Exhibit 10.86
THIS FIRST PREFERRED FLEET MORTGAGE, dated the 25th day
of May, 1995, is made and given by READING & ▇▇▇▇▇ OFFSHORE,
LIMITED, an Oklahoma corporation with its principal place of
business at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the
"Mortgagor"), to THE CIT GROUP/EQUIPMENT FINANCING, INC., a
New York corporation with an office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Mortgagee").
W I T N E S S E T H:
WHEREAS, the Mortgagor is the sole owner of the whole of
the following vessel:
Name Official No.
▇.▇. ▇▇▇▇▇▇▇▇▇▇ 562059
which vessel has been duly documented in the name of the
Mortgagor under the laws of the United States and having its
home port and port of documentation at Houston, Texas (the
"Vessel") and, in addition, is in the process of purchasing
the U.S. flag vessel, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Official No. 651646
(the "Other Vessel," the Vessel and the Other Vessel being
referred to herein collectively as the "Vessels");
WHEREAS, the Mortgagor, as borrower and the Mortgagee are
parties to a Loan Agreement dated as of May 25, 1995, a copy
of which is annexed hereto as Annex I and made a part hereof
(said Loan Agreement, as the same may be amended, supplemented
or otherwise modified from time to time, being herein called
"Loan Agreement"), pursuant to which the Mortgagee has agreed
to make a loan to the Mortgagor with respect to the Vessels in
an aggregate amount not to exceed Twenty Five Million United
States Dollars (USD 25,000,000) (the "Loan");
WHEREAS, the Loan will be evidenced by a secured
promissory note made by the Mortgagor in favor of the
Mortgagee (the "Note") in the aggregate principal amount not
to exceed Twenty Five Million United States Dollars (USD
25,000,000), dated the date of the Loan and in the form
annexed hereto as Exhibit A to the Loan Agreement, payable in
accordance with the provisions of Article I of the Loan
Agreement including provisions therein set forth for payment
of interest at rates set forth in the Loan Agreement;
WHEREAS, the Mortgagor has agreed to execute and deliver
to the Mortgagee this Mortgage (herein, as the same may from
time to time be amended, supplemented or otherwise modified,
called the "Mortgage"), in order to secure the payment in full
of its obligations as contained in the Loan Agreement and to
execute and deliver a supplement to this Mortgage
substantially in the form of Annex II hereto extending the
lien of this Mortgage to the Other Vessel upon the completion
of its purchase by the Mortgagor;
NOW, THEREFORE, in consideration of the foregoing
premises and of other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, and in
order to secure the payment and performance of (i) all
obligations, undertakings and liabilities of Mortgagor, now
existing or hereafter incurred, under, arising out of, or in
connection with the Loan Agreement and the Note; (ii) the
unpaid principal amount of, and accrued interest on, the Note;
(iii) all obligations, undertakings and liabilities of
Mortgagor now existing or hereafter incurred, under, arising
out of or in connection with this Mortgage; and (iv) any and
all other present and future indebtedness, obligations,
undertakings and liabilities of any kind whatsoever of
Mortgagor to Mortgagee arising out of the Loan Agreement,
whether direct or indirect, joint or several, absolute or
contingent, liquidated or unliquidated, secured or unsecured,
matured or unmatured and whether originally contracted with
Mortgagee or otherwise acquired by Mortgagee or from time to
time reduced and thereafter increased, the Mortgagor has
granted, conveyed, mortgaged, pledged, assigned, transferred,
set over and confirmed and by these presents does grant,
convey, mortgage, pledge, assign, transfer, set over and
confirm unto the Mortgagee, its successors and assigns, the
whole of the Vessel, together with all of the boilers,
engines, generators, air compressors, cranes, machinery,
masts, spars, rigging, boats, anchors, cables, chains, tackle,
tools, pumps and pumping equipment, apparel, furniture,
fittings and equipment, spare parts (excluding equipment not
owned by the Mortgagor), and all other appurtenances thereunto
appertaining or belonging, whether now owned or hereafter
acquired, whether on board or not, and all additions,
improvements, renewals and replacements hereafter made in or
to the Vessel, or any part thereof, or in or to said
appurtenances, all of which property shall be deemed to be
included in the term "Vessel" as used in this Mortgage.
Provided that, the Other Vessel and the appurtenances
thereto subject to the lien of this Mortgage pursuant to the
supplement to this Mortgage, and all additions, improvements
renewals and replacements, which may be made in or to the
Other Vessel or its appurtenances after the same shall have
become subject to the lien of the Mortgage, shall be deemed to
be encompassed within the term "Vessels", and the term
"Vessel", whenever used, shall apply with equal force to each
of the Vessels.
TO HAVE AND TO HOLD all and singular the above mortgaged
and described property unto the Mortgagee, its successors and
assigns forever upon the terms herein set forth;
PROVIDED, HOWEVER, and these presents are on the
conditions that, if the Mortgagor, its successor or assigns
shall pay and perform each and every one of the obligations,
in accordance with the terms of the Loan Agreement, the Note,
this Mortgage and any other instrument evidencing any
obligation of the Mortgagor to the Mortgagee then these
presents and the estate and rights hereunder shall cease,
terminate and be void, otherwise to be and remain in full
force and effect.
The Mortgagor hereby agrees with the Mortgagee that each
and every Vessel now or at any time subject to the lien of
this Mortgage is to be held by the Mortgagee subject to the
further agreements and conditions hereinafter set forth.
Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to them in the Loan
Agreement.
ARTICLE 1. REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE MORTGAGOR
In order to induce the Mortgagee to make the Loan
provided for in the Loan Agreement and for Mortgagee to accept
this Mortgage as collateral security for the payment of its
obligations contained in the Loan Agreement, the Mortgagor
represents and warrants to the Mortgagee and covenants with
the Mortgagee that:
Section 1.1 Payment and Performance of Obligations. The
Mortgagor will pay, observe, perform and comply with each and
every one of the covenants, terms and conditions herein
expressed or implied, on its part to be observed, performed,
or complied with.
Section 1.2 Citizenship. The Mortgagor is a citizen of
the United States as defined in Section 2 of the Shipping Act,
1916, as amended, duly qualified to engage in the coastwise
trade and in foreign commerce of the United States, and shall
remain such a citizen during the life of this Mortgage.
Section 1.3 Ownership of Vessel Warranty and Defense of
Title. The Mortgagor lawfully owns and is lawfully possessed
of the whole of the Vessel free from any mortgage, security
interest, lien, charge or encumbrance whatsoever other than
the lien of this Mortgage and liens permitted, and to the
extent permitted, by the provisions of Section 1.7 hereof and,
upon acquisition of the Other Vessel by Mortgagor, Mortgagor
will lawfully own and be lawfully possessed of the whole of
the Vessels free from any mortgage, security interest, lien,
charge or encumbrance whatsoever other than the lien of this
Mortgage and liens permitted, and to the extent permitted, by
the provisions of Section 1.7 hereof and the Mortgagor will
warrant and defend the title to, and possession of each of the
Vessels and every part thereof for the benefit of the
Mortgagee against the claims and demands of all persons
whomsoever.
Section 1.4 Compliance with Laws.
(a) Documentation. The Mortgagor will comply with and
satisfy all provisions of the laws and regulations of the
United States now or hereafter from time to time in effect in
order that the Vessels shall continue to be documented vessels
pursuant to the laws of the United States as a vessel of the
United States under the United States flag with such
endorsements as shall qualify each of the Vessels for
participation in the trades and services to which it may be
dedicated from time to time.
(b) U.S. Code. Tit. 46. Ch. 313. The Mortgagor will, at
its expense and at no cost to the Mortgagee, cause this
Mortgage to be duly recorded at the U.S. Coast Guard Vessel
Documentation Office at the Port of Houston, Texas in
accordance with the provisions of 46 U.S.C. 31321, on the
date hereof, and will otherwise comply with and satisfy all
the applicable provisions of the U.S. Code, Tit. 46, Ch. 301
and Ch. 313, as amended, in order to establish, record and
maintain this Mortgage as a First Preferred Mortgage
thereunder upon the Vessels, and will do all such other acts
and execute all such instruments, deeds, conveyances,
mortgages and assurances as the Mortgagee shall reasonably
require in order to subject the Vessels to the lien of this
Mortgage as aforesaid.
(c) Laws Treaties and Conventions. The Vessels shall,
and the Mortgagor covenants that they will, at all times
comply with all applicable laws, treaties and conventions and
rules and regulations issued thereunder, and shall have on
board as and when required thereby valid certificates showing
compliance therewith.
Section 1.5 Operation of the Vessels. The Mortgagor
will not cause or permit the Vessels to be operated in any
manner contrary to applicable law or regulation, or in any
manner not permitted by the Loan Agreement or by any
insurances required thereby and hereby, will not engage in any
unlawful trade, violate any applicable law or carry any cargo
that will expose the Vessels to penalty, forfeiture or capture
and will not do, or suffer or permit to be done, anything
which can or may injuriously affect the documentation of the
Vessels under the laws and regulations of the United States of
America. Mortgagor shall keep the operation of the Vessels
within the permitted navigational limits set forth in the
trading warranties of the policies of insurance covering each
of the Vessels and in any case will not operate the Vessels,
or permit the Vessels to be operated, in any area where such
insurance would not be fully applicable and enforceable with
respect to each of the Vessels and its operation.
Section 1.6 Claims, Taxes, Fees, Etc. The Mortgagor will
pay and discharge or cause to be paid and discharged all
claims against, and fees, taxes, assessments, governmental
charges, fines and penalties imposed on each Vessel, its
cargoes or any income therefrom when due and payable, except
those claims, fees, taxes, assessments, governmental charges
and penalties being contested in good faith by appropriate
proceedings for which adequate reserves are being maintained.
Section 1.7 Liens. (a) Neither the Mortgagor, any
charterer, the master of any Vessel nor any other person has
or shall have any right, power or authority to create, incur
or permit to be placed or imposed or continued upon any
Vessel, its freights, profits or hires, any lien, security
interest, encumbrance or charge whatsoever other than the lien
of this Mortgage and Permitted Liens as defined below.
Mortgagor agrees to hold a certified copy of this Mortgage in
safekeeping with each Vessel's papers on board each Vessel and
on demand to exhibit the same to any person having business
with such Vessel, or to any representative of Mortgagee.
(b) Mortgagor shall also place and cause to be
displayed in a prominent place on board each Vessel and in a
durable manner a notice printed in plain type of such size
that the paragraph of reading matter shall cover a space not
less than six inches wide by nine inches high, reading as
follows:
"NOTICE OF FIRST PREFERRED FLEET MORTGAGE AND OWNERSHIP"
"This Vessel is owned by READING & ▇▇▇▇▇ OFFSHORE,
LIMITED, and is covered by a First Preferred Fleet Mortgage in
favor of THE CIT GROUP/EQUIPMENT FINANCING, INC., as
Mortgagee, under Chapter 313 of Title 46 of the United States
Code. Under the terms of said First Preferred Fleet Mortgage
neither Owner, any charterer nor any subcharterer nor the
master of this Vessel nor any other person has the right,
power or authority to create, incur or permit to be placed or
imposed upon this Vessel, or upon title thereto or any
interest therein any lien whatsoever other than liens for
wages of the crew, for wages of stevedores when employed
directly by a person listed in Section 31341 of Title 46 of
the United States Code, or for general average or salvage."
(c) Such notice shall be amended at the sole cost
and expense of Mortgagor, upon request of Mortgagee, to
reflect the identity of any successor Mortgagee.
(d) "Permitted Liens" shall mean:
(i) liens for wages of the crew, including the
master of such Vessel, for wages of stevedores when
employed directly by a person listed in 46 U.S. Code
31341 or for general average or salvage;
(ii) liens for taxes, assessments or other
governmental charges or levies not at the time delinquent
or thereafter payable without penalty or being contested
in good faith, provided provision is made to the
reasonable satisfaction of the Mortgagee for the eventual
payment thereof in the event it is found that such is
payable by the Mortgagor;
(iii) liens of carriers, warehousemen,
mechanics, materialmen, landlords, operators of, and
participants in, any oil, gas or mineral properties of
the Mortgagor and maritime liens incurred in the ordinary
course of business for sums not overdue or being
contested in good faith, provided provision is made to
the reasonable satisfaction of the Mortgagee for the
eventual payment thereof in the event it is found that
such sums are payable by the Mortgagor;
(iv) liens incurred in the ordinary course of
business in connection with workmen's compensation,
unemployment insurance or other forms of governmental
insurance or benefits, or to secure performance of
tenders and statutory obligations entered into in the
ordinary course of business or to secure obligations on
surety or appeal bonds in an aggregate amount not
exceeding (1) USD 2,500,000 at any one time, (2) USD
5,000,000 in any calendar year and (3) USD 10,000,000
during the term of this Mortgage;
(v) judgment liens in existence less than 30
days after the entry thereof or with respect to which
execution has been stayed or the payment of which is
covered in full by insurance;
(vi) liens required by the terms of the Loan
Agreement; and
(vii) liens existing as of the date of this
Mortgage and disclosed in writing to the Mortgagor.
Section 1.8 Exhibit of Mortgage. The Mortgagor shall
exhibit and shall require that any other person having custody
or control of such Vessel to exhibit a copy of this Mortgage
to any person having business with the Vessel which might give
rise to a maritime lien upon such Vessel or otherwise be
deemed a sale, conveyance, mortgage or lease thereof and, on
demand, to any representative of the Mortgagee.
Section 1.9 Removal of Liens. The Mortgagor will not
suffer to be continued any lien (other than Permitted Liens
but only to the extent permitted under Section 1.7),
encumbrance or charge on any Vessel other than this Mortgage,
and in due course and in any event within thirty (30) days
after the same shall become due and payable, (except for those
claims or demands being contested in good faith by appropriate
proceedings for which adequate reserves are being maintained),
will pay or caused to be discharged or make adequate
provisions for the satisfaction or discharge of all claims or
demands secured by any lien, charge or encumbrance on such
Vessel and will cause the Vessel to be released or discharged
from any such lien, encumbrance or charge thereon.
Section 1.10 Libel or Attachment. If a libel is filed
against any Vessel or if any Vessel shall be attached, levied
upon or taken into custody by virtue of any proceeding in any
court or tribunal or by any government or other authority, the
Mortgagor shall promptly notify the Mortgagee thereof by
telecopier, confirmed by overnight letter addressed to the
Mortgagee, and within three (3) Business Days after any such
libel, levy, attachment or taking into custody will cause any
such Vessel to be released and will promptly notify the
Mortgagee of such release in the manner aforesaid.
Section 1.11 Maintenance and Classification of Vessel.
The Mortgagor will at all times and without cost or expense to
the Mortgagee (a) maintain each Vessel and its machinery in
such condition and repair as will keep the Vessel entitled to
the highest classification in the American Bureau of Shipping,
or other classification society of like standing approved in
writing by the Mortgagee for such vessels, (b) keep each
Vessel, its machinery, boilers, appurtenances and spare parts
in a good state of repair, wear and tear and depreciation
excepted, and in efficient operating condition in accordance
with good commercial maintenance practices employed in the
offshore oil and gas contract drilling industry, (c) keep each
Vessel tight, staunch, strong and in all respects seaworthy,
in so far as due diligence can make it, (d) maintain each
Vessel with full unexpired classification and other required
certificates and (e) furnish prior to May 25 of each year to
the Mortgagee, a written statement of the classification
society that the classification referred to in (a) above is in
effect. All maintenance and repairs will be made in a good
and workmanlike manner by persons of appropriate skill and
experience whose work will not adversely affect the service
life or marketability of each Vessel. All repairs, parts,
mechanisms, devices, replacements, improvements, changes,
additions and alterations to the Vessels shall immediately and
without further act, become part of the Vessels and subject to
this Mortgage. Mortgagor shall promptly furnish to the
Mortgagee copies of each damage survey with respect to damage
to any Vessel where the survey does not specifically quantify
the cost of total damages or where the survey states total
damage in excess of USD 100,000.00.
Section 1.12 Changes in Vessels. The Mortgagor will not
make, or permit to be made, any material change in the
structure or type of any Vessel or in its equipment which
would alter the essential character of such Vessel, or
materially impair its use for the purpose for which it was
designed, other than as necessary to meet regulatory or
classification society requirements, unless it shall have
received the prior written consent thereto of the Mortgagee,
which consent shall not be unreasonably withheld.
Section 1.13 Inspection. The Mortgagor at all times
shall afford the Mortgagee or its authorized representatives
full and complete access to the Vessels for the purpose of
inspecting or surveying the same and their papers and, at the
request of the Mortgagee, the Mortgagor shall deliver for
inspection copies of any and all contracts and documents
relating to each Vessel, whether on board or not and shall
cause any charterer to comply herewith during the term of any
charter to the maximum extent permitted thereunder; provided,
however, that any inspection of the Vessels shall be subject
to any consents required by operators under applicable
drilling contracts or by applicable Government Agencies, which
consents the Mortgagor shall use its best efforts to obtain.
Section 1.14 Change of Flag or Port of Documentation.
The Mortgagor will not change the flag or port of
documentation of either Vessel without the prior written
consent of the Mortgagee and the payment by the Mortgagor of
all expenses of registration or re-registration of this
Mortgage. Such consent may be denied or withheld for any
reason or for no reason, except that Mortgagee shall not
unreasonably withhold its consent to a change in the port of
documentation, although reasonable conditions may be attached
to such consent. Any such written consent to any one transfer
or change of flag or port of documentation shall not be
construed as a waiver of these provisions with respect to any
other or subsequent proposed transfer or change of flag or
port of documentation.
Section 1.15 Sale or Other Disposition of Vessels.
(a) Except as provided below, the Mortgagor will not
sell, charter, mortgage, transfer or in any other way dispose
of all or any part of or interest in any Vessel without the
prior written consent of the Mortgagee. Any sale, mortgage,
charter, transfer or other disposition of all or any part of
or interest in any Vessel shall be subject to the provisions
of this Mortgage and the lien hereof. The Mortgagor will not
charter any Vessel to, or permit any Vessel to serve under any
drilling contract with, a person included within the
definition of "designated foreign country" or a "national" of
a "designated foreign country" in the "Foreign Assets Control
Regulations" or "Cuban Assets Control Regulations" of the
United States Treasury Department, 31 C.F.R. Chapter V, as
amended, within the meaning of said regulations or of any
regulation, interpretation or ruling issued thereunder.
(b) Mortgagor shall not enter into any bareboat charter
for any Vessel in excess of twelve months (inclusive of all
extension and renewal opt-on periods) with an entity not an
affiliate of the Guarantor without the prior written consent
of the Mortgagee, and in the case where such consent is given,
not without providing Mortgagee a copy thereof and without
first obtaining the written agreement of such charterer in
each case to the collateral assignment by Mortgagor to
Mortgagee of a first priority lien and security interest in
the charter, charter hire and earnings of such charter, such
consent to be in form acceptable to Mortgagee. Mortgagor
undertakes and covenants that any such charter shall contain a
provision prohibiting the charterer and any other persons from
incurring or acquiring any lien on any Vessel.
Section 1.16 Requisition of Title or Use. In the event
that the title to or ownership of any Vessel, or the use of
any Vessel (whether on a bareboat, time or voyage charter
basis or any other basis), shall be requisitioned, purchased
or taken by, or any Vessel shall be seized by or forfeited to
any government of any country or any department, agency or
representative thereof, pursuant to any present or future law,
proclamation, decree, order or otherwise, or by any other
person or persons, whether or not acting under color of
governmental authority, the compensation, purchase price,
reimbursement or award for such requisition, purchase,
seizure, forfeiture or other taking of such title, ownership
or use shall forthwith be and become payable to the Mortgagee,
who shall be entitled to receive the same and shall apply it
as provided in Section 1.05(c) of the Loan Agreement.
Section 1.17 Notice of Loss, Requisition or Damage. In
the event of (a) the disappearance or actual or constructive
loss of any Vessel, (b) any event referred to in Section 1.16
hereof with respect to any Vessel, or (c) any casualty,
accident or damage to any Vessel established to be in excess
of USD 100,000.00, the Mortgagor will give written notice
thereof (containing full particulars), within three (3)
Business Days of the occurrence thereof, to the Mortgagee.
Section 1.18 Insurance.
I. Form and Amount.
I(A). Hull & Machinery Insurance. At its own expense,
Mortgagor shall maintain or cause to be maintained with
financially sound and reputable insurers reasonably
satisfactory to Mortgagee all risk equivalent marine hull and
machinery insurance (and, if necessary to satisfy the proviso
of this subparagraph, policies of increased value insurance)
and war risk hull and machinery insurance covering
confiscation, nationalization, expropriation and seizure on an
agreed value basis on each Vessel against loss, damage, fire
and such other perils and in such amounts as are usually
maintained on vessels engaged in the same or a similar
business under blanket fleet policies with respect to vessels
of like size, character and marine activity; provided,
however, that in no event shall the amount of such insurance,
subject to such deductible, if any, as permitted by Mortgagee,
at any time be less than the greater of (a) the Fair Market
Value (as defined in the Loan Agreement) or (b) the amount of
the outstanding principal, interest and all other obligations
secured by this Mortgage.
Such insurance shall name the Mortgagee, Mortgagor and
other interested persons as insureds as their respective
interests may appear, but (subject only to paragraph II of
Section 1.18) shall be payable solely to Mortgagee for further
disbursement by it to the other insureds as their interests
may appear and shall be applied as set forth in Subpart II of
this Section 1.18.
Unless a Default hereunder shall have occurred and is
continuing hereunder, Mortgagee consents to a deductible of
USD 250,000.00 per incident with respect to policies required
under this Subsection I(A).
I(B). Liability Insurance. At its own expense, Mortgagor
shall maintain entries with financially sound and reputable
insurers or protection and indemnity associations reasonably
satisfactory to the Mortgagee protection and indemnity,
collision, tower's liability including crew, cargo,
contractual liabilities, and removal of wreck insurance and
protection and indemnity war risk insurance protecting the
interests of Mortgagor and Mortgagee against liability for
property damage to third persons (including liability to any
governmental authority or other person with respect to
pollution liability) and personal injury or death to any
person arising out of the maintenance, use, operation and
ownership of the Vessels, cargo damage or loss, contractual
liability and wreck removal in such amounts as are usually
carried by persons engaged in the same or similar businesses;
provided, however, that in no event shall the amount of such
insurance per person and per occurrence (subject to such
deductible, if any, permitted by Mortgagee) be less than the
customary amount of coverage available on the market from time
to time with respect to vessels of the same type, age and
trade as the Vessels and reasonably acceptable to the
Mortgagee and in no event shall the total amount of such
liability insurance be less than USD 25,000,000. Such
liability insurance shall name each of the Mortgagee,
Mortgagor and other interested persons as additional insureds,
as their respective interests may appear, but the proceeds of
such policies shall be payable to the person actually
suffering the loss in respect of which such proceeds are
payable provided, however, that if Mortgagee shall have first
notified the underwriters or brokers that a Default hereunder
has occurred then all such proceeds to which the Mortgagor
would have otherwise been entitled shall be thereafter payable
to Mortgagee for distribution to itself and others as their
interests may appear as hereinafter set forth or otherwise
with the consent of Mortgagee in each case.
I(C). Other Insurance. At its own expense, the
Mortgagor shall, at all times during which the Vessels are
operating within the jurisdiction of the United States of
America, maintain
(i) insurance or post bond or maintain or cause to
be maintained approved evidence of financial
responsibility with respect to the Vessels to cover the
actual cost of removal of discharged oil for which the
Mortgagor or the Vessels may be held strictly liable (or
held liable due to negligence of the Mortgagor or any
other person) under the Clean Water Act of 1977, the Oil
Pollution Act of 1990 or the Outer Continental Shelf
Lands Act, or under any other federal or state law which,
in the future, may apply to the Vessels or to the
Mortgagor; and the Mortgagor shall maintain insurance or
post bond or maintain or cause to be maintained approved
evidence of financial responsibility covering similar
pollution risks or liabilities incident thereto under any
law, regulation or judicial decision of any foreign
jurisdiction or jurisdictions or political subdivision
thereof applicable to the Mortgagor, the Vessels or their
operations;
(ii) such workmen's compensation or longshoremen's
and harbor workers' insurance as shall be required by
applicable law, including endorsements for Outer
Continental Shelf operations, borrowed servant, voluntary
compensation and in rem claims;
(iii) insurance (with a limit of USD 5,000,000 per
occurrence) naming the Mortgagor and the Mortgagee
assureds and loss payees, as their interests may appear,
against contingent Energy, Exploration and Development
("E.E.D.") liabilities in connection with operations
conducted by the Vessels with respect to Vessels
operating under a drilling contract with a financially
responsible operator acceptable to the Mortgagee that
indemnifies against such E.E.D. arising out of blowout
occurring (above and below the seabed), cratering,
redrilling/recompletion, cost of control, clean-up,
containment seepage and pollution from blowouts above the
seabed, spillage or leakage in connection with operations
conducted by any Vessel to the extent available at
reasonable cost, in form and substance satisfactory to
the Mortgagee, and third party liabilities ("T.P.L.")
that may be assumed by a contract which is legally
enforceable and in form and substance reasonably
satisfactory to the Mortgagee. Deductibles or self-
insured retentions shall not exceed USD 250,000 (E.E.D.)/
(T.P.L.) and shall be for the account of the Mortgagor;
(iv) excess seepage, pollution, clean-up and
containment liability coverage in the amount of USD
50,000,000 in respect of offshore operations in excess of
and following the seepage, pollution, clean-up and
containment liability coverage recited in Subsection
(iii) above; and
(v) mortgagee's interest insurance or breach of
warranty endorsement in favor of the Mortgagee with such
underwriters and under forms of policies approved by the
Mortgagee, which approval shall not be unreasonably
withheld, in an amount equal to at least 125% of the
Loan.
II. Application of Proceeds. All policies of insurance
required under this Section 1.18 shall be placed through
first-class marine brokers reasonably acceptable to Mortgagee
and shall name the Mortgagor and Mortgagee as Additional
Insureds. All policies maintained under Subsection I above
shall also name the Mortgagee as a loss payee for all hull and
machinery policies, and, in the case of policies procured
under Subpart I(A) hereof, shall provide that all payments in
respect of loss or damage shall be made solely to the
Mortgagee for all amounts in excess of USD 1,000,000 and that
upon the occurrence and continuance of a Default hereunder,
all proceeds shall be payable solely to Mortgagee. Any
insurance recoveries under any policies to which the Mortgagee
shall be so entitled shall be applied as provided in Section
1.05(c) of the Loan Agreement. Until a Default has occurred,
the Mortgagee and the Mortgagor shall cooperate in adjusting
any claim with the underwriters of insurances for the Vessels
and underwriters may rely on any agreement reached with the
Mortgagor as binding both the Mortgagee and the Mortgagor.
Following the occurrence of a Default, the Mortgagee and the
Mortgagor shall continue to cooperate to adjust any claim but
only the Mortgagee shall have the power to agree any
adjustment with underwriters on behalf of the Vessels, the
Mortgagor and itself.
III. Constructive Total Loss. In the event of an
accident, occurrence or event resulting in a constructive
total loss of any Vessel, the Mortgagee shall have the right
to claim for a constructive total loss of the Vessel and to
require that Mortgagor declare such to be a constructive total
loss, and if both (1) such claim is accepted by all
underwriters under all policies then in force as to the Vessel
under which payment is due for total loss and (2) payment in
full is made in cash under such policies, then the Mortgagee
shall have the right at its election, to abandon the Vessel to
the underwriters under such policies, free from the lien of
this Mortgage and apply the proceeds of such insurance as
provided in Section 1.05(c) of the Loan Agreement.
IV. Agreed or Compromised Total Loss. In the event of an
accident, occurrence or event of damage to any Vessel, the
Mortgagee shall have the right in its discretion to enter into
an agreement or compromise with underwriters providing for an
agreed or compromised total loss of the Vessel.
V. Carriers; Approvals. All insurance required under
this Section shall be placed and kept with the United States
Government or with American, British, or other insurance
companies, underwriters' associations, clubs or underwriting
funds approved by the Mortgagee, which consent shall not be
unreasonably withheld. Any approval of a policy under this
Section 1.18 shall be effective until the end of the policy
period or until thirty (30) days after the Mortgagee shall
notify the Mortgagor of the desired change in the form and/or
amount thereof, whichever shall first occur. Notwithstanding
the foregoing, Mortgagee may require changes on shorter notice
if such changes are necessary or desirable to comply with
requirements of or insure against liabilities created or
increased by any change, modification, amendment in the law
(including judicial or administrative decisions), regulations,
rules, policies or practices of the United States government
or the government of any state, territory, possession thereof
or of any other place where the Vessel may be operating or
whose laws may apply.
VI. Taking, Requisition, etc. During the continuance of a
taking, requisition or charter of the use of any Vessel by the
United States Government, with the prior written consent of
the Mortgagee, the provisions of this Section shall be deemed
to have been complied with in all respects as to any Vessel if
the United States Government shall have agreed, pursuant to an
agreement in form and substance satisfactory to the Mortgagee,
to reimburse the Mortgagee and the Mortgagor for loss or
damage resulting from the risks indicated in subsection I of
this Section. In the event of any taking, requisition, charter
or loss of any Vessel contemplated by this paragraph the
Mortgagor shall promptly furnish to the Mortgagee a
certificate from a Responsible Officer stating that such
taking, requisition, charter or loss has occurred and, if such
is the case, that the United States Government has agreed to
reimburse the Mortgagee and the Mortgagor for loss or damage
resulting from the risks covered pursuant to the requirements
of Subpart I of this Section 1.18.
VII. Additional Provisions. All insurance required
under this Section 1.18 shall, unless otherwise first agreed
in writing by the Mortgagee, provide that (1) there shall be
no recourse against the Mortgagee for the payment of premiums,
supplemental or back calls or commissions or warranties or
representations to underwriters, (2) if such insurance
provides for the payment of club calls, assessments or
advances, there shall be no recourse against the Mortgagee for
the payment thereof, (3) at least thirty (30) days' (seven (7)
days in the case of war risk coverage) prior written notice of
any cancellation, reduction in amount or change in coverage or
other material change of such insurance shall be given to the
Mortgagee by the insurance underwriters, (4) the interests of
the Mortgagee shall be continued insured regardless of any
breach of or violation by Mortgagor or any other insured of
any warranties, declarations or conditions contained in such
insurances, (5) no insurance shall be excess over other
coverage but shall be primary insurance and shall not require
any contribution from any excess insurance on any Vessel which
may be carried by Mortgagee, (6) no insurance shall be
invalidated by any assignment of any charters of any Vessel,
and (7) the insurers agree to advise Mortgagee promptly in
writing of any default in the payment of any premium and of
any other act or omission of which such insurer has knowledge
which might invalidate or render unenforceable, in whole or in
part, any such policy. The policies shall provide for
severability of interest as though separate policies were
issued to each additional insured except with respect to the
limits of liability.
The Mortgagor shall not, without the prior written
consent of the Mortgagee, do any act, nor voluntarily suffer
nor permit any act to be done, whereby any insurance required
by this Section shall or may be suspended, impaired or
defeated, or suffer or permit any Vessel to engage in any
voyage or any activity not permitted under policies of
insurance satisfactory to the Mortgagee in all respects for
such voyage or the engaging in of such activity.
Section 1.19 Reimbursement of Mortgagee. In the event
that Mortgagor shall fail to obtain or maintain insurance in
accordance with the provisions of this Mortgage, Mortgagee
shall have the right to obtain, and pay the premiums on, such
insurance as Mortgagee reasonably deems necessary. The
Mortgagor shall reimburse the Mortgagee on demand, with
interest at the rate (described in Section 1.04(c) of the Loan
Agreement) for any and all expenditures which the Mortgagee
may from time to time make, lay out or expend in providing
protection in respect of insurance, discharge or purchase of
any liens, taxes, dues, assessments, governmental charges,
fines and penalties imposed, repairs, attorneys' fees and
other matters as the Mortgagor is obligated herein to provide,
but fails to provide. Such obligation of the Mortgagor to
reimburse the Mortgagee, together with interest as provided
above, shall be an additional indebtedness due from the
Mortgagor, secured by this Mortgage, and shall be payable by
the Mortgagor on demand. The Mortgagee, though privileged so
to do, shall be under no obligation to the Mortgagor or to any
other person to make any such expenditures, nor shall the
making thereof relieve the Mortgagor of any Default in that
respect.
Section 1.20 Reports. Prior to the date hereof and
concurrently with each renewal or replacement of each policy
or entry thereafter, Mortgagor shall furnish to the Mortgagee
an original certificate of insurance or a report by a first
class marine insurance broker reasonably acceptable to the
Mortgagee, describing in reasonable detail the insurance then
carried and maintained on and with respect to the Vessels and
certifying that such insurance complies with the terms hereof
and certifying that the insurances are in the form, cover the
risks and are in the amounts determined in accordance with
Section 1.18 of this Mortgage, and that, in the opinion of
such firm, the insurance then carried and maintained complies
with the terms of said Section 1.18. Mortgagor shall obtain
for the benefit of Mortgagee the undertaking of Mortgagor's
insurance agent or broker to promptly advise the Mortgagee in
writing of any act or omission of which such agent or broker
has knowledge which might invalidate or render unenforceable,
in whole or in part, any such policy.
ARTICLE 2. DEFAULTS
Section 2.1 Defaults. The occurrence and continuance of
any of the following events (each of which is herein called a
"Default") shall constitute a default hereunder:
(a) The occurrence of an Event of Default under
(and as defined in) the Loan Agreement; or
(b) The occurrence of a default under the Guaranty;
or
(c) Default by the Mortgagor in the due and
punctual observance or performance of any of the covenants or
agreements contained in Sections 1.4, 1.5, 1.9, 1.10, 1.11,
1.12, 1.13, 1.14, 1.15, 1.17, 1.18 or 1.19 hereof; or
(d) Breach by Mortgagor under any entry or policy
of insurance from time to time in effect with respect to the
Vessels.
(e) Default by the Mortgagor in the due and
punctual observance or performance of any other covenant or
agreement contained in this Mortgage and the continuance of
such default unremedied for a period of 30 days; or
(f) The arrest, attachment or detention of any
Vessel by a U.S. Marshal or other officer of any court of law,
equity or admiralty jurisdiction in any country or nation of
the world or by any government or other person; or
(g) The Mortgagor or any charterer shall remove or
attempt to remove any Vessel beyond the geographic limits of
the then current insurance coverage in place on the Vessel, or
shall abandon the Vessel in a foreign port or shall cease to
be a citizen of the United States of America within the
meaning of Section 2 of the Shipping Act, 1916, as amended.
ARTICLE 3. REMEDIES: APPLICATION OF PROCEEDS
Section 3.1 Sale. etc. If a Default specified in
Subsection 2.1(a) above shall occur as a result of an Event of
Default occurring under Article IV, subsections H or I of the
Loan Agreement, then, and in any such event, the principal
amount of the Note, together with accrued interest thereon and
all other obligations shall become immediately due and payable
without any notice or other action by the Mortgagee, or if any
other Default shall occur and be continuing, then, and in any
such event, the Mortgagee may, by notice of default given to
the Mortgagor, declare the principal amount of the Note,
together with accrued interest thereon and any other amounts
due in accordance therewith and all other obligations to be
forthwith due and payable, whereupon all such amounts shall
become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are
hereby expressly waived. During the continuance of any
Default, Mortgagee shall have the right to pursue and enforce
any of its rights and remedies under the Loan Agreement and
any other Loan Document and, in addition, Mortgagee may do any
one or more of the following as it may elect:
(a) Exercise all the rights and remedies in foreclosure
and otherwise given to mortgagees by the provisions of the
U.S. Code, Tit. 46, Ch. 313, as amended, or other applicable
law including the laws of any other applicable jurisdiction;
(b) Bring suit at law, in equity or in admiralty or
initiate and prosecute such other judicial, extra-judicial, or
administrative proceedings as it may consider appropriate to
recover any and all sums due, or declared due, on the Note,
and all other obligations due, with the right to enforce
payment of said sums against any assets of the Mortgagor,
whether they are covered by this Mortgage or otherwise;
(c) Take possession of the Vessels with or without legal
proceedings, at any place where it or they may be found; and
the Mortgagor or any person in possession of the Vessels,
forthwith upon request by the Mortgagee, as mortgage creditor,
shall deliver possession to the Mortgagee, and the Mortgagee
shall have the right, without being responsible for loss or
damage, to lay up, hold, charter, lease, operate or otherwise
use the Vessels for such period and under such conditions as
it may deem most expedient for its interest, and demand,
collect and retain all hire, freights, earnings, issues,
revenues, income, profits, returns, premiums, salvage awards
or recoveries, recoveries in general average, and all other
sums due or to become due in respect of the Vessels or in
respect of any insurance thereon from any person whomsoever,
accounting only for net profits, if any, arising from such use
and charging against all receipts from such use or from the
sale of the Vessels by court proceedings or pursuant to
subsection (d) below, all costs, expenses (including without
limitation attorneys' fees and disbursements), charges,
damages or losses by reason of such use; and if at any time
the Mortgagee shall avail itself of the right herein given to
it to take the Vessels and shall take them, the Mortgagee
shall have the right to dock the Vessels at any dock, pier or
other premises owned or leased by the Mortgagor without
charge, or at any other place at the cost and expense of the
Mortgagor;
(d) Take and enter into possession of the Vessels, at
any time, wherever the same may be, without legal process, and
if it seems desirable to the Mortgagee without being
responsible for loss or damage, sell it at any place or places
and at such time or times as the Mortgagee may specify, at
public or private sale, by sealed bids or otherwise, on such
terms and conditions as the Mortgagee deems best, free of any
claim, commitment or encumbrance, regardless of the nature
thereof, in favor of the Mortgagor and, except as provided by
law, in favor of any other person, upon advance notice of ten
(10) consecutive days published in any newspaper authorized to
publish legal notices of that kind in the port of
documentation and the places of sale of the Vessels and by
sending notice of each such sale at least fourteen (14) days
prior to the date fixed for such sale, by mail, to the
Mortgagor. In the event that the Vessels shall be offered for
sale by private sale, no newspaper publication of notice shall
be required, nor notice of adjournment of sale. Sale may be
held at such place and at such time as the Mortgagee by notice
may have specified, or may be adjourned by the Mortgagee from
time to time by announcement at the time and place appointed
for such sale or for such adjourned sale, and, without further
notice or publication the Mortgagee may make any such sale at
the time and place to which the same shall be so adjourned;
and any sale may be conducted without bringing the Vessels to
the place designated for such sale and in such manner as the
Mortgagee may deem to be for its best advantage, and the
Mortgagee may become the purchaser at any public sale, and
shall have the right to credit on the purchase price any and
all sums of money due to the Mortgagee under the Note, or
otherwise due to the Mortgagee hereunder or under the Loan
Agreement, the Guaranty or under any other instrument
evidencing any obligation.
Section 3.2 Finality of Sale. A sale of the Vessels
made in pursuance of this Mortgage, whether under the power of
sale hereby granted or any judicial proceedings, shall operate
to divest all right, title and interest of any nature
whatsoever of the Mortgagor therein and thereto, and shall bar
the Mortgagor, its successors and assigns, and all persons
claiming by, through or under them. No purchaser shall be
bound to inquire whether notice has been given or whether any
Default has occurred, or as to the propriety of the sale, or
as to application of the proceeds thereof. In case of any
such sale, any purchaser who is the holder of this Mortgage
shall be entitled, for the purpose of making settlement or
payment for the Vessels, to apply the balance due under this
Mortgage or a part thereof as part or all of the purchase
price to the extent of the amount remaining due and unpaid.
At any such sale, the holder of this Mortgage may bid for and
purchase the Vessels and upon compliance with the terms of
sale may hold, retain and dispose of the Vessels without
further accountability. At any such sale, the Mortgagee may
bid for the purchase of the Vessels and upon compliance with
the terms of sale may hold and retain and dispose of the
Vessels without further accountability therefor.
Section 3.3 Powers and Rights of Mortgagee upon
Occurrence of Default.
(a) Sale. For the purpose of Sections 3.1 and 3.2
the Mortgagor does hereby irrevocably appoint the Mortgagee
and its successors and assigns the true and lawful
attorneys-in-fact of the Mortgagor, in its name and stead, to
make the necessary transfers of the Vessels, and for that
purpose the Mortgagee may execute the necessary instruments of
assignment and transfer (including bills of sale), the
Mortgagor hereby ratifying and confirming all that its said
attorney shall lawfully do by virtue hereof. Nevertheless,
the Mortgagor, if so requested by the Mortgagee, shall ratify
and confirm any sale of the Vessels by executing and
delivering to the purchaser thereof such proper bills of sale,
conveyances, instruments of transfer and releases as may be
designated in such request.
(b) Revenues and Proceeds of the Vessels. The
Mortgagee is hereby irrevocably appointed attorney-in-fact of
the Mortgagor, upon the happening and during the continuation
of any Default, in the name of the Mortgagor to demand,
collect, receive, compromise and ▇▇▇ for, so far as may be
permitted by law, all drilling contract revenues, freights,
hire, earnings, issues, revenues, income and profits of the
Vessels, and all amounts due from underwriters under any
insurance thereon as payment or losses or as return premiums
or otherwise, salvage awards and recoveries, recoveries in
general average or otherwise, and all other sums due or to
become due in respect of the Vessels or in respect of any
insurance thereon from any person whomsoever, and to make,
give and execute in the name of the Mortgagor acquittances,
receipts, releases or other discharges for the same, whether
under seal or otherwise, and to endorse and accept in the name
of the Mortgagor all checks, notes, drafts, warrants,
agreements and all other instruments in writing with respect
to the foregoing, the Mortgagor hereby confirming and
ratifying the same.
(c) Additional Rights. The Mortgagor covenants and
agrees that in addition to any and all other rights, powers
and remedies elsewhere in this Mortgage granted to and
conferred upon the Mortgagee, and including, without
limitation, in any suit to enforce any of its rights, powers
or remedies, if a Default shall have occurred and be
continuing and shall not have been waived by the Mortgagee,
the Mortgagee shall be entitled as a matter of right and not
as a matter of discretion (i) to the appointment of a receiver
or receivers of the Vessels and collection of the freights,
hire, earnings, issues, revenues, income and profits due or to
become due arising from any operation of the Vessels, and any
receiver or receivers so appointed shall have full right and
power to use and operate the Vessels, and (ii) to a decree
ordering and directing the sale and disposal of the Vessels,
and the Mortgagee may become the purchaser at such sale and
shall have the right to credit on the purchase price any and
all sums of money due under the Note or otherwise due to the
Mortgagee hereunder or under the Loan Agreement, the Guaranty
or under any other Loan Document. The Mortgagee shall not be
required to have the Vessels marshalled (upon any sale of the
Vessels pursuant to this Mortgage or otherwise) or be required
to realize on any other collateral prior to realization on the
Vessels. Whenever any right to enter and take possession of
any Vessel accrues to the Mortgagee, it may require the
Mortgagor to deliver, and the Mortgagor shall on demand, at
its own cost and expense, deliver such Vessel to the Mortgagee
at the location designated by the Mortgagee.
Section 3.4 Restoration of Position. In case the
Mortgagee shall have proceeded to enforce any right, power or
remedy under this Mortgage by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned
for any reason or shall have been determined adversely to the
Mortgagee, then and in every such case the Mortgagor and the
Mortgagee shall be restored to their former positions and
rights hereunder with respect to the property subject or
intended to be subject to the Mortgage, and all rights,
remedies and powers of the Mortgagee shall continue as if no
such proceedings had been taken.
Section 3.5 Application of Proceeds. (a) The proceeds
of any sale and net earnings derived from the operation, use,
charter, or any other employment of the Vessels by the
Mortgagee, as mortgage creditor, and within any of the powers
and authority above given, as well as the proceeds of any
judgment which the Mortgagee may obtain by reason of the
breach or failure to perform any of the terms of this
Mortgage, as well as the proceeds of any claim for damage
received by the Mortgagee while exercising the powers and the
authorities above given, shall be applied by Mortgagee as
provided in the Loan Agreement.
(b) In the event the proceeds and the net earnings
referred to in this Section 3.5 should be insufficient to pay
the sum total of the Mortgagor's obligations to the Mortgagee,
then the Mortgagee, as mortgage creditor, shall have the right
to collect and to receive from the Mortgagor, or from any
other person or persons who may be chargeable in respect
thereof, such amount as will fully pay any remaining
deficiency with respect to the obligations. In any action to
enforce the Mortgage whether in rem or in personam, in
admiralty, in equity or at law Mortgagor hereby waives any
right to trial by jury.
Section 3.6 No Transfer in Violation of Shipping Act.
Notwithstanding any other provision herein to the contrary, no
sale, charter, transfer or other disposition of any Vessel or
any interest therein may be made to any entity not a citizen
of the United States within the meaning of Section 2 of the
Shipping Act of 1916, as amended, without the approval of the
Secretary of Transportation of the United States.
Section 3.7 Defeasance. If the Note shall have been
satisfied and discharged, then this Mortgage and the estate
and rights hereunder shall cease, determine, and become null
and void; and the Mortgagee, on the request of the Mortgagor
and at the Mortgagor's cost and expense, shall forthwith cause
satisfaction and discharge of this Mortgage to be entered upon
its and other appropriate records and shall execute and
deliver to the Mortgagor such instruments as may be necessary
in the Mortgagor's reasonable opinion to duly acknowledge the
satisfaction and discharge of this Mortgage.
Section 3.8 Right of Peaceful Enjoyment. During the
term of this Mortgage and so long as no Event of Default or
Default shall have occurred and be continuing, the Mortgagor
shall have full and peaceful enjoyment, use, right to
possession and control of the Vessels.
Section 3.9 Cure of Events of Default or Default. If at
any time after an Event of Default or Default and declaration
of acceleration pursuant to Section 3.1 of this Article III
and prior to any foreclosure action having been taken by the
Mortgagee under any of the Loan Documents to realize upon the
security provided by such documents, the Mortgagor offers
completely to cure all Events of Default or Default and to pay
all expenses, advances and damages to the Mortgagee consequent
to such Events of Default or Default, with interest at the
rate provided for in Section 1.04(c) of the Loan Agreement,
then and in the case of the first such Event of Default or
Default, the Mortgagee shall, and in the case of any
succeeding Events of Default or Default, the Mortgagee may
accept such offer and payment and restore the Mortgagor to its
former position. However, such action shall not affect any
subsequent Event of Default or Default or impair any rights
consequent thereon.
ARTICLE 4. GENERAL POWERS OF MORTGAGEE
(a) Arrest or Detention of a Vessel. In the event
that any Vessel shall be arrested or detained by a Marshal or
other
officer of any court of law, equity or admiralty jurisdiction
in any country or nation of the world or by any government or
other person, the Mortgagor does hereby authorize and empower
the Mortgagee, from the date of arrest or detention, in the
name of the Mortgagor, or its successors or assigns, to apply
for and receive possession of and to take possession of the
Vessel with all the rights and powers that the Mortgagor, or
its successors or assigns, might have, possess or exercise in
any such event; and this power of attorney shall be
irrevocable and may be exercised not only by the Mortgagee but
also by its appointee or appointees, with full power of
substitution, to the same extent as if the said appointee or
appointees had been named as one of the attorneys above named
by express designation.
(b) Suits. The Mortgagor also authorizes and
empowers the Mortgagee or its appointees or any of them to
appear in the name of the Mortgagor, its successors or
assigns, in any court of any country or nation of the world
where a suit is pending against any Vessel because of or on
account of any alleged lien against the Vessel from which the
Vessel has not been released and to take such proceedings as
to them may seem proper towards the defense of such suit and
the discharge of such lien, and all expenditures made or
incurred by them or any of them for the purpose of such
defense or discharge shall be a debt due from the Mortgagor,
its successors and assigns, to the Mortgagee, and shall be
secured by the lien of this Mortgage in like manner and extent
as if the amount and description thereof were written herein.
ARTICLE 5. INDEMNITY
The Mortgagor assumes liability for, and agrees to
indemnify and hold the Mortgagee harmless from, all claims,
costs, expenses (including legal expenses), damages and
liabilities arising from or pertaining to this Mortgage or the
ownership, use, possession or operation of the Vessels;
provided that Mortgagor shall have no obligation hereunder
with respect to amounts subject to indemnification between
such parties under any agreement of trust between such parties
or for indemnified liabilities arising from the gross
negligence or wilful misconduct of Mortgagee. The agreements
and indemnities contained in this Article shall survive the
maturity or earlier discharge of this Mortgage and payment in
full of the Note.
ARTICLE 6. SUNDRY PROVISIONS
Section 6.1 Cumulative Remedies; No Waiver. Each and
every power and remedy herein given to the Mortgagee shall be
cumulative and shall be in addition to every other power and
remedy herein or now or hereafter existing at law, in equity,
in admiralty or by statute, and each and every power and
remedy whether herein given or otherwise existing may be
exercised from time to time and as often and in such order as
may be deemed expedient by the Mortgagee, and the exercise or
the beginning of the exercise of any power or remedy shall not
be construed to be a waiver of the right to exercise at the
same time or thereafter any other power or remedy. No delay
or omission by the Mortgagee in the exercise of any right or
power in the pursuance of any remedy specified in Article 3
above accruing upon any Default hereof shall impair any such
right, power or remedy or be construed to be a waiver of any
such Default or an acquiescence therein; nor shall the
acceptance by the Mortgagee of any security or of any payment
of or on account of any part of the indebtedness secured by
this Mortgage or of any payment on account of any past Default
be construed to be a waiver of any right to take advantage of
any future Default or of any past Default not completely cured
thereby.
Section 6.2 Further Assurances. In the event that this
Mortgage, or any provisions hereof, shall be deemed invalid in
whole or in part by reason of any present or future law or any
decision of any court having jurisdiction, or if the documents
at any time held by the Mortgagee shall be deemed by the
Mortgagee for any reason insufficient to carry out the rights
and powers granted to the Mortgagee herein, then, from time to
time, the Mortgagor will do, execute, acknowledge and deliver,
or cause to be done, executed, acknowledged and delivered such
other and further assurances and documents as in the opinion
of the Mortgagee may reasonably be required in order to more
effectively subject the Vessels to the lien of this Mortgage
or more effectively subject the Vessels to the performance of
the terms and provisions of this Mortgage, or to enable this
Mortgage continuously to enjoy the status of a First
"Preferred" Mortgage.
Section 6.3 No Waiver of Preferred Status. No provision
of this Mortgage shall be deemed to constitute a waiver by the
Mortgagee of the preferred status hereof given by the U.S.
Code, Tit. 46, Ch. 313, as amended, and any provision of this
Mortgage which would otherwise constitute such a waiver shall
to such extent be of no force or effect.
Section 6.4 Survival of Agreements. All
representations, warranties, covenants and agreements herein
contained or made in writing in connection with this Mortgage
shall survive the execution of this Mortgage and shall
continue in full force and effect until all sums secured
hereby shall have been paid in full, and the same shall bind
and inure to the benefit of the respective successors and
assigns of the Mortgagor and the Mortgagee.
Section 6.5 Notices. All notices, requests and demands
shall be in writing (including telecopier) given to or made
upon the respective parties hereto as follows:
In the case of the Mortgagor or the Guarantor, at
Reading & ▇▇▇▇▇ Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
In the case of Mortgagee, at
The CIT Group/Equipment Financing, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: (a) Senior Vice President-Credit
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Legal Department
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or in such other manner as any party hereto shall designate by
written notice to the other parties hereto. All such notices
shall be effective upon delivery or 3 days after being
deposited in the United States mail with postage prepaid
certified, return receipt requested in a correctly addressed
wrapper, or upon receipt if delivered to Federal Express or
similar courier company or transmitted by telefax, except that
all notices, requests and demands to the Mortgagee shall not
be effective until received by the Mortgagee. All notices,
demands, requests, communications and other documents
delivered hereunder or under the Loan Documents, unless
submitted in the English language, shall be accompanied by
certified English translation thereof.
Section 6.6 Counterparts. This instrument may be
executed in any number of counterparts, and each of such
counterparts shall for all purposes be deemed to be an
original.
Section 6.7 Nature of Agreements Hereunder. The
agreements, terms, conditions, rights, remedies and
indemnities provided herein are in addition to, not in
limitation of, and shall not be limited by, each of the
agreements, terms, conditions, rights, remedies and
indemnities contained in the Loan Agreement.
Section 6.8 Recording. For purposes of this Mortgage
and for purposes of recording this Mortgage as required by 46
U.S. Code, Ch. 313, the total amount of this Mortgage is
Twenty Five Million United States Dollars (USD 25,000,000)
plus interest, costs, expenses and performance of Mortgage
covenants; the discharge amount is the same as the total
amount and there is no separate discharge amount.
Section 6.9 Construction. Any provision of this
Mortgage 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 provisions hereof, any such
prohibition or unenforceability shall not invalidate or render
unenforceable such provision in any other jurisdiction. To
the extent permitted by law, the Mortgagor hereby waives any
provision of law which renders any provision hereof prohibited
or unenforceable in any respect.
Section 6.10 Consent to Forum. THE MORTGAGOR HEREBY
IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION, SUIT,
OR PROCEEDING ARISING OUT OF OR IN ANY WAY IN CONNECTION WITH
THIS MORTGAGE MAY BE INSTITUTED OR BROUGHT IN THE COURTS OF
THE STATE OF NEW YORK, IN THE COUNTY OF NEW YORK, OR THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, AS THE MORTGAGEE MAY ELECT, AND BY EXECUTION AND
DELIVERY OF THIS MORTGAGE, THE MORTGAGOR HEREBY IRREVOCABLY
ACCEPTS AND SUBMITS TO, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH
COURTS. THE MORTGAGOR IRREVOCABLY CONSENTS TO SERVICE OF ANY
SUMMONS AND/OR LEGAL PROCESS BY REGISTERED OR CERTIFIED UNITED
STATES AIR MAIL, POSTAGE PREPAID, TO THE MORTGAGOR AT THE
ADDRESS SET FORTH IN SECTION 6.5 HEREOF, SUCH METHOD OF
SERVICE TO CONSTITUTE, IN EVERY RESPECT, SUFFICIENT AND
EFFECTIVE SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR
PROCEEDING. NOTHING IN THIS MORTGAGE SHALL AFFECT THE RIGHT
OF THE MORTGAGEE TO EFFECT SERVICE OF PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR LIMIT THE RIGHT OF THE MORTGAGEE TO
BRING ACTIONS, SUITS OR PROCEEDINGS WHETHER IN REM, IN
PERSONAM, IN LAW, EQUITY, ADMIRALTY OR OTHERWISE IN THE COURTS
OF ANY OTHER JURISDICTION. THE MORTGAGOR FURTHER AGREES THAT
FINAL JUDGMENT AGAINST IT IN ANY SUCH LEGAL ACTION, SUIT OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION, WITHIN OR OUTSIDE THE UNITED STATES OF
AMERICA, BY SUIT ON THE JUDGMENT, A CERTIFIED OR EXEMPLIFIED
COPY OF WHICH Shall BE CONCLUSIVE EVIDENCE OF THE FACT AND THE
AMOUNT OF THE LIABILITY.
Section 6.11 Rights of Mortgagor. Until one or more of
the Events of Default herein above described shall happen, the
Mortgagor (a) shall be suffered and permitted to retain actual
possession and use of the Vessels; (b) may at any time alter,
repair, change or re-equip the Vessels, subject, however, to
the provisions of Section 1.12 hereof and (c) shall have the
right, from time to time in its discretion and without
application to the Mortgagee, and without obtaining a release
thereof by the Mortgagee, to dispose of, free from the lien
hereof, any boilers, engines, machinery, masts, spars, sails,
rigging, boats, anchors, chains, tackle, apparel, furniture,
fittings, drilling equipment, pumps, drill pipes, collars,
racking, housing spare parts and supporting inventory,
vehicles or living quarters or any other appurtenances of the
Vessels, first or simultaneously replacing the same by
boilers, engines, machinery, masts, spars, sails, rigging,
boats, anchors, chains, tackle, apparel, furniture, fittings,
drilling equipment, pumps, drill pipes, collars, racking,
housing, spare parts and supporting inventory, vehicles or
living quarters or other appurtenance of substantially equal
value to the Mortgagor, which shall forthwith become subject
to the lien of this Mortgage as a preferred mortgage thereon.
IN WITNESS WHEREOF, the Mortgagor has caused this
Mortgage to be duly executed and delivered as of the day and
year first above written.
READING & ▇▇▇▇▇ OFFSHORE, LIMITED
By: _____________________________
Name: ▇. ▇. ▇▇▇▇▇
Title: Vice President and
Treasurer
STATE OF TEXAS )
) ss.:
COUNTY OF ▇▇▇▇▇▇ )
On this ____ day of May, 1995, before me personally came
▇.▇. ▇▇▇▇▇, to me known, who, being by me duly sworn, did
depose and say that his address is ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇; that he is Vice President and Treasurer of
Reading & ▇▇▇▇▇ Offshore, Limited the corporation described in
and which executed the foregoing instrument; and that he
signed his name thereto pursuant to authority granted to him
by the Board of Directors of said corporation.
_________________________________
(Notary Public)