Participation Agreement - Deepwater Drilling LLC, Deepwater Investment Trust 1998-A, Wilmington Trust FSB, ABN AMRO Bank NV, Wilmington Trust Co., BA Leasing & Capital Corp., Bank of Nova Scotia, RBF Deepwater Exploration Inc. and Conoco Development Co.
EXECUTION COPY
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PARTICIPATION AGREEMENT
dated as of July 30, 1998
among
DEEPWATER DRILLING L.L.C.,
DEEPWATER INVESTMENT TRUST 1998-A, as Investment Trust
WILMINGTON TRUST FSB, not in its individual capacity
except as expressly stated herein, but solely as Investment Trustee
ABN AMRO BANK N.V.,
as Administrative Agent,
WILMINGTON TRUST COMPANY,
not in its individual capacity except as expressly
provided herein, but solely as Charter Trustee,
BA LEASING & CAPITAL CORPORATION,
as Documentation Agent,
THE BANK OF NOVA SCOTIA,
as Syndication Agent,
THE OTHER FINANCIAL INSTITUTIONS LISTED ON THE
SIGNATURE PAGES HEREOF OR THAT MAY
HEREAFTER BECOME PARTY HERETO,
as Certificate Purchasers,
and
solely with respect to Sections 5.2 and 6.4,
RBF DEEPWATER EXPLORATION INC. and
CONOCO DEVELOPMENT COMPANY
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<PAGE>
SECTION 1
DEFINITIONS; INTERPRETATION
SECTION 2
COMMITMENTS OF THE PARTIES
SECTION 2.1 Certain Closing Date Events . . . . . . . . . . . . . . . 2
SECTION 2.2 Certain Delivery Date Events . . . . . . . . . . . . . . . 3
SECTION 2.3 Advances by Certificate Purchasers . . . . . . . . . . . . 4
SECTION 2.4 Certificates and Payments . . . . . . . . . . . . . . . . 4
SECTION 2.5 Limitations on Advances. . . . . . . . . . . . . . . . . . 5
SECTION 2.6 Fundings; Application of Proceeds. . . . . . . . . . . . . 5
SECTION 2.7 Time and Place of Advance Closings . . . . . . . . . . . . 7
SECTION 2.8 Postponement of Advance . . . . . . . . . . . . . . . . . 7
SECTION 2.9 Records; Capitalized Certificate Return. . . . . . . . . . 8
SECTION 2.10 The Trustee's Account. . . . . . . . . . . . . . . . . . . 8
SECTION 2.11. Timing of Fundings to Investment Trustee and
Payments to Certificate Purchasers . . . . . . . . . . . . 9
SECTION 2.12 Computations . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.13 Conditions to each Advance . . . . . . . . . . . . . . . . 10
SECTION 2.14 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3
EFFECTIVE DATE; CLOSING DATE; CONDITIONS PRECEDENT
SECTION 3.1 Effective Date; Closing Date. . . . . . . . . . . . . . . 11
SECTION 3.2 Conditions Precedent to Closing Date. . . . . . . . . . . 11
SECTION 4
DELIVERY DATE; CONDITIONS PRECEDENT
SECTION 4.1 Conditions Precedent to Delivery Date . . . . . . . . . . 15
SECTION 4.2 Head Lease Transaction. . . . . . . . . . . . . . . . . . 17
SECTION 5
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of Deepwater . . . . . . . 19
SECTION 5.2 Representations and Warranties of Members . . . . . . . . 23
SECTION 5.3 Representations and Warranties of the Investment
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TABLE OF CONTENTS
Page
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Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 5.4 Representations and Warranties of the Certificate
Purchasers. . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.5 Representations and Warranties of the Trustee . . . . . . 28
SECTION 6
CERTAIN COVENANTS AND AGREEMENTS
SECTION 6.1 Covenants of Deepwater. . . . . . . . . . . . . . . . . . 29
SECTION 6.2 Certain Covenants of the Charter Trustee, the
Investment Trustee and the Investment Trust . . . . . . . 34
SECTION 6.3 Covenants of the Certificate Purchasers . . . . . . . . . 36
SECTION 6.4 Covenants of the Members. . . . . . . . . . . . . . . . . 37
SECTION 6.5 Hedging Agreements. . . . . . . . . . . . . . . . . . . . 38
SECTION 6.6 Purchase Obligation . . . . . . . . . . . . . . . . . . . 38
SECTION 6.7 Charter Extension Option. . . . . . . . . . . . . . . . . 39
SECTION 6.8 Excessive Use Indemnity . . . . . . . . . . . . . . . . . 39
SECTION 7
CERTAIN PROCEDURES
SECTION 7.1 Illegality. . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.2 Increased Costs and Reduction of Return . . . . . . . . . 40
SECTION 7.3 Funding Losses. . . . . . . . . . . . . . . . . . . . . . 41
SECTION 7.4 Inability to Determine Rates. . . . . . . . . . . . . . . 41
SECTION 7.5 Reserves on Base Rate Advances. . . . . . . . . . . . . . 42
SECTION 7.6 Certificates of Certificate Purchasers. . . . . . . . . . 42
SECTION 7.7 Substitution of Certificate Purchasers; Change in
Applicable Office; Prepayments. . . . . . . . . . . . . . 42
SECTION 7.8 Legal and Tax Representation. . . . . . . . . . . . . . . 43
SECTION 7.9 Failure of a Certificate Purchaser to Fund. . . . . . . . 43
SECTION 8
PAYMENT OF CERTAIN EXPENSES
SECTION 8.1 Transaction Expenses. . . . . . . . . . . . . . . . . . . 45
SECTION 8.2 Transaction Expenses if Closing does not Occur. . . . . . 45
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TABLE OF CONTENTS
Page
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SECTION 8.3 On-Going Expenses . . . . . . . . . . . . . . . . . . . . 45
SECTION 9
RESTRICTIONS ON TRANSFERS; CHANGE OF CONTROL
SECTION 9.1 Restrictions on the Certificate Purchasers. . . . . . . . 46
SECTION 9.2 Restrictions on Trustees. . . . . . . . . . . . . . . . . 48
SECTION 9.3 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9.4 Conoco Change of Control. . . . . . . . . . . . . . . . . 48
SECTION 10
INDEMNIFICATION
SECTION 10.1 General Indemnity . . . . . . . . . . . . . . . . . . . . 49
SECTION 10.2 General Indemnity Exclusions. . . . . . . . . . . . . . . 50
SECTION 10.3 Proceedings in Respect of Claims. . . . . . . . . . . . . 51
SECTION 10.4 General Tax Indemnity . . . . . . . . . . . . . . . . . . 52
SECTION 11
AGENTS
SECTION 11.1. Appointment of Administrative Agent,
Documentation Agent and Syndication Agent; No
Duties. . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 11.2 Delegation of Duties. . . . . . . . . . . . . . . . . . . 63
SECTION 11.3 Exculpatory Provisions. . . . . . . . . . . . . . . . . . 63
SECTION 11.4 Reliance by Agents. . . . . . . . . . . . . . . . . . . . 63
SECTION 11.5 Notice of Default . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.6. Non-Reliance on Administrative Agent and Other
Certificate Purchasers. . . . . . . . . . . . . . . . . . 64
SECTION 11.7 Indemnification . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.8 Agents. . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 11.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . 66
SECTION 12
MISCELLANEOUS
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TABLE OF CONTENTS
Page
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SECTION 12.1 Survival of Agreements. . . . . . . . . . . . . . . . . . 67
SECTION 12.2 No Broker; etc. . . . . . . . . . . . . . . . . . . . . . 67
SECTION 12.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 12.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 12.5 Amendments, Waivers and Consents. . . . . . . . . . . . . 70
SECTION 12.6 Confidentiality . . . . . . . . . . . . . . . . . . . . . 71
SECTION 12.7 Headings; etc . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 12.8 Parties in Interest . . . . . . . . . . . . . . . . . . . 72
SECTION 12.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 12.10 Severability. . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 12.11 Further Assurances. . . . . . . . . . . . . . . . . . . . 72
SECTION 12.12 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . 72
SECTION 12.13 Limitations on Recourse . . . . . . . . . . . . . . . . . 72
SECTION 12.14 Applicable Laws . . . . . . . . . . . . . . . . . . . . . 73
SECTION 12.15 Right to Inspect. . . . . . . . . . . . . . . . . . . . . 74
SECTION 12.16 Accounts, Distribution of Payments and Flow of
Funds . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 12.17 Attorneys-in-Fact . . . . . . . . . . . . . . . . . . . . 74
SECTION 12.18 Successor Trustees; Jurisdiction of Trust . . . . . . . . 74
SECTION 12.19 Third-Party Beneficiary . . . . . . . . . . . . . . . . . 75
SECTION 12.20 Consent to Jurisdiction . . . . . . . . . . . . . . . . . 75
SECTION 12.21 Deepwater Acknowledgement With Respect to
Charter Trust Agreement . . . . . . . . . . . . . . . . . 75
EXHIBITS
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EXHIBIT A - Form of Funding Indemnity Letter
EXHIBIT B - Opinion of White & Case LLP, special counsel to Deepwater
EXHIBIT C - Opinion of Hunton & Williams, counsel to Conoco
EXHIBIT D - Opinion of Wayne K. Anderson, in-house counsel to Conoco
EXHIBIT E - Opinion of Wayne K. Hillin, counsel to R&B
EXHIBIT F - Officer's and Manager's Certificate
EXHIBIT G - Officer's Certificate
EXHIBIT H-1 - Amended and Restated Drilling Contract
EXHIBIT H-2 - Amended and Restated Drilling Contract Guaranty
EXHIBIT I - Conoco Drilling Consent
EXHIBIT J - Securities Act Representation from PricewaterhouseCoopers LLP
EXHIBIT K - Form of Conoco Assumption Agreement and Opinion
EXHIBIT L - Builder's Certificate
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TABLE OF CONTENTS
Page
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EXHIBIT M - Bill of Sale
EXHIBIT N - Form of Advance Request
EXHIBIT O - Opinion of Haight, Gardner, Holland & Knight
EXHIBIT P - Opinion of Arias, Fabrega & Fabrega, Panamanian Counsel
EXHIBIT Q - Form of Notice of Certificate Return Rate
EXHIBIT R - Replacement Certificate Purchaser Assignment and Assumption
Agreement
EXHIBIT S-1 - Form of Hedging Agreements
EXHIBIT S-2 - Form of Deepwater Hedging Agreements
EXHIBIT T - Form of Ship Mortgage
EXHIBIT U - Opinions of Cynthia L. Corliss, Vice President and Trust Counsel of
Wilmington Trust Company and Richards, Layton, and Finger
SCHEDULES
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SCHEDULE 1 - List of Transaction Documents
SCHEDULE 2 - Facility Fee Rate
SCHEDULE 3 - List of UCC and Other Necessary Security Filings
SCHEDULE 4 - Information Relied Upon by Appraiser
SCHEDULE 5 - Certificate Purchaser Notice Addresses, Payment Instructions and
Responsible Officers
SCHEDULE 6 - Description of OFE
SCHEDULE 7 - Terms of Subordination for Subordinated Debt
SCHEDULE 8 - Conditions to Effective Date
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT, dated as of July 30, 1998 (this "Agreement"
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or "Participation Agreement"), is entered into by and among DEEPWATER DRILLING
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L.L.C., a Delaware limited liability company ("Deepwater"), WILMINGTON TRUST
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FSB, a Federal savings bank, not in its individual capacity except as expressly
provided herein, but solely as trustee under the Investment Trust Agreement (the
"Investment Trustee"), DEEPWATER INVESTMENT TRUST 1998-A, a Delaware business
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trust (the "Investment Trust"), ABN AMRO BANK N.V., as agent for the Certificate
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Purchasers (the "Administrative Agent"), WILMINGTON TRUST COMPANY, a Delaware
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banking corporation, not in its individual capacity except as expressly provided
herein, but solely as trustee under the Charter Trust Agreement (the "Charter
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Trustee"), BA LEASING & CAPITAL CORPORATION, a California corporation, as
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documentation agent (the "Documentation Agent"), THE BANK OF NOVA SCOTIA, as
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syndication agent (the "Syndication Agent"), each of the financial institutions
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listed on the signature pages hereto, or that may hereafter become a party
hereto, as a certificate purchaser (each, a "Certificate Purchaser" and
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collectively, the "Certificate Purchasers") (each of the foregoing parties, a
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"Participant"), and solely with respect to Sections 5.2 and 6.4, RBF DEEPWATER
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EXPLORATION INC., a Nevada corporation, and CONOCO DEVELOPMENT COMPANY, a
Delaware corporation (each, a "Member").
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WITNESSETH
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WHEREAS, the Charter Trustee contemplates acquiring title to the Drillship
from the Builder or chartering the Drillship from the Head Lessor, and Deepwater
contemplates chartering or subchartering the Drillship from the Charter Trustee;
WHEREAS, pursuant to the Construction Supervisory Agreement, the Charter
Trustee and Deepwater have agreed that Deepwater will act as Construction
Supervisor and supervise the construction of the Vessel and the acquisition and
installation of the OFE (the Vessel and the OFE, collectively, the "Drillship");
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WHEREAS, Deepwater, the Charter Trustee and the Investment Trust wish to
arrange financing for the cost of the acquisition of OFE and the construction
and delivery of the Vessel;
WHEREAS, Deepwater and Conoco Drilling are parties to the Drilling Contract
providing for drilling services utilizing the Drillship from Deepwater, and
payments to Deepwater by Conoco Drilling of the Day Rate and other amounts
referred to in the Drilling Contract; and
WHEREAS, the Certificate Purchasers have agreed to make Advances to the
Charter Trustee and the Investment Trust, as applicable, in an aggregate amount
not to exceed the Maximum Certificate Purchaser Commitment to fund the
construction of the Vessel pursuant to
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the Construction Contract, the acquisition of the OFE and certain other costs.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1
DEFINITIONS; INTERPRETATION
Unless the context otherwise requires, capitalized terms used and not
otherwise defined in this Agreement have the meanings given to them in Appendix
1 of this Agreement and, for all purposes of this Agreement, the rules of
interpretation set forth in such Appendix 1 apply.
SECTION 2
COMMITMENTS OF THE PARTIES
Subject to the terms and conditions of this Agreement (including Sections 3
and 4) and the other Transaction Documents, each of the parties hereto agrees to
participate in the transactions contemplated by this Agreement and the other
Transaction Documents and, among other things, to take each of the actions to be
taken by it on the Closing Date and thereafter, as more fully described in this
Section 2.
SECTION 2.1 Certain Closing Date Events. On the Closing Date, subject
---------------------------
to the terms and conditions of this Agreement and the other Transaction
Documents:
(a) the Certificate Purchasers shall make Advances to the Charter
Trustee pursuant to Section 2.3 in an aggregate amount equal to the Series A
Portion of the Closing Date Construction Costs plus the Series A Portion of the
Transaction Expenses then due and owing pursuant to Section 8.1;
(b) the Certificate Purchasers shall purchase, and the Charter
Trustee shall issue, the Series A Trust Certificates in the aggregate principal
amount of the Series A Portion of the Maximum Certificate Purchaser Commitment;
(c) the Certificate Purchasers shall make Advances to the
Investment Trust pursuant to Section 2.3 in an aggregate amount equal to the
Investment Portion of the Closing Date Construction Costs plus the Investment
Portion of the Transaction Expenses then due and owing pursuant to Section 8.1;
(d) the Certificate Purchasers shall purchase, and the Investment
Trust shall issue, the Investment Trust Certificates in the aggregate principal
amount of the Investment
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Portion of the Maximum Certificate Purchaser Commitment;
(e) the Investment Trust shall make advances to the Charter
Trustee pursuant to Section 2.3 in an aggregate amount equal to the Investment
Portion of the Closing Date Construction Costs plus the Investment Portion of
the Transaction Expenses then due and owing pursuant to Section 8.1;
(f) the Investment Trust shall purchase, and the Charter Trustee
shall issue, the Series B Trust Certificates in the aggregate principal amount
of the Investment Portion of the Maximum Certificate Purchaser Commitment;
(g) the Charter Trustee shall advance to the Construction
Supervisor (as directed by the Construction Supervisor) the amounts received
from the Certificate Purchasers in accordance with Sections 2.3 and 2.6;
(h) the Transaction Expenses and the Facility Fees shall be paid
to the Persons entitled to receive such payments on the Closing Date pursuant to
Section 8.1 by the Person responsible therefor;
(i) Deepwater and the Charter Trustee shall enter into the
Construction Supervisory Agreement;
(j) Deepwater and the Charter Trustee shall enter into the
Charter, pursuant to which Deepwater shall charter the Drillship from the
Charter Trustee effective as of the Delivery Date; and
(k) the parties shall enter into the other Transaction
Documents indicated on Schedule 1 hereto as being entered into as of the Closing
Date.
SECTION 2.2 Certain Delivery Date Events. On the Delivery Date,
-------------------------------
subject to the terms and conditions of this Agreement (including Section 4.1)
and the other Transaction Documents:
(a) Deepwater, as Construction Supervisor on behalf of the
Charter Trustee, shall take delivery of the Drillship from the Builder pursuant
to the Construction Contract;
(b) if the Head Lease Transaction is being entered into in
accordance with Section 4.2, Deepwater, as Construction Supervisor on behalf of
the Charter Trustee, shall transfer and convey, or cause to be transferred and
conveyed, to the Head Lessor all of its right, title and interest in and to the
Drillship and the Construction Contract (other than the Warranties) and,
immediately upon such transfer and conveyance, the Charter Trustee shall enter
into the Head Lease with the Head Lessor;
(c) if the Head Lease Transaction is not being entered into,
Deepwater, as
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Construction Supervisor on behalf of the Charter Trustee, shall transfer all of
its right, title and interest in and to the Drillship and the Construction
Contract to the Charter Trustee;
(d) Deepwater, on behalf of the Head Lessor or the Charter
Trustee, as applicable, shall cause the Drillship and the Ship Mortgage to be
duly provisionally registered under the laws of the Republic of Panama;
(e) the Charter Term shall commence; and
(f) the parties shall enter into the other Transaction Documents
indicated on Schedule 1 hereto as being entered into as of the Delivery Date.
SECTION 2.3 Advances by Certificate Purchasers. Subject to the terms
-----------------------------------
and conditions of this Agreement (including Sections 2.5, 3 and 4), the
Depository Agreement and the Trust Agreements, and in reliance on the
representations and warranties of the other parties contained herein or made
pursuant hereto, upon receipt of an Advance Request, each Certificate Purchaser
shall advance (each an "Advance") to the Charter Trustee and to the Investment
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Trust, as applicable, on the Advance Date specified in such Advance Request in
immediately available funds the Series A Portion and the Investment Portion,
respectively, of its Commitment Percentage of the following amounts: (i) on the
Closing Date, an amount equal to the Closing Date Construction Costs (plus any
Transaction Expenses then due and owing pursuant to Section 8.1) as set forth in
a written request from Deepwater to the Charter Trustee and the Investment Trust
delivered at least three Business Days prior to the Closing Date (the "Initial
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Advance Request"); (ii) during the Construction Period, the amount of each
----------------
Advance requested by Deepwater in a written request from Deepwater to the
Charter Trustee and the Investment Trust delivered at least three Business Days
prior to the date specified in such request for the payment of such Advance (a
"Subsequent Advance Request"); (iii) on the Delivery Date, the amount of the
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Advance in the Subsequent Advance Request delivered in connection with the
Delivery Date; (iv) during the Interim Charter Term, the amount of each Advance
requested by Deepwater in a Subsequent Advance Request; and (v) on the Day Rate
Commencement Date, the amount of the final Advance requested by Deepwater in the
Final Advance Request.
SECTION 2.4 Certificates and Payments.
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(a) Payments to Certificate Purchasers. Each Advance made
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available by a Certificate Purchaser pursuant to Section 2.3 shall be evidenced
by the Certificates issued by the Investment Trust and the Charter Trustee,
respectively, on the Closing Date to such Certificate Purchaser. Each
Certificate Purchaser shall be entitled to receive on the last day of any Return
Period as of which there is a Certificate Purchaser Balance greater than zero, a
return on its Certificate Purchaser Amount at the Certificate Return Rate;
provided that, notwithstanding the foregoing, Certificate Return accrued on the
Certificate Purchaser Balance during the Interim Charter Term shall be
capitalized to the extent provided in Section 2.9. Any payment required to be
made to the Certificate Purchasers by the Charter Trustee or the Investment
Trust pursuant to any Transaction Document shall be made in accordance with the
Depository Agreement and
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Article IV of the Investment Trust Agreement and Article IV of the Charter Trust
Agreement, as applicable.
(b) Payments to Investment Trust. Each advance made available
------------------------------
by the Investment Trust to the Charter Trustee pursuant to Section 2.6 shall be
evidenced by the Series B Trust Certificate issued by the Charter Trustee on the
Closing Date to the Investment Trust. The Investment Trust shall be entitled to
receive on the last day of any Return Period as of which there is an Investment
Balance greater than zero, a return on its Investment Trust Amount at the
Certificate Return Rate; provided that, notwithstanding the foregoing, any such
return accrued on the Investment Trust Amount during the Interim Charter Term
shall be capitalized to the extent provided in Section 2.9. Any payment required
to be made to the Investment Trust by the Charter Trustee pursuant to any
Transaction Document shall be made in accordance with the Depository Agreement
and Article IV of the Charter Trust Agreement.
SECTION 2.5 Limitations on Advances.
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(a) Limitation on Disbursements and Capitalizations. The
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aggregate amount of Advances made by the Certificate Purchasers hereunder,
together with the aggregate amount of all Capitalized Certificate Return, shall
not exceed the Maximum Certificate Purchaser Commitment, and the aggregate
amount of Advances made by any Certificate Purchaser hereunder, together with
the aggregate amount of all Capitalized Certificate Return allocable to such
Certificate Purchaser's Certificate Purchaser Amount, shall not exceed such
Certificate Purchaser's Commitment.
(b) Number and Dates of Advances. Deepwater may not request
--------------------------------
that Advances be made (and the Certificate Purchasers shall not be required to
make Advances) more than once in any calendar month other than: (i) Advances to
be made in connection with the Delivery Date and the Date Rate Commencement
Date, (ii) Advances to pay Capitalized Certificate Return and Non-Utilization
Fees and (iii) Advances made in the calendar month in which the Closing Date
occurs. Advances made by each Certificate Purchaser under the Investment Trust
Agreement and the Charter Trust Agreement pursuant to an Advance Request shall
be made on the same day and shall be considered one Advance for purposes hereof.
(c) Obligations Several. The obligations of the Certificate
--------------------
Purchasers, the Agents, the Depository and the Trustees under this Agreement and
the other Transaction Documents shall be several and not joint obligations, and
no Participant shall be liable or responsible for the acts or defaults of any
other Participant under any Transaction Document.
(d) Termination of Commitments. Notwithstanding anything herein
---------------------------
or in the Trust Agreements to the contrary, no Certificate Purchaser shall be
obligated to make any Advances after 2:00 p.m., Eastern time, on the Outside Day
Rate Commencement Date.
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SECTION 2.6 Fundings; Application of Proceeds.
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(a) Initial Advance. On the Closing Date, upon (i) receipt by
----------------
the Charter Trustee and the Investment Trust of the Advances by the Certificate
Purchasers pursuant to Section 2.3 and (ii) the satisfaction or waiver of each
of the applicable conditions set forth in Section 3.2, (x) the Investment Trust
shall advance in immediately available funds to the Charter Trustee on the
Closing Date the amount of the Advances received by it from the Certificate
Purchasers with respect to the Closing Date and (y) the Charter Trustee shall
deposit in immediately available funds into the Trustee's Account all proceeds
from the Advances made by the Certificate Purchasers pursuant to Section 2.3 and
the amount advanced by the Investment Trust pursuant to clause (x) above, the
total amount advanced in respect of the Closing Date (whether received directly
by the Charter Trustee or by the Investment Trust).
(b) Subsequent Advances. On any Subsequent Advance Date, upon
--------------------
(i) receipt by the Charter Trustee and the Investment Trust of the Advances by
the Certificate Purchasers pursuant to Section 2.3 and (ii) satisfaction or
waiver of each of the applicable conditions set forth in Section 2.13, and
subject to Section 2.5, (x) the Investment Trust shall advance to the Charter
Trustee, from the Advances made by the Certificate Purchasers pursuant to
Section 2.3, the amount of the Advances received by it from the Certificate
Purchasers with respect to such date and (y) the Charter Trustee shall deposit
in immediately available funds, into the Trustee's Account all proceeds from the
Advances made by the Certificate Purchasers pursuant to Section 2.3 and the
amount advanced by the Investment Trust pursuant to clause (x) above, the total
amount advanced in respect of such date (whether received directly by the
Charter Trustee or by the Investment Trust).
(c) Final Advance. At least three (3) Business Days prior to the
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Day Rate Commencement Date, to the extent that the aggregate amount of all prior
Advances plus all Capitalized Certificate Return is less than the Maximum
Certificate Purchaser Commitment, and subject to Section 2.5, Deepwater may make
a final Advance Request (the "Final Advance Request") in an aggregate amount
---------------------
sufficient to fund (i) any remaining costs of mobilization of the Drillship to
the Gulf of Mexico port designated pursuant to the Drilling Contract, (ii) any
remaining Construction Costs (including Certificate Return and payments under
the Deepwater Hedging Agreements, if any, that will be accrued and unpaid as of
the Day Rate Commencement Date and that will accrue from the Day Rate
Commencement Date through the end of the Interim Charter Term), and (iii) the
reimbursement of any Transaction Costs paid by Deepwater out of its own funds
(and not from the proceeds of any Advances) (the amounts in clauses (i), (ii)
and (iii), "Deferred Construction Costs"), as set forth in the Final Advance
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Request. On the Day Rate Commencement Date, (i) upon receipt by the Charter
Trustee and the Investment Trust of the Advances to be made by the Certificate
Purchasers pursuant to Section 2.3 and (ii) the satisfaction or waiver of each
of the applicable conditions set forth in Section 2.13 and subject to Section
2.5, (x) the Investment Trust shall advance to the Charter Trustee, from the
Advances made by the Certificate Purchasers pursuant to Section 2.3, the amount
of the Advances received by it from the Certificate Purchasers with respect to
such date and (y) the Charter Trustee shall
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advance to Deepwater the total amount advanced in respect of such date by the
Certificate Purchasers in immediately available funds remitted by wire transfer
to the Deferred Construction Costs Reserve Account.
(d) Application of Proceeds. The proceeds of all Advances made
------------------------
by the Certificate Purchasers to the Investment Trust shall be advanced by the
Investment Trust to the Charter Trustee and all Advances made by the Certificate
Purchasers or the Investment Trust to the Charter Trustee shall be deposited by
the Charter Trustee (x) into the Trustee's Account in accordance with Section
2.10 or (y) to the extent applicable, into the Deferred Construction Costs
Reserve Account pursuant to the Depository Agreement, and such proceeds shall be
used solely to pay Construction Costs and otherwise as provided in Section
3.1(c) of the Depository Agreement.
SECTION 2.7 Time and Place of Advance Closings. The closing to occur
-----------------------------------
on each Advance Date, if any, shall occur on the Advance Date set forth in the
Advance Request at a time and place reasonably satisfactory to the
Administrative Agent and Deepwater.
SECTION 2.8 Postponement of Advance. If the Certificate Purchasers
-------------------------
have made Advances requested pursuant to an Advance Request and the conditions
precedent to such Advance have not been satisfied or waived on the date
specified in the Advance Request (each, a "Postponed Advance"), Deepwater shall
-----------------
pay to the Charter Trustee and the Investment Trust, for the benefit of each
Certificate Purchaser which has made a Postponed Advance, yield (the
"Postponement Yield") on the Advance funded by such Certificate Purchaser at a
-------------------
rate equal to the Certificate Return Rate. Neither the Investment Trust nor the
Charter Trustee shall be required to invest such funds in interest-bearing
accounts, but the Charter Trustee shall, upon the direction of Deepwater (or, if
an Event of Default exists, the Required Certificate Purchasers), invest such
funds in Permitted Investments to the extent it is able to do so. Amounts held
by the Charter Trustee and the Investment Trust may be pooled for this purpose.
The Postponement Yield shall be due and payable by Deepwater upon the occurrence
of the postponed Advance Date and such payment shall be an additional condition
precedent to such Advance Date. On such postponed Advance Date, the Charter
Trustee is hereby directed to liquidate any Permitted Investments then held
pursuant to this Section 2.8, to distribute the Postponed Advances in accordance
with Section 2.6 and to distribute any proceeds of Permitted Investments held
pursuant to this Section 2.8 in excess of the amount of the Postponed Advances
to each Certificate Purchaser pro rata (based on the relation that such
--- ----
Certificate Purchaser's Postponed Advance bears to the aggregate of all such
Postponed Advances) for application to Deepwater's obligation to pay
Postponement Yield. Any accrued Postponement Yield thereafter remaining unpaid
shall be deemed to be Certificate Return and shall be capitalized to the extent
permitted under Section 2.9 (and, to the extent so capitalized, shall constitute
Capitalized Certificate Return). No additional Advance Request shall be
required if an Advance Date is postponed and thereafter timely consummated. If
any Advance Date (including the Initial Advance Date) has not occurred by the
third Business Day following the date specified in the Advance Request in
respect thereof, then all Postponement Yield shall be due and payable on such
third Business
7
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Day (and shall not be capitalized pursuant to Section 2.9), and the Charter
Trustee is hereby directed to liquidate any Permitted Investments then held
pursuant to this Section 2.8 and to pay to each Certificate Purchaser on such
third Business Day (i) the Postponed Advance funded by such Certificate
Purchaser and (ii) the proceeds of any Permitted Investments held pursuant to
this Section 2.8 in excess of the amount of the Postponed Advances refunded to
such Certificate Purchaser pro rata based on the relation that such Certificate
Purchaser's Postponed Advance bears to the aggregate of all such Postponed
Advances to be applied to Deepwater's obligation to pay Postponement Yield.
SECTION 2.9 Records; Capitalized Certificate Return. Upon the making
----------------------------------------
of each Advance, each Certificate Purchaser shall make a notation in its records
indicating the amount of such Advance and the Certificate Purchaser Amount of
such Certificate Purchaser as of such Advance Date. In addition, except as
provided in Section 2.8 hereof, on the last day of each Return Period which
occurs after the Closing Date and on or prior to the last day of the Interim
Charter Term, with respect to the Certificate Return accrued on the Certificates
during the Return Period ending on such date, each Certificate Purchaser shall
make a notation in its records that its percentage portion of such accrued
Certificate Return has been paid and such accrued Certificate Return shall
thereby be added to the Certificate Purchaser Amount of such Certificate
Purchaser and shall thereafter accrue yield at the Certificate Return Rate;
provided, however, that to the extent that adding such accrued Certificate
-------- -------
Return to the Certificate Purchaser Amount would cause such Certificate
Purchaser Amount to exceed such Certificate Purchaser's Commitment, such excess
accrued Certificate Return shall not be added to the Certificate Purchaser
Amount but shall be paid by Deepwater on the last day of such Return Period to
the Charter Trustee and the Investment Trust for the benefit of such Certificate
Purchaser. Each Certificate Purchaser is hereby authorized to record the date
and amount of each Advance made by such Certificate Purchaser, each continuation
thereof, the date and amount of each payment or capitalization of Certificate
Return with respect thereto, the date and amount of each payment or repayment of
Certificate Purchaser Amount of such Certificate Purchaser and the length of
each Return Period with respect thereto, in its records, and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded. The failure to make any recordation described in this
Section 2.9 or any error in such recordation shall not affect the obligation of
the Charter Trustee or the Investment Trust with respect of such Certificates,
or the obligation of Deepwater to pay Charter Hire in accordance with the
Transaction Documents.
SECTION 2.10 The Trustee's Account. The Charter Trustee shall
-----------------------
establish and maintain (or cause to be established and maintained) at Wells
Fargo (the "Bank") a deposit account (the "Trustee's Account") in the name of
---- -----------------
the Charter Trustee and the Investment Trust into which the following amounts
shall be paid: (x) the proceeds of Advances made by Certificate Purchasers in
accordance with Sections 2.6(a) or (b) and 2.11 (other than Advances made
pursuant to the Final Advance Request, which shall be deposited with the
Depository pursuant to the Depository Agreement) and (y) any payments received
from Deepwater or a Hedging Agreement Counterparty pursuant to the Deepwater
Hedging Agreements or the Hedging Agreements, if any, prior to the Base Charter
Term. Deepwater hereby grants to the
8
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Charter Trustee a security interest in any rights it may have in the Trustee's
Account and any proceeds therefrom. Deepwater and Construction Supervisor are
hereby granted a power of attorney to make withdrawals from the Trustee's
Account for payment of Construction Costs, so long as on any date of withdrawal
(i) Deepwater has not been notified in writing that a Default has occurred and
is continuing, (ii) Deepwater does not have Actual Knowledge or has not been
notified in writing that a Material Default has occurred and is continuing or
(iii) no Event of Default is continuing. The power of attorney granted in the
preceding sentence shall be immediately revoked at any time when any of the
events specified in clauses (i), (ii) or (iii) of the preceding sentence have
occurred and shall be immediately reinstated when any such Default, Event of
Default or Material Default has been cured or waived by the Required Certificate
Purchasers. The Charter Trustee agrees to give, and each Certificate Purchaser
agrees to take such action as may be required to cause the Charter Trustee to
give, written notice to the Bank of revocation and the reinstatement of the
power of attorney as provided in the immediately preceding sentence. Upon the
occurrence of the Day Rate Commencement Date, Deepwater, the Charter Trustee and
the Investment Trust shall notify the Hedging Agreement Counterparties that from
and after the first day of the Base Charter Term, all payments made by the
Hedging Agreement Counterparties under the Hedging Agreements shall be deposited
to the Operating Account.
SECTION 2.11 Timing of Fundings to Investment Trustee and Payments to
---------------------------------------------------------
Certificate Purchasers. The Advance Date specified in an Advance Request shall
-----------------------
be not less than three (3) Business Days after the date of delivery of such
Advance Request to the Charter Trustee. Any Advance Request delivered by
Deepwater to the Charter Trustee later than 2:00 p.m., New York time, on any day
shall be deemed to have been delivered on the next Business Day. Subject to
timely delivery of an Advance Request (together with a funding indemnity letter
from each of Conoco and R&B in the form attached hereto as Exhibit A) and the
other terms and conditions of the Transaction Documents, each Certificate
Purchaser shall make its Commitment Percentage of the requested aggregate
Advances available to the Charter Trustee and the Investment Trust in an account
at the Charter Trustee's corporate trust department designated by the Charter
Trustee by 12:00 noon, New York time, on the requested Advance Date, and the
Charter Trustee and the Investment Trust will transfer any such amounts so
received into the Trustee's Account, not later than 3:00 p.m., New York time, on
such Advance Date in accordance with Section 2.6.
Charter Hire shall be paid by or on behalf of Deepwater in immediately
available funds in accordance with the Depository Agreement and the Charter.
All such payments shall be paid by the Depository to the Trustees, the
Investment Trust or the Certificate Purchasers, as applicable, not later than
2:00 p.m., New York time, on the date due. Funds received after such time shall
for all purposes of the Transaction Documents be deemed to have been received on
the next succeeding Business Day.
9
<PAGE>
SECTION 2.12 Computations.
------------
(a) Determination of Certificate Return Rate and Fees. All
-------------------------------------------------------
computations of accrued amounts pursuant to the Transaction Documents shall be
made on the basis of the actual number of days elapsed in a 360-day year;
provided, that Certificate Return on any Advance that is an Alternate Rate
Advance and all Non-Utilization Fees shall be calculated on the basis of the
actual number of days elapsed in a 365-day or 366-day year, as applicable. The
Charter Trustee shall, as soon as practicable, but in no event later than 11:00
a.m., New York time, on the date two (2) Business Days before the effectiveness
of each Certificate Return Rate, cause to be determined such Certificate Return
Rate and notify each Certificate Purchaser and Deepwater thereof by delivery of
a notice of Certificate Return Rate in substantially the form of Exhibit Q
hereto.
(b) Disbursement Information. The Charter Trustee shall deliver
-------------------------
the Disbursement Information to Deepwater and the Depository in accordance with
Section 4.3 of the Depository Agreement.
(c) Conclusive Determinations. All information provided by the
--------------------------
Charter Trustee pursuant to this Section 2.12 for the purposes of any
Transaction Document shall be conclusive and binding on the Charter Trustee, the
Investment Trust, Deepwater and the Certificate Purchasers in the absence of
manifest error.
SECTION 2.13 Conditions to each Advance. The obligation of each
-----------------------------
Certificate Purchaser to make an Advance in accordance with this Section 2 and
the obligations of the Charter Trustee and the Investment Trust to disburse the
proceeds of an Advance in connection with any Advance Request and in accordance
with this Section 2 shall be subject to satisfaction or waiver of the following
conditions precedent:
(a) no Material Default or Event of Default shall have occurred
and be continuing; and
(b) the representations and warranties of Deepwater set forth in
Section 5.1 shall be true and correct in all material respects on the date of
such Advance as though made on and as of such date, except to the extent such
representations or warranties relate solely to an earlier date, in which case
such representations and warranties shall have been true and correct in all
material respects on and as of such earlier date.
SECTION 2.14 Fees.
----
(a) Facility Fee. On the Closing Date, Deepwater shall pay to
-------------
each Certificate Purchaser a nonrefundable upfront fee (the "Facility Fee")
------------
equal to such Certificate Purchaser's Commitment multiplied by the Facility Fee
rate applicable to such Certificate Purchaser as set forth in Schedule 2.
10
<PAGE>
(b) Non-Utilization Fee. Commencing on the Closing Date,
--------------------
Deepwater shall pay to the Charter Trustee and the Investment Trust for the
ratable benefit of each Certificate Purchaser (measured by their respective
Commitment Percentages) a non-utilization fee (the "Non-Utilization Fee") of ten
-------------------
(10) basis points per annum on the average daily unutilized amount of the
aggregate Maximum Certificate Purchaser Commitment during the relevant period.
The Non-Utilization Fee shall be payable by Deepwater in arrears on the last day
of each Return Period until the earlier of (i) the Outside Day Rate Commencement
Date and (ii) the Day Rate Commencement Date.
SECTION 3
EFFECTIVE DATE; CLOSING DATE; CONDITIONS PRECEDENT
SECTION 3.1 Effective Date; Closing Date.
-------------------------------
(a) This Agreement shall become effective on the date (the
"Effective Date") on which all of the conditions set forth on Schedule 8 have
---------------
been satisfied or waived.
(b) All documents and instruments required to be delivered on the
Closing Date shall be delivered at the offices of Hunton & Williams, 200 Park
Avenue, New York, New York 10166, or at such other location as may be determined
by the Documentation Agent and Deepwater.
SECTION 3.2 Conditions Precedent to Closing Date. The obligations
----------------------------------------
of the parties hereto to enter into the transactions contemplated by this
Agreement and the other Transaction Documents and to take the actions to be
taken by each such party which are contemplated by Section 2.1 to occur on the
Closing Date shall be subject to satisfaction or waiver as of the Closing Date
of the following conditions precedent (provided, that the obligations of any
party shall not be subject to any conditions contained in this Section 3.2 which
are required to be performed or caused to be performed by such party or any of
its respective Affiliates):
(a) Each Certificate Purchaser shall have funded the Advance to be
made by it on the Closing Date in accordance with Section 2.3.
(b) Each Certificate Purchaser shall have received its respective
Certificate in accordance with Section 2.4.
(c) Deepwater shall have given the Agents not less than three (3)
Business Days prior written notice of the Closing Date, which notice may be
included in the Initial Advance Request delivered in accordance with Section 2.3
and each Certificate Purchaser shall have received a funding indemnity letter
from R&B and Conoco in the form of Exhibit A hereto not less than three (3)
Business Days prior to the Closing Date.
(d) All parties thereto shall have executed and delivered each of
the
11
<PAGE>
Transaction Documents to be entered into on the Closing Date, as indicated on
Schedule 1 hereto.
(e) Deepwater shall have delivered to the Charter Trustee (with
copies for each Certificate Purchaser) copies of the Services Agreements, the
Construction Contract, the Drilling Contract, and the Drilling Contract
Guaranty, copies of all purchase orders and other documents relating to the
purchase of the OFE, together with any amendments thereto, in each case
certified by an authorized representative of Deepwater to be true, complete and
correct copies thereof as of the Closing Date and each of the Services
Agreements, the Construction Contract, the Drilling Contract and the Drilling
Contract Guaranty shall be in full force and effect and no default or material
breach shall exist thereunder.
(f) The Agents and each Certificate Purchaser shall have received
the Appraisal in form and substance satisfactory to the Documentation Agent and
Deepwater shall have received a copy thereof.
(g) All Taxes, fees and other charges due in connection with the
execution, delivery, performance, recording, filing and registration of the
Transaction Documents on the Closing Date shall have been paid.
(h) (i) White & Case LLP, special counsel to Deepwater, shall have
issued its opinion to the effect and in the form set forth in Exhibit B; (ii)
Hunton & Williams, counsel to Conoco, shall have delivered its opinion to the
effect and in the form set forth in Exhibit C; (iii) Wayne K. Anderson, in-house
counsel to Conoco, shall have delivered his opinion to the effect and in the
form set forth in Exhibit D; (iv) Wayne K. Hillin, counsel to R&B, shall have
delivered his opinion to the effect and in the form set forth in Exhibit E; (v)
Arias, Fabrega & Fabrega, Panamanian counsel, shall have delivered its opinion
to the effect and in the form set forth in Exhibit P; and (vi) Cynthia L.
Corliss, Vice President and Trust Counsel of Wilmington Trust Company, and
Richards, Layton & Finger, counsel to the Charter Trustee and Investment Trust,
shall have delivered their opinions to the effect and in the form set forth in
Exhibit U.
(i) All actions required to have been taken by any Government
Authority on or prior to the Closing Date in connection with the transactions
contemplated by this Participation Agreement and the other Transaction Documents
shall have been taken and all Government Actions required to be in effect on or
prior to the Closing Date in connection with the transactions contemplated by
this Participation Agreement and the other Transaction Documents shall have been
issued or made, and all such Government Actions shall be in full force and
effect on the Closing Date. All necessary consents, approvals and
authorizations of all non-Government Authorities required on the part of
Deepwater, the Investment Trust, the Trustees or third parties to be obtained,
given or made on or prior to the Closing Date in connection with the execution
and delivery of the Transaction Documents and transactions contemplated hereby
and thereby shall have been obtained, given or made and shall be in full force
and effect.
12
<PAGE>
(j) No action shall have been instituted, nor shall any action or
proceeding be threatened, before any Government Authority, nor shall any order,
judgment or decree have been issued or proposed to be issued by any Government
Authority (i) to set aside, restrain, enjoin or prevent the performance of this
Participation Agreement, any other Transaction Document or any transaction
contemplated hereby or thereby or (ii) which would have a Material Adverse
Effect.
(k) The transactions contemplated by the Transaction Documents do
not and will not (i) violate any Applicable Law, (ii) contravene any charter,
by-laws or other organizational document of Deepwater, the Members, Conoco, R&B,
the Investment Trust, the Trustees, the Agents or any Certificate Purchaser,
(iii) contravene any contract, agreement or other arrangement to which
Deepwater, the Investment Trust, the Trustees, the Agents or any Certificate
Purchaser is a party or by which any of their respective properties or assets
are bound, or (iv) subject Deepwater, any Member, the Investment Trust, the
Trustees, any Agent or any Certificate Purchaser to any regulations to which
such party had not been subject prior to entering into such Transaction
Documents and which would be materially adverse to such party.
(l) Deepwater, each Member, Conoco and R&B shall have each
delivered, or shall have caused to be delivered, to the Agents, and the Trustees
the following, in each case in form and substance satisfactory to the
Documentation Agent (with copies for each Certificate Purchaser):
(i) Organizational Documents. Copies of its articles of
-------------------------
incorporation or other organizational documents, certified to be true and
complete as of a recent date by the appropriate Government Authority of the
state, province or country of its incorporation or formation.
(ii) Resolutions. Copies of resolutions of its Members or Board
-----------
of Directors, as applicable, that, specifically or generally (as part of a
general enabling resolution), approve and adopt the Transaction Documents
and the transactions contemplated therein, and that, specifically or
generally (as part of a general enabling resolution), authorize execution
and delivery thereof, certified by an appropriate officer or representative
as of the Closing Date to be true and correct and in full force and effect
as of such date.
(iii) Bylaws. A copy of its operating agreement or bylaws
------
certified by an appropriate officer or representative as of the Closing
Date to be true and correct and in full force and effect as of such date.
(iv) Good Standing. Copies of certificates of good standing,
--------------
existence or its equivalent, certified as of a recent date by the
appropriate government authorities of the state, province or country of its
incorporation or formation.
(v) Officer's or Manager's Certificate. An officer's certificate
-----------------------------------
or
13
<PAGE>
manager's certificate, dated the Closing Date, substantially in the form of
Exhibit F.
(m) Each of the Trustees shall have delivered, or shall have
caused to be delivered, to Deepwater, the Members, the Administrative Agent, and
each Certificate Purchaser the following:
(i) Organizational Documents. Copies of its articles of
-------------------------
association or other organizational documents and a copy of the Charter
Trustee's and Investment Trust's certificate of trust (or, if certificates
of trust are not issued in the Charter Trustee's or Investment Trust's
jurisdiction of organization, other similar organizational documents),
together with all amendments in each case certified to be true and complete
as of a recent date by the appropriate Government Authority.
(ii) Resolutions. Copies of resolutions of its board of
-----------
directors, approving and adopting the Transaction Documents and the
transactions contemplated therein, and authorizing execution and delivery
thereof, certified by an appropriate officer as of the Closing Date to be
true and correct and in full force and effect as of such date.
(iii) Good Standing. Copies of certificates of good standing (or,
-------------
if certificates of good standing are not issued in the Trustees' or
Investment Trust's jurisdiction of organization, some other similar
certificate), existence or its equivalent with respect to the Trustees and
the Investment Trust, in each case certified as of a recent date by the
appropriate Government Authorities.
(iv) Officer's Certificate. An officer's certificate, dated the
----------------------
Closing Date, substantially in the form of Exhibit G.
(n) Closing Date. The Closing Date shall occur on or prior to
-------------
August 14, 1998.
(o) No Material Adverse Change. As of the Closing Date, there
-----------------------------
shall not have occurred any material adverse change in the consolidated assets,
liabilities, operations, business or financial condition of: (i) Conoco (except
as described in the letter, dated July 24, 1998, from Robert N. Heinrich of
Conoco to Claire M. Liu of Bank of America National Trust and Savings
Association ("Bank of America") and the copy of the press release attached
-----------------
thereto, copies of which have been previously delivered to each Certificate
Purchaser) or Deepwater from that set forth in their respective financial
statements for the fiscal year ended December 31, 1997 or (ii) R&B from that set
forth in its financial statements for the fiscal quarter ended March 31, 1998.
(p) Transaction Expenses. All Transaction Expenses then due and
---------------------
owing for which Deepwater has received an invoice at least two (2) Business Days
prior to the Closing Date and which will not be paid from the proceeds of the
Initial Advance shall have been paid by Deepwater.
14
<PAGE>
(q) Tax and Accounting. Deepwater shall have received (x) a
--------------------
satisfactory tax opinion of White & Case LLP and (y) confirmation from its
auditors of the accounting treatment for the transactions contemplated hereby
satisfactory in all respects to Deepwater.
(r) Representations. The representations and warranties of each
---------------
party set forth in Section 5 and in any other Transaction Document entered into
on or prior to the Closing Date shall be true and correct as of the Closing
Date.
(s) Filings. All UCC and other applicable filings listed on
-------
Schedule 3 shall have been duly made at the locations set forth beside the
filing on such schedule. All other filings or recordings of any document in any
jurisdiction which are required to establish the perfected security interests of
the Charter Trustee and the Investment Trust in the Accounts shall have been
made.
(t) No Defaults under Transaction Documents. All Transaction
-------------------------------------------
Documents required to be executed and delivered on or prior to the Closing Date
shall be in full force and effect as to all of the parties thereto and no
Defaults shall exist under any such Transaction Document.
(u) Insurance Report. The Charter Trustee, the Investment Trust
-----------------
and each Certificate Purchaser shall have received a satisfactory report from
J&H Marsh & McLennan with respect to the insurance to be carried by Deepwater
pursuant to Article XIV of the Charter.
(v) Drilling Contract. Conoco Drilling and Deepwater shall have
------------------
entered into the Drilling Contract in a form substantially similar to the form
attached hereto as Exhibit H and Conoco Drilling shall have delivered the Conoco
Drilling Consent in a form substantially similar to the form attached hereto as
Exhibit I.
(w) Securities Act Representation. PricewaterhouseCoopers LLP and Bank
-----------------------------
of America shall each have delivered to the Charter Trustee (with copies for
each Certificate Purchaser), the Investment Trust and Deepwater a certificate,
in form substantially similar to the form attached hereto as Exhibit J.
15
<PAGE>
SECTION 4
DELIVERY DATE; CONDITIONS PRECEDENT
SECTION 4.1 Conditions Precedent to Delivery Date. The obligations of
-------------------------------------
the parties hereto to enter into the transactions to be entered into and take
the actions to be taken by each such party which are contemplated by Section 2.2
to occur on the Delivery Date, taking into account Section 4.2, shall be subject
to satisfaction or waiver on the Delivery Date of the following conditions
precedent; provided, that the obligations of any party shall not be subject to
any condition contained in this Section 4.1 which is required to be performed or
caused to be performed by such party or any of its respective Affiliates:
(a) The following events shall have occurred with respect to the
delivery and documentation of the Drillship:
(i) The Drillship (including the OFE) shall have been accepted and
delivered, and a Protocol of Delivery and Acceptance substantially in the
form set forth in Exhibit A to the Charter (the "Protocol of Delivery and
------------------------
Acceptance") shall have been executed by the Builder and the Construction
----------
Supervisor and delivered to the Head Lessor or the Charter Trustee, as the
case may be, pursuant to the Construction Contract.
(ii) Copies of the Builder's Certificate and Bill of Sale
substantially in the forms set forth in Exhibits L and M, respectively, a
copy of the interim class certificate (showing that the Drillship shall
have been recommended for classification with the Classification Society
with the highest classification and rating for vessels of the same age and
type), and all other documents required to be delivered by Builder under
the Construction Contract shall be delivered to Deepwater, as Construction
Supervisor (with copies to the Charter Trustee (and the Head Lessor, if
applicable) and the Agents).
(iii) The Drillship shall have been duly provisionally registered
in the name of the Head Lessor or the Charter Trustee, as the case may be,
under Panamanian law free and clear of all Liens of record and a
provisional patente (the "Provisional Patente") shall have been issued.
--------------------
(iv) The Ship Mortgage shall have been duly provisionally recorded
under Panamanian Law.
(v) The Charter Trustee and Deepwater shall have received a
Certificate of Ownership and Encumbrance from the Panamanian registry,
showing the Head Lessor or the Charter Trustee, as the case may be, to be
the owner of the Drillship, free and clear of all recorded Liens, other
than the Ship Mortgage.
(vi) The Charter Trustee, the Investment Trust, the Administrative
Agent and the Certificate Purchasers shall have received an opinion of
Panamanian counsel in
16
<PAGE>
substantially the form of Exhibit P.
(b) If requested pursuant to Section 2.3, and subject to the terms
and conditions of this Agreement and the other Transaction Documents, each
Certificate Purchaser shall have funded the Advance, if any, to be made by it on
the Delivery Date in accordance with Section 2.3.
(c) The parties shall have received opinions of counsel with
respect to the transactions to be consummated on the Delivery Date substantially
in the forms as set forth in Exhibits B, C, D, E, O, P and U.
(d) All Transaction Documents to be entered into on the Delivery
Date, as indicated on Schedule 1 hereto, shall have been executed and delivered
by each of the parties thereto.
(e) All Transaction Expenses (including registration and
recordation fees under Panamanian Law) then due and owing shall have been paid
on or prior to the Delivery Date.
(f) The Charter Trustee, the Documentation Agent and the
Administrative Agent shall have received (i) an updated report from J&H Marsh &
McLennan confirming that the insurance then in effect satisfies the insurance
requirements set forth in Article XIV of the Charter, such report being
satisfactory in form and substance to the Documentation Agent and (ii)
certificates of insurance from Deepwater's insurance broker(s) evidencing that
all insurance required under Article XIV of the Charter is in effect and that
all premiums have been paid.
(g) Each of the Charter Trustee, the Investment Trust and the
Certificate Purchasers shall have received an Officer's Certificate of Deepwater
stating that the representations and warranties of Deepwater listed in Section
5.1 or in any other Transaction Document are true and correct as of the Delivery
Date (except to the extent that such representations and warranties relate
solely to an earlier or to a later date, in which event such representations and
warranties shall be true on and as of such earlier or later date).
(h) No Material Default, Event of Default, Event of Loss or
Construction Period Event of Loss shall have occurred and be continuing on such
date.
(i) All necessary approvals, orders, permits, authorizations, and
consents which are required as of the Delivery Date on the part of Deepwater,
the Certificate Purchasers, the Agents, the Investment Trust, the Trustees or
other third parties (except to the extent that such approvals, orders, permits,
authorizations and consents are required as a result of such Person's status as
a trust company or a regulated depository or banking institution) in connection
with any of the transactions contemplated by this Agreement or in connection
with the ownership, use or operation of the Drillship as of the Delivery Date
shall have been duly obtained, and Deepwater shall have provided evidence
thereof reasonably satisfactory to the
17
<PAGE>
Documentation Agent.
(j) All actions, if any, required to have been taken by any
Government Authority as of the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been taken and all Government Actions
required to be in effect as of the Delivery Date in connection with the
transactions contemplated by this Agreement shall have been issued and all such
Government Actions shall be in full force and effect.
(k) The Outside Day Rate Commencement Date shall not yet have
occurred.
(l) The Charter Trustee and the Certificate Purchasers shall have
received a report from the Independent Marine Surveyor stating that the
Drillship meets the Minimum Specifications.
SECTION 4.2 Head Lease Transaction. (a) Deepwater shall, with the
------------------------
consent of the Certificate Purchasers, be permitted to enter into, and to
require the Charter Trustee to enter into, the following transactions
(collectively, the "Head Lease Transaction") on or after the Delivery Date: (i)
----------------------
title to the Drillship shall be transferred to the Head Lessor; (ii) the Head
Lessor shall charter (directly or through a sub-charter) the Drillship to the
Charter Trustee; (iii) the Head Lessor shall finance its acquisition of title to
the Drillship, in part, through a loan (the "Head Lease Loan"); (iv) the Head
---------------
Lessor and the Charter Trustee shall enter into arrangements whereby the Charter
Trustee's payment obligations under the Head Lease are defeased (the "Head Lease
----------
Defeasance Arrangements"); (v) the Head Lessor shall enter into the Ship
------------------------
Mortgage; and (vi) the economic benefit of entering into the Head Lease
Transaction shall be paid over to, or otherwise accrue to the benefit of,
Deepwater. If Deepwater shall have requested the Certificate Purchasers to
consent to the Head Lease Transaction not less than 30 days prior to the
proposed closing date of the Head Lease Transaction (which request shall be
accompanied by drafts of the documents relating thereto), the Certificate
Purchasers agree to consider such request in good faith. Thereafter, Deepwater
shall promptly provide the Certificate Purchasers with the drafts of the Head
Lease Documents to the extent such drafts are distributed to the other parties
to the Head Lease Transaction. If each Certificate Purchaser in its sole
discretion approves the Head Lease Transaction, the Charter Trustee shall enter
into the Head Lease Transaction on the date proposed by Deepwater.
Notwithstanding the provisions of this Section 4, neither the consummation nor
the failure to consummate the Head Lease Transaction on or before the Delivery
Date shall be a condition to the obligation of any party hereto to enter into
the other transactions contemplated by this Agreement to occur on the Delivery
Date or to execute and deliver the Transaction Documents to be executed and
delivered on the Delivery Date (other than those transactions or documents
reflecting only the Head Lease Transaction).
(b) If Deepwater shall have requested the Certificate Purchasers
to consent to the Head Lease Transaction in accordance with this Section 4.2,
Deepwater may, in its sole discretion, elect to replace any Certificate
Purchaser that does not consent to the Head Lease Transaction by having another
financial institution that meets the conditions set forth in this
18
<PAGE>
Section 4.2(b) (a "Replacement Certificate Purchaser") purchase such
-----------------------------------
non-consenting Certificate Purchaser's interest in accordance with this Section
4.2. Replacement of a Certificate Purchaser by a Replacement Certificate
Purchaser shall be subject to the following conditions precedent (collectively,
the "Certificate Purchaser Replacement Conditions"):
-----------------------------------------------
(i) such replacement does not conflict with any Applicable Law;
(ii) the Replacement Certificate Purchaser shall pay to the
Certificate Purchaser being replaced the amount of its outstanding
Certificate Purchaser Amount and accrued and unpaid Certificate Return with
respect thereto plus any other accrued and unpaid amounts owed by Deepwater
to such Certificate Purchaser under the Transaction Documents, including
any reasonable expenses relating to its replacement; if the Replacement
Certificate Purchaser does not provide sufficient funds to allow the
Certificate Purchaser being replaced to receive such amount, Deepwater may
provide funds sufficient to cover the shortfall;
(iii) the Replacement Certificate Purchaser shall have agreed to
execute the Assignment and Assumption Agreement in substantially the form
of Exhibit R hereto; and
(iv) the requirements set forth in Section 9.1 shall have been
satisfied.
SECTION 5
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of Deepwater. Deepwater,
---------------------------------------------
in its individual capacity and as Construction Supervisor, represents and
warrants to each of the other parties hereto as of the date hereof as follows:
(a) Due Organization, etc. Deepwater is a limited liability
-----------------------
company duly organized, validly existing and in good standing under the laws of
Delaware and has the power and authority and has all requisite government
licenses, permits and other approvals that are required as of the date hereof to
enter into and perform its obligations under the Transaction Documents to which
it is or will be a party and each other agreement, instrument and document to be
executed and delivered by it in connection with, or as contemplated by, each
such Transaction Document to which it is or will be a party. Deepwater is duly
qualified to transact business and is in good standing as a foreign limited
liability company in every jurisdiction where the nature of its business
requires such qualification.
(b) Authorization; No Conflict. The execution, delivery and
----------------------------
performance by Deepwater of each Transaction Document to which it is or will be
a party (i) is within its company powers under Delaware law and its Certificate
of Formation and LLC Agreement
19
<PAGE>
(collectively, the "Organizational Documents"); (ii) has been duly authorized by
------------------------
all necessary company action on the part of Deepwater and its Members; (iii)
requires no Government Action by, or filing with, any Government Authority which
is required to be obtained, given or made by Deepwater or its Members as of the
date hereof (other than such Government Action as has been duly obtained, given
or made); (iv) does not and will not contravene, or constitute a default under,
any Applicable Law or its Organizational Documents, or of any material
agreement, judgment, injunction, order, decree or other instrument binding upon
or affecting Deepwater or the Drillship; and (v) does not and will not result in
the creation, imposition or violation of any Lien on any asset of Deepwater
other than as contemplated or permitted by the terms hereof or of the other
Transaction Documents. Deepwater has obtained all Government Actions necessary
to carry on its business as now conducted, except for those Government Actions
that are normally obtained at a later time and with respect to which Deepwater
does not anticipate any problems in obtaining.
(c) Enforceability, etc. Each of the Services Agreements, the
--------------------
Drilling Contract and the Transaction Documents, to which Deepwater is or will
be a party has been, or on or before the date on which such document is to be
signed will be, duly executed and delivered by Deepwater and each such document
to which Deepwater is a party constitutes, or upon execution and delivery will
constitute, assuming the due authorization, execution and delivery thereof by
the other parties thereto, a legal, valid and binding obligation enforceable
against Deepwater in accordance with the terms thereof, except as such
enforceability may be limited or denied by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights and the enforcement of debtors' obligations generally, and (ii) general
principles of equity, regardless of whether enforcement is pursuant to a
proceeding in equity or at law.
(d) Financial Information. The balance sheet of Deepwater for the
---------------------
fiscal year ended December 31, 1997 fairly presents, in conformity with GAAP
consistently applied, the financial position of Deepwater as of such date.
Since December 31, 1997, no event has occurred with respect to the assets,
liabilities, operations, business or financial condition of Deepwater which
would have a Material Adverse Effect.
(e) Litigation. There is no litigation, action, proceeding, or
----------
labor controversy to which Deepwater is a party which, if adversely determined,
would adversely affect the financial condition, operations, assets, business,
properties or prospects of Deepwater or which purports to affect the legality,
validity or enforceability of any of the Transaction Documents, the Services
Agreements or the Drilling Contract.
(f) Ownership of Properties. Deepwater has good title to all of
-------------------------
its properties and assets, real and personal, tangible and intangible, of any
nature whatsoever (including patents, trademarks, tradenames, service marks and
copyrights) which it purports to own, free and clear of all Liens (including
infringement claims with respect to patents, trademarks, copyrights and the
like), except for Permitted Liens.
20
<PAGE>
(g) Taxes. Deepwater has filed all tax returns and reports
-----
required by law to have been filed by it and has paid all Taxes thereby shown to
be owing, except for any Taxes which are not yet due or are being contested
pursuant to a Permitted Contest.
(h) Pension and Welfare Plans. As of the date hereof, Deepwater
---------------------------
does not maintain any Plan for the benefit of its employees. Except as provided
in Section 6.1(o) hereof, Deepwater will not maintain any Plan for the benefit
of its employees.
(i) Investment Company Act and Public Utility Holding Company Act.
-------------------------------------------------------------
Deepwater is not an "investment company" or a company controlled by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Act of
1935, as amended.
(j) Securities Act. Neither Deepwater nor any Person authorized
---------------
by Deepwater to act on its behalf has offered or sold any interest in the
Certificates, or in any similar security relating to the transactions
contemplated by the Transaction Documents, or in any security the offering of
which for the purposes of the Securities Act would be deemed to be part of the
same offering as the offering thereof, or solicited any offer to acquire any of
the same from, any Person other than the parties hereto and not more than 18
other institutional investors, and neither Deepwater nor any Person authorized
by Deepwater to act on its behalf will take any action which would subject the
issuance or sale of any interest in the Trust Estate, the Charter Trust, the
Investment Trust or the Certificates or in any similar security relating to the
Drillship to the provisions of Section 5 of the Securities Act or require the
qualification of any Transaction Document under the Trust Indenture Act of 1939,
as amended. The only Persons which have been authorized to act on behalf of
Deepwater for this purpose are PricewaterhouseCoopers LLP, Bank of America and
the Syndication Agent.
(k) Chief Place of Business. Deepwater's chief place of business,
-----------------------
chief executive office and office where the documents, accounts and records
relating to the transactions contemplated by this Agreement and each other
Transaction Document is kept and is located at 901 Threadneedle, Suite 200,
Houston, Texas 77079.
(l) Business of Deepwater. (i) Deepwater has engaged in no
-----------------------
business activity other than as contemplated by, or in connection with, the
Construction Contract, the Drilling Contract, the Services Agreements, the
Drilling Contract Guaranty and the Transaction Documents; (ii) Deepwater has no
subsidiaries; (iii) as of the Closing Date, all of the membership interests in
Deepwater are owned by the Members; and (iv) from and after the Closing Date,
Deepwater will have no Indebtedness except for Permitted Indebtedness.
(m) Bankruptcy. Deepwater has not filed a voluntary petition in
----------
bankruptcy or been adjudicated as bankrupt or insolvent, or filed any petition
or answer seeking any reorganization, liquidation, dissolution or similar relief
under any federal or state bankruptcy,
21
<PAGE>
insolvency or other law relating to relief for debtors, or sought or consented
to or acquiesced in the appointment of any trustee, receiver, conservator or
liquidator of all or any part of its properties or its interest in the
Drillship. No court of competent jurisdiction has entered an order, judgment or
decree approving a petition filed against Deepwater seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under federal bankruptcy or insolvency act or other law relating to
relief for debtors, and no other liquidator has been appointed for Deepwater or
of all or any part of its properties or its interest in the Drillship and no
such action is pending. Deepwater has not given notice to any Government
Authority of insolvency or pending insolvency, or suspension or pending
suspension of operations.
(n) Certain Contracts. From and after the Closing Date, the
------------------
Construction Contract, the Services Agreements, the Drilling Contract and the
Drilling Contract Guaranty are in full force and effect and have not been
amended except as permitted or contemplated by the Transaction Documents.
Deepwater is not in default under, and, to the knowledge of Deepwater, no other
Person is in default under, any of the Construction Contract, the Services
Agreements, the Drilling Contract or the Drilling Contract Guaranty. The
execution, delivery and performance by Deepwater of its obligations under the
Construction Contract, the Services Agreements, the Drilling Contract, this
Agreement and the other Transaction Documents to which it is a party, will not
violate in any material respect any provisions of any Applicable Law.
(o) Federal Reserve Regulations. Deepwater is not engaged in, and
---------------------------
does not have as one of its activities, the business of extending credit for the
purpose of purchasing or carrying any margin stock, and no proceeds of any
Advances will be used for a purpose which violates, or would be inconsistent
with, the rules and regulations of the Federal Reserve Board. Terms for which
meanings are provided in Federal Reserve Board Regulations U or X or any
regulations substituted therefor, as from time to time in effect, are used in
this clause (o) with such meanings.
(p) Absence of Events. No Default or Event of Default has
-------------------
occurred and is continuing, and no Construction Period Event of Loss has
occurred that has not been remedied before the date hereof and Deepwater is not
in default in, nor has any non-permanent waiver been granted to Deepwater with
respect to, the performance, observance or fulfillment of any of the
obligations, conditions or covenants contained in the Construction Contract, the
Drilling Contract or the Services Agreements.
(q) Subject to Government Regulation. None of the Investment
-----------------------------------
Trust, the Trustees, the Agents or any Certificate Purchaser, solely by reason
of entering into the Transaction Documents or the consummation of the
transactions contemplated thereby, will become subject to ongoing regulation of
its operations by any Government Authority having jurisdiction over the
ownership or operations of the Drillship solely by reason of any of Deepwater's
business activities or the nature of the Drillship.
(r) Solvency. Deepwater does not have capital unreasonably small in
--------
22
<PAGE>
relation to its business, will not be rendered insolvent by the execution,
delivery and performance of its obligations under the Transaction Documents, and
does not intend to hinder, delay or defraud its creditors by or through the
execution, delivery and performance of the Transaction Documents to which it is
a party, including the Charter. As of the date hereof and as of the Closing
Date, there are no outstanding unsatisfied judgments, liens for Taxes or
bankruptcy proceedings against Deepwater.
(s) Appraisal Disclosure. As of the date hereof, the information
---------------------
listed on Schedule 4 and provided by Deepwater or any Affiliates thereof in
writing to the Appraiser in connection with the Appraisal, when taken as a
whole, does not contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained therein not
materially misleading under the circumstances in which such statements were
made.
(t) Accuracy of Information. The cash flow projections contained
------------------------
in Section 7E of the Private Placement Memorandum, dated as of October 27, 1997,
were prepared by Deepwater in good faith on the basis of reasonable
investigation, information, assumptions and procedures which Deepwater believed
were reasonable under the facts and circumstances then existing, and since the
date of such projections there has been no change in any of the facts on which
such projections were based that would result in a material adverse change in
such projections.
(u) Title to the Drillship; Documentation; Condition. On the
-----------------------------------------------------
Delivery Date, after giving effect to the transactions to be effected on the
Delivery Date, the Charter Trustee (or the Head Lessor) will have valid title to
the Drillship (including all OFE) and the Drillship will be duly provisionally
documented in the name of the Charter Trustee (or the Head Lessor) under the
laws of the Republic of Panama free and clear of all liens, charges,
encumbrances and security interests other than Permitted Liens.
(v) Recording of Ship Mortgage. On the Delivery Date, after
-----------------------------
giving effect to the transactions to be effected on the Delivery Date, (i) the
Ship Mortgage shall have been duly provisionally recorded with the appropriate
Panamanian authorities in Panama City, Republic of Panama (which office is the
only place in which such recording is necessary), (ii) the Ship Mortgage shall
constitute a first naval mortgage on the Drillship in favor of the Investment
Trust, the Hedging Agreement Counterparties and, if the Head Lessor is the
mortgagor under the Ship Mortgage, the Charter Trustee, and (iii) no other
recordings or periodic rerecording or filing or periodic filing of the Ship
Mortgage is necessary under existing law to constitute the lien of the Ship
Mortgage on the Drillship (including all OFE), except final recordation of the
Ship Mortgage following the granting of the Permanent Patente by the Panamanian
authorities within six (6) months of the provisional recording of the Ship
Mortgage.
(w) Other Recordings and Filings. On the Delivery Date, all
-------------------------------
filings and recordings (including all filings of financing statements under the
Uniform Commercial Code) will have been duly made in each jurisdiction in which
such filings and recordings are required or reasonably requested by the Charter
Trustee or the Investment Trust in order to perfect the
23
<PAGE>
security interests granted by the Deepwater Assignment, the Ship Mortgage and
the other Security Documents and to make such security interests valid and
enforceable; provided, that Deepwater makes no representation or warranty with
--------
respect to any security interest in the Construction Contract or any
Construction Document.
SECTION 5.2 Representations and Warranties of Members. Each Member,
-------------------------------------------
severally and not jointly, represents and warrants to each of the other parties
hereto as of the date hereof as follows:
(a) Due Organization, etc. Such Member is a corporation duly
-----------------------
organized, validly existing and in good standing under the laws of the
respective jurisdiction of its organization and has the power and authority and
has all requisite government licenses, permits and other approvals currently
necessary to enter into and perform its obligations under the Transaction
Documents to which it is or will be a party and each other agreement, instrument
and document to be executed and delivered by it in connection with, or as
contemplated by, each such Transaction Document to which it is or will be a
party. Such Member is duly qualified to transact business in every jurisdiction
where the nature of its business requires such qualification.
(b) Authorization; No Conflict. The execution, delivery and
----------------------------
performance by such Member of each Transaction Document to which it is or will
be a party (i) is within its corporate powers; (ii) has been duly authorized by
all necessary corporate action; (iii) requires no Government Action by, or
filing with, any Government Authority; (iv) does not contravene, or constitute a
default under, any Applicable Law or its organizational documents, or of any
material agreement, judgment, injunction, order, decree or other instrument
binding upon or affecting it; and (v) does not result in the creation,
imposition or violation of any Lien on any of its assets. Such Member possesses
all government licenses, authorizations, consents and approvals required to
carry on its business as now conducted.
(c) Enforceability, etc. Each Transaction Document to which the
--------------------
Member is or will be a party has been, or on or before the Closing Date or the
Delivery Date on which such Transaction Document is to be signed will be, duly
executed and delivered by such Member and each such Transaction Document to
which such Member is a party constitutes, or upon execution and delivery will
constitute, assuming the due authorization, execution and delivery thereof by
the other parties thereto, a legal, valid and binding obligation of such Member
enforceable against such Member in accordance with the terms thereof, except as
such enforceability may be limited or denied by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws effecting creditors'
rights and the enforcement of debtors' obligations generally, and (ii) general
principles of equity, regardless of whether enforcement is pursuant to a
proceeding in equity or at law.
(d) Securities Act. Neither such Member nor any Person authorized
--------------
by such Member to act on its behalf has offered or sold any interest in
Deepwater, or in any security relating to the Drillship, or in any security the
offering of which for the purposes of the Securities Act would be deemed to be
part of the same offering as the offering thereof, or solicited any
24
<PAGE>
offer to acquire any of the same from, any Person other than the parties hereto
and not more than 10 other institutional investors, and neither such Member nor
any Person authorized by such Member to act on its behalf will take any action
which would subject the issuance or sale of any interest in Deepwater to the
provisions of Section 5 of the Securities Act or require the qualification of
any Transaction Document under the Trust Indenture Act of 1939, as amended.
(e) Litigation. To such Member's Actual Knowledge, there is no
----------
action or proceeding pending or threatened to which the Charter Trustee or the
Investment Trust is or will be a party before any court or arbitrator or
Government Authority that, if adversely determined, would reasonably be expected
to have a material adverse effect on the property, operations or financial
condition of Deepwater.
(f) Assignment. From and after the Closing Date, such Member will
----------
not assign or transfer to any Person that is not a party hereto, any of its
right, title or interest in or under Deepwater, the Charter, the Completion
Guaranty, the Construction Supervisory Agreement, the Drillship, or the
Collateral or any other Transaction Document, except as contemplated by the
Transaction Documents.
(g) Absence of Events. To such Member's Actual Knowledge, no
-------------------
Default or Event of Default has occurred and is continuing, and no Construction
Period Event of Loss has occurred that has not been remedied before the date
hereof and Deepwater is not in default in, nor has any non-permanent waiver been
granted to Deepwater with respect to, the performance, observance or fulfillment
of any of the obligations, conditions or covenants contained in the Construction
Contract, Drilling Contract or the Services Agreements.
(h) Compliance With Laws. To such Member's Actual Knowledge,
----------------------
Deepwater is currently in compliance, in all material respects, with all
Applicable Laws with respect to the conduct of its business and the ownership of
its properties.
SECTION 5.3 Representations and Warranties of the Investment Trust.
---------------------------------------------------------
The Investment Trust represents and warrants to each of the other parties hereto
as of the date hereof as follows:
(a) Due Organization, etc. It is a business trust duly formed and
---------------------
validly existing and in good standing under the laws of the jurisdiction of its
organization and has the power and authority to enter into and perform its
obligations under the Transaction Documents to which it is or will be a party
and each other agreement, instrument and document to be executed and delivered
by it in connection with, or as contemplated by, each such Transaction Document
to which it is or will be a party.
(b) Authorization; No Conflict. The execution, delivery and
----------------------------
performance by it of each Transaction Document to which it is or will be a party
(i) is within its powers; (ii) has been duly authorized by all necessary action;
(iii) requires no Government Action by, or filing with, any Government
Authority; (iv) does not contravene, or constitute a default under,
25
<PAGE>
any Applicable Law or its organizational documents, or of any material
agreement, judgment, injunction, order, decree or other instrument binding upon
it; and (v) does not result in the creation, imposition or violation of any Lien
on any of its assets. It possesses all government licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
(c) Enforceability, etc. Each Transaction Document to which it is
-------------------
or will be a party has been, or on or before the date on which such Transaction
Document is to be signed will be, duly executed and delivered by it and each
such Transaction Document to which it is a party constitutes, or upon execution
and delivery will constitute, assuming the due authorization, execution and
delivery hereof and thereof by the other parties hereto and thereto, a legal,
valid and binding obligation enforceable against it in accordance with the terms
thereof, except as such enforceability may be limited or denied by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights and the enforcement of debtors' obligations
generally, and (ii) general principles of equity, regardless of whether
enforcement is pursuant to a proceeding in equity or at law.
(d) Assignment. It has not assigned or transferred any of its
----------
right, title or interest in or under the Charter, the Completion Guaranty, the
Construction Supervisory Agreement, the Drillship, or the Collateral or any
other Transaction Document, except as expressly contemplated by the Transaction
Documents.
(e) Securities Act. Neither it nor any Person authorized by it to
--------------
act on its behalf has offered or sold any interest in the Trust Estate, the
Charter Trust, the Investment Trust or the Certificates, or in any similar
security relating to the Drillship, or in any security the offering of which for
the purposes of the Securities Act would be deemed to be part of the same
offering as the offering thereof, or solicited any offer to acquire any of the
same from, any Person other than the parties hereto, and neither it nor any
Person authorized by it to act on its behalf will take any action which would
subject the issuance or sale of any interest in the Trust Estate, the Charter
Trust, the Investment Trust or the Certificates or in any similar security
related to the Drillship to the provisions of Section 5 of the Securities Act or
require the qualification of any Transaction Document under the Trust Indenture
Act of 1939, as amended.
(f) Chief Place of Business. The Investment Trust's chief place
-------------------------
of business, chief executive office and office where the documents, accounts and
records relating to the transactions contemplated by this Agreement and each
other Transaction Document are and will be kept is located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001.
(g) No Other Activities. It does not hold any assets, conduct any
-------------------
business nor is it party to any document, agreement or instrument other than the
Transaction Documents to which it is, or will be, a party.
SECTION 5.4 Representations and Warranties of the Certificate
------------------------------------------------------
Purchasers. Each
----------
26
<PAGE>
Certificate Purchaser, individually and not jointly, represents and warrants to
each of the other parties hereto as of the date hereof as follows:
(a) Due Organization, etc. Such Certificate Purchaser is duly
-----------------------
organized, validly existing and in good standing (to the extent relevant under
Applicable Law) in the jurisdiction of its organization and has the power and
authority to enter into and perform its obligations under the Transaction
Documents to which it is or will be a party and each other agreement, instrument
and document to be executed and delivered by it in connection with, or as
contemplated by, each such Transaction Document to which it is or will be a
party.
(b) Authorization; No Conflict. The execution, delivery and
----------------------------
performance by such Certificate Purchaser of each Transaction Document to which
it is or will be a party (i) is within its powers; (ii) has been duly authorized
by all necessary action; (iii) requires no Government Action by, or filing with,
any Government Authority (it being understood that such Certificate Purchaser
makes no representation or warranty relating to the Drillship or the Applicable
Laws pertaining thereto); (iv) does not contravene, or constitute a default
under, any Applicable Law or its organizational documents, or of any material
agreement, judgment, injunction, order, decree or other instrument binding upon
such Certificate Purchaser; and (v) does not result in the creation, imposition
or violation of any Lien on any asset of such Certificate Purchaser.
(c) Enforceability, etc. Each Transaction Document to which such
--------------------
Certificate Purchaser is or will be a party has been, or on or before the
Closing Date will be, duly executed and delivered by such Certificate Purchaser
and each such Transaction Document to which such Certificate Purchaser is a
party constitutes, or upon execution and delivery will constitute, assuming the
due authorization, execution and delivery hereof and thereof by the other
parties hereto and thereto, a legal, valid and binding obligation enforceable
against such Certificate Purchaser in accordance with the terms thereof, except
as such enforceability may be limited or denied by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws effecting creditors'
rights and the enforcement of debtors' obligations generally, and (ii) general
principles of equity, regardless of whether enforcement is pursuant to a
proceeding in equity or at law.
(d) ERISA. Either (x) such Certificate Purchaser is not and will
-----
not be making any Advance with the assets of an "employee benefit plan" (as
defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or a
"plan" (as defined in Section 4975(e)(1) of the Code) or (y) the source of funds
for any Advance made by such Certificate Purchaser is an insurance company
general account (as such term is defined in PTE 95-60 (issued July 12, 1995) in
respect of which the reserves and liabilities (as defined by the annual
statement for life insurance companies approved by the National Association of
Insurance Commissioners) (the "NAIC Annual Statement")) for the general account
---------------------
contract(s) held by or on behalf of any employee benefit plan, together with the
amount of the reserves and liabilities for the general account contract(s) held
by or on behalf of any other employee benefit plans maintained by the same
employer (or affiliate thereof as defined in PTE 95-60) or by the same employee
27
<PAGE>
organization in the general account, do not exceed 10% of the total reserves and
liabilities of the general account (exclusive of separate account liabilities)
plus surplus as set forth in the NAIC Annual Statement filed with such
Certificate Purchaser's state of domicile.
(e) Securities Act. Neither such Certificate Purchaser nor any
---------------
Person authorized by such Certificate Purchaser to act on its behalf has offered
or sold any interest in the Trust Estate, the Charter Trust, the Investment
Trust or the Certificates, or in any similar security relating to the Drillship,
or in any security the offering of which for the purposes of the Securities Act
would be deemed to be part of the same offering as the offering thereof, or
solicited any offer to acquire any of the same from, any Person other than the
parties hereto, and neither such Certificate Purchaser nor any Person authorized
by such Certificate Purchaser to act on its behalf will take any action which
would subject the issuance or sale of any interest in the Trust Estate, the
Charter Trust, Investment Trust or the Certificates or in any similar security
relating to the Drillship to the provisions of Section 5 of the Securities Act
or require the qualification of any Transaction Document under the Trust
Indenture Act of 1939, as amended.
(f) Litigation. To such Certificate Purchaser's Actual Knowledge,
----------
there is no action or proceeding pending or threatened to which the Charter
Trustee, the Trust Estate or the Investment Trust is or will be a party before
any court or arbitrator or Government Authority that, if adversely determined,
would reasonably be expected to have a material adverse effect on the property,
operations or financial condition of the Charter Trustee or the Investment
Trust.
(g) No Other Documents. Such Certificate Purchaser has not
--------------------
authorized, or voted to authorize, the Charter Trustee or the Investment Trust
to execute any document, agreement or instrument other than the Transaction
Documents to which either the Charter Trustee or the Investment Trust is or will
be a party.
SECTION 5.5 Representations and Warranties of the Trustees. Each of
------------------------------------------------
the Trustees in their respective individual capacities (and where indicated, as
trustee) represents and warrants, severally and not jointly, to each of the
other Participants as of the date hereof as follows:
(a) Due Organization, etc. It is a banking corporation or a
-----------------------
Federal savings bank (as applicable), duly organized, validly existing and in
good standing under the laws of the state of its incorporation or the United
States (as applicable), has full corporate power and authority to enter into and
perform its obligations under the Transaction Documents to which it
(individually or as trustee, as the case may be) is or will be a party and each
other agreement, instrument and document to be executed and delivered by it
(individually or as trustee, as the case may be) in connection with, or as
contemplated by, each such Transaction Document to which it is or will be a
party.
(b) Authorization; No Conflict. The execution, delivery and
----------------------------
performance by it of each Transaction Document to which it (individually or as
trustee, as the case may be) is or will be a party (i) is within its powers;
(ii) has been duly authorized by all necessary action; (iii) requires no
Government Action by, or filing with, any Government Authority; (iv) does not
28
<PAGE>
contravene, or constitute a default under, any Applicable Law or its
organizational documents, or of any material agreement, judgment, injunction,
order, decree or other instrument binding upon it (individually or as trustee);
and (v) does not result in the creation, imposition or violation of any Lien on
any of its assets (individually or as trustee).
(c) Enforceability, etc. Each Transaction Document to which it is
-------------------
or will be a party (individually or as trustee, as the case may be) has been, or
on or before the Closing Date or the Delivery Date on which such Transaction
Document is to be signed will be, duly executed and delivered by it and each
such Transaction Document to which it is a party constitutes, or upon execution
and delivery will constitute, assuming the due authorization, execution and
delivery hereof and thereof by the other parties hereto and thereto, a legal,
valid and binding obligation enforceable against it in accordance with the terms
thereof, except as such enforceability may be limited or denied by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights and the enforcement of debtors' obligations
generally, and (ii) general principles of equity, regardless of whether
enforcement is pursuant to a proceeding in equity or at law.
(d) Litigation. There is no action, suit or proceeding pending
----------
or, to its knowledge (individually or as trustee, as the case may be) threatened
to which it (individually or as trustee), or, in the case of the Investment
Trustee, the Investment Trust is or will be a party, before any court or
arbitrator or any Government Authority that, if adversely determined, would
reasonably be expected to materially and adversely affect the ability of it
(individually or as trustee, as the case may be), or, in the case of the
Investment Trustee, the Investment Trust to perform their respective obligations
under each of the Transaction Documents to which it (individually or as trustee,
as the case may be), or, in the case of the Investment Trustee, the Investment
Trust is or is to be a party.
(e) Assignment. It has not assigned or transferred any of its
----------
right, title or interest in or under the Charter, the Completion Guaranty, the
Construction Supervisory Agreement, the Drillship or the Collateral, except as
expressly contemplated by the Transaction Documents.
(f) Securities Act. Neither it (individually or as trustee) nor
---------------
any Person authorized by it (individually or as trustee) to act on its behalf
has offered or sold any interest in the Trust Estate, the Investment Trust or
the Certificates, or in any similar security relating to the Drillship, or in
any security the offering of which for the purposes of the Securities Act would
be deemed to be part of the same offering as the offering thereof, or solicited
any offer to acquire any of the same from, any Person other than the parties
hereto, and neither it (individually or as trustee) nor any Person authorized by
it (individually or as trustee) to act on its behalf will take any action which
would subject the issuance or sale of any interest in the Trust Estate, the
Investment Trust or the Certificates to the provisions of Section 5 of the
Securities Act or require the qualification of any Transaction Document under
the Trust Indenture Act of 1939, as amended.
29
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(g) Chief Place of Business. The Charter Trustee's chief place of
-----------------------
business and the office where the documents, accounts and records relating to
the Drillship and the transactions contemplated by this Agreement and the other
Transaction Documents are and will be kept is located at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001. The Investment
Trustee's chief place of business, chief executive office and the office where
the documents, accounts and records relating to the Drillship and the
transactions contemplated by this Agreement and the other Transaction Documents
are and will be kept is located at 3773 Howard Hughes Parkway, Suite 300 North,
Las Vegas, Nevada 89109.
(h) No Other Documents. The Charter Trustee has not executed, and
------------------
the Investment Trustee has not authorized, or voted to authorize, the Investment
Trust to execute, any document, agreement or instrument other than the
Transaction Documents to which either the Charter Trustee or the Investment
Trust is or will be a party.
SECTION 6
CERTAIN COVENANTS AND AGREEMENTS
SECTION 6.1 Covenants of Deepwater.
------------------------
(a) No Other Business. From the date hereof to the expiration or
------------------
termination of the Charter Term, Deepwater shall not (i) engage in any business
other than as expressly contemplated by the Transaction Documents, the Head
Lease Documents (if any), the Drilling Contract or the Services Agreements; (ii)
become a party to any agreement other than this Agreement, the other Transaction
Documents, the Drilling Contract, the Drilling Contract Guaranty, the Services
Agreements, the Construction Contract, the Construction Documents, the Head
Lease Documents (if any), and any other agreements incidental to the performance
of its obligations hereunder or thereunder; (iii) amend, modify or supplement
the Drilling Contract, the Drilling Contract Guaranty, or the Services
Agreements in any manner that would have an adverse effect on the rights or
interests of the Charter Trustee, the Investment Trust or the Certificate
Purchasers without the prior written consent of the Majority Certificate
Purchasers; (iv) make any distributions to its Members so long as an Event of
Loss has occurred or a Material Default or Event of Default has occurred and is
continuing; or (v) incur any Indebtedness other than Permitted Indebtedness.
Deepwater shall provide the Charter Trustee with substantially final drafts of
any amendments, modifications or supplements to the Drilling Contract, the
Drilling Contract Guaranty or the Services Agreements at least ten (10) Business
Days prior to the effectiveness of such amendments, modifications or
supplements.
(b) No Profit-Sharing. From the date hereof to the expiration or
------------------
termination of the Charter Term, Deepwater shall not enter into any partnership,
profit-sharing or royalty arrangement or other similar arrangement whereby
Deepwater's income or profits are, or might be, shared with any other Person, or
enter into any management contract or similar arrangement whereby its business
or operations are managed by any other Person, in each case
30
<PAGE>
other than as provided in the Transaction Documents, the Head Lease Documents,
the LLC Agreement, the Drilling Contract, the Services Agreements or any other
agreement incidental to the performance of its obligations under the Transaction
Documents; provided that, notwithstanding the foregoing, this Section 6.1(b)
shall not prohibit profit-sharing arrangements made pursuant to a Plan
maintained by Deepwater in accordance with Section 6.1(o).
(c) No Merger. Deepwater shall not, from the date hereof to the
----------
expiration or termination of the Charter Term, merge with any other entity or
sell all or substantially all of its assets.
(d) No Subsidiaries. Deepwater shall not, from the date hereof to
---------------
the expiration or termination of the Charter Term, form, or cause to be formed,
or own any interest in, any Subsidiaries.
(e) No Abandonment. Deepwater shall not, from the date hereof to
---------------
the expiration or termination of the Charter Term, abandon or agree to abandon
the Drillship other than a tender of an abandonment to an insurer in connection
with obtaining payment from such insurer for an Event of Loss.
(f) Corporate Existence, Etc. Deepwater shall, from the date
---------------------------
hereof to the expiration or termination of the Charter Term, do or cause to be
done, in all material respects, all things necessary to preserve and keep in
full force and effect its rights and powers and franchises as a limited
liability company and its power and authority to perform its obligations under
the Transaction Documents, including any necessary qualification or licensing in
any foreign jurisdiction.
(g) Compliance With Laws. Deepwater shall, from the date hereof
----------------------
to the expiration or termination of the Charter Term, comply in all material
respects with all Applicable Laws with respect to the conduct of its business
and the ownership of its properties except in connection with a Permitted
Contest.
(h) Change of Name or Location. Deepwater shall, from the date
-----------------------------
hereof to the expiration or termination of the Charter Term, furnish to the
Administrative Agent and each Certificate Purchaser notice before any relocation
of its chief executive officer, principal place of business or the office where
it keeps its records concerning its accounts or change of its name, identity or
limited liability structure.
(i) No Disposition of the Drillship. Deepwater shall, from the
----------------------------------
date hereof to the expiration or termination of the Charter Term, not sell,
contract to sell, assign, transfer, convey or otherwise dispose of or permit to
be sold, assigned, leased, transferred, conveyed or otherwise disposed of the
Drillship or any part thereof except as otherwise contemplated by the
Transaction Documents.
(j) Brokers Fees. Deepwater shall hold the Charter Trustee, the
-------------
31
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Investment Trust, the Administrative Agent, and each Certificate Purchaser
harmless from and against any claim, demand or liability for any brokers,
finders, or placement fees or commissions incurred as a result of any action by
Deepwater in connection with the transactions contemplated by the Transaction
Documents, except for any such fee or commission included in Construction Costs;
provided, that the covenant contained in this Section 6.1(j) shall not apply to
any claim, demand or liability for any brokers, finders or placement fees or
commissions: (i) due and payable to Bank of America; (ii) due and payable to any
broker engaged by the Trustees, Investment Trust, Certificate Purchasers,
Administrative Agent or Affiliate thereof; or (iii) due and payable to any
broker retained after Deepwater's election of the Return Option pursuant to
Section 20.3 of the Charter.
(k) Notice of Material Default, Event of Default or Environmental
--------------------------------------------------------------
Claim; Other Certificates. If a Responsible Officer of Deepwater has Actual
---------------------------
Knowledge of a Material Default, Event of Default, Construction Period Event of
Loss or Environmental Claim with respect to the Drillship (to the extent that
Deepwater reasonably expects the cost to remediate or liability to be incurred
with respect to all such Environmental Claims then outstanding to exceed
$2,000,000 individually or in the aggregate), Deepwater shall promptly give
notice thereof to each other party to this Agreement.
Deepwater shall, upon the request of the Administrative Agent, (i) advise
the Charter Trustee and the Administrative Agent in writing in reasonable detail
of its response to any Environmental Claim with respect to the Drillship and
(ii) provide to the Administrative Agent prompt notice of the date and location
of the next scheduled dry-docking, if any, of the Drillship prior to such date.
If a default occurs and is continuing with respect to Deepwater's
obligations under any Permitted Indebtedness of the type specified in clause
(iii) of the definition of Permitted Indebtedness, Deepwater shall notify the
Trustees of such default promptly after Deepwater obtains Actual Knowledge of
such default and, upon receiving such notice, either of the Trustees may cure
such default at Deepwater's expense.
Deepwater shall furnish to the Charter Trustee, the Investment Trust and
the Administrative Agent (with copies for the Certificate Purchasers) within
ninety (90) days after each anniversary of the Delivery Date, the annual
confirmation of classification of the Drillship issued by the Classification
Society, and at any other time upon the request of the Charter Trustee, copies
of all certificates issued by the U.S. Coast Guard or the Classification Society
with respect to the Drillship.
(l) Documentation of Drillship and Ship Mortgage. Deepwater shall
--------------------------------------------
obtain a Permanent Patente from the Panamanian authorities and shall cause the
Drillship to be duly permanently documented and the Ship Mortgage to be duly
permanently recorded under the laws of Panama at least ten (10) Business Days
before the end of six (6) months following the issuance of the Provisional
Patente. In the event that a successor trustee to the Charter Trustee shall have
been appointed pursuant to Section 5.10 of the Charter Trust Agreement and
Section
32
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12.18, or the Charter Trustee shall merge or consolidate with any Person in
accordance with Section 5.12 of the Charter Trust Agreement and Section 12.18,
Deepwater, at its sole expense, shall cause the Drillship to be provisionally
documented (if the Head Lease Transaction has not been entered into) and the
Ship Mortgage to be provisionally recorded under the laws of Panama in the name
of any successor trustee within fifteen (15) Business Days of the receipt of
written notice of any such appointment, merger or consolidation; provided that
Deepwater shall not be deemed to be in violation of the covenant contained in
this sentence to the extent that any delay in procuring such provisional
documentation or recordation results from the failure of any of the Participants
to execute any necessary documents or instruments promptly upon receipt from
Deepwater or to take any other action necessary to effectuate such documentation
or recording promptly upon request by Deepwater. Deepwater, at its sole expense,
shall thereafter cause the Drillship to be duly permanently documented (if the
Head Lease Transaction has not been entered into) and the Ship Mortgage to be
duly permanently recorded at least 10 Business Days prior to the end of the six
(6) months following the issuance of the provisional documentation.
(m) Financial Statements. Deepwater shall, from the date hereof
---------------------
to the expiration or termination of the Charter Term, provide to the Charter
Trustee and each Certificate Purchaser financial statements as follows:
(i) for each fiscal year ended after December 31, 1997, within 90
days after the end of such fiscal year, annual financial statements
including a statement of earnings, a statement of cash flows and a balance
sheet of Deepwater for the fiscal year then ended prepared in conformity
with GAAP, consistently applied, and audited by its independent outside
auditors;
(ii) for each fiscal quarter of Deepwater, within 45 days after
the end of such fiscal quarter, unaudited financial statements, including a
statement of earnings, a statement of cash flows and a balance sheet of
Deepwater for the fiscal quarter then ended prepared in conformity with
GAAP, consistently applied; and
(iii) together with the financial statements required to be
delivered under clauses (i) and (ii) above, a certificate from a member's
representative of Deepwater certifying that no Material Default or Event of
Default has occurred and is then continuing.
(n) Subordinated Operating Expenses. Deepwater shall, from the
---------------------------------
date hereof to the expiration or termination of the Charter Term, maintain the
Services Agreements in effect and shall ensure that to the extent that Operation
and Maintenance Expenses incurred during each month of the Charter Term exceed
the Unsubordinated Operating Expense Amount, such expenses shall be payable by
Deepwater under the Services Agreements as Subordinated Operating Expenses. In
the event that on any Charter Hire Payment Date there are insufficient funds in
the Operating Account to pay all Subordinated Operating Expenses then due and
payable in accordance with Section 3.4(b) of the Depository Agreement, Deepwater
shall be entitled to issue Subordinated Debt to the Person to whom such
Subordinated Operating
33
<PAGE>
Expenses are due in the amount of such shortfall.
(o) Plans. Deepwater shall not, from the date hereof to the
-----
expiration or termination of the Charter Term, maintain any Plan for the benefit
of its employees; provided, however, that, notwithstanding the foregoing,
-------- -------
Deepwater may adopt one or more Plans for the benefit of its employees which
are, in the aggregate, comparable to the Plans maintained by other employers
engaged in the same or similar industry. With respect to any such Plan adopted
by Deepwater:
(i) such Plan shall be operated and administered by Deepwater in
compliance with its terms and with the requirements of any and all
Applicable Laws, in all material respects;
(ii) no material liability pursuant to Titles I or IV of ERISA or
the penalty or excise tax provisions of the Code shall be incurred; and
(iii) no lien pursuant to Titles I or IV of ERISA or Section 412
of the Code shall be imposed on any of the rights, properties or assets of
Deepwater.
(p) Y2K Compliance. Deepwater shall use its best efforts to cause
--------------
the computer programs used as part of the OFE, when used in accordance with the
pertinent user documentation and when the input to them is formatted in
accordance with such documentation, to comply with the following: (i) such
programs shall accurately and completely process (including but not limited to
calculation, comparison and sequencing, and including without limitation leap
year calculations) date-related data for dates prior to the year 2000,
date-related data for dates after the year 1999, and date-related data for dates
both before the year 2000 and after the year 1999; and (ii) such programs shall
not, as a consequence of the change of centuries or the fact that data from more
than one century is being processed, cause an abnormal termination of execution,
an endless loop, incorrect values or invalid results, or otherwise fail to
perform accurately and completely those functions set forth in such user
documentation. All date-related data generated by or embodied in such programs
shall include an indication of century.
SECTION 6.2 Certain Covenants of the Charter Trustee, the Investment
----------------------------------------------------------
Trustee and the Investment Trust. Each of the Charter Trustee, the Investment
----------------------------------
Trustee and the Investment Trust, severally and not jointly, covenants as
follows:
(a) Maintenance of Existence. The Investment Trust shall maintain
------------------------
its existence as a Delaware business trust and its qualification to do business
in each jurisdiction in which the failure to have such a qualification may have
a material adverse effect on the performance of its obligations under the
Transaction Documents. The Charter Trustee shall maintain its existence and its
qualification to do business in each jurisdiction in which the failure to have
such qualification may have a material adverse effect on the performance of its
obligations under the Transaction Documents.
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<PAGE>
(b) Indebtedness; Other Business. Neither the Investment Trust
------------------------------
nor the Trustees shall contract for, create, incur or assume any Indebtedness,
or enter into any business or other activity, other than pursuant to, or as
contemplated by, the Transaction Documents and the Head Lease Documents.
(c) Change of Chief Place of Business. Each of the Trustees in
------------------------------------
their respective individual capacities shall give prompt notice to Deepwater if
any of the Investment Trust's or Trustees' chief place of business or chief
executive office or the office where the records concerning the accounts or
contract rights relating to the Drillship are kept, shall cease to be located at
the address set forth in Section 12.3.
(d) No Voluntary Bankruptcy by Investment Trust. The Investment
---------------------------------------------
Trust shall not (i) commence any case, proceeding or other action under any
existing or future law, relating to bankruptcy, insolvency, reorganization,
arrangement, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts, (ii) seek appointment of a receiver, trustee,
custodian or other similar official for them or for all or any substantial part
of its assets or property or (iii) take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in this Section 6.2.
(e) No Voluntary Bankruptcy by Charter Trustee. The Charter
-----------------------------------------------
Trustee, in its individual capacity or as trustee, shall not (i) commence any
case, proceeding or other action under any existing or future law, relating to
bankruptcy, insolvency, reorganization, arrangement, winding-up, liquidation,
dissolution, composition or other relief with respect to it, its debts, (ii)
seek appointment of a receiver, trustee, custodian or other similar official for
it or for all or any substantial part of its assets or property or (iii) take
any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in this Section 6.2.
(f) No Voluntary Bankruptcy by Investment Trustee. The Investment
---------------------------------------------
Trustee, in its individual capacity or as trustee, shall not (i) commence any
case, proceeding or other action under any existing or future law, relating to
bankruptcy, insolvency, reorganization, arrangement, winding-up, liquidation,
dissolution, composition or other relief with respect to it, its debts, the
Investment Trust or the Investment Trust's debts, (ii) seek appointment of a
receiver, trustee, custodian or other similar official for all or any
substantial part of its or the Investment Trust's assets or property or (iii)
take any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in this Section 6.2.
(g) No Sale of Drillship. Neither the Trustees nor the Investment
--------------------
Trust shall transfer all or any of its interest in the Drillship or the
Transaction Documents except as expressly permitted in the Transaction
Documents.
(h) Trust Agreements. Without prejudice to any right of either of
----------------
the Trustees under the Trust Agreements to resign as trustee, or the right of
the Certificate Purchasers under the Trust Agreements to remove either of the
Trustees as trustee, and in each case subject to the terms of the Transaction
Documents, neither the Trustees nor the Investment
35
<PAGE>
Trust shall (i) terminate or revoke the trusts created by the Trust Agreements
before the later of the expiration or termination of the Charter or the payment
in full of the obligations under the Certificates, (ii) amend, modify,
supplement, terminate or revoke or otherwise modify any provision of any
Transaction Document (other than the Ship Mortgage) or any Head Lease Document
in any manner that would have an adverse effect on the rights or interests of
Deepwater without the prior written consent of Deepwater, or (iii) amend, modify
or supplement the Ship Mortgage without Deepwater's prior written consent.
(i) Liens. Neither Trustee (in its individual capacity or as
-----
trustee) shall create or suffer to exist (and shall discharge promptly) any
Trust Lien; provided, however, that such Trustee shall not be required to remove
-------- -------
a Trust Lien if it is being contested pursuant to a Permitted Contest and is
bonded to the satisfaction of Deepwater.
(j) Change of Jurisdiction of the Trustees. Neither Trustee (in
----------------------------------------
its individual capacity) shall (i) without sixty (60) days' prior written notice
to Deepwater and the Participants, change its jurisdiction of incorporation or
organization (individually or as trustee) or (ii) change the jurisdiction of the
Investment Trust or the trust created by the Charter Trust Agreement, in any
case, without the consent of Deepwater and the Administrative Agent.
(k) Quiet Enjoyment. So long as no Charter Event of Default shall
---------------
have occurred and be continuing and Deepwater shall have received no notice
thereof, neither the Investment Trustee (in its individual and trustee
capacities) nor the Investment Trust shall take any action to interfere with or
otherwise disturb Deepwater's, its agents' or its permitted subcharterers' full
use and possession of the Drillship or do or cause to be done any act which
would deprive Deepwater, its agents, or its permitted subcharterers of the full
use and possession of the Drillship on the terms provided for in the Transaction
Documents.
SECTION 6.3 Covenants of the Certificate Purchasers.
-------------------------------------------
Each Certificate Purchaser, individually and not jointly, covenants as
follows:
(a) Trust Agreements. Without prejudice to any right of the
-----------------
Trustees under the Trust Agreements to resign as Trustees, or the right of the
Certificate Purchasers under the Trust Agreements to remove the Trustees, and in
each case subject to the terms of the Transaction Documents, such Certificate
Purchaser hereby agrees with Deepwater (i) not to terminate or revoke the trusts
created by the Trust Agreements before the later of the expiration or
termination of the Charter Term or the payment in full of the obligations under
the Certificates, and (ii) not to amend, modify, supplement, terminate or revoke
or otherwise modify any provision of any Transaction Document or any Head Lease
Document in any manner that would have an adverse effect on the rights or
interests of Deepwater without the prior written consent of Deepwater; provided,
however, that the consent requirement contained in clause (ii) of this Section
6.3(a) shall only apply to amendments, supplements revocations or other
modifications which can be made legally effective without Deepwater's execution.
36
<PAGE>
(b) Compliance by Charter Trustee and Investment Trust. Subject
----------------------------------------------------
to the terms of Section 12.13, each of the Certificate Purchasers agrees that it
shall not instruct, or vote to instruct, the Charter Trustee or the Investment
Trust to take any action inconsistent with, contrary to or in violation of the
Transaction Documents or the Charter Trustee's or the Investment Trust's
obligations thereunder, and each of the Certificate Purchasers agrees that it
shall instruct, or vote to instruct, the Investment Trust and the Charter
Trustee to take any affirmative action necessary to satisfy the Investment
Trust's and the Charter Trustee's obligations under the Conoco Drilling Consent
(including any obligation to enter into an assumption agreement, replacement
drilling contract or similar arrangement in accordance with the terms of the
Conoco Drilling Consent).
(c) Each of the Certificate Purchasers agrees that it shall not
create or suffer to exist (and shall discharge promptly) any Certificate
Purchaser Lien attributable to it; provided, however, that no Certificate
-------- -------
Purchaser shall be required to remove a Certificate Purchaser Lien attributable
to it if it is being contested pursuant to a Permitted Contest and is bonded to
the satisfaction of Deepwater.
(d) No Voluntary Bankruptcy. Each of the Certificate Purchasers
-------------------------
agrees that it shall not (i) commence any case, proceeding or other action under
any existing or future law, relating to bankruptcy, insolvency, reorganization,
arrangement, winding-up, liquidation, dissolution, composition or other relief
with respect to the Charter Trustee's or Investment Trust's debts, or (ii) seek
appointment of a receiver, trustee, custodian or other similar official for the
Charter Trustee or the Investment Trust or for all or any substantial part of
either or both of their assets or property and each of the Certificate
Purchasers shall not take any action in furtherance of, or indicating its
consent to, approval of, any of the acts set forth in this Section 6.3 (d).
(e) Quiet Enjoyment. Each of the Certificate Purchasers agrees
----------------
that so long as no Charter Event of Default shall have occurred and be
continuing and Deepwater shall have received no notice thereof, such Certificate
Purchaser shall not take any action to interfere with or otherwise disturb
Deepwater's, its agents' or its permitted subcharterers' full use and possession
of the Drillship or do or cause to be done any act which would deprive
Deepwater, its agents, or its permitted subcharterers of the full use and
possession of the Drillship on the terms provided for in the Transaction
Documents.
SECTION 6.4 Covenants of the Members. As the sole obligation of the
--------------------------
Members under this Agreement, each of the Members, severally and not jointly,
covenants as follows:
(a) Bankruptcy. Such Member agrees that it shall not (i) commence
----------
any case, proceeding or other action under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, arrangement, winding-up, liquidation, dissolution, composition
or other relief with respect to Deepwater or its debts; (ii) seek appointment of
a receiver, trustee, custodian or other similar official for Deepwater or for
all or any substantial part of its property; or (iii) vote its interest as a
member of Deepwater to, or
37
<PAGE>
to otherwise, cause Deepwater to file a voluntary petition in bankruptcy or an
answer seeking reorganization in a proceeding under any bankruptcy, insolvency
or similar laws or an answer admitting the material obligations of a petition
filed against Deepwater in any such proceeding.
(b) No Amendment to LLC Agreement. Other than in connection with
------------------------------
a transfer of an ownership interest permitted by Section 6.4(c) or a transaction
permitted by Section 6.1(c), such Member agrees that it will not amend the LLC
Agreement as in effect on the Closing Date, in a manner that has an adverse
effect on the rights or interests of the Trustees, the Investment Trust, the
Certificate Purchasers, or their respective rights under the Transaction
Documents or the obligations of Deepwater thereunder, in each case, without the
prior written consent of the Administrative Agent, such consent not to be
unreasonably withheld.
(c) Maintenance of Membership Interests. Such Member agrees that
------------------------------------
it shall not sell, assign or transfer any of its interest in Deepwater if the
result of such sale, assignment or transfer is to cause the aggregate membership
interests in Deepwater of such Member and its Affiliates to be less than 40% of
all of the Membership interests in Deepwater.
(d) Compliance by Deepwater. Subject to the terms of Section
-------------------------
12.13, such Member agrees that it shall not instruct Deepwater to take any
action inconsistent with, contrary to or in violation of the Transaction
Documents or Deepwater's obligations thereunder.
SECTION 6.5 Hedging Agreements. On or prior to the Delivery Date, if
-------------------
Deepwater has arranged for one or more interest rate swaps in an aggregate
notional principal amount of up to $185,000,000 in substantially the form of
Exhibit S-1 hereto (the "Hedging Agreements") to be entered into by one or more
------------------
Hedging Agreement Counterparties, then upon the written request from Deepwater
the Charter Trustee shall enter into such Hedging Agreements and, concurrently
therewith, Deepwater and the Charter Trustee shall enter into one or more
matching interest rate swaps in substantially the form of Exhibit S-2 hereto
(the "Deepwater Hedging Agreements"); provided that, at the time the Hedging
------------------------------
Agreements are entered into, each of the Hedging Agreement Counterparties shall
be a Certificate Purchaser or an Affiliate thereof and each of the Hedging
Agreement Counterparties shall have executed acknowledgements to the Depository
Agreement, the Charter Trustee Assignment and any other appropriate Transaction
Document. The Charter Trustee is hereby instructed and agrees to deposit all
amounts owed to Deepwater under the Deepwater Hedging Agreements (the "Deepwater
---------
Hedge Payments") and all amounts paid to the Charter Trustee under the Hedging
---------------
Agreements (x) into the Trustee's Account pursuant to Section 2.10 or (y) with
the Depository to be applied pursuant to the Depository Agreement, as
applicable. All Deepwater Hedge Payments deposited pursuant to the preceding
sentence shall satisfy, to the extent so deposited, the obligations of the
Charter Trustee under the Deepwater Hedging Agreements. All payments made to
the Hedging Agreement Counterparties of amounts owed to the Hedging Agreement
Counterparties under the Hedging Agreements pursuant to the Depository Agreement
shall satisfy the corresponding obligations of Deepwater under the Deepwater
Hedging Agreements. If a Responsible Officer of Deepwater has Actual Knowledge
of an Event of Default, Construction Period Event of Loss or Event of Loss,
Deepwater shall promptly give notice thereof to each of the Hedging Agreement
Counterparties.
38
<PAGE>
In addition, Deepwater shall provide to each of the Hedging Agreement
Counterparties a copy of any notice of its election to exercise its Construction
Period Purchase Right under Section 6.3 of the Construction Supervisory
Agreement or its election of its Special Purchase Right under Section 16.4 of
the Charter. The Charter Trustee shall provide to each of the Hedging Agreement
Counterparties a copy of any notice given to Deepwater under Article XVI of the
Charter.
SECTION 6.6 Purchase Obligation. Notwithstanding any other provision
--------------------
of this Agreement or any other Transaction Document, in the event that the Day
Rate Commencement Date has not occurred on or before the Outside Day Rate
Commencement Date, Deepwater shall be obligated to purchase the Charter
Trustee's and Investment Trust's rights in and to the Drillship on the first
Business Day after the Outside Day Rate Commencement Date for an amount equal to
the Certificate Purchaser Balance plus all accrued and unpaid Certificate Return
as of the date of payment, plus all amounts then due and owing by Deepwater
under the Transaction Documents. Deepwater shall pay all such amounts in
immediately available funds on the first Business Day after the Outside Day Rate
Commencement Date. Nothing contained in this Section 6.6 shall be deemed to
extend the Outside Day Rate Commencement Date. Upon payment of all such
amounts, the Charter and the Construction Supervisory Agreement shall terminate
and the Trustees, the Investment Trust and the Certificate Purchasers shall
convey all of their right, title and interest in and to the Drillship (including
their rights under the Construction Contract or the Head Lease Documents, if
any), free and clear of the Ship Mortgage, all Trust Liens and Certificate
Purchaser Liens and otherwise "as is," "where is", without recourse or warranty
(except as to the absence of Trust Liens and Certificate Purchaser Liens), to
Deepwater, and Deepwater shall have no further obligation under the Charter or
the Construction Supervisory Agreement immediately upon such payment.
SECTION 6.7 Charter Extension Option. In the event that Deepwater
--------------------------
elects the Charter Extension Option in accordance with Section 20.2 of the
Charter, Deepwater may, in its sole discretion, elect to replace any Certificate
Purchaser that does not submit an offer to extend or whose offer to extend is
rejected by Deepwater by having a Replacement Certificate Purchaser purchase
such non-consenting Certificate Purchaser's interest in accordance with this
Agreement. Replacement of a Certificate Purchaser by a Replacement Certificate
Purchaser shall be subject to the Certificate Purchaser Replacement Conditions.
SECTION 6.8 Excessive Use Indemnity. In the event that (a) Deepwater
------------------------
elects the Return Option and (b) after paying to the Charter Trustee all amounts
due under Section 20.3 of the Charter, including Net Sales Proceeds and the
Residual Guarantee Amount, the Charter Trustee has not received sufficient funds
to reduce the Certificate Purchaser Balance to zero, then Deepwater shall
deliver a report from an independent appraiser acceptable to the Required
Certificate Purchasers establishing whether or not the decline in the fair
market value of the Drillship from the anticipated fair market value of the
Drillship as of the Scheduled Charter Expiration Date in the Appraiser's report
delivered pursuant to Section 3.2(f) was due to wear and tear on the Drillship
in excess of ordinary wear and tear. Deepwater shall pay to the Charter
39
<PAGE>
Trustee promptly after receipt of such report an amount equal to the amount, if
any, of the decline in the fair market value of the Drillship that the appraiser
has attributed to such excess wear and tear; provided, however, that the amount
owed by Deepwater pursuant to this Section 6.8 shall in no event exceed the
amount of funds necessary to reduce the Certificate Purchaser Balance to zero
and to pay all accrued and unpaid Certificate Return after Deepwater's payment
of all amounts due under Section 20.3 of the Charter. The appraiser's
determination shall be absolute and final and not contested by any of the
parties hereto, absent manifest error.
SECTION 7
CERTAIN PROCEDURES
SECTION 7.1 Illegality. If after the date of this Agreement the
----------
adoption of any Applicable Law, or any change in any Applicable Law, or in the
interpretation or administration by any central bank or other Government
Authority of any Applicable Law, has made it unlawful, or it is asserted by any
central bank or other Government Authority that it is unlawful, for any
Certificate Purchaser or its Applicable Office to make Base Rate Advances (an
"Illegality Event") then, on written notice thereof by such Certificate
-----------------
Purchaser to Deepwater and the Charter Trustee, any obligation of such
Certificate Purchaser to make Base Rate Advances shall be suspended to the
extent necessary to comply with any such Applicable Law until such Certificate
Purchaser notifies the Charter Trustee and Deepwater that such Illegality Event
no longer exists.
If an Illegality Event occurs, upon written notice of such Illegality Event
from the affected Certificate Purchaser to Deepwater (with a copy to the Charter
Trustee), all Base Rate Advances of that Certificate Purchaser then outstanding
shall automatically be converted to an Alternate Rate Advance, either on the
last day of the Return Period thereof, if the Certificate Purchaser may lawfully
continue to maintain such Base Rate Advances to such day, or immediately, if the
Certificate Purchaser may not lawfully continue to maintain such Base Rate
Advance.
If the obligation of any Certificate Purchaser to make or maintain Base
Rate Advances has been terminated or suspended in accordance with this Section
7.1, Deepwater may elect, by giving notice to such Certificate Purchaser through
the Charter Trustee or the Investment Trust that all Advances which would
otherwise be made by such Certificate Purchaser as Base Rate Advances shall be
made instead as Alternate Rate Advances.
Before giving any notice to Deepwater, the Charter Trustee or the
Investment Trust under this Section 7.1, the affected Certificate Purchaser
shall designate a different Applicable Office with respect to its Base Rate
Advances if such designation will avoid or cure the Illegality Event and will
not, in the judgment of the Certificate Purchaser, be illegal or otherwise
disadvantageous to the Certificate Purchaser.
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SECTION 7.2 Increased Costs and Reduction of Return. (a) If due to
-----------------------------------------
either (i) the adoption of or any change in or in the interpretation by any
Government Authority of any law or regulation or (ii) the compliance by any
Certificate Purchaser with any guideline or request from any central bank or
other Government Authority (whether or not having the force of law), any
Certificate Purchaser becomes subject to any Tax, duty or other charge (other
than Taxes for which indemnification is provided under Section 10.4) such that
there shall be any increase in the cost to any Certificate Purchaser of agreeing
to make or making, funding or maintaining any Base Rate Advances, then, subject
to Section 7.6, Deepwater shall be liable for, and shall from time to time, upon
written demand from such Certificate Purchaser (with a copy of such demand to be
sent to the Charter Trustee), pay to the Charter Trustee for the account of such
Certificate Purchaser, additional amounts equal to the amount of such increased
costs.
(b) If (i) the adoption of any Applicable Law relating to the
adequacy of the Certificate Purchaser's capital, (ii) any change in any such
Applicable Law, (iii) any change in the interpretation or administration of any
such Applicable Law by any central bank or other Government Authority charged
with the interpretation or administration thereof, or (iv) compliance by the
Certificate Purchaser (or its Applicable Office) or any corporation controlling
the Certificate Purchaser with any such Applicable Law, affects or would affect
the amount of capital required or expected to be maintained by the Certificate
Purchaser or any corporation controlling the Certificate Purchaser such that the
return on capital of such Certificate Purchaser is reduced as a consequence of
such Certificate Purchaser's Commitment or obligations under this Agreement to a
level below that which such Certificate Purchaser could have achieved but for
such adoption or change (taking into consideration such Certificate Purchaser's
or such corporation's policies with respect to capital adequacy and such
Certificate Purchaser's reasonably expected return on capital), then upon
written notice from such Certificate Purchaser to Deepwater (with a copy to the
Charter Trustee) Deepwater shall, subject to Section 7.6, pay to the Certificate
Purchaser additional amounts sufficient to compensate the Certificate Purchaser
for such reduction in return.
(c) A Certificate Purchaser affected by a change as described in
subparagraphs (a) or (b) shall, pursuant to Section 7.6, deliver to Deepwater
and the Charter Trustee as promptly as practicable a certificate setting forth
in reasonable detail the amount actually imposed or assessed on payments made
under the Certificates in the case of the occurrence of an event described in
Section 7.2(a) or (b), setting forth in reasonable detail such increased amounts
or the amount required to compensate such Certificate Purchaser for such reduced
return and the basis for the determination of such amounts.
SECTION 7.3 Funding Losses. Deepwater shall reimburse each
---------------
Certificate Purchaser and hold each Certificate Purchaser harmless from any
direct loss or expense (as opposed to consequential loss or expense) which the
Certificate Purchaser may sustain or incur as a consequence of: (a) the failure
of Deepwater to make on a timely basis any payment which it is required to make
under the Transaction Documents which is to be applied to the payment of
principal of any Base Rate Advance; (b) the failure of Deepwater to accept the
proceeds of any
41
<PAGE>
Advance; (c) the failure of Deepwater to accept, continue or convert the
proceeds of an Advance paid to the Charter Trustee by a Certificate Purchaser
after Deepwater has given (or is deemed to have given) an Advance Request; (d)
the failure of Deepwater to make any payment which it is required to make under
the Transaction Documents which is to be applied to the prepayment of an Advance
in accordance with any notice delivered pursuant to this Agreement or any
Transaction Document; (e) the prepayment or other payment (including after
acceleration thereof) of a Base Rate Advance on a day that is not the last day
of the relevant Return Period, or (f) the automatic conversion of any Base Rate
Advance to an Alternate Rate Advance on a day that is not the last day of the
relevant Return Period, including any such loss or expense arising from the
liquidation or reemployment of funds obtained by it to maintain its Base Rate
Advances or from fees payable to terminate the deposits from which such funds
were obtained. For purposes of calculating amounts payable by Deepwater to the
Certificate Purchasers under this Section 7.3 and under Sections 2.4 and 2.8,
each Base Rate Advance made by the Certificate Purchaser (and each related
reserve, special deposit or similar requirements) shall be conclusively deemed
to have been funded at the LIBOR used in determining the Certificate Return Rate
for such Base Rate Advance by a matching deposit or other borrowing in the
interbank Eurodollar market for a comparable amount and for a comparable period,
whether or not such Base Rate Advance is in fact so funded.
SECTION 7.4 Inability to Determine Rates. If the Charter Trustee or
------------------------------
the Required Certificate Purchasers determine that for any reason adequate and
reasonable means do not exist for determining the Base Rate for any requested
Return Period with respect to a proposed Base Rate Advance by reason of any
changes arising after the date of this Agreement affecting the interbank
Eurodollar market, the Charter Trustee will promptly so notify Deepwater and
each Certificate Purchaser. Thereafter, the obligation of the Certificate
Purchasers to make or maintain Base Rate Advances hereunder shall be suspended
until the Charter Trustee, upon the instruction of the Required Certificate
Purchasers, revokes such notice in writing. Upon receipt of such notice,
Deepwater may revoke any Advance Requests then submitted by it. If Deepwater
does not revoke any such Advance Request, the Certificate Purchasers shall make,
convert or continue the Advances, as proposed by Deepwater, in the amount
specified in the applicable notice submitted by Deepwater, but such Advances
shall be made, converted or continued as Alternate Rate Advances instead of Base
Rate Advances.
SECTION 7.5 Reserves on Base Rate Advances. If after the date hereof
-------------------------------
any Certificate Purchaser shall be required under regulations of the Federal
Reserve Board or any other applicable Government Authority to maintain reserves
with respect to liabilities or assets consisting of or including Eurocurrency
funds or deposits (currently known as "Eurocurrency liabilities"), Deepwater
------------------------
shall pay to such Certificate Purchaser additional costs on the unpaid principal
amount of each Base Rate Advance equal to the actual costs of such reserves
maintained and allocated to such Advance by the Certificate Purchaser, payable
on each date on which interest is payable on such Advance, provided Deepwater
shall have received at least 15 days' prior written notice (with a copy to the
Charter Trustee) of such additional Certificate Return from the Certificate
Purchaser. If a Certificate Purchaser fails to give notice 15 days
42
<PAGE>
prior to the relevant Payment Date, such additional Certificate Return shall be
payable 15 days from receipt of such notice.
SECTION 7.6 Certificates of Certificate Purchasers. Any Certificate
----------------------------------------
Purchaser claiming reimbursement or compensation under this Section 7 shall
deliver to Deepwater (with a copy to the Charter Trustee) a certificate setting
forth in reasonable detail the amount payable to the Certificate Purchaser
hereunder and the basis for the determination of such amount and such
certificate shall be conclusive and binding on Deepwater in the absence of
manifest error. Deepwater shall not be obligated to compensate any Certificate
Purchaser for any costs incurred more than 120 days before the date on which
such Certificate Purchaser first notifies Deepwater of its intent to make such a
claim or it notifies Deepwater of an event that entitles it to compensation.
SECTION 7.7 Substitution of Certificate Purchasers; Change in
------------------------------------------------------
Applicable Office; Prepayments. Upon the receipt by Deepwater from any
--------------------------------
Certificate Purchaser (an "Affected Certificate Purchaser") of a claim for
--------------------------------
compensation under Section 7.2, Deepwater may: (i) request the Affected
Certificate Purchaser to use its commercially reasonable efforts to obtain a
replacement bank or financial institution satisfactory to Deepwater (a
"Substitute Certificate Purchaser") to acquire and assume all or a ratable part
---------------------------------
of all of such Affected Certificate Purchaser's Advances and Commitment so long
as the Affected Certificate Purchaser is paid its Certificate Purchaser Amount,
accrued and unpaid Certificate Return and any other accrued and unpaid amount
owed to it by Deepwater under the Transaction Documents; (ii) request one more
of the other Certificate Purchasers to acquire and assume all or part of such
Affected Certificate Purchaser's Advances and Commitment; (iii) designate a
Substitute Certificate Purchaser and require the Affected Certificate Purchaser
to transfer all of its Advances and Commitments to such Substitute Certificate
Purchaser; (iv) request the Affected Certificate Purchaser to designate a
different Applicable Office if such designation will avoid the need for, or
reduce the amount of, such compensation and will not be illegal or otherwise
disadvantageous to the Affected Certificate Purchaser; or (v) make payments to
the Charter Trustee which are equal to the amounts necessary for the Charter
Trustee to prepay all or a portion of the Certificate Purchaser Amount of the
Affected Certificate Purchaser, together with accrued and unpaid Certificate
Return attributable to the amount being prepaid. The Affected Certificate
Purchaser shall take any commercially reasonable actions necessary to carry out
a request or election made by Deepwater in accordance with this Section 7.7 at
Deepwater's sole cost and expense. Any designation of a Substitute Certificate
Purchaser under this Section 7.7 shall be subject to the prior written consent
of the Administrative Agent which consent shall not be unreasonably withheld,
delayed or conditioned.
SECTION 7.8 Legal and Tax Representation. Deepwater acknowledges and
-----------------------------
agrees that none of the Trustees, the Investment Trust, the Agents or any
Certificate Purchaser has made any representation or warranty concerning the
tax, accounting or legal characteristics of the Charter or any of the other
Transaction
43
<PAGE>
Documents, and that Deepwater has obtained and relied on such tax, accounting
and legal advice regarding the Charter and the other Transaction Documents as
its deems appropriate. Each of the Charter Trustee, Investment Trust and each
Certificate Purchaser acknowledges and agrees that it has obtained and relied on
the Transaction Documents and the various items delivered in connection
therewith, and on such tax, accounting and legal advice regarding the Charter
and the other Transaction Documents as it deems appropriate.
SECTION 7.9 Failure of a Certificate Purchaser to Fund. If an Advance
------------------------------------------
is to be made in accordance with the terms and conditions hereof and if the
Charter Trustee determines that any Certificate Purchaser (each such Certificate
Purchaser a "Defaulting Certificate Purchaser") will not make available all or a
--------------------------------
portion of its Commitment Percentage of such Advance (the "Defaulted Amount"),
----------------
the Charter Trustee shall promptly so notify Deepwater and each other
Certificate Purchaser (each, a "Non-Defaulting Certificate Purchaser") and shall
------------------------------------
specify the additional amounts required to be funded by each such Non-Defaulting
Certificate Purchaser pursuant to this Section 7.9. Each such Non-Defaulting
Certificate Purchaser as soon as practical after receipt of notice but not
before the Advance Date, shall transfer to the Charter Trustee and the
Investment Trust, as applicable, in immediately available funds, its pro rata
share of the Defaulted Amount, determined in the same proportion that such
Non-Defaulting Certificate Purchaser's Commitment bears to the aggregate
Commitments of all such Non-Defaulting Certificate Purchasers; provided, that
such amount, together with all amounts previously funded by each such
Non-Defaulting Certificate Purchaser, shall not exceed such Non-Defaulting
Certificate Purchaser's Commitment; provided, further, that any funds advanced
-------- -------
to the Investment Trust by any Certificate Purchaser pursuant to this Section
7.9 shall be advanced to the Charter Trustee. If the Defaulted Amount cannot be
fully funded by the Non-Defaulting Certificate Purchasers, the Charter Trustee
shall so notify Deepwater and the Non-Defaulting Certificate Purchasers and give
to all such Non-Defaulting Certificate Purchasers the opportunity to increase
their respective Commitments by notice in writing to the Charter Trustee;
provided, that should the aggregate proposed increased Commitments by one or
more Non-Defaulting Certificate Purchasers exceed the Defaulted Amount, the
Charter Trustee shall increase the Commitments of the participating
Non-Defaulting Certificate Purchasers on a pro-rata basis in accordance with the
respective amounts by which such Non-Defaulting Certificate Purchasers have
offered to participate, it being understood that in no event shall the aggregate
amount funded by any Certificate Purchaser exceed the amount of such Certificate
Purchaser's Commitment after giving effect to any increase in such Commitment
pursuant to this sentence. If the Non-Defaulting Certificate Purchasers do not
increase their commitments by an amount sufficient to fund the entire Defaulted
Amount, then Deepwater shall have the right to elect to fund any such shortfall
and shall thereafter be deemed to be a Certificate Purchaser for all purposes of
the Transaction Documents and shall be entitled to receive yield on the amount
so funded in an amount equal to the applicable Certificate Return; provided,
--------
however, that Deepwater shall not be deemed to be a Certificate Purchaser for
-------
purposes of the definitions of "Required Certificate Purchasers" or "Majority
------------------------------- --------
Certificate Purchasers". Notwithstanding anything contained in this Section 7.9
----------------------
to the contrary, if Deepwater elects to fund a shortfall in accordance with this
Section 7.9, Deepwater shall not be obligated to make any subsequent Advances
(including any subsequent Advances with respect to any Defaulting Certificate
44
<PAGE>
Purchaser).
In the event of any funding of all or a portion of the Defaulted Amount by
the Non-Defaulting Certificate Purchasers, the following rules shall apply
notwithstanding any other provision in any Transaction Document:
(i) The Commitment of the Defaulting Certificate Purchaser shall be
decreased in an amount equal to the total aggregate increase, if any, in
the Commitments of the Non-Defaulting Certificate Purchasers pursuant to
this Section 7.9 and the Commitment Percentages of the Certificate
Purchasers shall be revised accordingly; provided, that nothing shall
preclude any party from pursuing any rights or remedies it may have against
the Defaulting Certificate Purchaser in connection with its failure to make
an Advance;
(ii) The Defaulting Certificate Purchaser shall be obligated to fund
any Advances occurring after its default based upon its revised Commitment
Percentage, if the Commitment Percentages are revised in accordance with
the immediately preceding clause (i); and to the extent that the Commitment
Percentage of any Defaulting Certificate Purchaser shall not be so revised,
the Charter Trustee may thereafter call upon such Defaulting Certificate
Purchaser to fund a share of one or more future Advances in an amount
greater than such Defaulting Certificate Purchaser's Commitment Percentage
so that the aggregate amount disbursed by such Defaulting Certificate
Purchaser shall equal (after giving effect to such Advance or Advances) its
original Commitment Percentage of the aggregate amount of all Advances then
made by all Certificate Purchasers;
(iii) A Defaulting Certificate Purchaser shall not have the right to
fund its Defaulted Amount without the written consent of Deepwater and then
only to the extent such Defaulted Amount has not been funded by the
Non-Defaulting Certificate Purchasers in a manner that resulted in a
decrease in such Defaulting Certificate Purchaser's Commitment Percentage;
(iv) If and to the extent that the Defaulted Amount is not funded in
full by the Non-Defaulting Certificate Purchasers, the Charter Trustee,
after providing written notice thereof to Deepwater, may delete funds from
the Advance Request so that the total Advance specified in the Advance
Request equals the aggregate revised fundings for the Advance Date and
shall so notify all Certificate Purchasers thereof; and
(v) The Non-Defaulting Certificate Purchasers shall not be responsible
for any damages suffered by Deepwater or any of Deepwater's Affiliates as a
result of the Defaulting Certificate Purchaser's failure to so fund. The
Defaulting Certificate Purchasers shall not be responsible for any
consequential or special damages suffered by Deepwater or any of
Deepwater's Affiliates as a result of its failure to fund.
45
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SECTION 8
PAYMENT OF CERTAIN EXPENSES
SECTION 8.1 Transaction Expenses. If the transactions contemplated by
--------------------
this Agreement to occur on the Closing Date are consummated, Deepwater shall pay
promptly all Transaction Expenses incurred in connection with the negotiation,
execution and delivery of this Agreement and the other Transaction Documents on
the Closing Date and the consummation of the other transactions contemplated
hereby and thereby to occur on (or in connection with) the Closing Date and on
(or in connection with) the Delivery Date as and when they become due.
Deepwater may pay any such Transaction Expenses out of the proceeds of Advances
made available to Deepwater in accordance with Section 2; provided, that
--------
Deepwater may not pay Transaction Expenses in connection with the Closing Date
in excess of $2,800,000 out of proceeds of Advances other than the final
Advance.
SECTION 8.2 Transaction Expenses if Closing does not Occur. If the
-------------------------------------------------
transactions contemplated by this Agreement to occur on the Closing Date are not
consummated for any reason Deepwater shall promptly pay all of the Transaction
Expenses submitted to Deepwater as they become due.
SECTION 8.3 On-Going Expenses. Deepwater shall, promptly upon demand,
-----------------
pay or reimburse the Charter Trustee, the Investment Trust, the Certificate
Purchasers, the Agents or the other Persons entitled thereto for all other
out-of-pocket expenses (including counsel fees) reasonably incurred in
connection with: (a) entering into, or the giving or withholding of, any future
amendments, supplements, waivers or consents with respect to the Transaction
Documents, to the extent required by the terms of the Transaction Documents, the
Head Lease Documents, the Services Agreements, the Drilling Contract or the
Drilling Contract Guaranty, or requested or consented to by Deepwater (whether
or not consummated); (b) the negotiation and documentation of any restructuring
or "workout" whether or not consummated, of any Transaction Document to the
extent requested or consented to by Deepwater; (c) the enforcement, attempted
enforcement or preservation of the rights or remedies under the Transaction
Documents, the Services Agreements, the Drilling Contract or the Drilling
Contract Guaranty; (d) further assurances requested by Deepwater pursuant to
Section 12.11; (e) any transfer by the Charter Trustee, the Investment Trust or
any Certificate Purchaser of any interest in the Transaction Documents during
the continuance of an Event of Default; (f) the ongoing fees (if any) and
expenses of the Agents, the Trustees and the Depository pursuant to separate
agreements entered into by Deepwater with such Persons; and (g) the costs and
expenses associated with the Delivery Date or any Advance Date, including fees
and expenses of U.S. and Panamanian counsel, recordation and recording fees and
all other out-of-pocket expenses of the parties hereto in connection with the
Delivery Date and the transactions contemplated herein (provided, that Deepwater
--------
shall only be responsible for fees and expenses of one U.S. counsel and one
Panamanian counsel for all of the Certificate Purchasers, the Agents, the
Trustees and the Investment Trust).
46
<PAGE>
SECTION 9
RESTRICTIONS ON TRANSFERS; CHANGE OF CONTROL
SECTION 9.1 Restrictions on the Certificate Purchasers. A Certificate
------------------------------------------
Purchaser may transfer all or a portion of its interest in its Series A Trust
Certificate and its Investment Trust Certificate with the prior written consent
of Deepwater, to a transferee that has executed an Assignment and Assumption
Agreement in substantially the form of Exhibit R hereto, by which such
transferee assumes the duties and obligations of the transferring Certificate
Purchaser under the Transaction Documents; provided, however, that no consent of
Deepwater will be required to transfer all or a portion of a Certificate
Purchaser's interest in its Series A Trust Certificate and its Investment Trust
Certificate if the following conditions shall be satisfied:
(a) such transfer shall be in respect of an aggregate
outstanding Certificate Purchaser Amount at least equal to the lesser of
$5,000,000 and such Certificate Purchaser's then outstanding Certificate
Purchaser Amount;
(b) if the transferee is an Affiliate of a Certificate Purchaser
and does not otherwise qualify under clause (c) below, such Certificate
Purchaser shall have unconditionally and irrevocably guaranteed the payment and
performance obligations of the transferee;
(c) if the transferee is an Affiliate of a Certificate
Purchaser, such transferee shall have a capital and surplus of at least $250
million or a tangible net worth at least equal to $100 million; or
(d) if the transferee is not an Affiliate of a Certificate
Purchaser, the transferee, or a party unconditionally and irrevocably
guaranteeing the payment and performance obligations of the transferee pursuant
to a guaranty in form and substance satisfactory to Deepwater, shall meet the
following criteria:
(i) the transferee or guarantor shall have a capital and surplus of at
least $400 million or a net worth of at least $150 million;
(ii) each of the transferee and the guarantor of the payment and
performance obligations of the transferee, if any, is an institutional
investor;
(iii) Deepwater, Conoco and R&B have not previously been involved in
material litigation with the proposed transferee or guarantor, if any, and
are not currently involved in material litigation proceedings with the
proposed transferee or guarantor, if any;
(iv) on the date of such transfer the transferee shall provide
evidence satisfactory to Deepwater that it is not subject to or is exempt
from United States withholding taxes;
47
<PAGE>
(v) neither such transferee nor any of its Affiliates is a Competitor;
and
(vi) on the date of such transfer, the transferee shall certify, in
writing, that no facts exist that would permit such transferee to make a
claim against Deepwater for increased costs, indemnities or other
additional amounts under Section 7.
Any transfer of an interest in a Series A Trust Certificate or an
Investment Trust Certificate by a Certificate Purchaser in violation of the
foregoing restrictions shall be null and void, and the transferor and any
guarantor thereof shall remain liable under the Transaction Documents. A
Certificate Purchaser that intends to transfer an interest in its Series A Trust
Certificate or Investment Trust Certificate (including a sale of a participation
in any such Certificate pursuant to Section 3.8(h) of the Trust Agreement or
Section 3.8(h) of the Investment Trust Agreement, respectively, or a pledge
thereof) must transfer the same percentage interest in both its Series A Trust
Certificate and Investment Trust Certificate together to the same purchaser or
transferee in a single transaction.
Notwithstanding any other provision in this Section 9.1, any Certificate
Purchaser may at any time create a security interest in, or pledge, all or any
portion of its rights under its Investment Trust Certificate and its Series A
Trust Certificate, together with the rights evidenced by such certificates, in
favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or
U.S. Treasury Regulation 31 C.F.R. Section 203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
Applicable Law.
SECTION 9.2 Restrictions on Trustees. The Charter Trustee shall not
--------------------------
resign as Charter Trustee and the Investment Trustee shall not resign as
Investment Trustee, unless and until a successor has been appointed which is a
Person who has agreed to act as Charter Trustee or Investment Trustee, as
applicable, and is reasonably acceptable to Deepwater.
SECTION 9.3 Expenses. All reasonable and documented costs and
--------
expenses (including counsel fees and disbursements) of the parties thereto in
connection with any transfer permitted by Sections 9.1 or 9.2 shall be the
responsibility of the transferor.
SECTION 9.4 Conoco Change of Control.
---------------------------
(a) If a Prepayment Change of Control Trigger Event occurs, each
Certificate Purchaser shall have the right, by written notice delivered to
Deepwater, the Charter Trustee and the Investment Trust within 10 days of such
event, to require Deepwater to make payments to the Charter Trustee and the
Investment Trust in an aggregate amount equal to such Certificate Purchaser's
Certificate Purchaser Amount, together with its accrued and unpaid Certificate
Return (the "Change of Control Prepayment Amount"). Deepwater shall make such
-----------------------------------
payment, in immediately available funds, no later than seven (7) Business Days
after receipt of such notice. Upon receipt of such payment from Deepwater, the
Charter Trustee shall pay the Series A Portion of the Change of Control
Prepayment Amount to the Certificate Purchaser requiring prepayment pursuant to
this Section 9.4 and shall pay the Investment Portion of the Change of Control
Prepayment Amount to the Investment Trust, which, in turn, shall pay the
Investment Portion of the
48
<PAGE>
Change of Control Prepayment Amount to such Certificate Purchaser.
(b) If a Pricing Change of Control Trigger Event occurs, the
Certificate Return Rate shall increase effective as of the date of such Pricing
Change of Control Trigger Event (with such increase to be based on the rating of
Conoco or the Acquiror of Conoco, and in the case of ratings that are not
equivalent, the lower of the two ratings) in accordance with the following
schedule:
Credit Rating of Conoco
or Acquiror of Conoco Increase of Certificate Return Rate
====================================== =====================================
Greater than or equal to Baa1/BBB+ 12.5 basis points
Less than or equal to Baa2/BBB additional 12.5 basis points
(c) If a Pricing Change of Control Trigger Event occurs and the
Certificate Return Rate has been increased as set forth in Section 9.4(b), in
the event that Conoco or the Acquiror of Conoco at any time thereafter obtains a
rating of at least A2 from Moody's and at least A from S&P, then the Certificate
Return Rate shall be adjusted downward to the Certificate Return Rate in effect
as of the Closing Date. Such decrease shall be effective as of the first day of
the Return Period which next succeeds the date of such adjustment.
SECTION 10
INDEMNIFICATION
SECTION 10.1 General Indemnity. Deepwater hereby agrees to indemnify,
-----------------
on an After-Tax Basis, each of the Trustees (in their trust and individual
capacities, respectively), the Investment Trust, the Certificate Purchasers, the
Depository, the Agents (in their agent and individual capacities), the Hedging
Agreement Counterparties (if any) and their respective officers, directors,
employees, agents and Affiliates (each an "Indemnified Party" and, collectively,
-----------------
the "Indemnified Parties") from and against any and all claims, damages, losses,
-------------------
liabilities, demands, suits, judgments, causes of action, legal proceedings,
whether civil or criminal, penalties, fines and other sanctions, and any
reasonable and documented costs and expenses in connection with any of the
foregoing ("Claims"), which may be asserted against such Indemnified Party
------
arising out of:
(a) the condition, ownership, construction, purchase, delivery,
nondelivery, subcharter, charter, acceptance, rejection, possession, return,
abandonment, disposition, use or operation of the Drillship;
(b) any defect in the Drillship arising from the material or any
articles used therein or from the design, testing, or use thereof or from any
maintenance, service, repair,
49
<PAGE>
overhaul or testing of the Drillship;
(c) any failure by Deepwater or either Member to perform or
observe any covenant, condition or agreement contained in any of the Transaction
Documents, or the falsity of any of Deepwater's or either Member's
representations and warranties;
(d) the transactions contemplated by the Transaction Documents;
(e) any Environmental Claims arising from or relating to the
construction, use, operation, ownership, maintenance, chartering or return of
the Drillship;
(f) the exercise by such Indemnified Party of remedies in the
event of a default under the Transaction Documents and the enforcement of any
security or other rights with respect thereto;
(g) any violation of Applicable Law by Deepwater or a Member with
respect to the transactions contemplated by the Transaction Documents;
(h) any Liens which Deepwater or any Member is required to remove;
or
(i) any obligation asserted to be owed by the Indemnified Party
under any Assigned Contract as a result of the assignment of such Assigned
Contract pursuant to the Deepwater Assignment.
SECTION 10.2 General Indemnity Exclusions. Notwithstanding the
------------------------------
provisions of Section 10.1, Deepwater shall not be obligated to indemnify an
Indemnified Party under Section 10.1 for any Claim that is attributable to any
of the following:
(a) acts, events or circumstances occurring after the expiration
or earlier termination of the Charter and the return of the Drillship, when
required in accordance with the Charter;
(b) Taxes, loss of tax benefits and the cost and expense of tax
controversies (whether or not indemnified by Deepwater under Section 10.4 and
other provisions of the Transaction Documents) (except (A) Taxes, penalties,
interest or charges of any nature whatsoever to the extent necessary to make any
required payment on an After Tax Basis, (B) Taxes that are governmental charges
incidental to any Government Action or proceeding that is in the nature of court
costs, filing fees, recording fees, postage, stamps, duties, license fees and
other similar charges);
(c) increased costs, losses or expenses for which compensation is
provided under Sections 2.8, 2.14, 6.8, 7.1, 7.2, 7.3, 7.4, 7.5, 8.1, 8.2, 8.3,
9.3 and 9.4;
(d) the gross negligence, willful misconduct or breach of any
covenant, representation or warranty under any Transaction Document by such
Indemnified Party to the
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extent that such Claim arises out of or is caused by an act, misrepresentation,
breach or omission of such Indemnified Party where such act, misrepresentation,
breach or omission (x) is in breach or violation of the express covenants,
representations or warranties of such Indemnified Party under the Transaction
Documents, (y) constitutes gross negligence or willful misconduct of such
Indemnified Party (other than gross negligence or willful misconduct imputed as
a matter of law to such Indemnified Party solely by reason of entering into the
Transaction Documents or consummation of the transactions contemplated thereby)
or (z) is in violation of any Applicable Law and such violation causes such
Claim;
(e) transfers (direct or indirect) by: (i) the Charter Trustee or
the Investment Trust of either of their interests in the Drillship or any
portion thereof (other than any such transfer pursuant to Sections 5.2, 16.2,
16.4, 20.1 or 20.3 of the Charter, Section 6.6 of the Participation Agreement or
Section 6.3 of the Construction Supervisory Agreement) or (ii) a Certificate
Purchaser of all or any portion of its interest in the Trust Estate, the
Investment Trust or the Transaction Documents, other than a transfer upon an
exercise of remedies after a Charter Event of Default has occurred and is
continuing and the Charter has been declared in default;
(f) any amount for which such Indemnified Party has agreed to make
payment without a right of reimbursement from Deepwater;
(g) any Claim resulting from the imposition of any Lien which such
Indemnified Party is responsible for or is required to lift and discharge;
(h) any Claim arising out of or related to an inspection of the
Drillship by or on behalf of an Indemnified Party, unless at the time of such
inspection a Charter Event of Default has occurred and is continuing or unless
and to the extent such Claim arises from the gross negligence or willful
misconduct of Deepwater or its agents; and
(i) any Claim for an amount of Basic Hire, Termination Value,
Construction Period Termination Amount, Certificate Return, Certificate
Purchaser Balance, Residual Guarantee Amount, or Postponement Yield, or an
amount due under the Deepwater Hedging Agreements or the Hedging Agreements.
SECTION 10.3 Proceedings in Respect of Claims. With respect to any
-----------------------------------
amount that Deepwater is requested by an Indemnified Party to pay by reason of
Section 10.1, such Indemnified Party shall, if so requested by Deepwater and
prior to any payment, submit such additional information to Deepwater as
Deepwater may reasonably request and which is in the possession of such
Indemnified Party to substantiate properly the requested payment. In case any
action, suit or proceeding shall be brought against any Indemnified Party in
respect of any Claim, such Indemnified Party shall notify Deepwater of the
commencement thereof, and Deepwater shall be entitled, at its expense, to
participate in, and, to the extent that Deepwater desires to, assume and control
the defense thereof; provided, however, that Deepwater shall have acknowledged
-------- -------
in writing its obligation to indemnify such Indemnified Party in respect of such
action, suit or proceeding under Section 10.1, such acknowledgment to be
conditioned on the
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accuracy and completeness of the information provided to Deepwater by such
Indemnified Party with respect to the Claim; and, provided further, that
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Deepwater shall not be entitled to assume and control the defense of any such
action, suit or proceeding if and to the extent that, (A) in the reasonable
opinion of such Indemnified Party (x) such action, suit or proceeding involves
any possibility of imposition of criminal liability or any material risk of
material civil liability on such Indemnified Party or (y) the control of such
action, suit or proceeding would involve a conflict of interest (in which case
each Indemnified Party may retain separate counsel at the expense of Deepwater),
(B) such proceeding involves Claims not indemnified by Deepwater which Deepwater
and the Indemnified Party have been unable to sever from the indemnified
claim(s), or (C) an Event of Default has occurred and is continuing. Deepwater
shall keep such Indemnified Party fully apprised of the status of such action,
suit or proceeding and shall provide such Indemnified Party with all information
with respect to such action suit or proceeding as such Indemnified Party shall
reasonably request. The Indemnified Party may participate in a reasonable manner
at its own expense and with its own counsel in any proceeding conducted by
Deepwater in accordance with the foregoing.
No Indemnified Party shall enter into any settlement or other compromise
with respect to any Claim which is entitled to be indemnified under Section 10.1
without the prior written consent of Deepwater, which consent shall not be
unreasonably withheld, unless such Indemnified Party waives its right to be
indemnified under Section 10.1 with respect to such Claim.
Upon payment in full of any Claim by Deepwater pursuant to Section 10.1 to
or on behalf of an Indemnified Party, Deepwater, without any further action,
shall be subrogated to any and all claims that such Indemnified Party may have
relating thereto to the extent of such payment, and such Indemnified Party shall
execute such instruments of assignment and conveyance, evidence of claims and
payment and such other documents, instruments and agreements as may be
reasonably necessary to preserve any such claims and otherwise cooperate with
Deepwater and give such further assurances as are reasonably necessary or
advisable to enable Deepwater vigorously to pursue such claims.
Any amount payable to an Indemnified Party pursuant to Section 10.1 shall
be paid to such Indemnified Party promptly upon receipt of a written demand
therefor from such Indemnified Party accompanied by a written statement
describing in reasonable detail the basis for such indemnity and the computation
of the amount so payable.
SECTION 10.4 General Tax Indemnity. (a) Without regard to any of the
----------------------
exclusions set forth in Section 10.4(b), if any amount payable by Deepwater as
Charter Hire (or by the Charter Trustee to the Investment Trust or any
Certificate Purchaser) under the Transaction Documents or otherwise payable by
Deepwater under the Head Lease Documents becomes subject to any Tax imposed by
way of withholding at the source, Deepwater shall hold harmless the Indemnified
Party against such Tax, and, if such withholding is required, shall, at the same
time that any such payment is due and payable, either (i) pay such Tax directly
to the appropriate taxing authority, (ii) indemnify such Person for such Tax, or
(iii) pay an additional amount, such
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that the net amount actually received by each Indemnified Party entitled
thereto, free and clear of, and without deduction for, any and all Taxes imposed
by withholding will equal the amount then due absent such withholding and shall
pay any additional Taxes payable in respect of such payment, indemnity or
additional amount, as the case may be, by each Indemnified Party. In the event
Deepwater is required to make any payment or indemnity pursuant to this
paragraph in respect of withholding Taxes on any payment made to any Indemnified
Party, Deepwater shall not be treated as responsible for such withholding Taxes
(1) if such withholding Taxes would not have been imposed but for (x) the
failure of the Indemnified Party or a Related Indemnified Party to be
incorporated in the United States or any state in the United States (it being
understood that, for this purpose, the Charter Trust shall not be treated as
failing to be incorporated in the United States or any state in the United
States merely as a result of the organization of the Charter Trust under the
laws of Panama) or (y) the amount payable to such Indemnified Party being
attributable to a permanent establishment of the Indemnified Party or a Related
Indemnified Party in any jurisdiction other than the United States (unless such
permanent establishment results solely from the location of all or any part of
the Drillship in, such jurisdiction) (it being understood that, for this
purpose, amounts payable to the Charter Trustee shall not be treated as
attributable to a permanent establishment of the Charter Trust in Panama merely
as a result of the organization of the Charter Trust under the laws of Panama
and/or the making of payments and the performance of its obligations by the
Charter Trustee in accordance with, and as contemplated by, the Transaction
Documents ("Permitted Charter Trustee Acts")), (2) if such withholding Tax
---------------------------------
results from a breach of any covenant or undertaking in Section 10.4(i) of such
Indemnified Party or any of its Related Indemnified Parties, (3) with respect to
any such Tax imposed in respect of any transferee of such Indemnified Party to
the extent of the excess of such Taxes over the amount of such Taxes that would
have been imposed and indemnified hereunder had such original Indemnified Party
from which such Indemnified Party derives its interest not sold, assigned,
transferred or otherwise disposed of all or a portion of its interest in the
Drillship or Transaction Documents (unless such transferee acquired its interest
pursuant to the transferor's exercise of remedies), (4) if such withholding Tax
results from (x) the gross negligence, willful misconduct or fraud of such
Indemnified Party or any of its Related Indemnified Parties or (y) the
inaccuracy or breach of a representation, warranty, covenant or any undertaking
of such Indemnified Party or any of its Related Indemnified Parties, (5) if such
withholding Taxes are imposed by a taxing authority of or in a country other
than the United States or Panama and would not have been imposed but for
activities, property or operations of the Indemnified Party or any of its
Related Indemnified Parties that are unrelated to the transactions contemplated
by the Transaction Documents, or (6) if such withholding Taxes are imposed by a
taxing authority in Panama as a result of the Indemnified Party's (or a Related
Indemnified Party's) direction that Deepwater make payments to an account
located in Panama (except if such direction is made while an Event of Default
exists). If, for any reason, Deepwater is required to make any payment to an
Indemnified Party or to a taxing authority on behalf of any Indemnified Party
pursuant to this Section 10.4(a) with respect to, or as a result of, any
withholding Tax imposed with respect to any payment of Charter Hire by Deepwater
(or by the Charter Trustee to the Investment Trust or any Certificate Purchaser)
pursuant to the Transaction Documents or other payment by Deepwater under the
Head Lease Documents, which
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withholding Tax is not the responsibility of Deepwater under this Section
10.4(a), then such Indemnified Party shall pay to Deepwater on written demand an
amount which equals on an After-Tax Basis such additional amount paid by
Deepwater with respect to, or as a result of, such withholding Tax plus interest
at (i) the Certificate Return Rate during the period commencing on the date
Deepwater shall have paid an amount pursuant to the first sentence of this
paragraph and ending on the date Deepwater demands in writing payment of such
amount pursuant to this sentence and (ii) the Overdue Rate from the period
commencing five Business Days following the date Deepwater shall have demanded
in writing such payment to the date Deepwater actually receives such payment.
(b) Except as provided in Section 10.4(a) and 10.4(c) hereof,
Deepwater agrees to indemnify, defend and hold harmless on an After-Tax Basis
each Indemnified Party against any and all Taxes, imposed against or payable by,
or imposed on payments to or from, Deepwater or any Indemnified Party, or
imposed against all or any part of, or interest in, the Drillship by any
federal, state or local taxing authority of or within the United States and by
any jurisdiction outside of the United States if the Drillship or Deepwater is
located in such jurisdiction, upon or with respect to or in connection with,
based upon or measured by, in whole or in part:
(i) the Drillship or any part thereof or interest therein;
(ii) the manufacture, purchase, financing, refinancing, ownership,
delivery, redelivery, transport, location, leasing, subleasing, possession,
registration, use, operation, condition, maintenance, repair, return,
abandonment, preparation, storage, transfer of title, sale, acceptance,
importation, exportation, rejection or other disposition of or action or
event with respect to the Drillship or any part thereof or interest
therein;
(iii) the hire, receipts, income or earnings arising from the
purchase, financing, ownership, delivery, redelivery, leasing, subleasing,
possession, use, operation, return, storage, transfer of title, sale or
other disposition of the Drillship or any part thereof or interest therein;
(iv) the Advances, Certificates, their issuance, modification,
refinancing or acquisition, or the payments of any amounts thereon or with
respect thereto;
(v) the Transaction Documents or the Head Lease Documents or
amendments or supplements thereto, their execution or the transactions
contemplated thereby or any proceeds or payments under any thereof; or
(vi) otherwise with respect to or in connection with the transactions
contemplated or effected by or resulting from the Transaction Documents or
the Head Lease Documents or the exercise of rights and remedies thereunder
or the enforcement thereof.
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(c) Exclusions. Except as provided in Section 10.4(a), the
----------
indemnity provided for in Section 10.4(b) above shall not apply to any of the
following:
(i) Taxes (other than Taxes that are sales, use or rental Taxes)
imposed by the United States federal government on, based on, or measured
by or with respect to the gross or net income, or gross or net receipts or
that are in the nature of, or are imposed with respect to, capital, net
worth, excess profits, accumulated earnings, capital gains, franchise or
conduct of business of such Indemnified Party; provided, that this Section
--------
10.4(c)(i) shall not be interpreted to exclude any amounts necessary to
make any payment on an After-Tax Basis;
(ii) Taxes imposed by (x) any state or local taxing authority in the
United States (other than Taxes that are sales, use, rental, stamp,
property (tangible or intangible) or similar Taxes imposed as a result of a
Deepwater Person's activities in (including being incorporated in, or
making payments from), or the location of the Drillship or any portion
thereof in, such state or local jurisdiction) or (y) any jurisdiction
outside of the United States other than any Taxes imposed as a result of a
Deepwater Person's activities in (including being incorporated in, having a
permanent establishment or other residence in, or making payments from), or
the location of the Drillship or any portion thereof in, such jurisdiction
outside of the United States or Taxes imposed by Panama merely as a result
of the organization of the Charter Trust under the laws of Panama and/or
the performance by the Charter Trustee of Permitted Charter Trustee Acts;
provided, that this Section 10.4(c)(ii) shall not be interpreted to exclude
--------
any amounts necessary to make any payment on an After-Tax Basis;
(iii) Taxes imposed on or against or payable by such Indemnified Party
to the extent of the excess of such Taxes over the amount of such Taxes
that would have been imposed and indemnified hereunder had there not been a
transfer by the original Indemnified Party (from which such Indemnified
Party derives its interest) of any interest in the Drillship, the
Certificates, the Trust Estate, the Investment Trust, any Indemnified Party
or the Transaction Documents or the Head Lease Documents; except (x) if
such transferee acquired its interest in connection with the exercise of
remedies with respect to a Charter Event of Default or (y) to the extent
necessary to make indemnity payments to the transferee on an After-Tax
Basis;
(iv) Taxes imposed with respect to any period (except during the
exercise of remedies pursuant to the Charter in connection with the
occurrence and continuance of a Charter Event of Default) more than one
year after the expiration or earlier termination of the Charter and, where
required, the return of the Drillship pursuant to Section 20.3 of the
Charter (but not to the extent attributable to events occurring on or prior
to such date);
(v) Taxes resulting from (x) the gross negligence, willful misconduct
or fraud of the Indemnified Party or any of its Related Indemnified Parties
(except as solely attributed to such Party by virtue of its having executed
the Transaction Documents),
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(y) the inaccuracy or breach of a representation, warranty or covenant
under the Transaction Documents or the Head Lease Documents or any
undertaking required by the Transaction Documents or the Head Lease
Documents of such Indemnified Party or any of its Related Indemnified
Parties (unless such inaccuracy or breach is caused by Deepwater's breach
of any representation, warranty or covenant under the Transaction Documents
or a breach by Deepwater or an Affiliate of Deepwater under the Head Lease
Documents), or (z) in the case of any Indemnified Party, any Liens
attributable to such Indemnified Party or a Related Indemnified Party;
(vi) Taxes that result from (x) a voluntary transfer or other
voluntary disposition by the Indemnified Party or a Related Indemnified
Party of all or any portion of its interest in the Drillship, the Trust
Estate, the Investment Trust, any Indemnified Party, the Certificates, the
Transaction Documents or the Head Lease Documents (other than a transfer or
disposition resulting from (A) any Charter, substitution, or maintenance
of, or any modification to the Drillship or any portion thereof, (B)
Deepwater's exercise of any purchase or termination option, (C) an Event of
Loss or (D) the exercise of remedies under the Charter following a Charter
Event of Default) or (y) an involuntary transfer or other involuntary
disposition by the Indemnified Party or a Related Indemnified Party of all
or any part of an interest in the Drillship, the Trust Estate, the
Investment Trust, any Indemnified Party, the Certificates, the Transaction
Documents or the Head Lease Documents (other than any such transfer or
disposition that occurs while an Event of Default has occurred and is
continuing) in connection with any bankruptcy or other proceeding for the
relief of debtors in which an Indemnified Party is the debtor or any
foreclosure by a creditor of an Indemnified Party that is in each case
unrelated to the transactions contemplated by the Transaction Documents or
the Head Lease Documents;
(vii) Taxes imposed on the Administrative Agent in its individual
capacity with respect to any fees received by or payable to the
Administrative Agent for services rendered;
(viii) Taxes that would not have been imposed but for an amendment to
any Transaction Document or Head Lease Document not requested or consented
to or acquiesced in by Deepwater in writing, other than any amendment (A)
that may be necessary or appropriate to, and is in conformity with, any
amendment to any Transaction Document or Head Lease Document initiated or
requested by or consented to by any Deepwater Person in writing, (B) to any
Transaction Document or Head Lease Document due to, or in connection with
there having occurred, an Event of Default or (C) that is required by
Applicable Law or the terms of the Transaction Documents or the Head Lease
Documents or is executed in connection with any other amendment to the
Transaction Documents or the Head Lease Documents that is required by
Applicable Law;
(ix) Taxes to the extent actually utilized on a current basis by an
Indemnified Party or an Affiliate of such Indemnified Party as a credit
against Taxes not
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indemnifiable by Deepwater hereunder;
(x) Taxes to the extent resulting from or measured by income, assets,
activities, or other matters of or relating to the Indemnified Party or a
Related Indemnified Party that are unrelated to the transactions
contemplated by the Transaction Documents (except to the extent necessary
to make a payment on an After-Tax Basis (which shall be calculated assuming
the Indemnified Party is taxable at the highest marginal rate in the
applicable jurisdiction));
(xi) any Taxes, while such Taxes are being contested in accordance
with the contest provisions of Section 10.4(f);
(xii) any interest, penalties or additions to Tax that result from the
failure of an Indemnified Party to file any return properly and timely,
unless such failure is caused by the failure of Deepwater to fulfill its
obligations, if any, under this Agreement with respect to such return
(including the provision of information sufficient to enable such
Indemnified Party to file such return);
(xiii) Taxes that would not have been imposed but for the Indemnified
Party or a Related Indemnified Party having its tax residence, place of
business, situs of organization, place of management or controls, permanent
establishment or other presence in the taxing jurisdiction (unless such tax
residence, place of business, situs of organization, place of management or
control, permanent establishment or other presence results from the
presence or activities of Deepwater or any Deepwater Person (including the
making of payments unless directed by the Charter Trustee or any
Certificate Holder to make payment to an account located in Panama (except
if such direction is made while an Event of Default exists)) in such
jurisdiction it being understood that, for this purpose, the Charter
Trustee shall not be treated as having any such presence in Panama merely
as a result of the trust being formed pursuant to the Charter Trust
Agreement under the laws of Panama and/or the performance by the Charter
Trustee of Permitted Charter Trustee Acts).
(d) Calculation of Payments. Any payment that Deepwater shall be
------------------------
required to make to or for the account of any Indemnified Party with respect to
any Tax that is subject to indemnification under this Section 10.4 shall be paid
on an After-Tax Basis. If an Indemnified Party or any Affiliate of such
Indemnified Party who files any tax return on a combined, consolidated, unitary
or similar basis with such Indemnified Party shall actually realize any saving
of any Tax not indemnified by Deepwater pursuant to the Transaction Documents
(by way of credit (including any foreign tax credit), deduction, exclusion from
income or otherwise) by reason of any amount with respect to which Deepwater has
indemnified such Indemnified Party pursuant to this Section 10.4, and such tax
saving was not taken into account in determining the amount payable by Deepwater
on account of such indemnification, such Indemnified Party shall pay to
Deepwater, so long as no Event of Default shall have occurred and be continuing
(but shall be required to make such payment at such time as the
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Event of Default shall have been cured or at the time Deepwater shall have
fulfilled all of its obligations arising upon such Event of Default), within 30
days after such Indemnified Party shall have actually realized such tax saving,
the amount of such saving, together with the amount of any tax saving resulting
from any payment pursuant to this sentence; provided, that Deepwater shall not
--------
be entitled to receive an amount in excess of all amounts previously paid by
Deepwater pursuant to this Section 10.4, to such Indemnified Party or to the
relevant taxing authority on behalf of such Indemnified Party (less the
aggregate amount of all prior payments by such Indemnified Party to Deepwater
under this Section 10.4(d)) (but any excess amount described in this proviso
shall reduce pro tanto any amount that Deepwater is subsequently obligated to
--- -----
pay to such Indemnified Party pursuant to Section 10.4).
(e) Payment. Deepwater shall pay any Tax for which it is liable
-------
pursuant to this Section 10.4 directly to the appropriate taxing authority or
upon demand of an Indemnified Party to such Indemnified Party in immediately
available funds within 30 days of a written demand, but in no event more than
two Business Days prior to the date such Tax is due (including all extensions),
or, in the case of Taxes which are being contested, more than two Business Days
prior to the time such contest is finally resolved. Any such demand shall
specify in reasonable detail the calculation of the payment and the facts upon
which the right to payment is based. Each Indemnified Party shall promptly
forward to Deepwater any notice, bill or advice received by it from the relevant
taxing authority concerning any Tax against which Deepwater may be required to
indemnify hereunder. Deepwater upon the reasonable written request of an
Indemnified Party shall furnish such Indemnified Party with the original or a
certified copy of a receipt (if any is reasonably available to Deepwater) for
Deepwater's payment of any Tax that is subject to indemnification pursuant to
this Section 10, or such other evidence of payment of such Tax as is reasonably
acceptable to such Indemnified Party (and reasonably available to Deepwater).
(f) Contest. If a written claim is made against an Indemnified
-------
Party or if any proceeding shall be commenced against any Indemnified Party
(including a written notice of such proceeding), for any Taxes with respect to
which Deepwater may be liable for payment or indemnity hereunder or if any
Indemnified Party shall determine that any Tax as to which Deepwater may have an
indemnity obligation hereunder shall be payable, such Indemnified Party shall
promptly notify Deepwater in writing and shall not take any action with respect
to such claim, proceeding or Tax without the consent of Deepwater for 30 days
after the receipt of such notice by Deepwater; provided, however, that, in the
-------- -------
case of any such claim or proceeding, if action shall be required by law or
regulation to be taken prior to the end of such 30-day period, such Indemnified
Party shall, in such notice to Deepwater, so inform Deepwater, and no action
shall be taken with respect to such claim or Tax without the consent of
Deepwater before the end of such shorter period. If, within 30 days of receipt
of such notice from the Indemnified Party (or such shorter period as the
Indemnified Party has notified Deepwater is required by law or regulation for
the Indemnified Party to commence such contest), Deepwater shall request in
writing that such Indemnified Party contest the imposition of such Tax, the
Indemnified Party shall, at the expense of Deepwater, in good faith contest
(including, without limitation, by pursuit
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of appeals), and shall not settle without Deepwater's good faith consent (or (i)
if such contest can be pursued in the name of Deepwater and independently from
any other proceeding involving a tax liability, other than a net income or
withholding Tax, of such Indemnified Party, the Indemnified Party shall, at
Deepwater's sole discretion, allow Deepwater to contest, (ii) if such contest
involves a Tax, other than a net income or withholding Tax, which must be
pursued in the name of the Indemnified Party, but can be pursued independently
from any other proceeding involving a tax liability of such Indemnified Party,
the Indemnified Party shall allow Deepwater to contest in the name of the
Indemnified Party unless, in the good faith judgment of the Indemnified Party,
such contest by Deepwater could have a material adverse impact on the business
or operations of the Indemnified Party, in which case the Indemnified Party may
control such contest or (iii) in the case of any contest, the Indemnified Party
may request Deepwater to contest) the validity, applicability or amount of such
Taxes by, in the sole discretion of the Person conducting such contest, (i)
resisting payment thereof, (ii) not paying the same except under protest, if
protest is necessary and proper, (iii) if the payment be made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and judicial
proceedings; or (iv) taking such other action as is reasonably requested by
Deepwater from time to time.
Notwithstanding the foregoing provisions of this Section 10.4(f), such
Indemnified Party shall not be required to take any administrative or judicial
or other action and Deepwater shall not be able to contest such claim in its own
name or that of the Indemnified Party unless (A) Deepwater shall have agreed to
pay, and shall pay, to such Indemnified Party on demand all reasonable
out-of-pocket costs, losses and expenses that such Indemnified Party may incur
in connection with contesting such Taxes, including all reasonable legal,
accounting and investigatory fees and disbursements (including reasonable
allocated time charges of internal counsel of such Indemnified Party), (B) the
action to be taken will not result in any material imminent danger of sale,
forfeiture or loss of the Drillship or any part thereof or interest therein or
risk of criminal liability, (C) if such contest shall involve the payment of the
Tax prior to the contest, Deepwater shall, at its option, either (x) pay or
reimburse the Indemnified Party for such Taxes or (y) provide to the Indemnified
Party an interest-free advance in an amount equal to the Tax which the
Indemnified Party is required to pay (with no additional net after-tax cost to
such Indemnified Party), (D) Deepwater shall have provided to such Indemnified
Party an opinion of independent tax counsel selected by Deepwater, and
reasonably satisfactory to the Indemnified Party that a Reasonable Basis exists
to contest such claim, and (E) if such contest is controlled by Deepwater,
Deepwater shall have acknowledged, in writing, its liability for such indemnity
in the event such contest is unsuccessful. In no event shall an Indemnified
Party be required to appeal an adverse judicial determination to the United
States Supreme Court. The Indemnified Party shall consult in good faith with
Deepwater regarding the conduct of any contest controlled by such Indemnified
Party and shall allow Deepwater to participate in the conduct of any such
contest unless the Indemnified Party shall in good faith determine that allowing
Deepwater to participate in the conduct of such contest could have a material
adverse impact on the business or operations of the Indemnified Party. The
parties agree that an Indemnified Party may at any time decline to take further
action with respect to the contest of any claim for a Tax and may settle such
claim, if such Indemnified Party shall waive its rights to any indemnity from
Deepwater
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that otherwise would be payable in respect of such claim (or any logically
related claim) and shall pay to Deepwater any amount previously paid or advanced
by Deepwater pursuant to this Section 10.4(f) other than clause (A) of this
paragraph (by way of indemnification or advance for the payment of a Tax) with
respect to such Taxes.
If an Indemnified Party shall fail to perform its obligations under this
Section 10.4(f), such failure shall not discharge, diminish or relieve Deepwater
of any liability for indemnification that it may have to such Indemnified Party
hereunder, unless the contest of a claim is precluded as a result of such
failure; provided, that any payment by Deepwater to such Indemnified Party
--------
pursuant hereto shall not be deemed to constitute a waiver or release of any
right or remedy (including any remedy of damages) that Deepwater may have
against such Indemnified Party.
(g) Refund. If an Indemnified Party shall receive a refund of (or
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receive a credit against, or any other current reduction in, any Tax not
indemnified by Deepwater under this Section 10.4, in respect of) all or part of
any Taxes which Deepwater shall have paid on behalf of such Indemnified Party or
for which Deepwater shall have reimbursed, advanced funds to or indemnified such
Indemnified Party (or would have received such a refund, credit or reduction but
for a counterclaim or other claim not indemnified by Deepwater hereunder (a
"deemed refund")), within 30 days of such receipt (or, in the case of a deemed
refund, within 30 days of the final determination of such deemed refund), such
Indemnified Party shall pay or repay to Deepwater an amount equal to the amount
of such refund or deemed refund, plus any net tax benefit (taking into account
any Taxes incurred by such Indemnified Party by reason of the receipt of such
refund, credit or reduction or deemed refund) realized by such Indemnified Party
as a result of any payment by such Indemnified Party made pursuant to this
sentence; provided, however, that such Indemnified Party shall not be obligated
-------- -------
to make any payment pursuant to this sentence to the extent that the amount of
such payment would exceed (x) the amount of all prior payments made by Deepwater
to such Indemnified Party pursuant to this Section 10.4 less (y) the amount of
all prior payments by such Indemnified Party to Deepwater pursuant to this
Section 10.4(g); provided, further, however, that such Indemnified Party shall
-------- ------- -------
not be obligated to make any payment to Deepwater pursuant to this sentence
while an Event of Default is continuing, but shall be required to make such
payment at such time as the Event of Default is cured or at the time Deepwater
shall have fulfilled all its obligations arising upon such Event of Default.
If, in addition to such refund, credit or reduction or deemed refund, as the
case may be, such Indemnified Party shall receive (or would have received but
for a counterclaim or other claim not indemnified by Deepwater hereunder) an
amount representing interest on the amount of such refund, credit or reduction,
or deemed refund, as the case may be, such Indemnified Party shall pay to
Deepwater within 30 days of such receipt or, in the case of a deemed refund,
within 30 days of the final determination of such deemed refund, that proportion
of such interest that shall be fairly attributable to Taxes paid, reimbursed or
advanced by Deepwater prior to the receipt of such refund or deemed refund.
(h) Reports. Deepwater will provide such information as may be
-------
available
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to it and reasonably requested in writing by an Indemnified Party that is
required to enable an Indemnified Party to fulfill its tax filing requirements
with respect to the transactions contemplated by the Transaction Documents. If
any return, statement or report is required to be made or filed with respect to
any Tax imposed on or indemnified against by Deepwater under this Section 10.4,
Deepwater shall promptly notify the appropriate Indemnified Party of such
requirement and (i) to the extent permitted by law (unless otherwise requested
by the Indemnified Party) or required by law, make and file in its own name such
return, statement or report and furnish the relevant Indemnified Party with a
copy of such return, statement or report, (ii) where such return, statement or
report is required to be in the name of or filed by such Indemnified Party or
the Indemnified Party otherwise requests that such return, statement or report
be filed in its name, prepare and furnish such return, statement or report for
filing by such Indemnified Party in such manner as shall be satisfactory to such
Indemnified Party and send the same to the Indemnified Party for filing no later
than 15 days prior to the due date or (iii) where such return, statement or
report is required to reflect items in addition to Taxes imposed on or
indemnified against under this Section 10.4 as determined by such Indemnified
Party, provide such Indemnified Party with information within a reasonable time,
sufficient to permit such return, statement or report to be properly made and
timely filed with respect thereto. If an Indemnified Party fails to file a
return after it has been properly prepared by Deepwater in accordance with this
Section 10.4(h) and furnished to such Indemnified Party at least 15 days prior
to the due date of such return, Deepwater shall not be liable for Taxes imposed
as a result of the failure to file. Each Indemnified Party shall furnish
Deepwater, at the request and expense of Deepwater, with such information, not
within the control of Deepwater, as is in such Indemnified Party's control and
is reasonably available to such Indemnified Party and necessary for Deepwater to
comply with its obligations under this Section 10.4(h).
(i) Forms, etc. Each Indemnified Party agrees to furnish to
------------
Deepwater from time to time, at Deepwater's timely made written request and
expense, such duly executed and properly completed forms as may be necessary or
appropriate in order to claim any reduction of or exemption from any withholding
or other Tax imposed by any taxing authority in respect of any payments
otherwise required to be made by Deepwater pursuant to the Transaction
Documents, which reduction or exemption may be available to such Indemnified
Party. Each Indemnified Party agrees that it will use its reasonable best
efforts to the extent permitted by Applicable Law (and to the extent such
Indemnified Party is entitled to do so) to file returns or tax declarations that
would minimize any indemnity payable by Deepwater; provided, that Deepwater
--------
shall indemnify the Indemnified Party for any cost resulting from such
Indemnified Party's filing of such return or declaration. Notwithstanding the
foregoing, no Indemnified Party shall be required to furnish any form or file
any return or tax declaration if it has determined in its reasonable good faith
judgment that furnishing the form or filing the return or tax declaration could
have a material adverse impact on the business or operations of such Indemnified
Party or any Related Indemnified Party, unless the Indemnified Party is
indemnified in a manner reasonably satisfactory to such Indemnified Party by
Deepwater for such material adverse impact.
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(j) Records. In addition to its obligations under the first
-------
sentence of Section 10.4(h), Deepwater shall make available for inspection and
copying by an Indemnified Party such records that are regularly maintained by
Deepwater in the ordinary course of its business as may be reasonably necessary
to enable such Indemnified Party to fulfill its tax return filing obligations,
subject to reasonable confidentiality requirements of Deepwater.
(k) Non-Parties. If an Indemnified Party is not a party to this
-----------
Agreement, Deepwater may require the Indemnified Party to agree in writing, in a
form reasonably acceptable to Deepwater, to the terms of this Section 10.4 prior
to making any payment to such Indemnified Party under this Section 10.4.
(l) Verification. The results of all computations required under
------------
this Section 10.4, together with a statement describing in reasonable detail the
manner in which such computations were made, shall be delivered to Deepwater in
writing. If Deepwater so requests within 30 days after receipt of such
computations, any determination shall be reviewed by a nationally recognized
independent public accounting firm mutually acceptable to the relevant
Indemnified Party and Deepwater who shall be asked to verify, after consulting
with Deepwater and the relevant Indemnified Party whether the relevant
Indemnified Party's computations are correct, and to report its conclusions to
both Deepwater and the relevant Indemnified Party. Subject to satisfactory
confidentiality agreements, the relevant Indemnified Party and Deepwater hereby
agree to provide such accountants with all information and materials as shall be
reasonably necessary or desirable in connection herewith. The fees of the
accountants in verifying an adjustment pursuant to this Section 10.4 shall be
paid by Deepwater, unless such verification discloses an error adverse to
Deepwater in an amount greater than 4.0% of the amount of the indemnity payment
as determined by the accounting firm, in which case such fees shall be paid by
the relevant Indemnified Party. Any information provided to such accountants by
any Person shall be and remain the exclusive property of such Person and shall
be deemed by the parties to be (and the accountants will confirm in writing that
they will treat such information as) the private, proprietary and confidential
property of such Person, and no Person other than such Person and the
accountants shall be entitled thereto, and all such materials shall be returned
to such Person. Such accounting firm shall be requested to make its
determination within 30 days of Deepwater's request to such accounting firm for
review. In the event such independent public accounting firm shall determine
that such computations are incorrect, then such firm shall determine what it
believes to be the correct computations. The computations of the independent
public accounting firm shall be final, binding and conclusive upon, Deepwater
and the relevant Indemnified Party and Deepwater shall not have any right to
inspect the books, records, tax returns or other documents of or relating to the
relevant Indemnified Party to verify such computations or for any other purpose.
The parties hereby agree that the independent public accounting firm's sole
responsibility shall be to verify the computation of any amounts payable under
this Section 10.4 and that matters of interpretation of this Agreement and the
other Transaction Documents are not within the scope of such independent public
accounting firm's responsibilities.
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(m) Restructuring For Withholding Taxes. Each party covered by
--------------------------------------
this Section 10.4 agrees to use reasonable efforts to investigate alternatives
for reducing any withholding Taxes that are indemnified against hereunder or
imposed on Charter Hire (or payments by the Charter Trustee to the Investment
Trust or any Certificate Purchaser) (whether or not indemnifiable hereunder) and
to use reasonable efforts to reduce any withholding Taxes that are indemnified
against hereunder, including, without limitation, negotiating in good faith to
relocate or restructure the Advance (which relocation or restructuring shall be
at Deepwater's expense) or the domicile of the Investment Trust or the Charter
Trustee, but no Party shall be obligated to take any such action as such Party
determines will be adverse to its business or financial or commercial interest.
SECTION 11
AGENTS
SECTION 11.1 Appointment of Administrative Agent, Documentation Agent
---------------------------------------------------------
and Syndication Agent; No Duties. Each Certificate Purchaser hereby irrevocably
--------------------------------
(subject to Section 11.9) designates, authorizes and appoints ABN AMRO Bank
N.V., as Administrative Agent of such Certificate Purchaser under the
Transaction Documents, BA Leasing & Capital Corporation, as Documentation Agent
of such Certificate Purchaser under the Transaction Documents, and The Bank of
Nova Scotia, as Syndication Agent of such Certificate Purchaser under the
Transaction Documents, and each such Certificate Purchaser irrevocably
authorizes each of ABN AMRO Bank N.V., BA Leasing & Capital Corporation and The
Bank of Nova Scotia to act as the Administrative Agent, Documentation Agent and
Syndication Agent, respectively, for such Certificate Purchaser, to take such
action on its behalf under the provisions of the Transaction Documents and to
exercise such powers and perform such duties as are expressly delegated to such
Agent by the terms of this Agreement and the other Transaction Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary herein or elsewhere in the
Transaction Documents, the Agents shall not have any duties or responsibilities
except those expressly set forth herein or therein, or any fiduciary
relationship with any Certificate Purchaser, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into the Transaction Documents or otherwise exist against the Agents.
SECTION 11.2 Delegation of Duties. The Agents may execute any of their
--------------------
duties under this Agreement and the other Transaction Documents by or through
agents or attorneys-in-fact, and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agents shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by them with reasonable care.
SECTION 11.3 Exculpatory Provisions. No Agent nor any of its officers,
----------------------
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action taken or omitted to be taken by it or such Person under or
in connection with the Transaction Documents
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(except for its or such Person's own gross negligence or willful misconduct), or
(ii) except as expressly set forth in the Transaction Documents, responsible in
any manner to any of the Certificate Purchasers for any recitals, statements,
representations or warranties made by Deepwater or any officer thereof contained
in the Transaction Documents or in any certificate, report, statement or other
document referred to or provided for in, or received by such Administrative
Agent under or in connection with, the Transaction Documents, or for the
validity, effectiveness, genuineness, enforceability or sufficiency of the
Transaction Documents, including the Certificates, or for any failure of
Deepwater to perform its obligations hereunder or thereunder. The Agents shall
be under no obligation to any Certificate Purchaser to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, the Transaction Documents, or to inspect the properties, books or
records of Deepwater.
SECTION 11.4 Reliance by Agents. The Agents shall be entitled to rely,
------------------
and shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex, facsimile or teletype message, statement, order or other document or
conversation reasonably believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to
Deepwater), independent accountants and other experts selected by such Agent.
The Agents may deem and treat the registered owner of any Certificate as the
owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with such Agent. Agents
shall be fully justified in failing or refusing to take any action under the
Transaction Documents unless they shall first receive such advice or concurrence
of the Majority Certificate Purchasers (or, where expressly required by any
provision of the Transaction Documents, the Required Certificate Purchasers) as
they deem appropriate and, if they so request, they shall first be indemnified
to their satisfaction against any and all liability and expense which may be
incurred by them by reason of taking or continuing to take any such action. The
Agents shall in all cases be fully protected in acting, or in refraining from
acting, under the Transaction Documents and the Certificates in accordance with
a request of the Majority Certificate Purchasers (or, where expressly required
by any provision of the Transaction Documents, the Required Certificate
Purchasers), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Certificate Purchasers and all future
holders of the Certificates.
SECTION 11.5 Notice of Default. The Administrative Agent shall not be
-----------------
deemed to have knowledge or notice of the occurrence of any Default, Material
Default or Event of Default hereunder unless such Administrative Agent has
received notice from a Certificate Purchaser, either Trustee or Deepwater
referring to this Agreement, describing such Default, Material Default or Event
of Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent receives such a notice, Administrative Agent shall
give notice thereof to the Documentation Agent, the Syndication Agent and the
Certificate Purchasers. The Administrative Agent shall take such action with
respect to such Default, Material Default or Event of Default as shall be
reasonably directed by the Majority Certificate Purchasers (or,
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<PAGE>
where expressly required by any provision of the Transaction Documents, the
Required Certificate Purchasers); provided, that unless and until the
--------
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default, Material Default or Event of
Default, as it shall deem advisable in the best interests of the Certificate
Purchasers.
SECTION 11.6 Non-Reliance on Administrative Agent and Other Certificate
----------------------------------------------------------
Purchasers. Each Certificate Purchaser expressly acknowledges that neither the
----------
Administrative Agent, Documentation Agent, Syndication Agent nor any of their
officers, directors, employees, agents, attorneys-in-fact or Affiliates have
made any representation or warranty to it, and that no act by the Administrative
Agent, the Documentation Agent or the Syndication Agent hereinafter taken,
including any review of the affairs of Deepwater and its Affiliates, shall be
deemed to constitute any representation or warranty by the Administrative Agent,
the Documentation Agent or the Syndication Agent to any Certificate Purchaser.
Each Certificate Purchaser represents to the Administrative Agent, the
Documentation Agent and the Syndication Agent that it has, independently and
without reliance upon the Administrative Agent, the Documentation Agent and the
Syndication Agent, or any other Certificate Purchaser, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, financial and
other condition and creditworthiness of Deepwater and its Affiliates, the value
of and title to any collateral, and all applicable bank regulatory laws relating
to the transactions contemplated hereby and by the other Transaction Documents
and has made its own decision to make its Certificate Purchaser Amount available
hereunder and enter into this Agreement and the other Transaction Documents to
which it is a party as a Certificate Purchaser. Each Certificate Purchaser also
represents that it will, independently and without reliance upon the
Administrative Agent, the Documentation Agent or the Syndication Agent, or any
other Certificate Purchaser, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Transaction Documents to which it is a party as a Certificate
Purchaser, and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition and
creditworthiness of Deepwater and its Affiliates. Except for notices, reports
and other documents expressly required to be furnished to the Certificate
Purchasers by the Agents hereunder, the Agents shall have no duty or
responsibility to provide any Certificate Purchaser with any credit or other
information concerning the business, operations, property, financial and other
condition or creditworthiness of Deepwater or its Affiliates, the Administrative
Agent, the Documentation Agent, the Syndication Agent and their respective
Affiliates which may come into the possession of the Administrative Agent, the
Documentation Agent or the Syndication Agent, or any of their officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
SECTION 11.7 Indemnification. The Certificate Purchasers severally
---------------
agree to indemnify each of the Administrative Agent, the Documentation Agent and
the Syndication Agent in their capacity as such (to the extent not reimbursed by
Deepwater within a reasonable period after demand has been made to Deepwater for
those amounts owing by Deepwater, and
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without limiting the obligation of Deepwater to do so), ratably according to
their respective Certificate Purchaser Amounts, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the
Certificates) be imposed on, incurred by or asserted against the Administrative
Agent, the Documentation Agent or the Syndication Agent in any way relating to
or arising out of the Transaction Documents, or any documents contemplated by or
referred to herein or therein or any action taken or omitted by the
Administrative Agent, the Documentation Agent or the Syndication Agent under or
in connection with any of the foregoing; provided that no Certificate Purchaser
--------
shall be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Administrative Agent's, the Documentation
Agent's or the Syndication Agent's gross negligence or willful misconduct; and
provided, further, that the Administrative Agent, the Documentation Agent and
-------- -------
the Syndication Agent shall not make any claim under this Section 11.7 for any
claim or expense indemnified against by Deepwater or its Affiliates without
first making demand on such Person for payment of such claim or expense (unless
such demand shall then be prohibited by Applicable Law). Whenever, at any time
after the Administrative Agent, the Documentation Agent or the Syndication Agent
has received from any Certificate Purchaser such Certificate Purchaser's ratable
share of amounts owing to the Administrative Agent, the Documentation Agent or
the Syndication Agent pursuant to this Section 11.7, the Administrative Agent,
the Documentation Agent or the Syndication Agent shall receive any reimbursement
from Deepwater on account of such amounts, the Administrative Agent, the
Documentation Agent or the Syndication Agent shall distribute to such
Certificate Purchaser its ratable share thereof in like funds as received;
provided, however, that in the event that the receipt by the Administrative
-------- -------
Agent, the Documentation Agent or the Syndication Agent of such reimbursement is
required by law or court or administrative order to be returned, such
Certificate Purchaser shall return to the Administrative Agent, the
Documentation Agent or the Syndication Agent any portion thereof previously
distributed by the Administrative Agent, the Documentation Agent or the
Syndication Agent to it in like funds as such reimbursement is required to be
returned by the Administrative Agent, the Documentation Agent or the Syndication
Agent.
SECTION 11.8 Agents. The Administrative Agent, the Documentation Agent
------
and the Syndication Agent and their respective Affiliates may make loans to,
issue letters of credit for the account of, accept deposits from, acquire equity
interests in and generally engage in any kind of business with Deepwater,
Conoco, R&B and their Affiliates as though the Administrative Agent, the
Documentation Agent and the Syndication Agent were not the Administrative Agent,
the Documentation Agent and the Syndication Agent hereunder and without notice
to or the consent of the Certificate Purchasers. It is understood and
acknowledged by each Certificate Purchaser that an Affiliate of the
Administrative Agent, the Documentation Agent and the Syndication Agent may also
separately be a Certificate Purchaser. It is further understood and
acknowledged by each Certificate Purchaser that, pursuant to the activities
referenced in this Section 11.8, the Administrative Agent, the Documentation
Agent and the Syndication Agent and their Affiliates may receive information
regarding Deepwater, Conoco, R&B and their
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Affiliates (including information that may be subject to confidentiality
obligations in favor of Deepwater, Conoco, R&B and their Affiliates) and
acknowledge that the Administrative Agent, the Documentation Agent and the
Syndication Agent shall be under no obligation to provide such information to
them. With respect to its Certificate Purchaser Amount, if any, each of the
Agents shall have the same rights and powers under this Agreement as any other
Certificate Purchaser and may exercise the same as though it were not an Agent.
SECTION 11.9 Successor Agent. At any time during the term of this
----------------
Agreement, the Administrative Agent, the Documentation Agent and the Syndication
Agent may resign upon thirty (30) days' notice to the Certificate Purchasers and
Deepwater. If any of the Administrative Agent, the Documentation Agent or the
Syndication Agent resigns herewith, the Required Certificate Purchasers shall
appoint from among the Certificate Purchasers a successor Agent which successor
Agent shall be approved by Deepwater (which approval shall not be unreasonably
withheld or delayed). If no successor Agent is appointed prior to the effective
date of the resignation of the corresponding Agent, such Agent may appoint,
after consulting with the Certificate Purchasers and Deepwater, a successor
Agent from among the Certificate Purchasers. Upon the successor Agent's
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights, powers and duties of the retiring Agent and (i)
the term "Administrative Agent" shall mean such successor administrative agent
--------------------
and such retiring Administrative Agent's appointment, powers and duties as an
Administrative Agent shall be terminated, (ii) the term "Documentation
-------------
Agent" shall mean such successor documentation agent and such retiring
-----
Documentation Agent's appointment, powers and duties as a Documentation Agent
shall be terminated, and (iii) the term "Syndication Agent" shall mean such
-----------------
successor syndication agent and such retiring Syndication Agent's appointment,
powers and duties as a Syndication Agent shall be terminated. After the
retiring Agent's resignation herewith, the provisions of this Section 11 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was an Agent hereunder and under the other Transaction Documents. If no
successor agent has accepted appointment by the date which is forty-five (45)
days following the notice of resignation, the resignation shall thereupon become
effective and the Certificate Purchasers shall perform all of the duties of such
Agent hereunder and under the other Transaction Documents until such time, if
any, as the Required Certificate Purchasers appoint a successor Agent as
provided for above.
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SECTION 12
MISCELLANEOUS
SECTION 12.1 Survival of Agreements. The representations, warranties,
----------------------
covenants, indemnities and agreements of the parties provided for in the
Transaction Documents, and the parties' obligations under any and all thereof,
shall survive the execution and delivery of this Agreement, the transfer of the
Drillship to the Head Lessor (if applicable), the lease of the Drillship by the
Head Lessor (if any) to the Charter Trustee and the subsequent charter of the
Drillship by the Charter Trustee to Deepwater, the construction of the
Drillship, any disposition of any interest of the Charter Trustee or the
Investment Trust in the Drillship, the payment of the Advances and shall be and
continue in effect notwithstanding any investigation made by any party and the
fact that any party may waive compliance with any of the other terms, provisions
or conditions of any of the Transaction Documents. Except as expressly provided
herein, it is expressly understood and agreed that the indemnification
obligations of Deepwater under Section 10 shall survive the expiration or
termination of the Charter and the other Transaction Documents and the payment
by Deepwater and Conoco of all amounts due thereunder for a period of three (3)
years (but shall continue in full force and effect following such date with
respect to any Claim asserted prior to such date) and shall be separate and
independent from any remedy under the Charter or any other Transaction Document.
SECTION 12.2 No Broker; etc. Each of the parties hereto represents to
--------------
the others that it has not retained or employed any broker, finder or financial
advisor, other than PricewaterhouseCoopers LLP and Bank of America, to act on
its behalf in connection with this Agreement or the transactions contemplated
herein, nor has it authorized any broker, finder or financial adviser retained
or employed by any other Person so to act. Any party who is in breach of this
representation shall indemnify and hold the other parties harmless from and
against any cost or liability arising out of such breach of this representation.
SECTION 12.3 Notices. Unless otherwise specifically provided herein,
-------
all notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be given in writing by United States mail, by nationally recognized
courier service, by hand or by facsimile communication and any such notice shall
become effective one (1) Business Day after delivery to a nationally recognized
courier service specifying overnight delivery or, if delivered by hand, when
received, or, if sent by facsimile communication, when confirmed by electronic
or other means during business hours on a Business Day (or, if confirmed after
business hours or on a non-Business Day, on the next Business Day) and shall be
directed to the address of such Person as indicated:
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If to Deepwater, to it at:
Attn: Manager
Deepwater Drilling L.L.C.
901 Threadneedle, Suite 200
Houston, Texas 77079
Telephone: (281) 496-5000
Telecopier: (281) 496-0285
with copies to:
Attn: Wayne K. Anderson, Esq.
Corporate Counsel
Conoco Inc. (formerly Continental Oil Company)
Charter Number 523126
600 North Dairy Ashford
Houston, Texas 77079
Telephone: (281)293-3890
Telecopier: (281)293-3700
Attn: Wayne K. Hillin, Esq.
Counsel
R & B Falcon Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Telephone: (281) 496-5000
Telecopier: (281) 496-0285
If to the Investment Trust, to it at:
Attn: Corporate Trust Administration
Wilmington Trust FSB
3773 Howard Hughes Parkway, Suite 300 North
Las Vegas, Nevada 89109
Telephone: (702) 866-2200
Telecopier: (702) 866-2244
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If to the Charter Trustee, to it at:
Attn: Corporate Trust Administration
Wilmington Trust Company
1100 North Market Street
Wilmington, DE, 19890
Telephone: (302) 651-1000
Telecopier: (302) 651-8882
If to Administrative Agent, to it at
Attn: Linda Boardman
ABN AMRO Bank N.V.
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Telephone: (212) 314-1724
Telecopier: (212) 314-1712
If to the Investment Trustee, to it at:
Attn: Corporate Trust Administration
Wilmington Trust FSB
3773 Howard Hughes Parkway, Suite 300 North
Las Vegas, Nevada 89109
Telephone: (702) 866-2200
Telecopier: (702) 866-2244
If to any Member, to it at:
Conoco Development Company
600 North Dairy Ashford
Houston, Texas 77079
Telephone: (281) 293-3890
Telecopier: (281) 293-3700
Attn: Assistant Secretary
or
RBF Deepwater Exploration Inc.
901 Threadneedle, Suite 200
Houston, Texas 77079
Telephone: (281) 496-5000
Telecopier: (281) 496-0285
Attn: President
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If to a Certificate Purchaser, to it at the address set forth in Schedule
5.
SECTION 12.4 Counterparts. This Agreement 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 agreement.
SECTION 12.5 Amendments, Waivers and Consents. Except as otherwise
-----------------------------------
expressly provided herein or in any other Transaction Document, no amendment,
waiver or termination of any provision of this Agreement or any other
Transaction Document, and no consent with respect to any departure by any Person
therefrom, shall be effective unless the same shall be in writing and signed by
the Majority Certificate Purchasers and the applicable Person and acknowledged
by the Trustees, and then any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
--------
however, that no such waiver, amendment or consent shall, unless in writing and
-------
signed by all Certificate Purchasers and acknowledged by the Trustees, do any of
the following:
(a) change the Commitment of any Certificate Purchaser (except with
the written consent of such Certificate Purchaser) except as provided in Section
7.9;
(b) postpone or delay any date fixed by any Transaction Document for
any payment of Certificate Return on the Certificates, or any fees or other
amounts due to the Certificate Purchasers (or any of them) under any Transaction
Document (except, with respect to amounts owed only to a particular Certificate
Purchaser, with the written consent of such Certificate Purchaser);
(c) reduce (i) the amount of any outstanding Advances or the rate of
the Certificate Return on the Certificates, or (ii) any fees or other amounts
payable to Certificate Purchasers (or any of them) under any Transaction
Document (except, with respect to amounts owed only to a particular Certificate
Purchaser, with the written consent of such Certificate Purchaser);
(d) postpone or reduce the payment obligations of Deepwater pursuant
to any Transaction Document (except, with respect to amounts owed only to a
particular Certificate Purchaser, with the written consent of such Certificate
Purchaser);
(e) change the aggregate percentage of the Certificate Purchaser
Balance or the Commitment Percentage which is required for Certificate
Purchasers (or any of them) to take any action hereunder;
(f) amend this Section or any provision herein or in any other
Transaction Document providing for consent or other action by all Certificate
Purchasers;
(g) discharge the Completion Guarantor, the Conoco Guaranty, the R&B
Guaranty or the Drilling Contract Guarantee, or release the Lien of the Ship
Mortgage or any
71
<PAGE>
material portion of any other Collateral or subordinate or take any action,
including the issuance of additional instruments or documents, which results in
the subordination of the interest of any Certificate Purchaser in any
Collateral;
(h) amend the definition of "Certificate Return Rate," "Certificate
----------------------- -----------
Margin", "Base Rate", "Alternate Rate", "Federal Funds Rate", "Charter Residual
------ --------- -------------- ------------------ ----------------
Risk Amount", "Coverage Ratio", "Residual Guarantee Amount", "Required
------------ --------------- ---------------------------- --------
Certificate Purchaser", "Certificate Return" or "Return Period"; or
---------------------- ------------------- --------------
(i) amend Section 14.1 of the Charter or Article 3 of the Depository
Agreement;
and provided, further, that no amendment, waiver or consent shall, unless in
-------- -------
writing and signed by the Trustees in addition to the appropriate number of
Certificate Purchasers or the Hedging Agreement Counterparties, as applicable,
affect the rights or duties of the Trustees under this Agreement or any other
Transaction Document or the Hedging Agreement Counterparties, respectively.
SECTION 12.6 Confidentiality. Each party hereto agrees to exercise
---------------
commercially reasonable efforts to keep any non-public information delivered or
made available by Deepwater to it which is indicated or stated in writing to be
confidential information, confidential from anyone other than persons employed
or retained by such Participant who are or are expected to become engaged in
evaluating, approving, structuring or administering any of the Transaction
Documents (such Persons to likewise be under similar obligations of
confidentiality with respect to such information); provided, however, that
-------- -------
nothing herein shall prevent any party from disclosing such information (i) to
any other party, (ii) upon the order of any court or administrative agency,
(iii) upon the request or demand of any regulatory agency or authority having
jurisdiction over such Participant, (iv) which has been publicly disclosed, (v)
to the extent reasonably required in connection with any litigation to which any
party or its Affiliates may be a party, (vi) to the extent reasonably required
in connection with the exercise of any remedy hereunder or under any other
Transaction Document, (vii) to such party's legal counsel, independent auditors
and to such party's Affiliates, (viii) to any actual or proposed assignee or
other transferee of all or part of its rights hereunder which has agreed in
writing to be bound by the provisions of this Section 12.6 and (ix) except as
otherwise required by Applicable Law; provided, however, that, should disclosure
-------- -------
of any such confidential information be required by virtue of clause (ii) or (v)
of the immediately preceding provisos, such party shall notify Deepwater of the
same so as to allow Deepwater to seek a protective order or to take any other
appropriate action; provided, further, that no such party shall be required to
-------- -------
delay compliance with any directive to disclose beyond the last date such delay
is legally permissible any such information so as to allow Deepwater to effect
any such action and provided, further, that if Deepwater exercises the Return
-------- -------
Option, no Participant thereafter shall be bound by the terms of this Section
12.6 with respect to any information regarding the Drillship (excluding,
however, any information regarding the Drilling Contract).
72
<PAGE>
SECTION 12.7 Headings; etc. The Table of Contents and headings of the
-------------
various Sections of this Agreement are for convenience of reference only and
shall not modify, define, expand or limit any of the terms or provisions hereof.
SECTION 12.8 Parties in Interest. Except as expressly provided
---------------------
herein, none of the provisions of this Agreement are intended for the benefit of
any Person except the parties hereto.
SECTION 12.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE
--------------
LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW BUT EXCLUDING, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL OTHER
CHOICE OF LAW AND CONFLICTS OF LAW RULES). THIS AGREEMENT HAS BEEN DELIVERED IN
THE STATE OF NEW YORK.
SECTION 12.10 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 12.11 Further Assurances. The parties hereto shall promptly
-------------------
cause to be taken, executed, acknowledged or delivered, at the expense of
Deepwater, all such further acts, conveyances, documents and assurances as any
of the parties may from time to time reasonably request in order to carry out
and effectuate the intent and purposes of this Agreement, the other Transaction
Documents and the transactions contemplated hereby and thereby (including, the
preparation, execution and filing of any and all Uniform Commercial Code
financing statements and other filings or registrations which the parties hereto
may from time to time request to be filed or effected). Deepwater will, at its
own expense and without need of any prior request from any other party, to take
such action as may be necessary (including any action specified in the preceding
sentence), or (if the Investment Trust or the Trustees shall so request) as so
requested, in order to maintain and protect all security interests provided for
hereunder or under any other Transaction Document.
SECTION 12.12 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY
-----------------------
APPLICABLE LAW, EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE
TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 12.13 Limitations on Recourse. (a) The Certificate
-------------------------
Purchasers, the Trustees and the Investment Trust agree that their rights in
respect of the obligations of Deepwater to pay Charter Hire, and any claim or
liability under this Agreement or any other Transaction Document shall be
limited to satisfaction out of, and enforcement against, the Collateral. The
Certificate
73
<PAGE>
Purchasers, the Trustees and the Investment Trust hereby acknowledge and agree
that none of the Non-Recourse Parties shall have any liability to all or any of
the Certificate Purchasers, the Trustees or the Investment Trust for the payment
of any sums now or hereafter owing by Deepwater under this Agreement or any
other Transaction Document or for the performance of any of the obligations of
Deepwater contained herein or therein or shall otherwise be liable or
responsible with respect thereto (such liability, including such as may arise by
operation of law, being hereby expressly waived), except as provided in this
Section 12.13. If any Event of Default shall occur and be continuing or if any
claim of any Certificate Purchasers, the Investment Trust and the Trustees
against or alleged liability to the Certificate Purchasers, the Trustees or the
Investment Trust of, Deepwater shall be asserted under this Agreement or any
other Transaction Document, the Certificate Purchasers, the Trustees and the
Investment Trust agree that they shall not have the right to proceed directly or
indirectly against the Non-Recourse Parties or against their respective
properties and assets (other than the Collateral) for the satisfaction of any of
the obligations of Deepwater to pay Charter Hire or of any such claim or
liability or for any deficiency judgment (except to the extent enforceable out
of the Collateral) in respect of such obligations or any such claim or
liability. The foregoing notwithstanding, it is expressly understood and agreed
that nothing contained in this Section 12.13 shall be deemed to (a) release any
Non-Recourse Party from liability for its fraudulent actions or willful
misconduct or (b) limit or affect the obligations of any Non-Recourse Party in
accordance with the terms of this Agreement or any other Transaction Document
creating such obligation to which such Non-Recourse Party is a party, including,
without limitation, the obligations of Conoco under the Completion Guaranty, the
obligations of Conoco Drilling under the Drilling Contract Guaranty and the
obligations of Conoco and R&B with respect to the Residual Guarantee Amount. The
foregoing acknowledgements, agreements and waivers shall be enforceable by any
Non-Recourse Party.
(b) Deepwater, Conoco and R&B hereby acknowledge and agree that none of
the Administrative Agent, the Syndication Agent, the Documentation Agent, the
Trustees and the Certificate Purchasers shall have any personal liability
whatsoever to Deepwater, Conoco or R&B or their respective successors and
assigns for any claim based on or in respect of this Agreement or arising from
the transactions contemplated hereby. Subject to Section 6.1 of the Charter,
the sole recourse of Deepwater, Conoco and R&B for any such claims arising
hereunder will be to the Trust Estate. Deepwater, Conoco and R&B further
acknowledge that each has no rights (as third-party beneficiaries or otherwise)
or standing under any agreement between the Trustees and any or all of the
Investment Trust, Administrative Agent, the Syndication Agent, the Documentation
Agent, or the Certificate Purchasers which agreements are not by their terms
intended for the benefit of other parties other than Sections 5.2,5.3, 5.4 and
5.5 of the Charter Trust Agreement and Sections 5.2, 5.3, 5.4 and 5.5 of the
Investment Trust Agreement.
SECTION 12.14 Applicable Laws. Nothing in this Agreement or any other
---------------
Transaction Document shall be construed to constitute or to require either the
Trustees, Investment Trust or Deepwater to take or omit any action which would
constitute a violation of, or subject the Trustees, Investment Trust or
Deepwater to a penalty under, the laws of the United States of
74
<PAGE>
America.
SECTION 12.15 Right to Inspect. Upon reasonable notice and at such
------------------
times and places as shall not unduly interfere with the commercial utilization
or operation of the Drillship (it being understood that Deepwater shall be under
no obligation to interrupt or delay any operation of the Drillship or to
otherwise incur any out-of-pocket expense or loss of revenue), but in no event
more than once in any twelve-month period, Deepwater shall afford
representatives of the Administrative Agent (together with representatives of
the Certificate Purchasers and the Trustees) reasonable access to the
Drillship, its logs and papers for the purpose of inspecting the same. Any such
inspection shall be subject to any required Government Approvals and shall be at
the sole risk and expense of the Administrative Agent, the Certificate
Purchasers and the Trustees, as applicable, unless a Charter Event of Default
has occurred and is continuing, in which case any such inspection shall be at
the expense of Deepwater and may occur more than once per year upon reasonable
notice after such Charter Event of Default. Upon written request by the
Administrative Agent and the Trustees, Deepwater shall give the Administrative
Agent and the Trustees prior written notice of the time and location of the
Drillship's next scheduled dry-docking.
SECTION 12.16 Accounts, Distribution of Payments and Flow of Funds.
-------------------------------------------------------
Pursuant to the Deepwater Assignment, Deepwater has assigned its right to
receive payment of all Deposited Amounts to the Charter Trustee and the
Investment Trust. Each of the Trustees, the Investment Trust and Deepwater
hereby agrees (severally and not jointly) to deposit, or to cause to be
deposited, all Account Collateral of any kind received by it promptly (but not
later than the six (6) Business Days after receipt) into the Accounts
established pursuant to the Depository Agreement to be applied as set forth in
the Depository Agreement.
SECTION 12.17 Attorneys-in-Fact. Subject to the terms of the
-----------------
Transaction Documents, without in any way limiting the obligations of Deepwater
hereunder, Deepwater hereby appoints each of the Charter Trustee and the
Investment Trust as its agent and attorney-in-fact, with full power and
authority at any time during which Deepwater is obligated to deliver possession
of the Drillship to the Charter Trustee in connection with the exercise of
remedies after the occurrence of an Event of Default, to demand and take
possession of the Drillship in the name and on behalf of Deepwater from
whomsoever shall be at the time in possession thereof in accordance with the
Transaction Documents.
SECTION 12.18 Successor Trustees; Jurisdiction of Trust.
---------------------------------------------
Notwithstanding the provisions of the Trust Agreement, so long as no Event of
Default shall have occurred and be continuing, (i) no successor or replacement
Charter Trustee or Investment Trustee shall be appointed without the prior
written consent of Deepwater (which consent shall not be unreasonably withheld
or delayed) and (ii) the jurisdiction in which the trusts under the Trust
Agreements are created shall not be changed without the prior written consent of
Deepwater.
SECTION 12.19 Third-Party Beneficiary. Each of the Certificate
------------------------
Purchasers agrees that Conoco Drilling shall be a third-party beneficiary of the
covenant contained in Section 6.3(b)
75
<PAGE>
and shall be entitled to rely on and enforce such covenant as though it were a
party to this Agreement. Each of the parties hereto agrees that the Hedging
Agreement Counterparties shall be third-party beneficiaries of the covenant
contained in Sections 10 and 12.5 and shall be entitled to rely on and enforce
such covenants as though the Hedging Agreement Counterparties were parties to
this Agreement.
SECTION 12.20 Consent to Jurisdiction. Each of the parties hereto (i)
-----------------------
hereby irrevocably submits to the nonexclusive jurisdiction of the Supreme Court
of the State of New York, New York County (without prejudice to the right of any
party to remove to the United States District Court for the Southern District of
New York) and to the jurisdiction of the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement, the other Transaction Documents, or
the subject matter hereof or thereof or any of the transactions contemplated
hereby or thereby brought by any of the parties hereto or their successors or
assigns, (ii) hereby irrevocably agrees that all claims in respect of such suit,
action or proceeding may be heard and determined in such New York State court
or, to the fullest extent permitted by Applicable Law, in such Federal court and
(iii) to the extent permitted by Applicable Law, hereby irrevocably waives, and
agrees not to assert, by way of motion, as a defense, or otherwise, in any such
suit, action or proceeding any claim that it is not personally subject to the
jurisdiction of the above-named courts, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement, the other Transaction Documents,
or the subject matter hereof or thereof may not be enforced in or by such court.
A final judgment obtained in respect of any action, suit or proceeding referred
to in this Section 12.20 shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any manner as provided by and
subject to Applicable Law. Each of the parties hereto hereby consents to
service of process in connection with the subject matter specified in the first
sentence of this Section 12.20 in connection with the above mentioned courts in
New York by registered mail, Federal Express, DHL or similar courier at the
address to which notices to it are to be given, it being agreed that service in
such manner shall constitute valid service upon such party or its respective
successors or assigns in connection with any such suit, action or proceeding
only; provided, however, that nothing in this Section 12.20(i) shall affect the
-------- -------
right of any of such party or its respective successors or assigns to serve
legal process in any other manner permitted by law or affect the right of any of
such parties or its respective successors or assigns to bring any suit, action
or proceeding against any other one of such parties or its respective property
in the courts of other jurisdictions.
SECTION 12.21 Deepwater Acknowledgement With Respect to Charter Trust
--------------------------------------------------------
Agreement. Deepwater hereby agrees and consents to the provisions of Section
---------
8.1(a) of the Charter Trust Agreement in respect of Deepwater's obligations to
reimburse the Charter Trustee's reasonable fees and expenses.
[Remainder of Page Intentionally Left Blank]
76
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this PARTICIPATION
AGREEMENT to be duly executed by their respective officers and thereunto duly
authorized as of the day and year first above written.
DEEPWATER DRILLING L.L.C.
By: /s/ TIM W. NAGLE
--------------------------------------------
Name: Tim W. Nagle
Title: Member Representative
DEEPWATER INVESTMENT TRUST 1998-A
By: WILMINGTON TRUST FSB, not in its
individual capacity, but solely as
Investment Trustee
By: /s/ JAMES P. LAWLER
--------------------------------------------
Name: James P. Lawler
Title: Vice President
WILMINGTON TRUST FSB, not in its
individual capacity, except as specified herein,
but solely as Investment Trustee
By: /s/ JAMES P. LAWLER
--------------------------------------------
Name: James P. Lawler
Title: Vice President
[Participation Agreement]
<PAGE>
WILMINGTON TRUST COMPANY, not in its
individual capacity, except as specified herein,
but solely as Charter Trustee
By: /s/ JAMES P. LAWLER
--------------------------------------------
Name: James P. Lawler
Title: Vice President
RBF DEEPWATER EXPLORATION INC.,
with respect to Sections 5.2 and 6.4 only
By: /s/ TIM W. NAGLE
--------------------------------------------
Name: Tim W. Nagle
Title: Vice President and Treasurer
CONOCO DEVELOPMENT COMPANY, with
respect to Sections 5.2 and 6.4 only
By: /s/ R. N. HEINRICH
--------------------------------------------
Name: R. N. Heinrich
Title: Attorney-in-Fact
[Participation Agreement]
<PAGE>
BA LEASING & CAPITAL CORPORATION,
as Documentation Agent
By: /s/ MARK A. ERICKSON
--------------------------------------------
Name: Mark A. Erickson
Title: Vice President
By:
--------------------------------------------
Name:
Title:
[Participation Agreement]
<PAGE>
ABN AMRO BANK N.V.,
as Administrative Agent
By: /s/ STUART MURRAY
--------------------------------------------
Name: Stuart Murray
Title: Vice President
By: /s/ STEPHANIE BALETTE
--------------------------------------------
Name: Stephanie Balette
Title: Assistant Vice President
[Participation Agreement]
<PAGE>
THE BANK OF NOVA SCOTIA,
as Syndication Agent
By: /s/ F. C. H. ASHBY
--------------------------------------------
Name: F. C. H. Ashby
Title: Senior Manager Loan Operations
By:
--------------------------------------------
Name:
Title:
[Participation Agreement]
<PAGE>
Certificate Purchasers:
BA LEASING & CAPITAL CORPORATION
By: /s/ MARK A. ERICKSON
--------------------------------------------
Name: Mark A. Erickson
Title: Vice President
By:
--------------------------------------------
Name:
Title:
ABN AMRO BANK N.V.
By: /s/ STUART MURRAY
--------------------------------------------
Name: Stuart Murray
Title: Vice President
By: /s/ STEPHANIE BALETTE
--------------------------------------------
Name: Stephanie Balette
Title: Assistant Vice President
BANK AUSTRIA AKTIENGESELLSCHAFT
NEW YORK BRANCH
By: /s/ R. TENHAVE
--------------------------------------------
Name: R. Tenhave
Title: SVP
By: /s/ KAREN L. JILL
--------------------------------------------
Name: Karen L. Jill
Title: Assistant Vice President
Bank Austria
[Participation Agreement]
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ F. C. H. ASHBY
--------------------------------------------
Name: F. C. H. Ashby
Title: Senior Manager Loan Operations
By:
--------------------------------------------
Name:
Title:
BAYERISCHE VEREINSBANK AG
NEW YORK BRANCH
By: /s/ RALF ENKE
--------------------------------------------
Name: Ralf Enke
Title: Assistant Treasurer
By: /s/ ALAN BABCOCK
--------------------------------------------
Name: Alan Babcock
Title: Executive Vice President
COMMERZBANK AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By:
--------------------------------------------
Name:
Title:
By: /s/ W. DAVID SUTTLES
--------------------------------------------
Name: W. David Suttles
Title: Vice President
[Participation Agreement]
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ CONRAD MEYER
--------------------------------------------
Name: Conrad Meyer
Title: Vice President
By:
--------------------------------------------
Name:
Title:
GREAT-WEST LIFE AND ANNUITY
INSURANCE COMPANY
By: /s/ JAMES G. LOWERY
--------------------------------------------
Name: James G. Lowery
Title: Assistant Vice President Investments
By: /s/ WAYNE T. HOFFMANN
--------------------------------------------
Name: Wayne T. Hoffmann
Title: Vice President Investments
MEES PIERSON CAPITAL CORPORATION
By: /s/ D. THOMAS ABBOTT
--------------------------------------------
Name: D. Thomas Abbott
Title: Chairman
By: /s/ SVEIN ENGH
--------------------------------------------
Name: Svein Engh
Title: Vice President
[Participation Agreement]
<PAGE>
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By: /s/ FELICIA LA FORGIA
--------------------------------------------
Name: Felicia La Forgia
Title: Vice President
By: /s/ KENNETH R. CREPSO
--------------------------------------------
Name: Kenneth R. Crespo
Title: Vice President
[Participation Agreement]
<PAGE>
EXHIBIT A
Form of Funding Indemnity Letter
[Participation Agreement]
<PAGE>
EXHIBIT B
Opinion of White & Case LLP, special counsel to Deepwater
Exhibit C
Opinion of Hunton & Williams, counsel to Conoco
Exhibit D
Opinion of Wayne K. Anderson, in-house counsel to Conoco
Exhibit E
Opinion of Wayne K. Hillin, counsel to R&B
Exhibit F
Officer's and Manager's Certificate
Exhibit G
Officer's Certificate
Exhibit H-1
Amended and Restated Drilling Contract
Exhibit H-2
Amended and Restated Drilling Contract Guaranty
Exhibit I
Conoco Drilling Consent
Exhibit J
Securities Act Representation from PricewaterhouseCoopers LLP
Exhibit K
Form of Conoco Assumption Agreement and Opinion
Exhibit L
Builder's Certificate
Exhibit M
Bill of Sale
Exhibit N
Form of Advance Request
Exhibit O
Opinion of Haight, Gardner, Holland & Knight
[Participation Agreement]
<PAGE>
Exhibit P
Opinion of Arias, Fabrega & Fabrega, Panamanian Counsel
Exhibit Q
Form of Notice of Certificate Return Rate
Exhibit R
Replacement Certificate Purchaser Assignment and Assumption Agreement
Exhibit S-1
Form of Hedging Agreements
Exhibit S-2
Form of Deepwater Hedging Agreements
Exhibit T
Form of Ship Mortgage
Exhibit U
Opinions of Cynthia L. Corliss, Vice President and Trust Counsel of
Wilmington Trust Company and Richards, Layton & Finger
Schedule 1
List of Transaction Documents
Schedule 2
Facility Fee Rate
Schedule 3
List of UCC and Other Necessary Security Filings
Schedule 4
Information Relied Upon by Appraiser
1. Description & General Design Specifications for the Drillship
2. Construction Cost Data
3. Participation Agreement
Schedule 5
Certificate Purchaser Notice Addresses,
Payment Instructions and Responsible Officers
[Participation Agreement]
<PAGE>
Schedule 6
Description of OFE
Schedule 7
Terms of Subordination for Subordinated Debt
[Participation Agreement]
<PAGE>
Schedule 8
Conditions to Effective Date
1. Each Certificate Purchaser shall have received its respective
Certificate in accordance with Section 2.4.
2. All parties thereto shall have executed and delivered this
Agreement, the Trust Agreements, the Completion Guaranty, the Conoco Guaranty
and the R&B Guaranty.
3. The Agents and each Certificate Purchaser shall have received the
Appraisal in form and substance satisfactory to the Documentation Agent and
Deepwater shall have received a copy thereof.
4. No action shall have been instituted, nor shall any action or
proceeding be threatened, before any Government Authority, nor shall any order,
judgment or decree have been issued or proposed to be issued by any Government
Authority (i) to set aside, restrain, enjoin or prevent the performance of this
Participation Agreement, any other Transaction Document or any transaction
contemplated hereby or thereby or (ii) which would have a Material Adverse
Effect.
5. The transactions contemplated by the Transaction Documents do not
and will not (i) violate any Applicable Law, (ii) contravene any charter,
by-laws or other organizational document of Deepwater, the Members, Conoco, R&B,
the Investment Trust, the Trustees, the Agents or any Certificate Purchaser,
(iii) contravene any contract, agreement or other arrangement to which
Deepwater, the Investment Trust, the Trustees, the Agents or any Certificate
Purchaser is a party or by which any of their respective properties or assets
are bound, or (iv) subject Deepwater, any Member, the Investment Trust, the
Trustees, any Agent or any Certificate Purchaser to any regulations to which
such party had not been subject prior to entering into such Transaction
Documents and which would be materially adverse to such party.