EXHIBIT 10.111
BAREBOAT CHARTER
X. X. XXXXX, XX.
BETWEEN
DEEP SEA INVESTORS, L.L.C., as OWNER
AND
READING & XXXXX DRILLING CO., as CHARTERER
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TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 2 SCHEDULES AND OBJECTIVES . . . . . . . . . . . . . . . . . . .
2.1 Schedules and Exhibits . . . . . . . . . . . . . . . . . .
2.2 Objectives . . . . . . . . . . . . . . . . . . . . . . . .
2.3 CONDITION OF THE PROPERTY . . . . . . . . . . . . . . . .
ARTICLE 3 TERM, DELIVERY DATE AND PURCHASE OPTION . . . . . . . . . . . .
3.1 Duration . . . . . . . . . . . . . . . . . . . . . . . . .
3.2 Delivery of the Vessel to the Charterer . . . . . . . . .
3.3 Early Termination . . . . . . . . . . . . . . . . . . . .
3.4 Remedies . . . . . . . . . . . . . . . . . . . . . . . . .
3.5 Redelivery of the Vessel . . . . . . . . . . . . . . . . .
3.6 Survey of the Vessel at End of Charter Period . . . . . .
3.7 Purchase Option . . . . . . . . . . . . . . . . . . . . .
3.8 Determination of Purchase Option Price . . . . . . . . . .
ARTICLE 4 NATURE OF COMPENSATION . . . . . . . . . . . . . . . . . . . .
4.1 Absolute Obligation . . . . . . . . . . . . . . . . . . .
4.2 Net Charter . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 5 UPGRADE PROGRAM . . . . . . . . . . . . . . . . . . . . . . . .
5.1 Scope of Upgrade; Title to Upgrade . . . . . . . . . . . .
5.2 Assignment of Rights Under Upgrade Program . . . . . . . .
5.3 Appointment of Upgrade Agent . . . . . . . . . . . . . . .
5.4 Upgrade Agent's Warranties . . . . . . . . . . . . . . . .
5.5 Upgrade Agent's Duties . . . . . . . . . . . . . . . . . .
5.6 Change Orders . . . . . . . . . . . . . . . . . . . . . .
5.7 Independent Engineer . . . . . . . . . . . . . . . . . . .
5.8 Completion . . . . . . . . . . . . . . . . . . . . . . . .
5.9 Payment . . . . . . . . . . . . . . . . . . . . . . . . .
5.10 Reimbursement Conditions . . . . . . . . . . . . . . . . .
ARTICLE 6 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . .
6.1 Representations and Warranties of the Owner . . . . . . .
6.2 Representations and
Warranties of the Charterer . . . . . . . . . . . . . .
ARTICLE 7 USE AND OPERATION OF THE VESSEL . . . . . . . . . . . . . . . .
7.1 Use of the Vessel . . . . . . . . . . . . . . . . . . . .
7.2 Xxxxxxx, etc., of the Vessel . . . . . . . . . . . . . . .
7.3 Documentation of the Vessel . . . . . . . . . . . . . . .
7.4 General and Particular Average . . . . . . . . . . . . . .
7.5 Site and Access . . . . . . . . . . . . . . . . . . . . .
7.6 Owner Liability for Materials
Furnished by the Charterer . . . . . . . . . . . . . .
7.7 Environmental and Related
Reporting and Inspection . . . . . . . . . . . . . . .
7.8 Notice of Entry . . . . . . . . . . . . . . . . . . . . .
ARTICLE 8 MAINTENANCE OF CONDITION AND CLASSIFICATION; REPAIRS . . . . .
8.1 Maintenance of Classification . . . . . . . . . . . . . .
8.2 Repair . . . . . . . . . . . . . . . . . . . . . . . . . .
8.3 Drydocking or Underwater
Survey in Lieu of Drydocking . . . . . . . . . . . . .
8.4 Required Survey . . . . . . . . . . . . . . . . . . . . .
ARTICLE 9 EQUIPMENT AND STORES . . . . . . . . . . . . . . . . . . . . .
9.1 Fuel, etc. . . . . . . . . . . . . . . . . . . . . . . . .
9.2 Equipment, etc. . . . . . . . . . . . . . . . . . . . . .
9.3 The Charterer's Additional Equipment, etc. . . . . . . . .
9.4 Title to Improvements; Option to Purchase . . . . . . . .
9.5 No Lease of Essential Severables . . . . . . . . . . . . .
ARTICLE 10 THE CHARTERER'S CHANGES, ADDITIONS AND REPLACEMENTS . . . . .
10.1 Structural Changes or Alterations;
Installation of Equipment, etc. . . . . . . . . . . . .
10.2 Replacement of Parts . . . . . . . . . . . . . . . . . . .
10.3 Vessel Markings . . . . . . . . . . . . . . . . . . . . .
ARTICLE 11ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . .
11.1 General Covenants . . . . . . . . . . . . . . . . . . . .
11.2 No Impairment . . . . . . . . . . . . . . . . . . . . . .
11.3 Financial Information . . . . . . . . . . . . . . . . . .
11.4 Compliance Certificates . . . . . . . . . . . . . . . . .
11.5 Further Assurances, etc. . . . . . . . . . . . . . . . . .
11.6 Maintenance of Corporate Existence, etc. . . . . . . . . .
11.7 Conditions of Consolidation, Merger, etc. . . . . . . . .
11.8 Indemnity of the Owner by Customers for Oil
Pollution and Related Environmental Claims . . . . . .
ARTICLE 12 PAYMENTS, INVOICES AND SECURITY . . . . . . . . . . . . . . .
12.1 Basic Hire . . . . . . . . . . . . . . . . . . . . . . . .
12.2 Supplemental Hire . . . . . . . . . . . . . . . . . . . .
12.3 Payment Terms . . . . . . . . . . . . . . . . . . . . . .
12.4 Invoices . . . . . . . . . . . . . . . . . . . . . . . . .
12.5 Security for Obligations . . . . . . . . . . . . . . . . .
ARTICLE 13 GENERAL OBLIGATIONS AND PERFORMANCE . . . . . . . . . . . . .
13.1 Independent Owner Relationships . . . . . . . . . . . . .
13.2 Inspection . . . . . . . . . . . . . . . . . . . . . . . .
13.3 Performance of the Charterer . . . . . . . . . . . . . . .
13.4 Operations Outside of U.S. Waters . . . . . . . . . . . .
ARTICLE 14 LIABILITY AND INDEMNITY . . . . . . . . . . . . . . . . . . .
14.1 Survival of Indemnities . . . . . . . . . . . . . . . . .
14.2 Pollution . . . . . . . . . . . . . . . . . . . . . . . .
14.3 The Charterer's Indemnity . . . . . . . . . . . . . . . .
14.4 Patent Infringement . . . . . . . . . . . . . . . . . . .
14.5 Both-to-Blame Collision Clause . . . . . . . . . . . . . .
14.6 Liens, Attachments and Encumbrances . . . . . . . . . . .
14.7 Indemnification by the Charterer . . . . . . . . . . . . .
14.8 The Charterer's Duties to Remove Liens, etc. . . . . . . .
ARTICLE 15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . .
15.1 The Charterer's Insurance . . . . . . . . . . . . . . . .
15.2 Nonperformance of Insurance Companies . . . . . . . . . .
15.3 Subrogation . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 16 ASSIGNMENT OF CHARTER . . . . . . . . . . . . . . . . . . . .
16.1 Assignment and Subcontract by the Owner . . . . . . . . .
16.2 Assignment by the Charterer . . . . . . . . . . . . . . .
16.3 Assignment of Subcharter Hire . . . . . . . . . . . . . .
ARTICLE 17 LOSS, TAKING OR SEIZURE. . . . . . . . . . . . . . . . . . . .
17.1 Taking by the U.S. Government . . . . . . . . . . . . . .
17.2 Event of Loss not a Total Loss . . . . . . . . . . . . . .
17.3 Payment of Stipulated Loss Value . . . . . . . . . . . . .
17.4 Application of Payments . . . . . . . . . . . . . . . . .
17.5 Date of Loss . . . . . . . . . . . . . . . . . . . . . . .
17.6 Effect of Payment of Stipulated Loss Value . . . . . . . .
ARTICLE 18 TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18.1 Characterization as a Lease . . . . . . . . . . . . . . .
18.2 Representations . . . . . . . . . . . . . . . . . . . . .
18.3 Tax Indemnity . . . . . . . . . . . . . . . . . . . . . .
18.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . .
18.5 Records . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 19 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . .
19.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . .
19.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . .
19.3 The Owner's Right to Perform for the Charterer . . . . . .
19.4 Waivers . . . . . . . . . . . . . . . . . . . . . . . . .
19.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . .
19.6 Successors and Assigns . . . . . . . . . . . . . . . . . .
19.7 Law . . . . . . . . . . . . . . . . . . . . . . . . . . .
19.8 Parties' Intention . . . . . . . . . . . . . . . . . . . .
19.9 Counterparts; Uniform Commercial Code . . . . . . . . . .
19.10 Warranty of Authority . . . . . . . . . . . . . . . . . .
19.11 Usage; Headings . . . . . . . . . . . . . . . . . . . . .
19.12 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . .
19.13 VENUE; SERVICE OF PROCESS . . . . . . . . . . . . . . . .
19.14 Agent for Service of Process . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . [fill in]
Schedule A Description of Vessel X. X. Xxxxx, Xx.,
Including Specifications
Schedule B Upgrade Program
Schedule C Charterer's Insurance
Schedule D Stipulated Loss Value
Schedule E Pending Litigation
Schedule F Computation of Basic Hire Upgrade Adjustment
Exhibit A Form of Certificate of Completion
Exhibit B Form of Certificate of Delivery
Exhibit C Form of Certificate for Reimbursement
Exhibit D Form of Completion Certificate of Independent Engineer
Exhibit E Form of Reimbursement Certificate of
Independent Engineer
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BAREBOAT CHARTER
"X.X. XXXXX, XX."
This Bareboat Charter dated as of November 28, 1995 is between Deep
Sea Investors, L.L.C., a Delaware limited liability company (the "Owner"),
and Reading & Xxxxx Drilling Co., an Oklahoma corporation, as the Charterer
(the "Charterer");
W I T N E S S E T H:
WHEREAS, the Charterer desires to conduct drilling activities; and
WHEREAS, the Owner is the owner of the Vessel X.X. XXXXX, XX. (as
described hereunder at Schedule A (the "Vessel")) and, upon the terms and
subject to the conditions hereof, is willing to charter such Vessel to the
Charterer on a bareboat basis to conduct such drilling activities;
NOW, THEREFORE, the parties hereto, each in consideration of the
promises and agreements of the other, hereby agree as follows:
ARTICLE 1
DEFINITIONS
When used in this Charter (in addition to the terms defined elsewhere in
this Charter), the following terms shall have the following meanings:
"Additional Collateral" has the meaning assigned to such term in
Section 12.5(a).
"Adequate Provision" means, with respect to any Lien, claim, liability
or other obligation, the posting with or for the benefit of the Owner
Group, of a bond or letter of credit issued by a bank, surety or other
similar institution acceptable to the Owner or other collateral
acceptable to the Owner, in each case, pursuant to documentation in
form and substance acceptable to the Owner, having a face amount or
fair market value no less than the amount owed under such Lien, claim,
liability or other obligation.
"Affiliate(s)" in relation to a party hereto, means any person
controlling, controlled by or under common control with such party,
with the concept of control in such context meaning the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of another, whether through the
ownership of voting securities, by contract or otherwise.
"Appraisal Procedure" means the procedure specified in the succeeding
sentences for determining an amount or value. If either the Owner or
the Charterer shall give written notice to the other requesting
determination of such amount or value by appraisal, the Owner and the
Charterer shall consult for the purpose of appointing a mutually
acceptable qualified independent appraiser. If such parties shall be
unable to agree on an appraiser within 20 days of the giving of such
notice, such amount or value shall be determined by a panel of three
independent appraisers, one of whom shall be selected by the
Charterer, another of whom shall be selected by the Owner and the
third of whom shall be selected by the American Arbitration
Association (or its successor) if such other two appraisers shall be
unable to agree upon a third appraiser within 10 days of the selection
date of the second of such two appraisers; provided, that if
(a) either party shall not select its appraiser within 35 days after
giving of such notice, such amount or value shall be determined solely
by the appraiser selected by the other party, and (b) if both parties
shall not select their respective appraisers within such period, such
amount or value shall be determined solely by an appraiser selected by
the American Arbitration Association (or its successor). The
appraiser or appraisers appointed pursuant to the foregoing procedure
shall be instructed to determine such amount or value within the
lesser of: (i) 45 days after such appointment and (ii) the applicable
period remaining until delivery of such appraisal is required under
this Charter and the Charter Documents; and such determination shall
be final and binding upon the parties. If three appraisers shall be
appointed, the determination of the appraiser that shall differ most
from the other two appraisers shall be excluded, the remaining two
determinations shall be averaged and such average shall constitute the
determination of the appraisers. The Charterer shall pay all fees and
expenses relating to an appraisal for any purpose under this Charter.
"Basic Hire" means the charter hire amount payable on the Payment
Dates as set forth in Section 12.1.
"Business Day" means any day on which commercial banks are open for
business in New York City, New York.
"Certificate of Completion" means the Certificate of Completion
substantially in the form of Exhibit A duly executed by the Charterer
for the purpose of evidencing the Upgrade Completion.
"Certificate of Delivery" means the Certificate of Delivery
substantially in the form of Exhibit B hereto duly executed by the
Charterer for the purpose of evidencing the Charterer's acceptance of
delivery of the Vessel under this Charter.
"Certificate for Reimbursement" means the Certificate for
Reimbursement substantially in the form of Exhibit C duly executed by
the Charterer evidencing the Charterer's request for reimbursement on
any Upgrade Payment Date.
"Change Order" means a written order to Contractor signed by the
Charterer and if required by Section 5.6, the Owner, issued after
execution of the Upgrade Contract, authorizing a change in the Upgrade
Program or an adjustment in the Upgrade Nonseverable Cost.
"Charter" means this Bareboat Charter as it may from time to time be
supplemented, amended, waived or modified in accordance with the terms
hereof.
"Charter Documents" means this Charter, the Guaranty, the Security
Documents and any other document, instrument or agreement executed in
connection herewith or therewith.
"Charter Period" means, collectively, the Primary Term and, if any,
the Extended Term.
"Charterer" means Reading & Xxxxx Drilling Co., an Oklahoma
corporation, and its successors and assigns to the extent permitted by
the terms hereof.
"Charterer Group" means, individually and collectively, the Charterer
and its subsidiaries, its and their co-venturers, contractors and
subcontractors and its and their Affiliates, and the employees,
invitees and insurers of all of those entities, but shall expressly
exclude the Owner Group.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and any amending or superseding tax laws of the United States
of America.
"Completion Certificate of Independent Engineer" means the Completion
Certificate of Independent Engineer substantially in the form of
Exhibit D hereto duly executed by the Independent Engineer for the
purpose of evidencing the Upgrade Completion.
"Contractor" means Amfels, Inc., a Texas corporation, and any other
Person performing all or any part of the Upgrade Program.
"Xxxxxxxxxx Mortgage" means the Preferred Ship Mortgage dated as of
November 28_, 1995 made by the Charterer in favor of the Trustee
covering the Xxx Xxxxxxxxxx.
"Crude Oil" means any hydrocarbon product that is in liquid form at
surface temperature and pressure, including condensate.
"Debt" means, for any Person (without duplication), whether recourse
is to all or a portion of the assets of such Person and whether or not
contingent, (a) every obligation of such Person for money borrowed,
(b) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) every reimbursement obligation
of such Person with respect to letters of credit, bankers' acceptances
or similar facilities issued for the account of such Person, (d) every
obligation of such Person issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business),
(e) every obligation of such Person under a lease, that under
generally accepted accounting principles is required to be capitalized
on the balance sheet of such Person, (f) every obligation under any
charter, operating lease or title retention arrangement with an
original term in excess of one year or which is renewable at the
option of the tenant for a total term of one year or more, (g) the
maximum fixed redemption or repurchase price of redeemable stock of
such Person that by its terms or otherwise is required to be redeemed,
if any, at the time of determination plus accrued but unpaid
dividends, and (h) every obligation of the type referred to in clauses
(a) through (g) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor,
guarantor or otherwise.
"Default" means any event or condition which after notice or lapse of
time or both would become an Event of Default.
"Delivery Date" means the date on which the Vessel is simultaneously
(a) sold by Reading and Xxxxx, Inc. to and accepted by the Owner
pursuant to the terms of the MOA and (b) chartered by the Owner to the
Charterer hereunder as provided in Article 2.
"Drilling Contracts" means any contractual arrangement with respect to
the Vessel providing for the use or employment of the Vessel for the
locating of, drilling for, development of, extraction of or processing
of Crude Oil, Natural Gas or mineral deposits found in underwater
locations, and activities ancillary thereto.
"Escalated" means, with respect to any amount and as at any date of
determination, such amount as multiplied by a fraction (a) the
numerator of which is the Consumer Price Index - U.S. Average as
published by the Bureau of Statistics of the Department of Labor (or
if the publication of the Consumer Price Index is discontinued, a
comparable index similar in nature to the discontinued index which
clearly reflects the change in the real value of the purchasing power
of the Dollar as reasonably selected by the Owner (hereafter in this
definition referred to as the "index")) reported for the calendar year
immediately preceding such date and (b) the denominator of which is
equal to the index reported for 1995.
"Event of Default" means any of the events defined as such in Section
3.3(b).
"Event of Loss" means any of the following events: (a) the actual or
constructive loss of the Vessel for the lesser of (i) six (6) months
(or such longer period of up to 12 months from the date of such loss
so long as the Charterer shall have made arrangements within such six
(6) month period for the repair and restoration of the Vessel
satisfactory to the Owner and the Independent Engineer and is
diligently proceeding with such repair and restoration) or (ii) the
remainder of the Charter Period, (b) the loss, theft or destruction of
the Vessel, (c) damage or destruction of the Vessel or damage to the
Vessel to such extent as shall make repair thereof uneconomical or
other event resulting in the Vessel's being permanently rendered unfit
for normal use for any reason whatsoever, other than obsolescence, or
(d) the condemnation, confiscation, requisition, seizure, forfeiture
or other taking of title to or use of the Vessel (except that, in the
case of a taking of title, or taking of use by the United States
Government, a period equal to the lesser of (i) six (6) months and
(ii) the then remaining term of the Charter Period shall have elapsed
from the date of such taking), in each case as determined by the
Owner.
"Expiration Date" means the last day of the Primary Term.
"Extended Term" has the meaning assigned to such term in Section
3.1(b).
"Fair Market Sale Value" means, for any property, the cash sale value
of such property that would be obtained in an arm's-length transaction
between an informed and willing seller under no compulsion to sell and
an informed and willing buyer-user (other than a person currently in
possession or a used equipment dealer), which determination shall be
made (a), in the case of the Vessel, without deduction for any costs
of removal of the Vessel from the location of current use and (b) on
the assumption that such property is free and clear of all liens,
charges and encumbrances and, in the case of the Vessel, is in the
condition and repair in which it is required to be returned pursuant
to Section 3.5 hereof (but otherwise on an "as-is" basis).
"Guarantor" means Reading & Xxxxx Corporation, a Delaware corporation,
or any other Person that guarantees or provides collateral or other
credit support for the obligations of the Charterer hereunder.
"Guaranty" shall mean the Guaranty entered into by any Guarantor for
the benefit of the Owner, as the same may from time to time be
supplemented, amended, waived or modified in accordance with the terms
thereof.
"Highest Lawful Rate" means the maximum nonusurious contract rate of
interest permitted by applicable law.
"Hire" means Basic Hire and Supplemental Hire, collectively.
"Income Taxes" means all income, franchise or similar Taxes which are
based on, or measured by or with respect to, net income.
"Indemnitee" has the meaning assigned to such term in Section 14.3.
"Independent Engineer" means Xxxxxxx & Casbarian, or any other Person
selected by the Owner and approved by the Charterer, which approval
shall not be unreasonably withheld or delayed.
"Investor" means each of GATX Marine Investors Corporation, MDFC
Equipment Leasing Corporation, Xxxxxx Financial Leasing, Inc. and
their respective successors and assigns.
"Xxx Xxxxxxxxxx" means the drilling rig Xxx Xxxxxxxxxx, official
number 651643.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease,
right, security interest or claim of any nature.
"Limited Liability Company Agreement" means the Limited Liability
Company Agreement dated as of November 28, 1995 among GATX Marine
Investors Corporation, MDFC Equipment Leasing Corporation, and Xxxxxx
Financial Leasing, Inc. creating the Owner.
"MOA" means the Memorandum of Agreement dated as of November 28, 1995
between Reading and Xxxxx, Inc. and the Owner.
"Moody's" means Xxxxx'x Investor Service, Inc., a New York
corporation, and its successors and assigns.
"Mortgages" means the Xxxxxxxxxx Mortgage and the Xxxx Mortgage.
"Natural Gas" means any mixture of hydrocarbons or of hydrocarbons and
noncombustible gases, in a gaseous form at surface temperature and
pressure, which consists essentially of methane, but includes ethane,
propane, butanes, and other liquefiable hydrocarbons.
"1954 Code" means the United States Internal Revenue Code of 1954, as
amended and in effect prior to the enactment of the Tax Reform Act of
1986 (Pub. L. No. 99-514).
"Nonseverables" means improvements, modifications and additions to the
Vessel that are not readily removable without causing damage to the
Vessel or that in accordance with applicable statutes, orders, cases,
rules, regulations and other laws may not be removed from the Vessel.
"Obligations" means the obligations of the Obligors under the Charter
Documents.
"Obligors" means, collectively, the Charterer and each Guarantor.
"Operating Area" means any area in which the Charterer shall operate
the Vessel with notice to the Owner pursuant to Section 13.4.
"Overdue Rate" means an interest rate per annum equal to the lesser of
(a) the Prime Rate plus four percent (4%) per annum and (b) the
Highest Lawful Rate.
"Owner" means Deep Sea Investors, L.L.C., a limited liability company
organized under the laws of the State of Delaware.
"Owner Group" means, individually and collectively, the Owner and its
subsidiaries, its and their co-venturers and contractors and
subcontractors and the Investors, its and their respective Affiliates
(other than the Charterer), and its and their shareholders, directors,
officers, attorneys, accountants, consultants and representatives, the
employees, insurers and invitees of all of those entities, the Trustee
and the X. X. Xxxxx, Xx., but shall expressly exclude Charterer Group.
"Owner Liens" means Liens described in clause (b) of the definition of
Permitted Liens.
"Owner's Cost" means, as of any date, the sum of the purchase price of
the Vessel and Upgrade Nonseverable Cost.
"Payment Date" means each date that is a monthly anniversary date of
the calendar day immediately before the Delivery Date (such monthly
date being deemed for this purpose to be the day of each succeeding
month corresponding to such date immediately before the Delivery Date
or, if such month does not have a corresponding day, the last day of
such month), up to and including the end of the Charter Period.
"Permitted Liens" means, as of any date, (a) any lien arising out of a
claim for crew's wages, supplies or the like, or salvage not covered
by insurance, or for taxes, assessments or other governmental charges,
in each case, incurred in the ordinary course of business, and in
existence as of the date of determination for not more than 30 days
and, as of the date of determination, neither overdue nor in the
aggregate in excess of $1,000,000 unless such are being contested in
good faith and by appropriate Persons and proceedings, in each case,
in the Owner's judgment and unless Adequate Provision has been
provided by the Charterer for payment of such amounts that may become
due and payable and such Lien attaches only to such Adequate Provision
and not to the Vessel, any part thereof or any Drilling Contract and,
in the Owner's judgment, no risk of forfeiture or other loss of the
Vessel, any part thereof, or any right of the Charterer or the Owner
under any Drilling Contract, exists, or is threatened or imminent;
(b) any lien created by, through or under the Owner as a result of
claims against the Owner for which the Owner is not entitled to
indemnification from the Charterer or any Guarantor, or discharge of
which is not the obligation of the Charterer or any Guarantor, whether
at law, by contract, in equity or under admiralty principles; and
(c) Drilling Contracts complying with the provisions of this Charter
and the other Charter Documents and the rights of the Charterer under
this Charter, including subcharters of the Vessel in accordance with
the terms of this Charter, provided that no such contracts, rights or
subcharters shall suffer or permit to be continued any Lien or
encumbrance incurred by Charterer or any subcharterer or any of their
agents which might have priority over the title and interest of the
Owner in the Vessel or any part thereof or equipment or other property
used in connection with the Vessel.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust or
unincorporated organization or any government or any agency or any
political subdivision thereof.
"Primary Term" has the meaning assigned to such term in Section
3.1(a).
"Prime Rate" means the per annum rate of interest published from time
to time in the Eastern edition of The Wall Street Journal, which rate
shall change with each published change in such rate, effective as of
the date of such publication.
"Purchase Option Price" means the Fair Market Sale Value of the Vessel
determined in accordance with Section 3.8, not to exceed 40% of
Owner's Cost.
"Xxxxxxxx Xxxx" means the Xxxxxxxx Xxxx, Official Number 601699, and
all fixtures, equipment and improvements of any kind whatsoever
installed or located thereon and owned by the Charterer.
"Rated Securities" means the implied long-term senior unsecured debt
of Reading & Xxxxx.
"Reading & Xxxxx" means Reading & Xxxxx Corporation, a Delaware
corporation.
"Reimbursement Certificate of Independent Engineer" means the
Reimbursement Certificate of Independent Engineer substantially in the
form of Exhibit E duly executed by the Independent Engineer for the
purpose of evidencing the Charterer's entitlement to reimbursement
under Section 5.9 on any Upgrade Payment Date.
"Rights Assignment" has the meaning assigned to such term in Section
16.3.
"Safe Harbor Lease Documents" means, collectively, the Agreement dated
as of March 22, 1982 between American Broadcasting Companies, Inc.
("ABC"), as Lessor, and the Charterer, as Lessee, covering the
Xxxxxxxxxx, the Agreement dated as of March 22, 1982 between ABC, as
lessor, and the Charterer, covering the xxxx-up rigs, X.X. Xxxxx and
X.X. Xxxxxx, the related Preferred Ship Mortgages and the documents
executed in connection therewith, including, without limitation, the
tax indemnification agreements.
"Sale Date" means the date, if any, on which the Charterer acquires
the Vessel by exercise of its purchase option granted pursuant to
Section 3.7.
"Security Agreement" means the Security Agreement between the Owner
and the Trustee.
"Security Documents" means the Mortgages, the Security Agreement, and
any other agreement, instrument or document executed and delivered for
the purpose of supporting or securing the Obligations.
"Severables" means improvements, modifications or additions to the
Vessel that are readily removable without causing damage to the Vessel
and may, in accordance with all applicable statutes, orders, cases,
rules, regulations and other laws, be removed from the Vessel.
"S&P" means Standard & Poor's Ratings Group, a division of XxXxxx-Xxxx
Companies, Inc., a New York corporation, and its successors and
assigns.
"Shipping Act, 1916" shall mean the United States Shipping Act, 1916,
as amended.
"Shipyard" means Amfel's shipyard in Brownsville, Texas.
"Stipulated Loss Value" as of any Payment Date listed by number in
Schedule D hereto means an amount determined by multiplying Owner's
Cost by the percentage set forth in Schedule D opposite such Payment
Date number.
"Subsidiary" means for any Person, any other corporation, partnership,
joint venture, limited liability company or other entity at least a
majority of the voting stock of which is beneficially owned, directly
or indirectly by such Person or its Subsidiaries.
"Substitute Collateral" has the meaning assigned to such term in
Section 12.5(d).
"Supplemental Hire" shall mean any and all amounts, liabilities and
obligations other than Basic Hire that the Charterer assumes or agrees
to pay hereunder to the Owner, including, without limitation,
Stipulated Loss Value and indemnity payments.
"Taxes" means all federal, foreign, state, local or other net or gross
income, gross receipts, sales, use, stamp, documentary, transfer,
general consumption, ad valorem, property, value added, franchise,
production, import, export, withholding, payroll, employment, excise
or similar taxes, assessments, duties, fees, levies or other
governmental charges, including without limitation, license,
recording, documentation and registration fees, together with any
interest thereon, any penalties, additions to tax or additional
amounts with respect thereto and any interest in respect of such
penalties, additions or additional amounts.
"Third Parties" means all persons and entities that are not Charterer
Group or Owner Group.
"Timely Liquidation Value" means, for any property, the cash sale
value of such property that would be obtained in an arm's-length
transaction between a seller that must sell such property in no more
than 90 days and an informed and willing buyer-user, which
determination shall be made with a deduction for the removal of the
property from its location and on the assumption that such property is
in its current actual condition, which condition shall reflect its
current physical condition and location and any applicable legal,
governmental, physical, contractual and other impediments to sale or
use.
"Trustee" means Wilmington Trust Company not in its individual
capacity but solely as trustee for the benefit of the Owner under the
Mortgages and any of its successors or assigns in such capacity.
"UCC" means the Uniform Commercial Code as enacted in the State of New
York.
"Upgrade Agreements" has the meaning assigned to such term in
Section 5.2.
"Upgrade Completion" means the delivery to the Owner of the
Certificate of Completion and the Certificate of Independent Engineer
and the Owner's acknowledgment in writing to the Charterer that it
accepts such Certificates; provided, however, that the Owner's
acceptance of such certificates shall not constitute any waiver of its
rights or remedies in respect of any failure of the Upgrade Program to
be completed in accordance with the terms hereof or any other right or
remedy.
"Upgrade Contract" means the Ship Repair Agreement dated as of
October 31, 1995 between Amfels, Inc., a Texas corporation, and the
Charterer.
"Upgrade Default" means the Owner shall determine that the work of the
Upgrade Program is not being conducted in all material respects in
accordance with the plans, schedules or specifications therefor or
that the Charterer has failed to perform its obligations under the
Upgrade Program in accordance with Article 5.
"Upgrade Maintenance" means that portion of the improvements
contemplated by the Upgrade Program that constitutes ordinary and
usual maintenance as more fully described on Schedule B.
"Upgrade Nonseverables" means that portion of the improvements
contemplated by the Upgrade Program that is not readily removable
without causing material damage to the Vessel as more fully described
on Schedule B.
"Upgrade Nonseverable Cost" means an amount not to exceed (i)
$10,000,000 to be paid under the Upgrade Agreements plus (ii) any
amounts authorized by the Owner to be paid to construct the Upgrade
Program.
"Upgrade Payment Date" means each of the Delivery Date, the Payment
Date falling in March 1996 and the date of the Upgrade Completion.
"Upgrade Program" means the upgrade of the Vessel from its current 850
meter water capacity to 1000, meters as more fully described in the
Upgrade Contract, any other Upgrade Agreements and the plans,
specifications and schedules set forth on Schedule B.
"Upgrade Severables" means that portion of the improvements
contemplated by the Upgrade Program that is readily removable from the
Vessel without causing material damage to the Vessel as more fully
described on Schedule B.
"Vessel" means the X. X. XXXXX, XX., as described on Schedule A and
all fixtures, equipment and improvements of any kind whatsoever
installed or located thereon pursuant to this Charter or as otherwise
agreed to by the Charterer and the Owner.
"Xxxx Mortgage" means the Preferred Ship Mortgage dated as of November
28, 1995 made by the Charterer in favor of the Trustee covering the
Xxxxxxxx Xxxx.
ARTICLE 2
SCHEDULES AND OBJECTIVES
2.1 Schedules and Exhibits
The following schedules and exhibits are attached hereto and made a
part hereof for all purposes. In the event there are any conflicts
between the body of this Charter and the schedules and exhibits
attached hereto, the provisions in the body of this Charter will
prevail.
(a) Schedules
Schedule A - Description of the Vessel, including
specifications.
Schedule B - Upgrade Program
Schedule C - Charterer's Insurance
Schedule D - Stipulated Loss Value
Schedule E - Pending Litigation
Schedule F - Computation of Basic Hire Upgrade Adjustment
(b) Exhibits
Exhibit A - Form of Certificate of Completion
Exhibit B - Form of Certificate of Delivery
Exhibit C - Form of Certificate for Reimbursement
Exhibit D - Form of Completion Certificate of Independent
Engineer
Exhibit E - Form of Reimbursement Certificate of Independent
Engineer
Exhibit F - Form of Notice to Account Debtor
2.2 Objectives
The Owner shall provide the Vessel to the Charterer on a bareboat or
demise charter basis. The Owner shall not be responsible for any
other service, xxxxxxx, operations or equipment whatsoever. By the
Owner providing the Vessel to the Charterer in accordance with this
Charter, upon the terms and subject to the conditions hereof, the
Charterer shall take and have command, possession and control of the
Vessel during the term of this Charter; as a part hereof, and without
limit to the foregoing, the Charterer's command, possession and
control of the Vessel shall specifically include the obligation to
have the Vessel under the command of an Offshore Installation Manager
certified by and for the area in which the Vessel is operating from
time to time.
2.3 CONDITION OF THE PROPERTY. THE CHARTERER ACKNOWLEDGES AND AGREES THAT
IT IS CHARTERING THE VESSEL AND OTHER PROPERTY HEREUNDER "AS IS,"
"WHERE IS," AND "WITH ALL FAULTS, WHETHER LATENT OR DISCERNIBLE,"
WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY
THE OWNER, OWNER GROUP OR ANY INVESTOR AND IN EACH CASE SUBJECT TO
(A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN
POSSESSION THEREOF, (C) ALL APPLICABLE LEGAL REQUIREMENTS AND
(D) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY EXIST ON THE DATE
HEREOF. NONE OF OWNER, ANY MEMBER, OWNER GROUP, OR ANY INVESTOR HAS
MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR
COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY
WHATSOEVER AS TO THE TITLE, VALUE, HABITABILITY, USE, SEAWORTHINESS,
CONDITION, STABILITY, SUITABILITY, DESIGN, OPERATION, CLASS,
COMPLIANCE WITH LAWS, CONFORMANCE TO SPECIFICATIONS, MERCHANTABILITY
OR FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF FOR A
PARTICULAR PURPOSE OR WITH RESPECT TO PATENT INFRINGEMENT), OR ANY
OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY PART THEREOF), AND NONE
OF OWNER, OWNER GROUP OR ANY INVESTOR SHALL BE LIABLE FOR ANY LATENT,
HIDDEN OR PATENT DEFECT THEREIN, ANY REPRESENTATION, WARRANTY OR
PROMISE, EXPRESS OR IMPLIED, WHICH ANY MANUFACTURER OR BUILDER OF THE
VESSEL OR ANY PROPERTY (OR ANY PART THEREOF) MAY HAVE MADE OR MAY BE
DEEMED TO HAVE MADE OR THE FAILURE OF ANY PROPERTY, OR ANY PART
THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT OR ANY DAMAGES, WHETHER
ACTUAL, SPECIAL, CONSEQUENTIAL OR INCIDENTAL, ARISING HEREFROM OR
THEREFROM. THE CHARTERER HAS BEEN AFFORDED FULL OPPORTUNITY TO
INSPECT THE VESSEL, IS (INSOFAR AS THE OWNER IS CONCERNED) SATISFIED
WITH THE RESULTS OF ITS INSPECTIONS AND IS ENTERING INTO THIS CHARTER
SOLELY ON THE BASIS OF THE RESULTS OF ITS OWN INSPECTIONS, AND ALL
RISKS INCIDENT TO THE MATTERS DESCRIBED IN THE PRECEDING SENTENCE, AS
BETWEEN OWNER, THE OWNER GROUP AND THE INVESTORS, ON THE ONE HAND, AND
THE CHARTERER, ON THE OTHER HAND, ARE TO BE BORNE BY THE CHARTERER.
NOTHING IN THIS SECTION 2.3 OR THE CHARTER SHALL OPERATE TO NEGATE OR
DIMINISH ANY CLAIM FOR BREACH OF ANY REPRESENTATION, WARRANTY OR
COVENANT THAT THE OWNER MAY NOW OR HEREAFTER HAVE UNDER ANY CHARTER
DOCUMENT OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED THEREBY.
ARTICLE 3
TERM, DELIVERY DATE AND PURCHASE OPTION
3.1 Duration
(a) Subject to the terms and conditions of this Charter, the Owner
bareboat (demise) charters to the Charterer, and the Charterer
bareboat (demise) charters from the Owner, the Vessel for a
period beginning on the Delivery Date and ending on the 10th
anniversary of the Delivery Date (the "Primary Term"), with the
option to extend this Charter pursuant to Section 3.1(b).
(b) At the end of the Primary Term, and subject to the terms and
conditions of this Charter, the term of this Charter may be
extended for a period of 90 days (the "Extended Term") by the
Charterer providing 180 days' written notice to the Owner prior
to the end of the Primary Term if, and only if, such extension
is necessary to complete a Drilling Contract in progress that is
in full force and effect on the date such extension notice is
delivered and no Default or Event of Default has occurred and is
continuing. The Charterer, at its sole cost and expense, shall
provide the Owner with independent verification of the necessity
of any such extension in form and substance satisfactory to the
Owner. During such Extended Term, if any, all of the
obligations of the Charterer under this Charter during the
Charter Period shall continue for the Extended Term, including,
without limitation, the obligation to pay Basic Hire under
Section 12.1. Prior to any extension of the Primary Period for
the Vessel, the Charterer shall give the Owner its good faith
estimate of the date on which the existing Drilling Contract
will be completed.
(c) The Charterer shall, at all reasonable times during the last 180
days of the Charter Period, permit access to the Vessel to the
Owner and to Persons designated by the Owner in connection with
any prospective sale or prospective rechartering of the Vessel
by the Owner, and shall permit the inspection of the Vessel by
such Persons; provided, however, that the exercise of such
rights shall in no way unreasonably interfere with the use of
the Vessel by the Charterer.
3.2 Delivery of the Vessel to the Charterer
Delivery of the Vessel by the Owner to the Charterer shall take place
at Garden Banks Block 387, Outer Continental Shelf, Gulf of Mexico
simultaneously with delivery of the Vessel to the Owner pursuant to
the MOA. Upon such delivery, the Vessel shall be deemed to have been
delivered and accepted by the Charterer and shall be subject
thereafter to all the terms and conditions of this Charter.
Delivery of the Vessel by the Owner to the Charterer shall, without
further action, irrevocably constitute acceptance by the Charterer of
the Vessel for all purposes of this Charter, which shall be further
evidenced by the Charterer's execution and delivery of the Certificate
of Delivery simultaneously with the execution and delivery of this
Charter, and shall be conclusive proof that the Vessel is in
compliance with all requirements of this Charter and that the Vessel
is seaworthy, in accordance with specifications, in good working
order, condition and repair and without defect or inherent vice in
title, condition, design, operation or fitness for use, whether or not
discoverable by the Charterer as of the date hereof, and free and
clear of all Liens, other than Permitted Liens; provided, however,
that nothing contained herein shall in any way diminish or otherwise
affect any right the Charterer, the Owner or any of their respective
Affiliates may have against any shipyard, manufacturer, supplier,
vendor or any other Person in respect of the Vessel. FROM AND AFTER
THE DELIVERY DATE, THE CHARTERER SHALL NOT BE ENTITLED TO MAKE OR
ASSERT ANY CLAIM AGAINST OWNER, THE OWNER GROUP OR ANY INVESTOR ON
ACCOUNT OF ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE VESSEL,
THE CONSUMABLE STORES ON BOARD OR WITH RESPECT TO ITS TITLE,
SEAWORTHINESS, MERCHANTABILITY, FITNESS, HABITABILITY, VALUE, USE,
CONDITION, SUITABILITY, CLASS, COMPLIANCE WITH LAWS, DESIGN,
OPERATION, CONFORMANCE TO SPECIFICATIONS NOR ABSENCE OF DEFECTS,
LATENT, HIDDEN, PATENT OR OTHER, NOR WITH RESPECT TO PATENT
INFRINGEMENT. FROM AND AFTER THE DELIVERY DATE, THE CHARTERER WAIVES
ANY CLAIM IT MIGHT HAVE AGAINST OWNER, THE OWNER GROUP OR ANY INVESTOR
FOR ANY LIABILITY, CLAIM, LOSS, DAMAGE OR EXPENSE OF ANY KIND OR
NATURE BY OR WITH RESPECT TO THE VESSEL OR ANY DEFICIENCY OR DEFECT
THEREIN OR INADEQUACY THEREOF, THE USE OR MAINTENANCE THEREOF, ANY
INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF, WHETHER IN CONTRACT,
TORT OR ANY THEORY OF PRODUCT OR STRICT LIABILITY.
3.3 Early Termination
This Charter shall terminate in accordance with any notice of
termination given in accordance with this Section 3.3. This Charter
shall also terminate at the time stipulated below for any of the
following reasons:
(a) At the option of the Owner, this Charter shall terminate
immediately and upon written notice to the Charterer if any
Event of Loss occurs and upon such termination the Charterer
shall pay the Owner on the earlier of (i) the receipt of any
insurance payable in respect of such Event of Loss and (ii) 60
days thereafter, the Stipulated Loss Value of the Vessel set
forth on Schedule D as of the Payment Date preceding the
occurrence of such Event of Loss plus any past due Hire, plus
the sum of the per diem of the Basic Hire due on the next
Payment Date, for each day during the period from the next
preceding Payment Date to the date of such Event of Loss (unless
the Event of Loss shall occur on a Payment Date, in which case,
such payment shall be equal to the Stipulated Loss Value on such
Payment Date plus any Hire due on such Payment Date), in each
case, together with interest thereon computed from the date of
such Event of Loss to the date of actual payment at a rate per
annum equal to the Overdue Rate. If the time of such loss be
uncertain, the loss shall be deemed to have occurred as of the
time at which communication from the Vessel was last heard. It
is expressly understood that the Charterer shall bear all risk
of any such loss.
(b) Each of the following events shall be an "Event of Default":
(i) the Charterer shall fail to pay the Owner any amounts due
and payable hereunder when due; or
(ii) the Charterer shall fail to perform any of its obligations
under Article 5, Sections 7.3, 10.1, 11.1(a), 11.6, 11.7,
11.8, 12.5, 13.4, or 14.6, Article 15, Section 17.3 or
Article 18 hereof or any other obligation as to which the
Charterer is specifically accorded elsewhere herein or
otherwise any notice and/or grace period in which to
perform such obligation or to cure such breach thereof or
default therein and such notice shall have been given
and/or such grace period shall have expired without cure
of such failure; or
(iii) any Obligor shall fail to perform any of its obligations
hereunder or under any Charter Document (other than those
specified in Section 3.3(a) or (b)(i)) which is not cured
within the lesser of (A) 10 days or (B) the then remaining
term of the Charter Period of the occurrence thereof; or
(iv) any representation, warranty or statement made or deemed
made by any Obligor in any Charter Document or information
furnished by or on behalf of any Obligor in any
instrument, certificate or other document delivered by or
on behalf of any Obligor shall be untrue in any material
respect on the date made or deemed made; or
(v) (i) any Obligor shall fail to pay any principal of or
premium or interest on any Debt (excluding Debt under this
Charter) of such Obligor under which any aggregate amount
of at least $1,000,000 is outstanding or committed, when
the same becomes due and payable, and such failure shall
continue after any applicable grace period; or (ii) any
other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and
shall continue after any applicable grace period, if the
effect of such event or condition results in the
acceleration of, the maturity of such Debt; or any such
Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled
required prepayment), redeemed, purchased or defeased, or
an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case, prior to the
stated maturity thereof; or legal action shall be taken
with respect to such other event (including, but not
limited to, the commencement of proceedings seeking
specific performance or injunctive or other equitable
relief); or
(vi) any Obligor shall generally not pay its debts as such
debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or voluntarily or
involuntarily dissolves or is dissolved, or terminates or
is terminated; or any proceeding shall be instituted by or
against such Person or any of its subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or
its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for
it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of 30 days, or any of
the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or
the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of
its property) shall occur; or any such Person or any of
its subsidiaries shall take any corporate or other
organizational action to authorize any of the actions set
forth above in this subsection (vi); provided, however,
that nothing contained in this Section 3.3(b)(vi) or
otherwise shall be deemed to limit, restrict or prohibit
Owner in any manner from intervening in any such
proceeding described above and enforcing any of its rights
and remedies whether under this Charter or any of the
Charter Documents, at law, in admiralty or equity or
otherwise; or
(vii) a judgment or order for the payment of money in the amount
of at least $1,000,000 or more shall be rendered against
any Obligor and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of 10 consecutive
days during which a stay of enforcement of such judgment
or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(viii) any provision of this Charter or any Charter Document shall
at any time for any reason cease to be valid and binding
on any Obligor, or shall be declared to be null and void,
or the validity or enforceability thereof shall be
contested by any Obligor, or any Obligor shall deny that
it has any or further liability or obligation under
this Charter or any Charter Document; or
(ix) failure of any Obligor to comply with, or to incur any
liability, whether fixed or contingent, under or pursuant
to, any statute, law, regulation or other governmental
requirement to which such Obligor is subject, including
but not limited to ERISA, the Oil Pollution Act of 1990
("OPA") and any other environmental, health or safety law
or regulation, in each case, which might reasonably be
expected to have a material adverse effect on the
condition (financial and otherwise), business prospects or
the ability of such Obligor to perform its obligations
under the Charter Documents; or
(x) any Lien securing the Obligations shall fail to be
perfected, valid or enforceable, or any material adverse
effect shall occur respecting the value or suitability as
collateral of any property encumbered by such Lien (unless
the Charterer shall have provided Substitute Collateral in
accordance with Section 12.5(c)), including, without
limitation, any levy, attachment or seizure thereof or,
subject to Section 12.5, the Lien securing the Obligations
under the Mortgage shall fail to be (A) at least a second
priority preferred ship mortgage (subject only to the
First Mortgage (as defined in the Mortgage) at any time on
or before December 31, 1997 or (B) a first priority
preferred ship mortgage at any time after December 31,
1997; or
(xi) the Upgrade Completion shall not occur on or before the
date that is 150 calendar days after the date the Vessel
shall have been delivered to the Shipyard in connection
with the Upgrade Program; or
(xii) an Upgrade Default shall occur and be continuing; or
(xiii) existing Drilling Contracts on the property subject to the
Mortgage or the Additional Collateral, as applicable, fail
to terminate on or before the earlier of (A) June 30,
1996 or (B) the occurrence of an Event of Loss; or
(xiv) an Event of Default under any of the Safe Harbor Lease
Documents shall occur or the Charterer or any member of
the Charterer Group shall fail to pay any tax
indemnification payment under the Safe Harbor Lease
Documents when due.
3.4 Remedies
Upon the occurrence of any Event of Default and at any time thereafter
so long as the same shall be continuing, the Owner may, at its option,
declare this Charter to be in default; and at any time thereafter, the
Owner may do, and the Charterer shall comply with, one or more of the
following, as the Owner in its sole discretion shall elect:
(a) Upon written demand (which demand shall have the effect of
terminating all of the Charterer's rights to use or possess the
Vessel or act as agent under the Upgrade Program), the Owner may
cause the Charterer to, and the Charterer hereby agrees that it
will, at the Charterer's sole cost and expense, promptly
redeliver the Vessel, or cause the Vessel to be redelivered, to
the Owner with all reasonable dispatch and in the same manner
and in the same condition as if the Vessel were being
redelivered at the expiration of the Charter Period in
accordance with all of the provisions of Section 3.5, and all
obligations of the Charterer under said Section shall apply to
such redelivery; or the Owner or its agent, at the Owner's
option, without further notice, may, but shall be under no
obligation to, retake the Vessel wherever found, whether upon
the high seas or at any port, harbor or other place and
irrespective of whether the Charterer, any subcharterer or any
other person may be in possession of the Vessel, all without
prior demand and without legal process, and for that purpose the
Owner or its agent may enter upon any dock, pier or other
premises where the Vessel may be and may take possession
thereof, without the Owner or its agent incurring any liability
by reason of such retaking, whether for the restoration of
damage to property caused by such retaking or for damages of any
kind to any Person for or with respect to any cargo carried or
to be carried by the Vessel or for any other reason.
Henceforth, the Owner shall hold, possess and enjoy the Vessel,
free and clear of any right of the Charterer or its successors
or assigns to possess or use the Vessel for any reason
whatsoever. The exercise by the Owner of its remedies under
this paragraph (a) shall be without prejudice, and in addition,
to any of the Owner's other remedies referred to in this Charter
or any of the other Charter Documents or at law, in admiralty or
equity.
(b) The Owner, by written notice to the Charterer specifying a
payment date not less than 10 days, nor more than 30 days, after
the date of such notice, may require the Charterer to pay to the
Owner, and the Charterer hereby agrees that it will pay to the
Owner, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty
and in lieu of any further Basic Hire payments hereunder, an
amount equal to all unpaid Basic Hire payable on each Payment
Date occurring on or before the payment date specified in such
notice, plus the Stipulated Loss Value computed as of the
Payment Date preceding the payment date specified in such notice
plus the sum of the per diem of the Basic Hire due on the next
Payment Date for each day during the period from the next
preceding Payment Date to the date of such Event of Loss (or as
of such payment date specified in such notice if such payment
date specified in such notice is a Payment Date), together with
interest on such amounts at the Overdue Rate for the period, if
any, from the Payment Date as of which such Stipulated Loss
Value is calculated to and including the date of actual payment.
Upon such payment of liquidated damages, the Owner shall pay
over to the Charterer the net proceeds of any sale, charter or
other disposition of the Vessel as and when received but only
after deducting all costs and expenses whatsoever incurred by
the Owner in connection therewith, to the extent such net
proceeds do not exceed the amount of such Stipulated Loss Value
actually so paid. Nothing contained in the preceding sentence
or otherwise shall require the Owner to sell, charter or
otherwise dispose of the Vessel at any time.
(c) The Owner may exercise any other right or remedy that may be
available to it under applicable law, in equity or admiralty or
proceed by appropriate court action to enforce the terms of this
Charter or to recover damages for the breach hereof or to
terminate this Charter.
(d) The Owner or its agent may sell the Vessel at public or private
sale, with or without notice to the Charterer, advertisement or
publication, as the Owner may determine, or otherwise may
dispose of, hold, possess, use, operate, charter (whether for a
period greater or less than the balance of what would have been
the Charter Period in the absence of the termination of the
Charterer's rights to the Vessel) to others or keep idle the
Vessel, all on such terms and conditions and at such place or
places as the Owner may determine and all free and clear of any
rights of the Charterer and of any claim of the Charterer in
admiralty, in equity, at law or by statute, whether for loss or
damage or otherwise, and without any duty to the Charterer
except to the extent provided in paragraph (b) above. The
Charterer and the Owner agree that 10 days' written notice of
the sale to be made by the Owner or its designee or after the
time in which a private sale shall occur is commercially
reasonable notice for all purposes.
In addition, the Charterer shall be liable for any and all
Supplemental Hire payable hereunder before, during or after the
exercise of any of the foregoing remedies and for all insurance
premiums and all demurrage, docking and anchorage charges and all
legal fees and any other costs and expenses whatsoever incurred by the
Owner or any Investor by reason of the occurrence of any Event of
Default or by reason of the exercise by the Owner of any right or
remedy hereunder, including, without limitation, any costs and
expenses incurred by the Owner in connection with any retaking of the
Vessel or, upon the redelivery or retaking of the Vessel in accordance
with this Section 3.4, the placing of the Vessel in the condition
required by and otherwise complying with the terms of Section 3.5
hereof. No right or remedy referred to in this Section 3.4 is
intended to be exclusive, but each shall be cumulative and is in
addition to, and may be exercised concurrently with, any other right
or remedy which is referred to in this Section 3.4 or which may
otherwise be available to the Owner at law, in equity or in admiralty,
including without limitation the right to terminate this Charter.
There shall be deducted from the aggregate amount so recoverable by
the Owner, the net balance, if any, remaining of any monies held by
the Owner which would have been required by the terms hereof to have
been paid to the Charterer but for the occurrence of an Event of
Default. The rights of the Owner and the obligations of the Charterer
under this Section 3.4 shall be effective and enforceable regardless
of the pendency of any proceeding which has or might have the effect
of preventing the Owner or the Charterer from complying with the terms
of this Charter. No express or implied waiver by the Owner of any
Event of Default shall in any way be, or be construed to be, a waiver
of any further or subsequent Event of Default. To the extent
permitted by applicable law, the Charterer hereby waives any rights
now or hereafter conferred by statute or otherwise which may require
the Owner to sell, charter or otherwise use the Vessel in mitigation
of the Owner's damages.
3.5 Redelivery of the Vessel
Upon termination of this Charter, the Charterer shall, at its sole
cost and expense not to exceed $2,500,000 as Escalated, redeliver the
Vessel to the Owner at an anchorage of the Owner's choice. The
Charterer shall notify the Owner in writing at least 360 days prior to
the expiration of the Charter Period of the location in which the
Vessel will be operating at the expiration of the Charter Period. The
Charterer agrees that at the time of such redelivery the Vessel shall
be free and clear of all Liens (other than Owner Liens), shall be
entitled to and shall have the classification and rating required by
Section 8.1, with no requirements, specifications or recommendations
of the American Bureau of Shipping or of any governmental agency or
department unfulfilled and with all required certificates in effect,
shall be in compliance with all laws, conventions, treaties and
customs and rules and regulations issued thereunder or applicable in
any way to the Vessel or any use or operation thereof, shall be free
of any insignia of the Charterer or others, shall be charter free,
cargo free, safely afloat, securely moored, free of charge and be in
the same good order and condition as described in the third sentence
of Section 3.2, but with the Upgrade Program completed and as required
by Section 8.1, ordinary wear and tear excepted; provided however,
that in the event that the Owner elects not to exercise its option to
purchase Severables acquired after the Delivery Date pursuant to
Section 9.4, the Charterer shall redeliver the Vessel to the Owner
with Severables comparable to the Severables aboard the Vessel when
the Vessel was delivered to the Charterer pursuant to Section 3.2.
Any Coast Guard certificates required to be issued annually with
respect to the Vessel shall have been issued within 12 months of the
date of redelivery of the Vessel. At the time and place of redelivery
of the Vessel, the Charterer shall also deliver to the Owner all
documentation, plans, drawings, specifications, logbooks,
classification and inspection, records, operating manuals, records of
modification, overhaul, use and/or maintenance and other warranties
and documents then in its possession or control which were furnished
by the manufacturers or builders of the Vessel or the Upgrade Program
or any supplier of equipment on the Vessel or otherwise maintained by
the Charterer. Upon redelivery of the Vessel hereunder, the
Charterer, if requested in writing by the Owner, will arrange for, at
the Charterer's cost and expense, docking or appropriate anchorage or
storage facilities for the Vessel for a period not exceeding 150 days,
including, but not limited to, any crew, staffing, materials, fuel or
other costs or expenses incurred to stack the Vessel with full marine
and maintenance crews.
3.6 Survey of the Vessel at End of Charter Period
At least 120 days before redelivery of the Vessel pursuant to Section
3.5, but sufficiently in advance of such redelivery date to permit any
needed repairs to be completed by such redelivery date, a joint survey
shall be made by the Charterer and the Owner (with drydocking or
underwater survey in lieu of drydocking and bottom painting, unless
the Owner shall otherwise agree in writing) to determine the condition
and fitness of the Vessel, during which survey the Vessel's tanks
shall be gas-freed and the Vessel's engines and boilers opened for
inspection; the redelivery survey shall meet all requirements of the
next special survey of the Vessel, provided that if a special survey
of the Vessel has been made, pursuant to the provisions of Article 8,
within 30 months prior to such redelivery, the records of such special
survey shall be taken into account in determining the scope of the
joint survey required pursuant to this Section 3.6. If requested by
the Owner, a surveyor from the American Bureau of Shipping shall be
present and the Charterer shall permit such surveyor to examine all
areas of hull and items of machinery and other parts of the Vessel.
The Charterer will pay for the costs of such survey, drydocking or
underwater survey in lieu of drydocking and bottom painting and the
Charterer shall notify the Owner at least 10 days in advance of the
time and place of such drydocking or underwater survey in lieu of
drydocking, bottom painting and survey. The Charterer, at its sole
cost and expense, will fully correct and repair any condition
disclosed by such survey to the extent necessary to cause the Vessel,
on or before the date specified for redelivery, to comply with all of
the terms of Section 8.1. The term of the Charter Period shall be
extended for any period necessary (a) so as to permit the survey
described in this Section 3.6 to occur at least 120 days before
redelivery of the Vessel pursuant to Section 3.5 whether as a result
of this Vessel's use in completing a Drilling Contract in progress
under Section 3.1(b) or otherwise; and (b) to make such repairs.
During such extension period, if any, all of the obligations of the
Charterer under this Charter applicable during the Charter Period
shall continue in respect of such extension period. Upon redelivery
of the Vessel under this or the preceding paragraph, the Charterer, if
requested in writing by the Owner, will provide docking or appropriate
anchorage or storage facilities for the Vessel (if available at the
designated port) for a period not exceeding 150 days at the
Charterer's cost and expense, including, but not limited to, any crew,
staffing, materials, fuels or other cost or expense to stack the
Vessel with full marine and maintenance crews.
3.7 Purchase Option.
No more than 540, but no less than 360 days prior to the Expiration
Date, the Charterer may, so long as no Default or Event of Default has
occurred and is continuing, give the Owner irrevocable written notice
(the "Expiration Date Election Notice") that the Charterer elects to
exercise its option to purchase the Vessel. If the Charterer elects
to exercise such option, then the Charterer shall pay to the Owner on
the Expiration Date an amount in immediately available funds equal to
the Purchase Option Price and, upon receipt of such amount plus all
other amounts payable under this Charter and the other Charter
Documents, the Owner shall transfer all of the Owner's right, title
and interest in the Vessel, such transfer shall be "AS IS," "WHERE
IS," without recourse and without any representation or warranty of
any kind or nature whatsoever, either express or implied (except for
the absence of Liens arising as a result of claims against the Owner
for which the Owner is not entitled to indemnification from the
Charterer or any Guarantor or the payment or discharge of which is not
the obligation of the Charterer or any Guarantor), in the Vessel's
then-current physical condition and without any other representation
or warranty on the part of, or recourse to, the Owner.
3.8 Determination of Purchase Option Price
During the period from the delivery of the Expiration Date Election
Notice to the Owner until 210 days prior to the Sale Date, the
Charterer and the Owner may mutually agree on the Fair Market Sale
Value of the Vessel as of the Sale Date, and if the Charterer and the
Owner fail to so agree, such Fair Market Sale Value shall be
determined not less than 90 days before the Sale Date by application
of the Appraisal Procedure.
ARTICLE 4
NATURE OF COMPENSATION
4.1 Absolute Obligation
The obligation of the Charterer to pay to the Owner the fees, rates,
hires, indemnities and reimbursements specified in this Charter shall
be absolute and unconditional and shall not be affected by any
circumstance whatsoever, and the Charterer waives (and agrees not to
allege or pursue) any right to any such defense, including without
limitation, (a) any setoff, counterclaim, abatement, reduction,
recoupment, defense, or other right that the Charterer may have
against the Owner or any other Person, firm, company, or entity for
any reason whatsoever; (b) any unavailability of the Vessel after its
delivery to the Charterer for any reason; (c) any damage, loss or
destruction of or damage to the Vessel or interruption, restriction,
interference, or cessation in the use or possession thereof by the
Charterer for any reason whatsoever, at whatever time and of whatever
duration; (d) any confiscation, expropriation, nationalization,
requisition, seizure, inability to export, deprivation, or other
taking of title to or possession or use of the Vessel or any part
thereof by any government or governmental authority or otherwise; (e)
any restriction on possession or use of the Vessel; (f) the
interference with or prohibition of the Charterer's possession or use
of the Vessel; (g) any invalidity or unenforceability or lack of due
authorization or other infirmity of this Charter or the lack of right,
power or authority of any Obligor or the Owner to enter into this
Charter or any Charter Document; (h) any default by the Owner; (i) any
defect in the title, condition, quality or fitness for a particular
purpose of the Vessel or other property or service provided hereunder;
(j) any amendment or modification of or supplement to the Charter
Documents, any agreements relating to any thereof or any other
instrument or agreement applicable to the Vessel or any part thereof,
or any assignment or transfer of any thereof, or any furnishing or
acceptance of additional security, or any release of any security, or
any failure or inability to perfect any security; (k) any failure on
the part of the Owner, the Owner Group or any Investor or any other
Person to perform or comply with any term of any instrument or
agreement; (l) any waiver, consent, change, extension, indulgence or
other action or inaction under or in respect of any such instrument or
agreement or any exercise or nonexercise of any right, remedy, power
or privilege under or in respect of any such instrument or agreement
or this Charter; (m) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation, or similar
proceeding with respect to any Obligor, the Owner, the Owner Group or
any Investor, or their respective properties or creditors, or any
action taken by any trustee or receiver or by any court in any such
proceeding, including, without limitation, any termination or
rejection of this Charter by any court or any trustee, receiver or
liquidating agent of any Obligor, the Owner Group, any Investor, or
the Owner or of any of their respective properties in connection with
any such proceeding; (n) any assignment or other transfer of this
Charter by the Charterer or the Owner or any lien, charge or
encumbrance on or affecting the Charterer's estate in, or any
subchartering of, all or any part of the Vessel; (o) any libel,
attachment, levy, detention, sequestration or taking into custody of
the Vessel, or any interruption or prevention of or restriction on or
interference with the use or possession of the Vessel; (p) any act,
omission or breach on the part of the Owner under this Charter or
under any other agreement at any time existing among the Owner or any
Obligor or under any other law, governmental regulation or other
agreement applicable to such Persons or the Vessel; (q) any claim as a
result of any other dealing between the Owner and any Obligor; (r) any
ineligibility of the Vessel, or any denial of the Vessel's right, to
engage in any trade or activity; (s) any failure to obtain any
required governmental consent for any transfer of rights or title
required to be made by the Owner under this Charter; (t) any
ineligibility of the Vessel for documentation under the laws of any
jurisdiction; (u) the recovery of any judgment against any Person or
any action to enforce the same; (v) any defect in the seaworthiness,
condition, design, operation or fitness for use or other
characteristics of the Vessel; (w) any change in the ownership, direct
or indirect, of the capital stock of the Owner or any of the Obligors;
or (x) any other cause, circumstance, or happening, whether similar or
dissimilar to the foregoing, any present or future law to the contrary
notwithstanding and whether or not any Obligor could have foreseen or
shall have notice or knowledge of any of the foregoing. Except as
specifically provided herein, the Charterer hereby waives any and all
rights that it may now have or which at any time hereafter may be
conferred upon it, by statute, at law, in admiralty or equity or
otherwise, to terminate, cancel, quit or surrender this Charter.
All payments hereunder shall be final and, once paid, be fully and
finally earned and nonrefundable, and the Charterer shall not seek to
recover all or any part of such payment from the Owner for any reason
whatsoever.
The Charterer shall remain obligated under this Charter in accordance
with its terms and shall not take any action to terminate, rescind or
avoid this Charter, notwithstanding any action for bankruptcy,
insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting the Owner, any governmental authority or any
other Person, or any action with respect to this Charter or any
Charter Document which may be taken by any trustee, receiver or
liquidator of the Owner, any governmental authority or any other
Person or by any court with respect to the Owner or any governmental
authority. The Charterer hereby waives all right (i) to terminate or
surrender this Charter or (ii) to avail itself of any abatement,
suspension, deferment, reduction, setoff, counterclaim or defense with
respect to any amount payable hereunder. The Charterer shall remain
obligated under this Charter in accordance with its terms and the
Charterer hereby waives any and all rights now or hereafter conferred
by statute, at law, in admiralty or equity or otherwise to limit or
modify any of the Owner's rights or remedies or any of the Charterer's
rights, remedies, obligations or liabilities as described in this
Charter or any Charter Document (such waiver to include, without
limitation, any and all rights and remedies against a lessor under
Article 2A of the UCC or to avoid strict compliance with its
obligations under this Charter).
4.2 Net Charter
This Charter is a net Charter and it is intended that the Charterer
shall pay all costs, charges, fees, assessments, expenses, duties and
taxes of every character incurred in connection with the delivery,
storage, use, possession, operation, maintenance, repair, chartering,
recovery, retaking, and return of the Vessel, including without
limitation those described elsewhere in this Charter. The parties
intend that the obligations of the Charterer hereunder shall be
covenants and agreements that are separate and independent of the
Owner's obligations hereunder or hereafter arising or existing and
shall continue unaffected.
ARTICLE 5
UPGRADE PROGRAM
5.1 Scope of Upgrade; Title to Upgrade
The Owner recognizes and agrees that the Charterer has entered into
the Upgrade Contract to provide for the upgrade of the Vessel in
accordance with the terms thereof and the other plans, schedules, and
specifications for the Upgrade Program set forth on Schedule B. The
Charterer shall implement the Upgrade Program as agent on behalf of
the Owner, subject to the terms and conditions of this Article 5 and
the Upgrade Program. The Charterer and the Owner agree that (a) the
Charterer will, in accordance with Section 5.9, pay for that portion
of the Upgrade Program that constitutes Upgrade Maintenance and shall
in accordance with Section 5.9 pay for and be reimbursed for that
portion of the Upgrade Program that constitutes Upgrade
Nonserverables. and shall pay for, own and have title to, that portion
of the Upgrade Program that constitutes Upgrade Severables, in each
case, subject to the Owner's rights under Sections 5.2 and 9.4 and (b)
the Owner will, in accordance with Sections 5.6 and 5.9, pay for, own,
and have title to, that portion of the Upgrade Program that
constitutes Upgrade Nonseverables and such Upgrade Nonseverables shall
be chartered to the Charterer in accordance with the terms and subject
to the conditions and requirements hereof and subject to the
Charterer's rights under Section 3.7.
5.2 Assignment of Rights Under Upgrade Program
The Charterer hereby assigns, transfers and sets over unto the Owner
(a) all of the Charterer's right, title and interest in and to all
agreements, including, without limitation, the Upgrade Contract,
entered into prior to the Delivery Date with any shipyard, contractor,
manufacturer, supplier or vendor relating to the Upgrade Program,
including, without limitation, any and all plans, specifications,
diagrams, designs or similar matters relating thereto (collectively,
the "Upgrade Agreements") and (b) all claims for damages in respect of
the Vessel arising as a result of any default by any such shipyard,
contractor, manufacturer, supplier or vendor under any such Upgrade
Agreements, including, without limitation, all claims arising under
any warranty and indemnity provisions contained therein, as well as
all claims arising thereunder. The Charterer shall at its sole cost
and expense xxxxx x xxxx to the Owner upon its rights in any property
acquired under the Upgrade Program as security for its obligations
hereunder pursuant to documentation in form and substance satisfactory
to the Owner.
5.3 Appointment of Upgrade Agent
The Owner hereby appoints the Charterer to act as the Owner's agent
for the implementation of the Upgrade Program in accordance with, and
subject to, the terms and conditions of this Article 5. If an Event
of Default or an Upgrade Default shall occur and be continuing, the
Owner may, by a written order, terminate such agency, direct the
Charterer to stop acting as such agent and, unless the Owner
determines otherwise, complete the Upgrade, without prejudice to any
other right or remedy the Owner may have against the Charterer or any
Person.
5.4 Upgrade Agent's Warranties
The Charterer acknowledges that the terms of the Upgrade Contract are
sufficient to have enabled it to determine the Upgrade Nonseverable
Cost, that the amount described in clause (i) of the definition of
Upgrade Nonseverable Cost is just and reasonable compensation for that
portion of the Upgrade that constitutes Upgrade Nonseverables, and
that the Upgrade Agreements are sufficient to enable the Contractor to
implement the Upgrade Program as described in Schedule B.
5.5 Upgrade Agent's Duties
Until the Charterer's agency is terminated pursuant to Section 5.3:
(a) The Charterer will administer the Upgrade Program as described
herein. The Charterer will be the Owner's representative until
final payment under the Upgrade Agreements is made.
(b) The Charterer will cause the Upgrade Program to be performed in
accordance with the plans, schedules and specifications of the
Upgrade Agreements and those described in Schedule B.
(c) The Charterer will visit the Shipyard at intervals appropriate
to the stage of construction to monitor the progress,
workmanship and quality of the Upgrade Program and to determine
whether the Upgrade Program is proceeding in accordance with the
terms of the Upgrade Agreements and the plans, specifications
and schedules set forth on Schedule B.
(d) The Charterer and the Owner will review and approve or take
other appropriate action upon the Contractor's submission of
shop drawings, product data and samples pursuant to the Upgrade
Contract, but only for conformance with the design concept of
the Upgrade Program and the information given in the Upgrade
Contract. The progress of the Upgrade Program shall not be
considered as having been delayed if such review occurs in a
timely fashion.
(e) The Charterer may make Change Orders to the extent provided in
Section 5.6.
(f) When the Charterer considers the Upgrade Program to be
substantially complete, it shall notify the Owner and the
Independent Engineer thereof and deliver to such Persons a list
of incomplete or unsatisfactory items with a schedule for their
completion. The Independent Engineer and/or the Owner will
conduct inspections to determine the accurateness and
completeness of the list and the projected date of Upgrade
Completion, and will receive and forward to the Owner for the
Owner's review written warranties and related documents required
by the Upgrade Contract and assembled by the Contractor.
(g) The Charterer may provide one or more representatives to assist,
at the Charterer's sole cost and expense, in carrying out the
Charterer's responsibilities at the Shipyard.
(h) The Charterer shall respond to all of the Contractor's requests
for interpretations of the plans and specifications, and other
inquiries regarding the Upgrade Program. The Charterer will
render in writing interpretations necessary for the proper
execution or progress of the Upgrade, within ten (10) business
days after receipt of the Contractor's requests and inquiries
and shall deliver a copy thereof to the Owner.
(i) The Charterer shall not enter into any Upgrade Agreement for the
supply of materials or services to the Vessel or Shipyard which
purports to grant a security interest or right of repossession
to any person or entity respecting the Upgrade or the Vessel or
Shipyard, or any portions thereof or chattels placed thereon.
5.6 Change Orders
(a) The Upgrade Contract, the Upgrade Program and the Upgrade
Nonseverable Cost may be changed only by Change Order. A Change
Order signed by the Owner shall indicate the Owner's agreement
therewith, including increases in the Upgrade Nonseverable Cost
in excess of $10,000,000.
(b) The Charterer may order or propose a Change Order within the
general scope of the Upgrade Program consisting of additions,
deletions or other revisions and the Upgrade Nonseverable Cost
shall be adjusted accordingly; provided, however, no Change
Order may increase the Upgrade Nonseverable Cost payable under
the Upgrade Agreements in respect of Upgrade Nonseverables in
excess of the aggregate amount of $10,000,000 without the prior
written approval of the Owner. The Charterer cannot authorize
payment for any extra work performed by the Contractor in
connection with the Upgrade Nonseverables unless such work is
expressly authorized in writing by the Charterer and, if
necessary, the Owner, and all other conditions contained herein
are fulfilled. All Change Orders shall be performed under the
applicable conditions of the Upgrade Agreements. The Charterer
shall deliver to the Owner and the Independent Engineer copies
of all Change Orders and amendments to the Upgrade Contract or
Upgrade Agreements.
(c) If the Charterer enters into a Change Order that allows the
Contractor to perform any such authorized extra work on an
actual cost plus basis, the Charterer shall require the
Contractor to furnish each week to the Charterer, duplicate
payroll sheets, material tickets, and a statement of slips for
all other charges, retaining a copy of each thereof, and
securing on each thereof the signature of the Charterer.
5.7 Independent Engineer
The Owner shall employ the Independent Engineer to advise the Owner
with respect to the design, workmanship and quality of the Upgrade
Program, the performance of work of the Charterer and the Contractor
under the Upgrade Program and this Charter, the review of Change
Orders, the delivery of the Reimbursement Certificate of Independent
Engineer and the Completion Certificate of Independent Engineer and
any other matters relating to the Vessel as the Owner may in its sole
discretion determine. The Charterer shall provide to the Independent
Engineer copies of all correspondence respecting the Upgrade Program
received from the Contractor or its subcontractors and shall permit
the Independent Engineer, the Owner and their representatives to have
access and inspect the Shipyard, the Vessel and the Charterer's
properties and to discuss its affairs, finances and accounts and other
matters respecting the Upgrade Program with any of the Charterer, the
Contractor or any of their respective employees, officers and other
representatives. The Charterer will cause the Independent Engineer to
have access to the Vessel at all times until the Upgrade Program is
complete.
5.8 Completion
The Upgrade Program shall be complete at the Upgrade Completion.
5.9 Payment
The Charterer shall pay directly to the Contractor all expenses of the
Upgrade Program and, upon fulfillment of the conditions set forth in
Section 5.10, the Owner shall reimburse the Charterer on each Upgrade
Payment Date in the maximum amounts and on the dates set forth below:
Date Amount
Delivery Date $2,500,000
March Payment Date $4,500,000
Upgrade Completion Date balance of Upgrade
Nonseverable Cost
5.10 Reimbursement Conditions
The Charterer shall have delivered to the Owner an appropriately
completed and duly executed Certificate for Reimbursement to which is
attached a bills paid affidavit and release of liens from the
Contractor and invoices, instruments and other documentation in form
and substance satisfactory to the Owner that the Charterer has paid
such costs and expenses under the Upgrade Agreements and, except on
the first Upgrade Payment Date, the Independent Engineer shall have
delivered to the Owner an appropriately completed and duly executed
Reimbursement Certificate of Independent Engineer.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of the Owner.
To induce the Charterer to enter into this Charter and to consummate
the transactions contemplated hereby, the Owner represents and
warrants to the Charterer that as of the date of execution of this
Charter:
(a) Organization and Good Standing. The Owner is a limited
liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) Title. The Owner has received whatever title to the Vessel that
was conveyed to the Owner pursuant to the MOA.
(c) Authority. The Owner has taken all action required by Delaware
law, and by the Limited Liability Company Agreement to authorize
the execution and delivery of this Charter. This Charter
constitutes the legal, valid and binding obligation of the
Owner, enforceable against the Owner in accordance with its
terms, subject to bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors'
rights and by general principles of equity. Neither the
execution and delivery of this Charter nor, on the Commencement
Date, will the consummation of the transactions by it in
accordance with the terms hereof: (i) violate or conflict with
any provision of the Limited Liability Company Agreement of the
Owner, or (ii) violate or conflict with any provision of any
law, rule, regulation, order, permit, certificate, writ,
judgment, injunction, decree, determination, award or other
decision of any court, government, government agency or
instrumentality, domestic or foreign, or arbitrator binding upon
the Owner, which violation or conflict is reasonably likely to
prevent the Owner's performance of its obligations hereunder.
Neither the execution and delivery of this Charter nor the
consummation of the transactions contemplated hereby will result
in a breach of, or constitute a default (or with notice or lapse
of time or both result in a breach of or constitute a default)
under or otherwise give any person the right to terminate any
mortgage, indenture, loan or credit agreement, lease, license,
contract or any other agreement or instrument to which the Owner
is a party or by which it or any of its properties is bound or
affected.
(d) EXCEPT AS EXPRESSLY SET OUT IN THIS SECTION 6.1, OWNER EXPRESSLY
DISCLAIMS ANY EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES,
INCLUDING WITHOUT LIMITATION, SEAWORTHINESS, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, OR WITH RESPECT TO PATENT
INFRINGEMENT, VALUE, USE, CONDITION, SUITABILITY, CLASS,
OPERATION, COMPLIANCE WITH LAWS, DESIGN, CONFORMANCE WITH
SPECIFICATIONS, OR ABSENCE OF DEFECTS, HIDDEN, PATENT, LATENT OR
OTHER.
6.2 Representations and Warranties of the Charterer.
To induce the Owner to enter into this Charter and to consummate the
transactions contemplated hereby, the Charterer represents and
warrants to the Owner that as of the date of execution of this
Charter:
(a) Organization and Good Standing. The Charterer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Oklahoma and is duly qualified or licensed and
in good standing as a foreign corporation in each other
jurisdiction in which it owns or leases any facility or property or
has any office, or in which the character of its business or
operations requires such qualification or licensing, in each case
related to the subject matter of this Charter or any of the Charter
Documents.
(b) Authority. The Charterer has taken all action required by law, its
Certificate of Incorporation, as amended, and its By-Laws to
authorize the execution and delivery of this Charter and each of
the Charter Documents to which it is a party. This Charter and
each of the Charter Documents to which it is a party constitute the
legal, valid and binding obligations of the Charterer, enforceable
against the Charterer in accordance with their respective terms,
subject to bankruptcy, insolvency or similar laws of general
application relating to the enforcement of creditors' rights and by
general principles of equity. Neither the execution and delivery
of this Charter or any of the Charter Documents, nor on the
Delivery Date, will the consummation of the transactions by it in
accordance with the terms hereof or thereof: (i) violate or
conflict with any provision of its Certificate of Incorporation or
By-Laws, (ii) violate or conflict with any provision of any law,
rule, regulation, order, permit, certificate, writ, judgment,
injunction, decree, determination, award or other decision of any
court, government, government agency or instrumentality, domestic
or foreign, or arbitrator binding upon it, or (iii) create any
conflicts or resulting liens or require any consents that the
Charterer has not obtained.
Neither the execution and delivery of this Charter and each of the
Charter Documents to which it is a party nor the consummation of
the transactions contemplated hereby or thereby will result in a
breach of, or constitute a default (or with notice or lapse of time
or both result in a breach of or constitute a default) under or
otherwise give any person the right to terminate any mortgage,
indenture, loan or credit agreement, lease, license, contract or
any agreement or instrument to which the Charterer is a party or by
which it or any of its properties is bound or affected.
(c) Litigation. There is no action, suit, proceeding, claim or
investigation pending or, to the best of the Charterer's knowledge
after due and reasonable inquiry, threatened against or affecting
the Charterer or any of its properties or related to the subject
matter of this Charter or any of the Charter Documents before any
court, government agency or regulatory authority (federal, state,
local or foreign) that questions the validity or enforceability of
this Charter or any Charter Document or is reasonably likely to
impair its ability to perform its obligations under this Charter or
any of the Charter Documents or to cause a material adverse effect
on the business, financial condition or prospects of the Charterer.
There are no orders, writs, judgments, stipulations, injunctions,
decrees, determinations, awards or other decisions of any court,
government or governmental agency or instrumentality, domestic or
foreign, or any arbitrator outstanding against the Charterer having
or likely to have any such effect.
(d) No Defaults. No event or condition has occurred and is continuing
that constitutes, or with the lapse of time or the giving of notice
or both, would constitute, an Event of Default by the Charterer or
any other Member of the Charterer Group, as the case may be, under
this Charter or any of the Charter Documents or a default or by the
Charterer or any other Member of the Charterer Group under any
indenture, trust, deed, loan agreement, lease other instrument or
contract, agreement, instrument or obligation (i) under which any
such Person pays, receives, borrows, lends, or is obligated or
entitled to pay, receive, borrow or lend, consideration in excess
of $1,000,000 to which it is a party or by which it is bound or
affected, or (ii) which is reasonably likely to have a material
adverse effect on the business, financial condition or prospects of
the Charterer or its ability to perform its obligations under the
Charter.
(e) Obligations and Liens. Except as disclosed in writing to, and
specifically consented to in writing by, the Owner, the Charterer
has no outstanding obligations, or Liens on its properties, for
unpaid Taxes other than Taxes incurred in the ordinary course of
business, and in existence for not more than 30 days and which are
not overdue unless such Taxes are, in the Owner's reasonable
judgment, being contested in good faith and by appropriate Persons
and proceedings.
(f) Government Regulations. The Charterer is not in violation of and
is not alleged to be in violation of any law, rule, regulation,
order, permit, certificate, writ, judgment, stipulation, injunction
decree, determination, award or decision of any court, government,
or governmental agency or instrumentality, domestic or foreign, or
arbitrator binding upon it, which violation or alleged violation is
reasonably likely to have a material adverse effect on the business,
financial condition or prospects of the Charterer or its ability to
perform its obligations under this Charter or any of the Charter
Documents.
(g) No Labor Unrest. There are no strikes or other significant labor
disputes in progress or pending or, to the best of the Charterer's
knowledge after due and reasonable inquiry, threatened against or
affecting the Charterer.
(h) Pollution Regulations. Neither the Charterer nor any member of the
Charterer Group is the subject of any actual or threatened
environmental, health or safety investigation or enforcement
proceeding related to its operations or business or the subject
matter of this Charter or any of the Charter Documents. To the
best of the Charterer's knowledge after due and reasonable inquiry,
the Charterer is in compliance with all applicable laws and
regulations relating to pollution control and environmental, health
and safety matters in all jurisdictions in which the Charterer is
doing business.
(i) Providing of Information. All information that the Charterer at any
time furnishes the Owner for use in any statement, application or
other filing provided for in this Charter or any of the Charter
Documents, does or shall (as the case may be) meet all
requirements of applicable laws, rules and regulations and does
not or shall not (as the case may be) as of the date prepared or
delivered to the Owner contain any statement which is false or
misleading with respect to any material fact and does not or shall
not (as the case may be) as of the date prepared or delivered to
the Owner omit any material fact required to be stated therein or
necessary in order to make such information not false or misleading
for the purpose for which such information was furnished and no
correction of any information or omission that is no longer true
and correct in all material respects that has not been made need be
made or updated in order to make such information, taken as a
whole, not false or misleading in any material respect. For
purposes of this Section 6.2(i), "information" includes, without
limitation, all information contained in the data sheets,
projections, pro forma sources and uses, the Drilling Contracts,
the "X.X. Xxxxx, Xx." 1,000 Meter Water Depth Upgrade Shipyard
Specification, Rev. 5, dated October 21, 1995 by X.X. Xxxxxxx,
Project Engineer, the Enserch-Green Canyon Analysis, dated
September 11, 1995 and the Reading & Xxxxx Corporation/GATX Due
Diligence Confidential Binder, dated July 20, 1995, in each case as
provided to the Investors prior to the date hereof.
Each audited income statement, balance sheet and statement of
operation and cash flows dated as of December 31, 1994 and for the
fiscal year then ended and the unaudited income statement, balance
sheet and statement of operation and cash flows dated as of
September 30, 1995 and for the nine months then ended were prepared
in accordance with generally accepted accounting principles,
consistently applied, are true, complete and correct, and fairly
present the financial condition, the results of operations and
cash flows for Reading & Xxxxx and its consolidated subsidiaries,
including the Charterer, for the dates and periods stated; and
there is no outstanding Debt, lien or liability, whether direct or
contingent, that is material to the Charterer and not shown in such
financial statements.
(j) Insurance. The Charterer maintains insurance listed on Schedule
C and other insurance in a manner consistent with persons engaged
in the same or similar business and in compliance with this Charter.
(k) Certain Federal Laws and Requirements.
(i) The Charterer and its affiliates are exempt from the
Public Utility Holding Company Act of 1935.
(ii) None of the Charterer and its subsidiaries, whether
separately or together, is an investment company
under the Investment Company Act of 1940.
(iii) Except as expressly identified in this Charter,
neither the Charterer nor any affiliate of the
Charterer, as that term is defined in the Employee
Retirement Income Security Act of 1974, as amended,
and the rules and regulations thereunder ("ERISA"),
has any material unfunded ERISA liabilities.
(l) Permits and Authorizations. The Charterer has obtained all
governmental permits, authorizations, certificates and
approvals and given or made all notices and filings required
under applicable law for the execution, delivery and
performance of this Charter and the other Charter Documents and
its possession, use and operation of the Vessel. Without
limiting the generality of the foregoing, and more
specifically, the Charterer has and maintains all
environmental, health and safety permits necessary or
appropriate for its operations and all such permits are in good
standing and the Charterer is in compliance with all terms and
conditions of such permits and all applicable environmental,
health or safety requirements of law.
ARTICLE 7
USE AND OPERATION OF THE VESSEL
7.1 Use of the Vessel
The Charterer shall have the full use of the Vessel and may, subject to
the terms and conditions of this Charter, employ the Vessel as a
semisubmersible drilling unit throughout the world consistent with its
design capability, except that the Vessel shall not be used contrary to
and shall comply with (a) all applicable laws or regulations of any
governmental authority, treaties or conventions (including, but not
limited to, all environmental, health and safety laws) and (b) the terms
or policies of any insurance then required hereunder; and provided that,
with respect to the use or possession of the Vessel outside of the
territorial waters and/or the Outer Continental Shelf of the United
States, the Charterer shall give such indemnities suitable to the Owner
in an amount and form, and obtain and continue such additional insurance
coverage, in such amounts, having such terms and conditions and with such
carriers, as the Owner may reasonably require at any time or from time to
time in connection with the use or possession of the Vessel in any given
area outside the territorial waters and/or the Outer Continental Shelf of
the United States. The Charterer, in respect of the Vessel, shall at all
times comply with all applicable laws and regulations (including, but not
limited to, all environmental, health and safety laws), and with the
applicable provisions and conditions of all licenses, permits, consents
and approvals of any governmental authority.
7.2 Xxxxxxx, etc., of the Vessel
During the Charter Period, the Charterer shall have the exclusive
possession and control of the Vessel and shall man, victual, navigate and
operate, supply, fuel, maintain and repair the Vessel at its own expense
or by its own measurement and shall pay all other charges and expenses of
every kind and nature whatsoever incidental to the possession, use and
operation of the Vessel. During the Charter Period, the possession, use,
operation and maintenance of the Vessel shall be at the sole risk, cost
and expense of the Charterer until redelivery pursuant to the terms
hereof upon the termination or expiration of this Charter. As between
the Owner and the Charterer, the Offshore Installation Manager, officers
and crew of the Vessel and all other persons at any time on board the
Vessel shall be deemed to be engaged and employed exclusively by the
Charterer and shall be deemed to be and remain the Charterer's servants,
navigating and working the Vessel solely on behalf of and at the risk of
the Charterer and the Charterer shall hold each Indemnitee harmless from
any and all claims against it by, or as the result of any act or omission
of, any such Offshore Installation Manager, officer, member of the crew
or other person. The Charterer assumes and shall satisfy all costs and
liabilities incurred in connection with all salvage services received by
the Vessel.
7.3 Documentation of the Vessel
At or before the time of delivery of the Vessel to the Charterer
hereunder on the Delivery Date, the Charterer shall cause the Vessel to
be documented for foreign trade in the name of the Owner at the
Charterer's sole cost and expense under the laws and the flag of the
United States of America. Neither the Owner nor the Charterer (without
the prior written consent of the other) will do or suffer or permit to be
done anything which can or might change or injuriously affect the
documentation of the Vessel for foreign trade under the laws and flag of
the United States of America. The Charterer covenants and agrees that it
will not (a) cause or permit the Vessel to be operated in any manner
which could subject the Owner to any criminal penalty, or (b) operate or
locate the Vessel, or permit the Vessel to be operated or located, in any
area excluded from coverage from any insurance required by the provisions
of Article 15 or (c) unless there shall have been an actual or total loss
or agreed or compromised total loss of the Vessel, abandon the Vessel in
any foreign port. The Owner and the Charterer hereby respectively
represent that they are as of the date of execution of this Charter, and
covenant that they shall remain during the Charter Period, "citizens of
the United States" within the meaning of Section 2 of the Shipping Act,
1916, as amended. The Charterer agrees that the Vessel will be operated
solely in the domestic or foreign commerce of the United States. The
Charterer shall throughout the Charter Period maintain to the
satisfaction of the Owner at the Charterer's sole cost and expense such
documentation of the Vessel, and shall not do or suffer or permit to be
done anything which can or might change or injuriously affect the
documentation of the Vessel for foreign trade under the laws and the flag
of the United States or which would result in a violation of any law or
regulation of the United States applicable to a vessel owned by a citizen
of the United States, as defined in the Shipping Act, 1916.
7.4 General and Particular Average
Whenever necessary, average adjusters shall be appointed by the
Charterer, who shall, at the Charterer's sole cost and expense, attend to
the settlement and collection of both general and particular average
losses.
7.5 Site and Access
The Charterer will be responsible for selecting and mooring the Vessel in
a safe and prudent manner at a location in the Operating Area. The
Charterer will conduct sea bottom condition surveys acceptable to the
Owner where required by the Vessel's hull underwater surveyor at the
Charterer's sole cost and expense and will be responsible for
identifying, marking and clearing the location of all major impediments
or hazards to operations or causing same to be done. Removal of all
impediments or hazards shall be, as between Owner and the Charterer, at
the Charterer's sole cost and expense.
7.6 Owner Liability for Materials Furnished by the Charterer
Without limiting any indemnity provided by the Charterer, the Owner shall
not be liable for any loss or damage resulting from the use or possession
of equipment, materials, supplies or other items furnished by the
Charterer.
7.7 Environmental and Related Reporting and Inspection
The Charterer shall notify the Owner in writing within five days of the
Charterer's obtaining notice or knowledge thereof of any (a) notice of
claim that there has been a release or threatened release of any
contaminant into the environment from the Vessel or any equipment,
machinery or property related thereto; (b) notice of any investigation by
any governmental authority evaluating whether any remedial action is
necessary or appropriate to respond to any release or threatened release
of any contaminant into the environment from the Vessel or any equipment,
machinery or property related thereto; (c) notice that the Vessel or any
equipment, machinery or property related thereto is subject to an
environmental Lien; (d) the commencement or threat of any judicial,
administrative or other proceeding alleging a violation of any
environmental, health or safety requirements of law; or (e) any new or
proposed changes to any existing environmental, health or safety
requirement of law that could have a material adverse effect upon the use
or operations of the Vessel or the Charterer. The Charterer shall
provide from time to time documentation deemed adequate by the Owner
showing the Charterer's compliance with financial responsibility
requirements of all applicable environmental, health and safety laws.
7.8 Notice of Entry
The Charterer will provide written notice within ten (10) days of entry
of the Vessel into the jurisdictional waters of any foreign country or of
any state or territory of the United States other than Louisiana, Texas
and any other state in which the Owner has filed financing statements or
taken other action to perfect its Lien upon the equipment owned by the
Charterer and its Affiliates and used in connection with the Vessel.
ARTICLE 8
MAINTENANCE OF CONDITION AND CLASSIFICATION; REPAIRS
8.1 Maintenance of Classification
The Charterer shall at all times and, at its sole cost and expense,
procurement and risk (a) have exclusive control of the Vessel, (b)
maintain and preserve the Vessel in accordance with good commercial
maintenance practices, and keep the Vessel and her drilling and other
equipment in good running order, condition and repair, so that the Vessel
shall be tight, staunch, strong and well and sufficiently tackled,
appareled, furnished, equipped and in every respect seaworthy and in good
operating condition, and (to the extent that such prescribes a standard
of maintenance that exceeds the foregoing standard in any respect) in the
condition, running order and repair which equals or exceeds industry
standards and the condition, running order and repair of vessels and
their equipment owned by the Charterer of like kind and age, and, in
addition, shall
(i) cause the Vessel to be a semi-submersible drilling unit capable of
operating in water depths of up to 850 meters, before completion of
the Upgrade Program and 1,000 meters after completion of the
Upgrade Program and to have technical specifications,
characteristics and capabilities at least the substantial
equivalent of those set forth in Schedule A hereto and after
completion of the Upgrade Program as set forth in Schedule B; and
(ii) keep the Vessel in such condition as will entitle her, during the
Charter Period and at the date of redelivery to the Owner, to the
highest applicable classification and rating to which an existing
vessel of the same age and type can qualify under the then existing
rules and standards of the American Bureau of Shipping and shall
furnish to the Owner within 90 days after each anniversary of the
Delivery Date and at any other time upon the request of the Owner
true and correct photostatic copies of all certificates issued by
the American Bureau of Shipping evidencing the maintenance of such
classification.
(iii) The Vessel shall, and the Charterer covenants that it will, at all
times comply with all applicable safety, operational and
maintenance requirements of the United States Coast Guard and any
other United States, international or other authority and all laws,
treaties and conventions, and rules and regulations (including, but
not limited to, all environmental, health and safety laws) issued
thereby or applicable in any way to the Vessel or any use,
possession or operation thereof and shall have on board, when
required thereby, valid certificates and appropriate environmental,
health and safety permits showing compliance therewith. The
Charterer shall, at its expense, make all modifications and
alterations to the Vessel which may be necessary to comply with the
provisions of this Section 8.1.
8.2 Repair
The Vessel shall be repaired and overhauled by the Charterer and the
Charterer shall install, affix and attach replacement parts thereon, at
its sole cost and expense, in each case, whenever necessary to keep the
same in good condition, repair and working order in accordance with
Section 8.1 or as a result of any requirement hereof. The Vessel shall
likewise be drydocked or undergo an underwater survey in lieu of
drydocking, cleaned and bottom painted by the Charterer, at its expense,
whenever necessary, but in any event at least as often as necessary in
order to maintain the classification referred to in Section 8.1. The
Charterer shall, at its expense, promptly and duly comply with all
requirements of the applicable classification society including those
resulting from each special survey of the Vessel. The Charterer shall,
at its expense, promptly furnish the Owner with written information as to
any casualty involving any loss or damage to the Vessel in excess of
$500,000 and, upon request, all survey reports in connection therewith.
8.3 Drydocking or Underwater Survey in Lieu of Drydocking
The Charterer shall give the Owner notice of each proposed drydocking or
underwater survey in lieu of drydocking 20 days in advance if
practicable, otherwise as long in advance as may be practicable under the
circumstances. The Owner, any Investor or any authorized representative
of any thereof may at any time, upon reasonable notice at its own expense
(but after the occurrence of an Event of Default, at the Charterer's sole
cost and expense), inspect the Vessel at drydocking or underwater survey
in lieu of drydocking or otherwise, at any time or from time to time, and
inspect the Vessel's logs, but neither the Owner nor any Investor shall
have any duty to do so.
8.4 Required Survey
At the request of the Owner following any explosion, release accident,
storm, act of God or other event or incident that gives the Owner
reasonable concern for the physical condition and operating ability of
the Vessel and at the Charterer's expense, a qualified independent marine
surveyor or surveyors of recognized standing, acceptable to the Owner,
shall conduct a survey of the Vessel. For purpose of such surveys, the
Vessel need not be drydocked (or subjected to an underwater survey in
lieu of drydocking) unless required by customary survey practices for
drilling vessels of similar age, type and service. The Charterer shall
submit a detailed report of the independent marine surveyor to the Owner
promptly upon the completion of such survey, containing:
(a) the location of the Vessel at the time of inspection;
(b) the findings and recommendations of the independent marine surveyor
with respect to the condition of the Vessel; and
(c) the opinion of the independent marine surveyor as to whether the
Vessel has been maintained in accordance with the terms of this
Article 8.
ARTICLE 9
EQUIPMENT AND STORES
9.1 Fuel, etc.
The Owner acknowledges that such fuel, lubricating oil and unbroached
consumable stores as may be aboard the Vessel at the time of its delivery
to the Charterer will be the property of the Charterer.
9.2 Equipment, etc.
The Charterer shall have the use, without additional payment to the
Owner, of such equipment, outfit, furniture, furnishings, appliances,
spare or replacement parts and nonconsumable stores as shall have been on
board the Vessel on the Delivery Date. The same or their substantial
equivalent shall be returned to the Owner on redelivery or retaking of
the Vessel in the same good order and condition as received by the
Charterer on the Delivery Date, ordinary wear and tear excepted, and any
such items damaged or so worn in service as to be unfit for use, or used
as a spare part for replacement purposes, or lost or destroyed shall be
replaced by the Charterer with an identical or substantially equivalent
replacement item in at least as good working order and condition as those
of the replaced item when received by the Charterer on the Delivery Date
at or before redelivery of the Vessel. Such replacement, whenever made,
shall be deemed part of the "Vessel" for all purposes of, and its use or
possession shall be subject to the terms and conditions of, this Charter.
9.3 The Charterer's Additional Equipment, etc.
The Charterer shall at its own expense provide such additional equipment,
outfit, tools, replacement parts, crockery, linen, and other items not
included in inventories as provided in this Article 9 as may be required
in the operation of the Vessel, and such equipment, and other items,
shall become, on being placed on board the Vessel and without further
act, part of the Vessel and the property of the Owner for all purposes of
this Charter, provided that so long as no Default or Event of Default
shall have occurred and be continuing, any such equipment and other
items, so provided by the Charterer (and not required to be provided or
to have been provided by Section 9.2 or any other provision of this
Charter other than this Section 9.3) and capable of being removed without
causing damage to the Vessel may be removed by the Charterer at the
expiration of the Charter Period, and such equipment, and other items,
shall become, without further act, the property of the Charterer. At
least 90 days prior to delivery or retaking of the Vessel (or such lesser
time as may be available in connection with any retaking), the Charterer
shall give notice to the Owner of any such equipment or other items
leased from third parties, which the Charterer has elected not to remove,
and will furnish the Owner with copies of all leases and contracts
relating thereto, and the Owner may, within 30 days thereafter (or such
lesser time as may be applicable in connection with any retaking), elect
to retain all or any part of such equipment on board the Vessel subject
to any required approval of the lessors of such equipment. Upon
redelivery or retaking the Owner shall assume the rights, obligations and
liabilities of the lessee under such leases arising subsequent to
delivery or retaking in connection with any equipment that the Owner
elects to so retain. The Charterer shall at its sole cost and expense
remove from the Vessel any such leased equipment which the Owner does not
so elect to retain and shall cause to be repaired at its sole cost and
expense any damage to the Vessel or any part or property thereof
resulting in any manner from the Charterer's removal of any equipment.
By its acceptance of the Vessel upon delivery, the Charterer represents
and warrants to the Owner that there is on board the Vessel an inventory
of equipment, outfit, appliances, tools, replacement parts, nonconsumable
stores, crockery, linen, and other items, as in the reasonable judgment
and experience of the Charterer are necessary or appropriate to the
possession, use and operation of the Vessel and the Charterer hereby
covenants that, subject to Section 9.3, upon redelivery or retaking of
the Vessel by the Owner, such inventory, which may include replacement
items of equivalent value, shall be on board the Vessel.
9.4 Title to Improvements; Option to Purchase
Title to Nonseverables of the Vessel acquired after the Delivery Date
shall without further act vest in the Owner and shall be deemed to
constitute a part of the Vessel and be subject to this Charter. Title to
all Severables of the Vessel acquired after the Delivery Date (other than
Severables that replace or substitute for Severables that have been
provided by the Owner, the title to which shall vest in the Owner) shall
vest in the Charterer; provided, however, that the Charterer may not
remove any thereof from the Vessel (except to the extent subsequently
replaced or worn out) prior to the end of the Charter Period except that
the Charterer may, so long as no Default or Event of Default shall have
occurred and be continuing, remove at the Charterer's expense and risk
any such Severables, provided, further, that the Owner may elect to
purchase for cash any such Severables at the time of redelivery of the
Vessel to the Owner in accordance with any of the provisions of this
Charter. Contemporaneously with its delivery of the Expiration Date
Election Notice, the Charterer shall notify the Owner of the Severables
described above that it intends to remove. To exercise the election
referred to in the second proviso to the second preceding sentence of
this Section 9.4, the Owner shall give to the Charterer written notice of
its election to purchase on or prior to such redelivery. The purchase
price of such Severables shall be equal to the Fair Market Sale Value
thereof, as of the date of purchase as determined by mutual agreement or,
in the absence of such agreement, by the Appraisal Procedure. The
Charterer shall repair any damage caused by the removal of any Severables
to the Owner's reasonable satisfaction.
9.5 No Lease of Essential Severables
The Charterer shall not lease any Severables that are necessary or
appropriate for the use, possession or operation of the Vessel in
accordance with the terms and conditions of this Charter and the Charter
Documents but shall hold good and marketable title to all such Severables
that are, in accordance with industry practice, customarily owned by
drilling contractors engaged in businesses similar to the Charterer's
business, free and clear of all Liens other than Permitted Liens.
ARTICLE 10
THE CHARTERER'S CHANGES, ADDITIONS AND REPLACEMENTS
10.1 Structural Changes or Alterations; Installation of Equipment, etc.
Except as may be required by Article 8 or 9 or the Upgrade Program, the
Charterer shall not make any structural changes or alterations in the
Vessel, or any change, alteration, addition or improvement to the Vessel
that is Nonseverable (except for changes, alterations, additions or
improvements required to be made pursuant to applicable law), and shall
make no material changes or alterations in the Vessel's machinery or
boilers, unless and to the extent that, in each instance, (a) it first
secures written approval of the Owner (which may be withheld in the
Owner's sole discretion if such change or alteration would materially
change the type or character of the Vessel or would adversely affect
Owner's status as a lessor for federal income tax purposes, but otherwise
such approval shall not be unreasonably withheld) and (b) any such change
or alteration is made at the Charterer's expense and risk and does not
diminish the value, utility, useful life or seaworthiness of the Vessel
below the value, utility, useful life and seaworthiness of the Vessel
immediately prior to such change if the Vessel were then in the condition
and state of seaworthiness required to be maintained by the terms of this
Charter. Subject to the foregoing provision, the Charterer may install
any pumps, gear or equipment it may require in addition to that on board
the Vessel on delivery, provided that such installations are accomplished
at the Charterer's sole cost, expense and risk. Pumps, gear and
equipment so installed shall, without necessity of further act, become
part of the Vessel and the property of the Owner; provided that so long
as no Default or Event of Default shall have occurred and be continuing,
any such pumps, gear or equipment not required to be installed in order
to meet the requirements of Articles 8 and 9 and not installed as
replacements for property included in the Vessel on the date hereof are
subject to the Owner's option to purchase set forth in Section 9.4, and,
if not purchased by the Owner, may be removed (so long as such removal
can be accomplished without damage to the Vessel) by the Charterer, at
its own expense and risk, at any time during, or at the expiration of,
the Charter Period, whereupon such pumps, gear or equipment shall,
without necessity of further act, become the property of the Charterer.
10.2 Replacement of Parts
In addition to the permitted structural changes or alterations and the
addition of pumps, gear and equipment referred to in Section 10.1, the
Charterer may, in the ordinary course of maintenance, repair or overhaul
of the Vessel, remove any item of property (including any item referred
to in Section 9.2 or 9.3 constituting a part of the Vessel), provided
such item is replaced as promptly as possible by an item of property
which is free and clear of all Liens and is in as good operating
condition, working order and repair, and is as seaworthy as, and has a
value, useful life and utility at least equal to that of, the item of
property being replaced (including each item of equipment) and assuming
the Vessel is in the working order, condition and repair and state of
seaworthiness required by the terms of this Charter. Any item of
property so removed from the Vessel shall remain the property of the
Owner until replaced in accordance with the terms of the preceding
sentence, but shall then, without further act, become the property of the
Charterer but shall remain subject to the Owner's option to purchase set
forth in Section 9.4. Any such replacement item of property shall,
without further act, become the property of the Owner, deemed part of the
"Vessel" as defined herein for all purposes, and its use and possession
shall be subject to the terms and conditions hereof.
10.3 Vessel Markings
The Charterer shall not allow the name of any person, association or
corporation, other than as required hereby, to be placed on the Vessel
(other than the current name of "X. X. Xxxxx, Xx.") as a designation
which might be interpreted as indicating a claim of ownership thereof by
any person, association or corporation other than the Owner, but, for
purposes of identification, the Charterer shall have the right at its
sole cost and expense to paint the Vessel in its own colors, to install
and display its stack insignia or name, and to fly its own house flag, or
to utilize the colors, insignia, name or flag of any Affiliate of the
Charterer. The Charterer shall notify the Owner of each such choice of
colors, name, insignia or flag before making any such change.
ARTICLE 11
ADDITIONAL COVENANTS
11.1 General Covenants
From and after the date of execution of this Charter and until the
termination or expiration of this Charter, the Charterer shall:
(a) continue its business as presently conducted and maintain its
existence, rights and privileges;
(b) comply with its obligations set forth in this Charter and all
applicable laws (including, without limitation, all environmental,
health and safety laws); and
(c) maintain its books and records in compliance with generally
accepted accounting principles, consistently applied with such
adjustments or changes as to which the independent public
accountants referred to in Section 11.3 concur.
11.2 No Impairment
Notwithstanding any other contract or other claim of right, from and
after the date of execution of this Charter and until the termination or
expiration of this Charter, the Charterer Group shall not enter any
contract or agreement or perform or omit any act that in any way
materially limits or impairs, or the effect of which would be to
materially limit or impair, the ability of any member of the Charterer
Group to comply with and fulfill its obligations set forth in the Charter
Documents.
11.3 Financial Information
The Charterer will furnish, or cause to be furnished, to the Owner and
each Investor:
(a) within 45 days after the end of each of the first three fiscal
quarters during each fiscal year of Reading & Xxxxx, a consolidated
balance sheet of Reading & Xxxxx and its consolidated Subsidiaries
as of the close of each such fiscal quarter, together with a
consolidated income statement and consolidated statement of cash
flows of Reading & Xxxxx and such Subsidiaries for such fiscal
quarter, in each case setting forth in comparative form the
corresponding consolidated figures for the same period of the next
preceding fiscal year, all in reasonable detail and certified by
the chief financial officer of Reading & Xxxxx as being true,
complete and correct and as fairly presenting the financial
condition and the results of operations of the respective
corporations covered thereby, subject to year-end adjustments;
(b) within 90 days after the close of each fiscal year of Reading &
Xxxxx, (i) audited consolidated balance sheets of Reading & Xxxxx
and its consolidated Subsidiaries as of the close of such fiscal
year, together with consolidated profit and loss statements and
consolidated statements of cash flows of Reading & Xxxxx and such
Subsidiaries for such fiscal year, certified as being true,
complete and correct by Xxxxxx Xxxxxxxx & Co. or independent public
accountants of comparable national standing and reputation as
fairly presenting the consolidated financial position, results of
operations and cash flow of Reading & Xxxxx and such Subsidiaries
as of the end of such fiscal year and the consolidated results of
their operations for such fiscal year, and as fairly presenting in
all material respects in conformity with generally accepted
accounting principles applied on a basis consistent with prior
fiscal years with such adjustments or changes as to which such
independent public accountants concur; and (ii) an update of the
Contract Data Sheet previously submitted to the Investors
(including, but not limited to, rig and contract status and updated
annual budget) true, complete and correct and fairly presenting the
information contained therein as of the date and of its submission
to the Owner and the Investors);
(c) within 30 days after the filing thereof with the Securities and
Exchange Commission, a copy of each report, form or prospectus
filed by Reading & Xxxxx or any of its Subsidiaries with the
Securities and Exchange Commission, within three days of the
issuance of any press release or similar materials issued by
Reading & Xxxxx or any of its Subsidiaries; and
(d) such other financial or other information relating to the affairs
of Reading & Xxxxx and its consolidated Subsidiaries as the Owner
or any Investor may from time to time reasonably request.
11.4 Compliance Certificates
The Charterer shall furnish or cause to be furnished, to the Owner and
the Investors:
(a) within 45 days after the end of the first, second and third
quarterly accounting period in each fiscal year of Reading & Xxxxx,
and within 90 days after the end of each fiscal year of Reading &
Xxxxx, a certificate of the Chairman, the President or a Vice
President and the Chief Financial Officer of Reading &
Xxxxx stating that the Charterer and each Guarantor has performed
and complied with all the terms and provisions of this Charter or
the Guaranty and/or the other Charter Documents, as the case may
be, or, if there shall have been an Event of Default hereunder or
if any Guarantor shall be in default under the Guaranty, specifying
all such defaults and the nature thereof of which the signer of
such certificate may have notice or knowledge;
(b) within 90 days after the end of each fiscal year of Reading &
Xxxxx, a certificate of the independent public accountants
reporting on the financial statements for such year (i) stating
that their examination in connection with such financial statements
has been made in accordance with generally accepted auditing
standards and has included a review of the relevant terms of the
Guaranty, the Charter and the other Charter Documents, (ii) stating
whether or not such examination has disclosed the existence, during
or at the end of such year, of any default by the Charterer or any
Guarantor in the observance of any of the terms of the Guaranty,
this Charter or the other Charter Documents, insofar as they relate
to accounting matters, and, if such examination has disclosed any
such default, specifying all such defaults and the nature thereof
(it being understood that such accountants shall not be liable for
any failure to obtain knowledge of any such default which would not
be disclosed in the course of such examination), and (iii) stating
that they have reviewed the certificate of the officers of
Reading & Xxxxx, delivered with respect to such year pursuant to
paragraph (a) of this Section 11.4, and confirming the matters set
forth in such certificate;
(c) promptly after Reading & Xxxxx' receipt thereof, any audit
management letter or similar document submitted after the date
hereof by independent accountants in connection with each annual or
interim audit made by such accountants with respect to the
financial condition or affairs of Readings and Xxxxx or any
Guarantor; and
(d) as promptly as practicable (but in any event not later than 15
days) after any officer of the Charterer or any Guarantor obtains
notice or knowledge of the occurrence of any default (which has not
been remedied or waived) in the performance or observance of any of
the terms or provisions of the Guaranty or any of the other Charter
Documents or any Event of Default under the Charter, a certificate
of either the Chairman, the President or a Vice President and the
Chief Financial Officer of the Charterer or Guarantor (as the case
may be) describing the default or Event of Default and stating the
date of commencement thereof, what action the Charterer proposes to
take with respect thereto and the estimated date when it will be
remedied.
11.5 Further Assurances, etc.
The Charterer shall, at its sole cost and expense, promptly and duly
execute, acknowledge and deliver to the Owner such further documents,
instruments, financing and similar statements and assurances and take
such further action as the Owner may from time to time reasonably request
in order more effectively to carry out the intent and purpose of this
Charter or the Charter Documents, to establish and protect the rights and
remedies created or intended to be created in favor of the Owner
hereunder or under the Charter Documents, and to protect the title of the
Owner in and to the Vessel. The Charterer shall also promptly furnish to
the Owner such information as may be required to enable the Owner timely
to file any reports required to be filed by it as the owner under the
Charter or as the owner of the Vessel with any governmental authority.
11.6 Maintenance of Corporate Existence, etc.
The Charterer shall at all times maintain its corporate existence except
as permitted by Section 11.7 and will do or cause to be done all things
necessary to preserve and keep in full force and effect its rights
(charter and statutory) and franchises; provided that (a) it shall not be
required to preserve any right or franchise if its Board of Directors
shall determine that the preservation thereof is no longer desirable in
the conduct of its business and (b) the loss thereof does not materially
adversely affect or diminish the rights of the Owner or any Investor.
11.7 Conditions of Consolidation, Merger, etc.
The Charterer shall not consolidate with or merge into any other
corporation or convey, transfer, or lease, all or substantially all of
its assets as an entirety to any Person, unless each of the following
conditions is satisfied:
(a) The Person formed by such consolidation, merger or acquisition by
conveyance, transfer or lease all or substantially all the assets
of the Charterer as an entirety (the "Resulting Entity"), shall, at
the same time, by consolidation, merger, conveyance, transfer or
lease, acquire all or substantially all of the assets of the
Guarantor as entireties, shall be a citizen of the United States
within the meaning of the Shipping Act, 1916 or shall have obtained
the approval of the U.S. Maritime Administration for any such
consolidation, merger (and the Owner and the Investors, without any
expense to any of the foregoing, shall have received an opinion of
counsel selected by the Owner as to such citizenship of the United
States of such Person, in form and substance satisfactory in all
respects to the Owner), and shall be a corporation organized and
existing under the laws of one of the several states of the United
States of America or the District of Columbia. Such Person, prior
to or upon the occurrence of any such transaction, shall execute
and deliver to the Owner an agreement in form and substance
satisfactory to the Owner, containing an assumption by such Person
of the due and punctual performance and observance of each covenant
and condition of the Charter and the Charter Documents to be
performed or observed by the Charterer.
(b) Before and immediately after giving effect to such transaction, no
Default, or Event of Default shall have occurred and be continuing.
(c) After giving effect to such transaction, the rating of the long-
term unsecured senior debt or implied long-term unsecured senior
debt rating of the Resulting Entity shall be and shall be
maintained for six months thereafter at least "B+" by S&P and, if
rated by Xxxxx'x, at least "B1".
(d) The Charterer shall have delivered to the Owner and each Investor,
prior to or upon the occurrence of such transaction, a Certificate
of either the Chairman or the President and the Chief Financial
Officer of the Charterer, and an opinion of counsel satisfactory to
the Owner, each stating that such consolidation, merger,
conveyance, transfer or lease and the assumption agreement
described in Section 11.7(a) comply with this Section 11.7 and that
all conditions precedent relating to such transaction herein
provided for have been fully complied with.
Upon any consolidation or merger, or any conveyance, transfer or lease of
all or substantially all of the assets of the Charterer as an entirety in
accordance with this Section 11.7, the Resulting Entity shall succeed to,
and be substituted for, and any exercise of every right and power,
obligation and liability of, the Charterer under this Charter and the
Charter Documents with the same effect as if such Resulting Entity had
been named as the Charterer herein and therein. No such conveyance,
transfer or lease of all or substantially all of the assets of the
Charterer, as an entirety shall have the effect of releasing the
Charterer or any Guarantor, as the case may be, or any Resulting Entity
which shall theretofore have become such in the manner prescribed in this
Section 11.7 from its liability under this Charter, the Guaranty or the
Charter Documents. Nothing contained herein shall permit any charter,
subcharter or other arrangement for the use, operation or possession of
the Vessel except in compliance with the applicable provisions of this
Charter.
11.8 Indemnity of the Owner by Customers for Oil Pollution and Related
Environmental Claims
The Charterer shall cause each of its customers or operators under any
Drilling Contract to (a) indemnify, defend and hold harmless the Owner,
the Investors and their Affiliates from any and all claims, demands,
liabilities, losses, damages, lawsuits and expenses respecting pollution
claims resulting from the release of Crude Oil as a consequence of a
blowout, crater or other cause arising out of or in connection with
operations under such Drilling Contract, in accordance with normal
industry practice, and any and all related environmental, health or
safety matters (including, but not limited to, all cost and expense of
controlling clean-up of pollution and all penalties imposed by any
Person) irrespective of whether the Charterer, the Owner or any of their
Affiliates may have been or may be alleged to have been negligent or
otherwise legally at fault; and (b) if any customer under such Drilling
Contract does not maintain (i) a consolidated tangible net worth as
determined in accordance with generally accepted accounting principles of
at least $500,000,000 (or be a consolidated Subsidiary of a parent entity
having such consolidated tangible net worth) or (ii) a senior unsecured
debt rating by S&P of "BBB-" or by Xxxxx'x of "Baa3" (or be a
consolidated direct or indirect Subsidiary of a parent entity having a
senior unsecured debt rating meeting such criteria), such customer shall
provide (or the Charterer shall provide) operators extra expense or
energy exploration and development insurance coverage in an amount of at
least the difference between $150,000,000 (or such greater amount, as may
be necessary to meet the applicable financial responsibility requirements
under the Oil Pollution Act of 1990, or any other applicable laws, as
amended from time to time) and the amount of the Charterer's contingent
operators extra expense or energy exploration and development insurance
or other coverage in effect at such time, with such underwriters or
carriers and containing such terms and conditions as the Owner may
require, in the form normally and customarily carried by oil and gas
operators engaged in offshore drilling operations, for oil pollution
liability and expense, with the Owner, Investors, the Owner Group and the
Charterer named as additional insureds and having the benefit of waivers
of subrogation.
ARTICLE 12
PAYMENTS, INVOICES AND SECURITY
12.1 Basic Hire
The Charterer shall pay to the Owner, in arrears on each Payment Date
through the Primary Term, an amount equal to 1.16848% of Owner's Cost
(the "Primary Term Basic Hire") as adjusted on each Upgrade Payment Date
after the Delivery Date for amounts disbursed by the Owner to the
Charterer pursuant to Section 5.9 according to the methodology outlined
on Schedule F attached hereto, and during any Extended Term, 125% of the
Primary Term Basic Hire payable on each Payment Date during such Extended
Term. The payment each month of the Basic Hire shall be a continuing
obligation for each month during which this Charter is in effect, and no
invoice for such amount need be issued to the Charterer by the Owner.
The Charterer's obligation to make such payment is unconditional and
absolute during the term hereof and shall not be affected by any event of
force majeure or otherwise.
12.2 Supplemental Hire
In addition to its obligation to pay Basic Hire hereunder, the Charterer
shall pay to the Owner any and all Supplemental Hire as and when the same
shall become due and owing, and in the event of any failure on the part
of the Charterer to pay any Supplemental Hire, the Owner shall have all
rights, powers and remedies provided for herein or at law or in equity or
admiralty or otherwise in the case of nonpayment of Basic Hire.
The Charterer shall pay to the Owner, as Supplemental Hire, all costs
incurred by the Owner in performing or complying with the Charter
Documents if the Charterer fails to perform or comply with any of its
agreements contained in this Charter, or any Charter Document including,
but not limited to:
(a) Direct and indirect cost of permits, licenses and the like required
of the Owner as owner of the Vessel. Owner shall use reasonable
efforts, without filing suit or incurring out-of-pocket or other
additional cost or expense, to avail itself of applicable
exemptions and/or reductions of such costs.
(b) All premiums and other costs to the Owner for insurance as
specified in Articles 11.8 and 15.
(c) Unless otherwise expressly set forth herein in Section 19.2, the
Charterer shall bear directly or reimburse the Owner, upon proof of
payment by the Owner, all fees and expenses (including fees and
expenses of the Owner's counsel) incurred by the Owner in the
performance of or related to this Charter or any Charter Documents.
12.3 Payment Terms
The Charterer shall pay all amounts for Supplemental Hire invoiced by the
Owner within 10 days after receipt of such invoice. Any Basic Hire not
paid when due and any invoices not paid in immediately available funds
within 10 days after receipt by the Charterer shall accrue interest from
the due date until paid at a per annum rate of interest equal to the
Overdue Rate, computed on a basis of 360 days, for actual days elapsed.
Payments shall be made by wire transfer in immediately available funds
prior to 12:00 noon, New York City time, on the day when each such
payment shall be due to the Owner's account at a financial institution
located in the State of New York or at such other office as the Owner may
from time to time designate in writing to the Charterer. All payments to
the Owner hereunder shall be without any offset, counterclaim, discount
or deduction and shall be made in United States Dollars. All payments to
the Owner stated in this Charter are exclusive of any Taxes, including,
without limitation, sales, excise, value added, stamp, documentary,
transfer, ad valorem, general consumption, property, use, export, import,
employment, payroll, withholding or other similar Taxes, which may be
imposed on or incurred by the Owner, its employees or the Investors
(other than, except as otherwise provided herein, Taxes on the net income
or franchise of the Owner, its employees or the Investors), and all costs
associated therewith, in connection with performance by the Owner of, or
the Owner's rights under, this Charter, including the costs associated
with bonds or letters of credit that are not otherwise the responsibility
of the Charterer under this Charter. The Charterer shall pay the Owner
the amount of all such charges, Taxes and costs upon receipt of an
invoice, subject to the Charterer's right to reasonably verify the
Owner's payment of such amounts. The Owner shall use reasonable efforts,
without filing suit or incurring any out-of-pocket or other additional
costs, to avail itself of any and all applicable exemptions and/or
reductions of such taxes. The Charterer shall, at the Owner's request,
pay such sums directly or post any required bonds or letter of credit
required on any such items.
12.4 Invoices
The Owner shall render to the Charterer a monthly invoice on or before
the 15th day of each month showing all Supplemental Hire payable to the
Owner for the preceding month.
12.5 Security for Obligations
(a) To secure the Obligations, the Obligors have executed and delivered
the Security Documents. Subject to Section 12.5(b), (c), (d) and
(e), the Charterer shall maintain (i) the Xxxxxxxxxx Mortgage or
(ii) any Substitute Collateral that has a fair market value at
least equal to the Stipulated Loss Value at the time of any
delivery of such Substitute Collateral (collectively, the
"Additional Collateral") to secure the Obligations. In addition,
subject to Section 12.5(e) the Charterer shall maintain the Xxxx
Mortgage.
(b) In the event that, at any time during the periods set forth below,
the Timely Liquidation Value of the Vessel as determined in
accordance with the Appraisal Procedure at such time is at least
the Stipulated Loss Value at such time, neither S&P nor Xxxxx'x has
a negative outlook for Reading & Xxxxx at such time and a Drilling
Contract is in full force and effect at such time that provides
adequate cash flow to service the Obligations for the term of such
Drilling Contract, the Charterer may request a reduction in the
amount of Additional Collateral as follows:
(i) after the fourth anniversary of the Delivery Date and so long
as (A) the rating of S&P of the Rated Securities is at least
"BB+" and the rating, if any, of Xxxxx'x of the Rated
Securities is at least "Ba1", and (B) no Default has occurred,
the Timely Liquidation Value of the Xxx Xxxxxxxxxx or the
Timely Liquidation Value of Substitute Collateral (as
determined by the Appraisal Procedure) required to be
maintained shall be reduced to 50% of the Stipulated Loss
Value;
(ii) after the seventh anniversary of the Delivery Date and so long
as (A) the rating of S&P of the Rated Securities is at least
"BBB-" or higher by S&P and the rating, if any, of Xxxxx'x of
the Rated Securities is at least "Baa3", and (B) no Default has
occurred, no Additional Collateral shall be required to be
maintained; or
(iii) at any time, and so long as (A) the rating of S&P of the Rated
Securities is at least "BBB+" or higher by S&P and the rating,
if any, of Xxxxx'x of the Rated Securities is at least "Baa1",
and (B) no Default has occurred, no Additional Collateral shall
be required to be maintained.
(c) The Owner shall release its lien and security interest in that
portion of the Additional Collateral that is in excess of the
Additional Collateral (the "Released Collateral") the Charterer is
required to maintain pursuant to Section 12.5(b). From and after
such release the Charterer shall maintain such Released Collateral
or other property (the "Negative Pledge Property") mutually agreed
upon by the Owner and the Charterer that has a Timely Liquidation
Value equal to the Stipulated Loss Value at the time of such
release, free and clear of all Liens (other than Permitted Liens as
defined in the Xxxxxxxxxx Mortgage). The Charterer shall
immediately notify the Owner and each of the Investors of the
occurrence of any event that would not entitle the Charterer to
maintain reduced Additional Collateral pursuant to Section 12.5(b)
and shall promptly reinstate or grant, as the case may be, Liens
upon the Negative Pledge Property or, with the approval of the
Owner, provide other Substitute Collateral in accordance with
Section 12.5(d) as required under Section 12.5(b).
(d) The Charterer shall be entitled to exchange collateral for the
Obligations (other than the Xxxx Mortgage) or discharge its
obligation to reinstate Additional Collateral or Substitute
Collateral by providing substitute property as collateral securing
the Obligations (the "Substitute Collateral") if each of the
following conditions precedent shall have been satisfied:
(i) The Charterer shall have notified the Owner of its intention to
provide Substitute Collateral, which Substitute Collateral
shall be cash, cash equivalents, or a mobile offshore drilling
unit and otherwise in all respects satisfactory in form and
substance to the Owner.
(ii) All instruments conveying or granting to the Charterer such
Substitute Collateral and any related agreements or instruments
shall in all respects be satisfactory in form and substance to
the Owner.
(iii) The Owner and each of the Investors shall have received with
respect to such Substitute Collateral a report at the sole cost
and expense of the Charterer prepared in accordance with the
Appraisal Procedure, in form and substance reasonably
satisfactory to the Owner, that the fair market value of such
Substitute Collateral when added to the fair market value of
other Additional Collateral for the Obligations shall, after
giving effect to any release, be in compliance with
Section 12.5 (a) or (b), as applicable.
(iv) The Charterer shall at its sole cost and expense have obtained
(to the satisfaction of the Owner) all government approvals
required in connection with the ownership, use, occupancy,
possession, operation or ordinary maintenance of such
Substitute Collateral, compliance with applicable
environmental, health and safety laws and regulations and the
mortgaging of such Substitute Collateral to the Owner. Each
such governmental approval shall be in full force and effect.
(v) The Charterer shall at its sole cost and expense have conducted
or caused to be conducted such title examination or title
review with respect to such Substitute Collateral as a
reasonably prudent operator would conduct under the
circumstances, and the Owner shall have approved the status of
title of such Substitute Collateral. The Charterer shall have
furnished to the Owner such title policy or other title
assurances as it receives in connection with the acquisition of
such Substitute Collateral.
(vi) The Charterer shall at its sole cost and expense have obtained
such casualty, liability and other insurance with respect to
such Substitute Collateral as shall be requested by the Owner,
which insurance shall in all respects comply with, and shall be
in all respects subject to, Article 15. The Owner and each of
the Investors shall have received a certificate of an
independent insurance broker setting forth the insurance
obtained in accordance with this paragraph (vi) and certifying
that such insurance is in full force and effect and that all
premiums then due thereon have been paid.
(vii) The Charterer shall at its sole cost and expense have executed
and delivered to the Owner or to a trustee or collateral agent
designated by them and acting on their behalf, a mortgage and
security agreement or other instrument or other document
granting to the Owner or such trustee or collateral agent a
mortgage Lien and security interest, subject to no other Liens
(other than Permitted Liens as defined in the Xxxxxxxxxx
Mortgage), in and to such Substitute Collateral, each deed,
lease, assignment or other instrument of conveyance referred to
in paragraph (ii) above, each government action as referred to
in paragraph (iv) above, each ancillary contract and any
agreement providing for the operation of such Substitute
Collateral (which assignment shall be consented to by the
operator, on terms satisfactory to the Owner), subject to no
Liens (other than Permitted Liens as defined in the Xxxxxxxxxx
Mortgage). Such mortgage and security agreement or such other
instrument shall be in full force and effect and shall be in
all respects satisfactory in form and substance to the Owner.
Each of the foregoing instruments and any necessary documents
relating thereto, including, without limitation, financing
statements under the applicable Uniform Commercial Code or
other instruments for filing or recordation, shall have been
duly recorded and filed in all public offices in which such
recordation or filing is necessary in order to provide
constructive notice to third parties of the interests and Liens
created thereby and in order to establish, perfect, preserve
and protect the validity and effectiveness thereof and the
mortgage Lien and security interest created by such mortgage
and security agreement or other instrument on all property
purported to be subject thereto; and all taxes, fees and other
charges payable in connection with any and all of the foregoing
shall have been paid in full by the Charterer.
(viii) The Owner and the Investors shall have received such
environmental reports with respect to such Substitute
Collateral (in form and substance satisfactory to the Owner) as
they may request.
(ix) The Owner and each of the Investors shall have received such
opinions of counsel satisfactory to the Owner as to such
matters relating to the acquisition of such Substitute
Collateral, including the validity and enforceability of all
documents and instruments referred to in this Section 12.5(d)
and the validity, extent and priority of the Owner's Lien, as
the Owner shall reasonably request, which opinions shall be in
form and substance satisfactory to the Owner and from counsel
acceptable to the Owner.
(x) The Charterer shall have paid all costs and expenses incurred
by the Owner and each of the Investors in respect of obtaining
any release, Additional Collateral, the Mortgages or the
Substitute Collateral, regardless of whether such release,
Collateral, the Mortgages, Substitute Collateral or Additional
Collateral is delivered.
(xi) The Owner shall have received an Officer's Certificate,
containing such representations and warranties with respect to
such Substitute Collateral and the matters set forth in this
Section 12.5(d) and any other matters as shall be reasonably
requested by the Owner, and such other documents or evidence as
to the satisfaction of the conditions set forth in this
Section 12.5(d), as the Owner shall reasonably request.
(e) The Charterer shall be entitled to obtain a release of the Xxxx
Mortgage if either (i) the Owner has satisfied itself that it
possesses a perfected first priority lien on the Xxx Xxxxxxxxxx or
(ii) the Charterer has provided the Owner with a substitute letter of
credit in form satisfactory to the Owner in an amount equal to the
excess (the "Excess Safe Harbor Exposure") of the maximum amount of
liability, whether direct or contingent, of any member of the
Charterer Group under the Safe Harbor Lease Documents over the lesser
of (i) $11,000,000 or (ii) the amount of such liability that is
secured by the Xxxxxxxxxx, as determined, in each case, by Xxxxxx
Xxxxxxxx & Co., or other independent expert satisfactory to the Owner
(the "Safe Harbor Exposure Expert"). The amount of such letter of
credit shall be subject to reduction as the Excess Safe Harbor
Exposure reduces as determined by the Safe Harbor Exposure Expert.
Any release shall be in form and substance reasonably satisfactory to
the Owner.
ARTICLE 13
GENERAL OBLIGATIONS AND PERFORMANCE
13.1 Independent Owner Relationships
In the performance of this Charter, the Owner is an independent
contractor. In the performance of this Charter, the Charterer is an
independent contractor and shall control and direct the operation of the
Vessel and the performance of the details of the work to be performed by
the Charterer's personnel and shall be responsible for the results of
such work, all in accordance with the obligations imposed upon the
Charterer hereunder and under the Charter Documents. The presence of and
the observation by the Owner's representative(s) at the site of any work
shall not relieve the Charterer from the Charterer's obligations and
responsibilities hereunder.
13.2 Inspection
The Owner shall have the right, at the Charterer's sole cost and expense,
to inspect the Vessel and its book and records at all reasonable times if
the exercise of such inspection right would not unreasonably interfere
with the operator's operations on the Vessel at the time or any
applicable governmental approval, which approvals the Charterer shall
endeavor to obtain in good faith, and shall have the right to confer with
and have access to the officers and employees of the Charterer and any
Guarantor in connection with any such inspection. The Owner shall have
the right annually to cause the Vessel to be surveyed by a marine
surveyor at the Owner's (but, after the occurrence and during the
continuance of any Default, the Charterer's) expense. The Charterer
shall correct at its sole cost expense all material deficiencies
discovered during any such survey or inspection.
13.3 Performance of the Charterer
The Charterer shall exercise due diligence to carry out any and all
operations with respect to the Vessel in a safe, workmanlike manner in
accordance with good offshore industry practice, which requirement shall
specifically include, not by way of limitation in any manner whatsoever,
the obligations to have the Vessel under the command of an offshore
instillation manager certified by and for the area in which the Vessel is
operating.
13.4 Operations Outside of U.S. Waters
In the event that the Charterer intends to operate the Vessel outside of
U.S. territorial waters and/or the Outer Continental Shelf, the Charterer
shall submit at least 15 days before movement of the Vessel to the
intended area of operation such documentation demonstrating to the
Owner's reasonable satisfaction (a) that operation of the Vessel within
the intended area of operation complies with all applicable laws and
regulations of the United States and of the intended area of operation;
(b) that the Vessel can be removed from such intended area of operation
upon either cessation of the Vessel's operation in the area or
termination of this Charter; (c) that the Charterer provides all
additional indemnities and has secured political risk insurance for such
area additive to the insurances provided for herein and (d) the Vessel is
not subject to any lien or interest that might have priority over the
title and interest of the Owner. Each move to a new area outside U.S.
territorial waters, whether or not subject to the jurisdiction of a
different foreign country, shall meet the foregoing requirements and
those of Section 7.1.
ARTICLE 14
LIABILITY AND INDEMNITY
14.1 Survival of Indemnities
The indemnities set forth in this Charter shall survive the termination
of this Charter, and shall remain enforceable (subject only to debtor
relief laws and general equitable principles) as to any claim, demand,
liability, damage and expense arising out of or incidental to this
Charter, without regard to the termination of this Charter.
14.2 Pollution
The Charterer shall assume all responsibility for the control and removal
of, and hold Owner Group harmless from loss, liabilities or damage or
claims arising from, directly or indirectly, pollution or contamination
by any liquid or nonliquid or waste material wheresoever found that is
discharged, spilled or leaked from the Vessel or noncompliance with
environmental, health and safety laws (including but not limited to,
those stemming from release of pollutants, private toxic tort claims,
off-site disposal of waste or other pollutants, PCB's, and asbestos-
containing materials on or in the Vessel (irrespective of whether any of
the foregoing occurred, existed or arose before or after the date
hereof)). To the extent that any law, regulation or governmental entity
acting within its jurisdiction imposes on Owner Group liability for any
such pollution, notwithstanding such imposition of direct liability, the
Charterer shall have designated Owner Group as an additional insured
under its insurance policies and the Charterer shall hold the Owner
harmless from such loss, liabilities, damage or claims and reimburse
Owner Group for any amounts that Owner Group may be required to pay.
This indemnity is valid irrespective of the negligence or fault, whether
sole, joint, active or passive of the indemnified party and whether
predicated on strict liability, statutory duty, contractual indemnity or
any other theory of liability of the indemnified party.
14.3 The Charterer's Indemnity
(a) The Charterer shall defend, indemnify and hold Owner Group, its
officers, directors, employees, agents and Affiliates
(collectively, the "Indemnitees") harmless from and against all
claims, liabilities, damages, Taxes and expenses (including,
without limitation, attorneys' fees and other costs of defense),
including all claims of any type whatsoever, irrespective of
insurance coverage, arising out of, incidental to, or related to
this Charter, any of the Charter Documents, any of the transactions
contemplated hereby or thereby, the Vessel, the Xxx Xxxxxxxxxx, the
Xxxxxxxx Xxxx or any Additional Collateral or Substitute
Collateral, except, unless otherwise specifically provided herein,
any claims directly arising out of the Owner's gross negligence or
willful misconduct.
(b) If it is judicially determined that the monetary limits of
insurance required under this Charter or of the indemnities
voluntarily and mutually assumed in this Charter (which the Owner
and the Charterer hereby agree will be supported either by
available liability insurance, under which the insurer has no right
of subrogation against the indemnitee, or voluntarily self-insured
in respect of permitted deductibles) exceed the maximum limits
permitted under applicable law, it is agreed that such insurance
requirements or indemnities shall automatically be amended to
conform to the maximum monetary limits permitted under such law.
(c) The Charterer shall indemnify, pay and hold harmless Owner Group
against any loss, liability, cost or expense incurred in respect of
the Vessel, including actual or constructive loss of the Vessel, or
any effort to interdict the payment to the Owner of proceeds
arising out of or related to this Charter.
(d) The indemnities in this Charter apply without regard to any
conflicting rules of liability under any applicable law or
regulation and shall include indemnification for any and all claims
in which recovery, indemnification or contribution is sought
directly or indirectly by any person or entity against Owner Group
whether predicated on negligence, strict liability, statutory duty
or contractual indemnity, except any such liability directly
arising out of the gross negligence or willful misconduct of the
Owner unless otherwise expressly specified herein.
14.4 Patent Infringement
(a) The Charterer shall assume liability for, and shall defend,
indemnify and hold the Owner harmless from and against, all suits
and actions alleging that the Vessel, any equipment or part
thereof, or any operation of the Vessel, any such equipment or part
thereof constitutes an infringement of any letters patent.
(b) If, as a result of any changes required by the Charterer in
equipment furnished by the Owner, or any changes required by the
Charterer in operation of such equipment or part thereof, a claim
is filed against the Owner alleging that such equipment or any such
operation conducted infringes any letters patent, then the
Charterer shall be liable for all such claims and indemnify and
hold the Owner harmless from all such claims.
14.5 Both-to-Blame Collision Clause
Without limitation on any other indemnity of the Charterer contained
herein, if the liability for any collision in which the Vessel is
involved while performing this Charter should be determined in accordance
with the laws of the United States of America, the following clauses
shall apply:
(a) If the Vessel comes into collision with another ship as a result of
the negligence of the other ship and any act, neglect or default of
the Master, mariner, pilot or the servants of the Charterer in the
navigation or in the management of the Vessel, the Charterer shall
indemnify the Owner against all direct, consequential or special
loss or liability to the other ship or her owner.
(b) The foregoing provisions shall also apply where the owners,
operators or those in charge of any ship or ships or objects other
than, or in addition to, the colliding ships or objects are at
fault in respect of a collision or contact.
14.6 Liens, Attachments and Encumbrances
None of the Charterer, any subcharterer or party to a Drilling Contract
shall have the right, power or authority to create, incur or permit to
exist any Lien upon the Vessel, except for Permitted Liens. The
Charterer further agrees to carry a true copy of this Charter with the
ship's papers on board the Vessel, and to exhibit the same to any person
having business with the Vessel which may give rise to any lien or claim
upon the Vessel other than a Permitted Lien or to the sale, conveyance or
mortgage of the Vessel, and on demand, to any person having business with
the Vessel or to any representative of the Owner, the Owner Group or any
Investor. The Charterer shall also place and keep prominently displayed
on board the Vessel a notice, framed under glass, printed in plain type
of such size that the paragraph of reading matter shall cover a space not
less than six inches wide by nine inches high, reading as follows:
NOTICE OF CHARTER
This Vessel is owned by Deep Sea Investors, L.L.C. It is under
bareboat demise charter to Reading & Xxxxx Drilling Co. Under the
terms of this Charter none of the Charterer, any subcharterer, the
Master nor any other person has any right, power or authority to
create, incur or permit to be imposed on the Vessel (a) any lien
whatsoever other than liens for current crew's wages, general
average and salvage, in each case, incurred in the ordinary course
of business and that are not yet overdue complying with the
provisions of such charter and (b) any claims whatsoever under any
drilling contracts in respect of the Vessel other than claims
complying with the provisions of such charter.
Such notice shall be promptly changed from time to time to reflect the
identity of the successors or assigns of the Owner.
14.7 Indemnification by the Charterer
The Charterer shall indemnify and hold harmless the Owner against any
Liens, claims or liabilities of whatsoever nature, other than Permitted
Liens (but if the Vessel is being redelivered to, or otherwise coming
into the possession of, the Owner pursuant to the terms and conditions of
this Charter, other than Permitted Liens arising as the result of claims
against the Owner for which the Owner is not entitled to indemnification
hereunder only), whether such Liens, claims or liabilities now exist or
are created hereafter or are founded or unfounded, upon or relating to
the Vessel, its possession, management, maintenance, repair, use,
employment, chartering or subchartering or operation or any act or
omission of the Charterer.
14.8 The Charterer's Duties to Remove Liens, etc.
Without limitation of the generality of the Charterer's indemnities
provided for in Section 8.2 and Article 14, the Charterer agrees that if
a libel or a complaint in admiralty or any other legal proceeding shall
be filed against the Vessel, or if the Vessel shall be otherwise levied
upon or taken into custody or detained or sequestered by virtue of
proceedings in any court or tribunal or by any government or other
authority because of any Liens, claims or liabilities arising from any
claims, other than claims against the Owner the payment or discharge of
which is not the obligation of the Charterer or any Guarantor or with
respect to which the Owner is not entitled to indemnification from the
Charterer or any Guarantor. The Charterer shall at its own expense
within 15 days thereafter cause the Vessel to be released and all such
Liens and (except to the extent that the same shall currently be
contested by the Charterer in good faith by appropriate persons and
appropriate proceedings in the Owner's sole judgment and shall not affect
the continued release, or until any risk of forfeiture or other loss of
or to the Vessel, or in any manner whatsoever interfere with the use and
operation of the Vessel) claims and liabilities to be discharged. The
Charterer shall forthwith notify the Owner by telecopy, telex or
telegram, confirmed by letter, of each such event and of each such
release and discharge. The Charterer shall advise the Owner in writing
at least once in each three-month period as to the status and merits of
all such excepted claims and liabilities being so contested by the
Charterer and not discharged within fifteen days as provided above, which
are either not bonded or affect the ability of the Charterer to use any
Vessel in the ordinary course of its business. The Charterer will pay
and discharge when due all claims for repairs and other charges incident
to current operations of the Vessel or with respect to any change,
alteration or addition made pursuant to this Charter and will not permit
any lien referred to in clause [(b) or (c)] of the definition of
"Permitted Liens" which has ripened into a cause of action to be in
effect for more than 30 days unless it is fully bonded or covered by
insurance or Adequate Provision.
ARTICLE 15
INSURANCE
15.1 The Charterer's Insurance
The Charterer shall, at its own expense, procure and maintain in effect
with respect to and for the duration of this Charter the insurance
policies with limits of at least, and with deductibles, if any, of no
more than, those as set forth in Schedule C approved by the Owner and
having such terms and conditions, and with carriers and/or underwriters
approved by the Owner (such approval not to be unreasonably withheld).
Any policies of insurance carried by the Charterer in accordance with
this Article 15 shall (a) provide that the interests of Owner Group in
such policies shall not be invalidated by any action, inaction, neglect,
breach of warranty or misrepresentation of the Charterer or change in
ownership of the Vessel and shall insure Owner Group's interests as they
appear, regardless of any breach or violation by the Charterer of any
warranty, declaration or condition contained in such policies, and (b) be
primary without right of contribution from any other insurance which may
be carried by Owner Group with respect to its interests in the Vessel.
The Charterer shall immediately notify underwriters of and shall furnish
all necessary information concerning any occurrence which may give rise
to a claim under any of said insurance policies. Prior to commencement
of any operations under this Charter and any renewal of the insurance
policies required to be maintained hereunder, the Charterer shall provide
the Owner with insurance certificates evidencing the Charterer's
insurance coverage; such certificates shall provide for at least 30 days'
(seven days, in the case of war risk) prior written notice to the Owner
and each of the Investors of any material change in, reduction or
cancellation of any of said insurance policies and shall show the
Charterer, the Owner, the Owner Group and the Investors as sole loss
payees and additional insureds thereunder as their interests appear. If
requested, copies of all correspondence and documents sent to
underwriters, related to any accident or claim arising out of or in
connection with the performance of the work hereunder, shall be provided
to the Owner.
15.2 Nonperformance of Insurance Companies
The insolvency, liquidation, bankruptcy, or failure of any insurance
company providing insurance for the Charterer or the Owner or their
respective subcontractors, or failure of any such insurance company to
pay claims accruing, shall not be considered a waiver of, nor shall it
excuse the Charterer from complying with, any of the provisions of this
Charter or any of the Charter Documents, except that any such act or
omission by an insurance company shall not be deemed a breach of this
Charter by the Charterer.
15.3 Subrogation
The Charterer agrees to endorse each such insurance policy to waive the
underwriters' and insurance providers' right of subrogation with respect
to Owner Group; and the Charterer agrees to indemnify and hold Owner
Group harmless with respect to any rights of subrogation pursued by the
Charterer's underwriters or insurance providers against Owner Group.
ARTICLE 16
ASSIGNMENT OF CHARTER
16.1 Assignment and Subcontract by the Owner
The Owner shall have the right, at any time, to assign all or part of
this Charter to any Person, so long as such Person agrees to be bound by
this Charter and, at the time of such assignment, has, or is a
consolidated Subsidiary of a parent entity having, a consolidated net
worth of at least $50,000,000 as determined in accordance with generally
accepted accounting principles and is not primarily engaged in the
offshore drilling business, other than as a financier or lessor of
offshore drilling equipment or operations.
16.2 Assignment by the Charterer
The Charterer shall not have the right to assign this Charter or to
subcharter the Vessel without the prior written consent of the Owner.
Subject to the terms of applicable law, the Charterer shall have the
right, without the consent of the Owner, so long as no Default or Event
of Default shall have occurred and be continuing, to subcharter the
Vessel on a bareboat or time basis to any Subsidiary of Reading & Xxxxx
that is and remains throughout the term of such subcharter a Subsidiary
of Reading & Xxxxx and a citizen of the United States within the meaning
of the Shipping Xxx, 0000, and to enter into, and to permit the Vessel to
serve under, Drilling Contracts that comply with the terms hereof and the
other Charter Documents (provided no such Drilling Contract constitutes a
demise or a bareboat charter or any grant of any property right or other
interest in the Vessel between the Charterer and others) provided that:
(a) each such subcharter and Drilling Contract shall be consistent with
the terms of this Charter and the subcharterer shall have agreed
not further to subcharter the Vessel without complying with this
Section 16.2 with respect to such further subcharter;
(b) either (i) the subcharterer under such subcharter or the customer
under a Drilling Contract is a citizen of the United States within
the meaning of the Shipping Act, 1916 and evidence thereof
satisfactory to the Owner in its sole judgment shall be submitted
to the Owner within 30 days of entering into such subcharter, (ii)
the prior approval of the U.S. Maritime Administration under the
Shipping Act, 1916 of such subcharter, in form satisfactory to the
Owner in its sole judgment, shall have been obtained and, within 30
days of entering into such subcharter or Drilling Contract,
evidence thereof satisfactory to the Owner in its sole judgment,
shall have been submitted to the Owner or (iii) such subcharter or
Drilling Contract shall be covered by a general approval of the
U.S. Maritime Administration under sections 9 and 37 or any other
applicable sections of the Shipping Act, 1916 and the Charterer
shall have given written notice to the Owner to that effect, which
notice shall set forth in reasonable detail the facts which
establish such coverage with respect to such subcharter or Drilling
Contract;
(c) such subcharter or Drilling Contract shall not violate any laws of
the United States of America or any regulations, rules,
interpretations or orders thereunder;
(d) irrespective of any such subcharter, the Charterer shall remain
liable for all of its obligations under this Charter and the
Charter Documents to the same extent as if such subcharter or
Drilling Contract were not in effect;
(e) the subcharterer under each such subcharter shall comply with all
applicable laws and regulations, provided that violations of laws
or regulations by any such subcharterer that (i) will not result in
the Owner, the Owner Group or the Vessel being in violation of, or
subject to any fine, penalty or other sanction under any applicable
law or regulation or any risk of forfeiture or other loss of or to
the Vessel, (ii) do not otherwise adversely affect the interests of
the Owner or the Owner Group or the Investors hereunder, and (iii)
are not consented to by the Charterer shall not, by reason of this
clause (e), constitute a breach, or cause such subcharter to be in
violation of the terms of this Charter so long as the Charterer is
taking appropriate action to terminate such violation or to
terminate such subcharter;
(f) such subcharter or Drilling Contract shall, by its terms, expire no
later than the end of the Charter Period, or any extension thereof,
and Charterer shall not suffer or permit to be continued under any
such subcharter or Drilling Contract any lien or encumbrance
incurred by it or its agents, which might have priority over the
title and interest of the Owner in the Vessel and any part thereof,
or equipment or other property used in connection with the Vessel;
and
(g) any Drilling Contract shall be on terms and conditions in
substantially the form generally used in offshore drilling and with
an operator and having (i) a consolidated tangible net worth as
determined in accordance with generally accepted accounting
principles of at least $500,000,000 (or be a consolidated
Subsidiary of a parent entity having such a consolidated tangible
net worth), or (ii) a senior unsecured debt rating by S&P of "BBB-"
or by Xxxxx'x of "Baa3" (or be a consolidated direct or indirect
Subsidiary of a parent entity having a senior unsecured debt rating
meeting such criteria) or (iii) maintaining (or the Charterer
providing) operators extra expense or energy exploration and
development insurance coverage in an amount of at least the
difference between $150,000,000 (or such greater amount, as may be
necessary to meet the applicable financial responsibility
requirements under the Oil Pollution Act of 1990, or any other
applicable laws, as amended from time to time) and the amount of
the Charterer's contingent operators extra expense or energy
exploration and development insurance or other coverage in effect
at such time, with such underwriters or carriers and containing
such terms and conditions as the Owner may require, in the form
normally and customarily maintained by oil and gas operators
engaged in offshore drilling operations, for oil pollution
liability and expense, with the Owner, Investors, the Owner Group
and the Charterer named as additional insureds and having the
benefit of waivers of subrogation and with carriers or underwriters
reasonably acceptable to the Owner.
The Charterer shall within 30 days after entering into each Drilling
Contract notify the Owner of the period thereof and of the identity of
the other party and its relationship with the Charterer, if any.
16.3 Assignment of Subcharter Hire.
The Charterer hereby sells, assigns, transfers, creates a security
interest in and sets over unto the Owner all of the Charterer's right,
title and interest in and to all accounts, chattel paper, contract rights
and general intangibles, and all monies and claims for monies due and to
become due under, or arising out of, and all claims for damages arising
out of the breach of, any subcharter or Drilling Contract (Drilling
Contracts being considered, for purposes of this Section 16.3,
subcharters) relating to the Vessel, whether now existing or hereafter
entered into. It is expressly agreed that, anything herein contained to
the contrary notwithstanding, the Charterer shall remain liable under
each such subcharter to perform all of its obligations thereunder, and
the Owner shall have no obligations or liabilities thereunder by reason
of or arising out of the foregoing assignment (herein, the "Rights
Assignment").
Upon the demand of the Owner after the occurrence and during the
continuation of an Event of Default, the Charterer will specifically
authorize and direct each person liable therefor to make payment of all
monies due and to become due under or arising out of each such subcharter
to the Owner or as the Owner shall direct, and upon such demand
irrevocably authorizes and empowers the Owner to ask, demand, receive,
receipt and give acquittance for any and all such amounts which may be or
become due or payable or remain unpaid at any time or times to the
Charterer by each such person under or arising out of such subcharters;
to endorse any checks, drafts or other orders for the payment of money
payable to the Charterer in payment therefor; and in its discretion to
file any claims or take any action or proceeding either in its own name
or in the name of the Charterer or otherwise which the Owner may deem to
be necessary or advisable in the premises.
The Charterer hereby irrevocably authorizes the Owner after any such
demand has been made, in its own name or in the name and on behalf of the
Charterer, to give notification to persons obligated under such
subcharters that payment is to be made to the Owner or as the Owner
directs and hereby agrees to cause to be delivered to the Owner consents
of such persons to the Rights Assignment, in form and substance
satisfactory to the Owner.
The Charterer agrees that at any time and from time to time, upon the
Owner's written request, the Charterer will execute and deliver such
further documents and do such further acts and things as the Owner may
request in order to effect further the purposes of the Rights Assignment,
provided that no such consent referred to in the preceding paragraph may
be required under this sentence.
The Charterer hereby irrevocably authorizes the Owner, at the Charterer's
expense, to file such financing statements relating to the Rights
Assignment, without the Charterer's signature, as the Owner at its option
may deem appropriate, and appoints the Owner as the Charterer's attorney-
in-fact to execute any such financing statements in the Charterer's name
and to perform all other acts which the Owner deems appropriate to
perfect and continue the security interest created hereby.
The Charterer covenants and agrees with the Owner that the Charterer will
(a) duly perform and observe all of the terms and provisions of such
subcharters on the part of the Charterer to be performed or observed, (b)
clearly record in the books and records of the Charterer notations of the
Rights Assignment and (c) in the event that the Charterer shall receive
payment of any money which should have been paid directly to the Owner
pursuant to a demand made or notice given under this Section 16.3
forthwith turn over the same to the Owner or as the Owner may direct, in
the identical form in which received (except for such endorsements as may
be required thereon).
ARTICLE 17
LOSS, TAKING OR SEIZURE.
17.1 Taking by the U.S. Government
A taking of the Vessel for use by the United States Government shall not
terminate this Charter, but the Charterer shall remain liable for all its
obligations hereunder, including its liability for payment of Hire, until
the expiration of the Charter Period. If, at the expiration of the
lesser of the then remaining term of the Charter Period or 180 days after
the taking of the Vessel for use by the United States Government Charter
Period, the Vessel shall still be subject to such taking for use by the
United States Government, an Event of Loss shall be deemed to have
occurred on the last day of such 180-day period or the Charter Period,
whichever occurs first.
17.2 Event of Loss not a Total Loss
In the case of any Event of Loss arising out of damage to the Vessel
other than actual total loss, the Charterer shall notify the Owner that
the Vessel is deemed to be subject to an Event of Loss and shall not
consent to a compromise or arranged total loss without the prior written
agreement of its insurance underwriters that the Vessel is a constructive
or compromised total loss and that such underwriters agree to pay an
amount at least equal to the amount payable by the Charterer under
Section 17.3.
17.3 Payment of Stipulated Loss Value
Upon the occurrence of an Event of Loss, the Charterer shall forthwith
give the Owner written notice of such Event of Loss and shall pay to the
Owner within 60 days following the date of the occurrence of such Event
of Loss the Stipulated Loss Value of the Vessel calculated as of such
Basic Hire Payment Date occurring after the occurrence of the Event of
Loss plus interest at a rate per annum equal to the Overdue Rate. The
Charterer shall also pay to the Owner all Basic Hire due on the Payment
Dates next occurring after the date of occurrence of such Event of Loss
and, if the date on which such Stipulated Loss Value actually is paid in
full is not such a Payment Date, an amount equal to the Overdue Rate
(computed on the basis of a 360-day year for actual days elapsed) on the
amount of such Stipulated Loss Value for the period from such Payment
Date to the date such Stipulated Loss Value is paid in full.
17.4 Application of Payments
In the case of all payments (other than insurance proceeds) received by
the Owner or the Charterer from any governmental authority or otherwise
as compensation for an Event of Loss, so much of such payments as shall
not exceed the sum of the Stipulated Loss Value and an amount equal to
interest hereon required to be paid by the Charterer as above provided
and any Hire then due and owing by the Charterer hereunder shall be
applied, provided no Default or Event of Default shall have occurred and
be continuing, first, in reduction of the Charterer's obligation to pay
such Hire, if any, then due and owing; and second, in reduction of the
Charterer's obligation to pay such Stipulated Loss Value and such amount
equal to interest thereon as provided above if not already paid by the
Charterer or, if already paid by the Charterer, to reimburse the
Charterer for its payment of such Stipulated Loss Value and the balance,
if any, of such payments remaining thereafter shall be paid over to, or
retained by, the Owner.
17.5 Date of Loss
For the purpose of this Charter, the date of the occurrence of an Event
of Loss shall be the date of the casualty or other occurrence giving rise
to such Event of Loss (or the earlier of the expiration of the remaining
term of the Charter Period or the date 180 days after such taking
thereafter, in the case of a taking of title or use or possession of the
government of the United States of America, as provided in the definition
of Event of Loss set forth in Section 1 hereof), and if the date of such
casualty or other occurrence shall be uncertain, such date shall be
deemed the date the Vessel was last heard from.
17.6 Effect of Payment of Stipulated Loss Value
In the event that the Charterer shall make payment in full of any overdue
payments of Basic Hire, and of such Stipulated Loss Value and an amount
equal to interest thereon as provided above, the Charterer shall have no
further obligation to make any payment of Basic Hire payable after the
Payment Date as of which such Stipulated Loss Value was calculated, and
the Charterer, subject to the Charterer's obtaining any governmental
consent required, (a) shall be subrogated to all rights which the Owner
shall have with respect to the Vessel, (b) shall receive assignments and
bills of sale from the Owner (in such form described in Section 3.7
hereof, but without any representation or warranty of any character on
the part of the Owner) of any or all such rights, together with all of
the Owner's right, title and interest in and to the Vessel and all
machinery and equipment pertaining thereto, and (c) shall have the right
to abandon the Vessel to underwriters on behalf of the Owner as well as
itself. In such case, the Owner shall execute such documents and take
such other action as the Charterer may reasonably require to effect the
surrender of the Vessel to the insurance underwriters. Nothing herein
contained shall relieve the Charterer or the Owner of any of its
obligations under Article 18 incurred up to and including the date of the
Event of Loss. After the payment in full of the Stipulated Loss Value of
the Vessel and such other amounts, the Charterer's obligation to pay
further Basic Hire with respect to such Vessel shall terminate. All
insurance proceeds received as the result of an Event of Loss with
respect to the Vessel, and all payments (other than insurance proceeds)
received by the Owner or the Charterer from any governmental authority or
otherwise as compensation for an Event of Loss with respect to the
Vessel, shall be applied in reduction of the Charterer's obligation to
pay Stipulated Loss Value with respect to the Vessel (plus any other
amounts of Basic Hire and Supplemental Hire then due and payable with
respect to the Vessel), if not already paid by the Charterer, or, if
already paid by the Charterer, shall be applied to reimburse the
Charterer for its payment of the Stipulated Loss Value with respect to
the Vessel and the balance, if any, of such proceeds or payments
remaining thereafter shall be paid over to, or retained by, the
Charterer.
ARTICLE 18
TAX
18.1 Characterization as a Lease
Each of the parties hereto intends that, for Income Tax purposes, this
Charter will be treated as a lease of the Vessel from the Owner to the
Charterer, the Owner will be treated as the sole owner of the Vessel and
the Charterer will be treated as not having any ownership interest in the
Vessel, the Owner or any partnership or joint venture with the Owner.
The Charterer, the Owner, each of the Investors and any Affiliate thereof
will not take any action or file any return or other document which is
inconsistent with such characterization.
18.2 Representations
The Charterer represents, warrants and covenants to the Owner, each of
the Investors and any Affiliate thereof as follows:
(a) All information provided by the Charterer and its Affiliates to any
independent appraiser or engineer with respect to the Vessel was
and is true, complete and accurate, and the Charterer and its
Affiliates did not omit any factual information necessary to make
such first-mentioned information not misleading or omit any factual
information required to permit any such independent appraiser or
engineer to perform the duties for which he was retained;
(b) Reading and Xxxxx, Inc. is the original owner of the Vessel and
initially placed the Vessel in service during its taxable year
ended December 31, 1983;
(c) The Vessel is currently in service at Garden Banks Block 387, Outer
Continental Shelf, Gulf of Mexico (OCS-G-7485);
(d) The Charterer is not, and will not become at any time during any
period in which the Owner is claiming federal income tax
depreciation deductions, a tax-exempt entity (within the meaning
of Section 168(h)(1)(A) of the Code and Section 168(j)(3)(A) of the
1954 Code);
(e) During any period during which the Owner is claiming federal income
tax depreciation deductions, the Charterer will take no action and
will not suffer any action to be taken by any Person (other than
the Owner) which would cause the Vessel to constitute "tax-exempt
use property" within the meaning of Section 168(h)(1) of the Code
(or Section 168(j)(3) of the 1954 Code), or property used
"predominantly outside the United States" within the meaning of
Section 168(g)(1)(A) of the Code (or Section 168(f)(2) of the 1954
Code);
(f) Immediately prior to the Delivery Date, Reading and Xxxxx, Inc. was
entitled to accelerated cost recovery deductions with respect to
the Vessel, computed on the basis that (i) the Vessel is 5-year
property (within the meaning of Section 168(c)(2)(B) of the 1954
Code) and (ii) recovery percentages applicable to the Vessel are
those set forth for 5-year property pursuant to Section 168(b)(1)
of the 1954 Code;
(g) Neither the Charterer nor any of its Affiliates will bear any of
the cost of the Upgrade Nonseverables;
(h) The total cost of the Upgrade Program will be reasonable and based
on arm's-length negotiations;
(i) All of the Upgrade Severables will be readily removable from the
Vessel without causing material damage to the Vessel;
(j) The allocation of the total cost of the Upgrade Program among the
Upgrade Nonseverables, the Upgrade Severables, and the Upgrade
Maintenance as set forth on Schedule B is reasonable;
(k) The Upgrade Maintenance will consist solely of ordinary and routine
maintenance and repairs that will not materially add to the
Vessel's value or appreciably prolong the Vessel's useful life;
(l) The Charterer has not made and will not make, with respect to the
period beginning with the Delivery Date and ending with the date
(if any) on which the Charterer acquires title to the Vessel from
the Owner, any claim predicated on tax or legal ownership of such
Vessel;
(m) Immediately after the Upgrade Completion, the basis for Income Tax
purposes of the Vessel in the hands of the Owner will take into
account (a) the purchase price of the Vessel, including all related
costs, expenses, commissions, taxes, etc. incurred by the Owner in
connection with the acquisition of the Vessel, and (b) all costs
incurred by the Owner pursuant to the Upgrade Program;
(n) The Vessel does not require any improvements, modifications,
upgrades or additions in order to be rendered complete or suitable
for its intended use, and the Vessel is ready and available for the
Charterer's intended use; and
(o) No member of the "Lessee Group" (as such term is defined in Revenue
Procedure 75-21, 1975-1 C.B. 715, as modified by Revenue Procedure
79-48, 1979-2 C.B. 529) of which the Charterer is a member has,
nor will it acquire at any time during the Charter Period, any
investment in the Vessel within the meaning of Section 4(4) of said
Revenue Procedures that is not permitted thereunder.
18.3 Tax Indemnity
The Charterer shall indemnify and hold the Owner, each of the Investors
and any Affiliate thereof harmless from:
(a) Any Taxes (other than Income Taxes) imposed on or incurred by the
Owner, such Investor or any Affiliate, employee, agent or
representative thereof with respect to this Charter or any of the
Charter Documents, the Vessel, any direct or indirect interest
therein or any amounts paid or payable in connection therewith;
(b) Any Income Taxes (other than U.S. federal Income Taxes) imposed on
or incurred by the Owner, such Investor or any Affiliate thereof
(i) caused by or arising from the location or operation of the
Vessel in any particular waters or (ii) imposed by any
jurisdiction, other than the jurisdiction of incorporation of such
Investor or the jurisdiction of a place of business of such
Investor (unless such place of business is determined on the basis
of the location of the Vessel or the operation of the Vessel or
this Charter or any of the Charter Documents), in respect of the
Vessel or by reason of the transactions contemplated by the Charter
or any of the Charter Documents;
(c) Any Income Taxes imposed on or incurred by the Owner, such Investor
or any Affiliate thereof caused by or arising from the Vessel s
failing to qualify for accelerated cost recovery deductions,
computed on the basis that (i) the Vessel is 5-year property
(within the meaning of Section 168(c)(2)(B) of the 1954 Code) and
(ii) recovery percentages applicable to the Vessel are those set
forth for 5-year property pursuant to Section 168(b)(1) of the 1954
Code, by reason of any act of commission or omission,
misrepresentation or breach of any agreement, covenant or warranty
contained in the Charter or any of the Charter Documents on the
part of the Charterer, any subcharterer, assignee or user of the
Vessel or any Affiliate thereof;
(d) Any Income Taxes imposed on or incurred by the Owner, such Investor
or any Affiliate thereof caused by or arising from the charter,
subcharter or use of the Vessel to or by a tax-exempt entity
(within the meaning of Section 168(h)(1)(A) of the Code or Section
168(j)(3)(A) of the 1954 Code);
(e) Any Income Taxes imposed on or incurred by the Owner, such Investor
or any Affiliate thereof caused by or arising from the Vessels
becoming limited use property;
(f) Any Income Taxes imposed on or incurred by the Owner, such Investor
or any Affiliate thereof caused by or arising from any item of loss
or deduction attributable to the Vessel, this Charter or any of the
Charter Documents or the transactions contemplated by the Charter
or any of the Charter Documents not being treated as derived from,
or allocable to, sources within the United States;
(g) Any Income Taxes imposed on or incurred by the Owner, such Investor
or any Affiliate thereof caused by or arising from any replacement,
improvement, modification, upgrade, addition or capital expenditure
made or to be made to or in connection with the Vessel or pursuant
to this Charter, any of the Charter Documents or the transactions
contemplated by the Charter or any of the Charter Documents or
otherwise;
(h) Any Taxes payable as a result of any inaccuracy or breach of any
representation, warranty or covenant of the Charterer under this
Charter or any of the Charter Documents;
(i) Any Income Taxes imposed on or incurred by the Owner, such Investor
or any Affiliate thereof caused by or arising from the inclusion in
income of any amount paid or payable by the Charterer under this
Section 18.3; and
(j) Any attorneys fees or other costs incurred by the Owner, such
Investor or any Affiliate thereof in connection with any payment
from the Charterer under this Section 18.3.
18.4 Payments
Any amount to which the Owner, any of the Investors or any Affiliate
thereof is entitled under Section 18.3 shall be paid in a lump sum equal
to the present value of the amounts of the existing and anticipated Taxes
described in Section 18.3 payable by such indemnitee for all affected
taxable periods. In the case of any such amount caused by a loss of
Income Tax deductions, such amount shall be reduced (but not below zero)
by an amount equal to the present value of the amounts of existing and
anticipated reductions in Income Taxes payable by such indemnitee for all
affected taxable periods that would not be realized but for the loss of
such deductions. Any amount to which such an indemnitee is entitled
under Section 18.3 shall be calculated on the basis of (i) a conclusive
presumption that such indemnitee has and will have sufficient amounts of
taxable income, foreign-source income, and foreign income tax liability
so as to be able to fully utilize on a current basis any Income Tax
benefits which could be derived from the Owner's ownership of the Vessel,
(ii) a conclusive presumption that such indemnitee is and will be liable
for Taxes at the highest marginal rates in effect for the relevant
taxable period, (iii) the date or dates on which any payment of Taxes
(including estimated Taxes) shall be due or would be due for the relevant
taxable period if such indemnitee was actually liable for Taxes for such
relevant period, and (iv) an after-tax discount rate of 4.42% per annum,
discounted quarterly. Any such amount shall be paid by the Charterer to
such indemnitee within thirty (30) days following the receipt by the
Charterer of written notice from such indemnitee which requests such
amount and provides details supporting the calculation of such amount.
18.5 Records
The Charterer will maintain sufficient records with respect to the Vessel
and this Charter, will preserve and retain any such records until the
expiration of the statutory period of limitations (including extensions)
of the taxable periods to which any such records relate and will provide
copies of such records as the Owner or any of the Investors or any
Affiliate thereof may reasonably request to enable the Owner, such
Investor or any Affiliate thereof to fulfill its Tax filing obligations.
ARTICLE 19
GENERAL
19.1 Notices
Notices and other communications required or permitted hereunder shall be
in writing and shall be deemed sufficient for all purposes if sent by
registered or certified letter, nationally recognized overnight courier
service specifying one-day delivery, facsimile or telex to the
recipient's address stipulated below and shall be effective from the date
of receipt thereof. Other addresses may be substituted for those below
upon giving notice thereof in the manner provided above:
if to the Owner: Deep Sea Investors, L.L.C.
c/x Xxxxxx Financial
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Legal Department
Fax: (000) 000-0000
GATX Marine Investors Corporation
Four Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Portfolio Management
Fax: (000) 000-0000
Xxxxxx Financial Leasing, Inc.
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: CEFD - Central Region Credit Manager
Fax: (000) 000-0000
MDFC Equipment Leasing Corporation
0000 Xxxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Director of Operations
Fax: (000) 000-0000
if to the Charterer: Reading & Xxxxx Drilling Co.
000 Xxxxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Chief Financial Officer
Fax: (000) 000-0000
19.2 Expenses
Whether or not any of the transactions contemplated hereby are
consummated, the Charterer agrees, upon demand, (a) to pay the appraisal
costs, the fees and expenses of the Independent Engineer and expenses and
disbursements of the Owner under the Charter and the Charter Documents
and (b) to pay to the parties entitled thereto, all of the legal fees and
expenses incurred by the Owner and each of the Investors in connection
with the preparation, execution and delivery of the Xxxx of Sale, the
Guaranty, the Mortgage, this Charter and the Charter Documents up to
$75,000 and all out-of-pocket costs and expenses plus 50% of any legal
fees in excess of $75,000. In addition, the Charter shall pay upon
demand all other costs and expenses incurred by the Owner and the
Investors in connection with the enforcement of any of their rights or
remedies, any future amendments, supplements, waivers or consents with
respect to any of the Charter Documents, including, without limitation:
(a) the reasonable expenses and disbursements of counsel for the Owner
and the reasonable fees, expenses and disbursements of Xxxxx &
Xxxxx, L.L.P., special counsel for the Investors, or any other
counsel for services rendered after the Delivery Date in connection
with any Charter Document or any transaction contemplated thereby,
or any modification, amendment or waiver of any thereof;
(b) all other reasonable expenses in connection with such transactions
including, without limitation, the expenses of appraisers, other
counsel or of experts whose opinions are required by the terms
hereof (to the extent not specifically required to be paid by third
parties by the terms hereof), printing expenses and all fees, taxes
and other charges payable in connection with the recording or
filing of instruments and financing statements desirable under the
Charter Documents;
(c) reimbursement to the Owner and Investors for their reasonable out-
of-pocket expenses in connection with entering into such
transactions, and any and all fees, expenses and disbursements of
the character referred to in clauses (a) and (b) above which shall
have been paid by the Owner or any of the Investors; and
(d) reimbursement to the Owner and Investors in an amount sufficient to
hold each of them harmless from and against any and all liability
and loss with respect to or resulting from any and all claims for
or on account of brokers' or finders' fees or commissions or
financial advisory fees by any brokers, finders or financial
advisors engaged by the Charterer or the Guarantor with respect to
such transactions.
19.3 The Owner's Right to Perform for the Charterer
If the Charterer fails to perform or comply with any of its agreements
contained herein other than its obligations to pay Hire, the Owner, may
upon notice to the Charterer itself perform or comply with such
agreement, and the amount of any expenses of the Owner incurred in
connection with such performance or compliance, together with interest on
such amount at the Overdue Rate, shall be deemed Supplemental Hire,
payable by the Charterer upon demand.
Without in any way limiting the obligations of the Charterer hereunder,
the Charterer hereby irrevocably appoints the Owner as its agent and
attorney, with full power and authority at any time at which the
Charterer is obligated to deliver possession of the Vessel to the Owner,
to demand and take possession of the Vessel in the name and on behalf of
the Charterer from whomsoever shall be at the time in possession thereof
in the manner described in, and with all rights and remedies conferred
under, Section 3.4(a) hereof.
19.4 Waivers
None of the requirements of this Charter shall be considered as waived by
either party unless the same is done in writing, and then only by the
persons executing this Charter, or other duly authorized agent or
representative of the Person designated in writing by a senior officer of
such Person and then any such waiver shall apply only in the specific
instance and for the specific purpose for which such is given.
19.5 Entire Agreement
This Charter and the Charter Documents contain the entire agreement
between the parties with respect to the subject matter hereof and
supersede and replace any oral or written communications heretofore made
between the parties relating to the subject matter hereof.
19.6 Successors and Assigns
This Charter shall inure to the benefit of and be binding upon the
successors and assigns of the parties, provided that, except as expressly
set forth herein, the Charterer may not assign its rights hereunder
without the express written consent of the Owner and that the assignor
shall remain liable for the performance of its assignee unless
specifically released by the other party hereto.
19.7 Law
The validity, construction, interpretation and effect of this Charter
shall be governed by the general maritime laws of the United States,
without regard to any choice of law rules that would otherwise require
the application of the laws of any other jurisdiction, except that where
the general maritime laws of the United States look to or adopt state
law, this Charter shall be governed by the laws of the State of New York,
without regard to any choice of law rules that would otherwise require
the application of the laws of any other jurisdiction.
19.8 Parties' Intention
It is the intent of all parties hereto and affected hereby in the
execution and performance of this Charter, the Charter Documents and all
related documentation to remain in strict compliance with all applicable
laws from time to time in effect. Further, it is the intent of all
parties hereto and affected hereby to evidence, by this Charter, a lease
between the Owner, as lessor, and the Charterer, as lessee, rather than
any other form of financial arrangement including specifically, but
without limitation, a loan or other debt financing. Any and all
payments, amounts, liabilities, commitment fees and other amounts
expended and obligations of the Charterer incurred or arising in
connection with this Charter, the Charter Documents and all related
documentation are intended to evidence, lease payment obligations of the
Charterer or reimbursements to the Owner and the Investors or their
agents, representatives or designees, for services actually performed,
goods actually furnished or provided, or other expenses or liabilities
for which reimbursement is provided in connection with this Charter and
the Charter Documents. To the extent that any such charge herein
provided for or payment herein made is held or deemed to be held by a
court of competent jurisdiction to be "interest", the parties hereto and
affected hereby stipulate and agree that none of the terms and provisions
contained in or pertaining to this Charter, the Charter Documents or any
related document shall ever be construed to create a contract to pay for
the use, forbearance or detention of money with interest at a rate or in
an amount in excess of the maximum lawful non-usurious rate or amount of
interest permitted to be charged, paid or received under said laws. For
purposes of this Charter, the Charter Documents and all related
documentation, "interest" shall include the aggregate of all charges
which constitute interest under applicable laws, which term "applicable
laws" shall include, but not be limited to, the laws of the State of New
York and, to the extent they may apply, the laws of the United States of
America, that are contracted for, chargeable or receivable under this
Charter and all related documentation. The Charterer shall never be
required to pay unearned interest on any of its obligations hereunder or
in connection herewith and shall never be required to pay interest on any
of its obligations hereunder or in connection herewith at a rate or in an
amount in excess of the maximum lawful non-usurious rate or amount of
interest that may be lawfully charged under applicable laws, and the
provisions of this paragraph shall control over all other provisions of
this Charter, the Charter Documents and all related documentation which
may be in apparent conflict herewith. If the effective rate or amount of
interest which would otherwise be payable under or in connection with
this Charter or any related documentation would exceed the maximum lawful
non-usurious rate or amount of interest the Owner or any Investor or any
assignee thereof is allowed by applicable laws to charge, collect and
receive, or in the event any such person or entity shall charge, collect
or receive monies that are deemed to constitute interest which would, in
the absence of this Section 19.8, be in excess of an amount permitted to
be charged, collected and received under the applicable laws then in
effect, then any such excess amount shall be reduced to the amount
allowed under said laws as now or hereafter construed by courts having
jurisdiction, and all such monies so collected, charged or received that
are deemed to constitute interest in excess of the maximum lawful non-
usurious rate or amount of interest permitted by applicable laws shall be
immediately, at the option of the recipient thereof, be applied to
principal, if any outstanding, or returned to or credited to the account
of the Charterer upon such determination.
19.9 Counterparts; Uniform Commercial Code
This Charter may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and
the same instrument. Each counterpart of this Charter which has been
executed by the parties hereto shall be prominently marked to identify
the party to whom originally delivered. If this Charter constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as
in effect in any applicable jurisdiction), a security interest in this
Charter may be created only by the transfer or possession of the
counterpart marked "Owner's Copy" and containing a receipt therefor
executed by the Owner on or immediately following the signature page
thereof and, in addition, the Owner may file Uniform Commercial Code
Financing Statements in any relevant jurisdiction.
19.10 Warranty of Authority
By executing this Charter on behalf of any entity, each signatory to this
Charter represents and warrants that he or she has full and valid
authority to enter into this Charter on behalf of the entity for which he
or she signs.
19.11 Usage; Headings
Unless the context otherwise requires, use of the singular number in this
Charter shall include the plural number and vice versa, and use of one
gender herein shall include each other gender and vice versa. Use of the
words "hereof," "herein," "hereto," "hereby," "hereunder," or words of
similar import in this Charter refer to this Charter as a whole and not
to any specific paragraph, subparagraph, section, sentence, clause or
part of this Charter. Section headings and numbers herein are for
reference purposes only and do not constitute a part of this Charter
(unless the context indicates otherwise).
19.12 WAIVER OF JURY TRIAL
EACH OF THE CHARTERER AND THE OWNER WAIVE ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS CHARTER,
THE CHARTER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
19.13 VENUE; SERVICE OF PROCESS
THE CHARTERER, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY KNOWINGLY
AND INTENTIONALLY AND IRREVOCABLY AND UNCONDITIONALLY a) SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS SITTING IN THE
STATE OF NEW YORK AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE
MADE UPON IT IN ANY LEGAL PROCEEDING ARISING OUT OF OR IN CONNECTION WITH
THIS CHARTER OR THE OTHER CHARTER DOCUMENTS BY SERVICE OF PROCESS AS
PROVIDED BY NEW YORK LAW, b) WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS CHARTER OR THE
OTHER CHARTER DOCUMENTS BROUGHT IN ANY NEW YORK STATE COURT OR FEDERAL
COURT SITTING IN THE STATE OF NEW YORK, c) WAIVES ANY CLAIMS THAT ANY
LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM, d) CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING OF COPIES
THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO
THE CHARTERER AT THE ADDRESS SET FORTH HEREIN AND e) AGREES THAT ANY
LEGAL PROCEEDING AGAINST THE CHARTERER ARISING OUT OF, RELATED TO OR IN
CONNECTION WITH THIS CHARTER OR THE OTHER CHARTER DOCUMENTS OR THE
OBLIGATIONS HEREUNDER OR THEREUNDER MAY BE BROUGHT IN ANY COURT OF
COMPETENT JURISDICTION IN THE STATE OF NEW YORK. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE OWNER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE CHARTERER OR ANY OF THE OTHER MEMBER OF THE CHARTERER
GROUP IN ANY OTHER JURISDICTION OR TO SERVE PROCESS IN ANY MANNER
PERMITTED BY APPLICABLE LAW.
19.14 Agent for Service of Process
The Charterer hereby irrevocably designates The Xxxxxxxx-Xxxx
Corporation, with offices at 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxx Xxxx 00000-
2290, as agent to receive for and on behalf of the Charterer service of
process in New York. In the event that The Xxxxxxxx-Xxxx Corporation
System, Inc. resigns or ceases to serve as the Charterer's agent for
service of process hereunder, the Charterer agrees forthwith (a) to
designate another agent for service of process in the State of New York
and (b) to give prompt written notice to the Owner of the name and
address of such agent. The Owner agrees to use reasonable efforts to
cause a copy of such process served on such agent to be promptly
forwarded to the Charterer at its address set forth herein, and the
Charterer agrees that the failure of the Charterer to receive such copy
shall not impair or affect in any way the validity of such service of
process or of any judgment based thereon. The Charterer agrees that the
failure of its agent for service of process to give any notice of any
such service of process to the Charterer shall not impair or affect the
validity of such service or of any judgment based thereon. If, despite
the foregoing, there is for any reason no agent for service of process of
the Charterer available to be served, then the Charterer further
irrevocably consents to the service of process by the mailing thereof by
the Owner by registered or certified mail, postage prepaid, to the
Charterer at its address herein. Nothing in this Section 19.14 shall
affect the right of the Owner to serve legal process in any other manner
permitted by law or affect the right of the Owner to bring any action or
proceeding against the Charterer or its property in the courts of any
other jurisdiction.
IN WITNESS HEREOF, the parties hereto have executed this Charter on
the 28th day of November, 1995.
DEEP SEA INVESTORS, L.L.C. READING & XXXXX DRILLING CO.
By: GATX MARINE INVESTORS
CORPORATION, Member
By: By:
Name: Name:
Title: Title:
By: XXXXXX FINANCIAL LEASING, INC.
Member
By:
Name:
Title:
By: MDFC EQUIPMENT LEASING CORPORATION,
Member
By:
Name:
Title:
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SCHEDULE A
DESCRIPTION OF VESSEL X.X. XXXXX, XX.,
INCLUDING SPECIFICATIONS
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SCHEDULE C
CHARTERER'S INSURANCE
As specified in Article 15, the Charterer shall maintain the following
insurance coverage:
1. Workmen's Compensation and Employers' Liability Insurance
All of the Charterer's employees shall be covered for statutory benefits
as set forth and required by applicable law in the Area of Operation or
such other jurisdiction under which the Charterer may become obligated to
pay benefits. Employers' Liability insurance, including appropriate
maritime coverage covering all employees, shall be provided with minimum
primary policy limits as required by applicable statute, or U.S. $1
million per occurrence, whichever is greater.
2. Comprehensive General Liability
Insurance coverage shall be provided for liability arising from all
operations of the Charterer. The policy shall include coverage for
premises and operations, independent contractors, completed operations,
and contractual liability (or their equivalents). Insurance coverage
shall also be provided for all owned, hired, and nonowned vehicles. The
minimum primary policy limits shall be U.S. $1 million single limit per
occurrence under the General Liability policies. Automobile Liability
insurance shall have minimum policy limits of U.S. $1,000,000 single
limit per occurrence, or such greater amount as required by law.
3. Protection and Indemnity (Marine Liability) Insurance
Full form marine protection and indemnity insurance, including, but not
limited to, sudden and accidental pollution liability and contractual
liability coverage or equivalent insurance (including equivalent
insurance against liability for fines and penalties arising out of the
operation of the Vessel) with such club or under forms of policies
approved by the Owner. Such protection and indemnity insurance shall be
maintained in the broadest forms generally available in the United States
market, shall be in an amount not less than that carried by experienced
and responsible companies engaged in the drilling of petroleum, shall
include a cross-liability endorsement and shall be placed through
independent brokers of recognized standing and with first-class
underwriters reasonably acceptable to the Owner. No hull and machinery
or protection and indemnity insurance shall provide for a deductible
amount in excess of $500,000 with respect to the Vessel without the prior
written consent of the Owner.
4. Excess Liability
The Charterer shall carry Excess Liability Insurance in amounts not less
than $200 million each occurrence in addition to and in excess of all
primary Liability Coverages carried by Charterer, including but not
limited to insurance required under Paragraphs 1, 2 and 3 (oil pollution
sublimit $80 million per Paragraph 6).
5. Marine Physical Damage, Including Hull and Machinery
All risk Marine and hull and machinery shall be provided with a limit
equal to that normally carried by experienced and responsible companies
engaged in offshore drilling, but shall not be less than the greater of
(a) 110% of the Stipulated Loss Value of the Vessel; or (b) the Fair
Market Sale Value of the Vessel. Coverage shall include collision
liability and navigation limits adequate for the Vessel's trade.
6. Oil Pollution Insurance
Oil pollution insurance coverage issued by the Vessel's P & I Club or
equivalent coverage in the amount of not less than US $80,000,000 per
occurrence, unless additional insurance or proof of financial
responsibility of a greater amount shall be required by a governmental
authority, in which case such greater amount shall be obtained and kept
in full force and effect by the Charterer. The Charterer shall maintain
insurance, if available, covering similar oil removal risks or
liabilities and civil or criminal penalties incident thereto and not
attributable to the action or inaction of the Owner under any law,
regulation or judicial decision of any of the United States of America or
foreign jurisdiction or jurisdictions or political subdivision thereof
applicable to the Vessel or its operations to the extent such insurance
is requested in writing by the Owner and recommended by an independent
marine insurance broker as insurance which it would be imprudent not to
carry for the protection of the Charterer and the Owner in view of the
nature of the Vessel and the Vessel's operations.
7. War, Political Risk, Confiscation and Expropriation Insurance
If and to the extent that the Vessel is operated outside of the
territorial waters and/or the Outer Continental Shelf of the United
States (and in addition to any coverage required by the Owner for such
operations under this Charter), War, Political Risk, Confiscation and
Expropriation Insurance shall be provided for the Vessel with a limit
equal to the value insured under Paragraph 5 above.
8. Other Losses
Losses not covered by the above stated policies because of deductibles
and policy limits stated above shall be borne according to the liability
and indemnity provisions of this Charter.
9. Owner Group as Additional Insured
All coverages and other insurance policies carried by the Charterer or
that the Charterer is required at any time to maintain pursuant to this
Charter shall name Owner Group as an additional insured and loss payee
for all risks and losses for which the Charterer is liable under this
Charter.
10. Additional Provisions
The Charterer will deliver to the Owner and each of the Investors copies
of all cover notes and certificates of insurance and, if requested by the
Owner copies of all binders and policies with respect to insurance
carried on the Vessel. On or before the Delivery Date of the Vessel, and
on each anniversary of the Delivery Date, and each time there is a
reduction or material change in the insurance coverage carried on the
Vessel, the Charterer will furnish to the Owner and each of the Investors
a detailed report signed by independent marine insurance brokers (who may
be the insurance brokers regularly employed by the Charterer) appointed
by the Charterer and reasonably acceptable to the Owner, describing the
insurance policies then carried and maintained on the Vessel (including
the names of the underwriters, the types of risk covered by such polices,
the amount insured thereunder and the expiration date thereof) and
stating that in the opinion of said insurance brokers such insurance is
adequate and reasonable for protection of the Owner, is in compliance
with the terms of Article 15 and is comparable with that carried by other
responsible operators of similar drilling vessels. All policies shall
include the following: (i) breach of warranty protection to the Owner
Group, (ii) waiver of subrogation clause and (iii) at least 30 days
prior written notice of cancellation or material modification. The
insurance shall be primary, without right of contribution from any other
insurance which may be carried by the Owner Group, and contain a waiver
of set off of premiums against claims proceeds and provide for no
recourse for premium payments by the Owner Group.
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SCHEDULE D
STIPULATED LOSS VALUE
------------------------------------------------------------------------------
SCHEDULE E
PENDING LITIGATION
Proceedings disclosed in Reading & Xxxxx' Report on Form 10-Q dated
September 30, 1995 filed with the Securities & Exchange Commission.
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SCHEDULE F
Computation of Basic Hire Upgrade Adjustment
Effective as of each Upgrade Payment Date after the Delivery Date, the
Basic Hire shall be adjusted for the amount to be funded by the Owner in
respect of the Upgrade Program on such Upgrade Payment Dates using the U.S.
Treasury note rate published in The Wall Street Journal for such notes
maturing on or about the Expiration Date as adjusted and illustrated below,
assuming a November 15, 1995 funding of the first Upgrade Program
installment payment and the Purchase Price under the MOA, the occurrence of
the second installment payment of the Upgrade Program on February 15, 1996
and the third installment payment of the Upgrade Program on Completion,
assumed to be May 15, 1996.
11/15/95 Close (Index change as of 11/13/ XXX - 00 xx)
Xxxxx: Rental 1.171945 Implicit to Cap 10.6841
Nov portion of Upgrade: Rental 1.1845983 Implicit to Cap 10.8726
Weighted 50:2.5: Rental 1.1725475 Implicit 10.6931
2/15/96 Close (at original 6/22 index rate)
Feb portion of Upgrade: Rental 1.21079696 Implicit to Cap 11.0884
5/16/96 Close (at original 6/22 index rate)
May portion of Upgrade: Rental 1.22053144 Implicit to Cap 11.0493
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Exhibit A to Charter
FORM OF CERTIFICATE OF COMPLETION
The following certificate (this "Certificate") is required for the
occurrence of the Upgrade Completion (as defined in the Bareboat Charter
(the "Charter") dated as of November 28, 1995 between Deep Sea Investors,
L.L.C., a Delaware limited liability company (the "Owner"), and Reading &
Xxxxx Drilling Co., an Oklahoma corporation (the "Charterer"). Unless
otherwise defined herein, all capitalized terms used herein have the
meanings assigned to such terms in the Charter.
The Charterer hereby certifies as follows:
(a) all environmental, governmental and other operating permits and
approvals necessary, as of the date hereof, for the continued operation of
the Vessel have been obtained and are in full force and effect, there have
been no defaults under any such permits and approvals and the Charterer has
no knowledge that any such permits or approvals will be suspended or
terminated prior to the scheduled expiration thereof;
(b) all insurance required by the Charter is in full force and effect;
(c) the Charter, the Charter Documents, the Drilling Contract and each
Security Document is in full force and effect;
(d) no Event of Default or Default has occurred and is continuing;
(e) all work performed in connection with the construction of the
Upgrade Program has been accepted by the Charterer without material
exception;
(f) the Vessel is capable of being operated for the purposes for which
it has undergone the Upgrade Program without material modification thereto;
(g) the Vessel Upgrade has been completed in accordance with the
plans, specifications and schedules set forth in the Upgrade Program,
industry standards and accepted practices;
(h) the statements contained in the Certificate of Independent
Engineer are true, complete and correct;
(i) the Charterer has paid all costs and expenses for the Upgrade
Program other than for Upgrade Nonseverables, which have been paid by the
Owner; and
(j) the Upgrade Nonseverables Cost is $______, which amount has been
incurred and computed in accordance with the terms of the Charter and is
properly reimburseable by the Owner thereunder.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
_____ day of ________________________, 199___.
READING & XXXXX DRILLING CO.
By:
Name:
Title:
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Exhibit B to Charter
FORM OF CERTIFICATE OF DELIVERY
The following certificate (this "Certificate") is delivered
pursuant to Section 3.2 of the Bareboat Charter (the "Charter") dated as of
November 28, 1995 between Deep Sea Investors, L.L.C., a Delaware limited
liability company (the "Owner"), and Reading & Xxxxx Drilling Co., an
Oklahoma corporation (the "Charterer"). Unless otherwise defined herein,
all capitalized terms used herein have the meanings assigned to such terms
in the Charter.
The Charterer hereby certifies as follows:
0.14.1 the Charterer has inspected the Vessel and made such
review, inquiry and other investigation necessary or appropriate to deliver
this Certificate.
0.14.2 the Charterer has accepted the Vessel for all
purposes under the Charter and confirms that the Vessel is in compliance
with all requirements of the Charter and that the Vessel is seaworthy, in
accordance with specifications, in good working order, condition and repair
and without defect or inherent vice in title, condition, design, operation
or fitness for use, whether or not discoverable by the Charterer as of the
date hereof, and free and clear of all Liens other than Permitted Liens.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of ________________________, 199___.
READING & XXXXX DRILLING CO.
By:
Name:
Title:
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Exhibit C to Charter
FORM OF CERTIFICATE FOR REIMBURSEMENT
The following certificate (this "Certificate") is delivered
pursuant to Section 5.10 of the Bareboat Charter (the "Charter") dated as of
November 28, 1995 between Deep Sea Investors, L.L.C., a Delaware limited
liability company (the "Owner"), and Reading & Xxxxx Drilling Co., an
Oklahoma corporation (the "Charterer"). Unless otherwise defined herein,
all capitalized terms used herein have the meanings assigned to such terms
in the Charter.
The Charterer hereby certifies as follows:
(a) the Charterer has visited the Shipyard, inspected
the Vessel and the work under the Upgrade Program and made such review,
inquiry and other investigation necessary or appropriate to deliver this
Certificate;
(b) each of the Charter, the Charter Documents, the
Drilling Contract and the Security Documents is in full force and effect;
(c) no Event of Default or Default has occurred and is
continuing;
(d) all work performed to date for the Upgrade Program
has been accepted by the Charterer without material exception and has been
completed in accordance with the plans, specifications and schedules of the
Upgrade Program, industry standards and accepted practices;
(e) the statements contained in the Certificate of
Independent Engineer attached hereto are true, complete and correct;
(f) the Charterer has paid all costs and expenses of the
Upgrade Program that are currently due, except any portion of Upgrade
Nonseverable Cost, all of which have been (or will be from the proceeds of
the advance requested under clause (g) below) and no Lien encumbers the
Vessel or any interest of the Owner therein (other than Permitted Liens) and
no litigation, investigation or proceeding of or before any governmental
authority or arbitrator is pending or threatened by or against the Charterer
or with respect to the Vessel or any interest of the Owner therein or with
respect to the Charter Documents or any of the transactions contemplated
thereby, nor is any litigation, investigation or proceeding of or before any
governmental authority or arbitrator pending or threatened by or against the
Charterer or any of their respective properties or revenues which could
reasonably be expected to create such a Lien or otherwise to have a material
adverse effect on the financial or other condition of the Charterer or its
ability to perform its obligations under the Charter Documents;
(g) the Charterer hereby requests reimbursement under
the Charter of $______, which amount constitutes a portion of the Upgrade
Nonseverable Cost, has been properly incurred and computed in accordance
with Article 5 of the Charter and has been properly paid by the Charterer
thereunder and is properly reimburseable by the Owner under the Charter; and
(h) the representations and warranties of the members of
the Charter Group contained in the Charter Documents are true and correct as
of the date hereof as though made on and as of the date hereof; and
(i) the Charterer agrees that the Basic Hire payable on
each Payment Date shall be increased to $________ and the Schedule D to the
Charter is hereby deleted and Schedule D in the form of Exhibit A attached
hereto is substituted in lieu thereof.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of ________________________, 199___.
READING & XXXXX DRILLING CO.
By:
Name:
Title:
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Exhibit D to Charter
FORM OF COMPLETION CERTIFICATE OF INDEPENDENT ENGINEER
The following certificate (this "Certificate") is delivered
pursuant to Section 5.10 of the Bareboat Charter (the "Charter") dated as of
November 28, 1995, between Deep Sea Investors, L.L.C., a Delaware limited
liability company (the "Owner"), and Reading & Xxxxx Drilling Co., an
Oklahoma corporation (the "Charterer"). Unless otherwise defined herein,
all capitalized terms used herein have the meanings assigned to such terms
in the Charter.
[Name of the Independent Engineer], a [type of entity] organized
under the laws of _____________ (the "Independent Engineer"), acting by and
through ___________, its duly authorized representative, does hereby certify
as follows:
(a) the Independent Engineer has visited the Shipyard,
inspected the Vessel and the work under the Upgrade Program and made such
review, inquiry and other investigation necessary or appropriate to deliver
this Certificate;
(b) the workmanship, quality and construction of the
Upgrade Program has been performed in accordance with the plans,
specifications and schedules for each portion of the Upgrade Program and in
accordance with industry practice;
(c) the Upgrade Program has been completed according to
its plans, specifications and schedule at a cost not to exceed the sum of:
(i) $10,000,000 and (ii) amounts to be expended pursuant to Change Orders
approved by the Owner in accordance with the terms of the Charter;
(d) all guaranties of workmanship, quality, design,
equipment, materials, construction and processes have been met or, to the
extent that any such guaranty has failed to have been met, such failure is
immaterial to the successful completion of the Upgrade Program;
(e) any performance tests under the Upgrade Program
required to have been successfully completed have been successfully
completed or, to the extent that any such test has been failed, such failure
is immaterial to the successful completion of the Upgrade Program; and
(f) to the best knowledge of the Independent Engineer
after due inquiry, no Lien encumbers the Vessel or any part thereof other
than Permitted Liens and no basis exists for the assertion of any such Lien.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this ______ day of _______________________.
By:
Name:
Title:
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Exhibit E to Charter
FORM OF REIMBURSEMENT CERTIFICATE OF INDEPENDENT ENGINEER
The following certificate (this "Certificate") is delivered
pursuant to Section 5.10 of the Bareboat Charter (the "Charter") dated as of
November 28, 1995, between Deep Sea Investors, L.L.C., a Delaware limited
liability company (the "Owner"), and Reading & Xxxxx Drilling Co., an
Oklahoma corporation (the "Charterer"). Unless otherwise defined herein,
all capitalized terms used herein have the meanings assigned to such terms
in the Charter.
[Name of the Independent Engineer], a [type of entity] organized
under the laws of _____________ (the "Independent Engineer"), acting by and
through ___________, its duly authorized representative, does hereby certify
as follows:
(a) the Independent Engineer has visited the Shipyard,
inspected the Vessel and the work under the Upgrade Program and made such
review, inquiry and other investigation necessary or appropriate to deliver
this Certificate;
(b) the workmanship, quality and construction of the Upgrade
Program has been performed to date in accordance with the plans,
specifications and schedules for each portion of the Upgrade Program and in
accordance with industry practice;
(c) in the opinion of the Independent Engineer and as far as
the Independent Engineer can reasonably ascertain, except as described on
Schedule A attached hereto, the Upgrade Program should be completed
according to its plans, specifications and schedule at a cost not to exceed
the sum of: (i) $10,000,000 and (ii) amounts to be expended pursuant to
Change Orders approved by the Owner in accordance with the terms of the
Charter;
(d) all guaranties of workmanship, quality, design, equipment,
materials, construction and processes required to have been met on or before
the date hereof, have been met or, to the extent that any such guaranty has
failed to have been met, such failure is immaterial to the successful
completion of the Upgrade Program;
(e) any performance tests under the Upgrade Program required
to have been successfully completed on or before the date hereof, have been
successfully completed or, to the extent that any such test has been failed,
such failure is immaterial to the successful completion of the Upgrade
Program; and
(f) to the best knowledge of the Independent Engineer after
due inquiry, no Lien encumbers the Vessel or any part thereof other than
Permitted Liens and no basis exists for the assertion of any such Lien.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this ______ day of _______________________.
By:
Name:
Title:
