person
By: By:
Name: Name:
Title: Title:
EXHIBIT "E" - FORM OF DEMAND PROMISSORY NOTE
DEMAND PROMISSORY NOTE
$22,000,000.- [Houston, Texas]
[ , 1996]
This Demand Promissory Note is given the day and year first above
written and made and executed by ("Maker"),
a corporation. Capitalized terms used herein and not defined
herein will have the respective meanings assigned thereto in the Limited
Liability Company Agreement dated as of June 1, 1996 between Conoco
Development Company and RB Deepwater Exploration Inc. (the "Agreement").
For value received, Maker hereby promises to pay to the order of
Deepwater Drilling L.L.C. ("Payee"), on the earlier of (i) demand, as set out
in the Agreement, or (ii) August 31, 1998, or (iii) one business day prior to
delivery of the Drillship (in each case the "Maturity"), the principal amount
of Twenty-Two Million Dollars ($22,000,000). Payee may make demand for the
entire principal amount or for any part thereof, and if only a part thereof is
demanded, Payee shall be entitled to make subsequent demand(s) for the
balance, or any portion thereof prior to Maturity, with the remaining balance,
if any, due on Maturity. All amounts due hereunder will paid to Payee in New
York, New York, at such bank as Payee may designate by written notice to
Maker, as provided in the Agreement.
No interest shall accrue under this Demand Promissory Note unless or
until the earlier of demand or Maturity, and if a demand is made only with
respect to a portion of the principal amount, interest shall accrue only with
respect to that portion not paid on demand. Any interest accruing under this
Demand Promissory Note shall accrue at the lesser of (i) the interest rate
publicly quoted by Texas Commerce Bank, N.A., Houston, Texas, as its prime
commercial rate, plus five percent (5%), or (ii) the maximum non-usurious
interest rate permitted by applicable law. Such interest will accrue only if
payment of the principal amount hereunder, or in the event of a demand for a
portion thereof, such portion, is not paid forthwith by Maker, and such
interest will continue to accrue thereafter until such time as the unpaid
amount has been paid.
This Demand Promissory Note is delivered in accordance with the terms
and the conditions of the Agreement.
THIS DEMAND PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Maker
By:
Name:
Its:
EXHIBIT "F" - MARINE SERVICES AGREEMENT
MARINE SERVICES AGREEMENT
This Agreement is made on October __, 1996, by and between DEEPWATER
DRILLING L.L.C., a limited liability company under the laws of the state of
Delaware and having an office in Houston, Texas, hereinafter called "the
Company", and CONOCO SHIPPING COMPANY, a corporation incorporated under the
laws of Liberia and having an office in Houston, Texas, hereinafter called
"Contractor".
WITNESSETH
WHEREAS, the Company desires to provide offshore drilling services to
the oil and gas industry utilizing the dynamically positioned drillship under
construction by Samsung Heavy Industries Co., Ltd. and Samsung Corporation at
Koje Island, Korea, Builder's Hull No. 1220, hereinafter called "the Drilling
Unit", to be delivered to the Company upon completion of such construction;
WHEREAS, the Company intends to enter into a drilling contract with
Conoco Drilling Inc. ("Conoco") having a term of five (5) years, plus options
as further set out therein, hereinafter called the "Drilling Contract", to
provide drilling services utilizing the Drilling Unit upon completion of
construction and mobilization of the Drilling Unit to a U.S. Gulf of Mexico
port;
WHEREAS, the group of companies of which Contractor is a member has been
engaged in operating tankers and other vessels for many years and has acquired
a qualified and experienced operational, marketing, technical and
administrative staff with the knowledge, skill and experience to assist the
Company in the marine aspects of the construction and operations of the
Drilling Unit;
WHEREAS, the Company desires to avail itself of certain operational,
marketing, technical and administrative staff of Contractor and has requested
Contractor to provide certain services and personnel to the Company; and
WHEREAS, Contractor has agreed to provide such services and personnel to
the Company in accordance with the following terms and conditions.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Services to be Provided by Contractor
Pursuant to the terms of this Agreement Contractor agrees to
provide the following services as requested from time to time by
the Company.
A. Engineering and related technical services in the mechanical,
electrical, structural and marine engineering disciplines,
pertaining to the construction, installation, testing,
commissioning and operation of the marine systems applicable to
the Drilling Unit.
B. Assistance to the Company for the procurement and delivery of
necessary equipment, spare parts and supplies applicable to the
marine system of the Drilling Unit in a timely manner.
C. Policies, procedures and systems for project management,
management information, safety, preventive maintenance and
inventory control applicable to the marine systems of the
Drilling Unit.
D. Assistance in the recruitment of qualified and experienced
marine personnel for the Drilling Unit by the Company and for
the training of marine personnel to be assigned to the Drilling
Unit.
E. Project management, inspection and related technical assistance
services applicable to the marine systems of the Drilling Unit
prior to delivery of the Drilling Unit from the shipyard.
If Contractor is unable to provide the services requested for
whatever reason, Contractor shall promptly advise Company of same
in writing, and Contractor will owe no further obligation to
Company with respect to the requested services.
All services provided by Contractor under this Agreement shall be
in conformance with good and accepted marine practice and standard
operating procedures and practices of the industry.
2. Personnel
Contractor agrees to provide, or cause to be provided, to the
Company all marine and support personnel in the categories set out
in Exhibit A to this Agreement, as may be reasonably requested by
the Company from time to time, to assist the Company in connection
with the construction, installation, testing and commissioning and
operation of the marine system of the Drilling Unit, and in order
for the Company to meet the requirements of any drilling contract
for the Drilling Unit. With respect to the Drilling Contract,
Contractor agrees to provide at the request of the Company the
marine personnel set out in Appendix B of the Drilling Contract.
3. Remuneration
A. In consideration of the services being provided hereunder, the
Company agrees to pay Contractor, on a monthly basis in arrears,
the sum of not to exceed U.S. $1,000 per day commencing on the
Commencement Date of the Drilling Contract and continuing for the
duration of the Drilling Contract, such rate to be adjusted
quarterly based on changes in the Consumer Price Index, as
published in the Survey of Current Business Bulletin by the U.S.
Department of Labor, commencing with the index for the month of
September, 1998. The parties agree to negotiate, in good faith,
adjustments in such rate from time to time, based on the level of
marine services Contractor provides to Company and the level of
marine services provided to Contractor by third parties.
B. The Company agrees to reimburse Contractor for:
(1) Any and all payroll and payroll burden costs incurred by
Contractor in providing personnel pursuant to Section 2
of this Agreement since June 1, 1996, such payroll and
payroll burden costs to be in conformance with
Contractor's normal accounting practices and employee
benefits in effect from time to time;
(2) Any and all third party costs incurred by Contractor in
the procurement of equipment, materials, supplies, spare
parts or personnel requested by the Company, including all
relevant transportation, travel and insurance costs.
C. As additional consideration for the services provided
hereunder, the Company agrees to pay, on a monthly basis in
arrears, to Contractor an amount equal to one percent (1%) of
the monthly revenues accruing to Company under the Drilling
Contract excluding, however, amounts for which Company is
entitled to cost reimbursement from Conoco under the terms of
the Drilling Contract.
4. Payment
A. The Company shall pay all amounts due to Contractor under this
Agreement by wire transfer, in freely available funds, to a
bank to be designated by Contractor in ,
for credit to Contractor's account.
B. All such amounts shall be paid within twenty days following
receipt by the Company of monthly invoices supported by
reasonable documentation. All amounts not paid when due shall
earn interest until paid at the rate of 50 basis points over
the 3 month LIBOR in effect, from time to time, as published in
the "Wall Street Journal".
5. Confidential Information
Any proprietary or confidential information, documents, manuals,
systems, designs, drawings or other like or unlike material or
information made available to the Company by Contractor is for the use
only by the Company for use with the services to be provided by
Contractor pursuant to this Agreement and shall be so designated at the
time of disclosure. Title to all such material and information shall at
all times be in Contractor, and the Company shall not have any rights
with respect to such material and information except the use provided by
this Agreement. During the term of this Agreement and thereafter for
five years after the expiration or earlier termination thereof or the
date of disclosure of such information, whichever is earlier, the
Company will not permit the use of any such information by a third party
and will at all times keep it in the strictest confidence. Upon the
expiration or earlier termination of this Agreement, the Company shall
return to Contractor all such material received from Contractor or
prepared by Contractor pursuant to this Agreement and shall neither
retain any copy of such material nor thereafter use any such
information. It is expressly agreed that the obligation of the Company
under this section will continue and survive any expiration or earlier
termination of this Agreement, provided that this section shall not
apply to information which is:
A. Contained in a publication of general circulation;
B. Disclosed in good faith by a third party not in privity with
the party originally disclosing such information which has a
bona fide right to disclose such information; or
C. Information substantially acquired or developed for, or from,
the operations or maintenance of the Drilling Unit;
save that the Company shall be entitled, after reasonable prior notice
to Contractor, to disclose any such confidential information, report or
document: -
(a) in connection with any proceedings arising out of or in
connection with this Agreement to the extent necessary to
protect its interests;
(b) to any prospective assignee of any interest in the Company
subject to it obtaining an undertaking from such
prospective assignee in the terms of this section;
(c) if required to do so by an order of any court of competent
jurisdiction;
(d) in pursuance of any procedure for discovery of documents
in any proceedings before any such court;
(e) pursuant to any law or regulation having the force of law
or any national stock exchange requirement;
(f) pursuant to a requirement of any authority being an
authority with whose requirement, of the nature and to the
extent in question, it is accustomed to comply; or
(g) to the technical or legal advisers of the Company subject
to it obtaining an undertaking from such advisers in the
terms of this section;
and the Company shall be entitled so to disclose or use any such
information, report or document if the information contained therein
shall have emanated in conditions free from confidentiality bona fide
from some person other than Contractor or the agent of Contractor and
such party would, but for the preceding provisions of this sub-section,
be free so to disclose or use the same; provided that the Company shall
use all reasonable endeavors to avoid disclosure to any third party in
accordance with sub-sections (c) (d) (e) and (f) above.
6. Term
A. This Agreement shall remain in effect until the expiration or
earlier termination of the Drilling Contract as it may be
amended or extended from time to time, and shall be
automatically renewed on an annual basis thereafter unless
either party gives six months' prior written notice of its
intention to terminate this Agreement or renegotiate its terms
to the other party. If such notice is given, the parties agree
to meet promptly and discuss in good faith such termination or
renegotiation, as the case may be, and if mutual agreement is
not reached regarding same, this Agreement may be terminated by
either party, effective upon expiration of such six month
period.
B. In case of termination of this Agreement, Contractor shall be
entitled to any payments with respect to services performed or
costs or expenses incurred prior to such termination.
C. If either party materially defaults in the fulfillment of any
obligation under this Agreement without reasonable
justification therefor, the other party will not have any
further obligation to fulfil its obligations until such default
has been cured. If such default continues for a period of more
than 30 days, the non-defaulting party shall have the option to
terminate this Agreement, without prejudice to any other rights
it may have.
7. Taxes
The remuneration payable under Sections 3.A and 3.B has been
calculated on the basis that Contractor will be liable for all federal
and state income and franchise taxes on the profits arising to it under
this Agreement but no other taxes. Any and all such other taxes that
may be imposed by any governmental authority shall be borne by the
Company.
8. Assignment
Neither party shall assign or transfer any of its right, title or
interest in or to this Agreement (except to a successor to substantially
all of such party's business or to a corporation owned by or under
common ownership with such party which agrees to assume all obligations
of such party, provided that the assigning party shall not thereby be
released from its obligations hereunder) without the prior written
consent of the other party, and any such attempt to assign or transfer
without such consent shall have no effect. Contractor may subcontract
for any services requested by Company hereunder, provided Company has
approved any such subcontract, such approval not to be unreasonably
withheld.
9. Notices
Any notice or other communication for which this Agreement
provides shall be in writing and will be delivered to the addressee
thereof or sent to the address thereof by electronic facsimile
communication or by registered or certified mail, return receipt
requested, or by other method which will constitute adequate evidence of
delivery, as follows:
If to the Company:
Deepwater Drilling L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Manager
If to Contractor:
Conoco Shipping Company
c/o Conoco Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention:
or addressed at such other address as the addressee thereof may have
designated for that purpose by written notice given as above provided.
Any notice given in conformance with this clause will be considered as
received for all purposes on the date of delivery.
10. Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of Texas an the parties hereto submit to the non-exclusive
jurisdiction of the federal and state courts in ▇▇▇▇▇▇ County, Texas.
11. Consequential Damages
In no event shall either party to this Agreement be liable to the
other party for loss of profits or other incidental, consequential or
special damages.
12. Indemnity
A. Contractor agrees to defend, indemnify and hold harmless the
Company, to the extent the Company is not insured or otherwise
indemnified, for all losses, claims, liabilities, obligations
or the like incurred by the Company or any member in the
Company either directly or through the Company arising from
Contractor's failure to perform its obligations hereunder
according to good marine practice and consistent with the
standard operating procedures and practices of the industry,
whether such obligations are to be performed by itself or
through an affiliate or sub-contractor appointed by it.
Further, it is agreed that Contractor's liability, if any,
under this paragraph shall not in any event exceed U.S.
$100,000.00 per occurrence, not to exceed U.S. $1,000,000 in
any one year.
B. Notwithstanding the foregoing it is agreed that Contractor
shall have no liability to the Company for pollution, well
control costs, reservoir or underground damage or loss of hole,
regardless of how caused, including, but not limited to, the
sole, joint or concurrent negligence, recklessness or wilful
misconduct of Contractor, its employees or sub-contractors.
13. Additional Insured and Waiver of Subrogation
The Company agrees to cause the relevant insurance policies and
cover notes being maintained at the expense of the Company for the
benefit of both parties to include both parties as named insureds and to
cause the interested underwriters to waive all rights of subrogation
against the parties hereto.
14. Force Majeure
The obligations (other than any obligations to pay money) of
either party to the Agreement shall be suspended (and failure to carry
out the same shall not constitute a breach of this Agreement) to the
extent, and during the period, that such party is prevented from
carrying out is obligations by virtue of any act or event outside the
reasonable control of that party.
15. Amendment
This Agreement may be amended, from time to time, only by mutual
agreement of the parties in writing.
IN WITNESS WHEREOF, the parties thereto have caused this Agreement to be
executed by its duly authorized representatives in ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇
, ▇▇▇▇.
CONOCO SHIPPING COMPANY
By:
Its:
DEEPWATER DRILLING L.L.C.
By:
Its:
EXHIBIT "G" - DRILLING SERVICES AGREEMENT
DRILLING SERVICES AGREEMENT
This Agreement is made on October __, 1996, by and between DEEPWATER
DRILLING L.L.C., a limited liability company under the laws of the state of
Delaware and having an office in Houston, Texas, hereinafter called "the
Company", and READING & ▇▇▇▇▇ DRILLING CO., a corporation incorporated under
the laws of Oklahoma and having an office in Houston, Texas, hereinafter
called "Contractor".
WITNESSETH
WHEREAS, the Company desires to provide offshore drilling services to
the oil and gas industry utilizing the dynamically positioned drillship under
construction by Samsung Heavy Industries Co., Ltd. and Samsung Corporation at
Koje Island, Korea, Builder's Hull No. 1220, hereinafter called "the Drilling
Unit", to be delivered to the Company upon completion of such construction;
WHEREAS, the Company intends to enter into a drilling contract with
Conoco Drilling Inc. ("Conoco") having a term of five (5) years, plus options
as further set out therein, hereinafter called the "Drilling Contract", to
provide offshore drilling services utilizing the Drilling Unit upon completion
of construction and mobilization of the Drilling Unit to a U.S. Gulf of Mexico
port;
WHEREAS, the group of companies of which Contractor is a member has been
engaged in operating offshore drilling units for many years and has acquired
a qualified and experienced operational, marketing, technical and
administrative staff with the knowledge, skill and experience to assist the
Company in the drilling aspects of the construction and operations of the
Drilling Unit;
WHEREAS, the Company desires to avail itself of certain operational,
marketing, technical and administrative staff of Contractor and has requested
Contractor to provide certain services and personnel to the Company; and
WHEREAS, Contractor has agreed to provide such services and personnel to
the Company in accordance with the following terms and conditions.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Services to be Provided by Contractor
Pursuant to the terms of this Agreement Contractor agrees to
provide the following services as requested from time to time by
the Company.
A. Engineering and related technical services in the mechanical,
electrical, structural and marine engineering disciplines,
pertaining to the construction, installation, testing,
commissioning and operation of the drilling and topsides
systems of the Drilling Unit.
B. Assistance to the Company's purchasing organization for the
procurement and delivery of necessary equipment, spare parts
and supplies applicable to the marine system of the Drilling
Unit in a timely manner.
C. Policies, procedures and systems for project management,
management information, safety, preventive maintenance and
inventory control applicable to the drilling and topsides
systems of the Drilling Unit.
D. Assistance in the recruitment of qualified and experienced
drilling personnel for the Drilling Unit by the Company and for
the training of drilling personnel to be assigned to the
Drilling Unit.
E. Project management, inspection and related technical assistance
services applicable to the drilling systems of the Drilling
Unit prior to delivery of the Drilling Unit from the shipyard.
If Contractor is unable to provide the services requested for whatever
reason, Contractor shall promptly advise Company of same in writing, and
Contractor will woe no further obligation to Company with respect to
those requested services.
All services provided by Contractor under this Agreement shall be in
conformance with good and accepted oilfield practice and standard
operating procedures and practices of the industry.
2. Personnel
Contractor agrees to provide, or cause to be provided, to the Company
all drilling and support personnel in the categories set out in Exhibit A to
this Agreement, as may be reasonably requested by the Company from time to
time, to assist the Company in connection with the construction, installation,
testing, commissioning and operation of the drilling and topsides systems of
the Drilling Unit, and in order for the Company to meet the requirements of
any drilling contract for the Drilling Unit. With respect to the Drilling
Contract, Contractor agrees to provide at the request of the Company the
drilling and support personnel set out in Appendix B of the Drilling Contract.
3. Remuneration
A. In consideration of the services being provided hereunder, the
Company agrees to pay Contractor, on a monthly basis in arrears,
the sum not to exceed U.S. $2,500 per day commencing on the
Commencement Date of the Drilling Contract and continuing for the
duration of the Drilling Contract, such rate to be adjusted
quarterly based on changes in the Consumer Price Index, as
published in the Survey of Current Business Bulletin by the U.S.
Department of Labor, commencing with the index for the month of
September, 1998. The parties agree to negotiate, in good faith,
adjustments to such rate based on the level of drilling services
Contractor provides to Company as compared to drilling services
obtained by the Company from third parties.
B. The Company agrees to reimburse Contractor for:
(1) Any and all payroll and payroll burden costs incurred by
Contractor in providing personnel pursuant to the Section
2 of this Agreement since June 1, 1996, such payroll and
payroll burden costs to be in conformance with
Contractor's normal accounting practices and employee
benefits in effect from time to time;
(2) Any and all third party costs incurred by Contractor in
the procurement of equipment, materials, supplies, spare
parts or personnel requested by the Company, including all
relevant transportation, travel and insurance costs.
C. As additional consideration for the services provided in
construction hereunder the Company agrees to pay, on a monthly
basis in arrears, to Contractor an amount equal to one percent
(1%) of the monthly revenues accruing to Company under the
Drilling Contract (excluding, however, amounts for which
Company is entitled to cost reimbursement from Conoco under the
terms of the Drilling Contract).
4. Payment
A. The Company shall pay all amounts due to Contractor under this
Agreement by wire transfer, in freely available funds, to a
bank to be designated by Contractor in ,
for credit to Contractor's account.
B. All such amounts shall be paid within twenty days following
receipt by the Company of monthly invoices supported by
reasonable documentation. All amounts not paid when due shall
earn interest until paid at the rate of 50 basis points over
the 3 month LIBOR in effect, from time to time, as published in
the "Wall Street Journal".
5. Confidential Information
Any proprietary or confidential information, documents, manuals,
systems, designs, drawings or other like or unlike material or
information made available to the Company by Contractor is for the use
only by the Company for use with the services to be provided by
Contractor pursuant to this Agreement and shall be so designated at the
time of disclosure. Title to all such material and information shall at
all times be in Contractor, and the Company shall not have any rights
with respect to such material and information except the use provided by
this Agreement. During the term of this Agreement and thereafter for
five years after the expiration or earlier termination thereof or the
date of disclosure of such information, whichever is earlier, the
Company will not permit the use of any such information by a third party
and will at all times keep it in the strictest confidence. Upon the
expiration or earlier termination of this Agreement, the Company shall
return to Contractor all such material received from Contractor or
prepared by Contractor pursuant to this Agreement and shall neither
retain any copy of such material nor thereafter use any such
information. It is expressly agreed that the obligation of the Company
under this section will continue and survive any expiration or earlier
termination of this Agreement, provided that this section shall not
apply to information which is:
A. Contained in a publication of general circulation;
B. Disclosed in good faith by a third party not in privity with
the party originally disclosing such information which has a
bona fide right to disclose such information; or
C. Information substantially acquired or developed for, or from,
the operations or maintenance of the Drilling Unit;
save that the Company shall be entitled, after reasonable prior notice
to Contractor, to disclose any such confidential information, report or
document: -
(a) in connection with any proceedings arising out of or in
connection with this Agreement to the extent necessary to
protect its interests;
(b) to any prospective assignee of any interest in the Company
subject to it obtaining an undertaking from such
prospective assignee in the terms of this section;
(c) if required to do so by an order of any court of competent
jurisdiction;
(d) in pursuance of any procedure for discovery of documents
in any proceedings before any such court;
(e) pursuant to any law or regulation having the force of law
or any national stock exchange requirement;
(f) pursuant to a requirement of any authority being an
authority with whose requirement, of the nature and to the
extent in question, it is accustomed to comply; or
(g) to the technical or legal advisers of the Company subject
to it obtaining an undertaking from such advisers in the
terms of this section;
and the Company shall be entitled so to disclose or use any such
information, report or document if the information contained therein
shall have emanated in conditions free from confidentiality bona fide
from some person other than Contractor or the agent of Contractor and
such party would, but for the preceding provisions of this sub-section,
be free so to disclose or use the same; provided that the Company shall
use all reasonable endeavors to avoid disclosure to any third party in
accordance with sub-sections (c) (d) (e) and (f) above.
6. Term
A. This Agreement shall remain in effect until the expiration or
earlier termination of the Drilling Contract, as it may be
amended or extended from time to time, and shall be
automatically renewed on an annual basis thereafter unless
either party gives six months' prior written notice of its
intention to terminate this Agreement or renegotiate its terms
to the other party. If such notice is given, the parties agree
to meet promptly and discuss in good faith such termination or
renegotiation, as the case may be, and if mutual agreement is
not reached regarding same, this Agreement may be terminated by
either party, effective upon expiration of such six month
period.
B. In case of termination of this Agreement, Contractor shall be
entitled to any payments with respect to services performed or
costs or expenses incurred prior to such termination.
C. If either party materially defaults in the fulfillment of any
obligation under this Agreement without reasonable
justification therefor, the other party will not have any
further obligation to fulfil its obligations until such default
has been cured. If such default continues for a period of more
than 30 days, the non-defaulting party shall have the option to
terminate this Agreement, without prejudice to any other rights
it may have.
7. Taxes
The remuneration payable under Sections 3.A and 3.B has been
calculated on the basis that Contractor will be liable for all federal
and state income and franchise taxes on the profits arising to it under
this Agreement but no other taxes. Any and all such other taxes that
may be imposed by any governmental authority shall be borne by the
Company.
8. Assignment
Neither party shall assign or transfer any of its right, title or
interest in or to this Agreement (except to a successor to substantially
all of such party's business or to a corporation owned by or under
common ownership with such party which agrees to assume all obligations
of such party, provided that the assigning party shall not thereby be
released from its obligations hereunder) without the prior written
consent of the other party, and any such attempt to assign or transfer
without such consent shall have no effect. Contractor may subcontract
for any services requested by the Company hereunder, provided Company
has approved any such subcontract, such approval not to be unreasonably
withheld.
9. Notices
Any notice or other communication for which this Agreement
provides shall be in writing and will be delivered to the addressee
thereof or sent to the address thereof by electronic facsimile
communication or by registered or certified mail, return receipt
requested, or by other method which will constitute adequate evidence of
delivery, as follows:
If to the Company:
Deepwater Drilling L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Manager
If to Contractor:
Reading & ▇▇▇▇▇ Drilling Co.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Manager
or addressed at such other address as the addressee thereof may have
designated for that purpose by written notice given as above provided.
Any notice given in conformance with this clause will be considered as
received for all purposes on the date of delivery.
10. Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of Texas an the parties hereto submit to the non-exclusive
jurisdiction of the federal and state courts in ▇▇▇▇▇▇ County, Texas.
11. Consequential Damages
In no event shall either party to this Agreement be liable to the
other party for loss of profits or other incidental, consequential or
special damages.
12. Indemnity
A. Contractor agrees to defend, indemnify and hold harmless the
Company, to the extent the Company is not insured or otherwise
indemnified, for all losses, claims, liabilities, obligations
or the like incurred by the Company or any member in the
Company either directly or through the Company arising from
Contractor's failure to perform its obligations hereunder
according to good oil field practice and consistent with the
standard operating procedures and practices of the industry,
whether such obligations are to be performed by itself or
through an affiliate or sub-contractor appointed by it.
Further, it is agreed that Contractor's liability, if any,
under this paragraph shall not in any event exceed U.S.
$100,000.00 per occurrence, not to exceed U.S. $1,000,000 in
any one year.
B. Notwithstanding the foregoing it is agreed that Contractor
shall have no liability to the Company for pollution, well
control costs, reservoir or underground damage or loss of hole,
regardless of how caused, including, but not limited to, the
sole, joint or concurrent negligence, recklessness or wilful
misconduct of Contractor, its employees or sub-contractors.
13. Additional Insured and Waiver of Subrogation
The Company agrees to cause the relevant insurance policies and
cover notes being maintained at the expense of the Company for the
benefit of both parties to include both parties as named insureds and to
cause the interested underwriters to waive all rights of subrogation
against the parties hereto.
14. Force Majeure
The obligations (other than any obligations to pay money) of
either party to the Agreement shall be suspended (and failure to carry
out the same shall not constitute a breach of this Agreement) to the
extent, and during the period, that such party is prevented from
carrying out is obligations by virtue of any act or event outside the
reasonable control of that party.
15. Amendment
This Agreement may be amended, from time to time, only by mutual agreement of
the parties in writing.
IN WITNESS WHEREOF, the parties thereto have caused this Agreement to be
executed by its duly authorized representatives in ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇
, ▇▇▇▇.
READING & ▇▇▇▇▇ DRILLING CO.
By:
Its:
DEEPWATER DRILLING L.L.C.
By:
Its:
EXHIBIT "H" - CONSTRUCTION FINANCING CREDIT AGREEMENT
CREDIT AGREEMENT
DATED AS OF ____________________, 1996
BETWEEN
DEEPWATER DRILLING L.L.C.
AND
CONOCO INC.
TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
I. DEFINITIONS; CERTAIN TERMS . . . . . . . . . . . . . . . . . . . . . 2
II. THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.01 The Vessel Loans . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Making the Vessel Construction Loans . . . . . . . . . 6
(b) Interest; Vessel Capitalized Interest . . . . . . . . . 7
(c) Construction Financing . . . . . . . . . . . . . . . . 8
(d) Repayment; Vessel Note . . . . . . . . . . . . . . . . 9
(e) Prepayments . . . . . . . . . . . . . . . . . . . . . . 9
(f) Use of Proceeds . . . . . . . . . . . . . . . . . . . . 10
(g) Termination of Vessel Commitment . . . . . . . . . . . 10
2.02 Payments and Computations . . . . . . . . . . . . . . . . . . . 10
2.03 Maximum Amount of Loans . . . . . . . . . . . . . . . . . . . . 12
2.04 Grant of Security Interest . . . . . . . . . . . . . . . . . . 12
III. CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . 12
3.01 Conditions Precedent to the Initial Loan . . . . . . . . . . . 12
(a) Delivery of Documents . . . . . . . . . . . . . . . . . 12
(b) Proceedings; Receipt of Documents . . . . . . . . . . . 13
3.02 Conditions Precedent to All Loans . . . . . . . . . . . . . . . 13
(a) Representations and Warranties; No Event of Default . . 13
(b) Legality . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Borrowing Notice . . . . . . . . . . . . . . . . . . . 14
(d) Delivery of Documents . . . . . . . . . . . . . . . . . 14
IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 14
4.01 Representations and Warranties of the Borrower . . . . . . . . 14
(a) Organization, Good Standing, Etc. . . . . . . . . . . . 14
(b) Authorization, Etc. . . . . . . . . . . . . . . . . . . 14
(c) Governmental Approvals . . . . . . . . . . . . . . . . 15
(d) Enforceability of Loan Documents . . . . . . . . . . . 15
(e) No Material Adverse Change . . . . . . . . . . . . . . 15
(f) Litigation, Labor Controversies, Etc. . . . . . . . . . 15
(g) Subsidiaries . . . . . . . . . . . . . . . . . . . . . 16
(h) Ownership of Assets . . . . . . . . . . . . . . . . . . 16
V. COVENANTS OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . . 16
5.01 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . 16
(a) Reporting Requirements . . . . . . . . . . . . . . . . 16
(b) Preservation of Existence, Etc. . . . . . . . . . . . . 17
(c) Obtaining of Permits, Etc. . . . . . . . . . . . . . . 18
(d) Keeping of Records and Books of Account . . . . . . . . 18
(e) Compliance with Laws, Etc. . . . . . . . . . . . . . . 18
(f) Insurance . . . . . . . . . . . . . . . . . . . . . . . 18
5.02 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . 18
(a) Construction Contract . . . . . . . . . . . . . . . . . 18
(b) Liens, Etc. . . . . . . . . . . . . . . . . . . . . . 19
(c) Indebtedness . . . . . . . . . . . . . . . . . . . . . 19
VI. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Payment Default . . . . . . . . . . . . . . . . . . . . 19
(b) Breach of Warranty . . . . . . . . . . . . . . . . . . 20
(c) Judgments . . . . . . . . . . . . . . . . . . . . . . . 20
(d) Bankruptcy, Insolvency, Etc. . . . . . . . . . . . . . 20
e) Impairment of Security, Etc. . . . . . . . . . . . . . . . . 21
6.02 Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . 21
VII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.01 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.02 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . 22
7.03 No Waiver; Remedies, Etc. . . . . . . . . . . . . . . . . . . . 23
7.04 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 23
7.06 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.07 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 24
7.08 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . 25
7.09 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.11 Application of Refunds and Payments under
Korean Bank Guarantees . . . . . . . . . . . . . . . . . . . 27
7.12 No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.13 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . 28
7.14 Payment of Costs and Expenses . . . . . . . . . . . . . . . . . 28
Exhibits
Exhibit A Form of Promissory Note
Exhibit B Form of Borrowing Request
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of __________________, 1996, between Deepwater
Drilling L.L.C., a Delaware limited liability company, (the "Borrower"), and
Conoco Inc., a corporation organized under the laws of the State of Delaware
("Conoco").
RECITALS
The Borrower is a Delaware limited liability company whose members are RB
Deepwater Exploration Inc., a Nevada corporation, ("Reading & ▇▇▇▇▇") and
Conoco Development Company ("CDC"). The Borrower has entered into or will
enter into a construction contract (the "Vessel Construction Contract," as
more fully defined herein) with Samsung Co., Ltd. and Samsung Heavy Industries
Co., Ltd., each a Korean corporation, (collectively the "Builder") for the
construction of a drillship with top sides (the "Vessel," as more fully
defined herein). Under the Vessel Construction Contract, Borrower is or will
be obligated to make certain payments to the Builder. Further, during the
construction of the Vessel, Borrower may purchase certain equipment to be
integrated into or installed on the Vessel ("BFE," as more fully defined
herein) and may be required to pay certain amounts for the BFE. It is
Borrower's intention to seek construction financing from third party
commercial lenders to fund the payments that will be required to be made to
the Builder or which may be necessary for the purchase of BFE, but under the
Vessel Construction Contract, certain amounts will be due to the Builder prior
to Borrower completing the contemplated construction financing and Borrower
may also need to purchase BFE prior to the completion of the construction
financing.
The Borrower has asked Conoco to make term loans to the Borrower in an
aggregate principal amount not to exceed $85,000,000 (including capitalized
interest in an aggregate principal amount not to exceed $___________________),
the proceeds of which are to be used to pay a portion of the costs due to the
Builder under the Vessel Construction Contract prior to the delivery of the
Vessel and/or to purchase BFE. Conoco is willing to make such term loans to
the Borrower on the terms and conditions hereinafter set forth. Accordingly,
the Borrower and Conoco hereby agree as follows:
I. DEFINITIONS; CERTAIN TERMS
Definitions
As used in this Agreement, the following terms shall have the respective
meanings indicated below, such meanings to be applicable equally to both
the singular and plural forms of such terms:
"BFE" means the buyer furnished equipment that Borrower is to provide
under the terms of the Vessel Construction Contract.
"Borrower" has the meaning specified therefor in the preamble hereto.
"Borrowing Date" means each date on which a Loan is made hereunder.
"Builder" has the meaning specified therefor in the preamble hereto.
"Business Day" means a day on which commercial banks in Houston, Texas
and New York City, New York are not required or authorized by law to
close.
"Capitalized Interest Commitment" means the commitment of Conoco to make
the Vessel Capitalized Interest Loans to the Borrower pursuant to
Sections 2.01(b) and 2.02(b) hereof, respectively, in an aggregate
principal amount at any one time outstanding not to exceed
$___________________.
"Closing Date" means the date on which the initial Loan is made
hereunder.
"Commitment" means the Vessel Construction Commitment and the
Capitalized Interest Commitment.
"Conoco" has the meaning specified therefor in the preamble hereto.
"Construction Financing" means the financing Borrower will put in place
on or prior to October 10, 1997, (i) to repay the amounts borrowed
hereunder, along with interest, and (ii) to finance other amounts in
connection with the construction of the Vessel.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both
would constitute an Event of Default.
"Default Rate" means, for any day, a rate per annum equal to the Six
Month LIBOR Rate plus 3%.
"Dollars" and the symbol "$" means the lawful currency of the United
States of America.
"Event of Default" means any of the events set forth in Section 6.01
hereof.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Governmental Authority" means the United States or any state or
political subdivision thereof or any foreign nation or political
subdivision thereof, any entity, body or authority exercising executive,
legislative, judicial, regulatory or administrative functions of, or
pertaining to, government in the United States (or any state or
political subdivision thereof) or any foreign nation or any political
subdivision thereof, including, without limitation, any central bank or
other governmental or quasi-governmental authority exercising control
over banks or other financial institutions, and any corporation or other
entity or authority owned or controlled (through stock or capital
ownership or otherwise) by any of the foregoing.
"Interest Period" means, with respect to each Loan, (a) the period
commencing on the Borrowing Date for such Loan and ending on the
numerically corresponding date six months thereafter, and (b) each
subsequent period beginning on the last day of the immediately preceding
Interest Period and ending on the numerically corresponding date six
months thereafter , provided that:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be
extended to the immediately following Business Day (unless
such immediately following Business Day falls in another
calendar month, in which case such Interest Period shall
end on the immediately preceding Business Day); and
(ii) any Interest Period that begins on the last Business Day
of a calendar month shall end on the last Business Day of
the corresponding sixth calendar month thereafter.
"Korean Bank" means the Bank of Seoul.
"Korean Bank Guarantee" means the Letter of Refundment Guarantee to be
issued by the Bank of Seoul, with respect to the Construction Contract.
"Lien or Liens" means any mortgage, pledge, lien, charge, encumbrance,
lease, right, security interest, libel, restriction, covenant,
assessment, rights in rem of any kind or claim of whatever nature or
description.
"Loan" means one of the Vessel Loans.
"Loan Documents" means this Agreement, the Vessel Note and the Security
Agreements.
"Loan Maturity Date" means the earlier of (i) October 10, 1997, or
(ii) the date on which Borrower has obtained Construction Financing as
contemplated by Section 2.01(c).
"Loan Termination Date" means the Loan Maturity Date or such earlier
date on which the Vessel Construction Commitment and the Capitalized
Interest Commitment with respect to the Vessel Loans shall be terminated
pursuant to Section 2.01(e), Section 2.01(g) or Section 6.01 hereof.
"Maturity Dates" means the Loan Maturity Date.
"Notice of Borrowing" means a notice, substantially in the form of
Exhibit B hereto, or, if given by telephone, specifying the matters set
forth in such Exhibit B, and followed promptly by a notice substantially
in the form of such Exhibit, delivered by the Borrower to Conoco
pursuant to Section 2.01(a) hereof.
"Obligations" means (i) the obligation of the Borrower to pay, as and
when due and payable (upon scheduled maturity, acceleration or
otherwise), all amounts from time to time owing by it in respect of any
Loan Document, whether for principal, interest, fees, expenses or
otherwise, and (ii) the obligation of the Borrower to perform or observe
all of its other obligations from time to time existing under any Loan
Document.
"Person" means an individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, limited
liability company, joint venture or governmental authority or other
regulatory body.
"Security Agreements" has the meaning specified in Section 2.04 hereof.
"Six Month LIBOR Rate" means the six month LIBOR rate as quoted in the
Wall Street Journal Money Rate Section on the date of funding or on the
date of determination thereof (or if the Wall Street Journal is not
published on that day, on the first publishing day thereafter), such
interest to be calculated for the actual number of days elapsed on the
basis of a 360 day year; provided that if no such rates are published in
the Wall Street Journal then the Borrower and Conoco shall negotiate in
good faith to agree upon an alternative note.
"Termination Date" means the Loan Termination Date.
"Vessel" means the Vessel being built pursuant to the Vessel
Construction Contract.
"Vessel Capitalized Interest Loan" has the meaning specified therefor in
Section 2.01(b)(ii) hereof.
"Vessel Construction Commitment" means the commitment of Conoco to make
Vessel Construction Loans to the Borrower pursuant to Section 2.01(a)
hereof in an aggregate principal amount at any one time outstanding not
to exceed $_____________________.
"Vessel Construction Contract" means the Contract that may or has been
entered into between Borrower and the Builder, providing for the
construction and the purchase and sale of a drillship designated as Hull
No. 1220, as amended or otherwise modified in accordance with the terms
hereof.
"Vessel Construction Loan" means any loan made by Conoco to the Borrower
pursuant to Section 2.01(a).
"Vessel Loans" means the Vessel Construction Loans and the Vessel
Capitalized Interest Loans.
"Vessel Note" means a promissory note of the Borrower, substantially in
the form of Exhibit A hereto, evidencing the obligation of the Borrower
to repay the Vessel Loans, as such promissory note may be modified or
extended from time to time, and any promissory note or notes issued in
exchange or replacement therefor.
II. THE LOANS
2.01 The Vessel Loans
(a) Making the Vessel Construction Loans
Conoco agrees, on the terms and conditions hereinafter set
forth, to make Vessel Construction Loans to the Borrower from
time to time during the period from the date hereof to but
excluding the Loan Termination Date in an aggregate principal
amount at any one time outstanding not to exceed the amount of
the Vessel Construction Commitment. Each Vessel Construction
Loan shall be in an amount which is not less than $1,000,000
and is an integral multiple of $100,000 and shall be made
pursuant to an irrevocable Notice of Borrowing delivered by the
Borrower to Conoco not later than 12 noon (New York City time)
on the third Business Day prior to the Borrowing Date of such
proposed Loan. On the Borrowing Date specified in the Notice
of Borrowing and upon fulfillment of the applicable conditions
set forth in Section III hereof, Conoco will make the requested
Vessel Construction Loan available to the Borrower in
immediately available funds in U.S. Dollars by, at the option
of Conoco, either (i) crediting the Borrower's designated
account or (ii) remitting on Borrower's behalf, and in
accordance with Borrower's written notification, amounts due
the Builder or Persons from whom the Borrower is purchasing
BFE.
(b) Interest; Vessel Capitalized Interest
(i) The Borrower will pay interest on the unpaid principal
amount of each Vessel Loan, from and including the
first day of the Interest Period for such Loan until
such principal amount shall be paid in full, at the
rate per annum at all times during each Interest
Period for such Loan equal to the six month LIBOR Rate
in effect two business days prior to the first day of
such Interest Period, plus 1% for such Interest
Period.
(ii) Interest accruing on the Vessel Loans shall be due on
the last day of each Interest Period and, subject to
the terms and conditions hereinafter set forth
(including, without limitation, Section 3.02 hereof),
prior to the Loan Termination Date shall be added
(each such addition herein a "Vessel Capitalized
Interest Loan") to the principal amount of the Vessel
Loans on the last day of each Interest Period and on
the date on which such Loan ceases to bear interest,
provided that the aggregate principal amount of the
Vessel Capitalized Interest Loans during the term of
this Agreement shall not exceed the amount of the
Capitalized Interest Commitment. Each Vessel
Capitalized Interest Loan shall constitute a Vessel
Loan and shall bear interest in accordance with
Section 2.01(b)(i) hereof. The Borrower will pay on
demand by Conoco any accrued interest on the Vessel
Loan (1) due on the date specified above if on such
date the Borrower shall not have fulfilled the
conditions precedent set forth in Section 3.02 hereof,
(2) to the extent that such accrued interest would
cause the aggregate principal amount of all Vessel
Capitalized Interest Loans to exceed the amount of the
Capitalized Interest Commitment, (3) on the Loan
Maturity Date and (4) accruing on or after the Loan
Termination Date with respect to all amounts not paid
on or before the Loan Termination Date.
(iii) Any amount of principal of and, to the extent
permitted by law, interest on a Vessel Loan that is
not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest, from
the date on which such amount is due until such amount
is paid in full, payable on demand, at a rate per
annum equal at all times to the Default Rate; provided
that the rate of interest payable pursuant to this
clause (iii) shall never exceed the rate of interest
that Conoco is permitted to charge and receive under
laws applicable to Conoco limiting rates of interest
that may be charged or collected.
(c) Construction Financing
Borrower agrees it will seek and obtain Construction Financing
prior to October 10, 1997, and through the proceeds obtained
from such Construction Financing, Borrower agrees to repay to
Conoco all amounts due hereunder, provided that the failure of
the Borrower to obtain Construction Financing will not effect
the obligation of the Borrower to repay all amounts due
hereunder no later than October 10, 1997, as provided for in
Section 2.01 (d) and Borrower's obligation to repay all amounts
due hereunder and under the Vessel Note no later than
October 10, 1997, is absolute.
(d) Repayment; Vessel Note
(i) The Borrower will repay the unpaid principal amount
of, and all accrued and unpaid interest on, and all
fees or expenses due in respect of, the Vessel Loans
on the Loan Termination Date. The obligation of the
Borrower to repay the Vessel Loans shall be evidenced
by a single Vessel Note payable to the order of Conoco
in a principal amount equal to $_________________.
(ii) Conoco shall record, and prior to any transfer of the
Vessel Note shall endorse on the schedules forming a
part thereof appropriate notations to evidence, the
date and amount of the Vessel Loans made by it and the
date and amount of each payment of principal made by
the Borrower with respect to the Vessel Loans,
provided that the failure of Conoco to make any such
recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the
Vessel Note. Conoco is hereby irrevocably authorized
by the Borrower to endorse the Vessel Note and to
attach to and make a part of the Vessel Note a
continuation of any such schedule as and when
required.
(e) Prepayments
(i) Mandatory Prepayments
The Borrower will prepay the aggregate principal
amount of the outstanding Vessel Loans in whole,
together with all accrued and unpaid interest thereon
within 60 days after any date when the Vessel
Construction Contract shall have been terminated or
rescinded.
(ii) Optional Prepayments
The Borrower may, upon at least three (3) Business
Days' prior written notice to Conoco (which notice
shall be irrevocable), prepay the Vessel Loans in
whole (but not in part), together with all accrued and
unpaid interest thereon.
(iii) In General
No amount prepaid may be reborrowed by the Borrower.
Further, there will be no premium or penalty
applicable to any prepayment.
(f) Use of Proceeds
The Borrower will use the proceeds of the Vessel Construction
Loans solely (i) to fund the First Installment payable to the
Builder as defined and described in the Vessel Construction
Contract, and (ii) to finance the acquisition of BFE.
(g) Termination of Vessel Commitment
(i) Borrower shall have the right, upon at least three
Business Days' notice to Conoco, to terminate in
whole or reduce in part the unused portion of the
Vessel Construction Commitment.
(ii) On the date a prepayment is made or required to be
made pursuant to Section 2.01 hereof, the Vessel
Construction Commitment shall be terminated.
2.02 Payments and Computations
(a) The Borrower will make each payment hereunder and under
the Vessel Note not later than 12 noon (New York City
time) on the day when due in Dollars and immediately
available funds to Conoco's Account Number
___________________, Reference _______________, maintained
by _______________________________, in _________,
___________, ABA Number _____________. Any payment made
by the Borrower hereunder or under the Vessel Note after
12 noon (New York City time) shall be deemed to have been
made on the next succeeding Business Day.
(b) All computations of interest shall be made by Conoco on
the basis of a year of 360 days for the actual number of
days (including the first day but excluding the last day)
occurring in the period for which such interest is
payable. Each determination by Conoco of an interest rate
hereunder shall be conclusive and binding for all purposes
in the absence of manifest error.
(c) Whenever any payment hereunder, under the Vessel Note or
under any other Loan Document shall be stated to be due on
a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such
extension of time shall in such case be included in the
computation of the payment of interest; provided, however,
if such extension would cause payment of principal of or
interest on a Loan to be made in the next following
calendar month, such payment shall be made on the next
preceding Business Day.
(d) All payments by the Borrower of principal of, and interest
on, the Vessel Loans and all other amounts payable
hereunder shall be made free and clear of and without
deduction for any present or future income, excise, stamp
or franchise taxes and other taxes, fees, duties,
withholdings or other charges of any nature whatsoever
imposed by any taxing authority, but excluding Conoco's
franchise taxes and taxes imposed on or measured by
Conoco's net income or receipts (such non-excluded items
being called "Taxes").
2.03 Maximum Amount of Loans
Notwithstanding anything herein to the contrary, Conoco shall have
no obligation to make a Vessel Loan if the making of such Loan
would cause the aggregate outstanding principal amount of all
Vessel Loans to exceed $85,000,000.
2.04 Grant of Security Interest
As security for the repayment of all amounts due hereunder and
under the Vessel Note, the Borrower, Reading & ▇▇▇▇▇, and CDC have
executed security agreements (the "Security Agreements") of even
date herewith granting to Conoco security interests in the
collateral described in the Security Agreements.
III. CONDITIONS OF LENDING
3.01 Conditions Precedent to the Initial Loan
The obligation of Conoco to make the initial Loan is subject to
the fulfillment, in a manner satisfactory to Conoco, of each of
the following conditions precedent.
(a) Delivery of Documents
Conoco shall have received on or before the Closing Date the
following, each in form and substance satisfactory to Conoco
and, other than in the cases of clauses (i) and (ii) of this
Section 3.01(a), dated the Closing Date:
(i) the Vessel Note duly executed by the Borrower;
(ii) such agreements, certificates, members committee and
board resolutions of the Borrower and the members,
opinions, instruments and other documents as Conoco
may reasonably require in connection with the Loan and
the giving of security interests as provided for in
Section 2.04; and
(iii) such other agreements, certificates, opinions,
instruments and other documents relating to the
transactions contemplated by this Agreement as may
have been reasonably requested by Conoco (including,
without limitation, all documents referred to herein
and not appearing as exhibits hereto) and all legal
matters in connection with such transactions shall be
satisfactory in form and substance to Conoco.
(b) Proceedings; Receipt of Documents
All proceedings in connection with the making of the initial
Loan and the other transactions contemplated by this Agreement,
and all documents incidental thereto, shall be reasonably
satisfactory to Conoco and its special counsel, and Conoco and
such special counsel shall have received all such information
and such counterpart originals or certified or other copies of
such documents as Conoco or such special counsel may reasonably
request.
3.02 Conditions Precedent to All Loans
The obligation of Conoco to make any Loan (including the initial
Loan) is subject to the fulfillment, in a manner satisfactory to
Conoco, of each of the following conditions precedent:
(a) Representations and Warranties; No Event of Default
The following statements shall be true (i) the representations
and warranties contained in Section 4.01 of this Agreement are
correct on and as of such date as though made on and as of such
date; and (ii) no Default or Event of Default has occurred and
is continuing or would result from the making of the Loan to be
made on such date.
(b) Legality
The making of such Loan shall not contravene any law, rule or
regulation applicable to Conoco or to the Borrower.
(c) Borrowing Notice
Conoco shall have received, at least three Business Days prior
to the date of each Vessel Construction Loan, a Notice of
Borrowing pursuant to Section 2.01(a) hereof, with respect to
such Loan.
(d) Delivery of Documents
Conoco shall have received such other certificates, members
committee and board resolutions of the Borrower and the
members, opinions, instruments and other documents relating to
the transactions contemplated by this Agreement as may have
been reasonably requested by Conoco (including, without
limitation, all documents referred to herein and not appearing
as exhibits hereto) and all legal matters in connection with
such transactions shall be satisfactory in form and substance
to the Conoco.
IV. REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of the Borrower
(a) Organization, Good Standing, Etc.
The Borrower (i) is a limited liability company duly organized,
validly existing and in good standing under the laws of the
State of Delaware, (ii) has all requisite power and authority
to conduct its business as now conducted and as presently
contemplated, to execute and deliver each Loan Document to
which it is a party, to make the borrowings hereunder and to
consummate the transactions contemplated hereby, and (iii) is
fully qualified to do business and is in good standing in each
of the states of Delaware and Texas.
(b) Authorization, Etc.
The execution, delivery and performance by the Borrower of each
Loan Document to which it is a party, (i) have been duly
authorized by all necessary limited liability company action,
(ii) do not and will not contravene its Certificate of
Formation or its Limited Liability Company Agreement, any law,
rule, regulation, order, decree or any contractual restriction
or otherwise affecting it or any of its properties and (iii) do
not and will not result in or require the creation of any Lien
(other than Liens permitted under Section 5.02) upon or with
respect to any of its properties.
(c) Governmental Approvals
No authorization or approval or other action by, and no notice
to or filing with, any United States governmental authority or
United States regulatory body is required in connection with
the due execution, delivery and performance by the Borrower of
any Loan Document to which it is a party except for such that
have been obtained or made.
(d) Enforceability of Loan Documents
Each of this Agreement and each other Loan Document to which
the Borrower is (or will be) a party, when delivered hereunder,
is (or will be), a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with
its terms, except as such enforcement may be subject to
bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally and to general principles
of equity (whether asserted at law or in equity).
(e) No Material Adverse Change
Since October 28, 1996, there has been no material adverse
change in the financial condition, operations, assets,
business, properties or prospects of the Borrower.
(f) Litigation, Labor Controversies, Etc.
There is no pending or, to the knowledge of the Borrower,
threatened litigation, action, proceeding, or labor controversy
affecting the Borrower or any of its properties, businesses,
assets or revenues, which may materially adversely affect the
financial condition, operations, assets, business, properties
or prospects of the Borrower or which purports to affect the
legality, validity or enforceability of this Agreement or any
other Loan Document.
(g) Subsidiaries
As of the date hereof, the Borrower has no Subsidiaries.
(h) Ownership of Assets
The Borrower owns good and marketable title to all of its
properties and assets, real and personal, tangible and
intangible, of any nature whatsoever (including patents,
trademarks, trade names, service marks and copyrights), free
and clear of all Liens (other than Liens permitted under
Section 5.02), charges or claims (including infringement claims
with respect to patents, trademarks, copyrights and the like).
The Borrower does not own, lease or operate, and has not
previously owned, leased or operated, any facilities or real
property.
V. COVENANTS OF THE BORROWER
5.01 Affirmative Covenants
So long as any principal of or interest on the Vessel Note shall
remain unpaid or Conoco shall have any Commitment hereunder, the
Borrower will, unless Conoco shall otherwise consent in writing:
(a) Reporting Requirements
Furnish to Conoco:
(i) such financial and other information as Conoco from
time to time reasonably request;
(ii) such other information available to the Borrower
concerning the Vessel or the Collateral (as defined in
Security Agreement) as Conoco from time to time may
reasonably request.
(iii) promptly and in any event within three Business Days
after the occurrence of each Default, a statement of
an authorized representative of the Borrower setting
forth details of such Default and the action which the
Borrower has taken and proposes to take with respect
thereto; and
(iv) promptly and in any event within three Business Days
after the Borrower knows or reasonably should have
known of (x) the occurrence of any adverse development
with respect to any litigation, action, proceeding,
arbitration or labor controversy which could
reasonably be expected to materially adversely affect
the Borrower's consolidated business, operations,
assets, revenues, properties or prospects or which
could reasonably be expected to affect the legality,
validity or enforceability of this Agreement or any
other Loan Document or the ability of the Borrower to
fulfill its obligations under the Loan Documents,
(y) the commencement of any labor controversy,
litigation, action, arbitration or other proceeding,
which could reasonably be expected to materially
adversely affect the Borrower's consolidated business,
operations, assets, revenues, properties or prospects
or which could reasonably be expected to affect the
legality, validity or enforceability of this Agreement
or any other Loan Document or the ability of the
Borrower to fulfill its obligations under the Loan
Documents, or (z) the occurrence of any material
adverse change in the financial condition, operations,
assets, business, properties or prospects of the
Borrower, in the Collateral or in the ability of the
Borrower to perform their Obligations under the Loan
Documents, notice thereof and copies of all
documentation relating thereto.
(b) Preservation of Existence, Etc.
Maintain and preserve its existence, rights and privileges, and
remain duly qualified and in good standing in the states of
Delaware and Texas.
(c) Obtaining of Permits, Etc.
Take all reasonable action to obtain, maintain and preserve all
permits, licenses, authorizations, approvals and accreditations
which are necessary in the United States to perform its
obligations under the Loan Documents.
(d) Keeping of Records and Books of Account
Keep adequate records and books of account, with complete
entries made in accordance with GAAP consistently applied,
reflecting all of its financial transactions.
(e) Compliance with Laws, Etc.
The Borrower will comply in all material respects with all
applicable laws, rules, regulations and orders.
(f) Insurance
The Borrower will maintain or cause to be maintained with
responsible insurance companies insurance with respect to its
properties and business against such casualties and
contingencies and of such types and in such amounts as is
customary in the case of similar businesses (and which
insurance shall name Conoco as an additional insured and loss
payee (except with respect to partial losses not exceeding
$2,000,000 per occurrence, provided Borrower uses the such
proceeds to repair the Vessel) with respect to tangible
Collateral, if applicable, and shall contain endorsements to
such policies providing that such insurer will notify Conoco
not less than 30 days prior to the expiration or termination of
such policies).
5.02 Negative Covenants
So long as any principal of or interest on the Vessel Note shall
remain unpaid or Conoco shall have any Commitment hereunder, the
Borrower will not, without the prior written consent of Conoco:
(a) Construction Contract
Amend, modify or supplement, nor agree to any amendment,
modification or supplement of, any of the provisions of the
Vessel Construction Contract (other than change orders not
exceeding $2,000,000 in any one year).
(b) Liens, Etc.
Create or assume any Lien upon or with respect to any of the
Vessel or any other property or asset of the Borrower, other
than Liens arising from the execution of the Loan Documents and
Liens for taxes, assessments or governmental charges or levies,
provided, that the Borrower is not in default with respect to
its payment obligations with respect thereto or is in good
faith and by appropriate proceedings diligently contesting such
obligations and adequate reserves for the payment thereof have
been established.
(c) Indebtedness
Create, incur, assume or suffer to exist or otherwise become or
be liable in respect of any indebtedness, other than, without
duplication, the following: (i) indebtedness in respect of the
Loans and other obligations hereunder and under the other Loan
Documents and (ii) unsecured indebtedness incurred in the
ordinary course of business (including open accounts extended
by suppliers on normal trade terms in connection with purchases
of goods and services, but excluding indebtedness incurred
through the borrowing of money).
VI. EVENTS OF DEFAULT
6.01 Events of Default
If any of the following Events of Default shall occur and be
continuing:
(a) Payment Default
Conoco shall not have received on behalf of the Borrower
sufficient funds to pay any principal of or interest on any
Vessel Loan or the Vessel Note within three (3) Business Days
after the date when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise); or
(b) Breach of Warranty
Borrower shall have breached any warranty or covenant hereunder
or in any other Loan Document and same shall not have been
cured within ten (10) Business Days following written notice
from Conoco.
(c) Judgments
Any judgment or order for the payment of money in excess of
$2,000,000 shall be rendered against the Borrower and either
any creditor shall have begun to enforce such judgment or
order, or there shall be any period of 10 consecutive days
during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in
effect.
(d) Bankruptcy, Insolvency, Etc.
The Borrower shall (i) become insolvent or generally fail to
pay or admit in writing its inability or unwillingness to pay,
debts as they become due; (ii) apply for, consent to, or
acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or any
property of any thereof, or make a general assignment for the
benefit of creditors; (iii) in the absence of such application,
consent or acquiescence, permit or suffer to exist the
appointment of a trustee, receiver, sequestrator or other
custodian for the Borrower or for a substantial part of the
property thereof, and such trustee, receiver, sequestrator or
other custodian shall not be discharged within 20 days,
provided that the Borrower hereby expressly authorizes Conoco
to appear in any court conducting any relevant proceeding
during such 20-day period to preserve, protect and defend its
rights under the Loan Documents; (iv) permit or suffer to exist
the commencement of any bankruptcy, reorganization, debt
arrangement or other case or proceeding under any bankruptcy or
insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Borrower, and, if any such case
or proceeding is not commenced by the Borrower, such case or
proceeding shall be consented to or acquiesced in by the
Borrower or shall result in the entry of an order for relief or
shall remain for 20 days undismissed, provided that the
Borrower hereby expressly authorizes Conoco to appear in any
court conducting any such case or proceeding during such 20-day
period to preserve, protect and defend its rights under the
Loan Documents; or (v) take any action authorizing, or in
furtherance of, any of the foregoing.
(e) Impairment of Security, Etc.
Any Loan Document, or any Lien granted thereunder, shall
(except in accordance with its terms), in whole or in part,
terminate, cease to be effective or cease to be the legally
valid, binding and enforceable obligation of the Borrower; the
Borrower or any other party shall, directly or indirectly,
contest in any manner such effectiveness, validity, binding
nature or enforceability; or any lien securing any obligation
to Conoco shall, in whole or in part, cease to be a perfected
lien.
then, and in any such event, Conoco may, by notice to the
Borrower, (i) declare the Commitment to be terminated, (ii)
declare the Vessel Note, plus all interest thereon and all other
amounts payable under this Agreement including all fees, costs and
expenses payable hereunder to be forthwith due and payable,
whereupon, the Vessel Note, all applicable interest and all other
applicable amounts shall become and be forthwith due and payable,
without presentment, demand, protest, notice of intent to
accelerate, or further notice of any kind, all of which are hereby
expressly waived by the Borrower and (iii) exercise any and all of
its other rights under applicable law, hereunder and under the
other Loan Documents .
6.02 Action if Bankruptcy
If any Event of Default described in Section 6.01(e) shall occur
with respect to the Borrower, the Commitment (if not theretofore
terminated) shall automatically terminate and the outstanding
principal amount of all outstanding Vessel Loans and all other
obligations shall automatically be and become immediately due and
payable, without notice or demand.
VII. MISCELLANEOUS
7.01 Notices, Etc.
All notices and other communications provided for hereunder shall
be in writing and shall be mailed, telegraphed, telecopied,
telexed or delivered:
to the Borrower at: Deepwater Drilling L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Manager
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
to Conoco at: Conoco Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention:
Fax No. (713) 293-
or, as to each party, at such other address as shall be designated
by such party in a written notice to the other party complying as
to delivery with the terms of this Section 7.01. All such notices
and other communications shall be effective (i) if mailed, 72
hours after being mailed, (ii) if telecopied, when transmitted and
receipt is electronically confirmed, (iii) if telexed, when the
appropriate answerback is received, or (iv) if hand delivered,
upon delivery, except that notices to Conoco pursuant to
Article II hereof shall not be effective until received by Conoco.
7.02 Amendments, Etc.
No amendment of any provision of this Agreement or the Vessel Note
or any other Loan Document shall be effective unless it is in
writing and signed by the Borrower and Conoco and no waiver of any
provision of this Agreement or the Vessel Note, nor consent to any
departure by the Borrower therefrom, shall be effective unless it
is in writing and signed by Conoco.
7.03 No Waiver; Remedies, Etc.
No failure on the part of Conoco to exercise, and no delay in
exercising, any right hereunder or under any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Document preclude any other
or further exercise thereof or the exercise of any other right.
The rights and remedies of Conoco provided herein and in the other
Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights
of Conoco under any Loan Document against any party thereto are
not conditional or contingent on any attempt by Conoco to exercise
any of its rights under any other Loan Document against such
party or against any other person.
7.04 Severability
Any provision of this Agreement, or of any other Loan Document to
which the Borrower is a party, which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of
such provision in any other jurisdiction.
7.05 Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of
the Borrower and Conoco and their respective successors and
assigns, except that the Borrower may not assign its rights
hereunder or any interest herein without the prior written consent
of Conoco. Conoco may freely assign to any affiliate of Conoco,
in whole or in part, its rights under this Agreement, or any of
the Loan Documents, but shall not otherwise assign such rights to
any other Person without the prior written consent of the
Borrower. To the extent of any assignment pursuant to this
Section 7.05, the assignee shall have the same rights and benefits
hereunder and under the Vessel Note as it would have if it were
Conoco hereunder (including, without limitation, the right to
receive payments under Sections 2.05 and 2.07 hereof).
7.06 Counterparts
This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken
together shall constitute one and the same agreement.
7.07 Indemnification
The Borrower hereby indemnifies and holds harmless Conoco, its
affiliates, parents, and subsidiaries and their respective
directors, officers, employees, agents and advisors, (each an
"Indemnified Party"), from and against, any and all actions,
claims, damages, losses, liabilities, fines, penalties, costs and
expenses of any kind (including, without limitation, reasonable
counsel fees and costs and expenses) INCLUDING ANY ACTIONS,
CLAIMS, DAMAGES, LOSSES, LIABILITIES, FINES, PENALTIES, COSTS OR
EXPENSES RESULTING FROM CONOCO'S NEGLIGENCE, in connection with or
arising from or relating to the execution, delivery or performance
of any of the Loan Documents or any transaction contemplated by,
or action omitted to be taken by Conoco under any Loan Document,
provided, however, that the Borrower shall have no obligation to
protect, indemnify and save harmless Conoco or any Person
otherwise entitled to indemnity hereunder with respect to any
loss, liability, action, suit, judgment, demand, damage, cost or
expense resulting solely from Conoco's or such Person's willful
misconduct as determined by final order of a court of competent
jurisdiction. If and to the extent that the foregoing undertaking
may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contributions to the payment and satisfaction of
the foregoing indemnified liabilities which is permissible under
applicable law. Without prejudice to the survival of any other
obligation of the Borrower hereunder, the indemnities and
obligations of the Borrower contained in this Section 7.07 shall
survive the payment in full of all Obligations and the termination
of the Commitments.
7.08 Submission to Jurisdiction
(a) The Borrower hereby irrevocably consents that any suit,
legal action or proceeding against it or any of its
property with respect to any of the rights or obligations
arising directly or indirectly under or relating to this
Agreement, any other Loan Document may be brought in any
Delaware State or United States Federal Court located in
the City of Wilmington, Delaware, as Conoco may elect, and
by execution and delivery of this Agreement, the Borrower
hereby irrevocably submits to and accepts with regard to
any such suit, legal action or proceeding, for itself and
in respect of its property, generally and unconditionally,
the jurisdiction of the aforesaid courts. The Borrower
agrees that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any
other manner provided by law. The Borrower further
irrevocably consents to the service of process in any such
suit, legal action or proceeding by the mailing of copies
thereof by registered mail, postage prepaid, return
receipt requested to all parties entitled to notices under
Section 7.01 hereof. The Borrower agrees that a final
judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by
law. The foregoing shall not limit the right of Conoco to
serve process in any other manner permitted by law or to
obtain execution of judgment in any other jurisdiction.
(b) The Borrower hereby irrevocably waives any objection that
it may now or hereafter have to the laying of venue of any
suit, legal action or proceeding arising directly or
indirectly under or relating to this Agreement or any
other Loan Document in any court located in the City of
Wilmington, Delaware and hereby further irrevocably waives
any claim that a court located in the City of Wilmington,
Delaware is not a convenient forum for any such suit,
legal action or proceeding.
(c) The Borrower hereby irrevocably waives any right it may
have under the laws of any jurisdiction to commence by
publication any suit, legal action or proceeding with
respect to this Agreement or any other Loan Document.
(d) The Borrower hereby irrevocably agrees that any suit,
legal action or proceeding commenced by it with respect to
any rights or obligations arising directly or indirectly
under or relating to this Agreement or any other Loan
Document shall be brought exclusively in any Delaware
State or United States Federal Court located in the City
of Wilmington, Delaware.
(e) To the extent that the Borrower has or hereafter may
acquire any immunity from jurisdiction of any court or
from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself
or its property, the Borrower hereby irrevocably waives
such immunity in respect of its obligations under this
Agreement and the other Loan Documents.
7.09 Headings
Section headings herein are included for convenience of reference
only and shall not constitute a part of this Agreement for any
other purpose.
7.10 Governing Law
THIS AGREEMENT AND THE VESSEL NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF DELAWARE
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN DELAWARE
WITHOUT CONSIDERATION AS TO CONFLICTS OF LAW PRINCIPLES.
7.11 Application of Refunds and Payments under Korean Bank Guarantees
(a) Any and all amounts received by Conoco (at an account
designated by Conoco or otherwise) on behalf of the
Borrower from the Builder as refunds under the Vessel
Construction Contract or from the Korean Bank under the
Korean Bank Guarantee shall be held by Conoco as
collateral for, and/or then or at any time thereafter
applied in whole or in part by Conoco against, all or any
part of the Obligations in such order as Conoco shall
elect. The Borrower hereby grants to Conoco a security
interest in all such amounts. Any surplus of such cash
held by Conoco and remaining after payment in full of all
of the Obligations and termination of the Commitment shall
be paid over to the Borrower.
(b) Anything herein to the contrary notwithstanding, (i) the
Borrower shall remain liable under this Agreement and the
other Loan Documents to the extent set forth herein and
therein to perform all of its obligations hereunder and
thereunder regardless of whether the Builder or the Korean
Bank do not make any refunds under the Vessel Construction
Contract or the Korean Bank Guarantee which they may
otherwise be required to make, (ii) the exercise by
Conoco of any of its rights hereunder and under the other
Loan Documents shall not release the Borrower from any of
its obligations hereunder or under the other Loan
Documents and (iii) Conoco shall not have any duty,
obligation or liability by reason of this Agreement or the
other Loan Documents under the Vessel Construction
Contract, nor shall Conoco be obligated to perform any of
the obligations or duties of the Borrower thereunder or to
take any action to collect or enforce any claim for
payment under any Loan Document.
7.12 No Recourse
(a) Except as otherwise provided herein or any other Loan
Document, no recourse shall be had for any claim based on
this Agreement or any other Loan Document or otherwise in
respect hereof or thereof against any past, present, or
future member, authorized representative or employee, as
such, of (i) the Borrower or (ii) any predecessor or
successor of the Borrower either directly or through the
Borrower or any predecessor or successor, whether such
recourse be by virtue of any constitution, statute or rule
of law or by the enforcement of any assessment or penalty
or by any legal or equitable proceedings or otherwise
howsoever; all such liability being expressly waived and
released by Conoco.
7.13 Waiver of Jury Trial
Each of the Borrower and Conoco waives any right to a trial by
jury in any action, proceeding or counterclaim concerning any
rights under this Agreement, the Vessel Note or any other Loan
Document, and agrees that any such action, proceeding or
counterclaim shall be tried before a court and not before a jury.
7.14 Payment of Costs and Expenses
The Borrower agrees to pay on demand all reasonable expenses of
Conoco (including the reasonable fees and out-of-pocket expenses
of counsel and of local counsel, if any, who may be retained by
Conoco) in connection with (i) the negotiation, preparation,
execution and delivery of this Agreement and of each other Loan
Document, including schedules and exhibits, and any amendments,
waivers, consents, supplements or other modifications to this
Agreement or any other Loan Document as may from time to time
hereafter be required, whether or not the transactions
contemplated hereby are consummated, (ii) the filing, recording,
refiling or rerecording of the Collateral Documents and/or any
Uniform Commercial Code financing statements relating thereto and
all amendments, supplements and modifications to any thereof and
any and all other documents or instruments of further assurance
required to be filed or recorded or refiled or rerecorded by the
terms hereof or of any of the Collateral Documents, and (iii) the
preparation and review of the form of any document or instrument
relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save Conoco harmless
from all liability for, any stamp or other taxes which may be
payable in connection with the execution or delivery of this
Agreement, the borrowings and credit extensions hereunder, or the
issuance of the Vessel Note or any other Loan Documents. The
Borrower also agrees to reimburse Conoco upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees and
legal expenses) incurred in connection with the enforcement of any
Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized representatives thereunto duly authorized, as of
this ________ day of October, 1996.
DEEPWATER DRILLING L.L.C. CONOCO INC.
By: By:
Name: Name:
Title: Title:
EXHIBIT A
PROMISSORY NOTE
$_______________ Dated:
[Location]
FOR VALUE RECEIVED, the undersigned, Deepwater Drilling L.L.C., a Delaware
limited liability company (the "Borrower"), HEREBY PROMISES TO PAY to the
order of Conoco Inc. ("Conoco") the principal amount of
______________________________ ________________________________
($________________) or, if less, the sum of each (i) Vessel Construction Loan
(as hereinafter defined) and (ii) Capitalized Interest Loan (as hereinafter
defined) made by Conoco to the Borrower pursuant to the Credit Agreement (as
hereinafter defined) on the Loan Maturity Date (as defined in the Credit
Agreement). The Vessel Construction Loans and the Capitalized Interest Loans
are collectively referred to herein as the "Vessel Loans."
The Borrower promises to pay interest on the unpaid principal amount of each
Vessel Loan made by the Bank to the Borrower, from the date of such Vessel
Loan until such principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.
Notwithstanding any other provision of this Promissory Note, interest paid or
becoming due hereunder shall in no event exceed the maximum rate permitted by
applicable law. Both principal and interest are payable in lawful money of
the United States of America in immediately available funds to Conoco at its
Account Number __________________, Reference __________________________,
maintained by Conoco. Each Vessel Loan made by Conoco to the Borrower
pursuant to the Credit Agreement, and all payments made on account of
principal hereof, shall be recorded by Conoco and, prior to any transfer
hereof, endorsed on the schedule attached hereto which is a part of this
Promissory Note; provided, that the failure of Conoco to make any recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This Promissory Note is the Vessel Note referred to in, and is entitled to the
benefits of, the Credit Agreement dated as of ______________________________
(as amended or otherwise modified from time to time, the "Credit Agreement"),
by and between the Borrower and Conoco. The Credit Agreement, among other
things, (i) provides for the making of (a) loans (the "Vessel Construction
Loans") by Conoco to the Borrower from time to time in an aggregate amount not
to exceed at any time outstanding the Vessel Construction Commitment (as
defined in the Credit Agreement), and (b) loans (the "Capitalized Interest
Loans") deemed made by Conoco to the Borrower to pay interest accrued on the
Vessel Construction Loans and on prior Capitalized Interest Loans in an
aggregate amount not to exceed $_____________________, the indebtedness of the
Borrower resulting from each such Vessel Loan being evidenced by this
promissory Note; and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for the prepayment
of the principal hereof (together with all accrued and unpaid interest
thereon) prior to the maturity hereof upon the terms and conditions therein
specified.
This Promissory Note shall be governed by, and construed in accordance with,
the laws of the State of Delaware.
DEEPWATER DRILLING L.L.C.
By:
Name:
Title:
EXHIBIT B
BORROWING REQUEST
Conoco Inc.
Attention: [Name]
[Title]
Ladies and Gentlemen:
This Borrowing Request is delivered to you pursuant to the Credit Agreement,
dated as of October _____, 1996 (together with all amendments, if any, from
time to time made thereto, the "Credit Agreement"), among Deepwater Drilling
LLC, a Delaware limited liability company (the "Borrower") and Conoco Inc..
Unless otherwise defined herein or the context otherwise requires, terms used
herein have the meanings provided in the Credit Agreement.
The Borrower hereby requests that a Vessel Loan be made in the aggregate
principal amount of $____________ on ____________________, 19____.
The Borrower hereby agrees that the acceptance by the Borrower of the proceeds
of the Loans requested hereby constitute a representation and warranty by the
Borrower that, on the date of such Loans, and before and after giving effect
thereto and to the application of the proceeds therefrom, all statements set
forth in Section 3.02 of the Credit Agreement are true and correct in all
material respects.
The Borrower agrees that if prior to the time of the Borrowing requested
hereby any matter certified to herein by it will not be true and correct at
such time as if then made, it will immediately so notify Conoco. Except to
the extent, if any, that prior to the time of the Borrowing requested hereby
Conoco shall receive written notice to the contrary from the Borrower, each
matter certified to herein shall be deemed once again to be certified as true
and correct at the date of such borrowing as if then made.
Please wire transfer the proceeds of the Borrowing to the accounts of the
following persons at the financial institutions indicated respectively:
Person to be Paid
Amount to be Name Account No. Name, Address, etc.
Transferred of Transferee Lender
$
Attention:
$
Attention:
Balance of The Borrower
such
Proceeds Attention:
The Borrower has caused this Borrowing Request to be executed and delivered,
and the certification and warranties contained herein to be made, by its duly
Authorized Representative this _______ day of _________________, 19_____.
DEEPWATER DRILLING L.L.C.
By:
Name:
Title: