MASTER SEPARATION AGREEMENT
AMONG
TRANSOCEAN INC.,
TRANSOCEAN HOLDINGS INC.
AND
TODCO
TABLE OF CONTENTS
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Conditional Insurance Notice. . . . . . . . . . . . . . . . . . . 3
1.14 Confidential Information. . . . . . . . . . . . . . . . . . . . . 3
1.15 Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 D&O Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 D&O Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 Devco Business. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 Employee Matters Agreement. . . . . . . . . . . . . . . . . . . . 3
1.22 Energy Virtual Partners . . . . . . . . . . . . . . . . . . . . . 3
1.23 Escalation Notice . . . . . . . . . . . . . . . . . . . . . . . . 3
1.24 Excess Director Number. . . . . . . . . . . . . . . . . . . . . . 3
1.25 Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.26 Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.27 Final Order . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.28 GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.29 Governmental Approvals. . . . . . . . . . . . . . . . . . . . . . 4
1.30 Governmental Authority. . . . . . . . . . . . . . . . . . . . . . 4
1.31 Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.33 Indemnifiable Loss. . . . . . . . . . . . . . . . . . . . . . . . 4
1.34 Indemnification Payment . . . . . . . . . . . . . . . . . . . . . 4
1.35 Indemnifying Party. . . . . . . . . . . . . . . . . . . . . . . . 4
1.36 Indemnitee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.37 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.38 Insurance Continuation Notice . . . . . . . . . . . . . . . . . . 5
1.39 Insurance Policies. . . . . . . . . . . . . . . . . . . . . . . . 5
1.40 Insurance Premium Amount. . . . . . . . . . . . . . . . . . . . . 5
1.41 Insurance Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 5
1.42 Intellectual Property Rights. . . . . . . . . . . . . . . . . . . 5
1.43 Intercompany Agreement. . . . . . . . . . . . . . . . . . . . . . 5
1.44 Intercompany Payables . . . . . . . . . . . . . . . . . . . . . . 6
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1.45 Intercompany Receivables. . . . . . . . . . . . . . . . . . . . . 6
1.46 IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.47 IPO Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . 6
1.48 IPO Prospectus. . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.49 IPO Registration Statement. . . . . . . . . . . . . . . . . . . . 6
1.50 Issuance Event. . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.51 Issuance Event Date . . . . . . . . . . . . . . . . . . . . . . . 6
1.52 Joint Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.53 Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.54 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.55 Licensed Intellectual Property. . . . . . . . . . . . . . . . . . 6
1.56 Licensed Marks. . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.57 Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.58 Market Price. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.59 Marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.60 North American Turnkey Business . . . . . . . . . . . . . . . . . 7
1.61 NYSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.62 Ownership Percentage. . . . . . . . . . . . . . . . . . . . . . . 7
1.63 Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.64 Prior Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.65 Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.66 Privileged Information. . . . . . . . . . . . . . . . . . . . . . 8
1.67 Reduced Ownership Date. . . . . . . . . . . . . . . . . . . . . . 8
1.68 Registration Rights Agreement . . . . . . . . . . . . . . . . . . 8
1.69 Securities Act. . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.70 Separation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.71 Subscription Right. . . . . . . . . . . . . . . . . . . . . . . . 8
1.72 Subscription Right Notice . . . . . . . . . . . . . . . . . . . . 8
1.73 Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.74 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.75 Tax Sharing Agreement . . . . . . . . . . . . . . . . . . . . . . 8
1.76 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.77 Third Party Claim . . . . . . . . . . . . . . . . . . . . . . . . 9
1.78 TODCO Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.79 TODCO Books and Records . . . . . . . . . . . . . . . . . . . . . 9
1.80 TODCO Business. . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.81 TODCO Class A Common Stock. . . . . . . . . . . . . . . . . . . .12
1.82 TODCO Class B Common Stock. . . . . . . . . . . . . . . . . . . .12
1.83 TODCO Common Stock. . . . . . . . . . . . . . . . . . . . . . . .12
1.84 TODCO Debt Obligations. . . . . . . . . . . . . . . . . . . . . .12
1.85 TODCO Excluded Liabilities. . . . . . . . . . . . . . . . . . . .12
1.86 TODCO Group . . . . . . . . . . . . . . . . . . . . . . . . . . .12
1.87 TODCO Guarantees. . . . . . . . . . . . . . . . . . . . . . . . .12
1.88 TODCO Indemnitees . . . . . . . . . . . . . . . . . . . . . . . .12
1.89 TODCO Liabilities . . . . . . . . . . . . . . . . . . . . . . . .12
1.90 TODCO Non-Voting Stock. . . . . . . . . . . . . . . . . . . . . .14
1.91 TODCO Pro Forma Balance Sheet . . . . . . . . . . . . . . . . . .14
1.92 TODCO Rights Plan . . . . . . . . . . . . . . . . . . . . . . . .14
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1.93 TODCO Stock . . . . . . . . . . . . . . . . . . . . . . . . . . .14
1.94 TODCO Voting Stock. . . . . . . . . . . . . . . . . . . . . . . .14
1.95 Transition Services Agreement . . . . . . . . . . . . . . . . . .14
1.96 Transocean Auditors . . . . . . . . . . . . . . . . . . . . . . .14
1.97 Transocean Books and Records. . . . . . . . . . . . . . . . . . .14
1.98 Transocean Business . . . . . . . . . . . . . . . . . . . . . . .15
1.99 Transocean Group. . . . . . . . . . . . . . . . . . . . . . . . .15
1.100 Transocean Indemnitees. . . . . . . . . . . . . . . . . . . . . .15
1.101 Transocean Transferee . . . . . . . . . . . . . . . . . . . . . .15
1.102 Underwriters. . . . . . . . . . . . . . . . . . . . . . . . . . .15
1.103 Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . .15
1.104 Voting Percentage . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE II SEPARATION AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . .15
2.1 Separation. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
2.2 Office Equipment and Furnishings. . . . . . . . . . . . . . . . .16
2.3 Intellectual Property . . . . . . . . . . . . . . . . . . . . . .16
2.4 Instruments of Transfer and Assumption. . . . . . . . . . . . . .17
2.5 No Representations or Warranties. . . . . . . . . . . . . . . . .18
2.6 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
2.7 Transfers Not Effected Prior to the Exchange Date . . . . . . . .18
2.8 Additional Transfers of Assets. . . . . . . . . . . . . . . . . .19
2.9 Working Capital . . . . . . . . . . . . . . . . . . . . . . . . .20
ARTICLE III MUTUAL RELEASES; INDEMNIFICATION . . . . . . . . . . . . . . . . .20
3.1 Release of Pre-Closing Claims . . . . . . . . . . . . . . . . . .20
3.2 Termination of Intercompany Agreements and Assumption
of Intercompany Balances. . . . . . . . . . . . . . . . . . . . .22
3.3 Indemnification by TODCO. . . . . . . . . . . . . . . . . . . . .22
3.4 Indemnification by Transocean Holdings. . . . . . . . . . . . . .23
3.5 Transocean's Guarantee of Transocean Holdings'
Indemnification Obligation. . . . . . . . . . . . . . . . . . . .24
3.6 Indemnification Obligations Net of Insurance Proceeds . . . . . .24
3.7 Indemnification Obligations Net of Taxes. . . . . . . . . . . . .25
3.8 Procedures for Indemnification of Third Party Claims. . . . . . .25
3.9 Additional Matters. . . . . . . . . . . . . . . . . . . . . . . .28
3.10 Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . .29
3.11 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . .29
3.12 Survival of Indemnities . . . . . . . . . . . . . . . . . . . . .29
3.13 Indemnification of Directors and Officers . . . . . . . . . . . .29
ARTICLE IV THE IPO AND ACTIONS PENDING THE IPO . . . . . . . . . . . . . . . .29
4.1 Transactions Prior to the IPO . . . . . . . . . . . . . . . . . .29
4.2 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . .30
4.3 Conditions Precedent to Consummation of the IPO . . . . . . . . .30
ARTICLE V CORPORATE GOVERNANCE AND OTHER MATTERS . . . . . . . . . . . . . . .31
5.1 Charter and Bylaws. . . . . . . . . . . . . . . . . . . . . . . .31
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5.2 Rights Plan Amendments. . . . . . . . . . . . . . . . . . . . . .31
5.3 Charter/Bylaw Amendments. . . . . . . . . . . . . . . . . . . . .31
5.4 TODCO Board Representation. . . . . . . . . . . . . . . . . . . .32
5.5 Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
5.6 Subscription Right. . . . . . . . . . . . . . . . . . . . . . . .34
5.7 Tax-Free Spin-Off . . . . . . . . . . . . . . . . . . . . . . . .36
5.8 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . .36
5.9 Applicability of Rights to Parent in the Event of
an Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . .36
5.10 Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . .37
ARTICLE VI ARBITRATION; DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . .37
6.1 Agreement to Arbitrate. . . . . . . . . . . . . . . . . . . . . .37
6.2 Escalation. . . . . . . . . . . . . . . . . . . . . . . . . . . .37
6.3 Demand for Arbitration. . . . . . . . . . . . . . . . . . . . . .38
6.4 Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . . .39
6.5 Hearings. . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
6.6 Discovery and Certain Other Matters . . . . . . . . . . . . . . .40
6.7 Certain Additional Matters. . . . . . . . . . . . . . . . . . . .41
6.8 Continuity of Service and Performance . . . . . . . . . . . . . .41
6.9 Law Governing Arbitration Procedures. . . . . . . . . . . . . . .42
ARTICLE VII COVENANTS AND OTHER MATTERS. . . . . . . . . . . . . . . . . . . .42
7.1 Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . .42
7.2 Further Instruments . . . . . . . . . . . . . . . . . . . . . . .42
7.3 Provision of Corporate Records. . . . . . . . . . . . . . . . . .43
7.4 Agreement For Exchange of Information . . . . . . . . . . . . . .43
7.5 Auditors and Audits; Annual, Quarterly and Monthly
Statements and Accounting Forecasts . . . . . . . . . . . . . . .45
7.6 Audit Rights. . . . . . . . . . . . . . . . . . . . . . . . . . .48
7.7 Preservation of Legal Privileges. . . . . . . . . . . . . . . . .49
7.8 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . .50
7.9 Governmental Approvals. . . . . . . . . . . . . . . . . . . . . .51
7.10 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . .51
7.11 Guarantee Obligations . . . . . . . . . . . . . . . . . . . . . .51
7.12 Certain Non-Competition Provisions. . . . . . . . . . . . . . . .52
7.13 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . .53
7.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .58
8.1 Limitation of Liability . . . . . . . . . . . . . . . . . . . . .58
8.2 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . .58
8.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .58
8.4 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . .58
8.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
8.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . .59
8.7 Binding Effect; Assignment. . . . . . . . . . . . . . . . . . . .59
8.8 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . .59
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8.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . .59
8.10 Failure or Indulgence Not Waiver; Remedies Cumulative . . . . . .59
8.11 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
8.12 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
8.13 Specific Performance. . . . . . . . . . . . . . . . . . . . . . .60
8.14 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . .60
8.15 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . .60
8.16 Conflicting Agreements. . . . . . . . . . . . . . . . . . . . . .60
Schedule 1.39
Schedule 1.89
Schedule 3.3(d)
Schedule 5.1(a)
Schedule 5.1(b)
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MASTER SEPARATION AGREEMENT
THIS MASTER SEPARATION AGREEMENT (this "Agreement") is entered into as
of February 4, 2004, among Transocean Inc., a company organized under the laws
of the Cayman Islands ("Transocean"), Transocean Holdings Inc., a Delaware
corporation ("Transocean Holdings"), and TODCO (formerly named R&B Falcon
Corporation), a Delaware corporation ("TODCO"). Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to such terms in
Article I hereof.
RECITALS
WHEREAS, TODCO is a direct wholly owned Subsidiary of Transocean
Holdings, and Transocean Holdings is a direct wholly owned Subsidiary of
Transocean; and
WHEREAS, the Board of Directors of Transocean has determined that it
would be appropriate and desirable for Transocean to separate the TODCO Group
from the Transocean Group and, in that connection, for each Group to acquire
certain assets from and assume certain Liabilities of the other Group; and
WHEREAS, the Board of Directors of each of TODCO and Transocean
Holdings has also approved such transactions; and
WHEREAS, Transocean, Transocean Holdings and TODCO currently
contemplate that TODCO will make an initial public offering ("IPO") of shares of
TODCO Class A Common Stock held by Transocean Holdings pursuant to a
registration statement on Form S-1 filed pursuant to the Securities Act; and
WHEREAS, Transocean wishes to retain the flexibility so that if,
following the IPO, Transocean's direct and indirect ownership of the voting
power of all of the outstanding shares of TODCO Voting Stock is at least 80%,
Transocean could distribute to the holders of its ordinary shares (including any
distribution in exchange for Transocean ordinary shares or other securities), by
means of a distribution or exchange offer, shares of TODCO Voting Stock it then
owns in a transaction intended to qualify as a tax-free distribution under
Section 355 of the Code or any corresponding provision of any successor statute;
and
WHEREAS, the parties intend in this Agreement, including the Exhibits
and Schedules hereto, to set forth the principal arrangements between them
regarding the separation of the TODCO Group from the Transocean Group, the IPO
and any Distribution.
NOW, THEREFORE, in consideration of the foregoing and the covenants
and agreements set forth below, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 ACTION. "Action" means any demand, action, suit, countersuit,
arbitration, inquiry, proceeding or investigation by or before any federal,
state, local, foreign or international Governmental Authority or any arbitration
or mediation tribunal.
1.2 AFFILIATES. An "Affiliate" of any Person means another Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For this purpose
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of the Person controlled,
whether through ownership of voting securities, by contract or otherwise.
Notwithstanding anything herein to the contrary, no member of the TODCO Group
shall be deemed an Affiliate of any member of the Transocean Group and no member
of the Transocean Group shall be deemed an Affiliate of any member of the TODCO
Group.
1.3 ANCILLARY AGREEMENTS. "Ancillary Agreements" has the meaning set
forth in Section 2.6.
1.4 APPLICABLE DEADLINE. "Applicable Deadline" has the meaning set
forth in Section 6.3(b).
1.5 APPROPRIATE MEMBER OF THE TODCO GROUP. "Appropriate Member of the
TODCO Group" has the meaning set forth in Section 3.3.
1.6 APPROPRIATE MEMBER OF THE TRANSOCEAN GROUP. "Appropriate Member of
the Transocean Group" has the meaning set forth in Section 3.4.
1.7 ARBITRATION ACT. "Arbitration Act" means the United States
Arbitration Act, 9 U.S.C. 1-14, as the same may be amended from time to time.
1.8 ARBITRATION DEMAND DATE. "Arbitration Demand Date" has the meaning
set forth in Section 6.3(a).
1.9 ARBITRATION DEMAND NOTICE. "Arbitration Demand Notice" has the
meaning set forth in Section 6.3(a).
1.10 BUSINESS DAY. "Business Day" means a day other than a Saturday, a
Sunday or a day on which banking institutions located in the State of Texas are
authorized or obligated by law or executive order to close.
1.11 CODE. "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
1.12 COMMISSION. "Commission" means the Securities and Exchange
Commission.
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1.13 CONDITIONAL INSURANCE NOTICE. "Conditional Insurance Notice" has
the meaning set forth in Section 7.14.
1.14 CONFIDENTIAL INFORMATION. "Confidential Information" has the
meaning set forth in Section 7.13.
1.15 CONTRACT. "Contract" means any contract, agreement, lease,
license, sales order, purchase order, instrument or other commitment or
arrangement that is binding on any Person or entity or any part of its property
under applicable Law.
1.16 D&O CLAIMS. "D&O Claims" means claims under any D&O Policy.
1.17 D&O POLICIES. "D&O Policy" means Transocean's current Directors
and Officers Liability Policies, Employment Practices Liability Policy,
Fiduciary Liability Policy, Special Crimes Policy and ERISA Bonding Facility and
any other similar future policies (including any agreements related to such
policies) issued to Transocean by any insurance carrier unaffiliated with
Transocean pursuant to which one or more members of the TODCO Group (or their
respective officers or directors) are insured parties, if Transocean has
notified TODCO in writing that such policy has been issued and TODCO has
notified Transocean in writing within 10 Business Days of its receipt of such
notice from Transocean that it elects that such policy shall constitute a "D&O
Policy" within the meaning of this definition.
1.18 DEVCO BUSINESS. "Devco Business" has the meaning set forth in
Section 1.81(b).
1.19 DISTRIBUTION. "Distribution" has the meaning set forth in Section
5.7.
1.20 DISTRIBUTION DATE. "Distribution Date" means the date the
Distribution is effective.
1.21 EMPLOYEE MATTERS AGREEMENT. "Employee Matters Agreement" means
the Employee Matters Agreement dated the date hereof among Transocean,
Transocean Holdings and TODCO.
1.22 ENERGY VIRTUAL PARTNERS. "Energy Virtual Partners" has the
meaning set forth in Section 1.81(a)(v).
1.23 ESCALATION NOTICE. "Escalation Notice" has the meaning set forth
in Section 6.2(a).
1.24 EXCESS DIRECTOR NUMBER. "Excess Director Number" has the meaning
set forth in Section 5.4(d).
1.25 EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.26 EXCHANGE. "Exchange" means the issuance by TODCO of TODCO Class B
Common Stock to Transocean and Transocean Holdings in exchange for all of its
Remaining
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outstanding 6.75%, 7.375% and 9.50% notes, if any, held by Transocean and
Transocean Holdings.
1.27 FINAL ORDER. Unless the context requires otherwise, "Final
Order," "Order," "Injunction," "Decree," "Legal Restraint," "Prohibition,"
"Writ" or other words of similar import shall mean final adjudication by a court
or regulatory agency that is no longer subject to rehearing or appeal.
1.28 GAAP. "GAAP" means generally accepted accounting principles in
the United States in effect from time to time.
1.29 GOVERNMENTAL APPROVALS. "Governmental Approvals" means any
notices, reports or other filings to be made, or any consents, registrations,
approvals, permits or authorizations to be obtained from, any Governmental
Authority.
1.30 GOVERNMENTAL AUTHORITY. "Governmental Authority" shall mean any
U.S. federal, state, local or non-U.S. court, government, department,
commission, board, bureau, agency, official or other regulatory, administrative
or governmental authority.
1.31 GROUP. "Group" means either of the Transocean Group or the TODCO
Group, as the context requires.
1.32 INDEBTEDNESS. "Indebtedness" of any Person means (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily paid, (d)
all obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (e) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services, (f) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any mortgage, lien, pledge, or other encumbrance on property
owned or acquired by such Person, whether or not the obligations secured thereby
have been assumed, (g) all guarantees by such Person of Indebtedness of others,
(h) all capital lease obligations of such Person, and (i) all securities or
other similar instruments convertible or exchangeable into any of the foregoing,
but excluding daily cash overdrafts associated with routine cash operations.
1.33 INDEMNIFIABLE LOSS. "Indemnifiable Loss" has the meaning set
forth in Section 3.6(a).
1.34 INDEMNIFICATION PAYMENT. "Indemnification Payment" means the
amount an Indemnifying Party is required to pay to (or for the benefit of) an
Indemnitee pursuant to this Agreement.
1.35 INDEMNIFYING PARTY. "Indemnifying Party" has the meaning set
forth in Section 3.6(a).
1.36 INDEMNITEE. "Indemnitee" shall have the meaning set forth in
Section 3.6(a).
4
1.37 INFORMATION. "Information" means information, whether or not
patentable or copyrightable, in written, oral, electronic or other tangible or
intangible forms, stored in any medium, including studies, reports, records,
books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
1.38 INSURANCE CONTINUATION NOTICE. "Insurance Continuation Notice"
has the meaning set forth in Section 7.14(c).
1.39 INSURANCE POLICIES. "Insurance Policies" means the insurance
policies (including any agreements related to such policies) set forth in
Schedule 1.39 and any future insurance policies (including any agreements
related to such policies) issued to Transocean by any insurance carrier
unaffiliated with Transocean pursuant to which one or more members of the TODCO
Group (or their respective officers or directors) are insured parties, if
Transocean has notified TODCO in writing that such policy has been issued and
TODCO has notified Transocean in writing within 10 Business Days of its receipt
of such notice from Transocean that it elects that such policy shall constitute
an "Insurance Policy" within the meaning of this definition; provided however
that any D&O Policies shall not constitute Insurance Policies.
1.40 INSURANCE PREMIUM AMOUNT. "Insurance Premium Amount" has the
meaning set forth in Section 7.14(b).
1.41 INSURANCE PROCEEDS. "Insurance Proceeds" means those monies:
(a) received by an insured from an insurance carrier; or
(b) paid by an insurance carrier on behalf of the insured;
in any such case and net of any out-of-pocket costs or expenses incurred in the
collection thereof.
1.42 INTELLECTUAL PROPERTY RIGHTS. "Intellectual Property Rights"
means all industrial and intellectual property rights, including, without
limitation, trademarks, service marks, patents, copyrights, design rights,
rights in know-how, trade secrets and other rights of a similar nature
subsisting anywhere in the world, in each case whether registered or
unregistered and including all applications for the registration of the same,
owned or used by any member of the TODCO Group on or prior to the date of this
Agreement.
1.43 INTERCOMPANY AGREEMENT. "Intercompany Agreement" means any
Contract between any entities included within the TODCO Group, on the one hand,
and any entities within the Transocean Group, on the other hand, entered into
prior to the IPO Closing Date, excluding any Contract to which a Person other
than Transocean, TODCO or one of their Subsidiaries is a party.
5
1.44 INTERCOMPANY PAYABLES. "Intercompany Payables" has the meaning
set forth in Section 3.2.
1.45 INTERCOMPANY RECEIVABLES. "Intercompany Receivables" has the
meaning set forth in Section 3.2.
1.46 IPO. "IPO" has the meaning set forth in the Recitals.
1.47 IPO CLOSING DATE. "IPO Closing Date" means the first date on
which the proceeds of any sale of TODCO Class A Common Stock to the underwriters
in the IPO are received.
1.48 IPO PROSPECTUS. "IPO Prospectus" means the prospectus included in
the IPO Registration Statement, including any prospectus subject to completion,
final prospectus or any supplement to or amendment of any of the foregoing.
1.49 IPO REGISTRATION STATEMENT. "IPO Registration Statement" means
the Registration Statement on Form S-1 (Registration No. 333-101921) of TODCO
filed with the Commission pursuant to the Securities Act of 1933, as amended,
registering the shares of TODCO Class A Common Stock to be sold in the IPO,
together with all amendments thereto.
1.50 ISSUANCE EVENT. "Issuance Event" has the meaning set forth in
Section 5.6(c).
1.51 ISSUANCE EVENT DATE. "Issuance Event Date" has the meaning set
forth in Section 5.6(c).
1.52 JOINT CLAIMS. "Joint Claims" means any claims under any Insurance
Policy or D&O Policy that (a) the insurance carrier claims or could reasonably
be expected to claim relate to a single incident or occurrence and (b) results
or could reasonably be expected to result in the payment of Insurance Proceeds
to or for the benefit of both one or more members of the Transocean Group and
one or more members of the TODCO Group.
1.53 LAW. "Law" means any law, statute, ordinance, rule, regulation,
order, writ, judgment, injunction or decree of any Governmental Authority.
1.54 LIABILITIES. "Liabilities" shall mean any and all Indebtedness,
liabilities and obligations, whether accrued, fixed or contingent, mature or
inchoate, known or unknown, reflected on a balance sheet or otherwise,
including, but not limited to, those arising under any Law, Action or any
judgment of any court of any kind or any award of any arbitrator of any kind,
and those arising under any contract, commitment or undertaking.
1.55 LICENSED INTELLECTUAL PROPERTY. "Licensed Intellectual Property"
means all industrial and intellectual property rights, including, without
limitation, patents, copyrights, design rights, rights in know-how, trade
secrets and other rights of a similar nature (excluding trade marks, service
marks, trade names and domain names) subsisting anywhere in the world, in each
case whether registered or unregistered, owned by the Transocean Group as of the
date of this Agreement and previously used by any member of the TODCO Group for
the conduct of the TODCO Business.
6
1.56 LICENSED MARKS. "Licensed Marks" means "R&B Falcon Corporation,"
"R&B Falcon," and "RBF."
1.57 LOSSES. "Losses" shall mean any and all damages, losses,
deficiencies, Liabilities, obligations, penalties, judgments, settlements,
claims, payments, fines, interest costs and expenses (including, without
limitation, the costs and expenses of any and all Actions and demands,
assessments, judgments, settlements and compromises relating thereto and the
costs and expenses of attorneys', accountants', consultants' and other
professionals' fees and expenses incurred in the investigation or defense
thereof or the enforcement of rights hereunder), including direct and
consequential damages, but excluding (a) punitive damages (other than punitive
damages awarded to any third party against an Indemnified Party for which
indemnity is owed hereunder) and (b) any reduction in the value of the shares of
TODCO Common Stock.
1.58 MARKET PRICE. "Market Price" of any shares of TODCO Stock on any
date means (i) the last sale price during regular trading hours of such shares
on such date on the New York Stock Exchange, Inc. or, if such shares are not
listed thereon, on the principal national securities exchange or automated
interdealer quotation system on which such shares are traded or (ii) if such
sale price is unavailable or such shares are not so traded, the value of such
shares on such date determined in accordance with agreed-upon procedures
reasonably satisfactory to Transocean and TODCO.
1.59 MARKS. "Marks" means trade names, registered and unregistered
trade marks, service marks, domain names and e-mail addresses comprising or
including the terms "Transocean," "R&B Falcon," "Reading & Xxxxx," "R&B," "RBF,"
or any derivatives thereof or any terms of a confusingly similar nature.
1.60 NORTH AMERICAN TURNKEY BUSINESS. "North American Turnkey
Business" has the meaning set forth in Section 1.81(b).
1.61 NYSE. "NYSE" means the New York Stock Exchange, Inc.
1.62 OWNERSHIP PERCENTAGE. "Ownership Percentage" means with respect
to any class or series of TODCO Non-Voting Stock, at any time, the fraction,
expressed as a percentage and rounded to the nearest thousandth of a percent,
whose numerator is the number of shares of such class or series of TODCO
Non-Voting Stock owned by the Transocean Group and whose denominator is the
total number of outstanding shares of such class or series of TODCO Non-Voting
Stock; provided, however, that any shares of such TODCO Non-Voting Stock issued
by TODCO in violation of its obligations under Section 5.6 of this Agreement
shall not be deemed outstanding for the purpose of determining the Ownership
Percentage.
1.63 PERSON. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization or a governmental
entity or any department, agency or political subdivision thereof.
1.64 PRIOR TRANSFER. "Prior Transfer" means a transfer prior to the
Exchange of any part of the TODCO Business contained in the Transocean Group to
the TODCO Group and an assumption prior to the Exchange Date by the TODCO Group
of any of the TODCO Liabilities,
7
and the transfer prior to the Exchange of any part of the Transocean Business
contained in the TODCO Group to the Transocean Group and an assumption prior to
the Exchange by the Transocean Group of any of the TODCO Excluded Liabilities.
1.65 PRIVILEGE. "Privilege" has the meaning set forth in Section
7.7(a).
1.66 PRIVILEGED INFORMATION. "Privileged Information" has the meaning
set forth in Section 7.7(a).
1.67 REDUCED OWNERSHIP DATE. "Reduced Ownership Date" means the first
date on which Transocean ceases to own at least 30% of the voting power of all
the outstanding shares of TODCO Voting Stock.
1.68 REGISTRATION RIGHTS AGREEMENT. "Registration Rights Agreement"
means the Registration Rights Agreement dated the date hereof among Transocean,
Transocean Holdings and TODCO.
1.69 SECURITIES ACT. "Securities Act" means the Securities Act of
1933, as amended.
1.70 SEPARATION. "Separation" means (i) the transfer of those assets
(including funds received relating to the TODCO Business) relating primarily to
the TODCO Business as conducted immediately prior to the Exchange that are
contained in the Transocean Group immediately prior to the Exchange to the TODCO
Group and the assumption by the TODCO Group of the TODCO Liabilities and (ii)
the transfer of those assets (including funds received relating to Transocean
Business) relating primarily to the Transocean Business as conducted immediately
prior to the Exchange that are contained in the TODCO Group immediately prior to
the Exchange to Transocean Holdings and its Subsidiaries and the assumption by
Transocean Holdings and its Subsidiaries of the TODCO Excluded Liabilities; all
as more fully described in this Agreement and the Ancillary Agreements.
1.71 SUBSCRIPTION RIGHT. "Subscription Right" has the meaning set
forth in Section 5.6(a).
1.72 SUBSCRIPTION RIGHT NOTICE. "Subscription Right Notice" has the
meaning set forth in Section 5.6(c).
1.73 SUBSIDIARY. A "Subsidiary" of any Person means any corporation or
other organization whether incorporated or unincorporated of which at least a
majority of the securities or interests having by the terms thereof ordinary
voting power to elect at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries.
1.74 TAXES. "Taxes" has the meaning set forth in the Tax Sharing
Agreement.
1.75 TAX SHARING AGREEMENT. "Tax Sharing Agreement" means the Tax
Sharing Agreement dated the date hereof between Transocean Holdings and TODCO.
8
1.76 TAX RETURNS. "Tax Returns" has the meaning set forth in the Tax
Sharing Agreement.
1.77 THIRD PARTY CLAIM. "Third Party Claim" has the meaning set forth
in Section 3.8(a).
1.78 TODCO AUDITORS. "TODCO Auditors" means TODCO's independent
certified public accountants.
1.79 TODCO BOOKS AND RECORDS. "TODCO Books and Records" means the
books and records of Transocean and its Subsidiaries (or true and complete
copies thereof) including all computerized books and records owned by Transocean
and its Subsidiaries, to the extent they primarily relate to the TODCO Business,
including, but not limited to, the minute books, corporate charters and by-laws
or comparable constitutive documents, records of shares issuances and related
corporate records of the TODCO Group, all such books and records primarily
relating to Persons who are employees of TODCO as of the IPO Closing Date, the
purchase of materials, supplies and services, dealings with customers of the
TODCO Business and all files relating to any Action the Liability with respect
to which is an TODCO Liability, except that no portion of the books and records
of Transocean or its Subsidiaries containing minutes of meetings of any board of
directors of any of them shall be included. Notwithstanding the foregoing,
"TODCO Books and Records" shall not include any Tax Returns or other
information, documents or materials relating to Taxes.
1.80 TODCO BUSINESS.
(a) "TODCO Business" means the following businesses and activities
(including, without limitation, those conducted prior to the date of this
Agreement):
(i) contract drilling, workover, production or similar
services for oil and gas xxxxx provided by TODCO and its Subsidiaries
using jackup, submersible, barge (including workover) and platform
drilling rigs in the U.S. Gulf of Mexico and U.S. inland waters
(including, without limitation, maintenance activities and
mobilization activities (in the event such mobilization activities
were undertaken in preparation for services described in clause (i) or
(ii) of this Section 1.80(a)) in connection with the rigs or other
assets utilized to provide such services),
(ii) contract drilling, workover, production or similar
services for oil and gas xxxxx provided by TODCO and its Subsidiaries
in and offshore Mexico, Trinidad, Colombia and Venezuela (including,
without limitation, maintenance activities and mobilization activities
(in the event such mobilization activities were undertaken in
preparation for services described in clause (i) or (ii) of this
Section 1.80(a)) in connection with the rigs or other assets utilized
to provide such services and including turnkey drilling services in
Venezuela),
(iii) construction activities (including construction
activities involving an upgrade to, or modification of, a rig) in
connection with the
9
rigs or other assets owned by a member of the TODCO Group immediately
after the IPO Closing Date (after giving effect to any transfers of
assets pursuant to Section 2.1),
(iv) the business and activities conducted through, and
ownership of, R&B Falcon Drilling USA, Inc.'s joint venture interest
in Delta Towing Holdings, LLC ("Delta Towing"), including without
limitation those related to any Indebtedness of Delta Towing and its
Subsidiaries owed to TODCO Group and its Subsidiaries and the
operation of such business and activities by TODCO and its
Subsidiaries prior to the formation of Delta Towing,
(v) the business and activities conducted through, and
ownership of, TODCO's investment in Energy Virtual Partners, Inc. and
Energy Virtual Partners, LP (together, "Energy Virtual Partners"),
(vi) the office or yard facilities (excluding the former
headquarters of R&B Falcon Corporation and Reading & Xxxxx
Corporation) owned or used by TODCO and its Subsidiaries to the extent
related to the services and activities described in this definition,
including without limitation those in Abbeville, Xxxxxxxxx, Houma and
New Iberia, Louisiana and the respective former headquarters of Falcon
Drilling Company, Inc. and Cliffs Drilling Company,
(vii) any business and activities conducted by the TODCO
Group following the IPO Closing Date,
(viii) except as otherwise provided in this Agreement, any
terminated, divested or discontinued business or operations that at
the time of termination, divestiture or discontinuation related
primarily to the TODCO Business, and
(ix) without limiting the generality of the foregoing
provisions of this Section 1.80(a), the ownership, charter, lease,
management or operation by TODCO and its Subsidiaries of any rigs or
other equipment or assets used to provide the services, and conduct
the business and activities, described above during the time such
services were provided and such business and activities were conducted
by TODCO and its Subsidiaries.
(b) The "TODCO Business" specifically excludes all businesses and
activities to the extent associated with the following activities of TODCO and
its Subsidiaries conducted prior to the IPO Closing Date:
(i) contract drilling, workover, production or similar
services for oil and gas xxxxx using semisubmersibles and drillships
in the U.S. Gulf of Mexico and offshore Trinidad (including, without
limitation, maintenance activities and mobilization activities (in the
event such
10
mobilization activities were undertaken in preparation for services
described in clause (i) or (ii) of this Section 1.80(b)) in connection
with the rigs or other assets utilized to provide such services),
(ii) contract drilling, workover, production or similar
services for oil and gas xxxxx in geographic regions outside of the
U.S. Gulf of Mexico, U.S. inland waters, Mexico, Colombia, Trinidad
and Venezuela (including, without limitation, maintenance activities
and mobilization activities (in the event such mobilization activities
were undertaken in preparation for services described in clause (i) or
(ii) of this Section 1.80(b)) in connection with the rigs or other
assets utilized to provide such services and such services using land
rigs in the United States),
(iii) construction activities (including construction
activities involving an upgrade to, or modification of, a rig) in
connection with the rigs or other assets and activities in connection
with the sale of rigs or other assets (A) owned by a member of the
Transocean Group immediately after the IPO Closing Date (after giving
effect to any transfer of assets pursuant to Section 2.1) or (B) not
owned by either a member of the TODCO Group or a member of the
Transocean Group immediately after the IPO Closing Date.
(iv) the ownership and operations of Reading & Xxxxx
Development Co. ("Devco") and other oil and gas exploration and
production activities conducted by other Subsidiaries of TODCO,
excluding TODCO's investment in Energy Virtual Partners (the "Devco
Business"),
(v) the ownership and operations of Reading & Xxxxx Coal Co.
and other coal production activities conducted by other Subsidiaries
of TODCO, and
(vi) the turnkey drilling business that TODCO and its
Subsidiaries operated in the U.S. Gulf of Mexico or in Mexico (the
"North American Turnkey Business") (provided that contract drilling
services involving the use of a rig included in the TODCO Business
pursuant to paragraph (a) of this Section 1.80 provided to the North
American Turnkey Business shall be included in the TODCO Business).
(c) For the sake of clarity with respect to Sections 1.80(a) and
(b) above, (i) any action described in such Sections 1.80(a) and (b) undertaken
by a Person that is a Subsidiary of TODCO shall be an action of TODCO and its
Subsidiaries notwithstanding the fact that such action was taken prior to the
time that such Person became a Subsidiary of TODCO and (ii) any action described
in such Sections 1.80(a) and (b) undertaken by a Person that was a Subsidiary of
TODCO at the time of such action shall be an action of TODCO and its
Subsidiaries notwithstanding the fact that such Person later ceased to be a
Subsidiary of TODCO.
11
1.81 TODCO CLASS A COMMON STOCK. "TODCO Class A Common Stock" means
the Class A Common Stock, par value $.01 per share, of TODCO.
1.82 TODCO CLASS B COMMON STOCK. "TODCO Class B Common Stock" means
the Class B Common Stock, par value $.01 per share, of TODCO.
1.83 TODCO COMMON STOCK. "TODCO Common Stock" means the TODCO Class A
Common Stock together with the TODCO Class B Common Stock.
1.84 TODCO DEBT OBLIGATIONS. "TODCO Debt Obligations" means all
Indebtedness of TODCO or any other member of the TODCO Group, excluding all
Indebtedness of any member of the Transocean Group to the extent it constitutes
Indebtedness of TODCO by virtue of clause (f) or clause (g) of the definition of
Indebtedness. TODCO Debt Obligations shall include, without limitation, as of
the date of the most recent pro forma balance sheet of TODCO included in the IPO
Prospectus, the Indebtedness of TODCO reflected on such pro forma balance sheet.
1.85 TODCO EXCLUDED LIABILITIES. "TODCO Excluded Liabilities" shall
mean any and all Liabilities that are expressly contemplated by this Agreement
or any Ancillary Agreement as Liabilities to be retained or assumed by
Transocean or any other member of the Transocean Group, and all agreements and
obligations of any member of the Transocean Group under this Agreement or any of
the Ancillary Agreements. "TODCO Excluded Liabilities" shall include, without
limitation, the Liabilities associated with the activities, services and
businesses described in paragraph (b) of Section 1.80 (the definition of TODCO
Business).
1.86 TODCO GROUP. "TODCO Group" means TODCO and all Persons that are
Subsidiaries of TODCO immediately after the IPO Closing Date, including without
limitation the Subsidiaries set forth in Exhibit 21 to the IPO Registration
Statement and each Person that becomes a Subsidiary of TODCO after the IPO
Closing Date. For purposes of Section 7.14, TODCO Group shall include directors
and officers of the TODCO Group.
1.87 TODCO GUARANTEES. "TODCO Guarantees" has the meaning set forth in
Section 7.11(b).
1.88 TODCO INDEMNITEES. "TODCO Indemnitees" has the meaning set forth
in Section 3.4.
1.89 TODCO LIABILITIES. (a) "TODCO Liabilities" shall mean (without
duplication):
(i) any and all Liabilities that are expressly contemplated
by this Agreement or any Ancillary Agreement to be assumed by TODCO or
any member of the TODCO Group, and all agreements, obligations and
Liabilities of any member of the TODCO Group under this Agreement or
any of the Ancillary Agreements;
(ii) all Liabilities (other than Taxes) to the extent
relating to, arising out of or resulting from:
12
(A) the operation of the TODCO Business, as conducted at any
time prior to, on or after the IPO Closing Date (including any
Liability relating to, arising out of or resulting from any act
or failure to act by any director, officer, employee, agent or
representative (whether or not such act or failure to act is or
was within such Person's authority));
(B) the operation of any business conducted at any time
after the IPO Closing Date by any member of the TODCO Group
(including any Liability relating to, arising out of or resulting
from any act or failure to act by any director, officer,
employee, agent or representative (whether or not such act or
failure to act is or was within such Person's authority));
(C) any assets owned by TODCO or any other member of the
TODCO Group as of or after the IPO Closing Date (it being
understood that any asset not transferred because of the
application of Section 2.7 will be treated for the purposes of
this Section 1.89 as owned by the party to which the parties
intended such asset be transferred); or
(D) the TODCO Debt Obligations;
and in any case whether arising before, on or after the IPO Closing
Date; and
(iii) all Liabilities relating to corporate office activities
of TODCO and its Subsidiaries to the extent such activities are
attributable or related to the TODCO Business, except for any
Liabilities arising out of any untrue statement or omission in
connection with the filings by TODCO or any of its Subsidiaries under
the Securities Act or the Exchange Act or other public disclosures by
TODCO or any of its Subsidiaries other than those included in or made
concurrently, after or in connection with the IPO Prospectus, the IPO
Registration Statement or the IPO.
(b) Notwithstanding anything else in this Section 1.89, the TODCO
Liabilities shall not include the TODCO Excluded Liabilities.
(c) Without limiting the generality of any other provision hereof,
the following Liabilities are illustrative of certain TODCO Liabilities:
(i) a Liability attributable or related to an employee,
representative or agent of any member of the TODCO Group (A) who at
the time the Liability accrued or arose was engaged in the operation
of the TODCO Business, (B) whose activities were based in the
corporate office or headquarters and whose primary duties related to
the TODCO Business (e.g., head of operations, other line management
and accounting and marketing staff for the former shallow and inland
water business segment
13
of TODCO or Transocean or other TODCO Business) or (C) whose
activities were based in the corporate office or headquarters and
whose actions with respect to such Liability were undertaken in
connection with the TODCO Business (e.g., a human resources staff
member taking actions with respect to an employee of the former
shallow and inland water business segment of TODCO or Transocean);
(ii) in the case of a Liability attributable or related to
corporate office activities that affect both employees engaged in the
operation of the TODCO Business and employees engaged in the operation
of the Transocean Business (e.g., employee benefit policies or
practices or employment policies or practices), a proportional share
of such Liability based on the portion of such Liability that is
attributable to or related to employees engaged in the operation of
the TODCO Business.
(d) For the sake of clarity, Schedule 1.89 sets forth certain
legal proceedings and identifies whether or not such legal proceedings are TODCO
Liabilities.
1.90 TODCO NON-VOTING STOCK. "TODCO Non-Voting Stock" means any class
or series of TODCO Stock other than TODCO Voting Stock.
1.91 TODCO PRO FORMA BALANCE SHEET. "TODCO Pro Forma Balance Sheet"
means the unaudited condensed pro forma consolidated balance sheet of TODCO and
subsidiaries as of September 30, 2003.
1.92 TODCO RIGHTS PLAN. "TODCO Rights Plan" shall mean the
stockholders rights plan of TODCO as evidenced by the Rights Agreement dated the
date hereof between TODCO and The Bank of New York, as Rights Agent.
1.93 TODCO STOCK. "TODCO Stock" means TODCO Common Stock, any class of
TODCO preferred stock, any other TODCO capital stock that may be issued from
time to time and any warrant, option or other right in any of the above.
1.94 TODCO VOTING STOCK. "TODCO Voting Stock" means the TODCO Class A
Common Stock, the TODCO Class B Common Stock and any other capital stock of
TODCO entitled to vote generally in the election of directors but excluding any
class or series of capital stock only entitled to vote in the event of dividend
arrearages thereon, whether or not at the time of determination there are any
such dividend arrearages.
1.95 TRANSITION SERVICES AGREEMENT. "Transition Services Agreement"
means the Transition Services Agreement dated the date hereof between Transocean
Holdings and TODCO.
1.96 TRANSOCEAN AUDITORS. "Transocean Auditors" means Transocean's
independent certified public accountants.
1.97 TRANSOCEAN BOOKS AND RECORDS. "Transocean Books and Records"
means the books and records (or true and complete copies thereof), including all
computerized books and
14
records, minute books, corporate charters and by-laws or comparable constitutive
documents, records of shares issuances and related corporate records, of or
owned by Transocean and its Subsidiaries (including TODCO and its Subsidiaries)
other than the TODCO Books and Records. Notwithstanding the foregoing,
"Transocean Books and Records" shall not include any Tax Returns or other
information, documents or materials relating to Taxes.
1.98 TRANSOCEAN BUSINESS. "Transocean Business" means any business of
Transocean and its Subsidiaries other than the TODCO Business.
1.99 TRANSOCEAN GROUP. "Transocean Group" means Transocean, each
Subsidiary of Transocean other than a member of the TODCO Group immediately
after the IPO Closing Date and each Person that becomes a Subsidiary of
Transocean after the IPO Closing Date. For purposes of Section 7.14, Transocean
Group shall include directors and officers of the Transocean Group.
1.100 TRANSOCEAN INDEMNITEES. "Transocean Indemnitees" has the meaning
set forth in Section 3.3.
1.101 TRANSOCEAN TRANSFEREE. "Transocean Transferee" has the meaning
set forth in Section 5.3.
1.102 UNDERWRITERS. "Underwriters" means the underwriters named in the
Underwriting Agreement.
1.103 UNDERWRITING AGREEMENT. "Underwriting Agreement" has the meaning
set forth in Section 4.1(b).
1.104 VOTING PERCENTAGE. "Voting Percentage" means, at any time, the
fraction, expressed as a percentage and rounded to the nearest thousandth of a
percent, whose numerator is the number of votes entitled to be cast with respect
to all of the outstanding shares of TODCO Voting Stock owned by the Transocean
Group and whose denominator is the number of votes entitled to be cast with
respect to all of the outstanding shares of TODCO Voting Stock; provided,
however, that any shares of such TODCO Voting Stock issued by TODCO in violation
of its obligations under Section 5.6 of this Agreement shall not be deemed
outstanding for the purpose of determining the Voting Percentage.
ARTICLE II
SEPARATION AND RELATED TRANSACTIONS
2.1 SEPARATION. Transocean Holdings and TODCO will take, or cause to
be taken, any actions, including the transfer of assets and the assumption of
Liabilities, necessary to effect the Separation as soon after the Exchange as
practicable. The parties agree that, after the completion of the Separation,
the TODCO Group will own all of the drilling rigs listed in "Our
Business-Drilling Rig Fleet" in the IPO Prospectus, and all other drilling rigs
owned by Transocean and its Subsidiaries (including TODCO and its Subsidiaries)
on the date of the Exchange will be owned by the Transocean Group.
15
2.2 OFFICE EQUIPMENT AND FURNISHINGS. The parties agree that all of
the office equipment and furnishings located at Transocean's offices at 0
Xxxxxxxx Xxxxx and Park 10 as of the IPO Closing Date shall remain assets of the
Transocean Group. All of the office equipment and furnishings located at
TODCO's offices at 0000 X. Xxx Xxxxxxx Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx
00000 as of the IPO Closing Date shall remain assets of the TODCO Group.
2.3 INTELLECTUAL PROPERTY.
(a) TODCO, for itself and as representative of all other members
of the TODCO Group, hereby assigns all right, title and interest, of itself and
each member of the TODCO Group, in and to any Intellectual Property Rights,
including any and all Marks (except the marks, "Cliffs Drilling Company,"
"Falcon Drilling Company," "THE Offshore Drilling Company" and "TODCO", which
shall remain the property of the TODCO Group) to Transocean Holdings.
Transocean Holdings hereby grants to TODCO a perpetual, worldwide,
non-exclusive, royalty free license, with the right to sublicense only to
members of the TODCO Group, to use the Licensed Intellectual Property for the
purpose of enabling the TODCO Group to conduct the TODCO Business.
(b) TODCO agrees and acknowledges that (i) as of the date of this
Agreement, all right, title and interest in and to any and all Marks shall be
the sole and exclusive property of the Transocean Group and (ii) except as
otherwise provided in Section 2.3(c), the TODCO Group shall cease and
discontinue all use of the Marks as of the date of this Agreement.
(c) Transocean Holdings hereby grants to TODCO, for a period
terminating one year after the IPO Closing Date, a worldwide, non-exclusive,
royalty free license, with the right to sublicense only to each member of the
TODCO Group and only so long as each such member complies with the provisions of
this Section 2.3(c) and remains a Subsidiary of TODCO, to use the Licensed Marks
in connection with the goods and services of the TODCO Business. As of one year
after the IPO Closing Date, Transocean Holdings grants to TODCO a perpetual,
worldwide, non-exclusive, royalty free right to sublicense the marks, "R&B
Falcon" and "RBF," only to each such member of the TODCO Group that, as of the
IPO Closing Date, uses "R&B Falcon" or "RBF" as, or as part of, its corporate
name, to continue to use "R&B Falcon" or "RBF" as, or as part of, only its
corporate name or an existing name of a rig but not in connection with any
advertising, marketing or sales of, or otherwise in relation to, any goods or
services; provided, however, this right to sublicense will extend only so long
as each such member of the TODCO Group complies with the provisions of this
Section 2.3(c) and remains a Subsidiary of TODCO. During the term of the
licenses in this Section 2.3(c), TODCO shall not use, and shall ensure its
sublicensees do not use, the Licensed Marks in any way that may reasonably be
deemed to impair or injure the value or goodwill of the Licensed Marks. All of
TODCO's and its sublicensees' use of the Licensed Marks shall inure to the
benefit of Transocean Holdings. TODCO will not, and shall ensure each of its
sublicensees does not, claim or assert any right of ownership in or to the
Licensed Marks or register the Licensed Marks anywhere in its own name, or on
behalf of any other person or entity. TODCO will, and shall cause its
sublicensees to, do all such lawful acts and things and execute all such
documents as Transocean Holdings shall consider necessary or proper to register
the Licensed Marks in any country. The parties agree that Transocean Holdings
may terminate the licenses contained in this
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Section 2.3(c) upon a change of control of TODCO or if TODCO or any of its
sublicensees violate any provision of this Section 2.3(c). For the purpose of
this clause, "control" means the ability to direct the affairs of another
whether by means of voting or contractual rights or otherwise and whether
directly or indirectly. Upon termination or expiration of the licenses contained
in this Section 2.3(c), TODCO shall, and shall cause its sublicensees to,
immediately cease and desist all use of the relevant Licensed Marks.
(d) Nothing contained in this Section 2.3 shall be construed as
(i) a warranty or representation by the Transocean Group as to the validity or
scope of the Licensed Intellectual Property or the Licensed Marks; (ii) a
warranty or representation that the Licensed Intellectual Property and Licensed
Marks will not infringe the intellectual property rights of a third party; (iii)
a warranty or representation that the Licensed Intellectual Property and
Licensed Marks constitute all intellectual property the TODCO Group may need for
the conduct of the TODCO Business; or (iv) an agreement to defend any member of
the TODCO Group against actions or suits of any nature brought by any third
parties regarding the Licensed Intellectual Property or Licensed Marks.
2.4 INSTRUMENTS OF TRANSFER AND ASSUMPTION. Transocean Holdings and
TODCO agree that (a) transfers of assets required to be transferred by this
Agreement shall be effected by delivery by the transferring entity to the
transferee of (i) with respect to those assets that constitute stock,
certificates endorsed in blank or evidenced or accompanied by stock powers or
other instruments of transfer endorsed in blank, against receipt, (ii) with
respect to any real property interest or any improvements thereon, a general
warranty deed with general warranty of limited application limiting recourse and
remedies to title insurance and warranties by predecessors in title and (iii)
with respect to all other assets, such good and sufficient instruments of
contribution, conveyance, assignment and transfer, in form and substance
reasonably satisfactory to Transocean Holdings and TODCO, as shall be necessary
to vest in the designated transferee all of the title and ownership interest of
the transferor in and to any such asset, and (b) to the extent necessary, the
assumption of the Liabilities contemplated pursuant to Section 2.1 shall be
effected by delivery by the transferee to the transferor of such good and
sufficient instruments of assumption, in form and substance reasonably
satisfactory to Transocean Holdings and TODCO, as shall be necessary for the
assumption by the transferee of such Liabilities. Transocean, Transocean
Holdings and TODCO agree that, to the extent that the documents described in
clause (a)(i), (ii) and (iii) and clause (b) have not previously been delivered
in connection with any Prior Transfers, the documents relating to such Prior
Transfers shall be delivered by the transferring entity to the transferee. Each
of the parties hereto also agrees to deliver to any other party hereto such
other documents, instruments and writings as may be reasonably requested by such
other parties hereto in connection with the transactions contemplated hereby or
by Prior Transfers. Notwithstanding any other provisions of this Agreement to
the contrary, (x) THE TRANSFERS AND ASSUMPTIONS REFERRED TO IN THIS ARTICLE II
(INCLUDING PRIOR TRANSFERS) HAVE BEEN, OR WILL BE, MADE WITHOUT ANY
REPRESENTATION OR WARRANTY OF ANY NATURE (A) AS TO THE VALUE OR FREEDOM FROM
ENCUMBRANCE OF, ANY ASSETS, (B) AS TO ANY WARRANTY OF MERCHANTABILITY OR
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OF, OR ANY OTHER MATTER CONCERNING,
ANY ASSETS OR (C) AS TO THE LEGAL SUFFICIENCY TO CONVEY TITLE TO ANY ASSETS, and
(y) the instruments of transfer or assumption referred to in this Section 2.4
shall not include any
17
representations and warranties other than as specifically provided herein.
Transocean and TODCO hereby acknowledge and agree that ALL ASSETS TRANSFERRED
PURSUANT TO THIS ARTICLE II AND ALL ASSETS INCLUDED IN PRIOR TRANSFERS ARE BEING
OR WERE TRANSFERRED "AS IS, WHERE IS." To the extent that the instruments of
transfer and assumption with respect to any Prior Transfers are inconsistent
with this Section 2.4, the TODCO Group and the Transocean Group agree that the
inconsistent provisions of such instruments are hereby amended and superseded by
the provisions of this Section 2.4. To the extent reasonably requested by a
member of either Group, each party will, or will cause its Subsidiaries to,
execute any documents necessary to evidence such amendment.
2.5 NO REPRESENTATIONS OR WARRANTIES. Except as expressly set forth in
this Agreement or in an Ancillary Agreement, TODCO, Transocean Holdings and
Transocean understand and agree that no member of the Transocean Group is
representing or warranting to TODCO or any member of the TODCO Group in any way
as to the TODCO Business or the TODCO Liabilities. Except as expressly set
forth in this Agreement or in an Ancillary Agreement, Transocean, Transocean
Holdings and TODCO understand and agree that no member of the TODCO Group is
representing or warranting to Transocean or any member of the Transocean Group
in any way as to the Transocean Business or the TODCO Excluded Liabilities.
2.6 AGREEMENTS. Prior to the Exchange, Transocean and TODCO shall
execute and deliver (or shall cause their appropriate Subsidiaries to execute
and DELIVER, AS APPLICABLE) THE AGREEMENTS BETWEEN THEM DESIGNATED AS FOLLOWS:
(i) the Transition Services Agreement,
(ii) the Employee Matters Agreement,
(iii) the Tax Sharing Agreement,
(iv) the Registration Rights Agreement, and
(v) such other written agreements, documents or instruments
as the parties may agree are necessary or desirable and which
specifically state that they are Ancillary Agreements within the
meaning of this Agreement
(collectively, the "Ancillary Agreements"). To the extent such documents are
not executed and delivered before the Exchange, they shall be executed and
delivered as soon as practicable thereafter and (except as otherwise provided
therein) shall be effective immediately before the Exchange.
2.7 TRANSFERS NOT EFFECTED PRIOR TO THE EXCHANGE DATE.
(a) To the extent that any transfers contemplated by this Article
II shall not have been consummated as of the Exchange, the parties shall
cooperate to effect such transfers as promptly following the Exchange as shall
be practicable. Nothing herein shall be deemed to require the transfer of any
assets or the assumption of any Liabilities that by their terms or
18
operation of law cannot be transferred or assumed; provided that the TODCO Group
and the Transocean Group shall cooperate to obtain any necessary consents or
approvals for the transfer of all assets and the assumption of all Liabilities
contemplated to be transferred or assumed pursuant to this Article II and shall,
even in the absence of necessary consents or approvals, transfer the equitable
ownership of assets when such a transfer is permitted. In the event that any
such transfer of assets or assumption of Liabilities has not been consummated
effective as of the time of the Exchange, the party retaining such asset or
Liability shall thereafter hold such asset in trust for the use and benefit of
the party entitled thereto (at the expense of the party entitled thereto) and
retain such Liability for the account of the party by whom such liability is to
be assumed pursuant hereto, and take such other action as may be reasonably
requested by the party to which such asset is to be transferred, or by whom such
liability is to be assumed, as the case may be, in order to place such party,
insofar as reasonably possible, in the same position as would have existed had
such asset or Liability been transferred or assumed as contemplated hereby.
Without limiting any other duty of a party holding any asset in trust for the
use and benefit of the party entitled thereto, such party shall take all
reasonable actions necessary to preserve the value of that asset. As and when
any such asset becomes transferable or such Liability can be assumed, such
transfer or assumption shall be effected forthwith. Subject to the foregoing,
the parties agree that, as of the time of the Exchange (or such earlier time as
any such asset may have been acquired or Liability assumed pursuant to a Prior
Transfer), each party hereto shall be deemed to have acquired complete and sole
beneficial ownership over all of the assets, together with all rights, powers
and privileges incident thereto, and shall be deemed to have assumed in
accordance with the terms of this Agreement all of the Liabilities, and all
duties, obligations and responsibilities incident thereto, which such party is
entitled to acquire or required to assume pursuant to the terms of this
Agreement.
(b) If two years after the IPO Closing Date any asset remains
subject to an arrangement described in Section 2.7(a), the beneficial owner may
(i) direct the party acting as trustee to transfer the asset to the beneficial
owner, at the sole risk of such beneficial owner (who will thereafter indemnify
the trustee/transferor from all Losses and Liabilities, other than Taxes (which
are covered by the Tax Sharing Agreement), arising as a result of such
transfer), (ii) direct the party acting as trustee to sell or liquidate the
subject asset for the account of, and at the sole risk and expense of, such
beneficial owner, who shall be entitled to receive all of the net proceeds of
such sale or liquidation or (iii) continue the arrangement described in Section
2.7(a).
2.8 ADDITIONAL TRANSFERS OF ASSETS.
(a) Without limiting the generality of Section 2.1, for a period
beginning on the date of the Exchange and ending on the date one year following
the IPO Closing Date, if Transocean in its good faith judgment, after reasonable
consultation with the General Counsel of TODCO, or other person designated by
TODCO, identifies any asset owned by a member of the Transocean Group or a
member of the TODCO Group, as applicable, that (i) during the twelve (12) month
period prior to the date of the Exchange was used primarily in the TODCO
Business and is then owned by a member of the Transocean Group or (ii) during
the twelve (12) month period prior to the date of the Exchange was used
primarily in the Transocean Business and is then owned by a member of the TODCO
Group, Transocean or TODCO, as the case may be, shall or shall cause any such
asset to be conveyed, assigned, transferred and delivered in
19
accordance with Section 2.4 to the entity identified by TODCO or Transocean, as
the case may be, as the appropriate transferee.
(b) The parties hereto acknowledge and agree that any transfers
pursuant to this Section 2.8 are to be made without any additional
consideration.
(c) All conveyances, assignments, transfers and deliveries of
assets occurring after the Exchange pursuant to this Section 2.8 shall be
governed by the terms of this Agreement. In furtherance of the foregoing, any
asset transferred pursuant to this Section 2.8 to a member of the TODCO Group
shall be deemed an asset of the TODCO Business, and any asset transferred to a
member of the Transocean Group shall be deemed an asset of the Transocean
Business.
2.9 WORKING CAPITAL. The parties to this Agreement acknowledge that
the amount of cash and cash equivalents of TODCO and its Subsidiaries as of June
30, 2003 was $25.0 million, after giving effect to a payment by Transocean to
TODCO of approximately $11.4 million after June 30, 2003. The amount paid to
TODCO by Transocean equals the difference between $25.0 million and the amount
of cash and cash equivalents of TODCO and its Subsidiaries as of June 30, 2003
prior to giving effect to the payment by Transocean. TODCO and its Subsidiaries
shall retain all cash and cash equivalents generated by the TODCO Business
following June 30, 2003. Transocean shall not be required to make any
additional payments to TODCO or its Subsidiaries for their working capital needs
except as otherwise expressly agreed in writing. As used in this Section 2.9,
cash and cash equivalents are determined in accordance with GAAP and the
financial reporting policies and procedures used by TODCO and its Subsidiaries
prior to the IPO Closing Date, as reflected in the consolidated financial
statements and pro forma information of TODCO and its Subsidiaries included in
the IPO Prospectus.
ARTICLE III
MUTUAL RELEASES; INDEMNIFICATION
3.1 RELEASE OF PRE-CLOSING CLAIMS.
(a) Except as provided in Section 3.1(c), effective as of the IPO
Closing Date, TODCO does hereby, for itself and each other member of the TODCO
Group, their respective Affiliates, successors and assigns, and all Persons who
at any time prior to the IPO Closing Date have been stockholders, directors,
officers, agents or employees of any member of the TODCO Group (in each case, in
their respective capacities as such), remise, release and forever discharge
Transocean, each member of the Transocean Group and their respective Affiliates,
successors and assigns, and all stockholders, directors, officers, agents or
employees of any member of the Transocean Group (in each case, in their
respective capacities as such), and their respective heirs, executors,
administrators, successors and assigns, from any and all Liabilities whatsoever
to TODCO and each other member of the TODCO Group, whether at law or in equity
(including any right of contribution), whether arising under any contract or
agreement, by operation of law or otherwise, existing or arising from any acts
or events occurring or failing to occur or alleged to have occurred or to have
failed to occur or any conditions existing or alleged to have existed on or
before the IPO Closing Date, including in connection with the transactions and
all other activities to implement any Prior Transfers, the Separation, the IPO
and any Distribution.
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(b) Except as provided in Section 3.1(c), effective as of the IPO
Closing Date, Transocean does hereby, for itself and each other member of the
Transocean Group, their respective Affiliates, successors and assigns, and all
Persons who at any time prior to the IPO Closing Date have been shareholders,
directors, officers, agents or employees of any member of the Transocean Group
(in each case, in their respective capacities as such), remise, release and
forever discharge TODCO, each member of the TODCO Group, and their respective
Affiliates, successors and assigns, and all shareholders, directors, officers,
agents or employees of any member of the TODCO Group (in each case, in their
respective capacities as such), and their respective heirs, executors,
administrators, successors and assigns, from any and all Liabilities whatsoever
to Transocean and each other member of the Transocean Group, whether at law or
in equity (including any right of contribution), whether arising under any
contract or agreement, by operation of law or otherwise, existing or arising
from any acts or events occurring or failing to occur or alleged to have
occurred or to have failed to occur or any conditions existing or alleged to
have existed on or before the IPO Closing Date, including in connection with the
transactions and all other activities to implement Prior Transfers, the
Separation, the IPO and any Distribution.
(c) Nothing contained in Section 3.1(a) or (b) shall impair any
right of any Person to enforce this Agreement, any Ancillary Agreement or any
agreements, arrangements, commitments or understandings that are specified in,
or contemplated to continue pursuant to, this Agreement or any Ancillary
Agreement. Nothing contained in Section 3.1(a) or (b) shall release any Person
from:
(i) any Liability, contingent or otherwise, assumed,
transferred, assigned or allocated to the Group of which such
Person is a member in accordance with, or any other Liability of
any member of either Group under, this Agreement or any Ancillary
Agreement;
(ii) any Liability that the parties may have with respect to
indemnification or contribution pursuant to this Agreement for
claims brought against the parties by third Persons, which
Liability shall be governed by the provisions of this Article III
and, if applicable, the appropriate provisions of the Ancillary
Agreements;
(iii) any Liability the release of which would result in the
release of any Person other than an Indemnitee; provided that the
parties agree not to bring suit or permit any of their
Subsidiaries to bring suit against any Indemnitee with respect to
such Liability; or
(iv) any Liability with respect to the TODCO Debt
Obligations.
(d) TODCO shall not make, and shall not permit any member of the
TODCO Group to make, any claim or demand, or commence any Action asserting any
claim or demand, including any claim of contribution or indemnification, against
Transocean or any member of the Transocean Group, or any other Person released
pursuant to Section 3.1(a), with respect to any Liabilities released pursuant to
Section 3.1(a). Transocean shall not make, and shall not permit any member of
the Transocean Group to make, any claim or demand, or commence any Action
21
asserting any claim or demand, including any claim of contribution or any
indemnification, against TODCO or any member of the TODCO Group, or any other
Person released pursuant to Section 3.1(b), with respect to any Liabilities
released pursuant to Section 3.1(b).
(e) It is the intent of each of Transocean and TODCO by virtue of
the provisions of this Section 3.1 to provide for a full and complete release
and discharge of all Liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed on or before the
IPO Closing Date, between or among TODCO or any member of the TODCO Group, on
the one hand, and Transocean or any member of the Transocean Group, on the other
hand (including any contractual agreements or arrangements existing or alleged
to exist between or among any such members on or before the IPO Closing Date),
except as expressly set forth in Section 3.1(c). At any time, at the request of
any other party, each party shall cause each member of its respective Group to
execute and deliver releases reflecting the provisions hereof.
3.2 TERMINATION OF INTERCOMPANY AGREEMENTS AND ASSUMPTION OF
INTERCOMPANY BALANCES.
(a) Without limiting the generality of Section 3.1(e) and subject
to the terms of Section 3.1, each of the parties hereto agrees that, except for
(i) this Agreement, the Ancillary Agreements (including any amounts owed with
respect to such agreements), (ii) any amounts owed by (other than amounts owed
with respect to any agreement in clause (i)) TODCO or one of its Subsidiaries to
Transocean or one of its Subsidiaries immediately prior to the Exchange (the
"Intercompany Payables"), and (iii) any amounts owed (other than amounts owed
with respect to any agreement in clause (i)) by Transocean or one of its
Subsidiaries to TODCO or one of its Subsidiaries immediately prior to the
Exchange (the "Intercompany Receivables"), all Intercompany Agreements and all
other intercompany arrangements and course of dealings whether or not in writing
and whether or not binding or in effect immediately prior to the Exchange shall
terminate immediately prior to the Exchange unless the parties thereto otherwise
agree in writing after the date of this Agreement.
(b) Except to the extent previously discharged, the Intercompany
Payables shall be assumed by Transocean Holdings and the Intercompany
Receivables, other than TODCO's outstanding 6.75%, 7.375% and 9.50% notes, if
any, held by Transocean or Transocean Holdings, shall be distributed by TODCO to
Transocean Holdings immediately prior to the Exchange; provided, however, that
(i) the foregoing shall be without prejudice to the terms of Section 7.14,
including without limitation any accrued rights, insurance proceeds or
Intercompany Payables for premiums, (ii) Intercompany Payables for services
similar to those provided under the Transition Services Agreement or Employee
Matters Agreement that were rendered prior to the Exchange shall remain the
obligation of TODCO or its respective Affiliates, and (iii) Intercompany
Payables relating to third-party vendors for services rendered to or on behalf
of the TODCO Business prior to the Exchange shall remain the obligation of
TODCO.
3.3 INDEMNIFICATION BY TODCO. Except as provided in Sections 3.6 and
3.7, TODCO shall, and in the case of clauses (a), (b) and (c) below shall in
addition cause the Appropriate Member of the TODCO Group to, indemnify, defend
and hold harmless Transocean, each member of the Transocean Group and their
respective Affiliates, successors
22
and assigns, and all stockholders, directors, officers, agents or employees of
any member of the Transocean Group (in each case, in their respective capacities
as such), and their respective heirs, executors, administrators, successors and
assigns (collectively, the "Transocean Indemnitees") from and against any and
all Losses of the Transocean Indemnitees relating to, arising out of or
resulting from any of the following (without duplication):
(a) the failure of TODCO or any other member of the TODCO Group or
any other Person to pay, perform or otherwise promptly discharge any TODCO
Liabilities in accordance with their respective terms, whether prior to or after
the IPO Closing Date or the date thereof;
(b) the TODCO Business or any TODCO Liability;
(c) any breach by TODCO or any member of the TODCO Group of this
Agreement or any of the Ancillary Agreements; and
(d) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, with
respect to all Information contained in the IPO Registration Statement or any
IPO Prospectus (other than Information regarding Transocean included in the IPO
Registration Statement or any IPO Prospectus set forth on Schedule 3.3(d) or in
the Information required to be supplied pursuant to Section 7.4(d)).
As used in this Section 3.3, "Appropriate Member of the TODCO Group" means the
member or members of the TODCO Group, if any, whose acts, conduct or omissions
or failures to act caused, gave rise to or resulted in the loss from and against
which indemnity is provided.
3.4 INDEMNIFICATION BY TRANSOCEAN HOLDINGS. Except as provided in
Sections 3.6 and 3.7, Transocean Holdings shall, and in case of clauses (a), (b)
and (c) below shall in addition cause the Appropriate Member of the Transocean
Group to, indemnify, defend and hold harmless TODCO, each member of the TODCO
Group and their respective Affiliates, successors and assigns, and all
shareholders, directors, officers, agents or employees of any member of the
TODCO Group (in each case, in their respective capacities as such), and their
respective heirs, executors, administrators, successors and assigns
(collectively, the "TODCO Indemnitees") from and against any and all Losses of
the TODCO Indemnitees relating to, arising out of or resulting from any of the
following (without duplication):
(a) the failure of Transocean or any other member of the
Transocean Group or any other Person to pay, perform or otherwise promptly
discharge any Liabilities of any member of the Transocean Group other than the
TODCO Liabilities, in accordance with their respective terms, whether prior to
or after the IPO Closing Date or the date hereof;
(b) the Transocean Business or any Liability of any member of the
Transocean Group other than the TODCO Liabilities;
(c) any breach by Transocean or any member of the Transocean Group
of this Agreement or any of the Ancillary Agreements; and
23
(d) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, with
respect to information regarding Transocean provided by Transocean in writing to
TODCO for inclusion in the IPO Registration Statement or any IPO Prospectus.
As used in this Section 3.4, "Appropriate Member of the Transocean Group" means
the member or members of the Transocean Group, if any, whose acts, conduct or
omissions or failures to act caused, gave rise to or resulted in the Loss from
and against which indemnity is provided.
3.5 TRANSOCEAN'S GUARANTEE OF TRANSOCEAN HOLDINGS' INDEMNIFICATION
OBLIGATION. If Transocean Holdings fails to perform any of its obligations
under Section 3.4 above, then Transocean shall indemnify, defend and hold
harmless the TODCO Indemnitees from and against any and all Losses of the TODCO
Indemnitees relating to, arising out of or resulting from any of the matters
described in clauses (a), (b), (c) and (d) of Section 3.4 (without duplication).
3.6 INDEMNIFICATION OBLIGATIONS NET OF INSURANCE PROCEEDS.
(a) The parties intend that any Loss subject to indemnification or
reimbursement pursuant to this Article III (an "Indemnifiable Loss") will be net
of Insurance Proceeds that actually reduce the amount of the Loss. Accordingly,
the amount which any party (an "Indemnifying Party") is required to pay to any
Person entitled to indemnification hereunder (an "Indemnitee") will be reduced
by any Insurance Proceeds theretofore actually recovered by or on behalf of the
Indemnitee in reduction of the related Loss. If an Indemnitee receives a
payment (an "Indemnity Payment") required by this Agreement from an Indemnifying
Party in respect of any Loss and subsequently receives Insurance Proceeds, then
the Indemnitee will pay to the Indemnifying Party an amount equal to the excess
of the Indemnity Payments received over the amount of the Indemnity Payments
that would have been due if the Insurance Proceeds recovery had been received,
realized or recovered before the Indemnity Payments were made. The existence of
a claim by an Indemnitee for insurance or against a third party in respect of
any Indemnifiable Loss shall not, however, delay any payment pursuant to the
indemnification provisions contained in this Article III and otherwise
determined to be due and owing by an Indemnifying Party. Rather the
Indemnifying Party shall make payment in full of such amount so determined to be
due and owing by it against an assignment by the Indemnitee to the Indemnifying
Party of the portion of the claim of the Indemnitee for such insurance or
against such third party equal to the amount of such payment. The Indemnitee
shall use and cause its Affiliates to use commercially reasonable efforts to
assist the Indemnifying Party in recovering or to recover on behalf of the
Indemnifying Party, any Insurance Proceeds to which the Indemnifying Party is
entitled with respect to any Indemnifiable Loss as a result of such assignment.
The Indemnitee shall make available to the Indemnifying Party and its counsel
all employees, books and records, communications, documents, items or matters
within its knowledge, possession or control that are necessary, appropriate or
reasonably deemed relevant by the Indemnifying Party with respect to the
recovery of such Insurance Proceeds; provided, however, that subject to Section
7.7 hereof, nothing in this sentence shall be deemed to require a party to make
available books and records, communications, documents or items which (i) in
such party's good faith judgment could result in a waiver of any Privilege or
(ii) such party is not
24
permitted to make available because of any Law or any confidentiality obligation
to a third party, in which case such party shall use its reasonable commercial
efforts to seek a waiver of or other relief from such confidentiality
restriction. Unless the Indemnifying Party has made payment in full of any
Indemnifiable Loss, such Indemnifying Party shall use and cause its Affiliates
to use commercially reasonable efforts to recover any Insurance Proceeds to
which it or such Affiliate is entitled with respect to any Indemnifiable Loss.
(b) An insurer who would otherwise be obligated to pay any claims
shall not be relieved of the responsibility with respect thereto or, solely by
virtue of the indemnification provisions hereof, have any subrogation rights
with respect thereto, it being expressly understood and agreed that no insurer
or any other third party shall be entitled to a "windfall" (i.e., a benefit it
would not be entitled to receive in the absence of the indemnification
provisions) by virtue of the indemnification provisions hereof.
3.7 INDEMNIFICATION OBLIGATIONS NET OF TAXES. The parties intend that
any Loss subject to indemnification or reimbursement pursuant to this Article
III (other than a Loss arising out of a payment obligation under Sections 3, 4
or 5 of the Tax Sharing Agreement) will be net of Taxes. Accordingly, the
amount which an Indemnifying Party is required to pay to an Indemnitee will be
adjusted to reflect any tax benefit to the Indemnitee from the underlying Loss
and to reflect any Taxes imposed upon the Indemnitee as a result of the receipt
of such payment. Such an adjustment will first be made at the time that the
indemnity payment is made and will further be made, as appropriate, to take into
account any change in the liability of the Indemnitee for Taxes that occurs in
connection with the final resolution of an audit by a taxing authority. For
purposes of this Section 3.7, the value of such tax benefit shall be an amount
equal to the product of (x) the amount of the deduction allowed to the
Indemnitee by the Code as a result of the underlying Loss and (y) the highest
statutory rate applicable under Section 11 of the Code. Notwithstanding the
immediately preceding sentence, if the Loss subject to indemnification exceeds
U.S. $1.0 million (determined on an item-by-item basis) and such deduction, or
portion thereof, creates or increases a net operating loss under section 172 of
the Code, then (i) such deduction, or portion thereof, will not be included in
the computation of the tax benefit and (ii) the Indemnitee shall pay the
Indemnifying party the amount by which the tax benefit is reduced by application
of this sentence when such net operating loss is used or absorbed by the
Indemnitee. To the extent permitted by law, the parties will treat any
indemnity payment as a capital contribution made by Transocean Holdings to TODCO
or as a distribution made by TODCO to Transocean Holdings, as the case may be,
immediately prior to the date recited above on which the parties entered into
the Agreement.
3.8 PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS.
(a) If an Indemnitee shall receive notice or otherwise learn of
the assertion by a Person (including any Governmental Authority) who is not a
member of the Transocean Group or the TODCO Group of any claims or of the
commencement by any such Person of any Action (collectively, a "Third Party
Claim") with respect to which an Indemnifying Party may be obligated to provide
indemnification to such Indemnitee pursuant to Section 3.3 or 3.4, or any other
Section of this Agreement or any Ancillary Agreement, such Indemnitee shall
promptly give such Indemnifying Party written notice thereof. Any such notice
shall describe the Third Party Claim in reasonable detail. Notwithstanding the
foregoing, the failure of any Indemnitee
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or other Person to give notice as provided in this Section 3.8(a) shall not
relieve the related Indemnifying Party of its obligations under this Article
III, except to the extent that such Indemnifying Party is actually prejudiced by
such failure to give notice.
(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30 days after
the receipt of notice from an Indemnitee in accordance with Section 3.8(a) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the Indemnitee of its election whether the Indemnifying Party
will assume responsibility for defending such Third Party Claim, which election
shall specify any reservations or exceptions. The failure to give such notice
of election within the 30-day period shall be deemed a rejection of the
opportunity to assume responsibility. After notice from an Indemnifying Party
to an Indemnitee of its election to assume the defense of a Third Party Claim
(or in the case where Transocean, as the Indemnitee or on behalf of a member of
the Transocean Group as the Indemnitee, elects to defend a Third Party Claim
pursuant to paragraph (b)(i) or (b)(ii), after notice from Transocean to the
Indemnifying Party), such non-defending party shall have the right to employ
separate counsel and to participate in (but not control) the defense, compromise
or settlement thereof, but the fees and expenses of such counsel shall be at the
expense of such non-defending party. Notwithstanding the foregoing, Transocean,
in its sole discretion, upon written notice (which notice shall include
Transocean's basis for electing to defend such Third Party Claim and whether or
not Transocean has specified, and continues to assert, any reservations or
exceptions with respect to such Third Party Claim), may elect to defend or
assume the defense of (and to seek to settle or compromise) any Third Party
Claim or series of related Third Party Claims:
(i) that relate in any way to the TODCO Business or the TODCO
Liabilities if a member of the Transocean Group is named a party
thereto and if (x) Transocean or one of its Subsidiaries' ability to
conduct its business could be impaired in any significantly adverse
manner as a result of any injunctive relief sought or (y) an adverse
resolution of such Third Party Claim (or series of related Third Party
Claims) presents in the good faith judgment of Transocean's General
Counsel a reasonable risk of having a material adverse effect on the
business, operations, financial condition, results of operations or
prospects of Transocean and its Subsidiaries, taken as a whole, in
which case (A) Transocean or one of its Subsidiaries shall pay all
costs and expenses incurred in connection with the defense of such
Third Party Claim if Transocean or one of its Subsidiaries is the
Indemnifying Party with respect to such Third Party Claim or (B) such
costs and expenses shall be included in Transocean's or one of its
Subsidiaries' Losses if TODCO or one of its Subsidiaries is the
Indemnifying Party with respect to such Third Party Claim; or
(ii) with respect to which both parties hereto, or TODCO and
one or more of its Subsidiaries, or Transocean and one or more of its
Subsidiaries may be Indemnifying Parties, and to which paragraph (i)
above does not apply and as to which, in the good faith judgment of
the
26
General Counsel of Transocean the portion of the aggregate Liability
that is the responsibility of Transocean and any of its Subsidiaries
(after taking into account indemnification obligations hereunder)
equals or exceeds the portion of such Liability that is the
responsibility of TODCO and any of its Subsidiaries.
(c) A party's right to defend any Third Party Claim pursuant to
Section 3.8(b) includes the right (after consultation with the other party
following at least five Business Days' written notice thereof) to compromise,
settle or consent to the entry of any judgment or determination of liability
concerning such Third Party Claim; provided, however, that the Indemnifying
Party shall not compromise, settle or consent to the entry of judgment or
determination of liability concerning any Third Party Claim without prior
written approval by the Indemnitee (which may not be unreasonably withheld) if
the terms or conditions of such compromise, settlement or consent would, in the
reasonable judgment of the Indemnitee, have a material adverse financial impact
or a material adverse effect upon the ongoing operations of the Indemnitee.
Notwithstanding any other provision of this Section 3.8, unless otherwise agreed
to by the parties in writing (which agreement may not be unreasonably withheld),
no party shall enter into any compromise or settlement or consent to the entry
of any judgment which does not include as an unconditional term thereof the
giving by the third party of a release of both the Indemnitee and the
Indemnifying Party from all further liability concerning such Third Party Claim.
(d) If the party having the right to elect to defend a particular
Third Party Claim pursuant to Section 3.8(b) elects, or is deemed to have
elected, not to defend a particular Third Party Claim, the other party may
defend such Third Party Claim without any prejudice to its rights to
indemnification from the Indemnifying Party pursuant to this Article III. In
such case, (i) such other party shall have the right to compromise, settle or
consent to the entry of any judgment with respect to such Third Party Claim as
provided in Section 3.8(c) and (ii) the amount of such compromise, settlement or
judgment shall be determinative of the amount of the Loss (but such compromise,
settlement or judgment shall not necessarily be determinative of which party
hereunder is entitled to indemnification).
(e) The Indemnifying Party shall bear all costs and expenses of
defending any Third Party Claim; provided, however, that (A) if Transocean
elects to defend any Third Party Claim or series of related Third Party Claims
pursuant to the last sentence of Section 3.8(b) and Transocean is not an
Indemnifying Party with respect thereto, TODCO shall reimburse Transocean
promptly upon demand by Transocean for all out-of-pocket costs and expenses
reasonably incurred in connection with Transocean's defense of such Third Party
Claim and (B) if both parties may be Indemnifying Parties with respect to such
Third Party Claim, the non-defending party shall reimburse the defending party
promptly upon demand by the defending party for the non-defending party's
proportionate share, allocated based on each party's proportionate
responsibility for the Indemnifiable Loss pursuant to this Agreement, of all
out-of-pocket costs and expenses reasonably incurred in connection with the
defending party's defense of such Third Party Claim.
(f) The non-defending party shall make available to the defending
party and its counsel all employees, books and records, communications,
documents, items or matters
27
within its knowledge, possession or control that are necessary, appropriate or
reasonably deemed relevant by the defending party with respect to such defense;
provided, however, that subject to Section 7.7 hereof, nothing in this
subparagraph (f) shall be deemed to require a party to make available books and
records, communications, documents or items which (i) in such party's good faith
judgment could result in a waiver of any Privilege or (ii) such party is not
permitted to make available because of any Law or any confidentiality obligation
to a third party, in which case such party shall use its reasonable commercial
efforts to seek a waiver of or other relief from such confidentiality
restriction.
(g) Upon final judgment, determination, settlement or compromise
of any Third Party Claim, and unless otherwise agreed by the parties in writing,
the Indemnifying Party shall pay promptly on behalf of the Indemnitee, or to the
Indemnitee in reimbursement of any amount theretofore required to be paid by it,
all amounts required to be paid by the Indemnifying Party pursuant to this
Article III with respect to such claim as determined by such final judgment,
determination, settlement or compromise.
3.9 ADDITIONAL MATTERS.
(a) Any claim on account of a Loss which does not result from a
Third Party Claim shall be asserted by written notice given by the Indemnitee to
the related Indemnifying Party. Any such notice shall describe the claim in
reasonable detail. Such Indemnifying Party shall have a period of 30 days after
the receipt of such notice within which to respond thereto. If such
Indemnifying Party does not respond within such 30-day period, such Indemnifying
Party shall be deemed to have refused to accept responsibility to make payment.
If such Indemnifying Party does not respond within such 30-day period or rejects
such claim in whole or in part, such Indemnitee shall be free to pursue such
remedies as may be available to such party as contemplated by this Agreement and
the Ancillary Agreements.
(b) In the event of payment by or on behalf of any Indemnifying
Party to any Indemnitee in connection with any Third Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the place of such
Indemnitee in respect of any rights, defenses or claims of such Indemnitee
relating to such Third Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner in prosecuting any subrogated right,
defense or claim, and its out-of-pocket costs and expenses in connection
therewith shall be reimbursed by the Indemnifying Party.
(c) In the event of an Action in which the Indemnifying Party is
not a named defendant, if either the Indemnified Party or Indemnifying Party
shall so request, the parties shall endeavor to substitute the Indemnifying
Party for the named defendant, if reasonably practicable. If such substitution
or addition cannot be achieved for any reason or is not requested, the named
defendant shall allow the Indemnifying Party to manage the Action as set forth
in this Article III.
(d) THE PARTIES UNDERSTAND AND AGREE THAT THE RELEASE FROM
LIABILITIES AND INDEMNIFICATION OBLIGATIONS HEREUNDER AND UNDER THE ANCILLARY
AGREEMENTS MAY INCLUDE RELEASE FROM LIABILITIES AND INDEMNIFICATION FOR LOSSES
RESULTING FROM, OR ARISING
28
OUT OF, DIRECTLY OR INDIRECTLY, AN INDEMNIFIED PARTY'S OWN NEGLIGENCE OR STRICT
LIABILITY.
3.10 CONTRIBUTION. If any indemnification provided for in this Article
III is unavailable to an Indemnitee in respect of any Loss arising out of or
related to information contained in the IPO Registration Statement as provided
in Section 3.3(d) or 3.4(d), then the Indemnifying Party, in lieu of
indemnifying such Indemnitee, shall contribute to the amount paid or payable by
such Indemnitee as a result of such Loss, in such proportion as is appropriate
to reflect the relative fault of TODCO and each other member of the TODCO Group,
on the one hand, and Transocean and each other member of the Transocean Group,
on the other hand, in connection with the statements or omissions which resulted
in such Loss. With respect to any Loss relating to matters covered by Section
3.3(d) or otherwise relating to misstatements or omissions under securities or
antifraud laws, the relative fault of a member of the TODCO Group, on the one
hand, and of a member of the Transocean Group, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to a member of the TODCO Group or a member of the
Transocean Group and was supplied by such member (taking into account the
proviso to Section 3.3(d)).
3.11 REMEDIES CUMULATIVE. The remedies provided in this Article III
shall be cumulative and, subject to the provisions of Article VI, shall not
preclude assertion by any Indemnitee of any other rights or the seeking of any
and all other remedies against any Indemnifying Party.
3.12 SURVIVAL OF INDEMNITIES. The rights and obligations of each of
Transocean and TODCO and their respective Indemnitees under this Article III
shall survive the sale or other transfer by any party of any Assets or
businesses or the assignment by it of any Liabilities.
3.13 INDEMNIFICATION OF DIRECTORS AND OFFICERS. For purpose of
Sections 3.3 through 3.12, inclusive, and notwithstanding anything to the
contrary contained in this Agreement, Persons who serve as officers or directors
of both TODCO and Transocean shall be deemed both TODCO Indemnitees and
Transocean Indemnitees.
ARTICLE IV
THE IPO AND ACTIONS PENDING THE IPO
4.1 TRANSACTIONS PRIOR TO THE IPO. Subject to the conditions specified
in Section 4.3, Transocean, Transocean Holdings and TODCO shall use their
reasonable commercial efforts to consummate the IPO. Such efforts shall include,
but not necessarily be limited to, those specified in this Section 4.1 (to the
extent not previously accomplished):
(a) TODCO has filed the IPO Registration Statement, and shall use
its best efforts to cause such IPO Registration Statement to become effective,
including by filing such amendments thereto as may be necessary or appropriate,
responding promptly to any comments of the Commission and taking such other
action in that connection as may be reasonably requested by Transocean.
Transocean, Transocean Holdings and TODCO shall also cooperate in
29
preparing, filing with the Commission and causing to become effective a
registration statement registering the TODCO Common Stock under the Exchange
Act, and any registration statements or amendments thereof which are required to
reflect the establishment of, or amendments to, any employee benefit and other
plans necessary or appropriate in connection with the IPO, any Prior Transfers,
the Separation or the other transactions contemplated by this Agreement.
(b) TODCO, Transocean Holdings and Transocean shall enter into an
underwriting agreement with the underwriters named in the IPO Registration
Statement (the "Underwriting Agreement"), in form and substance reasonably
satisfactory to Transocean, and shall comply with its obligations thereunder.
(c) Transocean, Transocean Holdings and TODCO shall consult with
each other and the Underwriters regarding the timing, pricing and other material
matters with respect to the IPO, it being understood that decisions on such
matters may be dictated by Transocean in its sole discretion.
(d) TODCO shall take all such action as may be necessary or
appropriate under state securities and blue sky laws of the United States (and
any comparable laws under any foreign jurisdictions) in connection with the IPO.
(e) TODCO shall prepare, file and seek to make effective, an
application for listing of the TODCO Class A Common Stock issued in the IPO on
the NYSE, subject to official notice of issuance.
4.2 COOPERATION. TODCO and Transocean Holdings shall, at Transocean's
direction, promptly take any and all actions necessary or desirable to
consummate the IPO as contemplated by the IPO Registration Statement and the
Underwriting Agreement. Notwithstanding anything to the contrary contained
herein, as between Transocean, Transocean Holdings and TODCO, Transocean may in
its sole discretion choose to terminate, abandon or amend any aspect of the IPO,
and TODCO and Transocean Holdings shall take all actions directed by Transocean
in that regard.
4.3 CONDITIONS PRECEDENT TO CONSUMMATION OF THE IPO. The parties
hereto shall use their reasonable commercial efforts to satisfy the conditions
listed below for the consummation of the IPO as soon as practicable. The
obligations of the parties to use their reasonable commercial efforts to
consummate the IPO shall be conditioned on the satisfaction, or waiver by
Transocean, of the following conditions:
(a) The IPO Registration Statement shall have been filed and
declared effective by the Commission, and there shall be no stop order in effect
with respect thereto.
(b) The actions and filings with regard to state securities and
blue sky laws of the United States (and any comparable laws under any foreign
jurisdictions) described in Section 4.1(d) shall have been taken and, where
applicable, have become effective or been accepted.
(c) The TODCO Class A Common Stock to be issued in the IPO shall
have been accepted for listing on the NYSE, on official notice of issuance.
30
(d) TODCO, Transocean Holdings and Transocean shall have entered
into the Underwriting Agreement and all conditions to the obligations of TODCO,
Transocean Holdings, Transocean and the Underwriters shall have been satisfied
or waived.
(e) Transocean shall be satisfied, in its sole discretion, that
(1) following the IPO, Transocean and other members of the Transocean Group will
collectively own stock of TODCO representing control of TODCO, within the
meaning of Section 368(c) of the Code and (2) to Transocean's actual knowledge
(with no duty to investigate), all other conditions to permit the Distribution
to qualify as a tax-free distribution to Transocean, TODCO and Transocean's
shareholders shall, to the extent applicable as of the time of the IPO, be
satisfied, and there shall be no event or condition that is likely to cause any
of such conditions not to be satisfied as of the time of the Distribution or
thereafter.
(f) Any material Governmental Approvals necessary to consummate
the IPO shall have been obtained and be in full force and effect.
(g) No order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Separation or the IPO or any of the other transactions
contemplated by this Agreement or any Ancillary Agreement shall be in effect.
(h) Such other actions as the parties hereto may, based upon the
advice of counsel, reasonably request to be taken prior to the IPO in order to
assure the successful completion of the IPO shall have been taken.
(i) This Agreement and all Ancillary Agreements shall have been
executed and shall not have been terminated.
(j) Pricing committees designated by the Board of Directors of
each of Transocean and Transocean Holdings shall have determined that the terms
of the IPO are acceptable to Transocean and Transocean Holdings, respectively.
ARTICLE V
CORPORATE GOVERNANCE AND OTHER MATTERS
5.1 CHARTER AND BYLAWS. As of the IPO Closing Date, the Amended and
Restated Certificate of Incorporation and Bylaws of TODCO shall be in the forms
of Schedule 5.1(a) and 5.1(b), respectively, with such changes therein as may be
agreed to in writing by Transocean.
5.2 RIGHTS PLAN AMENDMENTS. Following the IPO Closing Date and for so
long as Transocean beneficially owns shares representing at least 15% of the
voting power of all of the outstanding shares of the TODCO Voting Stock, without
the prior written consent of Transocean, TODCO shall not amend or modify the
TODCO Rights Plan.
5.3 CHARTER/BYLAW AMENDMENTS. So long as Transocean owns shares
representing at least 15% of the voting power of all of the outstanding shares
of TODCO Voting Stock, TODCO will not, without the prior consent of Transocean,
adopt any amendments to its
31
Amended and Restated Certificate of Incorporation or Bylaws or take or recommend
to its stockholders any action during the term of this Agreement which would (i)
impose limitations on the legal rights of Transocean or any other member of the
Transocean Group or any transferee of any securities of TODCO from Transocean or
a member of the Transocean Group (a "Transocean Transferee") as a stockholder of
TODCO other than those imposed pursuant to the express terms of this Agreement
or the forms of TODCO's Amended and Restated Certificate of Incorporation and
Bylaws attached hereto as Schedules 5.1(a) and 5.1(b), respectively, including,
without limitation, any action which would impose restrictions (A) based upon
the size of security holding, the business in which a security holder is engaged
or other considerations applicable to Transocean or any other member of the
Transocean Group or a Transocean Transferee and not to security holders
generally, (B) by means of the issuance of or proposal to issue any class of
securities having voting power disproportionately greater than the equity
investment in TODCO represented by such securities or (C) involving impairment
of rights granted to any member of the Transocean Group, (ii) involve the
issuance or corporate action providing for the issuance of any warrant, right,
capital stock or other security (A) which is, or under specified circumstances
will become, convertible into or represent the right to acquire any securities
of Transocean or any other member of the Transocean Group or a Transocean
Transferee or (B) which is dependent upon the amount of voting securities owned
by Transocean or any other member of the Transocean Group or a Transocean
Transferee, (iii) deny any benefit to Transocean or any other member of the
Transocean Group or a Transocean Transferee proportionately as holders of any
class of voting securities generally, or (iv) alter voting or other rights of
the holders of any class of voting securities so that any such rights (or the
vote required with respect to any matter) are determined with reference to the
amount of voting securities held by Transocean or any other member of the
Transocean Group or a Transocean Transferee; provided, that this Section 5.3
shall not prohibit TODCO from adopting the TODCO Rights Plan or taking any
action otherwise prohibited hereby, so long as Transocean and the other members
of the Transocean Group and any Transocean Transferee are, either expressly or
as part of a class of stockholders which includes Transocean and the other
members of the Transocean Group, together with the Transocean Transferees,
exempted from such action or the limitations on legal rights imposed thereby.
5.4 TODCO BOARD REPRESENTATION.
(a) Beginning on the IPO Closing Date, and for so long as the
Transocean Group beneficially owns shares representing less than a majority but
at least 10% of the voting power of all of the outstanding shares of TODCO
Voting Stock, Transocean shall have the right to designate for nomination by the
TODCO Board (or any nominating committee thereof) to the TODCO Board a
proportionate number of members of the TODCO Board, as calculated in accordance
with this Section 5.4.
(b) For so long as the Transocean Group beneficially owns shares
representing at least 10% of the voting power of all of the outstanding shares
of TODCO Voting Stock, Transocean shall be entitled to present to the TODCO
Board or any nominating committee thereof such number of designees of Transocean
(each, a "Transocean Designee") for election to the TODCO Board (or if there is
a classified board, the class of directors up for election) as would result in
Transocean having the appropriate number of Transocean Designees on the TODCO
Board as determined pursuant to Section 5.4(a). TODCO shall exercise all
32
authority under applicable law and shall use its best efforts to cause each
Transocean Designee to be elected to the TODCO Board effective as of the IPO
Closing Date (or at the first regularly scheduled meeting thereafter).
(c) TODCO shall at all such times exercise all authority under
applicable law and use its best efforts to cause all such designees to be
nominated as Board members by the nominating committee of the TODCO Board if
there is such a committee. TODCO shall cause each Transocean Designee for
election to the TODCO Board to be included in the slate of designees recommended
by the TODCO Board to holders of TODCO Common Stock (including at any special
meeting of stockholders held for the election of directors) and shall use its
best efforts to cause the election of each such Transocean Designee, including
soliciting proxies in favor of the election of such persons. In the event that
any Transocean Designee elected to the TODCO Board shall cease to serve as a
director for any reason, the vacancy resulting therefrom shall be filled by the
TODCO Board with a substitute Transocean Designee, unless such vacancy was
caused by action of stockholders (in which case, in accordance with TODCO's
Amended and Restated Certificate of Incorporation, the stockholders shall fill
such vacancy). In the event that as a result of any increase in the size of the
TODCO Board, Transocean is entitled to have one or more additional Transocean
Designees elected to the TODCO Board pursuant to Section 5.4(a), the Transocean
Board shall appoint the appropriate number of such additional Transocean
Designees, unless such increase in size of the TODCO Board was caused by the
action of stockholders (in which case, in accordance with TODCO's Amended and
Restated Certificate of Incorporation, the stockholders shall elect such
additional director or directors).
(d) If at any time that Transocean Designees are serving on the
TODCO Board, the Transocean Group beneficially owns shares representing at least
10% of the total voting power of all of the outstanding shares of TODCO Voting
Stock, the number of persons Transocean shall be entitled to designate for
nomination by the TODCO Board (or any nominating committee thereof) for election
to the TODCO Board shall be equal to the number of directors computed using the
following formula (rounded to the nearest whole number): the product of (1) the
percentage of the voting power of all of the outstanding shares of TODCO Voting
Stock beneficially owned by the Transocean Group and (2) the number of directors
then on the TODCO Board (assuming no vacancies exist). Notwithstanding the
foregoing, if the Transocean Group beneficially owns shares of TODCO Common
Stock representing less than a majority of the total voting power of all
outstanding shares of TODCO Voting Stock and the calculation of the formula set
forth in the foregoing sentence would result in Transocean being entitled to
elect a majority of the members of the TODCO Board, the formula will be
recalculated with the product being rounded down to the nearest whole number;
provided, however, that if the Transocean Group at any time, acquires additional
shares of TODCO Common Stock so that the Transocean Group beneficially owns
shares of TODCO Common Stock representing a majority of the total voting power
of all of the outstanding shares of TODCO Voting Stock, then the number of
persons Transocean shall be entitled to designate for nomination by the TODCO
Board (or any nominating committee thereof) for election to the TODCO Board
shall be adjusted upward, if appropriate as a result of rounding, in accordance
with the provisions of this Section 5.4(d). If the number of Transocean
Designees serving on the TODCO Board exceeds the number determined pursuant to
the foregoing sentences of this Section 5.4(d) (such difference being herein
called the "Excess Director Number"), then Transocean in its sole discretion
shall instruct a number of Transocean Designees (the number of
33
which designees shall be equal to the Excess Director Number) to resign from the
TODCO Board, and, to the extent such persons do not so resign, Transocean shall
assist TODCO in increasing the size of the TODCO Board, so that after giving
effect to such increase, the number of Transocean Designees on the TODCO Board
is in accordance with the provisions of this Section 5.4(d).
(e) For so long as the Transocean Group beneficially owns shares
representing at least a majority of the voting power of all of the outstanding
shares of TODCO Voting Stock, Transocean shall have the right to designate the
chairman of the TODCO Board. TODCO shall exercise all authority under
applicable law and shall use its best efforts to cause the person designated by
Transocean to be elected as chairman of the TODCO Board.
5.5 COMMITTEES. Effective as of the IPO Closing Date and for so long
as the Transocean Group owns shares of TODCO Common Stock representing a
majority of the total voting power of all of the outstanding shares of TODCO
Voting Stock, any committee of the Board of Directors of TODCO shall be composed
of directors at least a majority of which are Transocean Designees. Effective
as of the IPO Closing Date and for so long as the Transocean Group beneficially
owns shares of TODCO Common Stock representing less than a majority but more
than 10% of the total voting power of all of the outstanding shares of TODCO
Voting Stock, each committee of the TODCO Board of Directors shall, unless
Transocean consents otherwise, include at least one Transocean Designee to the
extent permitted by Law or stock exchange requirement.
5.6 SUBSCRIPTION RIGHT.
(a) TODCO hereby grants to Transocean, on the terms and conditions
set forth herein, a continuing right (the "Subscription Right") to purchase from
TODCO, at the times set forth herein:
(i) with respect to the issuance of a class or series of
shares of TODCO Voting Stock, the number of such shares as is
necessary to allow Transocean to maintain its Voting Percentage, and
(ii) with respect to the issuance of a class or series of
shares of TODCO Non-Voting Stock, the number of such shares as is
necessary to allow Transocean to maintain its Ownership Percentage
with respect to such class or series of shares (or, in the case of a
class or series not outstanding prior to such issuance, 80% of the
total number of shares of such class or series being issued).
The Subscription Right shall be assignable, in whole or in part and from time to
time, by Transocean to any member of the Transocean Group. The exercise price
for each share of TODCO Stock purchased pursuant to an exercise of the
Subscription Right shall be: (i) in the event of the issuance by TODCO of TODCO
Stock in exchange for cash consideration, the per share price paid to TODCO for
shares of the TODCO Stock issued by TODCO in the related Issuance Event; and
(ii) in the event of the issuance by TODCO of TODCO Stock for
34
consideration other than cash, the per share Market Price of such TODCO Stock at
the Issuance Event Date of such issuance.
(b) The provisions of Section 5.6(a) hereof notwithstanding, the
Subscription Right granted pursuant to Section 5.6(a) shall not apply and shall
not be exercisable in connection with the issuance by TODCO of any shares of
TODCO Common Stock pursuant to any stock option or other executive or employee
benefit or compensation plan maintained by TODCO, to the extent such issuance
would not result in Transocean and other members of the Transocean Group losing
collective control of TODCO within the meaning of Section 368(c) of the Code.
The Subscription Right granted pursuant to Section 5.6(a) shall terminate if at
any time the Voting Percentage, or the Ownership Percentage with respect to any
class or series of TODCO Non-Voting Stock, is less than 80%.
(c) At least 20 Business Days prior to the issuance of any shares
of TODCO Stock (other than pursuant to any stock option or other executive or
employee benefit or compensation plan maintained by TODCO in the circumstances
described in Section 5.6(b) above and other than issuances of TODCO Stock to any
member of the Transocean Group) or the first date on which any event could occur
that, in the absence of a full or partial exercise of the Subscription Right,
would result in a reduction in the Voting Percentage, a reduction in any
Ownership Percentage or the issuance of any shares of a class or series of TODCO
Non-Voting Stock not outstanding prior to such issuance, TODCO will notify
Transocean in writing (a "Subscription Right Notice") of any plans it has to
issue such shares or the date on which such event could first occur. Each
Subscription Right Notice must specify the date on which TODCO intends to issue
such additional shares of TODCO Stock or on which such event could first occur
(such issuance or event being referred to herein as an "Issuance Event" and the
date of such issuance or event as an "Issuance Event Date"), the number of
shares TODCO intends to issue or may issue and the other terms and conditions of
such Issuance Event.
(d) The Subscription Right may be exercised by Transocean (or any
member of the Transocean Group to which all or any part of the Subscription
Right has been assigned) for a number of shares equal to or less than the number
of shares the Transocean Group is entitled to purchase pursuant to Section
5.6(a). The Subscription Right may be exercised at any time after receipt of an
applicable Subscription Right Notice and prior to the applicable Issuance Event
Date by the delivery to TODCO of a written notice to such effect specifying (i)
the number of shares of TODCO Stock to be purchased by Transocean, or any member
of the Transocean Group, and (ii) a determination of the exercise price for such
shares. Upon any such exercise of the Subscription Right, TODCO will, prior to
the applicable Issuance Event Date, deliver to Transocean (or any member of the
Transocean Group designated by Transocean), against payment therefor,
certificates (issued in the name of Transocean or its permitted assignee
hereunder or as directed by Transocean) representing the shares of TODCO Stock
being purchased upon such exercise. Payment for such shares shall be made by
wire transfer or intrabank transfer of immediately-available funds to such
account as shall be specified by TODCO, for the full purchase price of such
shares.
(e) Except as provided in Section 5.6(f), any failure by
Transocean to exercise the Subscription Right, or any exercise for less than all
shares purchasable under the Subscription Right, in connection with any
particular Issuance Event shall not affect
35
Transocean's right to exercise the Subscription Right in connection with any
subsequent Issuance Event; provided, however, that the Voting Percentage and any
Ownership Percentage following such Issuance Event in connection with which
Transocean so failed to exercise such Subscription Right in full or in part
shall be recalculated as set forth in Section 1.110 or Section 1.66,
respectively.
(f) The Subscription Right, or any part thereof, assigned to any
member of the Transocean Group other than Transocean, shall terminate in the
event that such member ceases to be a Subsidiary of Transocean for any reason
whatsoever.
5.7 TAX-FREE SPIN-OFF. At any time after the IPO Closing Date, if
Transocean advises TODCO that it intends to pursue a tax-free distribution under
Section 355 of the Code or any corresponding provision of any successor statute
or that it intends to otherwise distribute all or a portion of the capital stock
of TODCO beneficially owned by Transocean to its securityholders by way of
dividend, exchange or otherwise (any of the foregoing, a "Distribution"), TODCO
agrees to take all action requested by Transocean to facilitate such transaction
(including without limitation internal restructurings and continuation of
businesses necessary to achieve such tax-free distribution), at TODCO's own
expense. In the event a registration statement is filed in connection with such
transaction, TODCO and Transocean will cooperate to take actions analogous (to
the extent applicable) to those set forth in the Registration Rights Agreement
with respect to a Demand Registration and in particular the parties will
indemnify and provide contribution to each other in a manner analogous to that
set forth in Section 8 of the Registration Rights Agreement.
5.8 NO VIOLATIONS.
(a) So long as the Transocean Group owns shares representing at
least a majority of the voting power of all of the outstanding shares of TODCO
Voting Stock, TODCO covenants and agrees that it will not (i) take any action or
enter into any commitment or agreement which may reasonably be anticipated to
result, with or without notice and with or without lapse of time or otherwise,
in a contravention or event of default by it or any of its Affiliates of (A) any
provisions of applicable Law, including but not limited to provisions pertaining
to the Code or the Employee Retirement Income Security Act of 1974, as amended,
(B) any provision of Transocean's Memorandum of Association or Articles of
Association or (C) any credit agreement or other material agreement (including
agreements relating to covenants not to compete) binding upon Transocean or (ii)
enter into any commitment or agreement that contains provisions that trigger a
default or require a material payment when Transocean exercises its rights to
convert the TODCO Class B Common Stock.
(b) TODCO and Transocean agree to provide to each other any
information and documentation requested by the other for the purpose of
evaluating and ensuring compliance with Section 5.8(a).
5.9 APPLICABILITY OF RIGHTS TO PARENT IN THE EVENT OF AN ACQUISITION.
In the event TODCO merges into, consolidates, sells substantially all of its
assets to or otherwise becomes an Affiliate of a Person (other than Transocean),
pursuant to a transaction or series of related transactions in which Transocean
receives equity securities of such Person (or of any Affiliate of
36
such Person) in exchange for TODCO Common Stock held by Transocean, all of the
rights of Transocean set forth in this Article V and in Section 7.5 shall
continue in full force and effect and shall apply to the Person the equity
securities of which are received by Transocean pursuant to such transaction or
series of related transactions (it being understood that all other provisions of
this Agreement will apply to TODCO notwithstanding this Section 5.9). TODCO
agrees that, without the consent of Transocean, it will not enter into any
agreement which will have the effect set forth in the first clause of the
preceding sentence, unless such Person agrees to be bound by the foregoing
provision.
5.10 OTHER MATTERS. TODCO covenants and agrees that it will not, and
will not permit any of its Affiliates to, enter into any commitment or agreement
that binds or purports to bind Transocean or any of its Affiliates.
ARTICLE VI
ARBITRATION; DISPUTE RESOLUTION
6.1 AGREEMENT TO ARBITRATE. Except as otherwise specifically provided
in any Ancillary Agreement, the procedures for discussion, negotiation and
arbitration set forth in this Article VI shall apply to all disputes,
controversies or claims (whether sounding in contract, tort or otherwise) that
may rise out of or relate to, or arise under or in connection with this
Agreement or any Ancillary Agreement, or the transactions contemplated hereby or
thereby (including all actions taken in furtherance of the transactions
contemplated hereby or thereby on or prior to the date hereof), or (for a period
of ten years after the date hereof) the commercial or economic relationship of
the parties relating hereto or thereto, between or among any member of the
Transocean Group and the TODCO Group. Each party agrees on behalf of itself and
each member of its respective Group that the procedures set forth in this
Article VI shall be the sole and exclusive remedy in connection with any
dispute, controversy or claim relating to any of the foregoing matters and
irrevocably waives any right to commence any Action in or before any
Governmental Authority, except as expressly provided in Section 6.7(b) and
except to the extent provided under the Arbitration Act in the case of judicial
review of arbitration results or awards. Each party on behalf of itself and
each member of its respective Group irrevocably waives any right to any trial by
jury with respect to any claim, controversy or dispute set forth in this Section
6.1.
6.2 ESCALATION.
(a) It is the intent of the parties to use their respective
reasonable best efforts to resolve expeditiously any dispute, controversy or
claim between or among them with respect to the matters covered hereby that may
arise from time to time on a mutually acceptable negotiated basis. In
furtherance of the foregoing, any party involved in a dispute, controversy or
claim may deliver a notice (an "Escalation Notice") demanding an in-person
meeting involving representatives of the parties at a senior level of management
of the parties (or if the parties agree, of the appropriate strategic business
unit or division within such entity). A copy of any such Escalation Notice
shall be given to the General Counsel, or like officer or official, of each
party involved in the dispute, controversy or claim (which copy shall state that
it is an Escalation Notice pursuant to this Agreement). Any agenda, location or
procedures for such discussions or
37
negotiations between the parties may be established by the parties from time to
time; provided, however, that the parties shall use their reasonable best
efforts to meet within 30 days of the Escalation Notice.
(b) The parties may, by mutual consent, retain a mediator to aid
the parties in their discussions and negotiations by informally providing advice
to parties. Any opinion expressed by the mediator shall be strictly advisory
and shall not be binding on the parties, nor shall any opinion expressed by the
mediator be admissible in any arbitration proceedings. The mediator may be
chosen from a list of mediators previously selected by the parties or by other
agreement of the parties. Costs of the mediation shall be borne equally by the
parties involved in the matter, except that each party shall be responsible for
its own expenses. Mediation is not a prerequisite to a demand for arbitration
under Section 6.3.
6.3 DEMAND FOR ARBITRATION.
(a) At any time after the first to occur of (i) the date of the
meeting actually held pursuant to the applicable Escalation Notice or (ii) 45
days after the delivery of an Escalation Notice (as applicable, the "Arbitration
Demand Date"), any party involved in the dispute, controversy or claim
(regardless of whether such party delivered the Escalation Notice) may deliver a
notice demanding arbitration of such dispute, controversy or claim (a
"Arbitration Demand Notice"). In the event that any party shall deliver an
Arbitration Demand Notice to another party, such other party may itself deliver
an Arbitration Demand Notice to such first party with respect to any related
dispute, controversy or claim with respect to which the Applicable Deadline has
not passed without the requirement of delivering an Escalation Notice. No party
may assert that the failure to resolve any matter during any discussions or
negotiations, the course of conduct during the discussions or negotiations or
the failure to agree on a mutually acceptable time, agenda, location or
procedures for the meeting, in each case, as contemplated by Section 6.2, is a
prerequisite to a demand for arbitration under this Section 6.3. In the event
that any party delivers an Arbitration Demand Notice with respect to any
dispute, controversy or claim that is the subject of any then pending
arbitration proceeding or of a previously delivered Arbitration Demand Notice,
all such disputes, controversies and claims shall be resolved in the arbitration
proceeding for which an Arbitration Demand Notice was first delivered unless the
arbitrator in his or her sole discretion determines that it is impracticable or
otherwise inadvisable to do so.
(b) Except as may be expressly provided in any Ancillary
Agreement, any Arbitration Demand Notice may be given until one year after the
later of the occurrence of the act or event giving rise to the underlying claim
or the date on which such act or event was, or should have been, in the exercise
of reasonable due diligence, discovered by the party asserting the claim (as
applicable and as it may in a particular case be specifically extended by the
parties in writing, the "Applicable Deadline"). Any discussions, negotiations
or mediations between the parties pursuant to this Agreement or otherwise will
not toll the Applicable Deadline unless expressly agreed in writing by the
parties. Each of the parties agrees on behalf of itself and each member of its
Group that if an Arbitration Demand Notice with respect to a dispute,
controversy or claim is not given prior to the expiration of the Applicable
Deadline, as between or among the parties and the members of their Groups, such
dispute, controversy or claim will be barred. Subject to Sections 6.7(d) and
6.8, upon delivery of an Arbitration Demand Notice pursuant to
38
Section 6.3(a) prior to the Applicable Deadline, the dispute, controversy or
claim shall be decided by a sole arbitrator in accordance with the rules set
forth in this Article VI.
6.4 ARBITRATORS.
(a) Within 15 days after a valid Arbitration Demand Notice is
given, the parties involved in the dispute, controversy or claim referenced
therein shall attempt to select a sole arbitrator satisfactory to all such
parties.
(b) In the event that such parties are not able jointly to select
a sole arbitrator within such 15-day period, such parties shall each appoint an
arbitrator (who need not be disinterested as to the parties or the matter)
within 30 days after delivery of the Arbitration Demand Notice. If one party
appoints an arbitrator within such time period and the other party or parties
fail to appoint an arbitrator within such time period, the arbitrator appointed
by the one party shall be the sole arbitrator of the matter.
(c) In the event that a sole arbitrator is not selected pursuant
to paragraph (a) or (b) above, the two arbitrators will, within 30 days after
the appointment of the later of them to be appointed, select an additional
arbitrator who shall act as the sole arbitrator of the dispute. After selection
of such sole arbitrator, the initial arbitrators shall have no further role with
respect to the dispute. In the event that the arbitrators so appointed do not,
within 30 days after the appointment of the later of them to be appointed, agree
on the selection of the sole arbitrator, any party involved in such dispute may
apply to the U.S. District Court for the Southern District of Texas to select
the sole arbitrator, which selection shall be made within 30 days after such
application. Any arbitrator selected pursuant to this paragraph (c) shall be
disinterested with respect to each of the parties and shall be reasonably
competent in the applicable subject matter.
(d) The sole arbitrator selected pursuant to paragraph (a), (b) or
(c) above will set a time for the hearing of the matter, which will commence no
later than 90 days after the date of appointment of the sole arbitrator pursuant
to paragraph (a), (b) or (c) above and which hearing will be no longer than 30
days (unless in the judgment of the arbitrator the matter is unusually complex
and sophisticated and thereby requires a longer time, in which event such
hearing shall be no longer than 90 days). The final decision of such arbitrator
will be rendered in writing to the parties not later than 60 days after the last
hearing date, unless otherwise agreed by the parties in writing.
(e) The place of any arbitration hereunder will be Houston, Texas,
unless otherwise agreed by the parties.
6.5 HEARINGS. Within the time period specified in Section 6.4(d), the
matter shall be presented to the arbitrator at a hearing by means of written
submissions of memoranda and verified witness statements, filed simultaneously,
and responses, if necessary in the judgment of the arbitrator or both the
parties. If the arbitrator deems it to be essential to a fair resolution of the
dispute, live cross-examination or direct examination may be permitted, but is
not generally contemplated to be necessary. The arbitrator shall actively
manage the arbitration with a view to achieving a just, speedy and
cost-effective resolution of the dispute, claim or controversy. The arbitrator
may, in his or her discretion, set time and other limits on the presentation of
39
each party's case, its memoranda or other submissions, and refuse to receive any
proffered evidence, which the arbitrator, in his or her discretion, finds to be
cumulative, unnecessary, irrelevant or of low probative nature. Except as
otherwise set forth herein, any arbitration hereunder will be conducted in
accordance with the procedures of CPR Institute for Dispute Resolution ("CPR").
The decision of the arbitrator will be final and binding on the parties, and
judgment thereon may be had and will be enforceable in any court having
jurisdiction over the parties. Arbitration awards will bear interest at an
annual rate of the Prime Rate plus 2% per annum, subject to any maximum amount
permitted by applicable law. To the extent that the provisions of this
Agreement and the prevailing rules of the CPR conflict, the provisions of this
Agreement shall govern.
6.6 DISCOVERY AND CERTAIN OTHER MATTERS.
(a) Any party involved in a dispute subject to this Article VI may
request limited document production from the other party or parties of specific
and expressly relevant documents, with the reasonable expenses of the producing
party incurred in such production paid by the requesting party. Any such
discovery (which right to documents shall be substantially less than document
discovery rights prevailing under the Federal Rules of Civil Procedure) shall be
conducted expeditiously and shall not cause the hearing provided for in Section
6.5 to be adjourned except upon consent of all parties involved in the
applicable dispute or upon an extraordinary showing of cause demonstrating that
such adjournment is necessary to permit discovery essential to a party to the
proceeding. Depositions, interrogatories or other forms of discovery (other
than the document production set forth above) shall not occur except by consent
of the parties involved in the applicable dispute. Disputes concerning the
scope of document production and enforcement of the document production requests
will be determined by written agreement of the parties involved in the
applicable dispute or, failing such agreement, will be referred to the
arbitrator for resolution. All discovery requests will be subject to the
parties' rights to claim any applicable privilege. The arbitrator will adopt
procedures to protect the proprietary rights of the parties and to maintain the
confidential treatment of the arbitration proceedings (except as may be required
by law). Subject to the foregoing, the arbitrator shall have the power to issue
subpoenas to compel the production of documents relevant to the dispute,
controversy or claim.
(b) The arbitrator shall have full power and authority to
determine issues of arbitrability but shall otherwise be limited to interpreting
or construing the applicable provisions of this Agreement or any Ancillary
Agreement, and will have no authority or power to limit, expand, alter, amend,
modify, revoke or suspend any condition or provision of this Agreement or any
Ancillary Agreement; it being understood, however, that the arbitrator will have
full authority to implement the provisions of this Agreement or any Ancillary
Agreement, and to fashion appropriate remedies for breaches of this Agreement
(including interim or permanent injunctive relief); provided that the arbitrator
shall not have (i) any authority in excess of the authority a court having
jurisdiction over the parties and the controversy or dispute would have absent
these arbitration provisions or (ii) any right or power to award punitive or
treble damages (provided that this clause (ii) shall not limit the award of
damages for any Losses). It is the intention of the parties that in rendering a
decision the arbitrator give effect to the applicable provisions of this
Agreement and the Ancillary Agreements and follow applicable law (it being
40
understood and agreed that this sentence shall not give rise to a right of
judicial review of the arbitrator's award).
(c) If a party fails or refuses to appear at and participate in an
arbitration hearing after due notice, the arbitrator may hear and determine the
controversy upon evidence produced by the appearing party.
(d) Arbitration costs will be borne equally by each party involved
in the matter, except that each party will be responsible for its own attorney's
fees and other costs and expenses, including the costs of witnesses selected by
such party.
6.7 CERTAIN ADDITIONAL MATTERS.
(a) Any arbitration award shall be an award with a holding for or
against a party and shall include findings as to facts, issues or conclusions of
law (including with respect to any matters relating to the validity or
infringement of patents or patent applications) and shall include a statement of
the reasoning on which the award rests. The award must also be in adequate form
so that a judgment of a court may be entered thereupon. Judgment upon any
arbitration award hereunder may be entered in any court having jurisdiction
thereof.
(b) Prior to the time at which an arbitrator is appointed pursuant
to Section 6.4, any party may seek one or more temporary restraining orders or
other injunctive relief in a court of competent jurisdiction if necessary in
order to preserve and protect the status quo. Neither the request for, nor the
grant or denial of, any such temporary restraining order or other injunctive
relief shall be deemed a waiver of the obligation to arbitrate as set forth
herein, and the arbitrator may dissolve, continue or modify any such order. Any
such temporary restraining order or other injunctive relief shall remain in
effect until the first to occur of the expiration of the order in accordance
with its terms or the dissolution thereof by the arbitrator.
(c) Except as required by law, the parties shall hold, and shall
cause their respective officers, directors, employees, agents and other
representatives to hold, the existence, content and result of mediation or
arbitration in confidence in accordance with the provisions of Section 7.13 and
except as may be required in order to enforce any award. Each of the parties
shall request that any mediator or arbitrator comply with such confidentiality
requirement.
(d) In the event that at any time the sole arbitrator shall fail
to serve as an arbitrator for any reason, the parties shall select a new
arbitrator who shall be disinterested as to the parties and the matter in
accordance with the procedures set forth herein for the selection of the initial
arbitrator. The extent, if any, to which testimony previously given shall be
repeated or as to which the replacement arbitrator elects to rely on the
stenographic record (if there is one) of such testimony shall be determined by
the replacement arbitrator.
6.8 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Article VI with respect
to all matters not subject to such dispute, controversy or claim.
41
6.9 LAW GOVERNING ARBITRATION PROCEDURES. The interpretation of the
provisions of this Article VI, only insofar as they relate to the agreement to
arbitrate and any procedures pursuant thereto, shall be governed by the
Arbitration Act and other applicable federal law. In all other respects, the
interpretation of this Agreement shall be governed as set forth in Section 8.3.
ARTICLE VII
COVENANTS AND OTHER MATTERS
7.1 OTHER AGREEMENTS. In addition to the specific agreements,
documents and instruments annexed to this Agreement, Transocean, Transocean
Holdings and TODCO agree to execute or cause to be executed by the appropriate
parties and deliver, as appropriate, such other agreements, instruments and
other documents as may be reasonably requested and necessary or desirable in
order to effect the purposes of this Agreement and the Ancillary Agreements.
7.2 FURTHER INSTRUMENTS. At the request of any of TODCO, Transocean
Holdings or Transocean and without further consideration, the other party will
execute and deliver, and will cause its applicable Subsidiaries to execute and
deliver, to the requesting party and its Subsidiaries such other instruments of
transfer, conveyance, assignment, substitution and confirmation and take such
action as the requesting party may reasonably deem necessary or desirable in
order more effectively to transfer, convey and assign to the requesting party
and its Subsidiaries and confirm the requesting party's and its Subsidiaries'
title to all of the assets, rights and other things of value contemplated to be
transferred to the requesting party and its Subsidiaries pursuant to this
Agreement, the Ancillary Agreements, any documents referred to therein and any
Prior Transfers, to put the requesting party and its Subsidiaries in actual
possession and operating control thereof and to permit the requesting party and
its Subsidiaries to exercise all rights with respect thereto (including, without
limitation, rights under contracts and other arrangements as to which the
consent of any third party to the transfer thereof shall not have previously
been obtained). At the request of any of TODCO, Transocean Holdings or
Transocean and without further consideration, the other party will execute and
deliver, and will cause its applicable Subsidiaries to execute and deliver, to
the requesting party and its Subsidiaries all instruments, assumptions,
novations, undertakings, substitutions or other documents and take such other
action as the requesting party may reasonably deem necessary or desirable in
order to have the other party fully and unconditionally assume and discharge the
Liabilities contemplated to be assumed by such party under this Agreement, any
Ancillary Agreement, any document in connection herewith or the Prior Transfers
and to relieve the TODCO Group or the Transocean Group, as applicable, of any
liability or obligation with respect thereto and evidence the same to third
parties. Neither Transocean, Transocean Holdings nor TODCO shall be obligated,
in connection with the foregoing, to expend money other than reasonable
out-of-pocket expenses, attorneys' fees and recording or similar fees.
Furthermore, each party, at the request of another party hereto, shall execute
and deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
the transactions contemplated hereby or by the Prior Transfers.
42
7.3 PROVISION OF CORPORATE RECORDS.
As soon as practicable after the IPO Closing Date, subject to the
provisions of this Section 7.3, and subject to the provisions of the Transition
Services Agreement, Transocean shall use all reasonable commercial efforts to
deliver or cause to be delivered to TODCO all TODCO Books and Records in the
possession of Transocean or any of its Subsidiaries, and TODCO shall use all
reasonable commercial efforts to deliver or cause to be delivered to Transocean
all Transocean Books and Records in the possession of TODCO or any of its
Subsidiaries. The foregoing shall be limited by the following:
(a) To the extent any document (including computer tape) can be
subdivided without unreasonable effort or cost into two portions, one of which
constitutes an TODCO Book and Record and the other of which constitutes a
Transocean Book and Record, such document (including computer tape) shall be so
subdivided and the appropriate portions shall be delivered to the parties.
(b) "Reasonable commercial efforts" shall require only deliveries
of (i) specific and discrete books and records or a reasonably limited class of
items requested by the other party and (ii) specific and discrete books and
records identified by either party in the ordinary course of business and
determined by such party to be material to the other's business.
(c) Each party may retain copies of books and records delivered to
the other, subject to holding in confidence in accordance with Section 7.13
information contained in such books and records.
(d) Each party may in good faith refuse to furnish any Information
if it believes in good faith that doing so could adversely affect its ability to
successfully assert a claim of Privilege.
(e) Neither party shall be required to deliver to the other books
and records or portions thereof which are subject to any Law or confidentiality
agreements which would by their terms prohibit such delivery; provided, however,
if requested by the other party, such party shall use its reasonable commercial
efforts to seek a waiver of or other relief from such confidentiality
restriction.
7.4 AGREEMENT FOR EXCHANGE OF INFORMATION. Each of Transocean and
TODCO agrees to provide, or cause to be provided, to each other as soon as
reasonably practicable after written request therefor, any Information in the
possession or under the control of such party that the requesting party
reasonably needs (i) to comply with reporting, disclosure, filing or other
requirements imposed on the requesting party (including under applicable
securities laws) by a Governmental Authority having jurisdiction over the
requesting party, (ii) for use in any judicial proceeding or other proceeding or
in order to satisfy audit, accounting, claims, regulatory, litigation or other
similar requirements, except in the case of a dispute subject to this Article
VII brought by one party against another party (which shall be governed by such
discovery rules as may be applicable under Article VII or otherwise), (iii) to
comply with its obligations under this Agreement or any Ancillary Agreement or
(iv) in connection with the ongoing businesses of Transocean or TODCO as it
relates to the conduct of such businesses on or prior to the Reduced
43
Ownership Date, as the case may be; provided, however, that in the event that
any party determines that any such provision of Information is reasonably likely
to be commercially detrimental, violate any law or agreement, or waive any
attorney-client privilege, the parties shall take all reasonable measures to
permit the compliance with such obligations in a manner that avoids any such
harm or consequence.
(a) After the IPO Closing Date, (i) each party shall maintain in
effect at its own cost and expense adequate systems and controls for its
business to the extent necessary to enable the other party to satisfy its
reporting, accounting, audit and other obligations, and (ii) each party shall as
soon as reasonably practicable, provide, or cause to be provided, to the other
party and its Subsidiaries in such form as such requesting party shall request,
at no charge to the requesting party, all financial and other data and
information as the requesting party determines necessary or advisable in order
to prepare its financial statements and reports or filings with any Governmental
Authority.
(b) Any Information owned by a party that is provided to a
requesting party pursuant to this Section 7.4 shall be deemed to remain the
property of the providing party. Unless specifically set forth herein, nothing
contained in this Agreement shall be construed as granting or conferring rights
of license or otherwise in any such Information.
(c) To facilitate the possible exchange of Information pursuant to
this Section 7.4 and other provisions of this Agreement after the Reduced
Ownership Date, each party agrees to use its reasonable commercial efforts to
retain all Information in its respective possession or control on the Reduced
Ownership Date substantially in accordance with its policies as in effect on the
Reduced Ownership Date (which, for TODCO and its Subsidiaries, shall be deemed
to be Transocean's policies). TODCO shall not amend its or its Subsidiaries'
record retention policies on or prior to the Reduced Ownership Date without the
consent of Transocean. Except as set forth in the Tax Sharing Agreement, in the
event that TODCO amends its retention policy within three (3) years after the
Reduced Ownership Date, TODCO must give thirty days' prior written notice of
such change in the policy to Transocean. No party will destroy, or permit any
of its Subsidiaries to destroy, any Information that exists on the IPO Closing
Date (other than Information that is permitted to be destroyed under the current
record retention policy of such party) without first using its reasonable
commercial efforts to notify the other party of the proposed destruction and
giving the other party the opportunity to take possession of such Information
prior to such destruction.
(d) Except as otherwise provided for herein or in any Ancillary
Agreement, no party shall have any liability to any other party in the event
that any Information exchanged or provided pursuant to this Section is found to
be inaccurate (including, without limitation, by misstatement or omission), in
the absence of willful misconduct by the party providing such Information;
provided, that TODCO shall be strictly liable for any untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, with respect to all Information contained in
Information supplied to Transocean in connection with its filings under the
Securities Act and the Exchange Act, the preparation of its financial statements
or the preparation of any other public disclosures (as well as for the failure
to provide such Information). Except as provided in the foregoing sentence, no
party shall have any liability to
44
any other party if any Information is destroyed or lost after reasonable
commercial efforts by such party to comply with the provisions of Section
7.4(c).
(e) The rights and obligations granted under this Section 7.4 are
subject to any specific limitations, qualifications or additional provisions on
the sharing, exchange or confidential treatment of Information set forth in this
Agreement and any Ancillary Agreement.
(f) Each party hereto shall, except in the case of a dispute
subject to Article VI brought by one party against another party (which shall be
governed by such discovery rules as may be applicable under Article VI or
otherwise), use its reasonable commercial efforts to make available to each
other party, upon written request, (i) the former, current and future directors,
officers, employees, other personnel and agents of such party for fact finding,
consultation and interviews and as witnesses to the extent such Persons may
reasonably be required in connection with any Actions (other than Actions in
which both Transocean or any of its Subsidiaries, on the one hand, and TODCO or
any of its Subsidiaries, on the other hand, as the case may be, are parties and
may reasonably be adverse to one another in such Action) in which the requesting
party may from time to time be involved relating to the conduct of the TODCO
Business or the Transocean Business and (ii) any books, records or other
documents within its control or which it otherwise has the ability to make
available, to the extent that any such person (giving consideration to business
demands of such directors, officers, employees, other personnel and agents) or
books, records or other documents may reasonably be required in connection with
any judicial proceeding or other proceeding in which the requesting party may
from time to time be involved, regardless of whether such judicial proceeding or
other proceeding is a matter with respect to which indemnification may be sought
hereunder. The requesting party shall bear all costs and expenses in connection
therewith.
7.5 AUDITORS AND AUDITS; ANNUAL, QUARTERLY AND MONTHLY STATEMENTS AND
ACCOUNTING FORECASTS.
(a) Each party agrees that, for so long as Transocean and its
Subsidiaries own 50% or more of the voting power of the outstanding shares of
TODCO Voting Stock, and with respect to any financial reporting period during
which TODCO was a Subsidiary of Transocean:
(i) To the extent permitted by law, TODCO shall not select a
different accounting firm than the firm selected by Transocean to
audit its financial statements to serve as its independent certified
public accountants (the "TODCO Auditors") for purposes of providing an
opinion on its consolidated financial statements without Transocean's
prior written consent (which may be withheld in its sole discretion).
(ii) TODCO shall use its reasonable commercial efforts to
enable the TODCO Auditors to complete their audit such that they will
date their opinion on TODCO's audited annual financial statements on
the same date that the Transocean Auditors date their opinion on
Transocean's audited annual financial statements, and to enable
Transocean to meet its timetable for the printing, filing and public
dissemination of Transocean's annual financial statements. TODCO shall
use its reasonable commercial
45
efforts to enable the TODCO Auditors to complete their quarterly
review procedures such that they will provide clearance on TODCO'
quarterly financial statements on the same date that the Transocean
Auditors provide clearance on Transocean's quarterly financial
statements.
(iii) TODCO shall provide to Transocean financial information
or documents in the possession of TODCO or any of its Subsidiaries as
Transocean may reasonably request. TODCO shall provide to Transocean
on a monthly basis management and periodic reports related to any such
financial information in form and substance consistent with the
practice of TODCO as of the date of this Agreement, including without
limitation monthly and quarterly management's discussion and analysis
reports and quarterly significant issues memorandums. In addition,
TODCO shall provide to Transocean on a timely basis all Information
that Transocean requires, in its sole discretion, to meet its schedule
for the preparation, printing, filing and public dissemination of
Transocean's annual and quarterly financial statements. Without
limiting the generality of the foregoing, (A) TODCO shall provide all
required financial information with respect to TODCO and its
Subsidiaries to the TODCO Auditors in a sufficient and reasonable time
and in sufficient detail to permit the TODCO Auditors to take all
steps and perform all reviews necessary to provide sufficient
assistance to the Transocean Auditors with respect to Information to
be included or contained in Transocean's annual and quarterly
financial statements, and (B) TODCO shall provide to Transocean within
seven Business Days after the end of each quarter and of each fiscal
year, the unaudited balance sheet, income statement and statement of
cash flows of TODCO and its Subsidiaries as at the end of such period;
provided, that TODCO shall submit such balance sheets, income
statements and statements of cash flows within a different time period
requested by Transocean in the event Transocean changes the timing of
its earnings releases from such timing as of the date of this
Agreement. Transocean shall provide to TODCO on a timely basis all
Information that TODCO reasonably requires to meet its schedule for
the preparation, printing, filing and public dissemination of TODCO's
annual and quarterly financial statements. Without limiting the
generality of the foregoing, Transocean will provide all required
financial Information with respect to Transocean and its Subsidiaries
to the Transocean Auditors in a sufficient and reasonable time and in
sufficient detail to permit the Transocean Auditors to take all steps
and perform all reviews necessary to provide sufficient assistance to
the TODCO Auditors with respect to Information to be included or
contained in TODCO's annual and quarterly financial statements.
(iv) TODCO shall authorize the TODCO Auditors to make
available to the Transocean Auditors both the personnel who performed
or are performing the annual audits and quarterly reviews of TODCO and
work papers related to the annual audits and quarterly reviews of
TODCO,
46
in all cases within a reasonable time prior to the TODCO Auditors'
opinion date, so that the Transocean Auditors are able to perform the
procedures they consider necessary to take responsibility for the work
of the TODCO Auditors as it relates to the Transocean Auditors' report
on Transocean's financial statements, all within sufficient time to
enable Transocean to meet its timetable for the printing, filing and
public dissemination of Transocean's annual and quarterly statements.
Similarly, Transocean shall authorize the Transocean Auditors to make
available to the TODCO Auditors both the personnel who performed or
are performing the annual audits and quarterly reviews of Transocean
and work papers related to the annual audits and quarterly reviews of
Transocean, in all cases within a reasonable time prior to the
Transocean Auditors' opinion date, so that the TODCO Auditors are able
to perform the procedures they consider necessary to take
responsibility for the work of the Transocean Auditors as it relates
to the TODCO Auditors' report on TODCO's financial statements, all
within sufficient time to enable TODCO to meet its timetable for the
printing, filing and public dissemination of TODCO's annual and
quarterly financial statements.
(v) TODCO may not change its accounting principles or
practices without the prior written consent of Transocean, except for
changes which are required by GAAP and as to which there is no
discretion on the part of TODCO, if the TODCO Auditors concur with
such changes prior to their implementation. TODCO shall give
Transocean as much prior notice as reasonably practical of any
proposed determination of, or any significant changes in, its
accounting estimates or any accounting principles or practices from
those in effect on the IPO Closing Date. TODCO will consult with
Transocean and, if requested by Transocean, TODCO will consult with
the Transocean Auditors with respect thereto.
(vi) TODCO shall change its accounting principles or
practices if Transocean changes its accounting principles or practices
in order to maintain the same accounting principles and practices as
Transocean regardless of whether or not such a change in its
accounting principles or practices would be required to be disclosed
in TODCO's financial statements as filed with the SEC or otherwise
publicly disclosed therein; provided that the TODCO Auditors concurred
with such change prior to its implementation. Transocean shall give
TODCO as much prior notice as reasonably practical of any proposed
determination of, or any significant changes in, its accounting
estimates, accounting principles or accounting practices from those in
effect on the IPO Closing Date. Transocean will consult with TODCO
and, if requested by TODCO, Transocean will consult with TODCO's
Auditors with respect thereto.
(vii) TODCO shall provide to Transocean budget and forecast
periodic reports and related information in form and substance
consistent
47
with the practice of TODCO at the date of this Agreement or as may
otherwise be reasonably requested by Transocean from time to time,
including without limitation detailed annual budget information,
detailed quarterly forecast information and summary monthly forecast
information. TODCO shall provide such reports and information to
Transocean on a timely basis which in any event is sufficient to allow
Transocean to meet its schedule for the preparation of its own
periodic budgets and forecasts.
(viii) Nothing in Sections 7.4 and 7.5 shall require TODCO to
violate any agreement with any third party regarding the
confidentiality of confidential and proprietary information relating
to that third party or its business; provided, however, that in the
event that TODCO is required under Sections 7.4 and 7.5 to disclose
any such information, TODCO shall use all commercially reasonable
efforts to seek to obtain such third party's consent to the disclosure
of such information. Similarly, nothing in Sections 7.4 and 7.5 shall
require Transocean to violate any agreement with any third party
regarding the confidentiality of confidential and proprietary
information relating to that third party or its business; provided,
however, that in the event that Transocean is required under Sections
7.4 and 7.5 to disclose any such information, Transocean shall use all
commercially reasonable efforts to seek to obtain such third party's
consent to the disclosure of such information.
(b) For so long as Transocean beneficially owns shares
representing 20% or more of the voting power of the outstanding share of TODCO
Voting Stock (i) TODCO shall furnish Transocean, within five Business Days after
the end of each month, TODCO's consolidated net income (loss) for purposes of
allowing Transocean to record its share of TODCO's net income (loss), (ii) TODCO
shall furnish Transocean, within seven Business Days after the end of each
month, quarter and fiscal year, the unaudited consolidated balance sheet, income
statement and statement of cash flows of TODCO and its Subsidiaries as at, or
for, as the case may be, the end of such period, (iii) TODCO shall furnish to
Transocean such financial information or documents in the possession of TODCO
and any of its Subsidiaries as Transocean may reasonably request and (iv) TODCO
shall furnish to Transocean on a monthly basis such management and other
periodic reports related to financial information as reasonably requested from
time to time; provided that the information required in subsection (i) above
shall be submitted within a different time period requested by Transocean in the
event Transocean changes the timing of its earnings releases from such timing as
of the date of this Agreement.
7.6 AUDIT RIGHTS. To the extent any member of the Transocean Group
provides goods or services to any member of the TODCO Group or any member of the
TODCO Group provides goods or services to a member of the Transocean Group under
this Agreement or under any Ancillary Agreement, the company providing such
goods or services (the "Providing Company") shall maintain complete and accurate
books and records relating to costs and charges made to the company receiving
such goods and services (the "Receiving Company"). Books and accounts shall be
maintained in accordance with U.S. generally accepted accounting principles,
consistently applied. Upon 60 days' notice, the Receiving Company shall be
entitled to audit the Providing Company's books and records related to the goods
and services provided, using its
48
own personnel or personnel from its independent auditing firm. Discrepancies
identified as a result of any audit shall be promptly reconciled between the
parties in accordance with any provisions of the Ancillary Agreement or, if no
such provision is applicable, in accordance with the dispute resolution
provisions of this Agreement. Any charge which is not questioned by the
Receiving Company within the calendar year after the charge was rendered shall
be deemed incontestable.
7.7 PRESERVATION OF LEGAL PRIVILEGES.
(a) Transocean and TODCO recognize that the members of their
respective Groups possess and will possess information and advice that has been
previously developed but is legally protected from disclosure under legal
privileges, such as the attorney-client privilege or work product exemption and
other concepts of legal protection ("Privilege"). Each party recognizes that it
shall be jointly entitled to the Privilege with respect to such privileged
information and that each shall be entitled to maintain and use for its own
benefit all such information and advice, but both parties shall ensure that such
information is maintained so as to protect the Privileges with respect to the
other party's interest. Transocean and TODCO agree that their respective rights
and obligations to maintain, preserve, assert or waive any or all Privileges
belonging to either party with respect to the TODCO Business or the Transocean
Business shall be governed by the provisions of this Section 7.7. With respect
to matters relating to the Transocean Business, Transocean shall have sole
authority in perpetuity to determine whether to assert or waive any or all
Privileges, and TODCO shall take no action (or permit any of its Subsidiaries to
take action) without the prior written consent of Transocean that could result
in any waiver of any Privilege that could be asserted by Transocean or any of
its Subsidiaries under applicable Law and this Agreement. With respect to
matters relating to the TODCO Business, TODCO shall have sole authority in
perpetuity to determine whether to assert or waive any or all Privileges, and
Transocean shall take no action (or permit any of its Subsidiaries to take
action) without the prior written consent of TODCO that could result in any
waiver of any Privilege that could be asserted by TODCO or any of its
Subsidiaries under applicable Law and this Agreement. The rights and
obligations created by this Section 7.7 shall apply to all Information as to
which Transocean or TODCO or their respective Subsidiaries would be entitled to
assert or has asserted a Privilege without regard to the effect, if any, of the
Separation ("Privileged Information"). Privileged Information of Transocean
includes but is not limited to (i) any and all Information existing prior to the
Separation regarding the Transocean Business but which after the Separation is
in the possession of TODCO or any of its Subsidiaries; (ii) all communications
subject to a Privilege occurring prior to the Separation between counsel for
Transocean or any of its Subsidiaries (including in-house counsel and former
in-house counsel who are employees of TODCO) and any person who, at the time of
the communication, was an employee of Transocean or any of its Subsidiaries,
regardless of whether such employee is or becomes an employee of TODCO or any of
its Subsidiaries; and (iii) all Information generated, received or arising after
the IPO Closing Date that refers or relates to Privileged Information generated,
received or arising prior to the IPO Closing Date. Privileged Information of
TODCO includes but is not limited to (i) any and all Information generated prior
to the Separation regarding the TODCO Business but which after the Separation is
in the possession of Transocean or any of its Subsidiaries; (ii) all
communications subject to a Privilege occurring prior to the Separation between
counsel for TODCO or any of its Subsidiaries (including in-house counsel and
former in-house counsel who are employees of Transocean or its
49
Subsidiaries) and any person who, at the time of the communication, was an
employee of TODCO or any of its Subsidiaries, regardless of whether such
employee is or becomes an employee of Transocean or any of its Subsidiaries; and
(iii) all Information generated, received or arising after the IPO Closing Date
that refers or relates to Privileged Information generated, received or arising
prior to the IPO Closing Date.
(b) Upon receipt by Transocean or TODCO, as the case may be, of
any subpoena, discovery or other request from any third party that actually or
arguably calls for the production or disclosure of Privileged Information of the
other or if Transocean or TODCO, as the case may be, obtains knowledge that any
current or former employee of Transocean or TODCO, as the case may be, has
received any subpoena, discovery or other request from any third party that
actually or arguably calls for the production or disclosure of Privileged
Information of the other, Transocean or TODCO, as the case may be, shall
promptly notify the other of the existence of the request and shall provide the
other a reasonable opportunity to review the Information and to assert any
rights it may have under this Section 7.7 or otherwise to prevent the production
or disclosure of Privileged Information. Transocean or TODCO, as the case may
be, will not produce or disclose to any third party any of the other's
Information covered by a Privilege under this Section 7.7 unless (A) the other
has provided its express written consent to such production or disclosure, or
(B) a court of competent jurisdiction has entered an order not subject to
interlocutory appeal or review finding that the Information is not entitled to
protection from disclosure under any applicable privilege, doctrine or rule.
(c) Transocean's transfer of TODCO Books and Records and other
Information to TODCO, Transocean's agreement to permit TODCO to obtain
Information existing prior to the Separation, TODCO's transfer of Transocean
Books and Records and other Information and TODCO's agreement to permit
Transocean to obtain Information existing prior to the Separation are made in
reliance on Transocean's and TODCO's respective agreements, as set forth in
Section 7.13 and this Section 7.7, to maintain the confidentiality of such
Information and to take the steps provided herein for the preservation of all
Privileges that may belong to or be asserted by Transocean or TODCO, as the case
may be. The access to Information being granted pursuant to Section 7.3 hereof,
the agreement to provide witnesses and individuals pursuant to Section 7.4(f)
hereof and the disclosure to TODCO and Transocean of Privileged Information
relating to the TODCO Business or the Transocean Business pursuant to this
Agreement in connection with the Separation shall not be asserted by Transocean
or TODCO to constitute, or otherwise be deemed, a waiver of any Privilege that
has been or may be asserted under this Section 7.7 or otherwise. Nothing in
this Agreement shall operate to reduce, minimize or condition the rights granted
to Transocean and TODCO in, or the obligations imposed upon Transocean and TODCO
by, this Section 7.7.
7.8 PAYMENT OF EXPENSES. Transocean or Transocean Holdings shall pay
all underwriting fees, discounts and commissions and any transfer Taxes and any
other direct costs incurred in connection with the IPO. Except as otherwise
provided in this Agreement, the Ancillary Agreements or any other agreement
between the parties relating to the Separation and the IPO, all other
out-of-pocket costs and expenses of the parties hereto in connection with the
preparation of this Agreement and the Ancillary Agreements, the Separation and
the IPO shall be paid by Transocean or Transocean Holdings. Except as may
otherwise be expressly set forth herein or in an Ancillary Agreement, the TODCO
Group and the Transocean Group shall
50
perform their respective obligations under this Agreement and the Ancillary
Agreements at their own respective cost and expense.
7.9 GOVERNMENTAL APPROVALS. The parties acknowledge that certain of
the transactions contemplated by this Agreement and the Ancillary Agreements are
subject to certain conditions established by applicable government regulations,
orders and approvals ("Existing Authority"). The parties intend to implement
this Agreement, the Ancillary Agreements and the transactions contemplated
thereby consistent with and to the extent permitted by Existing Authority and to
cooperate toward obtaining and maintaining in effect such Governmental Approvals
as may be required in order to implement this Agreement and each of the
Ancillary Agreements as fully as possible in accordance with their respective
terms. To the extent that any of the transactions contemplated by this Agreement
or any Ancillary Agreement require any Governmental Approvals, the parties will
use their reasonable commercial efforts to obtain any such Governmental
Approvals.
7.10 LETTERS OF CREDIT. After the IPO Closing Date, if any letters of
credit, financial or surety bonds issued by third parties or other similar
financial instruments issued by third parties (collectively, "Surety
Instruments") for the account of TODCO or any of its Subsidiaries issued on
behalf of or for the benefit of the Transocean Business remain outstanding, or
if any Surety Instruments for the account of Transocean or any of its
Subsidiaries issued on behalf of or for the benefit of the TODCO Business remain
outstanding, the party benefiting from the Surety Instruments shall, and shall
cause its Subsidiaries to, use their respective reasonable best efforts to
replace such Surety Instruments as promptly as practicable with substantially
similar Surety Instruments issued for its own account or the account of any of
its Subsidiaries. Following the IPO Closing Date, (i) the party benefiting from
such Surety Instruments shall indemnify and hold harmless the other party's
Group for any Losses arising from or relating to such unreplaced Surety
Instruments as set forth on Section 3.3 or 3.4, as applicable, and (ii) the
party benefiting from such Surety Instruments shall not, and shall not permit
any of its Subsidiaries to, enter into, renew or extend the term of, increase
its obligations under, or transfer to a third party, any loan, lease, contract
or other obligation in connection with which the other party or any of its
Subsidiaries has issued, or caused to be issued, any Surety Instruments which
remain outstanding. The parties hereto agree that neither party nor any of its
respective Subsidiaries will have any obligation to renew any Surety Instruments
issued on behalf of a member of the other party's Group after the expiration of
any such Surety Instruments, provided that nothing in this Section 7.10 shall
prevent a party from renewing any Surety Instrument.
7.11 GUARANTEE OBLIGATIONS.
(a) Transocean and TODCO shall cooperate and TODCO shall use its
reasonable best efforts to terminate, or to cause TODCO, one of its
Subsidiaries, or one of its Affiliates to be substituted in all respects for
Transocean and any of its Subsidiaries in respect of, all obligations of
Transocean or any of its Subsidiaries under any loan, financing, lease, contract
or other obligation (other than Surety Instruments governed by Section 7.10) in
existence as of the IPO Closing Date pertaining to the TODCO Business for which
Transocean or any of its Subsidiaries is or may be liable as guarantor
("Transocean Guarantees"). If such a termination or substitution is not
effected by the IPO Closing Date, (i) TODCO shall indemnify and hold harmless
the Transocean Group for any Losses arising from or relating to Transocean
51
Guarantees, and (ii) neither Transocean nor any of its Subsidiaries will have
any obligation to renew any Transocean Guarantees after the expiration of such
Transocean Guarantees. To the extent that Transocean or any of its Subsidiaries
have performance obligations under any Transocean Guarantee, TODCO will use
reasonable best efforts to (i) perform such obligations on behalf of Transocean
and its Subsidiaries or (ii) otherwise take such action as requested by
Transocean so as to put Transocean and its Subsidiaries in the same position as
if TODCO, and not Transocean and its Subsidiaries, had performed or were
performing such obligations.
(b) Transocean and TODCO shall cooperate and Transocean shall use
its reasonable best efforts to terminate, or to cause Transocean, one of its
Subsidiaries, or one of its Affiliates to be substituted in all respects for
TODCO and any of its Subsidiaries in respect of, all obligations of TODCO or any
of its Subsidiaries under any loan, financing, lease, contract or other
obligation (other than Surety Instruments governed by Section 7.10) in existence
as of the IPO Closing Date pertaining to the Transocean Business for which TODCO
or any of its Subsidiaries is or may be liable as guarantor ("TODCO
Guarantees"). If such a termination or substitution is not effected by the IPO
Closing Date, (i) Transocean shall indemnify and hold harmless the TODCO Group
for any Losses arising from or relating to TODCO Guarantees, and (ii) neither
TODCO nor any of its Subsidiaries will have any obligation to renew any TODCO
Guarantees after the expiration of such TODCO Guarantees. To the extent that
TODCO or any of its Subsidiaries have performance obligations under any TODCO
Guarantee, Transocean will use reasonable best efforts to (i) perform such
obligations on behalf of TODCO and its Subsidiaries or (ii) otherwise take such
action as requested by TODCO so as to put TODCO and its Subsidiaries in the same
position as if Transocean, and not TODCO and its Subsidiaries, had performed or
were performing such obligations.
(c) To the extent covenants and agreements contained in any loan
or credit agreement or other financing document in effect on the date of this
Agreement to which any member of the Transocean Group is a party require, or
require such party to cause, any member of the TODCO Group to take or refrain
from taking any action, or provides for a default or event of default if any
member of the TODCO Group takes or refrains from taking any action, such member
of the TODCO Group shall at all times prior to the Reduced Ownership Date, take
or refrain from taking any such action as would result in a breach or violation
of, or a default under, such agreement.
7.12 CERTAIN NON-COMPETITION PROVISIONS.
(a) As an essential consideration for the obligations of
Transocean Holdings and Transocean under this Agreement, including obligations
in connection with any Prior Transfers and the Separation, and in contemplation
of the disposition by Transocean and Transocean Holdings of shares of TODCO
Common Stock in the IPO, TODCO hereby agrees that for so long as the Transocean
Group beneficially owns shares representing a majority of the voting power of
all of the outstanding shares of TODCO Voting Stock, TODCO shall not, and it
shall cause its Affiliates not to, engage in the following businesses and
activities: (i) any offshore (including marine areas in which swamp drilling
barges operate) contract drilling, workover, production or similar services for
oil and gas xxxxx using any type of drilling unit in any geographic location,
including without limitation the following areas: offshore North America
(including without limitation the Gulf of Mexico), offshore South America,
offshore Europe
52
(including without limitation the North Sea), offshore Africa, offshore Middle
East (including without limitation the Mediterranean Sea, the Red Sea and the
Persian Gulf), offshore India, offshore Asia (including without limitation
Southeast Asia), offshore Australia and the Caspian Sea and (ii) without
limiting the generality of the foregoing clause (i), the ownership, charter,
lease, management or operation of any rigs or other equipment or assets used to
provide the services, and conduct the business and activities, described above
in clause (i); provided however, that this Section 7.12(a) shall not restrict
TODCO and its Affiliates from engaging in any of the following businesses and
activities: (A) contract drilling, workover, production or similar services for
oil and gas xxxxx using jackup, barge, platform or land rigs in the following
geographic locations: U.S. onshore, U.S. inland water, U.S. Gulf of Mexico and
offshore or onshore Mexico, Trinidad, Venezuela or Colombia and (B) without
limiting the generality of the foregoing clause (A), the ownership, charter,
lease, management or operation of the drilling units described above in clause
(A) used to provide the services, and conduct the business and activities,
described above in clause (A).
(b) It is the intention of each of the parties hereto that if any
of the restrictions or covenants contained in this Section 7.12 is held by a
court of competent jurisdiction to cover a geographic area or to be for a length
of time that is not permitted by Law, or is in any way construed by a court of
competent jurisdiction to be too broad or to any extent invalid, such provision
shall not be construed to be null, void and of no effect, but to the extent such
provision would be valid or enforceable under Law, a court of competent
jurisdiction shall construe and interpret or reform this Section 7.12 to provide
for a covenant having the maximum enforceable geographic area, time period and
other provisions (not greater than those contained in this Section 7.12) as
shall be valid and enforceable under such Law. TODCO acknowledges that any
breach of the terms, conditions or covenants set forth in this Section 7.12
shall be competitively unfair and may cause irreparable damage to Transocean
because of the special, unique, unusual and extraordinary character of
Transocean's business, and Transocean's recovery of damages at law will not be
an adequate remedy. Accordingly, each of the parties hereto agrees that for any
breach of the terms, covenants or agreements of this Section 7.12, a restraining
order or an injunction or both may be issued against such person, in addition to
any other rights or remedies Transocean or Transocean Holdings may have.
7.13 CONFIDENTIALITY.
(a) Transocean and TODCO shall hold and shall cause the members of
the Transocean Group and the TODCO Group, respectively, to hold, and shall each
cause their respective officers, employees, agents, consultants and advisors to
hold, in strict confidence and not to disclose or release without the prior
written consent of the other party, any and all Confidential Information (as
defined herein); provided, that the parties may disclose, or may permit
disclosure of, Confidential Information (1) to their respective auditors,
attorneys, financial advisors, bankers and other appropriate consultants and
advisors who have a need to know such information and are informed of their
obligation to hold such information confidential to the same extent as is
applicable to the parties hereto and in respect of whose failure to comply with
such obligations, Transocean or TODCO, as the case may be, will be responsible
or (2) to the extent any member of the Transocean Group or the TODCO Group is
compelled to disclose any such Confidential Information by judicial or
administrative process or, in the opinion of legal counsel, by other
requirements of law. Notwithstanding the foregoing, in the event that any
53
demand or request for disclosure of Confidential Information is made pursuant to
clause (ii) above, Transocean or TODCO, as the case may be, shall promptly
notify the other of the existence of such request or demand and shall provide
the other a reasonable opportunity to seek an appropriate protective order or
other remedy, which both parties will cooperate in seeking to obtain. In the
event that such appropriate protective order or other remedy is not obtained,
the party whose Confidential Information is required to be disclosed shall or
shall cause the other party to furnish, or cause to be furnished, only that
portion of the Confidential Information that is legally required to be
disclosed. As used in this Section 7.13, "Confidential Information" shall mean
all proprietary, technical or operational information, data or material of one
party which, prior to or following the IPO Closing Date, has been disclosed by
Transocean or members of the Transocean Group, on the one hand, or TODCO or
members of the TODCO Group, on the other hand, in written, oral (including by
recording), electronic, or visual form to, or otherwise has come into the
possession of, the other, including pursuant to the access provisions of Section
7.4 hereof or any other provision of this Agreement (except to the extent that
such Information can be shown to have been (a) in the public domain through no
fault of such party (or, in the case of Transocean, any other member of the
Transocean Group or, in the case of TODCO, any other member of the TODCO Group)
or (b) later lawfully acquired from other sources by the party (or, in the case
of Transocean, such member of the Transocean Group or, in the case of TODCO,
such member of the TODCO Group) to which it was furnished; provided, however, in
the case of (b) that such sources did not provide such Information in breach of
any confidentiality obligations).
(b) Notwithstanding anything to the contrary set forth herein, (i)
Transocean and the other members of the Transocean Group, on the one hand, and
TODCO and the other members of the TODCO Group, on the other hand, shall be
deemed to have satisfied their obligations hereunder with respect to
Confidential Information if they exercise the same degree of care (but no less
than a reasonable degree of care) as they take to preserve confidentiality for
their own similar Information and (ii) confidentiality obligations provided for
in any agreement between Transocean or any other member of the Transocean Group,
or TODCO or any other members of the TODCO Group, on the one hand, and any
employee of Transocean or any other member of the Transocean Group, or TODCO or
any other members of the TODCO Group, on the other hand, shall remain in full
force and effect. Confidential Information of Transocean or any other member of
the Transocean Group, on the one hand, or TODCO or any other member of the TODCO
Group, on the other hand, in the possession of and used by the other as of the
IPO Closing Date may continue to be used by such Person in possession of the
Confidential Information in and only in the operation of the Transocean Business
or the TODCO Business, as the case may be, and may be used only so long as the
Confidential Information is maintained in confidence and not disclosed in
violation of Section 7.13(a). Such continued right to use may not be
transferred to any third party unless the third party purchases all or
substantially all of the business and assets in which the relevant Confidential
Information is used or employed in one transaction or in a series of related
transactions. In the event that such right to use is transferred in accordance
with the preceding sentence, the transferring party shall not disclose the
source of the relevant Confidential Information.
7.14 INSURANCE.
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(a) Except as otherwise provided in any Ancillary Agreement, the
parties intend by this Agreement that each member of the TODCO Group be
successors-in-interest to all rights that such member of the TODCO Group may
have as of the IPO Closing Date as a Subsidiary or Affiliate of Transocean prior
to the IPO Closing Date under any Insurance Policy or D&O Policy in effect as of
the date of this Agreement, including any rights such member of the TODCO Group
may have as an insured or additional named insured, Subsidiary or Affiliate, to
avail itself of any such policy of insurance as in effect prior to the IPO
Closing Date. At the request of TODCO, Transocean shall take all reasonable
steps, including the execution and delivery of any instruments, to effect the
foregoing; provided, however, that Transocean shall not be required to pay any
amounts, waive any rights or incur any Liabilities in connection therewith.
(b) TODCO agrees that it will pay to Transocean the Insurance
Premium Amount (as defined below) per month (prorated on a daily basis for any
partial month) in respect of Insurance Policies under which any member of the
TODCO Group will continue to have coverage following the date hereof during the
period from the date hereof until the date on which all of the members of the
TODCO Group cease to be insured parties under any Insurance Policies; provided
that any portion of the Insurance Premium Amount shall be paid directly to any
third party insurance broker, syndicate or company to the extent Transocean
directs TODCO to do so. The Insurance Premium Amount shall be payable in
arrears by the 10th day of the next succeeding month. The "Insurance Premium
Amount" will initially equal $519,612. Such amount shall be adjusted in the
event any member of the TODCO Group ceases to be an insured party under any
Insurance Policy or in the event of any change in coverage of any member of the
TODCO Group under any Insurance Policy, in each case to equal the TODCO Group's
proportional share of the premiums thereunder as set forth on Schedule 1.39 with
respect to Insurance Policies in effect as of the date of this Agreement and
based upon the actual third party costs of such coverage with respect to any
Insurance Policies issued after the date of this Agreement. In the event of any
change in the terms of any Insurance Policy with respect to any member of the
TODCO Group, or any change in circumstances involving any member of the TODCO
Group (including without limitation, completion of the IPO), which increases the
premiums with respect to such Insurance Policy, TODCO shall be responsible for
all of such increase.
(c) Promptly upon receipt of an invoice from Transocean, TODCO
agrees that it will pay one-half of the amount of the premium in respect of the
D&O Policies for the current policy year of such coverages, to the extent that
such amount has not been paid prior to the date of this Agreement. The parties
shall agree upon an allocation of premium amounts between the parties at least
30 days in advance of the coverage commencement date in respect of any future
D&O Policies under which any member of the TODCO Group has coverage. If the
parties fail to reach such an agreement, Transocean shall have no obligation to
renew or secure such coverages on behalf of any member of the TODCO Group. In
the event of any change in the terms of any D&O Policy with respect to any
member of the TODCO Group, or any change in circumstances involving any member
of the TODCO Group (including without limitation, completion of the IPO), which
increases the premiums with respect to such D&O Policy, TODCO shall be
responsible for all of such increase.
55
(d) The parties to this Agreement acknowledge that Transocean has
notified TODCO of the renewal dates for the coverage under each of the Insurance
Policies and the D&O Policies in effect as of the date of this Agreement under
which a member of the TODCO Group is entitled to coverage. Transocean shall
notify TODCO of any change in such renewal dates and of the renewal dates for
the coverage under each Insurance Policy and D&O Policy obtained after the date
of this Agreement. TODCO will provide written notice to Transocean at least 120
days prior to the renewal date of coverage in respect of any Insurance Policy
and at least 60 days prior to the renewal date of coverage in respect of any D&O
Policy if (l) TODCO desires that any member of the TODCO Group remain covered
thereunder on the then existing terms of such Insurance Policy or D&O Policy (an
"Insurance Continuation Notice") or (2) TODCO desires that any member of the
TODCO Group remain covered thereunder on the condition that changes are made to
the terms of such Insurance Policy or D&O Policy (a "Conditional Insurance
Continuation Notice"), which changes shall be specified in reasonable detail in
such Conditional Insurance Continuation Notice. In the event of a Conditional
Insurance Continuation Notice, Transocean shall use its reasonable efforts to
seek proposals for Insurance Policies or D&O Policies reflecting such changes;
provided that such changes do not affect the premiums attributable to or
coverage for any member of the Transocean Group. In the event of any changes
affecting the premiums attributable to or coverage for any member of the TODCO
Group under any Insurance Policy or D&O Policy as to which TODCO has delivered
an Insurance Continuation Notice, Transocean shall promptly notify TODCO of such
changes and TODCO shall promptly notify Transocean as to whether TODCO elects to
withdraw such Insurance Continuation Notice.
(e) Nothing in this Agreement shall be deemed to restrict any
member of the TODCO Group from acquiring at its own expense any other insurance
policy in respect of any Liabilities or covering any period; provided, however,
that in the event any member of the TODCO Group desires to acquire any other
insurance policy, TODCO shall notify Transocean at least 45 days prior to the
date such member of the TODCO Group acquires such insurance policy and in such
event Transocean shall be permitted to terminate any equivalent coverage of any
member of the TODCO Group under any Insurance Policies or D&O Policies (it being
understood and acknowledged that Transocean may terminate such coverage
notwithstanding any differences in premiums, deductibles, limits or other
terms). Transocean shall use its reasonable efforts to notify TODCO at least 45
days prior to the renewal date for the coverage in respect of any Insurance
Policy and at least 30 days prior to the renewal date for coverage in respect of
any D&O Policy as to which TODCO has delivered an Insurance Continuation Notice
or a Conditional Insurance Continuation Notice of Transocean's election to not
to renew coverage of any member of the TODCO Group and if Transocean receives
proposed terms of coverage or other information after such date and Transocean
elects not to renew such coverage, it shall promptly notify TODCO. Except as
provided in this paragraph, Transocean shall not terminate coverage of any
member of the TODCO Group under any Insurance Policy or any D&O Policy unless
Transocean provides TODCO written notice of such termination at least 90 days
prior to such termination and either (1) a material breach of Section 7.14 by a
member of the TODCO Group has occurred or (2) in the reasonable judgment of
Transocean, claims or other actions by, or the inclusion of any, members of the
TODCO Group under such Insurance Policies or D&O Policies are reasonably likely
to impact future insurance premiums or coverages for members of the Transocean
Group.
56
(f) The parties to this Agreement acknowledge that members of the
TODCO Group shall be responsible for any deductibles and coinsurance for claims
under the Insurance Policies and D&O Policies with respect to members of the
TODCO Group, and members of the Transocean Group shall be responsible for any
deductibles and coinsurance for claims under the Insurance Policies and D&O
Policies with respect to members of the Transocean Group. The parties to this
Agreement further acknowledge that any claims made under any Insurance Policies
or D&O Policies after any applicable coverage limit is met shall be subject to
the limitations on coverage specified in such policies, and members of the TODCO
Group and members of the Transocean Group shall not be restricted by this
Agreement from making claims under such policies under which such members have
coverage prior to any applicable coverage limit being met (for the sake of
clarity, it being understood that claims shall not be restricted by this
Agreement based on a pre-claim allocation of such limit between members of the
TODCO Group and members of the Transocean Group).
(g) Each of the parties hereto acknowledges that members of the
TODCO Group will cease to have coverage under the Insurance Policies and the D&O
Policies in effect as of the date of this Agreement (and may cease to have
coverage under any Insurance Policies or D&O Policies obtained thereafter) at
such time as the Transocean Group ceases to beneficially own shares representing
a majority of the voting power of all of the outstanding shares of TODCO Voting
Stock (in which case no prior notice shall be required). In no event shall
Transocean, any other member of the Transocean Group or any Transocean
Indemnitee have any liability or obligation whatsoever to any member of the
TODCO Group in the event that any Insurance Policy, D&O Policy or other contract
or policy of insurance (1) shall be terminated or otherwise cease to be in
effect for any reason (including without limitation in the event the Transocean
Group ceases to beneficially own shares representing a majority of the voting
power of all of the outstanding shares of TODCO Voting Stock (in which case no
prior notice shall be required), but excluding the termination by Transocean of
an Insurance Policy or D&O Policy if Transocean does not validly provide notice
of termination pursuant to paragraph (d) of this Section 7.14), (2) shall be
unavailable or inadequate to cover any Liability of any member of the TODCO
Group for any reason whatsoever or (3) shall not be renewed or extended beyond
the current expiration date. Without limiting the generality of this Section
7.14, in no event shall Transocean be required to renew the coverage under any
Insurance Policy or D&O Policy.
(h) Transocean will be responsible for the administration of
claims under the Insurance Policies and D&O Policies with respect to members of
the Transocean Group and for the administration of any Joint Claims and D&O
Claims, including D&O Claims made by TODCO. TODCO will be responsible for the
administration of claims under the Insurance Policies with respect to members of
the TODCO Group other than Joint Claims and D&O Claims; provided that TODCO will
inform Transocean of all claims with respect to members of the TODCO Group and
will inform Transocean of the status and details thereof on a reasonable
periodic basis. The parties to this Agreement understand and agree that
administration of claims includes, without limitation, the administration of
risk management functions and the delivery and receipt of insurance certificates
to third parties, including clients and vendors. Each of TODCO and Transocean
will share such information as is reasonably necessary in order to permit the
other party to manage and conduct its insurance matters in an orderly fashion.
TODCO will provide Transocean with any assistance that is reasonably necessary
or beneficial in connection with Transocean's insurance matters.
57
(i) This Agreement shall not be considered as an attempted
assignment of any policy of insurance or as a contract of insurance and shall
not be construed to waive any right or remedy of any member of the Transocean
Group in respect of any Insurance Policy, D&O Policy or any other contract or
policy of insurance.
(j) TODCO does hereby, for itself and each other member of the
TODCO Group, agree that no member of the Transocean Group or any Transocean
Indemnitee shall have any Liability whatsoever as a result of the insurance
policies and practices of Transocean and its Affiliates as in effect at any time
prior to the IPO Closing Date or at any time thereafter, including as a result
of the level or scope of any such insurance, the creditworthiness of any
insurance carrier, the terms and conditions of any policy, the adequacy or
timeliness of any notice to any insurance carrier with respect to any claim, any
action taken in connection with the administration of any claims or potential
claim or otherwise.
ARTICLE VIII
MISCELLANEOUS
8.1 LIMITATION OF LIABILITY. EXCEPT TO THE EXTENT SPECIFICALLY
PROVIDED IN ANY ANCILLARY AGREEMENT, IN NO EVENT SHALL ANY MEMBER OF THE
TRANSOCEAN GROUP OR THE TODCO GROUP OR THEIR RESPECTIVE DIRECTORS, OFFICERS AND
EMPLOYEES BE LIABLE TO ANY OTHER MEMBER OF THE TRANSOCEAN GROUP OR THE TODCO
GROUP FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES
OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING
NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE
FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS
FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT.
8.2 ENTIRE AGREEMENT. This Agreement, the Ancillary Agreements and the
Exhibits and Schedules referenced or attached hereto and thereto, constitute the
entire agreement between the parties with respect to the subject matter hereof
and shall supersede all prior written and oral and all contemporaneous oral
agreements and understandings with respect to the subject matter hereof.
8.3 GOVERNING LAW. This Agreement shall be governed and construed and
enforced in accordance with the laws of the State of Texas as to all matters
regardless of the laws that might otherwise govern under the principles of
conflicts of laws applicable thereto.
8.4 TERMINATION. This Agreement and all Ancillary Agreements may be
terminated at any time prior to the IPO Closing Date by and in the sole
discretion of Transocean without the approval of TODCO. This Agreement may be
terminated at any time after the IPO Closing Date by mutual consent of
Transocean and TODCO. In the event of termination pursuant to this Section,
neither party shall have any liability of any kind to the other party.
58
8.5 NOTICES. Unless expressly provided herein, all notices, claims,
certificates, requests, demands and other communications hereunder shall be in
writing and shall be deemed to be duly given (i) when personally delivered or
(ii) if mailed registered or certified mail, postage prepaid, return receipt
requested, on the date the return receipt is executed or the letter is refused
by the addressee or its agent or (iii) if sent by overnight courier which
delivers only upon the signed receipt of the addressee, on the date the receipt
acknowledgment is executed or refused by the addressee or its agent or (iv) if
sent by facsimile or other generally accepted means of electronic transmission,
on the date confirmation of transmission is received (provided that a copy of
any notice delivered pursuant to this clause (iv) shall also be sent pursuant to
clause (ii) or (iii)), addressed to the attention of the addressee's General
Counsel at the address of its principal executive office or to such other
address or facsimile number for a party as it shall have specified by like
notice.
8.6 COUNTERPARTS. This Agreement, including the Schedules and Exhibits
hereto and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
8.7 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
not be assigned by any party hereto.
8.8 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and their respective Subsidiaries and is not
intended to confer upon any other Person except the parties hereto and their
respective Subsidiaries any rights or remedies hereunder.
8.9 SEVERABILITY. If any term or other provision of this Agreement or
the Schedules or Exhibits attached hereto is determined by a nonappealable
decision by a court, administrative agency or arbitrator to be invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to either
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the court, administrative agency or
arbitrator shall interpret this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest extent possible.
If any sentence in this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
8.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of either party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this
59
Agreement or the Schedules or Exhibits attached hereto are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
8.11 AMENDMENT. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
this Agreement.
8.12 AUTHORITY. Each of the parties hereto represents to the other
that (a) it has the corporate or other requisite power and authority to execute,
deliver and perform this Agreement and the Ancillary Agreements, (b) the
execution, delivery and performance of this Agreement and the Ancillary
Agreements by it have been duly authorized by all necessary corporate or other
actions, (c) it has duly and validly executed and delivered this Agreement and
the Ancillary Agreements to be executed and delivered on or prior to the IPO
Closing Date, and (d) this Agreement and such Ancillary Agreements are legal,
valid and binding obligations, enforceable against it in accordance with their
respective terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equity principles.
8.13 SPECIFIC PERFORMANCE. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement or any Ancillary Agreement, the party or the parties who are or are to
be thereby aggrieved shall have the right to specific performance and injunctive
or other equitable relief of their rights under this Agreement or such Ancillary
Agreement, in addition to any and all other rights and remedies at law or in
equity, and all such rights and remedies shall be cumulative. The parties agree
that the remedies at law for any breach or threatened breach, including monetary
damages, are inadequate compensation for any loss and that any defense in any
action for specific performance that a remedy at law would be adequate is
waived. Any requirements for the securing or posting of any bond with such
remedy are waived.
8.14 CONSTRUCTION. This Agreement and the Ancillary Agreements shall
be construed as if jointly drafted by TODCO and Transocean and no rule of
construction or strict interpretation shall be applied against either party.
8.15 INTERPRETATION. The headings contained in this Agreement, in any
Exhibit or Schedule hereto and in the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule or
Exhibit, but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a Section, an Exhibit or a Schedule, such reference shall be to an
Article or a Section of, or an Exhibit or a Schedule to, this Agreement unless
otherwise indicated.
8.16 CONFLICTING AGREEMENTS. In the event of conflict between this
Agreement and any Ancillary Agreement executed in connection herewith, the
provisions of such other agreement shall prevail.
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WHEREFORE, the parties have signed this Master Separation Agreement
effective as of the date first set forth above.
TRANSOCEAN INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
------------------------------
Title: Senior Vice President and
-----------------------------
Chief Financial Officer
-----------------------------
TRANSOCEAN HOLDINGS INC.
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Name: Xxxx X. Xxxxx
------------------------------
Title: Vice President and
-----------------------------
Secretary
-----------------------------
TODCO
By: /s/ Xxx Xxxx
-----------------------------------
Name: Xxx Xxxx
------------------------------
Title: President and Chief
-----------------------------
Executive Officer
-----------------------------
61
