EXHIBIT 10.177
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AMENDED AND RESTATED BAREBOAT CHARTER
▇. ▇. ▇▇▇▇▇, ▇▇.
BETWEEN
DEEP SEA INVESTORS, L.L.C., as OWNER
AND
READING & ▇▇▇▇▇ DRILLING CO., as CHARTERER
DATED AS OF JULY 1, 1998
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TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS 1
ARTICLE 2 SCHEDULES AND OBJECTIVES 11
2.1 Schedules 11
2.2 Objectives 11
2.3 CONDITION OF THE PROPERTY 12
ARTICLE 3 TERM, DELIVERY DATE AND PURCHASE OPTION 13
3.1 Duration 13
3.2 Delivery of the Vessel to the Charterer 13
3.3 Early Termination 14
3.4 Remedies 17
3.5 Redelivery of the Vessel 19
3.6 Survey of the Vessel at End of Charter Period 20
3.7 Purchase Option 21
3.8 Determination of Purchase Option Price 21
ARTICLE 4 NATURE OF COMPENSATION 21
4.1 Absolute Obligation 21
4.2 Net Charter 23
ARTICLE 5 CONDITIONS TO EFFECTIVENESS 24
5.1 Conditions 24
ARTICLE 6 REPRESENTATIONS AND WARRANTIES 25
6.1 Representations and Warranties of the Owner 26
6.2 Representations and Warranties of the Charterer 27
ARTICLE 7 USE AND OPERATION OF THE VESSEL 30
7.1 Use of the Vessel 30
7.2 ▇▇▇▇▇▇▇, etc., of the Vessel 31
7.3 Documentation of the Vessel 31
7.4 General and Particular Average 32
7.5 Site and Access 32
7.6 Owner Liability for Materials Furnished
by the Charterer 32
7.7 Environmental and Related Reporting and Inspection 32
7.8 Notice of Entry 32
ARTICLE 8 MAINTENANCE OF CONDITION AND CLASSIFICATION;
REPAIRS 33
8.1 Maintenance of Classification 33
8.2 Repair 34
8.3 Drydocking or Underwater Survey in Lieu
of Drydocking 34
8.4 Required Survey 34
ARTICLE 9 EQUIPMENT AND STORES 35
9.1 Fuel, etc. 35
9.2 Equipment, etc. 35
9.3 The Charterer's Additional Equipment, etc. 35
9.4 Title to Improvements; Option to Purchase 36
9.5 No Lease of Essential Severables 37
ARTICLE 10 THE CHARTERER'S CHANGES, ADDITIONS
AND REPLACEMENTS 37
10.1 Structural Changes or Alterations;
Installation of Equipment, etc. 37
10.2 Replacement of Parts 38
10.3 Vessel Markings 38
ARTICLE 11 ADDITIONAL COVENANTS 38
11.1 General Covenants 38
11.2 No Impairment 39
11.3 Financial Information 39
11.4 Compliance Certificates 40
11.5 Further Assurances, etc. 41
11.6 Maintenance of Corporate Existence, etc. 41
11.7 Conditions of Consolidation, Merger, etc. 41
11.8 Indemnity of the Owner by Customers for
Oil Pollution and Related Environmental Claims 43
ARTICLE 12 PAYMENTS, INVOICES AND SECURITY 43
12.1 Basic Hire 43
12.2 Supplemental Hire 44
12.3 Payment Terms 44
12.4 Invoices 45
12.5 Security for Obligations 45
ARTICLE 13 GENERAL OBLIGATIONS AND PERFORMANCE 48
13.1 Independent Owner Relationships 48
13.2 Inspection 49
13.3 Performance of the Charterer 49
13.4 Operations Outside of U.S. Waters 49
ARTICLE 14 LIABILITY AND INDEMNITY 50
14.1 Survival of Indemnities 50
14.2 Pollution 50
14.3 The Charterer's Indemnity 50
14.4 Patent Infringement 51
14.5 Both-to-Blame Collision Clause 51
14.6 Liens, Attachments and Encumbrances 52
14.7 Indemnification by the Charterer 52
14.8 The Charterer's Duties to Remove Liens, etc. 53
ARTICLE 15 INSURANCE 53
15.1 The Charterer's Insurance 53
15.2 Nonperformance of Insurance Companies 54
15.3 Subrogation 54
ARTICLE 16 ASSIGNMENT OF CHARTER 54
16.1 Assignment and Subcontract by the Owner 54
16.2 Assignment by the Charterer 55
16.3 Assignment of Subcharter Hire 57
ARTICLE 17 LOSS, TAKING OR SEIZURE. 58
17.1 Taking by the U.S. Government 58
17.2 Event of Loss not a Total Loss 58
17.3 Payment of Stipulated Loss Value 58
17.4 Application of Payments 59
17.5 Date of Loss 59
17.6 Effect of Payment of Stipulated Loss Value 59
ARTICLE 18 TAX 60
18.1 Characterization as a Lease 60
18.2 Representations 60
18.3 Tax Indemnity 62
18.4 Payments 63
18.5 Records 64
ARTICLE 19 GENERAL 64
19.1 Notices 64
19.2 Expenses 65
19.3 The Owner's Right to Perform for the Charterer 66
19.4 Waivers 66
19.5 Entire Agreement 66
19.6 Successors and Assigns 67
19.7 Law 67
19.8 Parties' Intention 67
19.9 Counterparts; Uniform Commercial Code 68
19.10 Warranty of Authority 68
19.11 Usage; Headings 68
19.12 WAIVER OF JURY TRIAL 69
19.13 VENUE; SERVICE OF PROCESS 69
19.14 Agent for Service of Process 70
SIGNATURES 70
Schedule A Description of Vessel ▇. ▇. ▇▇▇▇▇, ▇▇., Including
Specifications
Schedule B-1 First Upgrade Program
Schedule B-2 Second Upgrade Program
Schedule B-3 Third Upgrade Program
Schedule C Charterer's Insurance
Schedule D Stipulated Loss Value
Schedule E Pending Litigation
Schedule F Computation of Basic Hire Upgrade Adjustment
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AMENDED AND RESTATED BAREBOAT CHARTER
"▇.▇. ▇▇▇▇▇, ▇▇."
This Amended and Restated Bareboat Charter dated as of July 1,
1998 is between Deep Sea Investors, L.L.C., a Delaware limited liability
company (the "Owner"), and R&B Falcon Drilling Co. (formerly known as
Reading & ▇▇▇▇▇ Drilling Co.), an Oklahoma corporation, as the Charterer
(the "Charterer");
W I T N E S S E T H:
WHEREAS, the Charterer and the Owner have entered into the
Bareboat Charter dated as of November 28, 1995 (the "Original Agreement")
and the Amended and Restated Bareboat Charter dated as of July 23, 1997
(the "Amended Agreement") under which the Owner as the owner of the
Vessel ▇.▇. ▇▇▇▇▇, ▇▇. (as described hereunder at Schedule A (the
"Vessel") chartered such Vessel to the Charterer on a bareboat basis to
conduct drilling activities;
WHEREAS, with the concurrence of the Owner and the Charterer,
the Vessel is undergoing an upgrade; and
WHEREAS, the Charterer desires to continue to charter the
Vessel as upgraded, and the Charterer and the Owner have agreed to amend
and restate the Amended Agreement in accordance with the terms and
conditions set forth herein;
NOW, THEREFORE, the parties hereto, each in consideration of
the promises and agreements of the other, hereby amend and restate the
Amended Agreement in its entirety as follows:
ARTICLE 1
DEFINITIONS
When used in this Charter (in addition to the terms defined elsewhere in
this Charter), the following terms shall have the following meanings:
"Additional Collateral" has the meaning assigned to such term in
Section 12.5(a).
"Adequate Provision" means, with respect to any Lien, claim,
liability or other obligation, the posting with or for the benefit
of the Owner Group, of a bond or letter of credit issued by a bank,
surety or other similar institution acceptable to the Owner or other
collateral acceptable to the Owner, in each case, pursuant to
documentation in form and substance acceptable to the Owner, having
a face amount or fair market value no less than the amount owed
under such Lien, claim, liability or other obligation.
"Affiliate(s)" in relation to a party hereto, means any person
controlling, controlled by or under common control with such party,
with the concept of control in such context meaning the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of another, whether through
the ownership of voting securities, by contract or otherwise.
"Appraisal Procedure" means the procedure specified in the
succeeding sentences for determining an amount or value. If either
the Owner or the Charterer shall give written notice to the other
requesting determination of such amount or value by appraisal, the
Owner and the Charterer shall consult for the purpose of appointing
a mutually acceptable qualified independent appraiser. If such
parties shall be unable to agree on an appraiser within 20 days of
the giving of such notice, such amount or value shall be determined
by a panel of three independent appraisers, one of whom shall be
selected by the Charterer, another of whom shall be selected by the
Owner and the third of whom shall be selected by the American
Arbitration Association (or its successor) if such other two
appraisers shall be unable to agree upon a third appraiser within 10
days of the selection date of the second of such two appraisers;
provided, that if (a) either party shall not select its appraiser
within 35 days after giving of such notice, such amount or value
shall be determined solely by the appraiser selected by the other
party, and (b) if both parties shall not select their respective
appraisers within such period, such amount or value shall be
determined solely by an appraiser selected by the American
Arbitration Association (or its successor). The appraiser or
appraisers appointed pursuant to the foregoing procedure shall be
instructed to determine such amount or value within the lesser of:
(i) 45 days after such appointment and (ii) the applicable period
remaining until delivery of such appraisal is required under this
Charter and the Charter Documents; and such determination shall be
final and binding upon the parties. If three appraisers shall be
appointed, the determination of the appraiser that shall differ most
from the other two appraisers shall be excluded, the remaining two
determinations shall be averaged and such average shall constitute
the determination of the appraisers. The Charterer shall pay all
fees and expenses relating to an appraisal for any purpose under
this Charter.
"Basic Hire" means the charter hire amount payable on the Payment
Dates as set forth in Section 12.1.
"Business Day" means any day on which commercial banks are open for
business in New York City, New York.
"Charter" means this Bareboat Charter as it may from time to time be
supplemented, amended, waived or modified in accordance with the
terms hereof.
"Charter Documents" means this Charter, the Guaranty, the Security
Documents, the Upgrade Documents and any other document, instrument
or agreement executed in connection herewith or therewith.
"Charter Period" means, collectively, the Primary Term and, if any,
the Extended Term.
"Charterer" means Reading & ▇▇▇▇▇ Drilling Co., an Oklahoma
corporation, and its successors and assigns to the extent permitted
by the terms hereof.
"Charterer Group" means, individually and collectively, the
Charterer and its subsidiaries, its and their co-venturers,
contractors and subcontractors and its and their Affiliates, and the
employees, invitees and insurers of all of those entities, but shall
expressly exclude the Owner Group.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and any amending or superseding tax laws of the United
States of America.
"Contractor" means Newpark Marine Fabricators, Inc., a Texas
corporation, and any other Person performing all or any part of the
Third Upgrade Program.
"▇▇▇▇▇▇▇▇▇▇ Mortgage" means the Preferred Ship Mortgage dated as of
November 28, 1995 made by the Charterer in favor of the Trustee
covering the ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, as amended by the First Supplement to
Preferred Ship Mortgage dated as of July 23, 1997, and the Second
Supplement to Preferred Ship Mortgage dated as of July 1, 1998 and
any other amendment, supplement or modification thereof entered into
in accordance with the term thereof or hereof.
"Crude Oil" means any hydrocarbon product that is in liquid form at
surface temperature and pressure, including condensate.
"Debt" means, for any Person (without duplication), whether recourse
is to all or a portion of the assets of such Person and whether or
not contingent, (a) every obligation of such Person for money
borrowed, (b) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) every
reimbursement obligation of such Person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the
account of such Person, (d) every obligation of such Person issued
or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business), (e) every obligation of such
Person under a lease that under generally accepted accounting
principles is required to be capitalized on the balance sheet of
such Person, (f) every obligation under any charter, operating lease
or title retention arrangement with an original term in excess of
one year or which is renewable at the option of the tenant for a
total term of one year or more, (g) the maximum fixed redemption or
repurchase price of redeemable stock of such Person that by its
terms or otherwise is required to be redeemed, if any, at the time
of determination plus accrued but unpaid dividends, and (h) every
obligation of the type referred to in clauses (a) through (g) of
another Person and all dividends of another Person the payment of
which, in either case, such Person has guaranteed or is responsible
or liable for, directly or indirectly, as obligor, guarantor or
otherwise.
"Default" means any event or condition which after notice or lapse
of time or both would become an Event of Default.
"Delivery Date" means November 29, 1995.
"Drilling Contracts" means any contractual arrangement with respect
to the Vessel providing for the use or employment of the Vessel for
the locating of, drilling for, development of, extraction of or
processing of Crude Oil, Natural Gas or mineral deposits found in
underwater locations, and activities ancillary thereto.
"Escalated" means, with respect to any amount and as at any date of
determination, such amount as multiplied by a fraction (a) the
numerator of which is the Consumer Price Index - U.S. Average as
published by the Bureau of Statistics of the Department of Labor (or
if the publication of the Consumer Price Index is discontinued, a
comparable index similar in nature to the discontinued index which
clearly reflects the change in the real value of the purchasing
power of the Dollar as reasonably selected by the Owner (hereafter
in this definition referred to as the "index")) reported for the
calendar year immediately preceding such date and (b) the
denominator of which is equal to the index reported for 1995.
"Event of Default" means any of the events defined as such in
Section 3.3(b).
"Event of Loss" means any of the following events: (a) the actual
or constructive loss of the Vessel for the lesser of (i) six (6)
months (or such longer period of up to 12 months from the date of
such loss so long as the Charterer shall have made arrangements
within such six (6) month period for the repair and restoration of
the Vessel satisfactory to the Owner and the Independent Engineer
and is diligently proceeding with such repair and restoration) or
(ii) the remainder of the Charter Period, (b) the loss, theft or
destruction of the Vessel, (c) damage or destruction of the Vessel
or damage to the Vessel to such extent as shall make repair thereof
uneconomical or other event resulting in the Vessel's being
permanently rendered unfit for normal use for any reason whatsoever,
other than obsolescence, or (d) the condemnation, confiscation,
requisition, seizure, forfeiture or other taking of title to or use
of the Vessel (except that, in the case of a taking of title, or
taking of use by the United States Government, a period equal to the
lesser of (i) six (6) months and (ii) the then remaining term of the
Charter Period shall have elapsed from the date of such taking), in
each case as determined by the Owner.
"Expiration Date" means the last day of the Primary Term.
"Extended Term" has the meaning assigned to such term in Section
3.1(b).
"Fair Market Sale Value" means, for any property, the cash sale
value of such property that would be obtained in an arm's-length
transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer-user (other
than a person currently in possession or a used equipment dealer),
which determination shall be made (a), in the case of the Vessel,
without deduction for any costs of removal of the Vessel from the
location of current use and in the case of the First Upgrade
Severables without deduction for the cost of removal or delivery,
and (b) on the assumption that such property is free and clear of
all liens, charges and encumbrances and, in the case of the Vessel
is in the condition and repair in which it is required to be
returned pursuant to Section 3.5 hereof (but otherwise on an "as-is"
basis).
"First Upgrade Maintenance" means that portion of the improvements
contemplated by the First Upgrade Program that constitutes ordinary
and usual maintenance as more fully described on Schedule B-1.
"First Upgrade Nonseverables" means that portion of the improvements
contemplated by the First Upgrade Program that is not readily
removable without causing material damage to the Vessel as more
fully described on Schedule B-1.
"First Upgrade Program" means the upgrade of the Vessel from its 850
meter water capacity to 1,000 meters as more fully described in the
First Upgrade Contract, any other Upgrade Documents related thereto
and the plans, specifications and schedules set forth on Schedule B-
1.
"First Upgrade Severables" means that portion of the improvements
contemplated by the First Upgrade Program that is readily removable
from the Vessel without causing material damage to the Vessel as
more fully described on Schedule B-1.
"Guarantor" means R&B Falcon and any other Person that guarantees or
provides collateral or other credit support for the obligations of
the Charterer hereunder.
"Guaranty" shall mean the Guaranty entered into by any Guarantor for
the benefit of the Owner, as the same may from time to time be
supplemented, amended, waived or modified in accordance with the
terms thereof.
"Highest Lawful Rate" means the maximum nonusurious contract rate of
interest permitted by applicable law.
"Hire" means Basic Hire and Supplemental Hire, collectively.
"Income Taxes" means all income, franchise or similar Taxes which
are based on, or measured by or with respect to, net income.
"Indemnitee" has the meaning assigned to such term in Section 14.3.
"Independent Engineer" means ▇▇▇▇▇▇▇ & Casbarian, or any other
Person selected by the Owner and approved by the Charterer, which
approval shall not be unreasonably withheld or delayed.
"Investor" means each of GATX Marine Investors Corporation, MDFC
Equipment Leasing Corporation, ▇▇▇▇▇▇ Financial Leasing, Inc. and
their respective successors and assigns.
"▇▇▇ ▇▇▇▇▇▇▇▇▇▇" means the drilling rig ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, official
number 651643.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease,
right, security interest or claim of any nature.
"Limited Liability Company Agreement" means the Amended and Restated
Limited Liability Company Agreement dated as of July 1, 1998 among
GATX Marine Investors Corporation, MDFC Equipment Leasing
Corporation, and ▇▇▇▇▇▇ Financial Leasing, Inc. creating the Owner.
"MOA" means the Memorandum of Agreement dated as of November 28,
1995 between Reading and ▇▇▇▇▇, Inc. and the Owner.
"Moody's" means ▇▇▇▇▇'▇ Investor Service, Inc., a New York
corporation, and its successors and assigns.
"Mortgages" means the ▇▇▇▇▇▇▇▇▇▇ Mortgage and any other mortgage
that may from time to time secure the Obligations.
"Natural Gas" means any mixture of hydrocarbons or of hydrocarbons
and noncombustible gases, in a gaseous form at surface temperature
and pressure, which consists essentially of methane, but includes
ethane, propane, butanes, and other liquefiable hydrocarbons.
"1954 Code" means the United States Internal Revenue Code of 1954,
as amended and in effect prior to the enactment of the Tax Reform
Act of 1986 (Pub. L. No. 99-514).
"Nonseverables" means improvements, modifications and additions to
the Vessel that are not readily removable without causing damage to
the Vessel or that in accordance with applicable statutes, orders,
cases, rules, regulations and other laws may not be removed from the
Vessel.
"Obligations" means the obligations of the Obligors under the
Charter Documents.
"Obligors" means, collectively, the Charterer and each Guarantor.
"Operating Area" means any area in which the Charterer shall operate
the Vessel with notice to the Owner pursuant to Section 13.4.
"Overdue Rate" means an interest rate per annum equal to the lesser
of (a) the Prime Rate plus four percent (4%) per annum and (b) the
Highest Lawful Rate.
"Owner" means Deep Sea Investors, L.L.C., a limited liability
company organized under the laws of the State of Delaware.
"Owner Group" means, individually and collectively, the Owner and
its subsidiaries, its and their co-venturers and contractors and
subcontractors and the Investors, its and their respective
Affiliates (other than the Charterer), and its and their
shareholders, directors, officers, attorneys, accountants,
consultants and representatives, the employees, insurers and
invitees of all of those entities, the Trustee and the Vessel, but
shall expressly exclude Charterer Group.
"Owner Liens" means Liens described in clause (b) of the definition
of Permitted Liens.
"Owner's Cost" means, as of any date, the sum of (a) the purchase
price of the Vessel, (b) the First Upgrade Nonseverable Cost, (c)
the Second Upgrade Cost and (d) the Third Upgrade Cost.
"Payment Date" means each date that is a monthly anniversary date of
the calendar day immediately before the Delivery Date (such monthly
date being deemed for this purpose to be the day of each succeeding
month corresponding to such date immediately before the Delivery
Date or, if such month does not have a corresponding day, the last
day of such month), up to and including the end of the Charter
Period.
"Permitted Liens" means, as of any date, (a) any lien arising out of
a claim for crew's wages, supplies or the like, or salvage not
covered by insurance, or for taxes, assessments or other
governmental charges, in each case, incurred in the ordinary course
of business, and in existence as of the date of determination for
not more than 30 days and, as of the date of determination, neither
overdue nor in the aggregate in excess of $1,000,000 unless such are
being contested in good faith and by appropriate Persons and
proceedings, in each case, in the Owner's judgment and unless
Adequate Provision has been provided by the Charterer for payment of
such amounts that may become due and payable and such Lien attaches
only to such Adequate Provision and not to the Vessel, any part
thereof or any Drilling Contract and, in the Owner's judgment, no
risk of forfeiture or other loss of the Vessel, any part thereof, or
any right of the Charterer or the Owner under any Drilling Contract,
exists, or is threatened or imminent; (b) any lien created by,
through or under the Owner as a result of claims against the Owner
for which the Owner is not entitled to indemnification from the
Charterer or any Guarantor, or discharge of which is not the
obligation of the Charterer or any Guarantor, whether at law, by
contract, in equity or under admiralty principles; and (c) Drilling
Contracts complying with the provisions of this Charter and the
other Charter Documents and the rights of the Charterer under this
Charter, including subcharters of the Vessel in accordance with the
terms of this Charter, provided that no such contracts, rights or
subcharters shall suffer or permit to be continued any Lien or
encumbrance incurred by Charterer or any subcharterer or any of
their agents which might have priority over the title and interest
of the Owner in the Vessel or any part thereof or equipment or other
property used in connection with the Vessel.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock
company, trust or unincorporated organization or any government or
any agency or any political subdivision thereof.
"Primary Term" has the meaning assigned to such term in Section
3.1(a).
"Prime Rate" means the per annum rate of interest published from
time to time in the Eastern edition of The Wall Street Journal,
which rate shall change with each published change in such rate,
effective as of the date of such publication.
"Purchase Option Price" means the Fair Market Sale Value of the
Vessel determined in accordance with Section 3.8, not to exceed 40%
of Owner's Cost.
"▇▇▇▇▇▇▇▇ ▇▇▇▇" means the ▇▇▇▇▇▇▇▇ ▇▇▇▇, Official Number 601699, and
all fixtures, equipment and improvements of any kind whatsoever
installed or located thereon and owned by the Charterer.
"R&B Falcon" means R&B Falcon Corporation, a Delaware corporation.
"Rated Securities" means the implied long-term senior unsecured debt
of R&B Falcon.
"Reading & ▇▇▇▇▇" means Reading & ▇▇▇▇▇ Corporation, a Delaware
corporation.
"Rights Assignment" has the meaning assigned to such term in Section
16.3.
"Sale Date" means the date, if any, on which the Charterer acquires
the Vessel by exercise of its purchase option granted pursuant to
Section 3.7.
"Second Upgrade Agreement" means the Upgrade Agreement dated
July 23, 1997, but effective as of April 22, 1997 between the Owner
and R&B Drilling, individually and as agent.
"Second Upgrade Contract" means the Ship Repair Agreement dated as
of April 22, 1997 between Ham Marine, Inc., a Mississippi
corporation, and the Charterer.
"Second Upgrade Cost" means an amount not to exceed (i)
$25,346,756.15 to be paid under the Second Upgrade Agreement plus
(ii) any amounts authorized by the Owner to be paid to construct the
Second Upgrade Program.
"Second Upgrade Default" means the occurrence of an Upgrade Event of
Default (as defined in the Second Upgrade Agreement).
"Second Upgrade Program" means the upgrade of the Vessel from its
current 1,000 meter water capacity to 4,000 feet as more fully
described in the Second Upgrade Agreement, any other Upgrade
Documents (as defined in the Second Upgrade Agreement) and the
plans, specifications and schedules set forth on Schedule B-2.
"Second Upgrade Severables" means the severables acquired in
connection with the Second Upgrade Program.
"Security Agreement" means the Security Agreement dated November 28,
1995 between the Owner and the Trustee, as amended by the
Ratification Agreement dated as of July 23, 1997 between the Owner
and the Trustee, and the Ratification Agreement dated as of July 1,
1998 as such agreement may be further amended, supplemented or
modified in accordance with the terms thereof and hereof.
"Security Documents" means the Mortgages, the Security Agreement,
and any other agreement, instrument or document executed and
delivered for the purpose of supporting or securing the Obligations.
"Severables" means improvements, modifications or additions to the
Vessel that are readily removable without causing damage to the
Vessel and may, in accordance with all applicable statutes, orders,
cases, rules, regulations and other laws, be removed from the
Vessel.
"S&P" means Standard & Poor's Ratings Group, a division of ▇▇▇▇▇▇-
▇▇▇▇ Companies, Inc., a New York corporation, and its successors and
assigns.
"Shipping Act, 1916" shall mean the United States Shipping Act,
1916, as amended.
"Shipyard" means Newpark Marine Fabricators's shipyard in Galveston,
Texas.
"Stipulated Loss Value" as of any Payment Date listed by number in
Schedule D hereto means an amount determined by multiplying Owner's
Cost by the percentage set forth in Schedule D opposite such Payment
Date number.
"Subsidiary" means for any Person, any other corporation,
partnership, joint venture, limited liability company or other
entity at least a majority of the voting stock of which is
beneficially owned, directly or indirectly by such Person or its
Subsidiaries.
"Substitute Collateral" has the meaning assigned to such term in
Section 12.5(d).
"Supplemental Hire" shall mean any and all amounts, liabilities and
obligations other than Basic Hire that the Charterer assumes or
agrees to pay hereunder to the Owner, including, without limitation,
Stipulated Loss Value and indemnity payments.
"Taxes" means all federal, foreign, state, local or other net or
gross income, gross receipts, sales, use, stamp, documentary,
transfer, general consumption, ad valorem, property, value added,
franchise, production, import, export, withholding, payroll,
employment, excise or similar taxes, assessments, duties, fees,
levies or other governmental charges, including without limitation,
license, recording, documentation and registration fees, together
with any interest thereon, any penalties, additions to tax or
additional amounts with respect thereto and any interest in respect
of such penalties, additions or additional amounts.
"Third Parties" means all persons and entities that are not
Charterer Group or Owner Group.
"Third Upgrade Agreement" means the Upgrade Agreement dated July 1,
1998 but effective as of May 29, 1998 between the Owner and R&B
Drilling, individually and as agent.
"Third Upgrade Contract" means the Master Service Agreement dated as
of May 29, 1998 between Newpark Marine Fabricators, Inc., a Texas
corporation, and the Charterer.
"Third Upgrade Cost" means an amount not to exceed (i) $9,258,157 to
be paid under the Third Upgrade Agreement plus (ii) any amounts
authorized by the Owner to be paid to construct the Third Upgrade
Program.
"Third Upgrade Default" means the occurrence of an Upgrade Event of
Default (as defined in the Third Upgrade Agreement).
"Third Upgrade Program" means the upgrade of the Vessel from its
current 4,000 feet water capacity to 5,000 feet as more fully
described in the Third Upgrade Agreement, any other Upgrade
Documents (as defined in the Third Upgrade Agreement) and the plans,
specifications and schedules set forth on Schedule B-3.
"Third Upgrade Severables" means the severables acquired in
connection with the Third Upgrade Program.
"Timely Liquidation Value" means, for any property, the cash sale
value of such property that would be obtained in an arm's-length
transaction between a seller that must sell such property in no more
than 90 days and an informed and willing buyer-user, which
determination shall be made with a deduction for the removal of the
property from its location and on the assumption that such property
is in its current actual condition, which condition shall reflect
its current physical condition and location and any applicable
legal, governmental, physical, contractual and other impediments to
sale or use.
"Trustee" means Wilmington Trust Company not in its individual
capacity but solely as trustee for the benefit of the Owner under
the Mortgages and any of its successors or assigns in such capacity.
"UCC" means the Uniform Commercial Code as enacted in the State of
New York.
"Upgrade Documents" has the meaning assigned to such term in the
Third Upgrade Agreement.
"Upgrade Programs" means, collectively, the First Upgrade Program,
the Second Upgrade Program and the Third Upgrade Program.
"Vessel" means the ▇. ▇. ▇▇▇▇▇, ▇▇., as described on Schedule A, as
upgraded pursuant to the Upgrade Programs, and all fixtures,
equipment and improvements of any kind whatsoever installed or
located thereon pursuant to this Charter (including, without
limitation, the First Upgrade Severables, the Second Upgrade
Severables and the Third Upgrade Severables) or as otherwise agreed
to by the Charterer and the Owner.
ARTICLE 2
SCHEDULES AND OBJECTIVES
2.1 Schedules
The following schedules are attached hereto and made a part hereof
for all purposes. In the event there are any conflicts between the
body of this Charter and the schedules attached hereto, the
provisions in the body of this Charter will prevail.
(a) Schedules
Schedule A - Description of the Vessel, including specifications.
Schedule B-1 - First Upgrade Program
Schedule B-2 - Second Upgrade Program
Schedule B-3 - Third Upgrade Program
Schedule C - Charterer's Insurance
Schedule D - Stipulated Loss Value
Schedule E - Pending Litigation
Schedule F - Computation of Basic Hire Adjustment for Third
Upgrade
2.2 Objectives
The Owner shall provide the Vessel to the Charterer on a bareboat or
demise charter basis. The Owner shall not be responsible for any
other service, ▇▇▇▇▇▇▇, operations or equipment whatsoever. By the
Owner providing the Vessel to the Charterer in accordance with this
Charter, upon the terms and subject to the conditions hereof, the
Charterer shall take and have command, possession and control of the
Vessel during the term of this Charter; as a part hereof, and
without limit to the foregoing, the Charterer's command, possession
and control of the Vessel shall specifically include the obligation
to have the Vessel under the command of an Offshore Installation
Manager certified by and for the area in which the Vessel is
operating from time to time.
2.3 CONDITION OF THE PROPERTY. THE CHARTERER ACKNOWLEDGES AND AGREES
THAT IT IS CHARTERING THE VESSEL AND OTHER PROPERTY HEREUNDER AAS
IS", AWHERE IS", AND AWITH ALL FAULTS, WHETHER LATENT OR
DISCERNIBLE", WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS
OR IMPLIED) BY THE OWNER, OWNER GROUP OR ANY INVESTOR AND IN EACH
CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF
ANY PARTIES IN POSSESSION THEREOF, (C) ALL APPLICABLE LEGAL
REQUIREMENTS AND (D) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY
EXIST ON THE DATE HEREOF. NONE OF OWNER, ANY MEMBER, OWNER GROUP,
OR ANY INVESTOR HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY
REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL
BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE, VALUE,
HABITABILITY, USE, SEAWORTHINESS, CONDITION, STABILITY, SUITABILITY,
DESIGN, OPERATION, CLASS, COMPLIANCE WITH LAWS, CONFORMANCE TO
SPECIFICATIONS, MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY
(OR ANY PART THEREOF FOR A PARTICULAR PURPOSE OR WITH RESPECT TO
PATENT INFRINGEMENT), OR ANY OTHER REPRESENTATION, WARRANTY OR
COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY
PROPERTY (OR ANY PART THEREOF), AND NONE OF OWNER, OWNER GROUP OR
ANY INVESTOR SHALL BE LIABLE FOR ANY LATENT, HIDDEN OR PATENT DEFECT
THEREIN, ANY REPRESENTATION, WARRANTY OR PROMISE, EXPRESS OR
IMPLIED, WHICH ANY MANUFACTURER OR BUILDER OF THE VESSEL OR ANY
PROPERTY (OR ANY PART THEREOF) MAY HAVE MADE OR MAY BE DEEMED TO
HAVE MADE OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO
COMPLY WITH ANY LEGAL REQUIREMENT OR ANY DAMAGES, WHETHER ACTUAL,
SPECIAL, CONSEQUENTIAL OR INCIDENTAL, ARISING HEREFROM OR THEREFROM.
THE CHARTERER HAS BEEN AFFORDED FULL OPPORTUNITY TO INSPECT THE
VESSEL, IS (INSOFAR AS THE OWNER IS CONCERNED) SATISFIED WITH THE
RESULTS OF ITS INSPECTIONS AND IS ENTERING INTO THIS CHARTER SOLELY
ON THE BASIS OF THE RESULTS OF ITS OWN INSPECTIONS, AND ALL RISKS
INCIDENT TO THE MATTERS DESCRIBED IN THE PRECEDING SENTENCE, AS
BETWEEN OWNER, THE OWNER GROUP AND THE INVESTORS, ON THE ONE HAND,
AND THE CHARTERER, ON THE OTHER HAND, ARE TO BE BORNE BY THE
CHARTERER. NOTHING IN THIS SECTION 2.3 OR THE CHARTER SHALL OPERATE
TO NEGATE OR DIMINISH ANY CLAIM FOR BREACH OF ANY REPRESENTATION,
WARRANTY OR COVENANT THAT THE OWNER MAY NOW OR HEREAFTER HAVE UNDER
ANY CHARTER DOCUMENT OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED
THEREBY.
ARTICLE 3
TERM, DELIVERY DATE AND PURCHASE OPTION
3.1 Duration
(a) Subject to the terms and conditions of this Charter, the Owner
bareboat (demise) charters to the Charterer, and the Charterer
bareboat (demise) charters from the Owner, the Vessel for a
period beginning on the Delivery Date and ending on the 10th
anniversary of the Delivery Date (the "Primary Term"), with the
option to extend this Charter pursuant to Section 3.1(b).
(b) At the end of the Primary Term, and subject to the terms and
conditions of this Charter, the term of this Charter may be
extended for a period of 90 days (the "Extended Term") by the
Charterer providing 180 days' written notice to the Owner prior
to the end of the Primary Term if, and only if, such extension
is necessary to complete a Drilling Contract in progress that
is in full force and effect on the date such extension notice
is delivered and no Default or Event of Default has occurred
and is continuing. The Charterer, at its sole cost and
expense, shall provide the Owner with independent verification
of the necessity of any such extension in form and substance
satisfactory to the Owner. During such Extended Term, if any,
all of the obligations of the Charterer under this Charter
during the Charter Period shall continue for the Extended Term,
including, without limitation, the obligation to pay Basic Hire
under Section 12.1. Prior to any extension of the Primary
Period for the Vessel, the Charterer shall give the Owner its
good faith estimate of the date on which the existing Drilling
Contract will be completed.
(c) The Charterer shall, at all reasonable times during the last
180 days of the Charter Period, permit access to the Vessel to
the Owner and to Persons designated by the Owner in connection
with any prospective sale or prospective rechartering of the
Vessel by the Owner, and shall permit the inspection of the
Vessel by such Persons; provided, however, that the exercise of
such rights shall in no way unreasonably interfere with the use
of the Vessel by the Charterer.
3.2 Delivery of the Vessel to the Charterer
The Vessel was delivered by the Owner to the Charterer at Garden
Banks Block 387, Outer Continental Shelf, Gulf of Mexico on November
29, 1995, pursuant to the MOA. Upon such delivery, the Vessel
became subject to all the terms and conditions of this Charter.
Such delivery of the Vessel by the Owner to the Charterer, without
further action, irrevocably constituted acceptance by the Charterer
of the Vessel for all purposes of this Charter, and shall be
conclusive proof that the Vessel was at such time in compliance with
all requirements of this Charter and that the Vessel was at such
time seaworthy, in accordance with specifications, in good working
order, condition and repair and without defect or inherent vice in
title, condition, design, operation or fitness for use, whether or
not discoverable by the Charterer as of the date hereof, and free
and clear of all Liens, other than Permitted Liens; provided,
however, that nothing contained herein shall in any way diminish or
otherwise affect any right the Charterer, the Owner or any of their
respective Affiliates may have against any shipyard, manufacturer,
supplier, vendor or any other Person in respect of the Vessel. FROM
AND AFTER THE DELIVERY DATE, THE CHARTERER SHALL NOT BE ENTITLED TO
MAKE OR ASSERT ANY CLAIM AGAINST OWNER, THE OWNER GROUP OR ANY
INVESTOR ON ACCOUNT OF ANY REPRESENTATION OR WARRANTY WITH RESPECT
TO THE VESSEL, THE CONSUMABLE STORES ON BOARD OR WITH RESPECT TO ITS
TITLE, SEAWORTHINESS, MERCHANTABILITY, FITNESS, HABITABILITY, VALUE,
USE, CONDITION, SUITABILITY, CLASS, COMPLIANCE WITH LAWS, DESIGN,
OPERATION, CONFORMANCE TO SPECIFICATIONS NOR ABSENCE OF DEFECTS,
LATENT, HIDDEN, PATENT OR OTHER, NOR WITH RESPECT TO PATENT
INFRINGEMENT. FROM AND AFTER THE DELIVERY DATE, THE CHARTERER
WAIVES ANY CLAIM IT MIGHT HAVE AGAINST OWNER, THE OWNER GROUP OR ANY
INVESTOR FOR ANY LIABILITY, CLAIM, LOSS, DAMAGE OR EXPENSE OF ANY
KIND OR NATURE BY OR WITH RESPECT TO THE VESSEL OR ANY DEFICIENCY OR
DEFECT THEREIN OR INADEQUACY THEREOF, THE USE OR MAINTENANCE
THEREOF, ANY INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF, WHETHER
IN CONTRACT, TORT OR ANY THEORY OF PRODUCT OR STRICT LIABILITY.
3.3 Early Termination
This Charter shall terminate in accordance with any notice of
termination given in accordance with this Section 3.3. This Charter
shall also terminate at the time stipulated below for any of the
following reasons:
(a) At the option of the Owner, this Charter shall terminate
immediately and upon written notice to the Charterer if any
Event of Loss occurs and upon such termination the Charterer
shall pay the Owner on the earlier of (i) the receipt of any
insurance payable in respect of such Event of Loss and (ii) 60
days after the occurrence of such Event of Loss, the Stipulated
Loss Value of the Vessel set forth on Schedule D as of the
Payment Date preceding the occurrence of such Event of Loss
plus any past due Hire, plus the sum of the per diem of the
Basic Hire due on the next Payment Date, for each day during
the period from the next preceding Payment Date to the date of
such Event of Loss (unless the Event of Loss shall occur on a
Payment Date, in which case, such payment shall be equal to the
Stipulated Loss Value on such Payment Date plus any Hire due on
such Payment Date), in each case, together with interest
thereon computed from the date of such Event of Loss to the
date of actual payment at a rate per annum equal to the Overdue
Rate. If the time of such loss be uncertain, the loss shall be
deemed to have occurred as of the time at which communication
from the Vessel was last heard. It is expressly understood
that the Charterer shall bear all risk of any such loss.
(b) Each of the following events shall be an "Event of Default":
(i) the Charterer shall fail to pay the Owner any amounts due
and payable hereunder when due; or
(ii) the Charterer shall fail to perform any of its obligations
under Article 5, Sections 7.3, 10.1, 11.1(a), 11.6, 11.7,
11.8, 12.5, 13.4, or 14.6, Article 15, Section 17.3 or
Article 18 hereof or any other obligation as to which the
Charterer is specifically accorded elsewhere herein or
otherwise any notice and/or grace period in which to
perform such obligation or to cure such breach thereof or
default therein and such notice shall have been given
and/or such grace period shall have expired without cure
of such failure; or
(iii) any Obligor shall fail to perform any of its
obligations hereunder or under any Charter Document (other
than those specified in Section 3.3(a) or (b)(i)) which is
not cured within the lesser of (A) 10 days or (B) the then
remaining term of the Charter Period of the occurrence
thereof; or
(iv) any representation, warranty or statement made or deemed
made by any Obligor in any Charter Document or information
furnished by or on behalf of any Obligor in any
instrument, certificate or other document delivered by or
on behalf of any Obligor shall be untrue in any material
respect on the date made or deemed made; or
(v) (i) any Obligor shall fail to pay any principal of or
premium or interest on any Debt (excluding Debt under this
Charter) of such Obligor under which any aggregate amount
of at least $1,000,000 is outstanding or committed, when
the same becomes due and payable, and such failure shall
continue after any applicable grace period; or (ii) any
other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and
shall continue after any applicable grace period, if the
effect of such event or condition results in the
acceleration of, the maturity of such Debt; or any such
Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled
required prepayment), redeemed, purchased or defeased, or
an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case, prior to the
stated maturity thereof; or legal action shall be taken
with respect to such other event (including, but not
limited to, the commencement of proceedings seeking
specific performance or injunctive or other equitable
relief); or
(vi) any Obligor shall generally not pay its debts as such
debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or voluntarily or
involuntarily dissolves or is dissolved, or terminates or
is terminated; or any proceeding shall be instituted by or
against such Person or any of its subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or
its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for
it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of 30 days, or any of
the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or
the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of
its property) shall occur; or any such Person or any of
its subsidiaries shall take any corporate or other
organizational action to authorize any of the actions set
forth above in this subsection (vi); provided, however,
that nothing contained in this Section 3.3(b)(vi) or
otherwise shall be deemed to limit, restrict or prohibit
Owner in any manner from intervening in any such
proceeding described above and enforcing any of its rights
and remedies whether under this Charter or any of the
Charter Documents, at law, in admiralty or equity or
otherwise; or
(vii) a judgment or order for the payment of money in the
amount of at least $1,000,000 or more shall be rendered
against any Obligor and either (i) enforcement proceedings
shall have been commenced by any creditor upon such
judgment or order or (ii) 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; or
(viii) any provision of this Charter or any Charter Document
shall at any time for any reason cease to be valid and
binding on any Obligor, or shall be declared to be null
and void, or the validity or enforceability thereof shall
be contested by any Obligor, or any Obligor shall deny
that it has any or further liability or obligation under
this Charter or any Charter Document; or
(ix) failure of any Obligor to comply with, or to incur any
liability, whether fixed or contingent, under or pursuant
to, any statute, law, regulation or other governmental
requirement to which such Obligor is subject, including
but not limited to ERISA, the Oil Pollution Act of 1990
(AOPA") and any other environmental, health or safety law
or regulation, in each case, which might reasonably be
expected to have a material adverse effect on the
condition (financial and otherwise), business prospects or
the ability of such Obligor to perform its obligations
under the Charter Documents; or
(x) any Lien securing the Obligations shall fail to be
perfected, valid or enforceable, or any material adverse
effect shall occur respecting the value or suitability as
collateral of any property encumbered by such Lien (unless
the Charterer shall have provided Substitute Collateral in
accordance with Section 12.5(c)), including, without
limitation, any levy, attachment or seizure thereof or,
subject to Section 12.5, the Lien securing the Obligations
under the ▇▇▇▇▇▇▇▇▇▇ Mortgage shall fail to be a first
priority preferred ship mortgage at any time after
December 31, 1997; or
(xi) the Completion (as defined in the Third Upgrade Agreement)
shall not occur on or before September 30, 1998; or
(xii) a Third Upgrade Default shall occur and be continuing.
3.4 Remedies
Upon the occurrence and during the continuation of any Event of
Default, the Owner may, at its option, declare this Charter to be in
default; and at any time thereafter, the Owner may do, and the
Charterer shall comply with, one or more of the following, as the
Owner in its sole discretion shall elect:
(a) Upon written demand (which demand shall have the effect of
terminating all of the Charterer's rights to use or possess the
Vessel or act as agent under the Upgrade Programs), the Owner
may cause the Charterer to, and the Charterer hereby agrees
that it will, at the Charterer's sole cost and expense,
promptly redeliver the Vessel, or cause the Vessel to be
redelivered, to the Owner with all reasonable dispatch and in
the same manner and in the same condition as if the Vessel were
being redelivered at the expiration of the Charter Period in
accordance with all of the provisions of Section 3.5, and all
obligations of the Charterer under said Section shall apply to
such redelivery; or the Owner or its agent, at the Owner's
option, without further notice, may, but shall be under no
obligation to, retake the Vessel wherever found, whether upon
the high seas or at any port, harbor or other place and
irrespective of whether the Charterer, any subcharterer or any
other person may be in possession of the Vessel, all without
prior demand and without legal process, and for that purpose
the Owner or its agent may enter upon any dock, pier or other
premises where the Vessel may be and may take possession
thereof, without the Owner or its agent incurring any liability
by reason of such retaking, whether for the restoration of
damage to property caused by such retaking or for damages of
any kind to any Person for or with respect to any cargo carried
or to be carried by the Vessel or for any other reason.
Henceforth, the Owner shall hold, possess and enjoy the Vessel,
free and clear of any right of the Charterer or its successors
or assigns to possess or use the Vessel for any reason
whatsoever. The exercise by the Owner of its remedies under
this paragraph (a) shall be without prejudice, and in addition,
to any of the Owner's other remedies referred to in this
Charter or any of the other Charter Documents or at law, in
admiralty or equity.
(b) The Owner, by written notice to the Charterer specifying a
payment date not less than 10 days, nor more than 30 days,
after the date of such notice, may require the Charterer to pay
to the Owner, and the Charterer hereby agrees that it will pay
to the Owner, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty
and in lieu of any further Basic Hire payments hereunder, an
amount equal to all unpaid Basic Hire payable on each Payment
Date occurring on or before the payment date specified in such
notice, plus the Stipulated Loss Value computed as of the
Payment Date preceding the payment date specified in such
notice plus the sum of the per diem of the Basic Hire due on
the next Payment Date for each day during the period from the
next preceding Payment Date to the date of such Event of Loss
(or as of such payment date specified in such notice if such
payment date specified in such notice is a Payment Date),
together with interest on such amounts at the Overdue Rate for
the period, if any, from the Payment Date as of which such
Stipulated Loss Value is calculated to and including the date
of actual payment. Upon such payment of liquidated damages,
the Owner shall pay over to the Charterer the net proceeds of
any sale, charter or other disposition of the Vessel as and
when received but only after deducting all costs and expenses
whatsoever incurred by the Owner in connection therewith, to
the extent such net proceeds do not exceed the amount of such
Stipulated Loss Value actually so paid. Nothing contained in
the preceding sentence or otherwise shall require the Owner to
sell, charter or otherwise dispose of the Vessel at any time.
(c) The Owner may exercise any other right or remedy that may be
available to it under applicable law, in equity or admiralty or
proceed by appropriate court action to enforce the terms of
this Charter or to recover damages for the breach hereof or to
terminate this Charter.
(d) The Owner or its agent may sell the Vessel at public or private
sale, with or without notice to the Charterer, advertisement or
publication, as the Owner may determine, or otherwise may
dispose of, hold, possess, use, operate, charter (whether for a
period greater or less than the balance of what would have been
the Charter Period in the absence of the termination of the
Charterer's rights to the Vessel) to others or keep idle the
Vessel, all on such terms and conditions and at such place or
places as the Owner may determine and all free and clear of any
rights of the Charterer and of any claim of the Charterer in
admiralty, in equity, at law or by statute, whether for loss or
damage or otherwise, and without any duty to the Charterer
except to the extent provided in paragraph (b) above. The
Charterer and the Owner agree that 10 days' written notice of
the sale to be made by the Owner or its designee or after the
time in which a private sale shall occur is commercially
reasonable notice for all purposes.
In addition, the Charterer shall be liable for any and all
Supplemental Hire payable hereunder before, during or after the
exercise of any of the foregoing remedies and for all insurance
premiums and all demurrage, docking and anchorage charges and all
legal fees and any other costs and expenses whatsoever incurred by
the Owner or any Investor by reason of the occurrence of any Event
of Default or by reason of the exercise by the Owner of any right or
remedy hereunder, including, without limitation, any costs and
expenses incurred by the Owner in connection with any retaking of
the Vessel or, upon the redelivery or retaking of the Vessel in
accordance with this Section 3.4, the placing of the Vessel in the
condition required by and otherwise complying with the terms of
Section 3.5 hereof. No right or remedy referred to in this Section
3.4 is intended to be exclusive, but each shall be cumulative and is
in addition to, and may be exercised concurrently with, any other
right or remedy which is referred to in this Section 3.4 or which
may otherwise be available to the Owner at law, in equity or in
admiralty, including without limitation the right to terminate this
Charter. There shall be deducted from the aggregate amount so
recoverable by the Owner, the net balance, if any, remaining of any
monies held by the Owner which would have been required by the terms
hereof to have been paid to the Charterer but for the occurrence of
an Event of Default. The rights of the Owner and the obligations of
the Charterer under this Section 3.4 shall be effective and
enforceable regardless of the pendency of any proceeding which has
or might have the effect of preventing the Owner or the Charterer
from complying with the terms of this Charter. No express or
implied waiver by the Owner of any Event of Default shall in any way
be, or be construed to be, a waiver of any further or subsequent
Event of Default. To the extent permitted by applicable law, the
Charterer hereby waives any rights now or hereafter conferred by
statute or otherwise which may require the Owner to sell, charter or
otherwise use the Vessel in mitigation of the Owner's damages.
3.5 Redelivery of the Vessel
Upon termination of this Charter, the Charterer shall, at its sole
cost and expense not to exceed $2,500,000 as Escalated, redeliver
the Vessel to the Owner at an anchorage of the Owner's choice. The
Charterer shall notify the Owner in writing at least 360 days prior
to the expiration of the Charter Period of the location in which the
Vessel will be operating at the expiration of the Charter Period.
The Charterer agrees that at the time of such redelivery the Vessel
shall be free and clear of all Liens (other than Owner Liens), shall
be entitled to and shall have the classification and rating required
by Section 8.1, with no requirements, specifications or
recommendations of the American Bureau of Shipping or of any
governmental agency or department unfulfilled and with all required
certificates in effect, shall be in compliance with all laws,
conventions, treaties and customs and rules and regulations issued
thereunder or applicable in any way to the Vessel or any use or
operation thereof, shall be free of any insignia of the Charterer or
others, shall be charter free, cargo free, safely afloat, securely
moored, free of charge and be in the same good order and condition
as described in the third sentence of Section 3.2, but with the
Upgrade Programs completed and as required by Section 8.1, ordinary
wear and tear excepted; provided however, that in the event that the
Owner elects not to exercise its option to purchase Severables
(other than Third Upgrade Severables) acquired after the Delivery
Date pursuant to Section 9.4, the Charterer shall redeliver the
Vessel to the Owner with Severables comparable to the Severables
aboard the Vessel when the Vessel was delivered to the Charterer
pursuant to Section 3.2 and Severables comparable to the Third
Upgrade Severables. Any Coast Guard certificates required to be
issued annually with respect to the Vessel shall have been issued
within 12 months of the date of redelivery of the Vessel. At the
time and place of redelivery of the Vessel, the Charterer shall also
deliver to the Owner all documentation, plans, drawings,
specifications, logbooks, classification and inspection, records,
operating manuals, records of modification, overhaul, use and/or
maintenance and other warranties and documents then in its
possession or control which were furnished by the manufacturers or
builders of the Vessel, the Upgrade Programs or any other upgrade of
the Vessel or any supplier of equipment on the Vessel or otherwise
maintained by the Charterer. Upon redelivery of the Vessel
hereunder, the Charterer, if requested in writing by the Owner, will
arrange for, at the Charterer's cost and expense, docking or
appropriate anchorage or storage facilities for the Vessel for a
period not exceeding 150 days, including, but not limited to, any
crew, staffing, materials, fuel or other costs or expenses incurred
to stack the Vessel with full marine and maintenance crews.
3.6 Survey of the Vessel at End of Charter Period
At least 120 days before redelivery of the Vessel pursuant to
Section 3.5, but sufficiently in advance of such redelivery date to
permit any needed repairs to be completed by such redelivery date, a
joint survey shall be made by the Charterer and the Owner (with
drydocking or underwater survey in lieu of drydocking and bottom
painting, unless the Owner shall otherwise agree in writing) to
determine the condition and fitness of the Vessel, during which
survey the Vessel's tanks shall be gas-freed and the Vessel's
engines and boilers opened for inspection; the redelivery survey
shall meet all requirements of the next special survey of the
Vessel, provided that if a special survey of the Vessel has been
made, pursuant to the provisions of Article 8, within 30 months
prior to such redelivery, the records of such special survey shall
be taken into account in determining the scope of the joint survey
required pursuant to this Section 3.6. If requested by the Owner, a
surveyor from the American Bureau of Shipping shall be present and
the Charterer shall permit such surveyor to examine all areas of
hull and items of machinery and other parts of the Vessel. The
Charterer will pay for the costs of such survey, drydocking or
underwater survey in lieu of drydocking and bottom painting and the
Charterer shall notify the Owner at least 10 days in advance of the
time and place of such drydocking or underwater survey in lieu of
drydocking, bottom painting and survey. The Charterer, at its sole
cost and expense, will fully correct and repair any condition
disclosed by such survey to the extent necessary to cause the
Vessel, on or before the date specified for redelivery, to comply
with all of the terms of Section 8.1. The term of the Charter
Period shall be extended for any period necessary (a) so as to
permit the survey described in this Section 3.6 to occur at least
120 days before redelivery of the Vessel pursuant to Section 3.5
whether as a result of this Vessel's use in completing a Drilling
Contract in progress under Section 3.1(b) or otherwise; and (b) to
make such repairs. During such extension period, if any, all of the
obligations of the Charterer under this Charter applicable during
the Charter Period shall continue in respect of such extension
period. Upon redelivery of the Vessel under this or the preceding
paragraph, the Charterer, if requested in writing by the Owner, will
provide docking or appropriate anchorage or storage facilities for
the Vessel (if available at the designated port) for a period not
exceeding 150 days at the Charterer's cost and expense, including,
but not limited to, any crew, staffing, materials, fuels or other
cost or expense to stack the Vessel with full marine and maintenance
crews.
3.7 Purchase Option.
No more than 540, but no less than 360 days prior to the Expiration
Date, the Charterer may, so long as no Default or Event of Default
has occurred and is continuing, give the Owner irrevocable written
notice (the "Expiration Date Election Notice") that the Charterer
elects to exercise its option to purchase the Vessel (except for the
First Upgrade Severables). If the Charterer elects to exercise such
option, then the Charterer shall pay to the Owner on the Expiration
Date an amount in immediately available funds equal to the Purchase
Option Price and, upon receipt of such amount plus all other amounts
payable under this Charter and the other Charter Documents, the
Owner shall transfer all of the Owner's right, title and interest in
the Vessel (except for the First Upgrade Severables), such transfer
shall be AAS IS", AWHERE IS", without recourse and without any
representation or warranty of any kind or nature whatsoever, either
express or implied (except for the absence of Liens arising as a
result of claims against the Owner for which the Owner is not
entitled to indemnification from the Charterer or any Guarantor or
the payment or discharge of which is not the obligation of the
Charterer or any Guarantor), in the then-current physical condition
of the Vessel and without any other representation or warranty on
the part of, or recourse to, the Owner.
3.8 Determination of Purchase Option Price
During the period from the delivery of the Expiration Date Election
Notice to the Owner until 210 days prior to the Sale Date, the
Charterer and the Owner may mutually agree on the Fair Market Sale
Value of the Vessel as of the Sale Date, and if the Charterer and
the Owner fail to so agree, such Fair Market Sale Value shall be
determined not less than 90 days before the Sale Date by application
of the Appraisal Procedure.
ARTICLE 4
NATURE OF COMPENSATION
4.1 Absolute Obligation
The obligation of the Charterer to pay to the Owner the fees, rates,
hires, indemnities and reimbursements specified in this Charter
shall be absolute and unconditional and shall not be affected by any
circumstance whatsoever, and the Charterer waives (and agrees not to
allege or pursue) any right to any such defense, including without
limitation, (a) any setoff, counterclaim, abatement, reduction,
recoupment, defense, or other right that the Charterer may have
against the Owner or any other Person, firm, company, or entity for
any reason whatsoever; (b) any unavailability of the Vessel after
its delivery to the Charterer for any reason; (c) any damage, loss
or destruction of or damage to the Vessel or interruption,
restriction, interference, or cessation in the use or possession
thereof by the Charterer for any reason whatsoever, at whatever time
and of whatever duration; (d) any confiscation, expropriation,
nationalization, requisition, seizure, inability to export,
deprivation, or other taking of title to or possession or use of the
Vessel or any part thereof by any government or governmental
authority or otherwise; (e) any restriction on possession or use of
the Vessel; (f) the interference with or prohibition of the
Charterer's possession or use of the Vessel; (g) any invalidity or
unenforceability or lack of due authorization or other infirmity of
this Charter or the lack of right, power or authority of any Obligor
or the Owner to enter into this Charter or any Charter Document;
(h) any default by the Owner; (i) any defect in the title,
condition, quality or fitness for a particular purpose of the Vessel
or other property or service provided hereunder; (j) any amendment
or modification of or supplement to the Charter Documents, any
agreements relating to any thereof or any other instrument or
agreement applicable to the Vessel or any part thereof, or any
assignment or transfer of any thereof, or any furnishing or
acceptance of additional security, or any release of any security,
or any failure or inability to perfect any security; (k) any failure
on the part of the Owner, the Owner Group or any Investor or any
other Person to perform or comply with any term of any instrument or
agreement; (l) any waiver, consent, change, extension, indulgence or
other action or inaction under or in respect of any such instrument
or agreement or any exercise or nonexercise of any right, remedy,
power or privilege under or in respect of any such instrument or
agreement or this Charter; (m) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation,
or similar proceeding with respect to any Obligor, the Owner, the
Owner Group or any Investor, or their respective properties or
creditors, or any action taken by any trustee or receiver or by any
court in any such proceeding, including, without limitation, any
termination or rejection of this Charter by any court or any
trustee, receiver or liquidating agent of any Obligor, the Owner
Group, any Investor, or the Owner or of any of their respective
properties in connection with any such proceeding; (n) any
assignment or other transfer of this Charter by the Charterer or the
Owner or any lien, charge or encumbrance on or affecting the
Charterer's estate in, or any subchartering of, all or any part of
the Vessel; (o) any libel, attachment, levy, detention,
sequestration or taking into custody of the Vessel, or any
interruption or prevention of or restriction on or interference with
the use or possession of the Vessel; (p) any act, omission or breach
on the part of the Owner under this Charter or under any other
agreement at any time existing among the Owner or any Obligor or
under any other law, governmental regulation or other agreement
applicable to such Persons or the Vessel; (q) any claim as a result
of any other dealing between the Owner and any Obligor; (r) any
ineligibility of the Vessel, or any denial of the Vessel's right, to
engage in any trade or activity; (s) any failure to obtain any
required governmental consent for any transfer of rights or title
required to be made by the Owner under this Charter; (t) any
ineligibility of the Vessel for documentation under the laws of any
jurisdiction; (u) the recovery of any judgment against any Person or
any action to enforce the same; (v) any defect in the seaworthiness,
condition, design, operation or fitness for use or other
characteristics of the Vessel; (w) any change in the ownership,
direct or indirect, of the capital stock of the Owner or any of the
Obligors; or (x) any other cause, circumstance, or happening,
whether similar or dissimilar to the foregoing, any present or
future law to the contrary notwithstanding and whether or not any
Obligor could have foreseen or shall have notice or knowledge of any
of the foregoing. Except as specifically provided herein, the
Charterer hereby waives any and all rights that it may now have or
which at any time hereafter may be conferred upon it, by statute, at
law, in admiralty or equity or otherwise, to terminate, cancel, quit
or surrender this Charter.
All payments hereunder shall be final and, once paid, be fully and
finally earned and nonrefundable, and the Charterer shall not seek
to recover all or any part of such payment from the Owner for any
reason whatsoever.
The Charterer shall remain obligated under this Charter in
accordance with its terms and shall not take any action to
terminate, rescind or avoid this Charter, notwithstanding any action
for bankruptcy, insolvency, reorganization, liquidation,
dissolution, or other proceeding affecting the Owner, any
governmental authority or any other Person, or any action with
respect to this Charter or any Charter Document which may be taken
by any trustee, receiver or liquidator of the Owner, any
governmental authority or any other Person or by any court with
respect to the Owner or any governmental authority. The Charterer
hereby waives all right (i) to terminate or surrender this Charter
or (ii) to avail itself of any abatement, suspension, deferment,
reduction, setoff, counterclaim or defense with respect to any
amount payable hereunder. The Charterer shall remain obligated
under this Charter in accordance with its terms and the Charterer
hereby waives any and all rights now or hereafter conferred by
statute, at law, in admiralty or equity or otherwise to limit or
modify any of the Owner's rights or remedies or any of the
Charterer's rights, remedies, obligations or liabilities as
described in this Charter or any Charter Document (such waiver to
include, without limitation, any and all rights and remedies against
a lessor under Article 2A of the UCC or to avoid strict compliance
with its obligations under this Charter).
4.2 Net Charter
This Charter is a net Charter and it is intended that the Charterer
shall pay all costs, charges, fees, assessments, expenses, duties
and taxes of every character incurred in connection with the
delivery, storage, use, possession, operation, maintenance, repair,
chartering, recovery, retaking, and return of the Vessel, including
without limitation those described elsewhere in this Charter. The
parties intend that the obligations of the Charterer hereunder shall
be covenants and agreements that are separate and independent of the
Owner's obligations hereunder or hereafter arising or existing and
shall continue unaffected.
ARTICLE 5
CONDITIONS TO EFFECTIVENESS
5.1 Conditions
This Charter shall become effective upon (i) receipt by the Owner of
each of the documents described in subsections (a) through (k)
below, in form and substance satisfactory to the Owner and each
Investor, and (ii) satisfaction of each of the other conditions set
forth in subsections (l) through (p) below in a manner satisfactory
to the Owner and each Investor in all respects.
(a) This Charter duly executed by Charterer.
(b) A Guaranty duly executed by R&B Falcon in form and substance
satisfactory to the Owner.
(c) A Second Supplement to Preferred Mortgage, duly executed by
Charterer, mortgaging the ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in form and substance
satisfactory to the Owner.
(d) A Ratification Agreement duly executed by Charterer and the
Owner in form and substance satisfactory to the Owner.
(e) Duly executed Officers' Certificates, dated as of the Closing
Date, from an executive officer and the Secretary or Assistant
Secretary of each of the Charterer and R&B Falcon
(collectively, the AR&B Companies") certifying copies of
resolutions of each of the R&B Companies approving this Charter
and the other Charter Documents to which each is a party and
authorizing the transactions contemplated herein and therein,
duly adopted at a meeting of, or by the unanimous written
consent of, the Board of Directors of each corporation, and the
articles or certificates of incorporation and by-laws of the
R&B Companies, as in effect at such time.
(f) An original executed opinion dated the Closing Date from ▇▇▇▇▇
▇. ▇▇▇▇▇▇, General Counsel to the R&B Companies, setting forth
customary opinions regarding (i) the R&B Companies' due
organization, valid existence, good standing, corporate power
and authority, (ii) the legal, valid and binding nature of this
Charter and the other Charter Documents, (iii) the absence of
violations of, or conflicts with, laws, corporate
organizational and governance documents or other agreements,
(iv) the absence of any required consents, and (v) such other
matters as the Owner may reasonably require be addressed. In
addition, such opinion shall also opine that no consent or
approval of the U.S. Department of Transportation Maritime
Administration, the United States Coast Guard or any other
entity having jurisdiction over the Vessel, the Collateral
Vessels or any of the R&B Companies is required in order to
consummate the transactions contemplated hereby or by any of
the other Charter Documents.
(g) An original executed opinion from ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.,
counsel to the Owner, regarding (i) the legal, valid and
binding nature of this Charter and certain other Charter
Documents and (ii) certain tax matters.
(h) [intentionally deleted]
(i) [intentionally deleted]
(j) A consent to the assignment of Third Upgrade Contract to the
Owner executed by the Contractor.
(k) A duly executed Third Upgrade Agreement.
(l) No loss, constructive loss or requisitioning for use by any
governmental authority of the Vessel shall have occurred.
(m) No change shall have occurred in applicable law or regulations
thereunder or in interpretations thereof by any regulatory
authority which would make it illegal for the Charterer, the
Owner or any Investor to enter into any of the transactions
contemplated in the Charter Documents or which would subject
the Charterer, the owner or any Investor to any penalty or
other liability as a result of any transaction contemplated in
any of the Charter Documents.
(n) No material adverse change shall have occurred in the physical
condition of the Vessel since December 31, 1995.
(o) All governmental and regulatory approvals, licenses and
authorizations necessary or, in the opinion of the Owner, the
Investors or their respective counsel, advisable in connection
with the transactions contemplated in the Charter Documents
shall have been duly received or obtained.
(p) The Owner's determination that, since December 31, 1997, no
material adverse change has occurred with respect to the
financial or other condition of Charterer or Reading & ▇▇▇▇▇
and R&B Falcon.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of the Owner.
To induce the Charterer to enter into this Charter and to consummate
the transactions contemplated hereby, the Owner represents and
warrants to the Charterer that as of the date of execution of this
Charter:
(a) Organization and Good Standing. The Owner is a limited
liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) Authority. The Owner has taken all action required by Delaware
law, and by the Limited Liability Company Agreement to
authorize the execution and delivery of this Charter. This
Charter constitutes the legal, valid and binding obligation of
the Owner, enforceable against the Owner in accordance with its
terms, subject to bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors'
rights and by general principles of equity. Neither the
execution and delivery of this Charter nor will the
consummation of the transactions by it in accordance with the
terms hereof: (i) violate or conflict with any provision of
the Limited Liability Company Agreement of the Owner, or (ii)
violate or conflict with any provision of any law, rule,
regulation, order, permit, certificate, writ, judgment,
injunction, decree, determination, award or other decision of
any court, government, government agency or instrumentality,
domestic or foreign, or arbitrator binding upon the Owner,
which violation or conflict is reasonably likely to prevent the
Owner's performance of its obligations hereunder.
Neither the execution and delivery of this Charter nor the
consummation of the transactions contemplated hereby will
result in a breach of, or constitute a default (or with notice
or lapse of time or both result in a breach of or constitute a
default) under or otherwise give any person the right to
terminate any mortgage, indenture, loan or credit agreement,
lease, license, contract or any other agreement or instrument
to which the Owner is a party or by which it or any of its
properties is bound or affected.
(c) EXCEPT AS EXPRESSLY SET OUT IN THIS SECTION 6.1, OWNER
EXPRESSLY DISCLAIMS ANY EXPRESS OR IMPLIED REPRESENTATIONS OR
WARRANTIES, INCLUDING WITHOUT LIMITATION, SEAWORTHINESS,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR WITH
RESPECT TO PATENT INFRINGEMENT, VALUE, USE, CONDITION,
SUITABILITY, CLASS, OPERATION, COMPLIANCE WITH LAWS, DESIGN,
CONFORMANCE WITH SPECIFICATIONS, OR ABSENCE OF DEFECTS, HIDDEN,
PATENT, LATENT OR OTHER.
6.2 Representations and Warranties of the Charterer.
To induce the Owner to enter into this Charter and to consummate the
transactions contemplated hereby, the Charterer represents and
warrants to the Owner that as of the date of execution of this
Charter:
(a) Organization and Good Standing. The Charterer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Oklahoma and is duly qualified or licensed
and in good standing as a foreign corporation in each other
jurisdiction in which it owns or leases any facility or
property or has any office, or in which the character of its
business or operations requires such qualification or
licensing, in each case related to the subject matter of this
Charter or any of the Charter Documents.
(b) Authority. The Charterer has taken all action required by law,
its Certificate of Incorporation, as amended, and its By-Laws
to authorize the execution and delivery of this Charter and
each of the Charter Documents to which it is a party. This
Charter and each of the Charter Documents to which it is a
party constitute the legal, valid and binding obligations of
the Charterer, enforceable against the Charterer in accordance
with their respective terms, subject to bankruptcy, insolvency
or similar laws of general application relating to the
enforcement of creditors' rights and by general principles of
equity. Neither the execution and delivery of this Charter or
any of the Charter Documents, nor will the consummation of the
transactions by it in accordance with the terms hereof or
thereof: (i) violate or conflict with any provision of its
Certificate of Incorporation or By-Laws, (ii) violate or
conflict with any provision of any law, rule, regulation,
order, permit, certificate, writ, judgment, injunction, decree,
determination, award or other decision of any court,
government, government agency or instrumentality, domestic or
foreign, or arbitrator binding upon it, or (iii) create any
conflicts or resulting liens or require any consents that the
Charterer has not obtained.
Neither the execution and delivery of this Charter and each of
the Charter Documents to which it is a party nor the
consummation of the transactions contemplated hereby or thereby
will result in a breach of, or constitute a default (or with
notice or lapse of time or both result in a breach of or
constitute a default) under or otherwise give any person the
right to terminate any mortgage, indenture, loan or credit
agreement, lease, license, contract or any agreement or
instrument to which the Charterer is a party or by which it or
any of its properties is bound or affected.
(c) Litigation. There is no action, suit, proceeding, claim or
investigation pending or, to the best of the Charterer's
knowledge after due and reasonable inquiry, threatened against
or affecting the Charterer or any of its properties or related
to the subject matter of this Charter or any of the Charter
Documents before any court, government agency or regulatory
authority (federal, state, local or foreign) that questions the
validity or enforceability of this Charter or any Charter
Document or is reasonably likely to impair its ability to
perform its obligations under this Charter or any of the
Charter Documents or to cause a material adverse effect on the
business, financial condition or prospects of the Charterer.
There are no orders, writs, judgments, stipulations,
injunctions, decrees, determinations, awards or other decisions
of any court, government or governmental agency or
instrumentality, domestic or foreign, or any arbitrator
outstanding against the Charterer having or likely to have any
such effect.
(d) No Defaults. No event or condition has occurred and is
continuing that constitutes, or with the lapse of time or the
giving of notice or both, would constitute, an Event of Default
by the Charterer or any other Member of the Charterer Group, as
the case may be, under this Charter or any of the Charter
Documents or a default or by the Charterer or any other Member
of the Charterer Group under any indenture, trust, deed, loan
agreement, lease other instrument or contract, agreement,
instrument or obligation (i) under which any such Person pays,
receives, borrows, lends, or is obligated or entitled to pay,
receive, borrow or lend, consideration in excess of $1,000,000
to which it is a party or by which it is bound or affected, or
(ii) which is reasonably likely to have a material adverse
effect on the business, financial condition or prospects of the
Charterer or its ability to perform its obligations under the
Charter.
(e) Obligations and Liens. Except as disclosed in writing to, and
specifically consented to in writing by, the Owner, the
Charterer has no outstanding obligations, or Liens on its
properties, for unpaid Taxes other than Taxes incurred in the
ordinary course of business, and in existence for not more than
30 days and which are not overdue unless such Taxes are, in the
Owner's reasonable judgment, being contested in good faith and
by appropriate Persons and proceedings.
(f Government Regulations. The Charterer is not in violation of
and is not alleged to be in violation of any law, rule,
regulation, order, permit, certificate, writ, judgment,
stipulation, injunction, decree, determination, award or
decision of any court, government, or governmental agency or
instrumentality, domestic or foreign, or arbitrator binding
upon it, which violation or alleged violation is reasonably
likely to have a material adverse effect on the business,
financial condition or prospects of the Charterer or its
ability to perform its obligations under this Charter or any of
the Charter Documents.
(g No Labor Unrest. There are no strikes or other significant
labor disputes in progress or pending or, to the best of the
Charterer's knowledge after due and reasonable inquiry,
threatened against or affecting the Charterer.
(h Pollution Regulations. Neither the Charterer nor any member of
the Charterer Group is the subject of any actual or threatened
environmental, health or safety investigation or enforcement
proceeding related to its operations or business or the subject
matter of this Charter or any of the Charter Documents. To the
best of the Charterer's knowledge after due and reasonable
inquiry, the Charterer is in compliance with all applicable
laws and regulations relating to pollution control and
environmental, health and safety matters in all jurisdictions
in which the Charterer is doing business.
(i Providing of Information. All information that the Charterer
at any time has furnished or will furnish the Owner for use in
any statement, application or other filing provided for in this
Charter or any of the Charter Documents, does or shall (as the
case may be) meet all requirements of applicable laws, rules
and regulations and does not or shall not (as the case may be)
as of the date prepared or delivered to the Owner contain any
statement which is false or misleading with respect to any
material fact and does not or shall not (as the case may be) as
of the date prepared or delivered to the Owner omit any
material fact required to be stated therein or necessary in
order to make such information not false or misleading for the
purpose for which such information was furnished and no
correction of any information or omission that is no longer
true and correct in all material respects that has not been
made need be made or updated in order to make such information,
taken as a whole, not false or misleading in any material
respect. For purposes of this Section 6.2(i), "information"
includes, without limitation, all information contained in the
data sheets, projections, pro forma sources and uses, the
Drilling Contracts, the AM.▇. ▇▇▇▇▇, ▇▇." 1,000 Meter Water
Depth Upgrade Shipyard Specification, Rev. 5, dated October 21,
1995 by ▇.▇. ▇▇▇▇▇▇▇, Project Engineer, the Enserch-Green
Canyon Analysis, dated September 11, 1995 and the Reading &
▇▇▇▇▇ Corporation/GATX Due Diligence Confidential Binder, dated
July 20, 1995, in each case as provided to the Investors prior
to the date hereof.
Each audited income statement, balance sheet and statement of
operation and cash flows dated as of December 31, 1997 and for
the fiscal year then ended and the unaudited income statement,
balance sheet and statement of operation and cash flows dated
as of March 31, 1998 and for the three months then ended were
prepared in accordance with generally accepted accounting
principles, consistently applied, are true, complete and
correct, and fairly present the financial condition, the
results of operations and cash flows for R&B Falcon and its
consolidated subsidiaries, including the Charterer, for the
dates and periods stated; and there is no outstanding Debt,
lien or liability, whether direct or contingent, that is
material to the Charterer and not shown in such financial
statements.
(j Insurance. The Charterer maintains insurance listed on
Schedule C and other insurance in a manner consistent with
persons engaged in the same or similar business and in
compliance with this Charter.
(k Certain Federal Laws and Requirements.
(i) The Charterer and its affiliates are exempt from the
Public Utility Holding Company Act of 1935.
(ii) None of the Charterer and its subsidiaries, whether
separately or together, is an investment company under the
Investment Company Act of 1940.
(iii) Except as expressly identified in this Charter,
neither the Charterer nor any affiliate of the Charterer,
as that term is defined in the Employee Retirement Income
Security Act of 1974, as amended, and the rules and
regulations thereunder (AERISA"), has any material
unfunded ERISA liabilities.
(l Permits and Authorizations. The Charterer has obtained all
governmental permits, authorizations, certificates and
approvals and given or made all notices and filings required
under applicable law for the execution, delivery and
performance of this Charter and the other Charter Documents and
its possession, use and operation of the Vessel. Without
limiting the generality of the foregoing, and more
specifically, the Charterer has and maintains all
environmental, health and safety permits necessary or
appropriate for its operations and all such permits are in good
standing and the Charterer is in compliance with all terms and
conditions of such permits and all applicable environmental,
health or safety requirements of law.
ARTICLE 7
USE AND OPERATION OF THE VESSEL
7.1 Use of the Vessel
The Charterer shall have the full use of the Vessel and may, subject
to the terms and conditions of this Charter, employ the Vessel as a
semisubmersible drilling unit throughout the world consistent with
its design capability, except that the Vessel shall not be used
contrary to and shall comply with (a) all applicable laws or
regulations of any governmental authority, treaties or conventions
(including, but not limited to, all environmental, health and safety
laws) and (b) the terms or policies of any insurance then required
hereunder; and provided that, with respect to the use or possession
of the Vessel outside of the territorial waters and/or the Outer
Continental Shelf of the United States, the Charterer shall give
such indemnities suitable to the Owner in an amount and form, and
obtain and continue such additional insurance coverage, in such
amounts, having such terms and conditions and with such carriers, as
the Owner may reasonably require at any time or from time to time in
connection with the use or possession of the Vessel in any given
area outside the territorial waters and/or the Outer Continental
Shelf of the United States. The Charterer, in respect of the
Vessel, shall at all times comply with all applicable laws and
regulations (including, but not limited to, all environmental,
health and safety laws), and with the applicable provisions and
conditions of all licenses, permits, consents and approvals of any
governmental authority.
7.2 ▇▇▇▇▇▇▇, etc., of the Vessel
During the Charter Period, the Charterer shall have the exclusive
possession and control of the Vessel and shall man, victual,
navigate and operate, supply, fuel, maintain and repair the Vessel
at its own expense or by its own measurement and shall pay all other
charges and expenses of every kind and nature whatsoever incidental
to the possession, use and operation of the Vessel. During the
Charter Period, the possession, use, operation and maintenance of
the Vessel shall be at the sole risk, cost and expense of the
Charterer until redelivery pursuant to the terms hereof upon the
termination or expiration of this Charter. As between the Owner and
the Charterer, the Offshore Installation Manager, officers and crew
of the Vessel and all other persons at any time on board the Vessel
shall be deemed to be engaged and employed exclusively by the
Charterer and shall be deemed to be and remain the Charterer's
servants, navigating and working the Vessel solely on behalf of and
at the risk of the Charterer and the Charterer shall hold each
Indemnitee harmless from any and all claims against it by, or as the
result of any act or omission of, any such Offshore Installation
Manager, officer, member of the crew or other person. The Charterer
assumes and shall satisfy all costs and liabilities incurred in
connection with all salvage services received by the Vessel.
7.3 Documentation of the Vessel
Neither the Owner nor the Charterer (without the prior written
consent of the other) will do or suffer or permit to be done
anything which can or might change or injuriously affect the
documentation of the Vessel for foreign trade under the laws and
flag of the United States of America. The Charterer covenants and
agrees that it will not (a) cause or permit the Vessel to be
operated in any manner which could subject the Owner to any criminal
penalty, or (b) operate or locate the Vessel, or permit the Vessel
to be operated or located, in any area excluded from coverage from
any insurance required by the provisions of Article 15 or (c) unless
there shall have been an actual or total loss or agreed or
compromised total loss of the Vessel, abandon the Vessel in any
foreign port. The Owner and the Charterer hereby respectively
represent that they are as of the date of execution of this Charter,
and covenant that they shall remain during the Charter Period,
"citizens of the United States" within the meaning of Section 2 of
the Shipping Act, 1916, as amended. The Charterer agrees that the
Vessel will be operated solely in the domestic or foreign commerce
of the United States. The Charterer shall throughout the Charter
Period maintain to the satisfaction of the Owner at the Charterer's
sole cost and expense such documentation of the Vessel, and shall
not do or suffer or permit to be done anything which can or might
change or injuriously affect the documentation of the Vessel for
foreign trade under the laws and the flag of the United States or
which would result in a violation of any law or regulation of the
United States applicable to a vessel owned by a citizen of the
United States, as defined in the Shipping Act, 1916.
7.4 General and Particular Average
Whenever necessary, average adjusters shall be appointed by the
Charterer, who shall, at the Charterer's sole cost and expense,
attend to the settlement and collection of both general and
particular average losses.
7.5 Site and Access
The Charterer will be responsible for selecting and mooring the
Vessel in a safe and prudent manner at a location in the Operating
Area. The Charterer will conduct sea bottom condition surveys
acceptable to the Owner where required by the Vessel's hull
underwater surveyor at the Charterer's sole cost and expense and
will be responsible for identifying, marking and clearing the
location of all major impediments or hazards to operations or
causing same to be done. Removal of all impediments or hazards
shall be, as between Owner and the Charterer, at the Charterer's
sole cost and expense.
7.6 Owner Liability for Materials Furnished by the Charterer
Without limiting any indemnity provided by the Charterer, the Owner
shall not be liable for any loss or damage resulting from the use or
possession of equipment, materials, supplies or other items
furnished by the Charterer.
7.7 Environmental and Related Reporting and Inspection
The Charterer shall notify the Owner in writing within five days of
the Charterer's obtaining notice or knowledge thereof of any
(a) notice of claim that there has been a release or threatened
release of any contaminant into the environment from the Vessel or
any equipment, machinery or property related thereto; (b) notice of
any investigation by any governmental authority evaluating whether
any remedial action is necessary or appropriate to respond to any
release or threatened release of any contaminant into the
environment from the Vessel or any equipment, machinery or property
related thereto; (c) notice that the Vessel or any equipment,
machinery or property related thereto is subject to an environmental
Lien; (d) the commencement or threat of any judicial, administrative
or other proceeding alleging a violation of any environmental,
health or safety requirements of law; or (e) any new or proposed
changes to any existing environmental, health or safety requirement
of law that could have a material adverse effect upon the use or
operations of the Vessel or the Charterer. The Charterer shall
provide from time to time documentation deemed adequate by the Owner
showing the Charterer's compliance with financial responsibility
requirements of all applicable environmental, health and safety
laws.
7.8 Notice of Entry
The Charterer will provide written notice within ten (10) days of
entry of the Vessel into the jurisdictional waters of any foreign
country or of any state or territory of the United States other than
Louisiana, Texas and any other state in which the Owner has filed
financing statements or taken other action to perfect its Lien upon
the equipment owned by the Charterer and its Affiliates and used in
connection with the Vessel.
ARTICLE 8
MAINTENANCE OF CONDITION AND CLASSIFICATION; REPAIRS
8.1 Maintenance of Classification
The Charterer shall at all times and, at its sole cost and expense,
procurement and risk (a) have exclusive control of the Vessel, (b)
maintain and preserve the Vessel in accordance with good commercial
maintenance practices, and keep the Vessel and her drilling and
other equipment in good running order, condition and repair, so that
the Vessel shall be tight, staunch, strong and well and sufficiently
tackled, appareled, furnished, equipped and in every respect
seaworthy and in good operating condition, and (to the extent that
such prescribes a standard of maintenance that exceeds the foregoing
standard in any respect) in the condition, running order and repair
which equals or exceeds industry standards and the condition,
running order and repair of vessels and their equipment owned by the
Charterer of like kind and age, and, in addition, shall
(i) cause the Vessel to be a semi-submersible drilling unit capable
of operating in water depths of up to 3,280 feet before
completion of the Second Upgrade Program, 4,000 feet after
completion of the Second Upgrade Program and 5,000 feet after
completion of the Third Upgrade and to have technical
specifications, characteristics and capabilities at least the
substantial equivalent of those set forth in Schedule A hereto
as upgraded in accordance with the First Upgrade Program and
the Second Upgrade Program as set forth in Schedule B-2 and
after completion of the Third Upgrade Program as set forth in
Schedule B-3; and
(ii) keep the Vessel in such condition as will entitle her, during
the Charter Period and at the date of redelivery to the Owner,
to the highest applicable classification and rating to which an
existing vessel of the same age and type can qualify under the
then existing rules and standards of the American Bureau of
Shipping and shall furnish to the Owner within 90 days after
each anniversary of the Delivery Date and at any other time
upon the request of the Owner true and correct photostatic
copies of all certificates issued by the American Bureau of
Shipping evidencing the maintenance of such classification.
(iii) The Vessel shall, and the Charterer covenants that it
will, at all times comply with all applicable safety,
operational and maintenance requirements of the United States
Coast Guard and any other United States, international or other
authority and all laws, treaties and conventions, and rules and
regulations (including, but not limited to, all environmental,
health and safety laws) issued thereby or applicable in any way
to the Vessel or any use, possession or operation thereof and
shall have on board, when required thereby, valid certificates
and appropriate environmental, health and safety permits
showing compliance therewith. The Charterer shall, at its
expense, make all modifications and alterations to the Vessel
which may be necessary to comply with the provisions of this
Section 8.1.
8.2 Repair
The Vessel shall be repaired and overhauled by the Charterer and the
Charterer shall install, affix and attach replacement parts thereon,
at its sole cost and expense, in each case, whenever necessary to
keep the same in good condition, repair and working order in
accordance with Section 8.1 or as a result of any requirement
hereof. The Vessel shall likewise be drydocked or undergo an
underwater survey in lieu of drydocking, cleaned and bottom painted
by the Charterer, at its expense, whenever necessary, but in any
event at least as often as necessary in order to maintain the
classification referred to in Section 8.1. The Charterer shall, at
its expense, promptly and duly comply with all requirements of the
applicable classification society including those resulting from
each special survey of the Vessel. The Charterer shall, at its
expense, promptly furnish the Owner with written information as to
any casualty involving any loss or damage to the Vessel in excess of
$500,000 and, upon request, all survey reports in connection
therewith.
8.3 Drydocking or Underwater Survey in Lieu of Drydocking
The Charterer shall give the Owner notice of each proposed
drydocking or underwater survey in lieu of drydocking 20 days in
advance if practicable, otherwise as long in advance as may be
practicable under the circumstances. The Owner, any Investor or any
authorized representative of any thereof may at any time, upon
reasonable notice at its own expense (but after the occurrence of an
Event of Default, at the Charterer's sole cost and expense), inspect
the Vessel at drydocking or underwater survey in lieu of drydocking
or otherwise, at any time or from time to time, and inspect the
Vessel's logs, but neither the Owner nor any Investor shall have any
duty to do so.
8.4 Required Survey
At the request of the Owner following any explosion, release
accident, storm, act of God or other event or incident that gives
the Owner reasonable concern for the physical condition and
operating ability of the Vessel and at the Charterer's expense, a
qualified independent marine surveyor or surveyors of recognized
standing, acceptable to the Owner, shall conduct a survey of the
Vessel. For purpose of such surveys, the Vessel need not be
drydocked (or subjected to an underwater survey in lieu of
drydocking) unless required by customary survey practices for
drilling vessels of similar age, type and service. The Charterer
shall submit a detailed report of the independent marine surveyor to
the Owner promptly upon the completion of such survey, containing:
(a) the location of the Vessel at the time of inspection;
(b) the findings and recommendations of the independent marine
surveyor with respect to the condition of the Vessel; and
(c) the opinion of the independent marine surveyor as to whether
the Vessel has been maintained in accordance with the terms of
this Article 8.
ARTICLE 9
EQUIPMENT AND STORES
9.1 Fuel, etc.
The Owner acknowledges that such fuel, lubricating oil and
unbroached consumable stores as may be aboard the Vessel at the time
of its delivery to the Charterer will be the property of the
Charterer.
9.2 Equipment, etc.
The Charterer shall have the use, without additional payment to the
Owner, of such equipment, outfit, furniture, furnishings,
appliances, spare or replacement parts and nonconsumable stores as
shall have been on board the Vessel on the Delivery Date. The same
or their substantial equivalent shall be returned to the Owner on
redelivery or retaking of the Vessel in the same good order and
condition as received by the Charterer on the Delivery Date,
ordinary wear and tear excepted, and any such items damaged or so
worn in service as to be unfit for use, or used as a spare part for
replacement purposes, or lost or destroyed shall be replaced by the
Charterer with an identical or substantially equivalent replacement
item in at least as good working order and condition as those of the
replaced item when received by the Charterer on the Delivery Date at
or before redelivery of the Vessel. Such replacement, whenever
made, shall be deemed part of the "Vessel" for all purposes of, and
its use or possession shall be subject to the terms and conditions
of, this Charter.
9.3 The Charterer's Additional Equipment, etc.
The Charterer shall at its own expense provide such additional
equipment, outfit, tools, replacement parts, crockery, linen, and
other items not included in inventories as provided in this
Article 9 as may be required in the operation of the Vessel, and
such equipment, and other items, shall become, on being placed on
board the Vessel and without further act, part of the Vessel and the
property of the Owner for all purposes of this Charter, provided
that so long as no Default or Event of Default shall have occurred
and be continuing, any such equipment and other items, so provided
by the Charterer (and not required to be provided or to have been
provided by Section 9.2 or any other provision of this Charter other
than this Section 9.3) and capable of being removed without causing
damage to the Vessel may be removed by the Charterer at the
expiration of the Charter Period, and such equipment, and other
items, shall become, without further act, the property of the
Charterer. At least 90 days prior to delivery or retaking of the
Vessel (or such lesser time as may be available in connection with
any retaking), the Charterer shall give notice to the Owner of any
such equipment or other items leased from third parties, which the
Charterer has elected not to remove, and will furnish the Owner with
copies of all leases and contracts relating thereto, and the Owner
may, within 30 days thereafter (or such lesser time as may be
applicable in connection with any retaking), elect to retain all or
any part of such equipment on board the Vessel subject to any
required approval of the lessors of such equipment. Upon redelivery
or retaking the Owner shall assume the rights, obligations and
liabilities of the lessee under such leases arising subsequent to
delivery or retaking in connection with any equipment that the Owner
elects to so retain. The Charterer shall at its sole cost and
expense remove from the Vessel any such leased equipment which the
Owner does not so elect to retain and shall cause to be repaired at
its sole cost and expense any damage to the Vessel or any part or
property thereof resulting in any manner from the Charterer's
removal of any equipment.
By its acceptance of the Vessel upon delivery, the Charterer
represents and warrants to the Owner that there is on board the
Vessel an inventory of equipment, outfit, appliances, tools,
replacement parts, nonconsumable stores, crockery, linen, and other
items, as in the reasonable judgment and experience of the Charterer
are necessary or appropriate to the possession, use and operation of
the Vessel and the Charterer hereby covenants that, subject to
Section 9.3, upon redelivery or retaking of the Vessel by the Owner,
such inventory, which may include replacement items of equivalent
value, shall be on board the Vessel.
9.4 Title to Improvements; Option to Purchase
Title to Nonseverables of the Vessel acquired after the Delivery
Date shall without further act vest in the Owner and shall be deemed
to constitute a part of the Vessel and be subject to this Charter.
Title to all Severables of the Vessel acquired after the Delivery
Date (other than Severables that replace or substitute for
Severables that have been provided by the Owner and Severables
provided in connection with the Second Upgrade Program and the Third
Upgrade Program, the title to which shall vest in the Owner) shall
vest in the Charterer; provided, however, that the Charterer may not
remove any thereof from the Vessel (except to the extent
subsequently replaced or worn out) prior to the end of the Charter
Period except that the Charterer may, so long as no Default or Event
of Default shall have occurred and be continuing, remove at the
Charterer's expense and risk any such Severables, provided, further,
that the Owner may elect to purchase for cash any such Severables at
the time of redelivery of the Vessel to the Owner in accordance with
any of the provisions of this Charter. Contemporaneously with its
delivery of the Expiration Date Election Notice, the Charterer shall
notify the Owner of the Severables described above that it intends
to remove. To exercise the election referred to in the second
proviso to the second preceding sentence of this Section 9.4, the
Owner shall give to the Charterer written notice of its election to
purchase on or prior to such redelivery. The purchase price of such
Severables shall be equal to the Fair Market Sale Value thereof, as
of the date of purchase as determined by mutual agreement or, in the
absence of such agreement, by the Appraisal Procedure. The
Charterer shall repair any damage caused by the removal of any
Severables to the Owner's reasonable satisfaction.
9.5 No Lease of Essential Severables
The Charterer shall not lease any Severables that are necessary or
appropriate for the use, possession or operation of the Vessel in
accordance with the terms and conditions of this Charter and the
Charter Documents but shall hold good and marketable title to all
such Severables that are, in accordance with industry practice,
customarily owned by drilling contractors engaged in businesses
similar to the Charterer's business, free and clear of all Liens
other than Permitted Liens.
ARTICLE 10
THE CHARTERER'S CHANGES, ADDITIONS AND REPLACEMENTS
10.1 Structural Changes or Alterations; Installation of Equipment, etc.
Except as may be required by Article 8 or 9 or the Upgrade Programs,
the Charterer shall not make any structural changes or alterations
in the Vessel, or any change, alteration, addition or improvement to
the Vessel that is Nonseverable (except for changes, alterations,
additions or improvements required to be made pursuant to applicable
law), and shall make no material changes or alterations in the
Vessel's machinery or boilers, unless and to the extent that, in
each instance, (a) it first secures written approval of the Owner
(which may be withheld in the Owner's sole discretion if such change
or alteration would materially change the type or character of the
Vessel or would adversely affect Owner's status as a lessor for
federal income tax purposes, but otherwise such approval shall not
be unreasonably withheld) and (b) any such change or alteration is
made at the Charterer's expense and risk and does not diminish the
value, utility, useful life or seaworthiness of the Vessel below the
value, utility, useful life and seaworthiness of the Vessel
immediately prior to such change if the Vessel were then in the
condition and state of seaworthiness required to be maintained by
the terms of this Charter. Subject to the foregoing provision, the
Charterer may install any pumps, gear or equipment it may require in
addition to that on board the Vessel on delivery, provided that such
installations are accomplished at the Charterer's sole cost, expense
and risk. Pumps, gear and equipment so installed shall, without
necessity of further act, become part of the Vessel and the property
of the Owner; provided that so long as no Default or Event of
Default shall have occurred and be continuing, any such pumps, gear
or equipment not required to be installed in order to meet the
requirements of Articles 8 and 9 and not installed as replacements
for property included in the Vessel on the date hereof are subject
to the Owner's option to purchase set forth in Section 9.4, and, if
not purchased by the Owner, may be removed (so long as such removal
can be accomplished without damage to the Vessel) by the Charterer,
at its own expense and risk, at any time during, or at the
expiration of, the Charter Period, whereupon such pumps, gear or
equipment shall, without necessity of further act, become the
property of the Charterer.
10.2 Replacement of Parts
In addition to the permitted structural changes or alterations and
the addition of pumps, gear and equipment referred to in
Section 10.1, the Charterer may, in the ordinary course of
maintenance, repair or overhaul of the Vessel, remove any item of
property (including any item referred to in Section 9.2 or 9.3
constituting a part of the Vessel), provided such item is replaced
as promptly as possible by an item of property which is free and
clear of all Liens and is in as good operating condition, working
order and repair, and is as seaworthy as, and has a value, useful
life and utility at least equal to that of, the item of property
being replaced (including each item of equipment) and assuming the
Vessel is in the working order, condition and repair and state of
seaworthiness required by the terms of this Charter. Any item of
property so removed from the Vessel shall remain the property of the
Owner until replaced in accordance with the terms of the preceding
sentence, but shall then, without further act, become the property
of the Charterer but shall remain subject to the Owner's option to
purchase set forth in Section 9.4. Any such replacement item of
property shall, without further act, become the property of the
Owner, deemed part of the "Vessel" as defined herein for all
purposes, and its use and possession shall be subject to the terms
and conditions hereof.
10.3 Vessel Markings
The Charterer shall not allow the name of any person, association or
corporation, other than as required hereby, to be placed on the
Vessel (other than the current name of AM. ▇. ▇▇▇▇▇, ▇▇.") as a
designation which might be interpreted as indicating a claim of
ownership thereof by any person, association or corporation other
than the Owner, but, for purposes of identification, the Charterer
shall have the right at its sole cost and expense to paint the
Vessel in its own colors, to install and display its stack insignia
or name, and to fly its own house flag, or to utilize the colors,
insignia, name or flag of any Affiliate of the Charterer. The
Charterer shall notify the Owner of each such choice of colors,
name, insignia or flag before making any such change.
ARTICLE 11
ADDITIONAL COVENANTS
11.1 General Covenants
From and after the date of execution of this Charter and until the
termination or expiration of this Charter, the Charterer shall:
(a continue its business as presently conducted and maintain its
existence, rights and privileges;
(b comply with its obligations set forth in this Charter and all
applicable laws (including, without limitation, all
environmental, health and safety laws); and
(c maintain its books and records in compliance with generally
accepted accounting principles, consistently applied with such
adjustments or changes as to which the independent public
accountants referred to in Section 11.3 concur.
11.2 No Impairment
Notwithstanding any other contract or other claim of right, from and
after the date of execution of this Charter and until the
termination or expiration of this Charter, the Charterer Group shall
not enter any contract or agreement or perform or omit any act that
in any way materially limits or impairs, or the effect of which
would be to materially limit or impair, the ability of any member of
the Charterer Group to comply with and fulfill its obligations set
forth in the Charter Documents.
11.3 Financial Information
The Charterer will furnish, or cause to be furnished, to the Owner
and each Investor:
(a) within 45 days after the end of each of the first three fiscal
quarters during each fiscal year of R&B Falcon, a consolidated
balance sheet of R&B Falcon and its consolidated Subsidiaries
as of the close of each such fiscal quarter, together with a
consolidated income statement and consolidated statement of
cash flows of R&B Falcon and such Subsidiaries for such fiscal
quarter, in each case setting forth in comparative form the
corresponding consolidated figures for the same period of the
next preceding fiscal year, all in reasonable detail and
certified by the Chief Financial Officer or Principal
Accounting Officer of R&B Falcon as being true, complete and
correct and as fairly presenting the financial condition and
the results of operations of the respective corporations
covered thereby, subject to year-end adjustments;
(b) within 90 days after the close of each fiscal year of R&B
Falcon, (i) audited consolidated balance sheets of R&B Falcon
and its consolidated Subsidiaries as of the close of such
fiscal year, together with consolidated profit and loss
statements and consolidated statements of cash flows of R&B
Falcon and such Subsidiaries for such fiscal year, certified as
being true, complete and correct by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. or
independent public accountants of comparable national standing
and reputation as fairly presenting the consolidated financial
position, results of operations and cash flow of R&B Falcon and
such Subsidiaries as of the end of such fiscal year and the
consolidated results of their operations for such fiscal year,
and as fairly presenting in all material respects in conformity
with generally accepted accounting principles applied on a
basis consistent with prior fiscal years with such adjustments
or changes as to which such independent public accountants
concur; and (ii) an update of the Contract Data Sheet
previously submitted to the Investors (including, but not
limited to, rig and contract status and updated annual budget)
true, complete and correct and fairly presenting the
information contained therein as of the date and of its
submission to the Owner and the Investors);
(c) within 30 days after the filing thereof with the Securities and
Exchange Commission, a copy of each report, form or prospectus
filed by R&B Falcon or any of its Subsidiaries with the
Securities and Exchange Commission, within three days of the
issuance of any press release or similar materials issued by
R&B Falcon or any of its Subsidiaries; and
(d) such other financial or other information relating to the
affairs of R&B Falcon and its consolidated Subsidiaries as the
Owner or any Investor may from time to time reasonably request.
11.4 Compliance Certificates
The Charterer shall furnish or cause to be furnished, to the Owner
and the Investors:
(a) within 45 days after the end of the first, second and third
quarterly accounting period in each fiscal year of R&B Falcon,
and within 90 days after the end of each fiscal year of R&B
Falcon, a certificate of the Chairman, the President or a Vice
President and the Chief Financial Officer or Principal
Accounting Officer of R&B Falcon stating that each of the
Charterer and each Guarantor has performed and complied with
all the terms and provisions of this Charter or the Guaranty
and/or the other Charter Documents, as the case may be, or, if
there shall have been an Event of Default hereunder or if any
Guarantor shall be in default under the Guaranty, specifying
all such defaults and the nature thereof of which the signer of
such certificate may have notice or knowledge;
(b) within 90 days after the end of each fiscal year of R&B Falcon,
a certificate of the independent public accountants reporting
on the financial statements for such year (i) stating that
their examination in connection with such financial statements
has been made in accordance with generally accepted auditing
standards and has included a review of the relevant terms of
the Guaranty, the Charter and the other Charter Documents,
(ii) stating whether or not such examination has disclosed the
existence, during or at the end of such year, of any default by
the Charterer or any Guarantor in the observance of any of the
terms of the Guaranty, this Charter or the other Charter
Documents, insofar as they relate to accounting matters, and,
if such examination has disclosed any such default, specifying
all such defaults and the nature thereof (it being understood
that such accountants shall not be liable for any failure to
obtain knowledge of any such default which would not be
disclosed in the course of such examination), and (iii) stating
that they have reviewed the certificate of the officers of R&B
Falcon, delivered with respect to such year pursuant to
paragraph (a) of this Section 11.4, and confirming the matters
set forth in such certificate;
(c) promptly after R&B Falcon's receipt thereof, any audit
management letter or similar document submitted after the date
hereof by independent accountants in connection with each
annual or interim audit made by such accountants with respect
to the financial condition or affairs of R&B Falcon or any
Guarantor; and
(d) as promptly as practicable (but in any event not later than 15
days) after any officer of the Charterer or any Guarantor
obtains notice or knowledge of the occurrence of any default
(which has not been remedied or waived) in the performance or
observance of any of the terms or provisions of the Guaranty or
any of the other Charter Documents or any Event of Default
under the Charter, a certificate of either the Chairman, the
President or a Vice President and the Chief Financial Officer
or Principal Accounting Officer of the Charterer or Guarantor
(as the case may be) describing the default or Event of Default
and stating the date of commencement thereof, what action the
Charterer proposes to take with respect thereto and the
estimated date when it will be remedied.
11.5 Further Assurances, etc.
The Charterer shall, at its sole cost and expense, promptly and duly
execute, acknowledge and deliver to the Owner such further
documents, instruments, financing and similar statements and
assurances and take such further action as the Owner may from time
to time reasonably request in order more effectively to carry out
the intent and purpose of this Charter or the Charter Documents, to
establish and protect the rights and remedies created or intended to
be created in favor of the Owner hereunder or under the Charter
Documents, and to protect the title of the Owner in and to the
Vessel. The Charterer shall also promptly furnish to the Owner such
information as may be required to enable the Owner timely to file
any reports required to be filed by it as the owner under the
Charter or as the owner of the Vessel with any governmental
authority.
11.6 Maintenance of Corporate Existence, etc.
The Charterer shall at all times maintain its corporate existence
except as permitted by Section 11.7 and will do or cause to be done
all things necessary to preserve and keep in full force and effect
its rights (charter and statutory) and franchises; provided that
(a) it shall not be required to preserve any right or franchise if
its Board of Directors shall determine that the preservation thereof
is no longer desirable in the conduct of its business and (b) the
loss thereof does not materially adversely affect or diminish the
rights of the Owner or any Investor.
11.7 Conditions of Consolidation, Merger, etc.
The Charterer shall not consolidate with or merge into any other
corporation or convey, transfer, or lease, all or substantially all
of its assets as an entirety to any Person, unless each of the
following conditions is satisfied:
(a) The Person formed by such consolidation, merger or acquisition
by conveyance, transfer or lease all or substantially all the
assets of the Charterer as an entirety (the "Resulting
Entity"), shall, at the same time, by consolidation, merger,
conveyance, transfer or lease, acquire all or substantially all
of the assets of the Guarantor as entireties, shall be a
citizen of the United States within the meaning of the Shipping
Act, 1916 or shall have obtained the approval of the U.S.
Maritime Administration for any such consolidation, merger (and
the Owner and the Investors, without any expense to any of the
foregoing, shall have received an opinion of counsel selected
by the Owner as to such citizenship of the United States of
such Person, in form and substance satisfactory in all respects
to the Owner), and shall be a corporation organized and
existing under the laws of one of the several states of the
United States of America or the District of Columbia. Such
Person, prior to or upon the occurrence of any such
transaction, shall execute and deliver to the Owner an
agreement in form and substance satisfactory to the Owner,
containing an assumption by such Person of the due and punctual
performance and observance of each covenant and condition of
the Charter and the Charter Documents to be performed or
observed by the Charterer.
(b) Before and immediately after giving effect to such transaction,
no Default, or Event of Default shall have occurred and be
continuing.
(c) After giving effect to such transaction, the rating of the long-
term unsecured senior debt or implied long-term unsecured
senior debt rating of the Resulting Entity shall be and shall
be maintained for six months thereafter at least AB+" by S&P
and, if rated by ▇▇▇▇▇'▇, at least AB1".
(d) The Charterer shall have delivered to the Owner and each
Investor, prior to or upon the occurrence of such transaction,
a Certificate of either the Chairman or the President and the
Chief Financial Officer of the Charterer, and an opinion of
counsel satisfactory to the Owner, each stating that such
consolidation, merger, conveyance, transfer or lease and the
assumption agreement described in Section 11.7(a) comply with
this Section 11.7 and that all conditions precedent relating to
such transaction herein provided for have been fully complied
with.
Upon any consolidation or merger, or any conveyance, transfer or
lease of all or substantially all of the assets of the Charterer as
an entirety in accordance with this Section 11.7, the Resulting
Entity shall succeed to, and be substituted for, and any exercise of
every right and power, obligation and liability of, the Charterer
under this Charter and the Charter Documents with the same effect as
if such Resulting Entity had been named as the Charterer herein and
therein. No such conveyance, transfer or lease of all or
substantially all of the assets of the Charterer, as an entirety
shall have the effect of releasing the Charterer or any Guarantor,
as the case may be, or any Resulting Entity which shall theretofore
have become such in the manner prescribed in this Section 11.7 from
its liability under this Charter, the Guaranty or the Charter
Documents. Nothing contained herein shall permit any charter,
subcharter or other arrangement for the use, operation or possession
of the Vessel except in compliance with the applicable provisions of
this Charter.
11.8 Indemnity of the Owner by Customers for Oil Pollution and Related
Environmental Claims
The Charterer shall cause each of its customers or operators under
any Drilling Contract to (a) indemnify, defend and hold harmless the
Owner, the Investors and their Affiliates from any and all claims,
demands, liabilities, losses, damages, lawsuits and expenses
respecting pollution claims resulting from the release of Crude Oil
as a consequence of a blowout, crater or other cause arising out of
or in connection with operations under such Drilling Contract, in
accordance with normal industry practice, and any and all related
environmental, health or safety matters (including, but not limited
to, all cost and expense of controlling clean-up of pollution and
all penalties imposed by any Person) irrespective of whether the
Charterer, the Owner or any of their Affiliates may have been or may
be alleged to have been negligent or otherwise legally at fault; and
(b) if any customer under such Drilling Contract does not maintain
(i) a consolidated tangible net worth as determined in accordance
with generally accepted accounting principles of at least
$500,000,000 (or be a consolidated Subsidiary of a parent entity
having such consolidated tangible net worth) or (ii) a senior
unsecured debt rating by S&P of ABBB-" or by ▇▇▇▇▇'▇ of ABaa3" (or
be a consolidated direct or indirect Subsidiary of a parent entity
having a senior unsecured debt rating meeting such criteria), such
customer shall provide (or the Charterer shall provide) operators
extra expense or energy exploration and development insurance
coverage in an amount of at least the difference between
$150,000,000 (or such greater amount, as may be necessary to meet
the applicable financial responsibility requirements under the Oil
Pollution Act of 1990, or any other applicable laws, as amended from
time to time) and the amount of the Charterer's contingent operators
extra expense or energy exploration and development insurance or
other coverage in effect at such time, with such underwriters or
carriers and containing such terms and conditions as the Owner may
require, in the form normally and customarily carried by oil and gas
operators engaged in offshore drilling operations, for oil pollution
liability and expense, with the Owner, Investors, the Owner Group
and the Charterer named as additional insureds and having the
benefit of waivers of subrogation.
ARTICLE 12
PAYMENTS, INVOICES AND SECURITY
12.1 Basic Hire
The Charterer shall pay to the Owner, in arrears on each Payment
Date through the Primary Term, an amount equal to 1.2024% of Owner's
Cost (the "Primary Term Basic Hire") as adjusted on the date of each
disbursement to the Charterer as agent under the Third Upgrade
Agreement according to the methodology outlined on Schedule F
attached hereto, and during any Extended Term, 125% of the Primary
Term Basic Hire payable on each Payment Date during such Extended
Term. The payment each month of the Basic Hire shall be a
continuing obligation for each month during which this Charter is in
effect, and no invoice for such amount need be issued to the
Charterer by the Owner. The Charterer's obligation to make such
payment is unconditional and absolute during the term hereof and
shall not be affected by any event of force majeure or otherwise.
12.2 Supplemental Hire
In addition to its obligation to pay Basic Hire hereunder, the
Charterer shall pay to the Owner any and all Supplemental Hire as
and when the same shall become due and owing, and in the event of
any failure on the part of the Charterer to pay any Supplemental
Hire, the Owner shall have all rights, powers and remedies provided
for herein or at law or in equity or admiralty or otherwise in the
case of nonpayment of Basic Hire.
The Charterer shall pay to the Owner, as Supplemental Hire, all
costs incurred by the Owner in performing or complying with the
Charter Documents if the Charterer fails to perform or comply with
any of its agreements contained in this Charter, or any Charter
Document including, but not limited to:
(a Direct and indirect cost of permits, licenses and the like
required of the Owner as owner of the Vessel. Owner shall use
reasonable efforts, without filing suit or incurring out-of-
pocket or other additional cost or expense, to avail itself of
applicable exemptions and/or reductions of such costs.
(b All premiums and other costs to the Owner for insurance as
specified in Articles 11.8 and 15.
(c Unless otherwise expressly set forth herein in Section 19.2,
the Charterer shall bear directly or reimburse the Owner, upon
proof of payment by the Owner, all fees and expenses (including
fees and expenses of the Owner's counsel) incurred by the Owner
in the performance of or related to this Charter or any Charter
Documents.
12.3 Payment Terms
The Charterer shall pay all amounts for Supplemental Hire invoiced
by the Owner within 10 days after receipt of such invoice. Any
Basic Hire not paid when due and any invoices not paid in
immediately available funds within 10 days after receipt by the
Charterer shall accrue interest from the due date until paid at a
per annum rate of interest equal to the Overdue Rate, computed on a
basis of 360 days, for actual days elapsed. Payments shall be made
by wire transfer in immediately available funds prior to 12:00 noon,
New York City time, on the day when each such payment shall be due
to the Owner's account at a financial institution located in the
State of New York or at such other office as the Owner may from time
to time designate in writing to the Charterer. All payments to the
Owner hereunder shall be without any offset, counterclaim, discount
or deduction and shall be made in United States Dollars. All
payments to the Owner stated in this Charter are exclusive of any
Taxes, including, without limitation, sales, excise, value added,
stamp, documentary, transfer, ad valorem, general consumption,
property, use, export, import, employment, payroll, withholding or
other similar Taxes, which may be imposed on or incurred by the
Owner, its employees or the Investors (other than, except as
otherwise provided herein, Taxes on the net income or franchise of
the Owner, its employees or the Investors), and all costs associated
therewith, in connection with performance by the Owner of, or the
Owner's rights under, this Charter, including the costs associated
with bonds or letters of credit that are not otherwise the
responsibility of the Charterer under this Charter. The Charterer
shall pay the Owner the amount of all such charges, Taxes and costs
upon receipt of an invoice, subject to the Charterer's right to
reasonably verify the Owner's payment of such amounts. The Owner
shall use reasonable efforts, without filing suit or incurring any
out-of-pocket or other additional costs, to avail itself of any and
all applicable exemptions and/or reductions of such taxes. The
Charterer shall, at the Owner's request, pay such sums directly or
post any required bonds or letter of credit required on any such
items.
12.4 Invoices
The Owner shall render to the Charterer a monthly invoice on or
before the 15th day of each month showing all Supplemental Hire
payable to the Owner for the preceding month.
12.5 Security for Obligations
(a To secure the Obligations, the Obligors have executed and
delivered the Security Documents. Subject to Section 12.5(b),
(c), (d) and (e), the Charterer shall maintain (i) the
▇▇▇▇▇▇▇▇▇▇ Mortgage or (ii) any Substitute Collateral that has
a fair market value at least equal to the Stipulated Loss Value
at the time of any delivery of such Substitute Collateral
(collectively, the "Additional Collateral") to secure the
Obligations.
(b In the event that, at any time during the periods set forth
below, the Timely Liquidation Value of the Vessel as determined
in accordance with the Appraisal Procedure at such time is at
least the Stipulated Loss Value at such time, neither S&P nor
▇▇▇▇▇'▇ has a negative outlook for R&B Falcon at such time and
a Drilling Contract is in full force and effect at such time
that provides adequate cash flow to service the Obligations for
the term of such Drilling Contract, the Charterer may request a
reduction in the amount of Additional Collateral as follows:
(i) after the fourth anniversary of the Delivery Date and so
long as (A) the rating of S&P of the Rated Securities is
at least ABB+" and the rating, if any, of ▇▇▇▇▇'▇ of the
Rated Securities is at least ABa1", and (B) no Default has
occurred, the Timely Liquidation Value of the ▇▇▇
▇▇▇▇▇▇▇▇▇▇ or the Timely Liquidation Value of Substitute
Collateral (as determined by the Appraisal Procedure)
required to be maintained shall be reduced to 50% of the
Stipulated Loss Value;
(ii) after the seventh anniversary of the Delivery Date and so
long as (A) the rating of S&P of the Rated Securities is
at least ABBB-" or higher by S&P and the rating, if any,
of ▇▇▇▇▇'▇ of the Rated Securities is at least ABaa3", and
(B) no Default has occurred, no Additional Collateral
shall be required to be maintained; or
(iii) at any time, and so long as (A) the rating of S&P of
the Rated Securities is at least ABBB+" or higher by S&P
and the rating, if any, of ▇▇▇▇▇'▇ of the Rated Securities
is at least ABaa1", and (B) no Default has occurred, no
Additional Collateral shall be required to be maintained.
(c The Owner shall release its lien and security interest in that
portion of the Additional Collateral that is in excess of the
Additional Collateral (the "Released Collateral") the Charterer
is required to maintain pursuant to Section 12.5(b). From and
after such release the Charterer shall maintain such Released
Collateral or other property (the "Negative Pledge Property")
mutually agreed upon by the Owner and the Charterer that has a
Timely Liquidation Value equal to the Stipulated Loss Value at
the time of such release, free and clear of all Liens (other
than Permitted Liens as defined in the ▇▇▇▇▇▇▇▇▇▇ Mortgage).
The Charterer shall immediately notify the Owner and each of
the Investors of the occurrence of any event that would not
entitle the Charterer to maintain reduced Additional Collateral
pursuant to Section 12.5(b) and shall promptly reinstate or
grant, as the case may be, Liens upon the Negative Pledge
Property or, with the approval of the Owner, provide other
Substitute Collateral in accordance with Section 12.5(d) as
required under Section 12.5(b).
(d) The Charterer shall be entitled to exchange collateral for the
Obligations or discharge its obligation to reinstate Additional
Collateral or Substitute Collateral by providing substitute
property as collateral securing the Obligations (the
"Substitute Collateral") if each of the following conditions
precedent shall have been satisfied:
(i) The Charterer shall have notified the Owner of its
intention to provide Substitute Collateral, which
Substitute Collateral shall be cash, cash equivalents, or
a mobile offshore drilling unit and otherwise in all
respects satisfactory in form and substance to the Owner.
(ii) All instruments conveying or granting to the Charterer
such Substitute Collateral and any related agreements or
instruments shall in all respects be satisfactory in form
and substance to the Owner.
(iii) The Owner and each of the Investors shall have
received with respect to such Substitute Collateral a
report at the sole cost and expense of the Charterer
prepared in accordance with the Appraisal Procedure, in
form and substance reasonably satisfactory to the Owner,
that the fair market value of such Substitute Collateral
when added to the fair market value of other Additional
Collateral for the Obligations shall, after giving effect
to any release, be in compliance with Section 12.5 (a) or
(b), as applicable.
(iv) The Charterer shall at its sole cost and expense have
obtained (to the satisfaction of the Owner) all government
approvals required in connection with the ownership, use,
occupancy, possession, operation or ordinary maintenance
of such Substitute Collateral, compliance with applicable
environmental, health and safety laws and regulations and
the mortgaging of such Substitute Collateral to the Owner.
Each such governmental approval shall be in full force and
effect.
(v) The Charterer shall at its sole cost and expense have
conducted or caused to be conducted such title examination
or title review with respect to such Substitute Collateral
as a reasonably prudent operator would conduct under the
circumstances, and the Owner shall have approved the
status of title of such Substitute Collateral. The
Charterer shall have furnished to the Owner such title
policy or other title assurances as it receives in
connection with the acquisition of such Substitute
Collateral.
(vi) The Charterer shall at its sole cost and expense have
obtained such casualty, liability and other insurance with
respect to such Substitute Collateral as shall be
requested by the Owner, which insurance shall in all
respects comply with, and shall be in all respects subject
to, Article 15. The Owner and each of the Investors shall
have received a certificate of an independent insurance
broker setting forth the insurance obtained in accordance
with this paragraph (vi) and certifying that such
insurance is in full force and effect and that all
premiums then due thereon have been paid.
(vii) The Charterer shall at its sole cost and expense have
executed and delivered to the Owner or to a trustee or
collateral agent designated by them and acting on their
behalf, a mortgage and security agreement or other
instrument or other document granting to the Owner or such
trustee or collateral agent a mortgage Lien and security
interest, subject to no other Liens (other than Permitted
Liens as defined in the ▇▇▇▇▇▇▇▇▇▇ Mortgage), in and to
such Substitute Collateral, each deed, lease, assignment
or other instrument of conveyance referred to in
paragraph (ii) above, each government action as referred
to in paragraph (iv) above, each ancillary contract and
any agreement providing for the operation of such
Substitute Collateral (which assignment shall be consented
to by the operator, on terms satisfactory to the Owner),
subject to no Liens (other than Permitted Liens as defined
in the ▇▇▇▇▇▇▇▇▇▇ Mortgage). Such mortgage and security
agreement or such other instrument shall be in full force
and effect and shall be in all respects satisfactory in
form and substance to the Owner. Each of the foregoing
instruments and any necessary documents relating thereto,
including, without limitation, financing statements under
the applicable Uniform Commercial Code or other
instruments for filing or recordation, shall have been
duly recorded and filed in all public offices in which
such recordation or filing is necessary in order to
provide constructive notice to third parties of the
interests and Liens created thereby and in order to
establish, perfect, preserve and protect the validity and
effectiveness thereof and the mortgage Lien and security
interest created by such mortgage and security agreement
or other instrument on all property purported to be
subject thereto; and all taxes, fees and other charges
payable in connection with any and all of the foregoing
shall have been paid in full by the Charterer.
(viii) The Owner and the Investors shall have received such
environmental reports with respect to such Substitute
Collateral (in form and substance satisfactory to the
Owner) as they may request.
(ix) The Owner and each of the Investors shall have received
such opinions of counsel satisfactory to the Owner as to
such matters relating to the acquisition of such
Substitute Collateral, including the validity and
enforceability of all documents and instruments referred
to in this Section 12.5(d) and the validity, extent and
priority of the Owner's Lien, as the Owner shall
reasonably request, which opinions shall be in form and
substance satisfactory to the Owner and from counsel
acceptable to the Owner.
(x) The Charterer shall have paid all costs and expenses
incurred by the Owner and each of the Investors in respect
of obtaining any release of Additional Collateral, the
Mortgages or the Substitute Collateral, regardless of
whether such release, Collateral, the Mortgages,
Substitute Collateral or Additional Collateral is
delivered.
(xi) The Owner shall have received an Officer's Certificate,
containing such representations and warranties with
respect to such Substitute Collateral and the matters set
forth in this Section 12.5(d) and any other matters as
shall be reasonably requested by the Owner, and such other
documents or evidence as to the satisfaction of the
conditions set forth in this Section 12.5(d), as the Owner
shall reasonably request.
ARTICLE 13
GENERAL OBLIGATIONS AND PERFORMANCE
13.1 Independent Owner Relationships
In the performance of this Charter, the Owner is an independent
contractor. In the performance of this Charter, the Charterer is an
independent contractor and shall control and direct the operation of
the Vessel and the performance of the details of the work to be
performed by the Charterer's personnel and shall be responsible for
the results of such work, all in accordance with the obligations
imposed upon the Charterer hereunder and under the Charter
Documents. The presence of and the observation by the Owner's
representative(s) at the site of any work shall not relieve the
Charterer from the Charterer's obligations and responsibilities
hereunder.
13.2 Inspection
The Owner shall have the right, at the Charterer's sole cost and
expense, to inspect the Vessel and its book and records at all
reasonable times if the exercise of such inspection right would not
unreasonably interfere with the operator's operations on the Vessel
at the time or any applicable governmental approval, which approvals
the Charterer shall endeavor to obtain in good faith, and shall have
the right to confer with and have access to the officers and
employees of the Charterer and any Guarantor in connection with any
such inspection. The Owner shall have the right annually to cause
the Vessel to be surveyed by a marine surveyor at the Owner's (but,
after the occurrence and during the continuance of any Default, the
Charterer's) expense. The Charterer shall correct at its sole cost
expense all material deficiencies discovered during any such survey
or inspection.
13.3 Performance of the Charterer
The Charterer shall exercise due diligence to carry out any and all
operations with respect to the Vessel in a safe, workmanlike manner
in accordance with good offshore industry practice, which
requirement shall specifically include, not by way of limitation in
any manner whatsoever, the obligations to have the Vessel under the
command of an offshore instillation manager certified by and for the
area in which the Vessel is operating.
13.4 Operations Outside of U.S. Waters
In the event that the Charterer intends to operate the Vessel
outside of U.S. territorial waters and/or the Outer Continental
Shelf, the Charterer shall submit at least 15 days before movement
of the Vessel to the intended area of operation such documentation
demonstrating to the Owner's reasonable satisfaction (a) that
operation of the Vessel within the intended area of operation
complies with all applicable laws and regulations of the United
States and of the intended area of operation; (b) that the Vessel
can be removed from such intended area of operation upon either
cessation of the Vessel's operation in the area or termination of
this Charter; (c) that the Charterer provides all additional
indemnities and has secured political risk insurance for such area
additive to the insurances provided for herein and (d) the Vessel is
not subject to any lien or interest that might have priority over
the title and interest of the Owner. Each move to a new area
outside U.S. territorial waters, whether or not subject to the
jurisdiction of a different foreign country, shall meet the
foregoing requirements and those of Section 7.1.
ARTICLE 14
LIABILITY AND INDEMNITY
14.1 Survival of Indemnities
The indemnities set forth in this Charter shall survive the
termination of this Charter, and shall remain enforceable (subject
only to debtor relief laws and general equitable principles) as to
any claim, demand, liability, damage and expense arising out of or
incidental to this Charter, without regard to the termination of
this Charter.
14.2 Pollution
The Charterer shall assume all responsibility for the control and
removal of, and hold Owner Group harmless from loss, liabilities or
damage or claims arising from, directly or indirectly, pollution or
contamination by any liquid or nonliquid or waste material
wheresoever found that is discharged, spilled or leaked from the
Vessel or noncompliance with environmental, health and safety laws
(including but not limited to, those stemming from release of
pollutants, private toxic tort claims, off-site disposal of waste or
other pollutants, PCB's, and asbestos-containing materials on or in
the Vessel (irrespective of whether any of the foregoing occurred,
existed or arose before or after the date hereof)). To the extent
that any law, regulation or governmental entity acting within its
jurisdiction imposes on Owner Group liability for any such
pollution, notwithstanding such imposition of direct liability, the
Charterer shall have designated Owner Group as an additional insured
under its insurance policies and the Charterer shall hold the Owner
harmless from such loss, liabilities, damage or claims and reimburse
Owner Group for any amounts that Owner Group may be required to pay.
This indemnity is valid irrespective of the negligence or fault,
whether sole, joint, active or passive of the indemnified party and
whether predicated on strict liability, statutory duty, contractual
indemnity or any other theory of liability of the indemnified party.
14.3 The Charterer's Indemnity
(a) The Charterer shall defend, indemnify and hold Owner Group, its
officers, directors, employees, agents and Affiliates
(collectively, the "Indemnitees") harmless from and against all
claims, liabilities, damages, Taxes and expenses (including,
without limitation, attorneys' fees and other costs of
defense), including all claims of any type whatsoever,
irrespective of insurance coverage, arising out of, incidental
to, or related to this Charter, any of the Charter Documents,
any of the transactions contemplated hereby or thereby, the
Vessel, the ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇▇ ▇▇▇▇ or any Additional
Collateral or Substitute Collateral, except, unless otherwise
specifically provided herein, any claims directly arising out
of the Owner's gross negligence or willful misconduct.
(b) If it is judicially determined that the monetary limits of
insurance required under this Charter or of the indemnities
voluntarily and mutually assumed in this Charter (which the
Owner and the Charterer hereby agree will be supported either
by available liability insurance, under which the insurer has
no right of subrogation against the indemnitee, or voluntarily
self-insured in respect of permitted deductibles) exceed the
maximum limits permitted under applicable law, it is agreed
that such insurance requirements or indemnities shall
automatically be amended to conform to the maximum monetary
limits permitted under such law.
(c) The Charterer shall indemnify, pay and hold harmless Owner
Group against any loss, liability, cost or expense incurred in
respect of the Vessel, including actual or constructive loss of
the Vessel, or any effort to interdict the payment to the Owner
of proceeds arising out of or related to this Charter.
(d) The indemnities in this Charter apply without regard to any
conflicting rules of liability under any applicable law or
regulation and shall include indemnification for any and all
claims in which recovery, indemnification or contribution is
sought directly or indirectly by any person or entity against
Owner Group whether predicated on negligence, strict liability,
statutory duty or contractual indemnity, except any such
liability directly arising out of the gross negligence or
willful misconduct of the Owner unless otherwise expressly
specified herein.
14.4 Patent Infringement
(a) The Charterer shall assume liability for, and shall defend,
indemnify and hold the Owner harmless from and against, all
suits and actions alleging that the Vessel, any equipment or
part thereof, or any operation of the Vessel, any such
equipment or part thereof constitutes an infringement of any
letters patent.
(b) If, as a result of any changes required by the Charterer in
equipment furnished by the Owner, or any changes required by
the Charterer in operation of such equipment or part thereof, a
claim is filed against the Owner alleging that such equipment
or any such operation conducted infringes any letters patent,
then the Charterer shall be liable for all such claims and
indemnify and hold the Owner harmless from all such claims.
14.5 Both-to-Blame Collision Clause
Without limitation on any other indemnity of the Charterer contained
herein, if the liability for any collision in which the Vessel is
involved while performing this Charter should be determined in
accordance with the laws of the United States of America, the
following clauses shall apply:
(a) If the Vessel comes into collision with another ship as a
result of the negligence of the other ship and any act, neglect
or default of the Master, mariner, pilot or the servants of the
Charterer in the navigation or in the management of the Vessel,
the Charterer shall indemnify the Owner against all direct,
consequential or special loss or liability to the other ship or
her owner.
(b) The foregoing provisions shall also apply where the owners,
operators or those in charge of any ship or ships or objects
other than, or in addition to, the colliding ships or objects
are at fault in respect of a collision or contact.
14.6 Liens, Attachments and Encumbrances
None of the Charterer, any subcharterer or party to a Drilling
Contract shall have the right, power or authority to create, incur
or permit to exist any Lien upon the Vessel, except for Permitted
Liens. The Charterer further agrees to carry a true copy of this
Charter with the ship's papers on board the Vessel, and to exhibit
the same to any person having business with the Vessel which may
give rise to any lien or claim upon the Vessel other than a
Permitted Lien or to the sale, conveyance or mortgage of the Vessel,
and on demand, to any person having business with the Vessel or to
any representative of the Owner, the Owner Group or any Investor.
The Charterer shall also place and keep prominently displayed on
board the Vessel a notice, framed under glass, 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 CHARTER
This Vessel is owned by Deep Sea Investors, L.L.C. It is
under bareboat demise charter to R&B Falcon Drilling Co.
Under the terms of this Charter none of the Charterer, any
subcharterer, the Master nor any other person has any
right, power or authority to create, incur or permit to be
imposed on the Vessel (a) any lien whatsoever other than
liens for current crew's wages, general average and
salvage, in each case, incurred in the ordinary course of
business and that are not yet overdue complying with the
provisions of such charter and (b) any claims whatsoever
under any drilling contracts in respect of the Vessel
other than claims complying with the provisions of such
charter.
Such notice shall be promptly changed from time to time to reflect
the identity of the successors or assigns of the Owner.
14.7 Indemnification by the Charterer
The Charterer shall indemnify and hold harmless the Owner against
any Liens, claims or liabilities of whatsoever nature, other than
Permitted Liens (but if the Vessel is being redelivered to, or
otherwise coming into the possession of, the Owner pursuant to the
terms and conditions of this Charter, other than Permitted Liens
arising as the result of claims against the Owner for which the
Owner is not entitled to indemnification hereunder only), whether
such Liens, claims or liabilities now exist or are created hereafter
or are founded or unfounded, upon or relating to the Vessel, its
possession, management, maintenance, repair, use, employment,
chartering or subchartering or operation or any act or omission of
the Charterer.
14.8 The Charterer's Duties to Remove Liens, etc.
Without limitation of the generality of the Charterer's indemnities
provided for in Section 8.2 and Article 14, the Charterer agrees
that if a libel or a complaint in admiralty or any other legal
proceeding shall be filed against the Vessel, or if the Vessel shall
be otherwise levied upon or taken into custody or detained or
sequestered by virtue of proceedings in any court or tribunal or by
any government or other authority because of any Liens, claims or
liabilities arising from any claims, other than claims against the
Owner the payment or discharge of which is not the obligation of the
Charterer or any Guarantor or with respect to which the Owner is not
entitled to indemnification from the Charterer or any Guarantor.
The Charterer shall at its own expense within 15 days thereafter
cause the Vessel to be released and all such Liens and (except to
the extent that the same shall currently be contested by the
Charterer in good faith by appropriate persons and appropriate
proceedings in the Owner's sole judgment and shall not affect the
continued release, or until any risk of forfeiture or other loss of
or to the Vessel, or in any manner whatsoever interfere with the use
and operation of the Vessel) claims and liabilities to be
discharged. The Charterer shall forthwith notify the Owner by
telecopy, telex or telegram, confirmed by letter, of each such event
and of each such release and discharge. The Charterer shall advise
the Owner in writing at least once in each three-month period as to
the status and merits of all such excepted claims and liabilities
being so contested by the Charterer and not discharged within
fifteen days as provided above, which are either not bonded or
affect the ability of the Charterer to use any Vessel in the
ordinary course of its business. The Charterer will pay and
discharge when due all claims for repairs and other charges incident
to current operations of the Vessel or with respect to any change,
alteration or addition made pursuant to this Charter and will not
permit any lien referred to in clause (b) or (c) of the definition
of "Permitted Liens" which has ripened into a cause of action to be
in effect for more than 30 days unless it is fully bonded or covered
by insurance or Adequate Provision.
ARTICLE 15
INSURANCE
15.1 The Charterer's Insurance
The Charterer shall, at its own expense, procure and maintain in
effect with respect to and for the duration of this Charter the
insurance policies with limits of at least, and with deductibles, if
any, of no more than, those as set forth in Schedule C approved by
the Owner and having such terms and conditions, and with carriers
and/or underwriters approved by the Owner (such approval not to be
unreasonably withheld). Any policies of insurance carried by the
Charterer in accordance with this Article 15 shall (a) provide that
the interests of Owner Group in such policies shall not be
invalidated by any action, inaction, neglect, breach of warranty or
misrepresentation of the Charterer or change in ownership of the
Vessel and shall insure Owner Group's interests as they appear,
regardless of any breach or violation by the Charterer of any
warranty, declaration or condition contained in such policies, and
(b) be primary without right of contribution from any other
insurance which may be carried by Owner Group with respect to its
interests in the Vessel. The Charterer shall immediately notify
underwriters of and shall furnish all necessary information
concerning any occurrence which may give rise to a claim under any
of said insurance policies. Prior to commencement of any operations
under this Charter and any renewal of the insurance policies
required to be maintained hereunder, the Charterer shall provide the
Owner with insurance certificates evidencing the Charterer's
insurance coverage; such certificates shall provide for at least 30
days' (seven days, in the case of war risk) prior written notice to
the Owner and each of the Investors of any material change in,
reduction or cancellation of any of said insurance policies and
shall show the Charterer, the Owner, the Owner Group and the
Investors as sole loss payees and additional insureds thereunder as
their interests appear. If requested, copies of all correspondence
and documents sent to underwriters, related to any accident or claim
arising out of or in connection with the performance of the work
hereunder, shall be provided to the Owner.
15.2 Nonperformance of Insurance Companies
The insolvency, liquidation, bankruptcy, or failure of any insurance
company providing insurance for the Charterer or the Owner or their
respective subcontractors, or failure of any such insurance company
to pay claims accruing, shall not be considered a waiver of, nor
shall it excuse the Charterer from complying with, any of the
provisions of this Charter or any of the Charter Documents, except
that any such act or omission by an insurance company shall not be
deemed a breach of this Charter by the Charterer.
15.3 Subrogation
The Charterer agrees to endorse each such insurance policy to waive
the underwriters' and insurance providers' right of subrogation with
respect to Owner Group; and the Charterer agrees to indemnify and
hold Owner Group harmless with respect to any rights of subrogation
pursued by the Charterer's underwriters or insurance providers
against Owner Group.
ARTICLE 16
ASSIGNMENT OF CHARTER
16.1 Assignment and Subcontract by the Owner
The Owner shall have the right, at any time, to assign all or part
of this Charter to any Person, so long as such Person agrees to be
bound by this Charter and, at the time of such assignment, has, or
is a consolidated Subsidiary of a parent entity having, a
consolidated net worth of at least $50,000,000 as determined in
accordance with generally accepted accounting principles and is not
primarily engaged in the offshore drilling business, other than as a
financier or lessor of offshore drilling equipment or operations.
16.2 Assignment by the Charterer
The Charterer shall not have the right to assign this Charter or to
subcharter the Vessel without the prior written consent of the
Owner. Subject to the terms of applicable law, the Charterer shall
have the right, without the consent of the Owner, so long as no
Default or Event of Default shall have occurred and be continuing,
to subcharter the Vessel on a bareboat or time basis to any
Subsidiary of R&B Falcon that is and remains throughout the term of
such subcharter a Subsidiary of R&B Falcon and a citizen of the
United States within the meaning of the Shipping ▇▇▇, ▇▇▇▇, and to
enter into, and to permit the Vessel to serve under, Drilling
Contracts that comply with the terms hereof and the other Charter
Documents (provided no such Drilling Contract constitutes a demise
or a bareboat charter or any grant of any property right or other
interest in the Vessel between the Charterer and others) provided
that:
(a) each such subcharter and Drilling Contract shall be consistent
with the terms of this Charter and the subcharterer shall have
agreed not further to subcharter the Vessel without complying
with this Section 16.2 with respect to such further subcharter;
(b) either (i) the subcharterer under such subcharter or the
customer under a Drilling Contract is a citizen of the United
States within the meaning of the Shipping Act, 1916 and
evidence thereof satisfactory to the Owner in its sole judgment
shall be submitted to the Owner within 30 days of entering into
such subcharter, (ii) the prior approval of the U.S. Maritime
Administration under the Shipping Act, 1916 of such subcharter,
in form satisfactory to the Owner in its sole judgment, shall
have been obtained and, within 30 days of entering into such
subcharter or Drilling Contract, evidence thereof satisfactory
to the Owner in its sole judgment, shall have been submitted to
the Owner or (iii) such subcharter or Drilling Contract shall
be covered by a general approval of the U.S. Maritime
Administration under sections 9 and 37 or any other applicable
sections of the Shipping Act, 1916 and the Charterer shall have
given written notice to the Owner to that effect, which notice
shall set forth in reasonable detail the facts which establish
such coverage with respect to such subcharter or Drilling
Contract;
(c) such subcharter or Drilling Contract shall not violate any laws
of the United States of America or any regulations, rules,
interpretations or orders thereunder;
(d) irrespective of any such subcharter, the Charterer shall remain
liable for all of its obligations under this Charter and the
Charter Documents to the same extent as if such subcharter or
Drilling Contract were not in effect;
(e) the subcharterer under each such subcharter shall comply with
all applicable laws and regulations, provided that violations
of laws or regulations by any such subcharterer that (i) will
not result in the Owner, the Owner Group or the Vessel being in
violation of, or subject to any fine, penalty or other sanction
under any applicable law or regulation or any risk of
forfeiture or other loss of or to the Vessel, (ii) do not
otherwise adversely affect the interests of the Owner or the
Owner Group or the Investors hereunder, and (iii) are not
consented to by the Charterer shall not, by reason of this
clause (e), constitute a breach, or cause such subcharter to be
in violation of the terms of this Charter so long as the
Charterer is taking appropriate action to terminate such
violation or to terminate such subcharter;
(f) such subcharter or Drilling Contract shall, by its terms,
expire no later than the end of the Charter Period, or any
extension thereof, and Charterer shall not suffer or permit to
be continued under any such subcharter or Drilling Contract any
lien or encumbrance incurred by it or its agents, which might
have priority over the title and interest of the Owner in the
Vessel and any part thereof, or equipment or other property
used in connection with the Vessel; and
(g) any Drilling Contract shall be on terms and conditions in
substantially the form generally used in offshore drilling and
with an operator and having (i) a consolidated tangible net
worth as determined in accordance with generally accepted
accounting principles of at least $500,000,000 (or be a
consolidated Subsidiary of a parent entity having such a
consolidated tangible net worth), or (ii) a senior unsecured
debt rating by S&P of ABBB-" or by ▇▇▇▇▇'▇ of ABaa3" (or be a
consolidated direct or indirect Subsidiary of a parent entity
having a senior unsecured debt rating meeting such criteria) or
(iii) maintaining (or the Charterer providing) operators extra
expense or energy exploration and development insurance
coverage in an amount of at least the difference between
$150,000,000 (or such greater amount, as may be necessary to
meet the applicable financial responsibility requirements under
the Oil Pollution Act of 1990, or any other applicable laws, as
amended from time to time) and the amount of the Charterer's
contingent operators extra expense or energy exploration and
development insurance or other coverage in effect at such time,
with such underwriters or carriers and containing such terms
and conditions as the Owner may require, in the form normally
and customarily maintained by oil and gas operators engaged in
offshore drilling operations, for oil pollution liability and
expense, with the Owner, Investors, the Owner Group and the
Charterer named as additional insureds and having the benefit
of waivers of subrogation and with carriers or underwriters
reasonably acceptable to the Owner.
The Charterer shall within 30 days after entering into each Drilling
Contract notify the Owner of the period thereof and of the identity
of the other party and its relationship with the Charterer, if any.
16.3 Assignment of Subcharter Hire.
The Charterer hereby sells, assigns, transfers, creates a security
interest in and sets over unto the Owner all of the Charterer's
right, title and interest in and to all accounts, chattel paper,
contract rights and general intangibles, and all monies and claims
for monies due and to become due under, or arising out of, and all
claims for damages arising out of the breach of, any subcharter or
Drilling Contract (Drilling Contracts being considered, for purposes
of this Section 16.3, subcharters) relating to the Vessel, whether
now existing or hereafter entered into. It is expressly agreed
that, anything herein contained to the contrary notwithstanding, the
Charterer shall remain liable under each such subcharter to perform
all of its obligations thereunder, and the Owner shall have no
obligations or liabilities thereunder by reason of or arising out of
the foregoing assignment (herein, the "Rights Assignment").
Upon the demand of the Owner after the occurrence and during the
continuation of an Event of Default, the Charterer will specifically
authorize and direct each person liable therefor to make payment of
all monies due and to become due under or arising out of each such
subcharter to the Owner or as the Owner shall direct, and upon such
demand irrevocably authorizes and empowers the Owner to ask, demand,
receive, receipt and give acquittance for any and all such amounts
which may be or become due or payable or remain unpaid at any time
or times to the Charterer by each such person under or arising out
of such subcharters; to endorse any checks, drafts or other orders
for the payment of money payable to the Charterer in payment
therefor; and in its discretion to file any claims or take any
action or proceeding either in its own name or in the name of the
Charterer or otherwise which the Owner may deem to be necessary or
advisable in the premises.
The Charterer hereby irrevocably authorizes the Owner after any such
demand has been made, in its own name or in the name and on behalf
of the Charterer, to give notification to persons obligated under
such subcharters that payment is to be made to the Owner or as the
Owner directs and hereby agrees to cause to be delivered to the
Owner consents of such persons to the Rights Assignment, in form and
substance satisfactory to the Owner.
The Charterer agrees that at any time and from time to time, upon
the Owner's written request, the Charterer will execute and deliver
such further documents and do such further acts and things as the
Owner may request in order to effect further the purposes of the
Rights Assignment, provided that no such consent referred to in the
preceding paragraph may be required under this sentence.
The Charterer hereby irrevocably authorizes the Owner, at the
Charterer's expense, to file such financing statements relating to
the Rights Assignment, without the Charterer's signature, as the
Owner at its option may deem appropriate, and appoints the Owner as
the Charterer's attorney-in-fact to execute any such financing
statements in the Charterer's name and to perform all other acts
which the Owner deems appropriate to perfect and continue the
security interest created hereby.
The Charterer covenants and agrees with the Owner that the Charterer
will (a) duly perform and observe all of the terms and provisions of
such subcharters on the part of the Charterer to be performed or
observed, (b) clearly record in the books and records of the
Charterer notations of the Rights Assignment and (c) in the event
that the Charterer shall receive payment of any money which should
have been paid directly to the Owner pursuant to a demand made or
notice given under this Section 16.3 forthwith turn over the same to
the Owner or as the Owner may direct, in the identical form in which
received (except for such endorsements as may be required thereon).
ARTICLE 17
LOSS, TAKING OR SEIZURE.
17.1 Taking by the U.S. Government
A taking of the Vessel for use by the United States Government shall
not terminate this Charter, but the Charterer shall remain liable
for all its obligations hereunder, including its liability for
payment of Hire, until the expiration of the Charter Period. If, at
the expiration of the lesser of the then remaining term of the
Charter Period or 180 days after the taking of the Vessel for use by
the United States Government, the Vessel shall still be subject to
such taking for use by the United States Government, an Event of
Loss shall be deemed to have occurred on the last day of such 180-
day period or the Charter Period, whichever occurs first.
17.2 Event of Loss not a Total Loss
In the case of any Event of Loss arising out of damage to the Vessel
other than actual total loss, the Charterer shall notify the Owner
that the Vessel is deemed to be subject to an Event of Loss and
shall not consent to a compromise or arranged total loss without the
prior written agreement of its insurance underwriters that the
Vessel is a constructive or compromised total loss and that such
underwriters agree to pay an amount at least equal to the amount
payable by the Charterer under Section 17.3.
17.3 Payment of Stipulated Loss Value
Upon the occurrence of an Event of Loss, the Charterer shall
forthwith give the Owner written notice of such Event of Loss and
shall pay to the Owner within 60 days following the date of the
occurrence of such Event of Loss the Stipulated Loss Value of the
Vessel calculated as of such Basic Hire Payment Date occurring after
the occurrence of the Event of Loss plus interest at a rate per
annum equal to the Overdue Rate. The Charterer shall also pay to
the Owner all Basic Hire due on the Payment Dates next occurring
after the date of occurrence of such Event of Loss and, if the date
on which such Stipulated Loss Value actually is paid in full is not
such a Payment Date, an amount equal to the Overdue Rate (computed
on the basis of a 360-day year for actual days elapsed) on the
amount of such Stipulated Loss Value for the period from such
Payment Date to the date such Stipulated Loss Value is paid in full.
17.4 Application of Payments
In the case of all payments (other than insurance proceeds) received
by the Owner or the Charterer from any governmental authority or
otherwise as compensation for an Event of Loss, so much of such
payments as shall not exceed the sum of the Stipulated Loss Value
and an amount equal to interest hereon required to be paid by the
Charterer as above provided and any Hire then due and owing by the
Charterer hereunder shall be applied, provided no Default or Event
of Default shall have occurred and be continuing, first, in
reduction of the Charterer's obligation to pay such Hire, if any,
then due and owing; and second, in reduction of the Charterer's
obligation to pay such Stipulated Loss Value and such amount equal
to interest thereon as provided above if not already paid by the
Charterer or, if already paid by the Charterer, to reimburse the
Charterer for its payment of such Stipulated Loss Value and the
balance, if any, of such payments remaining thereafter shall be paid
over to, or retained by, the Owner.
17.5 Date of Loss
For the purpose of this Charter, the date of the occurrence of an
Event of Loss shall be the date of the casualty or other occurrence
giving rise to such Event of Loss (or the earlier of the expiration
of the remaining term of the Charter Period or the date 180 days
after such taking thereafter, in the case of a taking of title or
use or possession of the government of the United States of America,
as provided in the definition of Event of Loss set forth in
Section 1 hereof), and if the date of such casualty or other
occurrence shall be uncertain, such date shall be deemed the date
the Vessel was last heard from.
17.6 Effect of Payment of Stipulated Loss Value
In the event that the Charterer shall make payment in full of any
overdue payments of Basic Hire, and of such Stipulated Loss Value
and an amount equal to interest thereon as provided above, the
Charterer shall have no further obligation to make any payment of
Basic Hire payable after the Payment Date as of which such
Stipulated Loss Value was calculated, and the Charterer, subject to
the Charterer's obtaining any governmental consent required,
(a) shall be subrogated to all rights which the Owner shall have
with respect to the Vessel, (b) shall receive assignments and bills
of sale from the Owner (in such form described in Section 3.7
hereof, but without any representation or warranty of any character
on the part of the Owner) of any or all such rights, together with
all of the Owner's right, title and interest in and to the Vessel
and all machinery and equipment pertaining thereto, and (c) shall
have the right to abandon the Vessel to underwriters on behalf of
the Owner as well as itself. In such case, the Owner shall execute
such documents and take such other action as the Charterer may
reasonably require to effect the surrender of the Vessel to the
insurance underwriters. Nothing herein contained shall relieve the
Charterer or the Owner of any of its obligations under Article 18
incurred up to and including the date of the Event of Loss. After
the payment in full of the Stipulated Loss Value of the Vessel and
such other amounts, the Charterer's obligation to pay further Basic
Hire with respect to such Vessel shall terminate. All insurance
proceeds received as the result of an Event of Loss with respect to
the Vessel, and all payments (other than insurance proceeds)
received by the Owner or the Charterer from any governmental
authority or otherwise as compensation for an Event of Loss with
respect to the Vessel, shall be applied in reduction of the
Charterer's obligation to pay Stipulated Loss Value with respect to
the Vessel (plus any other amounts of Basic Hire and Supplemental
Hire then due and payable with respect to the Vessel), if not
already paid by the Charterer, or, if already paid by the Charterer,
shall be applied to reimburse the Charterer for its payment of the
Stipulated Loss Value with respect to the Vessel and the balance, if
any, of such proceeds or payments remaining thereafter shall be paid
over to, or retained by, the Charterer.
ARTICLE 18
TAX
18.1 Characterization as a Lease
Each of the parties hereto intends that, for Income Tax purposes,
this Charter will be treated as a lease of the Vessel (except for
the Severables to which Charterer has title pursuant to Section 9.4)
from the Owner to the Charterer, the Owner will be treated as the
sole owner of the Vessel (except for the Severables to which
Charterer has title pursuant to Section 9.4) and the Charterer will
be treated as not having any ownership interest in the Vessel
(except for the Severables to which Charterer has title pursuant to
Section 9.4), the Owner or any partnership or joint venture with the
Owner. The Charterer, the Owner, each of the Investors and any
Affiliate thereof will not take any action or file any return or
other document which is inconsistent with such characterization.
18.2 Representations
The Charterer represents, warrants and covenants to the Owner, each
of the Investors and any Affiliate thereof as follows:
(a) All information provided by the Charterer and its Affiliates to
any independent appraiser or engineer with respect to the
Vessel and the Upgrade Programs was and is true, complete and
accurate, and the Charterer and its Affiliates did not omit any
factual information necessary to make such first-mentioned
information not misleading or omit any factual information
required to permit any such independent appraiser or engineer
to perform the duties for which he was retained;
(b) Reading and ▇▇▇▇▇, Inc. was the original owner of the Vessel
and initially placed the Vessel in service during its taxable
year ended December 31, 1983;
(c) The Charterer is not, and will not become at any time during
any period in which the Owner is claiming federal income tax
depreciation deductions, a "tax-exempt entity" (within the
meaning of Section 168(h)(1)(A) of the Code and Section
168(j)(3)(A) of the 1954 Code);
(d) During any period during which the Owner is claiming federal
income tax depreciation deductions, the Charterer will take no
action and will not suffer any action to be taken by any Person
(other than the Owner) which would cause the Vessel to
constitute "tax-exempt use property" within the meaning of
Section 168(h)(1) of the Code (or Section 168(j)(3) of the
1954 Code), or property used "predominantly outside the United
States" within the meaning of Section 168(g)(1)(A) of the Code
(or Section 168(f)(2) of the 1954 Code);
(e) Immediately prior to the Delivery Date, Reading and ▇▇▇▇▇, Inc.
was entitled to accelerated cost recovery deductions with
respect to the Vessel, computed on the basis that (i) the
Vessel is A5-year property" (within the meaning of Section
168(c)(2)(B) of the 1954 Code) and (ii) recovery percentages
applicable to the Vessel are those set forth for 5-year
property pursuant to Section 168(b)(1) of the 1954 Code;
(f) Neither the Charterer nor any of its Affiliates bore any of the
cost of the First Upgrade Nonseverables. Neither the Charterer
nor any of its Affiliates will bear any of the cost of the
Second Upgrade Program or the Third Upgrade Program;
(g) The total cost of the First Upgrade Program was reasonable and
based on arm's-length negotiations;
(h) All of the First Upgrade Severables will be readily removable
from the Vessel without causing material damage to the Vessel;
(i) The allocation of the total cost of the First Upgrade Program
among the First Upgrade Nonseverables, the First Upgrade
Severables, and the First Upgrade Maintenance as set forth on
Schedule B-1 is reasonable;
(j) The First Upgrade Maintenance consisted solely of ordinary and
routine maintenance and repairs that did not materially add to
the Vessel's value or appreciably prolong the Vessel's useful
life;
(k) The Charterer has not made and will not make, with respect to
the period beginning with the Delivery Date and ending with the
date (if any) on which the Charterer acquires title to the
Vessel from the Owner, any claim predicated on tax or legal
ownership of such Vessel;
(l) Immediately after the First Upgrade Completion, the basis for
Income Tax purposes of the Vessel in the hands of the Owner
took into account (a) the purchase price of the Vessel,
including all related costs, expenses, commissions, taxes, etc.
incurred by the Owner in connection with the acquisition of the
Vessel, and (b) all costs incurred by the Owner pursuant to the
First Upgrade Program;
(m) The Vessel does not require any improvements, modifications,
upgrades or additions in order to be rendered complete or
suitable for its intended use, and the Vessel is ready and
available for the Charterer's intended use; and
(n) No member of the "Lessee Group" (as such term is defined in
Revenue Procedure 75-21, 1975-1 C.B. 715, as modified by
Revenue Procedure 79-48, 1979-2 C.B. 529) of which the
Charterer is a member has, nor will it acquire at any time
during the Charter Period, any investment in the Vessel within
the meaning of Section 4(4) of said Revenue Procedures that is
not permitted thereunder.
18.3 Tax Indemnity
The Charterer shall indemnify and hold the Owner, each of the
Investors and any Affiliate thereof harmless from:
(a) Any Taxes (other than Income Taxes) imposed on or incurred by
the Owner, such Investor or any Affiliate, employee, agent or
representative thereof with respect to this Charter or any of
the Charter Documents, the Vessel, any direct or indirect
interest therein or any amounts paid or payable in connection
therewith;
(b) Any Income Taxes (other than U.S. federal Income Taxes) imposed
on or incurred by the Owner, such Investor or any Affiliate
thereof (i) caused by or arising from the location or operation
of the Vessel in any particular waters or (ii) imposed by any
jurisdiction, other than the jurisdiction of incorporation of
such Investor or the jurisdiction of a place of business of
such Investor (unless such place of business is determined on
the basis of the location of the Vessel or the operation of the
Vessel or this Charter or any of the Charter Documents), in
respect of the Vessel or by reason of the transactions
contemplated by the Charter or any of the Charter Documents;
(c) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from the
Vessel's failing to qualify for accelerated cost recovery
deductions, computed on the basis that (i) the Vessel is
A5-year property" (within the meaning of Section 168(c)(2)(B)
of the 1954 Code) and (ii) recovery percentages applicable to
the Vessel are those set forth for 5-year property pursuant to
Section 168(b)(1) of the 1954 Code, by reason of any act of
commission or omission, misrepresentation or breach of any
agreement, covenant or warranty contained in the Charter or any
of the Charter Documents on the part of the Charterer, any
subcharterer, assignee or user of the Vessel or any Affiliate
thereof;
(d) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from the
charter, subcharter or use of the Vessel to or by a "tax-exempt
entity" (within the meaning of Section 168(h)(1)(A) of the Code
or Section 168(j)(3)(A) of the 1954 Code);
(e) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from the
Vessel's becoming limited use property;
(f) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from any
item of loss or deduction attributable to the Vessel, this
Charter or any of the Charter Documents or the transactions
contemplated by the Charter or any of the Charter Documents not
being treated as derived from, or allocable to, sources within
the United States;
(g) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from any
replacement, improvement, modification, upgrade, addition or
capital expenditure made or to be made to or in connection with
the Vessel or pursuant to this Charter, any of the Charter
Documents or the transactions contemplated by the Charter or
any of the Charter Documents or otherwise;
(h) Any Taxes payable as a result of any inaccuracy or breach of
any representation, warranty or covenant of the Charterer under
this Charter or any of the Charter Documents;
(i) Any Income Taxes imposed on or incurred by the Owner, such
Investor or any Affiliate thereof caused by or arising from the
inclusion in income of any amount paid or payable by the
Charterer under this Section 18.3; and
(j) Any attorneys' fees or other costs incurred by the Owner, such
Investor or any Affiliate thereof in connection with any
payment from the Charterer under this Section 18.3.
18.4 Payments
Any amount to which the Owner, any of the Investors or any Affiliate
thereof is entitled under Section 18.3 shall be paid in a lump sum
equal to the present value of the amounts of the existing and
anticipated Taxes described in Section 18.3 payable by such
indemnitee for all affected taxable periods. In the case of any
such amount caused by a loss of Income Tax deductions, such amount
shall be reduced (but not below zero) by an amount equal to the
present value of the amounts of existing and anticipated reductions
in Income Taxes payable by such indemnitee for all affected taxable
periods that would not be realized but for the loss of such
deductions. Any amount to which such an indemnitee is entitled
under Section 18.3 shall be calculated on the basis of (i) a
conclusive presumption that such indemnitee has and will have
sufficient amounts of taxable income, foreign-source income, and
foreign income tax liability so as to be able to fully utilize on a
current basis any Income Tax benefits which could be derived from
the Owner's ownership of the Vessel, (ii) a conclusive presumption
that such indemnitee is and will be liable for Taxes at the highest
marginal rates in effect for the relevant taxable period, (iii) the
date or dates on which any payment of Taxes (including estimated
Taxes) shall be due or would be due for the relevant taxable period
if such indemnitee was actually liable for Taxes for such relevant
period, and (iv) an after-tax discount rate of 4.42% per annum,
discounted quarterly. Any such amount shall be paid by the
Charterer to such indemnitee within thirty (30) days following the
receipt by the Charterer of written notice from such indemnitee
which requests such amount and provides details supporting the
calculation of such amount.
18.5 Records
The Charterer will maintain sufficient records with respect to the
Vessel and this Charter, will preserve and retain any such records
until the expiration of the statutory period of limitations
(including extensions) of the taxable periods to which any such
records relate and will provide copies of such records as the Owner
or any of the Investors or any Affiliate thereof may reasonably
request to enable the Owner, such Investor or any Affiliate thereof
to fulfill its Tax filing obligations.
ARTICLE 19
GENERAL
19.1 Notices
Notices and other communications required or permitted hereunder
shall be in writing and shall be deemed sufficient for all purposes
if sent by registered or certified letter, nationally recognized
overnight courier service specifying one-day delivery, facsimile or
telex to the recipient's address stipulated below and shall be
effective from the date of receipt thereof. Other addresses may be
substituted for those below upon giving notice thereof in the manner
provided above:
if to the Owner: Deep Sea Investors, L.L.C.
"GATX Marine Investors Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Portfolio Management
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ Financial, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Legal Department
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ Financial Leasing, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: CEFD - Central Region Credit Manager
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Boeing Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Senior Documentation Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Charterer:
R&B Falcon Drilling Co.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Vice President and Treasurer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
19.2 Expenses
Whether or not any of the transactions contemplated hereby are
consummated, each of the Charterer and the Owner shall pay its own
expenses, including legal and appraisal fees and expenses, in
connection with the negotiation, execution and delivery of this
Charter. In addition, the Charterer shall pay upon demand all other
costs and expenses incurred by the Owner and the Investors in
connection with the enforcement of any of their rights or remedies,
any future amendments, supplements, waivers or consents with respect
to any of the Charter Documents, including, without limitation:
(a) the reasonable expenses and disbursements of counsel for the
Owner and the reasonable fees, expenses and disbursements of
▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., special counsel for the Investors, or
any other counsel for services rendered after the Delivery Date
in connection with any Charter Document or any transaction
contemplated thereby, or any modification, amendment or waiver
of any thereof;
(b) all other reasonable expenses in connection with such
transactions including, without limitation, the expenses of
appraisers, other counsel or of experts whose opinions are
required by the terms hereof (to the extent not specifically
required to be paid by third parties by the terms hereof),
printing expenses and all fees, taxes and other charges payable
in connection with the recording or filing of instruments and
financing statements desirable under the Charter Documents;
(c) reimbursement to the Owner and Investors for their reasonable
out-of-pocket expenses in connection with entering into such
transactions, and any and all fees, expenses and disbursements
of the character referred to in clauses (a) and (b) above which
shall have been paid by the Owner or any of the Investors; and
(d) reimbursement to the Owner and Investors in an amount
sufficient to hold each of them harmless from and against any
and all liability and loss with respect to or resulting from
any and all claims for or on account of brokers' or finders'
fees or commissions or financial advisory fees by any brokers,
finders or financial advisors engaged by the Charterer or the
Guarantor with respect to such transactions.
19.3 The Owner's Right to Perform for the Charterer
If the Charterer fails to perform or comply with any of its
agreements contained herein other than its obligations to pay Hire,
the Owner, may upon notice to the Charterer itself perform or comply
with such agreement, and the amount of any expenses of the Owner
incurred in connection with such performance or compliance, together
with interest on such amount at the Overdue Rate, shall be deemed
Supplemental Hire, payable by the Charterer upon demand.
Without in any way limiting the obligations of the Charterer
hereunder, the Charterer hereby irrevocably appoints the Owner as
its agent and attorney, with full power and authority at any time at
which the Charterer is obligated to deliver possession of the Vessel
to the Owner, to demand and take possession of the Vessel in the
name and on behalf of the Charterer from whomsoever shall be at the
time in possession thereof in the manner described in, and with all
rights and remedies conferred under, Section 3.4(a) hereof.
19.4 Waivers
None of the requirements of this Charter shall be considered as
waived by either party unless the same is done in writing, and then
only by the persons executing this Charter, or other duly authorized
agent or representative of the Person designated in writing by a
senior officer of such Person and then any such waiver shall apply
only in the specific instance and for the specific purpose for which
such is given.
19.5 Entire Agreement
This Charter and the Charter Documents contain the entire agreement
between the parties with respect to the subject matter hereof and
supersede and replace any oral or written communications heretofore
made between the parties relating to the subject matter hereof.
19.6 Successors and Assigns
This Charter shall inure to the benefit of and be binding upon the
successors and assigns of the parties, provided that, except as
expressly set forth herein, the Charterer may not assign its rights
hereunder without the express written consent of the Owner and that
the assignor shall remain liable for the performance of its assignee
unless specifically released by the other party hereto.
19.7 Law
The validity, construction, interpretation and effect of this
Charter shall be governed by the general maritime laws of the United
States, without regard to any choice of law rules that would
otherwise require the application of the laws of any other
jurisdiction, except that where the general maritime laws of the
United States look to or adopt state law, this Charter shall be
governed by the laws of the State of New York, without regard to any
choice of law rules that would otherwise require the application of
the laws of any other jurisdiction.
19.8 Parties' Intention
It is the intent of all parties hereto and affected hereby in the
execution and performance of this Charter, the Charter Documents and
all related documentation to remain in strict compliance with all
applicable laws from time to time in effect. Further, it is the
intent of all parties hereto and affected hereby to evidence, by
this Charter, a lease between the Owner, as lessor, and the
Charterer, as lessee, rather than any other form of financial
arrangement including specifically, but without limitation, a loan
or other debt financing. Any and all payments, amounts,
liabilities, commitment fees and other amounts expended and
obligations of the Charterer incurred or arising in connection with
this Charter, the Charter Documents and all related documentation
are intended to evidence, lease payment obligations of the Charterer
or reimbursements to the Owner and the Investors or their agents,
representatives or designees, for services actually performed, goods
actually furnished or provided, or other expenses or liabilities for
which reimbursement is provided in connection with this Charter and
the Charter Documents. To the extent that any such charge herein
provided for or payment herein made is held or deemed to be held by
a court of competent jurisdiction to be "interest", the parties
hereto and affected hereby stipulate and agree that none of the
terms and provisions contained in or pertaining to this Charter, the
Charter Documents or any related document shall ever be construed to
create a contract to pay for the use, forbearance or detention of
money with interest at a rate or in an amount in excess of the
maximum lawful non-usurious rate or amount of interest permitted to
be charged, paid or received under said laws. For purposes of this
Charter, the Charter Documents and all related documentation,
"interest" shall include the aggregate of all charges which
constitute interest under applicable laws, which term "applicable
laws" shall include, but not be limited to, the laws of the State of
New York and, to the extent they may apply, the laws of the United
States of America, that are contracted for, chargeable or receivable
under this Charter and all related documentation. The Charterer
shall never be required to pay unearned interest on any of its
obligations hereunder or in connection herewith and shall never be
required to pay interest on any of its obligations hereunder or in
connection herewith at a rate or in an amount in excess of the
maximum lawful non-usurious rate or amount of interest that may be
lawfully charged under applicable laws, and the provisions of this
paragraph shall control over all other provisions of this Charter,
the Charter Documents and all related documentation which may be in
apparent conflict herewith. If the effective rate or amount of
interest which would otherwise be payable under or in connection
with this Charter or any related documentation would exceed the
maximum lawful non-usurious rate or amount of interest the Owner or
any Investor or any assignee thereof is allowed by applicable laws
to charge, collect and receive, or in the event any such person or
entity shall charge, collect or receive monies that are deemed to
constitute interest which would, in the absence of this
Section 19.8, be in excess of an amount permitted to be charged,
collected and received under the applicable laws then in effect,
then any such excess amount shall be reduced to the amount allowed
under said laws as now or hereafter construed by courts having
jurisdiction, and all such monies so collected, charged or received
that are deemed to constitute interest in excess of the maximum
lawful non-usurious rate or amount of interest permitted by
applicable laws shall be immediately, at the option of the recipient
thereof, be applied to principal, if any outstanding, or returned to
or credited to the account of the Charterer upon such determination.
19.9 Counterparts; Uniform Commercial Code
This Charter may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but
one and the same instrument. Each counterpart of this Charter which
has been executed by the parties hereto shall be prominently marked
to identify the party to whom originally delivered. If this Charter
constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), a
security interest in this Charter may be created only by the
transfer or possession of the counterpart marked "Owner's Copy" and
containing a receipt therefor executed by the Owner on or
immediately following the signature page thereof and, in addition,
the Owner may file Uniform Commercial Code Financing Statements in
any relevant jurisdiction.
19.10 Warranty of Authority
By executing this Charter on behalf of any entity, each signatory to
this Charter represents and warrants that he or she has full and
valid authority to enter into this Charter on behalf of the entity
for which he or she signs.
19.11 Usage; Headings
Unless the context otherwise requires, use of the singular number in
this Charter shall include the plural number and vice versa, and use
of one gender herein shall include each other gender and vice versa.
Use of the words "hereof", "herein", "hereto", "hereby",
"hereunder", or words of similar import in this Charter refer to
this Charter as a whole and not to any specific paragraph,
subparagraph, section, sentence, clause or part of this Charter.
Section headings and numbers herein are for reference purposes only
and do not constitute a part of this Charter (unless the context
indicates otherwise).
19.12 WAIVER OF JURY TRIAL
EACH OF THE CHARTERER AND THE OWNER WAIVE ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
CHARTER, THE CHARTER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
19.13 VENUE; SERVICE OF PROCESS
THE CHARTERER, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY
KNOWINGLY AND INTENTIONALLY AND IRREVOCABLY AND UNCONDITIONALLY
a) SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK AND THE
FEDERAL COURTS SITTING IN THE STATE OF NEW YORK AND AGREES AND
CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL
PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS CHARTER OR THE
OTHER CHARTER DOCUMENTS BY SERVICE OF PROCESS AS PROVIDED BY NEW
YORK LAW, b) WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS CHARTER OR THE
OTHER CHARTER DOCUMENTS BROUGHT IN ANY NEW YORK STATE COURT OR
FEDERAL COURT SITTING IN THE STATE OF NEW YORK, c) WAIVES ANY CLAIMS
THAT ANY LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, d) CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING
OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
POSTAGE PREPAID, TO THE CHARTERER AT THE ADDRESS SET FORTH HEREIN
AND e) AGREES THAT ANY LEGAL PROCEEDING AGAINST THE CHARTERER
ARISING OUT OF, RELATED TO OR IN CONNECTION WITH THIS CHARTER OR THE
OTHER CHARTER DOCUMENTS OR THE OBLIGATIONS HEREUNDER OR THEREUNDER
MAY BE BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN THE STATE
OF NEW YORK. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE OWNER TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
CHARTERER OR ANY OF THE OTHER MEMBER OF THE CHARTERER GROUP IN ANY
OTHER JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY
APPLICABLE LAW.
19.14 Agent for Service of Process
The Charterer hereby irrevocably designates The ▇▇▇▇▇▇▇▇-▇▇▇▇
Corporation, with offices at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇-▇▇▇▇, as agent to receive for and on behalf of the Charterer
service of process in New York. In the event that The ▇▇▇▇▇▇▇▇-▇▇▇▇
Corporation System, Inc. resigns or ceases to serve as the
Charterer's agent for service of process hereunder, the Charterer
agrees forthwith (a) to designate another agent for service of
process in the State of New York and (b) to give prompt written
notice to the Owner of the name and address of such agent. The
Owner agrees to use reasonable efforts to cause a copy of such
process served on such agent to be promptly forwarded to the
Charterer at its address set forth herein, and the Charterer agrees
that the failure of the Charterer to receive such copy shall not
impair or affect in any way the validity of such service of process
or of any judgment based thereon. The Charterer agrees that the
failure of its agent for service of process to give any notice of
any such service of process to the Charterer shall not impair or
affect the validity of such service or of any judgment based
thereon. If, despite the foregoing, there is for any reason no
agent for service of process of the Charterer available to be
served, then the Charterer further irrevocably consents to the
service of process by the mailing thereof by the Owner by registered
or certified mail, postage prepaid, to the Charterer at its address
herein. Nothing in this Section 19.14 shall affect the right of the
Owner to serve legal process in any other manner permitted by law or
affect the right of the Owner to bring any action or proceeding
against the Charterer or its property in the courts of any other
jurisdiction.
IN WITNESS HEREOF, the parties hereto have executed this Charter on
July 1, 1998.
R&B FALCON DRILLING CO.
(formerly known as READING &
DEEP SEA INVESTORS, L.L.C. ▇▇▇▇▇ DRILLING CO.)
By: GATX MARINE INVESTORS
CORPORATION, Member
By: By:
Name: Name:
Title: Title:
By: ▇▇▇▇▇▇ FINANCIAL LEASING, INC.
Member
By:
Name:
Title:
By: MDFC EQUIPMENT LEASING
CORPORATION, Member
By:
Name:
Title:
SCHEDULE A
DESCRIPTION OF VESSEL ▇.▇. ▇▇▇▇▇, ▇▇.,
INCLUDING SPECIFICATIONS
SCHEDULE B-1
FIRST UPGRADE PROGRAM
SCHEDULE B-2
SECOND UPGRADE PROGRAM
SCHEDULE B-3
THIRD UPGRADE PROGRAM
SCHEDULE C
CHARTERER'S INSURANCE
As specified in Article 15, the Charterer shall maintain the following
insurance coverage:
1. Workmen's Compensation and Employers' Liability Insurance
All of the Charterer's employees shall be covered for statutory
benefits as set forth and required by applicable law in the Area of
Operation or such other jurisdiction under which the Charterer may
become obligated to pay benefits. Employers' Liability insurance,
including appropriate maritime coverage covering all employees,
shall be provided with minimum primary policy limits as required by
applicable statute, or U.S. $1 million per occurrence, whichever is
greater.
2. Comprehensive General Liability
Insurance coverage shall be provided for liability arising from all
operations of the Charterer. The policy shall include coverage for
premises and operations, independent contractors, completed
operations, and contractual liability (or their equivalents).
Insurance coverage shall also be provided for all owned, hired, and
nonowned vehicles. The minimum primary policy limits shall be U.S.
$1 million single limit per occurrence under the General Liability
policies. Automobile Liability insurance shall have minimum policy
limits of U.S. $1,000,000 single limit per occurrence, or such
greater amount as required by law.
3. Protection and Indemnity (Marine Liability) Insurance
Full form marine protection and indemnity insurance, including, but
not limited to, sudden and accidental pollution liability and
contractual liability coverage or equivalent insurance (including
equivalent insurance against liability for fines and penalties
arising out of the operation of the Vessel) with such club or under
forms of policies approved by the Owner. Such protection and
indemnity insurance shall be maintained in the broadest forms
generally available in the United States market, shall be in an
amount not less than that carried by experienced and responsible
companies engaged in the drilling of petroleum, shall include a
cross-liability endorsement and shall be placed through independent
brokers of recognized standing and with first-class underwriters
reasonably acceptable to the Owner. No hull and machinery or
protection and indemnity insurance shall provide for a deductible
amount in excess of $500,000 with respect to the Vessel without the
prior written consent of the Owner.
4. Excess Liability
The Charterer shall carry Excess Liability Insurance in amounts not
less than $200 million each occurrence in addition to and in excess
of all primary Liability Coverages carried by Charterer, including
but not limited to insurance required under Paragraphs 1, 2 and 3
(oil pollution sublimit $80 million per Paragraph 6).
5. Marine Physical Damage, Including Hull and Machinery
All risk Marine and hull and machinery shall be provided with a
limit equal to that normally carried by experienced and responsible
companies engaged in offshore drilling, but shall not be less than
the greater of (a) 110% of the Stipulated Loss Value of the Vessel;
or (b) the Fair Market Sale Value of the Vessel. Coverage shall
include collision liability and navigation limits adequate for the
Vessel's trade.
6. Oil Pollution Insurance
Oil pollution insurance coverage issued by the Vessel's P & I Club
or equivalent coverage in the amount of not less than US $80,000,000
per occurrence, unless additional insurance or proof of financial
responsibility of a greater amount shall be required by a
governmental authority, in which case such greater amount shall be
obtained and kept in full force and effect by the Charterer. The
Charterer shall maintain insurance, if available, covering similar
oil removal risks or liabilities and civil or criminal penalties
incident thereto and not attributable to the action or inaction of
the Owner under any law, regulation or judicial decision of any of
the United States of America or foreign jurisdiction or
jurisdictions or political subdivision thereof applicable to the
Vessel or its operations to the extent such insurance is requested
in writing by the Owner and recommended by an independent marine
insurance broker as insurance which it would be imprudent not to
carry for the protection of the Charterer and the Owner in view of
the nature of the Vessel and the Vessel's operations.
7. War, Political Risk, Confiscation and Expropriation Insurance
If and to the extent that the Vessel is operated outside of the
territorial waters and/or the Outer Continental Shelf of the United
States (and in addition to any coverage required by the Owner for
such operations under this Charter), War, Political Risk,
Confiscation and Expropriation Insurance shall be provided for the
Vessel with a limit equal to the value insured under Paragraph 5
above.
8. Other Losses
Losses not covered by the above stated policies because of
deductibles and policy limits stated above shall be borne according
to the liability and indemnity provisions of this Charter.
9. Owner Group as Additional Insured
All coverages and other insurance policies carried by the Charterer
or that the Charterer is required at any time to maintain pursuant
to this Charter shall name Owner Group as an additional insured and
loss payee for all risks and losses for which the Charterer is
liable under this Charter.
10. Additional Provisions
The Charterer will deliver to the Owner and each of the Investors
copies of all cover notes and certificates of insurance and, if
requested by the Owner copies of all binders and policies with
respect to insurance carried on the Vessel. On or before the
Delivery Date of the Vessel, and on each anniversary of the Delivery
Date, and each time there is a reduction or material change in the
insurance coverage carried on the Vessel, the Charterer will furnish
to the Owner and each of the Investors a detailed report signed by
independent marine insurance brokers (who may be the insurance
brokers regularly employed by the Charterer) appointed by the
Charterer and reasonably acceptable to the Owner, describing the
insurance policies then carried and maintained on the Vessel
(including the names of the underwriters, the types of risk covered
by such polices, the amount insured thereunder and the expiration
date thereof) and stating that in the opinion of said insurance
brokers such insurance is adequate and reasonable for protection of
the Owner, is in compliance with the terms of Article 15 and is
comparable with that carried by other responsible operators of
similar drilling vessels. All policies shall include the following:
(i) breach of warranty protection to the Owner Group, (ii) waiver of
subrogation clause and (iii) at least 30 days' prior written notice
of cancellation or material modification. The insurance shall be
primary, without right of contribution from any other insurance
which may be carried by the Owner Group, and contain a waiver of set
off of premiums against claims proceeds and provide for no recourse
for premium payments by the Owner Group.
SCHEDULE D
STIPULATED LOSS VALUE*
SCHEDULE E
PENDING LITIGATION
Proceedings disclosed in R & B Falcon Corporation's Report on
Form 10-Q dated March 31, 1998 filed with the Securities & Exchange
Commission.
SCHEDULE F
Computation of Basic Hire Adjustment for Third Upgrade
Effective as of each Upgrade Disbursement Date (as defined in
the Second Upgrade Agreement), the Basic Hire shall be adjusted for the
amount to be funded by the Owner on such date by reference to the yield
of the 6.375% coupon August 2002 U.S. Treasury note as published in The
Wall Street Journal on the second Business Day immediately preceding such
date and otherwise in accordance with the methodology used in the example
shown below.
Example:
Upgrade Disbursement Date: July 29, 1997
Assumed Published U.S. Treasury note yield: 6.11%
Value of Severables in respect of which
reimbursement is sought: $5,560,683.00
Value of Nonseverables in respect of which
reimbursement is sought: $4,720,896.00
Total amount in respect of which reimbursement
is sought: $10,281,579.00
Revised Primary Term Basic Hire (expressed as
a % of Owner's Cost): 1.1896%
[needs to be revised]
_______________________________
* Immediately prior to an Upgrade Disbursement Date (as defined in
the Third Upgrade Agreement), the Owner will deliver to the Charterer a
revised schedule of Stipulated Loss Value. The revised schedule shall
reflect the amount which the Charterer has requested be reimbursed by the
Owner on such date and shall otherwise be produced using the same
methodology as was used in preparation of the figures which appear in
this Schedule D. Upon the relevant disbursement being made, such revised
schedule shall for all purposes be and become Schedule D of this Charter.