EXHIBIT 10.159
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LIMITED LIABILITY COMPANY AGREEMENT
BETWEEN
CONOCO DEVELOPMENT II INC.
AND
RB DEEPWATER EXPLORATION II INC.
DATED APRIL 30, 1997
LIMITED LIABILITY COMPANY AGREEMENT
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TABLE OF CONTENTS
I. DEFINITIONS
1.1 Definitions
II. FORMATION OF COMPANY; FILINGS
2.1 Formation
2.2 Registered Office and Registered Agent.
2.3 Filings
2.4 Relationship of the Parties
III. NAME; PURPOSE; PLACE OF BUSINESS; TERM
3.1 Name
3.2 Purposes
3.3 Place of Business
3.4 Term
IV. MEMBERS; RESTRICTION ON DISPOSITION OF INTEREST; PREFERENTIAL RIGHT OF
PURCHASE
4.1 Members
4.2 Restrictions on the Disposition of an Interest
4.3 Preferential Right of Purchase
4.4 Disposition Documents
4.5 Legality
4.6 Status After Disposition
4.7 Disposition Costs
4.8 Limitation on Transfer
V. CONTRIBUTIONS; DISTRIBUTIONS; FAILURE TO MAKE CONTRIBUTIONS TIMELY;
SECURITY INTEREST
5.1 Initial Contributions
5.2 Cost Overrun Contributions.
5.3 Additional Contributions
5.4 Distributable Cash
5.5 Failure to Make Contributions
5.6 Grant of Security Interest
5.7 Secured Party.
VI. TAX MATTERS
6.1.1 Tax Matters
6.1.2 Information Request by TMP
6.1.3 TMP Agreements with IRS
6.1.4 Inconsistent Treatment of Company Item
6.1.5 Communication of Proceedings to Members
6.1.6 Requests for Administrative Adjustment
6.1.7 Judicial Proceedings
6.2 Income Tax Compliance and Capital Accounts
6.2.1 Tax Returns
6.2.2 Fair Market Value Capital Accounts
6.2.3 Information Request
6.3 Elections
6.3.1 General Elections
6.3.2 Other Elections or Consents
6.4 Capital Contributions and FMV Capital Accounts
6.4.1 Capital Contributions
6.4.2 FMV Capital Accounts
6.5 Company Allocations
6.5.1 FMV Capital Account Allocations
6.5.2 Tax Returns and Tax Basis Capital Account Allocation
6.6 Termination and Liquidating Distributions
6.6.1 Termination
6.6.2 Section 708(b)(1)(A) Termination
6.6.3 Balancing
6.6.4 Final Distribution
6.7 Transfers, Indemnification, and Correspondence
6.7.1 Transfers of Company Interests
6.7.2 Indemnification
6.7.3 Correspondence
6.8 No Interest
6.9 Return of Capital
VII. ADMINISTRATIVE MATTERS
7.1 Books and Records
7.2 Inspection
7.3 Bank Accounts; Investments
7.4 Monthly Progress Reports
▇▇▇▇.▇▇▇▇▇▇▇▇▇▇; MEMBERS COMMITTEE; MANAGER; STANDARD OF CARE;
INDEMNIFICATION
8.1 Management
8.2 Members Committee
8.3 Manager
8.4 Standard of Care
8.5 Indemnification of the Representatives and the Manager
IX. VOLUNTARY WITHDRAWAL
9.1 Resignation by Member
9.2 Wrongful Withdrawal
X. [DELETED]
XI. DISSOLUTION; RECONSTITUTION; WINDING UP
11.1 Events Deemed to Cause Dissolution
11.2 Distribution of Assets
11.3 Termination
XII. [DELETED]
▇▇▇▇.▇▇▇▇▇▇▇▇▇
13.1 Insurance Coverage
13.2 Certain Requirements
XIV. MISCELLANEOUS
14.1 Offset
14.2 Choice of Law; Submission to Jurisdiction
14.3 Notices
14.4 Entire Agreement
14.5 Effect of Waiver or Consent
14.6 Amendment or Modification
14.7 Binding Effect; Joinder of Additional Parties
14.8 Counterparts
14.9 Severability
14.10 Headings
14.11 Gender; Articles and Sections
14.12 Indemnity
14.13 Further Assurances
14.14 Independent Conduct
14.15 Deemed Assent
14.16 Signing Members; Certificate of Authority
14.17 Withholding or Granting of Consent
14.18 Waiver of Certain Rights
14.19 U.S. Currency
14.20 Dispute Resolution
14.21 Proprietary Information
14.22 Publicity
XV. DISSOLUTION
15.1 Dissolution
15.2 Ancillary Agreements
Exhibit "A" - Description of Drillship
Exhibit "B" - Indemnification Agreements
Exhibit "C" - Sharing Ratios
Exhibit "D" - Certificate of Formation
Exhibit "E" - Form of Demand Promissory Note (Equity Contributions)
Exhibit "F" - Form of Promissory Note (Loans)
Exhibit "G" - Marine Services Agreement
Exhibit "H" - Drilling Services Agreement
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LIMITED LIABILITY COMPANY AGREEMENT
This Limited Liability Company Agreement is made and entered into on
April 30, 1997 by and between Conoco Development II Inc., a Delaware
corporation having its principal office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (sometimes referred to as "Conoco") and RB Deepwater
Exploration II Inc., a Nevada corporation having its principal office at
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (sometimes referred to
as "Reading & ▇▇▇▇▇").
FOR AND IN CONSIDERATION of the mutual covenants, rights, and
obligations contained herein, the benefits to be derived therefrom, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Members hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms
shall have the respective meanings indicated:
"Act" means the Delaware Limited Liability Company Act, 6 Del.
C. Sections 18-101, et seq., as amended, from time to time.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited
to all directors and officers of such Person), controlled by, or
under direct or indirect common control with such Person.
"Assets" shall mean the Drillship and all other assets of the
Company of every kind whatsoever, real or personal, tangible or
intangible.
"Agreement" shall mean this Limited Liability Company
Agreement.
"Bankrupt" or "Bankruptcy" shall mean any of the events set out
in Section 18-304 of the Act happening with respect to a Member.
"Base Term" shall mean the period of time commencing on the
date of this Agreement and ending on the date one day after the
later of (i) the completion of the Drilling Contracts, including any
extensions or renewals thereof, or (ii) the complete discharge of
the Purchase Note, including all interest accrued thereon.
"Builder" shall mean collectively Samsung Heavy Industries Co.,
Ltd. and Samsung Corporation.
"Company" shall mean Deepwater Drilling II L.L.C.
"Control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under direct or indirect common
control") shall mean, with respect to a Person that is a
corporation, the right to the exercise, directly or indirectly, more
than 50% of the voting rights attributable to the shares of the
controlled Person normally entitled to vote for the election of
directors and, with respect to a Person that is not a corporation,
the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of the controlled
Person.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations issued thereunder.
"Default Interest Rate" shall mean a rate equal to the lesser
of (i) five (5) percentage points in excess of a varying rate per
annum that is equal to the interest rate publicly quoted by Texas
Commerce Bank, N.A., Houston, Texas, from time to time, as its prime
commercial rate, with adjustments in such varying rate to be made on
the same date as any change in the aforesaid prime rate, or (ii) the
maximum non-usurious rate permitted by applicable law.
"Delinquent Member" shall have the meaning attributed to it in
Section 5.5.
"Designated Representative" shall mean (a) when used with
respect to Reading & ▇▇▇▇▇, or any successor or permitted assign,
the chief executive officer of the ultimate parent of Reading &
▇▇▇▇▇ or any successor or permitted assign of Reading & ▇▇▇▇▇; and
(b) when used with respect to Conoco, or any successor or permitted
assign, a person who is at least a Vice President of Conoco Inc., or
the President of the successor or permitted assign of Conoco.
"Dispose" (or "Disposition") shall mean to sell or otherwise
transfer legal or beneficial ownership to any property or interest
in property, real or personal (or the act of such sale or transfer).
"Distributable Cash" means all cash of the Company in excess of
the amount which the Members Committee determines is required to
meet the Company's obligations (including reserves for projected
expenditures, working capital and contingencies).
"Disposition Notice" shall have the meaning attributed to it in
Section 4.3.
"Drilling Contracts" shall mean, collectively, the drilling
contracts (with options as provided therein) contemplated to be
awarded by Conoco Drilling Inc. and Reading & ▇▇▇▇▇ Corporation to
the Company for the Drillship, for minimum terms, in the aggregate,
of five (5) years, such drilling contracts to be on terms and
conditions satisfactory to the Members.
"Drillship" shall mean the shipshape self-propelled offshore
drilling vessel described in Exhibit "A" hereto, together with all
of her machinery and equipment, including without limitation all
marine, drilling and production equipment, drill string, risers,
blowout prevention equipment, spare and repair parts, inventory,
whether located on the vessel or on shore, belonging to the vessel
(excluding, however, equipment to be leased from third parties).
"First Member" shall have the meaning attributed to it in
Section 4.3.
"Indemnification Agreement" shall mean, with respect to Reading
& ▇▇▇▇▇, the indemnification agreement to be executed by Reading &
▇▇▇▇▇ Corporation, and with respect to Conoco the indemnification
agreement to be executed by Conoco Inc., each such indemnification
agreement to be in the form attached as Exhibit "C".
"Independent Accountants" shall mean Price Waterhouse LLP,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or such other firm of certified public
accountants, as may from time to time be designated by the Members
Committee.
"Manager" shall mean such Person as may be designated as
Manager from time to time by the Members Committee.
"Member " or "Members" shall mean the Persons named in Section
4.1 or any Member who is admitted as a substitute Member pursuant
hereto.
"Members Committee" shall mean the committee described in and
functioning according to Section 8.2.
"Membership Interest" shall mean the ownership interest of a
Member in the Company (which shall be considered personal property
for all purposes) consisting of (i) such Member's Sharing Ratio of
the entire ownership interests of the Company, (ii) such Member's
right to vote or grant or withhold consent with respect to Company
matters as provided herein or in the Act, and (iii) such Member's
other rights and privileges as herein provided or as provided in the
Act or otherwise at law.
"Non-Delinquent Member" shall have the meaning attributed to
it in Section 5.5(b).
"Person" shall mean an individual, corporation, trust,
unincorporated association, or other entity or association.
"Permitted Security Interest" means the security interest given
under Section 5.6 of the Agreement, any security interests given to
an interim construction lender or lenders to the Company, and any
other security interest in a Membership Interest given by one or
more Members which is consented to in writing by all other Members.
"Proprietary Information" means patents, trade secrets,
proprietary systems, designs, and processes, and technical or
business know-how, which is not in the public domain.
"Purchase Note" shall mean the promissory note or notes
constituting the permanent financing by the Company of the purchase
of the Drillship, such note or notes not to have a term greater than
five years from delivery of the Drillship by the Builder, or to be
in a principal amount to exceed eighty percent (80%) of the
acquisition cost of the Drillship, without the prior written
approval of the Members (such financing to be on a basis of recourse
limited to the Drillship, her earnings and insurances); Conoco or an
Affiliate has the option to provide such permanent financing for the
Company provided: (i) the interest rate is no greater than 25 basis
points in excess of that interest rate and on such other terms as
are comparable to any other permanent financing available to the
Company, and (ii) such option is exercised in writing by Conoco to
the Company no later than ninety (90) days prior to the scheduled
delivery of the Drillship by the Builder to the Company .
"Representatives" shall have the meaning attributed to it in
Section 8.2(c).
"Second Member" shall have the meaning attributed to it in
Section 4.3.
"Sharing Ratio" shall mean, with respect to each Member, as of
the date of this Agreement, the percentage set forth beside such
Member's name on Exhibit "C" to this Agreement.
"Shipbuilding Contract" means the Contract dated February 7,
1997 for the construction and sale of the Drillship between
Deepwater Drilling L.L.C. and Builder, to be assigned by Deepwater
Drilling L.L.C. to Company.
"TMP" shall have the meaning attributed to it in Section 6.1.
ARTICLE II
FORMATION OF COMPANY; FILINGS
2.1 Formation. The Company shall be organized by the Members upon
execution and delivery of this Agreement and the execution and filing of
the Certificate of Formation of the Company to the Delaware Secretary of
State in accordance with and pursuant to the Act, substantially in the form
attached as Exhibit "D" to this Agreement. Conoco or Reading & ▇▇▇▇▇ shall
be an "authorized person" within the meaning of the Act for purposes of
executing the Certificate of Formation. The Manager may provide the
Members with written evidence of their Membership Interest in such form as
the Members Committee may from time to time determine, provided that, if
issued, such written evidence shall always indicate that a Member shall not
transfer its Membership Interest except in accordance with the terms of
this Agreement. Except as provided to the contrary in this Agreement, the
rights and obligations of the Members shall be governed by the provisions
of the Act.
2.2 Registered Office and Registered Agent. The Company's initial
registered office shall be at the office of its registered agent at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the name of its initial
registered agent at such address shall be The Corporation Trust Company.
The registered office and registered agent may be changed from time
to time by filing the address of the new registered office and/or the name
of the new registered agent with the Delaware Secretary of State pursuant
to the Act.
2.3 Filings. The Members, the Members Committee and/or the Manager,
as applicable, shall execute, deliver and file such additional documents
and perform such additional acts consistent with the terms of this
Agreement as may be necessary to comply with the requirements of law for
the formation, qualification, and operation of a limited liability company
in each jurisdiction in which the Company shall conduct business.
2.4 Relationship of the Parties. The Members understand and agree
that the arrangement and undertakings evidenced by the Agreement result in
a partnership for purposes of federal income taxation and certain state
income tax laws which incorporate or follow federal income tax principles.
For every other purpose of the Agreement, the Members understand and agree
that their legal relationship to each other and to any third parties under
applicable state law is that of members of a limited liability company and
not as a partnership.
ARTICLE III
NAME; PURPOSE; PLACE OF BUSINESS; TERM
3.1 Name. The name of the Company shall be "Deepwater Drilling II
L.L.C.", and the business of the Company shall be conducted under such name
or under any other name or names as the Members Committee may from time to
time elect, or as may be necessary to comply with the laws of each
jurisdiction in which the Company conducts, or proposes to conduct,
business.
3.2 Purposes. The purposes of the Company are (a) to cause the
Drillship to be built and equipped, as described in Exhibit "A", to take
delivery of the Drillship from the Builder, to operate the Drillship and
perform the Drilling Contracts and other drilling and related contracts
obtained by the Company for the Drillship, and to carry out any and all
modifications to the Drillship deemed necessary or appropriate by the
Members Committee (including modifications to the Drillship which might
change the overall use of same from a mobile offshore drilling unit to a
floating production, storage and offloading vessel), (b) to obtain the
necessary permanent and construction financing [it being understood and
agreed that with respect to the construction financing each of the Members
shall provide, or cause to be provided, the necessary cost overrun
guaranty, to the extent of its respective Sharing Ratio, to support such
financing for the Company from third parties to enable the Company to
acquire the Drillship (including entering into the Purchase Note)], and to
enter into from time to time such other financing arrangements as may be
necessary, appropriate, or advisable to enable the Company to accomplish
its purposes and to mortgage, pledge, assign, grant a security interest in,
or otherwise encumber the Drillship, its earnings and insurances, and any
or all of the other Company assets to secure the Purchase Note and such
other financing arrangements, (c) to sell, assign, lease, exchange, or
otherwise Dispose of, or refinance or additionally finance, all or
substantially all of the Company's interest in one or more or all of its
assets, (d) to maximize the profits of the Company, and (e) to engage in
all activities and to enter into, exercise the rights and enjoy the
benefits under, and discharge the obligations of the Company pursuant to,
all contracts, agreements, and documents that may be necessary,
appropriate, or advisable to enable the Company to accomplish the purposes
set forth in clauses (a), (b), (c) and (d) of this sentence, and (f) any
other lawful business purpose or activity that may be legally exercised by
a limited liability company under the Act, as the Members may agree.
3.3 Place of Business. The principal place of business of the
Company shall be at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
The Company may establish offices at such other places within or outside
the State of Texas as the Members Committee may from time to time
designate.
3.4 Term. The Company shall be deemed to have commenced effective
as of the date the Certificate of Formation of the Company is filed with
the Delaware Secretary of State. The Company shall continue until the
close of Company business on December 31, 2027, unless sooner terminated as
provided in this Agreement.
ARTICLE IV
MEMBERS; RESTRICTION ON DISPOSITION OF INTEREST;
PREFERENTIAL RIGHT OF PURCHASE
4.1 Members. Simultaneously with the execution of this Agreement,
Conoco and Reading & ▇▇▇▇▇ are hereby admitted as Members of the Company.
4.2 Restrictions on the Disposition of an Interest. Each Member
shall be entitled from time to time, without the prior consent of the
Members Committee, but subject to the provisions of Sections 4.4, 4.5, 4.6,
and 4.7, to Dispose of all of its Membership Interest in the Company to an
Affiliate of such Member. Except as set forth in the immediately preceding
sentence, no Member shall have the right to effect a Disposition of all or
any part of its Membership Interest in the Company unless and until (i) the
consent of the Members Committee has been obtained and (ii) there has been
compliance with the provisions of Section 4.3, 4.4, 4.5, 4.6, and 4.7. If
the Members Committee consents to the Disposition of a Membership Interest
in the Company, the provisions of Section 4.3 shall then become applicable
to the Disposition in question. Any attempted Disposition by a Person of a
Membership Interest or right, or any part thereof, in or in respect of the
Company in contravention of this Section 4.2 shall be, and is hereby
declared, null and void ab initio.
4.3 Preferential Right of Purchase. (a) Subject to Section 4.2
should any Member at any time desire to Dispose of all or a portion of its
Membership Interest in the Company pursuant to a bona fide offer from
another Person (other than an Affiliate), such Member (the "First Member")
shall promptly give notice (the "Disposition Notice") thereof to the other
Member (hereinafter referred to as the "Second Member"). The Disposition
Notice shall set forth all relevant information in respect of the proposed
Disposition, including, without limitation, the name and address of the
prospective acquirer and each Person that Controls the prospective
acquirer, the purchase price (all of which must be payable in cash), and
the terms of any delayed payment of the purchase price. The Second Member
shall have the optional preferential right (to be exercised by notice to
the First Member given no later than ninety days after the Second Member's
receipt of the Disposition Notice) to acquire, for the same purchase price
and on the same terms of any delayed payment that are set forth in the
Disposition Notice, the Membership Interest that the First Member proposes
to Dispose. If the Second Member does not elect to exercise the optional
right set forth in the immediately preceding sentence within the time
period set forth therein, the First Member shall have the right, subject to
compliance with the provisions of Sections 4.2, 4.4, 4.5, 4.6 and 4.7, to
Dispose of the Membership Interest described in the Disposition Notice
strictly in accordance with the terms of the Disposition Notice for a
period of sixty-five days after the expiration of the above described
ninety day preferential right period. If the First Member fails so to
Dispose of the Membership Interest within such sixty-five day period, the
proposed Disposition shall again become subject to the preferential right
set forth in this Section 4.3.
(b) If the Second Member exercises the preferential right set forth
in Section 4.3(a), the closing of the acquisition by the Second Member of
the First Member's Membership Interest shall be held at the principal place
of business of the Company on a date mutually acceptable to the First
Member and the Second Member, but in no event more than sixty days after
receipt by the First Member of notice of the Second Member's election to
acquire the First Member's Membership Interest. At such closing the
following transactions shall occur:
(i)The First Member shall convey and assign by assignment with
general warranty of title to the Second Member, free and clear of all
liens, claims, and encumbrances (other than any lien, claim, or encumbrance
created pursuant to Section 5.6, set forth in the Disposition Notice, or
otherwise expressly permitted by the Second Member), the Membership
Interest in the Company described in the Disposition Notice and shall
execute and deliver to the Second Member all documents that may be
required to give effect to the Disposition and acquisition of such
interest; and
(ii) The Second Member shall pay to the First Member, in
accordance with the terms of payment set forth in the Disposition Notice
(that is, in cash, payable either 100% at the closing or in installments
over time, whichever is set forth in the Disposition Notice), the purchase
price specified in the Disposition Notice for the Membership Interest
described in the Disposition Notice whereupon such Second Member (or its
designee) shall be admitted as a substitute Member in respect of the
Membership Interest so purchased.
(c) If the Second Member exercises the preferential right set forth
in Section 4.3(a), in the notice to the First Member exercising such right
the Second Member shall be entitled to designate an Affiliate of the Second
Member to acquire the Membership Interest of the First Member. Upon such
designation, the designated Affiliate will be substituted in the place and
stead of the Second Member for purposes of the Disposition provided for in
Section 4.3(b)(i), but the Second Member will remain fully liable for
making any and all payments due under Section 4.3(b)(ii).
(d) It is expressly agreed that the remedy at law for breach of any
of the obligations set forth in this Section 4.3 is inadequate in view of
(i) the complexities and uncertainties in measuring the actual damages that
would be sustained by reason of the failure of a Member to comply fully
with each of said obligations, and (ii) the uniqueness of the Company
business and the relationship between the Members. Accordingly, each of
the aforesaid obligations shall be, and is hereby expressly made,
enforceable by specific performance.
4.4 Disposition Documents. Except as a result of the foreclosure of
a Permitted Security Interest in a Membership Interest, the Company shall
not recognize for any purpose any purported Disposition of all or any
portion of a Member's Membership Interest in the Company unless and until
the provisions of this Article have been satisfied and there shall have
been delivered to the Manager a dated notification of such Disposition (i)
executed and acknowledged by both the Member effecting such Disposition and
the Person to whom such Membership Interest is Disposed, (ii) if the Person
to whom such Membership Interest is Disposed is to become a Member in the
Company, containing the acceptance by such Person of all the terms and
provisions of this Agreement and an agreement by such Person to perform and
discharge timely all of the obligations and liabilities in respect of the
Membership Interest Disposed of that are attributable to the period on and
subsequent to the date of the Disposition, and (iii) containing a
representation that such Disposition was made in accordance with all
applicable laws and regulations. Any Disposition shall be effective as of
the first day of the calendar month immediately succeeding the month in
which the Manager actually receives the aforesaid notification of
Disposition.
4.5 Legality. Notwithstanding any provision of this Agreement to
the contrary, no Disposition by a Member shall be effective unless (i)
either (aa) the Membership Interest in the Company subject to such
Disposition shall have been registered under the Securities Act of 1933, as
amended, and any applicable state securities laws or (bb) the Company shall
have received a favorable opinion of the Company's legal counsel or of
other legal counsel acceptable to the Members Committee to the effect that
such Disposition is exempt from registration under such laws, and (ii)
unless waived by all of the other Members the Company shall have received a
favorable opinion of the Company's legal counsel or of other legal counsel
acceptable to the Members Committee, to the effect that such Disposition
would not (aa) when added to the total of all other sales, assignments, or
other Dispositions within the preceding twelve months, result in the
Company being considered to have terminated within the meaning of section
708 of the Code, or (bb) cause the Company to jeopardize its classification
as a partnership for federal income tax purposes.
4.6 Status After Disposition. Each Member shall have the right to
constitute the Person to whom its Membership Interest in the Company is
Disposed as a substituted Member if (i) the Disposition in question has
been effected in compliance with the provisions of this Article IV and (ii)
the preferential right of purchase set forth in Section 4.3 has not been
exercised. Each Member that Disposes of a Membership Interest in the
Company to a Member or to a Person that is admitted to the Company as a
Member contemporaneously with such Disposition shall, as between itself and
the other Members, remain responsible for the timely performance and
discharge of all obligations and liabilities in respect of the Membership
Interest Disposed of that are attributable to the period prior to the date
of its Disposition but shall, as between itself and the other Members, be
released from all other Company obligations and liabilities. Each Member
that Disposes of a Membership Interest in the Company to a Person that is
not a Member or that is not admitted to the Company as a Member
contemporaneously with such Disposition shall remain responsible for the
timely performance and discharge of all obligations and liabilities in
respect of the Membership Interest Disposed of, whether attributable to the
period prior or subsequent to the date of its Disposition.
4.7 Disposition Costs. All costs incurred by the Company in
connection with the Disposition of a Membership Interest in the Company
(including, without limitation, the legal fees incurred in connection with
the obtaining of the legal opinions referred to in Section 4.5) shall be
borne and paid by the Member effecting the Disposition within ten days
after the receipt by such Member of the Company's invoice for the amount
due.
4.8 Limitation on Transfer. Except as otherwise specifically
provided in this Agreement, no Member shall have the right without the
prior written consent of the other Member, to:
(i) other than through a Permitted Security Interest, dispose of,
assign, pledge, hypothecate, transfer, exchange or otherwise
transfer for consideration all or any part of its Membership
Interest in the Company; or
(ii) Give or otherwise transfer for no consideration (whether or not
by operation of law) all or part of its Membership Interest in
the Company.
In any agreement granting a Permitted Security Interest (including
this Agreement), provided all other Members agree in writing, a Member may
provide in such agreement that in the event of the foreclosure of such
Permitted Security Interest, the party foreclosing on same may become a
substituted Member of the Company. In addition, if and only if, the
foreclosing party is a Member, such Member may designate an Affiliate to
exercise its rights so as to avoid a single-Member limited liability
company.
Each Member covenants and agrees that it will not engage directly or
indirectly in any business other than the business arising out of its being
a Member of the Company; however, this provision is not intended in any
manner to prohibit an Affiliate of a Member from engaging in any business
whatsoever as further set out in Section 14.14.
If after the expiration of the Base Term a Member resigns (the
"Resigning Member"), the remaining Member (the "Non-Resigning Member")
shall have the option to purchase the Membership of the Resigning Member at
the then fair market value of the Resigning Member's Membership Interest.
The Non-Resigning Member shall have the right to designate an Affiliate to
exercise the rights provided in this Section. If a Non-Resigning Member
exercises the rights given in this Section, the Resigning Member and the
Non-Resigning Member shall close the sale of the Resigning Member's
Membership Interest to the Non-Resigning Member within twenty (20) days
after the 365 days written notice provided in Section 11.1(b), and the
Members shall follow the procedures set out in Section 4.3(b) in connection
with the sale of the Resigning Member's Membership Interest.
ARTICLE V
CONTRIBUTIONS; DISTRIBUTIONS; FAILURE
TO MAKE CONTRIBUTIONS TIMELY; SECURITY INTEREST
5.1 Initial Contributions and Loans. Conoco agrees it will make an
initial equity contribution to the Company of $20,000,000.--, and Reading &
▇▇▇▇▇ agrees it will make an initial equity contribution to the Company of
$30,000,000.--. The initial equity contributions represent the Sharing
Ratios of Conoco and Reading & ▇▇▇▇▇, and payment shall be made to the
Company by such Members on the earlier of (i) on February 28, 1999, (ii)
with the prior written approval of the Member's Committee, on demand, in
whole or in part, or (iii) as provided in the promissory notes referred to
in the next succeeding sentence. In order to secure its obligation to make
such initial equity contribution, each Member agrees upon execution of the
Drilling Contracts it will deliver to the Company a demand promissory note
in favor of the Company for the amount of its initial equity contribution,
as set out in the first sentence of this Section 5.1, each such demand
promissory note to allow the Company to make demands contemporaneously to
each of the Members for pro-rata payments of such notes on the Payment
Date. Such promissory notes shall be in the form attached as Exhibit "E"
to this Agreement and shall be payable as provided therein. It is
understood and agreed by the Members that any and all payments of such
initial equity contribution by a Member shall contemporaneously reduce the
principal of that Member's promissory note referred to in this Section 5.1
by the same amounts, and likewise any and all payments made by a Member
with respect to any demands made with respect to such Member's promissory
note shall contemporaneously be credited against such Member's obligation
to make its initial equity contribution under this Section 5.1.
In addition, Conoco agrees to loan the Company up to the sum of
$28,900,350.--, and Reading & ▇▇▇▇▇ agrees to loan the Company up to the
sum of $43,350,540.--, in order to enable the Company to reimburse
Deepwater Drilling L.L.C. for $14,240,180.-- previously paid to the Builder
with respect to the first installment payment due under the Shipbuilding
Contract, and to enable to Company to pay the second installment payment
due under the Shipbuilding Contract amounting to $57,800,720.--, such loans
to be secured by promissory notes executed and delivered by the Company
substantially in the form attached as Exhibit "F" to this Agreement.
Further, the Members agree to loan to the Company their respective Sharing
Ratios of up to an additional $30,000,000.- to enable the Company to make
commitments for owner-furnished equipment required for the Drillship,
provided such commitments are approved by the Members Committee and/or the
Manager in accordance with policies and procedures established by the
Members Committee pursuant to the terms of this Agreement, each such loan
to be secured by a promissory note or notes executed and delivered by the
Company substantially in the form attached as Exhibit "F" to this
Agreement.
5.2 Cost Overrun Contributions. Each of the Members agrees, to the
extent required by the construction lender(s) of the Company with respect
to the Drillship, it will provide or cause to be provided by its Affiliate
a cost overrun guaranty (or other similar type guaranty) in favor of such
interim construction lender(s), in a form acceptable to the Members,
pursuant to which the respective guarantor for each Member would guarantee
that Member's respective Sharing Ratio percentage, so the Company will be
able to fund that amount of any cost overruns incurred by Company under the
Shipbuilding Contract, in order for the Company to take delivery of the
Drillship under the Shipbuilding Contract. Accordingly, the Members also
agree, within three business days after demand by any such interim
construction lenders, to contribute to the Company in cash, their
respective Member's Sharing Ratio of any and all such additional monies
necessary in order to enable Company to take delivery of the Drillship
under the Shipbuilding Contract (including owner furnished equipment) in
compliance with the terms of any such cost overrun guaranties (over and
above the amount of the promissory notes made by the Members referred to in
the first paragraph of Section 5.1 and the amount of the Purchase Note).
5.3 Additional Contributions. Except for initial working capital
for the Company to commence operations, the Members intend for the Company
operations to be self-sustaining, and after the Drillship goes into
service, for the Company to pay its costs and expenses from operating
revenues. However, without creating any rights, remedies, or claims in
favor of or enforceable by any third party, if at any time the Company, as
determined by the Members Committee, requires funds in excess of operating
revenues which are necessary to allow the Company to accomplish its
objectives and purposes, each Member shall, and hereby agrees to,
contribute to the Company, in cash, within ten days after receiving a
request therefor from the Manager, such Member's Sharing Ratio of all such
additional monies that are necessary to enable the Company to cause the
Assets to be properly operated and maintained and to discharge its costs,
expenses, obligations, and liabilities.
5.4 Distributable Cash. The Distributable Cash of the Company shall
be determined on a quarterly basis and the amount thereof shall be
distributed to the Members pro rata according to their Sharing Ratios
(except as otherwise required to effect and carry out the provisions of
Section 5.5(b)(iv), 14.1 and 14.12), provided however, that no distribution
will be made to the extent any such distribution will result in the minimum
equity capital of the Company falling below 3% of the total assets.
Amounts payable to any Member other than in its capacity as a Member, such
as for services rendered, goods purchased or money borrowed, shall not be
treated as distributions for purposes of this Section 5.4.
5.5 Failure to Make Contributions. If either Member fails to
contribute timely all or any portion of any monetary sum that it has agreed
to contribute to the Company pursuant to the provisions of Section 5.1, 5.2
or 5.3 the Company may exercise, by notice to such Member (the "Delinquent
Member") any one or more of the following rights or remedies:
(a) Taking such action (including, without limitation, the
filing of a lawsuit) as the Members Committee deems appropriate to
obtain payment by the Delinquent Member of that portion of its
agreed contribution that is in default, together with interest
thereon at the Default Interest Rate from the date that such
contribution was due until the date that such contribution is made,
at the cost and expense of the Delinquent Member;
(b) Permitting the other Members that desire to do so (the "Non-
Delinquent Members") to advance that portion of the contribution that
is in default, with the following results:
(i) The sum thus advanced shall be deemed to be a loan
from the Non-Delinquent Member to the Delinquent Member and a
contribution of such sum to the Company by the Delinquent Member
pursuant to Section 5.1, 5.2 or 5.3, as appropriate;
(ii) The principal balance of such loan and all accrued
unpaid interest thereon shall be due and payable in whole within
thirty days after written demand therefor has been given to the
Delinquent Member by the Non-Delinquent Member;
(iii) The loan shall bear interest at the Default Interest
Rate, from the date that the loan was made until the date that
such loan, together with all interest accrued thereon, is repaid
to the Non-Delinquent Member;
(iv) All distributions from the Company that would
otherwise be made to the Delinquent Member (whether before or
after dissolution of the Company) shall, instead, be paid to the
Non-Delinquent Member until the loan and all interest accrued
thereon have been repaid in full to the Non-Delinquent Member
(with all such payments being applied first to interest earned
and unpaid and then to principal); provided however, that for
purposes of Section 6.4, any amounts paid by the Company to the
Non-Delinquent Member shall nevertheless be treated as
adjustments to the Delinquent Member's Capital Account;
(v) The repayment of the loan and all interest accrued
thereon shall be secured by a security interest in the Delinquent
Member's interest in the Company, as more fully set forth in
Section 5.6, and
(vi) The Non-Delinquent Member shall have the right, in
addition to the other rights and remedies granted to it pursuant
to this Agreement or available to it at law or in equity, to take
such action (including, without limitation, the filing of a
lawsuit) as the Non-Delinquent Member deem appropriate to obtain
payment by the Delinquent Member of the principal balance of such
loan and all accrued and unpaid interest thereon, at the cost and
expense of the Delinquent Member;
(c) Exercising the rights of a secured party under the Uniform
Commercial Code of the State of Delaware, as more fully set forth in
Section 5.6;
(d) Dissolving the Company; or
(e) Exercising any other rights and remedies available at law or
in equity.
5.6 Grant of Security Interest. Each Member hereby grants to the
Company and to the Non-Delinquent Member, in respect of any loans made by
the Non-Delinquent Member to the Delinquent Member pursuant to Section
5.5(b), as security for (i) the payment of all contributions to be made by
such Member pursuant to this Agreement and (ii) the repayment of any loans
and all interest accrued thereon made by the Non-Delinquent Member to a
Delinquent Member pursuant to Section 5.5(b), a security interest in and to
its Membership Interest in the Company, all pursuant to and in accordance
with the provisions of the Uniform Commercial Code of the State of
Delaware, and agrees that in the event of any default in the payment of
such contributions or in the repayment of such loans and all interest
accrued thereon, the Company or the Non-Delinquent Member, as applicable,
shall have and are hereby granted all the rights and remedies of a secured
party under the Uniform Commercial Code of the State of Delaware with
respect to the security interest granted herein. Each Member further
agrees to execute and deliver to the other Members all such financing
statements and other instruments as may be required by the Members
Committee or the Non-Delinquent Members, as applicable, to effect and carry
out the provisions of the immediately preceding sentence and agrees that
this Agreement may serve as the necessary security agreement and financing
statement. The Company shall register on its books the security interests
given pursuant to this Section 5.6. The Members agree that the security
interests granted under this Section 5.6 shall be subordinate to any
security interests granted to any interim construction lender or lenders to
the Company.
5.7 Secured Party. A secured party of a Permitted Security Interest
with respect to any Member's Membership Interest shall not as the result of
the exercise of any of its rights as a secured party become liable for any
of the obligations of such Member under this Agreement.
ARTICLE VI
TAX MATTERS
6.1.1 Tax Matters Partner. The Members intend that the Company
shall be taxed as a partnership for federal, state, local and foreign
income tax purposes, and have agreed to certain provisions of this
Agreement with that intention in mind. The Members agree to take all
reasonable actions, including the amendment of this Agreement and the
execution of such other documents as may be reasonably required in order
for the Company to qualify and receive partnership treatment for federal,
state, local and foreign income tax purposes. At such time, if ever, as
final regulations are promulgated as heretofore proposed (61 F.R. Section
21989) under Section 7701 of the Code with respect to classification of an
entity as a partnership for federal income tax purposes, the Members shall
elect in compliance with such regulations that the Company be treated, for
federal income tax purposes, as a partnership and take such other actions
as may be reasonably necessary or desirable in connection therewith. The
Member from which the Manager is selected by the Members Committee is
designated as the Tax Matters Partner ("TMP"), as such term is defined in
Section 6231(a)(7) of the Internal Revenue Code of 1986, as amended,
("Code"). In the event of any change in the TMP, the Member serving as TMP
at the beginning of a given taxable year shall continue as TMP with respect
to all matters concerning such year. The TMP and other Members shall use
their best efforts to comply with responsibilities outlined in this section
and in Code Sections 6222 and 6233 and 6050K (and the Treasury Regulations
thereunder) and in doing so shall incur no liability to any other Member.
Notwithstanding the TMP's obligation to use its best efforts in the
fulfillment of its responsibilities, the TMP shall not be required to incur
any expenses for the preparation for, or pursuance of administrative, or
judicial proceedings, unless the Members agree on a method for sharing such
expenses.
6.1.2 Information Request by TMP. The Members shall furnish the TMP
within two weeks from the receipt of the request with such information
(including information specified in Code Sections 6230(e) on Member
identification and 6050K for transfers of Membership Interests) as the TMP
may reasonably request to permit it to provide the Internal Revenue Service
with sufficient information for purposes of Code Sections 6223(c) and 650K.
6.1.3 TMP Agreements with IRS.
6.1.3.1 The TMP shall not agree to any extension of the statute of
limitations for making assessments on behalf of the Company without
first obtaining the written consent of all Members. The TMP shall not
bind any other Member to a settlement agreement in tax audits without
obtaining the written concurrence of any such Member.
6.1.3.2 Any other Member who enters into a settlement agreement with
the Secretary of the Treasury with respect to any Company items, as
defined in Code Section 6231(a)(3), shall notify the other Members of
the terms within ninety (90) days from the date of such settlement.
6.1.4 Inconsistent Treatment of Company Item. If any Member intends
to file a notice of inconsistent treatment under Code Section 6222(b), such
Member shall, prior to the filing of such notice, notify the TMP of the
(actual or potential) inconsistency of the Member's intended treatment of a
Company item with the treatment of that item by the Company. Within one
week of receipt the TMP shall remit copies of such notification to other
Members to the Company. If an inconsistency notice is filed solely because
a Member has not received a Schedule K-1 in time for filing of its income
tax return, the TMP need not be notified.
6.1.5 Communication of Proceedings to Members. The TMP shall to the
extent and in the manner provided by regulations issued pursuant to Section
6223(g) of the Code, keep all Members informed of all administrative and
judicial proceedings for the adjustment at the Company level of Company
items.
6.1.6 Requests for Administrative Adjustment. No Member shall file a
request pursuant to Code Section 6227 for an administrative adjustment of
Company items without first notifying all other Members. If all other
Members agree with the requested adjustment, the TMP shall file the request
on behalf of the Company. If unanimous consent is not obtained within
thirty (30) days from such notice, or within the period required to timely
file the request for administrative adjustment, if shorter, any Member,
including the TMP, may file a request for administrative adjustment on its
own behalf.
6.1.7 Judicial Proceedings. Any Member intending to file a petition
under Code Sections 6226, 6228, or any other Code Section with respect to
any Company item, or other tax matters involving the Company, shall notify
the other Members, prior to such filing, of the nature of the contemplated
proceeding. In the case where the TMP is the Member intending to file such
petition, such notice shall be given within a reasonable time to allow the
other Members to participate in the choice of the forum for such petition.
If the Members do not agree on the appropriate forum, then the forum shall
be decided by majority vote. Each Member shall have a vote in accordance
with its percentage interest in the Company for the year under audit. If
a majority cannot agree, the TMP shall choose the forum. If a Member
intends to seek review of any court decision rendered as a result of such a
proceeding such Member shall notify the other Members, prior to seeking
such review.
6.2 Income Tax Compliance and Capital Accounts
6.2.1 Tax Returns. The TMP shall prepare and file all required
federal, state, and local partnership income tax returns, as well as all
sales, use and other excise tax returns. In preparing such returns the TMP
shall use its best efforts and in doing so shall incur no liability to any
other Member with regard to such returns. Not less than thirty (30) days
prior to the due date (including extensions) the TMP shall submit to each
Member a copy of the income tax returns and/or franchise tax returns as
proposed for review.
6.2.2 Fair Market Value Capital Accounts. The TMP shall establish
and maintain fair market value ("FMV") capital accounts and tax basis
capital accounts for each Member. Upon request, the TMP shall submit to
each Member along with a copy of any proposed partnership income tax return
an accounting of its respective FMV capital accounts as of the end of the
tax return period.
6.2.3 Information Request. Each Member agrees to furnish to the TMP
not later than sixty (60) days before the return due date (including
extensions) such information relating to the operations conducted under
this Agreement as may be required for the proper preparation of all such
tax returns and capital accounts.
6.3 Elections
6.3.1 General Elections. For both income tax return and capital
account purposes, the Company shall elect: (a) to use the maximum
allowable accelerated tax method and the shortest permissible tax life for
depreciation purposes, (b) the accrual method of accounting, (c) to treat
all organizational costs of the Company as deferred expenses amortizable
over a sixty (60) month period pursuant to Section 709(b) of the Code and
comparable provisions of state law, (d) to amortize start-up expenditures
over a sixty (60) month period pursuant to Section 195(d) of the Code and
comparable provisions of state law, and (e) to report income on a calendar
year basis.
6.3.2 Other Elections or Consents. In connection with any permitted
transfer of a Membership Interest in the Company under Article IV, the TMP
shall cause the Company, at the written request of a transferee or the
transferor, on behalf of the Company and at the time and manner provided
under Code Section 754 to adjust the basis of Company property with the
adjustments provided in Code Sections 734 for a distribution of property
and 743 for a transfer of a Membership Interest. In case of a distribution
of property, the TMP shall adjust all tax basis capital accounts. In case
of a transfer of an interest in the Company, the transferee shall, no later
than sixty (60) days prior to the due date of the Company tax return
(including extensions), cooperate with the TMP in the filing of tax returns
by providing the TMP with all reconciliations necessary to reflect such
basis adjustments on the tax return. Any election other than those
referred to above must be approved by the Members Committee.
6.4 Capital Contributions and FMV Capital Accounts
6.4.1 Capital Contributions. The respective capital contributions of
each Member to the Company shall be (a) any properties contributed to the
Company (net of liabilities that the Company assumes or takes the
properties subject to), and (b) all amounts paid by each Member
characterized as contributions to the Company or Company expenses borne and
paid by such Member on behalf of the Company.
6.4.2 FMV Capital Accounts. The FMV capital accounts shall be
increased and decreased as follows:
(a) The FMV capital accounts shall be increased by: (i) the amount
of money and the fair market value of any property contributed by each
Member, respectively, to the Company (net of liabilities assumed by
the Company or to which the contributed property is subject); (ii)
that Member's [Section 6.5.1] allocated share of Company income and
gains, or items thereof; and, (iii) that Member's share of Code
Section 705(a)(1)(B) items.
(b) The FMV capital accounts shall be decreased by: (i) the amount
of money and the fair market value of property distributed to each
Member (net of liabilities assumed by such Member or to which the
property is subject); (ii) that Member's [Section 6.5.1] allocated
share of Company loss and deductions, or items thereof; and, (iii)
that Member's share of Code Section 705(a)(2)(B) items and Code
Section 709 nondeductible and nonamortizable items.
(c) "Fair market value" when it applies to property contributed by or
distributed to a Member or other Company property shall be determined
by the Members Committee.
6.5 Company Allocations
6.5.1 FMV Capital Account Allocations. Each item of income, gain,
loss or deduction shall be allocated to each Member as follows:
(a) Operating and maintenance cost shall be allocated to each
Member in accordance with its respective contribution, or
obligation to contribute, to such cost;
(b) Depreciation shall be allocated to each Member in accordance
with its contribution, or obligation to contribute, to the cost
of the underlying asset;
(c) Loss (or simulated loss) upon the sale, exchange,
distribution, abandonment or other disposition of depreciable
property, shall be allocated to the Members in the ratio of their
respective FMV capital account adjusted basis in the depreciable
property;
(d) Gain (or simulated gain) upon the sale, exchange,
distribution, or other disposition of depreciable or depletable
property shall be allocated to the Members so that the FMV
capital account balances of the Members will most closely reflect
their respective percentage or fractional interests under the
Agreement;
(e) Costs or expenses of any other kind shall be allocated to
each Member in accordance with its respective contribution, or
obligation to contribute, to such costs or expenses; and,
(f) Any other income item shall be allocated to the Members in
accordance with the manner in which such income is realized by
each Member.
6.5.2 Tax Returns and Tax Basis Capital Account Allocation.
(a) Unless otherwise expressly provided herein the allocations
of Company items of income, gain, loss or deduction for tax
return and tax basis capital account purposes shall follow the
principles of allocation under Section 6.5.1. However, the
Company's gain or loss on the taxable disposition of any Company
property in excess of the gain or loss under Section 6.5.1, if
any, is allocated to the contributing Member to the extent of
such Member's pre-contribution gain or loss;
(b) Depreciation shall be allocated to each Member in accordance
with its contribution to the adjusted tax basis of the
depreciable asset;
(c) Any recapture of depreciation or any other item of deduction
or credit shall, to the extent possible, be allocated among the
Members in accordance with their sharing of the depreciation or
other item or deduction or credit which is recaptured;
(d) For Company properties with values different from their
adjusted tax bases, the Members intend that allocations described
in this Section 6.5.2 constitute a "reasonable method" of
allocating gain or loss under Treasury Regulations Section 1.704-
3(a)(1).
6.6 Termination and Liquidating Distributions
6.6.1 Termination. Termination shall occur on the earlier of the
events described in Code Sections 708(b)(1)(B) or 708 (b)(1)(A).
(a) Termination Under Code Section 708(b)(1)(B). Upon
termination under Code Section 708(b)(1)(B), each Member's FMV
capital account shall be adjusted as provided for in the
regulations, Section 1.704-1(b)(2)(iv)(1), and Section 6.6.3.
The distributions provided for in Sections 6.6.2 through 6.6.4
shall be deemed to have occurred, with the Company cash and
properties deemed contributed to a new limited liability company,
the terms of which are identical to those contained in this
Agreement.
(b) Termination Under Code Section 708(b)(1)(A). Upon
termination under Code Section 708(b)(1)(A), the business shall
be wound-up and concluded, and the assets shall be distributed to
the Members as described below by the end of such calendar year
(or, if later, within ninety (90) days after the date of such
termination). The assets shall be valued and distributed to the
creditors of the Company, if any, and to the Members in the order
provided in Sections 6.6.2 through 6.6.4.
6.6.2 Section 708(b)(1)(A) Termination. In the event of a Code
Section 708(b)(1)(A) termination, the assets shall be valued, and the
Company shall first comply with Section 18-804(a)(1) of the Act, and
second, all cash representing unexpended contributions by any Member
shall be returned to the contributor.
6.6.3 Balancing. Third, the FMV capital accounts of the Members
shall be determined under this Section 6.6.3. The TMP shall take the
actions specified under this Section 6.6.3 in order to cause the ratio
of the Members' FMV capital accounts to reflect as closely as possible
their Sharing Ratios under the Agreement. The ratio of a Member's FMV
capital account is represented by a fraction, the numerator of which
is the Member's FMV capital account balance and the denominator of
which is the sum of all Members' FMV capital account balances. This
is hereafter referred to as "balancing of the FMV capital accounts",
and when completed, the FMV capital accounts of the Members shall be
referred to as being "balanced". The manner in which the FMV capital
accounts of the Members are to be balanced under this Section 6.6.3
shall be determined as follows:
(a) The fair market value of all Company properties shall be
determined and the gain or loss for each property which would
have resulted if a sale thereof at such fair market value had
occurred shall be allocated in accordance with Section 6.5.1. If
thereafter any Member has a negative FMV capital account balance,
that is, a balance less than zero, in accordance with Treas. Reg.
Section 1.704-1(b)(2)(ii)(b)(3) such Member is obligated to
contribute an amount of cash to the Company to facilitate the
balancing of the FMV capital accounts. If after these
adjustments the FMV capital accounts are not balanced, Article
6.6.3(b) shall apply; or
(b) If all the Members consent, any cash or an undivided
interest in certain selected properties shall be distributed to
one or more Members as necessary for the purpose of balancing the
FMV capital accounts;
(c) Unless (b) above applies, an undivided interest in each and
every property shall be distributed to one or more Members in
accordance with the ratios of their FMV capital accounts;
(d) If a property is to be valued under (a) above or distributed
pursuant to (b) or (c) above, the fair market value of the
property shall be agreed to by the Members. In the event all of
the Members do not reach agreement as to the fair market value of
property, the TMP shall cause a nationally recognized independent
engineering firm to prepare an evaluation of fair market value of
such property.
6.6.4 Final Distribution. Fourth, after the FMV capital accounts of
the Members have been adjusted, pursuant to Section 6.6.3 above, all
other or remaining property and interest then held by the Company
shall be distributed to the Members in accordance with their positive
FMV capital account balances.
6.7 Transfers, Indemnification, and Correspondence.
6.7.1 Transfers of Company Interests. Transfers of Membership
Interests shall be governed by the Agreement. A Member transferring
its Membership Interest, or any part thereof, shall notify the TMP in
writing within two weeks of such transfer.
6.7.2 Indemnification. This Agreement does not provide for any
indemnification provisions to protect Members against any harm caused
by a Code Section 708(b)(1)(B) termination. However, the Members
agree that if any of them makes a sale or assignment of its Membership
Interest under this Agreement, such sale or assignment shall be
structured, if reasonably possible, to avoid causing an Code Section
708(b)(1)(B) termination.
6.7.3 Correspondence. All correspondence relating to the preparation
and filing of the Company's income tax returns and capital accounts
shall be forwarded to the TMP.
6.8 No Interest. No Member shall be entitled to be paid interest in
respect of either its capital account or any contributions made by it to
the Company.
6.9 Return of Capital. Except as set forth in Section 6.6.2 hereof
and notwithstanding anything in this Agreement to the contrary, no Member
is entitled to a return on any cash or property that it has contributed to
the capital of the Company, but shall look solely to distributions from the
Company. No unrepaid capital contribution shall be deemed or considered to
be a liability of the Company or of any Member. No Member shall be
required to contribute any cash or property to the Company to enable the
Company to return any Member's capital contribution.
ARTICLE VII
ADMINISTRATIVE MATTERS
7.1 Books and Records. The books and records of the Company shall be
kept, at the expense of the Company, by the Member from which the Manager
is appointed in accordance with this Agreement, following that Member's
normal accounting systems, procedures and practices, consistent with
generally accepted accounting principles, on a calendar year basis for all
purposes, and shall reflect all Company transactions and be appropriate and
adequate for recording and reporting the financial condition of the
Company. Within forty-five days following the end of each calendar
quarter, the Manager shall cause to be prepared and submitted to the
Members Committee and each Member an unaudited balance sheet and an
unaudited income statement of the Company and a comparison to budgets in
respect of such calendar quarter. In addition, on or before March 31 (or
as soon thereafter as may be practicable) of each year the Manager shall
cause to be delivered to each Member, in respect of the immediately
preceding year, an audited balance sheet, an audited income statement, an
audited annual statement of changes in financial position of the Company
together with a report by the Company's Independent Accountants to the
effect that such financial statements have been prepared in accordance with
generally accepted accounting principles and present fairly the Company's
financial position, results of operation, and changes in financial
position, and a report indicating each Member's share for federal income
tax purposes of the Company income, gain, credits, losses, and deductions
prepared, in each case, by the Company's Independent Accountants. A copy
of each Company tax return required to be filed with any governmental
authority shall be delivered to each Member at least ten days before such
return is filed.
7.2 Inspection. Each Member, at its sole cost and expense, shall
have the right to inspect, copy, and audit the books and records of the
Company during reasonable business hours at the principal place of business
of the Company. No Person other than a Member (or its duly authorized
representative) and the Company's Independent Accountants shall have any
right to inspect the books and records of the Company for any purpose
whatsoever. Each Person that inspects the books and records of the Company
shall maintain the confidentiality of the information received pursuant to
or in connection with such inspection.
7.3 Bank Accounts; Investments. All funds of the Company shall be
deposited in its name in an account or accounts maintained in one or more
national or state bank or banks designated from time to time by the Members
Committee. The funds of the Company shall not be commingled with the funds
of any other Person. Checks shall be drawn upon the Company account or
accounts only for the purposes of the Company and shall be signed by such
signatory party or parties as may be designated by the Members Committee.
The Manager shall have the obligation from time to time to deposit Company
funds that (i) are not required for the operation of the business of the
Company and (ii) should not, in the Manager's opinion, be used to repay
Company debt, in interest bearing bank accounts or to purchase commercial
paper, treasury bills, or other high grade short term instruments following
guidelines approved by the Members Committee.
7.4 Monthly Progress Reports. At least once a month, the Manager, at
Company expense, shall furnish to the Members a progress report regarding
the operations of the Company.
ARTICLE VIII
MANAGEMENT; MEMBERS COMMITTEE; MANAGER;
STANDARD OF CARE; INDEMNIFICATION
8.1 Management. (a) The management and control of the Company
business shall be vested in the Members, who shall exercise such management
and control through and by virtue of their selection of the Members
Committee in accordance with the succeeding provisions of this Article VIII
and their participation in the making of the decisions accorded to them
pursuant to this Agreement.
(b) The Members shall be entitled to delegate any powers and
authority required for the management of the Company to the Members
Committee, save that the Members reserve the following powers and authority
exclusively to themselves, namely:
(i) to amend the purposes of the Company, as set out in
Section 3.2;
(ii) to liquidate or otherwise dissolve the Company;
(iii) to approve the merger or consolidation of the Company with or
into an "other business entity," as such term is defined in
Section 18-209(a) of the Act, or the sale, exchange, or other
disposition of all, or substantially all of the Company's
assets which is to occur as part of a single transaction or
plan;
(iv) to designate from time to time the Company's
Independent Accountants; and
(v) to amend this Agreement.
(c) In the exercise of any powers and authority the Members may have
in connection with the management and control of the Company, all decisions
or actions of the Members must be unanimous.
8.2 Members Committee.
(a) The Members Committee (herein referred to as the "Members
Committee") shall be responsible for the making of decisions with respect
to the Company business that are not accorded to the Members or the Manager
pursuant to this Agreement.
(b) Without limiting the generality of paragraph (a) of this Section
and subject always to the provisions of Section 8.1(b), the Members
Committee shall have the power to delegate to the Manager of the Company
any powers and authority necessary for the day-to-day operation of the
business of the Company, except that the Members Committee reserves the
following powers and authority exclusively to itself, namely:
(i) to set the overall policy and vision of the Company in
accordance with the purposes set out in Section 3.2;
(ii) to recommend to the annual meeting of the Members the
distribution policy of the Company and the level of
distribution to be declared;
(iii) to elect or appoint the Manager;
(iv) to approve capital expenditures of the Company in
such amount as the Members may from time to time determine;
(v) to approve the business and strategic plans and the
annual operating plans of the Company;
(vi) to recommend approval by the Members of any of the
matters referred to in Section 8.1(b);
(vii) to approve from time to time the location of the Company's
principal executive office;
(viii) to determine the banking policy of the Company and further in
that regard: to grant financial authorization (including the
opening and closing of bank accounts and to designate
signatories for such accounts) to the Manager; to approve all
borrowings by the Company of sums of money within the
limitations regarding amount as the Members may from time to
time determine, from banks, other lending institutions, the
Members or Affiliates of the Members, on such terms as the
Members Committee deems appropriate, and, in connection
therewith, to hypothecate, encumber, and grant security
interests in the assets of the Company to secure repayment of
the borrowed sums. No debt shall be contracted or liability
incurred by or on behalf of the Company except to the extent
permitted under the Act by the Manager or authorized agents of
the Company expressly authorized by the Members Committee to
contract such debt or incur such liability;
(ix) to approve the purchase of liability and other
insurance to protect the Company's property and business;
(x) to establish guidelines for the Manager in connection
with the temporary investment of Company funds;
(xi) to approve the execution on behalf of the Company of
all instruments and documents with a value in excess of such
amount as the Members may from time to time determine,
including, without limitation: checks; drafts; notes and
other negotiable instruments; mortgages or deeds of trust;
security agreements; financing statements; documents providing
for the acquisition, mortgage or disposition of the Company's
property; assignments; bills of sale; leases; partnership
agreements; operating agreements of other limited liability
companies; agreements between the Company and either of the
Members or their Affiliates; and any other instruments or
documents necessary, in the opinion of the Members Committee
to the business of the Company;
(xii) to assess the performance of the Manager of the Company;
(xiii) to approve the commencement or settlement of litigation
directly or indirectly involving the Company, where the claim
or potential liability of the Company or the amount of such
settlement is in excess of such amount as the Members may from
time to time determine;
(xiv) to determine the accounting policies of the Company and to
recommend to the Members the appointment of the Company's
Independent Accountants;
(xv) to approve the ethics, safety and health and
environmental policies of the Company; and
(xvi) to review and approve the terms of any public announcement
proposed to be made by the Company, as determined from time to
time by the Members Committee.
(c) The Members Committee shall be comprised of six individuals,
three of whom shall be named by each Member (individually a
"Representative" and collectively "Representatives"). These
Representative(s) may be changed at any time by the Members appointing such
Representative(s) by written notice to the other Member.
(d) Meetings of the Members Committee may be held at such regular
times as may be specified by the Members Committee and, in addition, may be
called by any Representative by giving at least ten days prior notice
thereof to each of the other Representatives. Notice of each meeting shall
be in writing and shall state the date, time, and place at which such
meeting is to be held and the purposes for which such meeting is called.
Prior notice of a meeting need not be given, however, if such notice is
waived in writing by all of the Representatives or if the action in
question is taken pursuant to the provisions of the second succeeding
sentence. In addition, the attendance in person or by a Person having the
written proxy of a Representative at a meeting shall constitute a waiver of
notice of such meeting, except where the Representative attends the meeting
for the express purpose of objecting to the transaction of any business on
the ground that the meeting is not lawfully called or convened.) Any
action required or permitted to be taken at a meeting of the Members
Committee may be taken (i) by means of a telephone conference (notice of
which shall be given to each of the Representatives) in which all
Representatives participating in the meeting in person or by a Person
having the written proxy and constituting a quorum can hear and speak to
each other (with the action taken during such telephone conference to be
reduced to writing and filed in the records of the Members Committee), or
(ii) by means of one Representative submitting to the other Representatives
in accordance with the provisions of Section 14.3 a statement of the matter
to be voted on, the purposes thereof, and the period within which the
Representatives must respond either in the affirmative or in the negative
to the matter in respect of which the vote is requested (which response
period shall not be less than seven business days nor more than twenty
business days from the date on which the Representative in question is
deemed to have received such request pursuant to Section 14.3). All action
taken pursuant to the immediately preceding sentence shall be deemed for
all purposes to have been taken at a meeting of the Members Committee. The
Members Committee shall conduct its proceedings in accordance with such
rules as it may from time to time establish and shall keep appropriate
records of the action taken by it.
(e) At all meetings of the Members Committee, at least one
Representative representing each Member shall constitute a quorum for the
transaction of business, and subject to this Section 8.2, the unanimous act
of all of the Member Representatives present at any meeting at which there
is a quorum shall be the act of the Members Committee, except as set forth
in Section 8.2(f). If a quorum shall not be present at any meeting of the
Members Committee, the meeting may be rescheduled by any Representative by
giving seven days prior notice thereof to each of the other
Representatives.
(f) Notwithstanding any provision of this Agreement to the contrary:
(i) neither a Member nor a Representative appointed by any Member that is
the subject of a vote with respect to the exercise of remedies relating to
such Member's delinquency or default under this Agreement, in the case of a
vote with respect to such matters; (ii) neither a Member nor a
Representative appointed by any Member that attempts to effect a
Disposition of an interest or right, or any part thereof, in or in respect
of the Company in willful contravention of Article IV, or in the case of
any vote with respect to any matter whatsoever subsequent to such attempted
Disposition; or (iii) neither a Delinquent Member nor the Representative
appointed by any Delinquent Member, in the case of any vote occurring
during the period in which such Delinquent Member is a Delinquent Member;
will be entitled to vote on the issue in question, and such Representative
shall not be counted for voting or quorum purposes in respect of the vote
in question or the Members Committee meeting at which the vote is taken.
Instead, a quorum in respect of the vote in question shall be comprised of
one or more of all Representatives other than those that are not entitled
to vote on such issue, and the decisions in respect of such issue shall be
made by the unanimous vote of all Representatives present that are entitled
to vote on such issue.
8.3 Manager. The Manager (who shall be an employee of a Member or of
an Affiliate of a Member) shall be appointed by, and shall serve at the
pleasure of, the Members Committee, subject to the direction of the
Members Committee, and shall be responsible for the general supervision
and management of the business, affairs, and property of the Company and
for the implementation of the decisions of the Members Committee, and
shall have, as may be delegated by the Members Committee, the authority to
conduct the day-to-day affairs of the Company. Without limitation of the
generality of the preceding provisions of this Section, the Manager shall
have (subject to the limitations of Sections 8.1 and 8.2 and to budgetary
limitations and such other limitations as may be imposed from time to time
by the Members Committee) the authority, the right, and the power, on
behalf of the Company:
(a) to enter into, make, and perform all contracts, agreements, and
other undertakings binding the Company as may be necessary, appropriate, or
advisable in furtherance of the purposes of the Company as the Manager may
determine in his or her discretion;
(b) to open, maintain, and close bank accounts, to designate and
change signatories on such accounts, and to draw checks and other orders
for the payment of monies;
(c) to maintain the assets of the Company in good order and repair;
(d) to collect all sums due the Company;
(e) to prepare and file all Company tax returns and to make all
elections for the Company thereunder in accordance with the instructions of
the TMP and the Members Committee;
(f) to the extent that funds of the Company are available therefor,
to pay as they become due all debts and obligations of the Company
(including, without limitation, the Purchase Note); and
(g) within any limitations as may be imposed from time to time by the
Members Committee, to take any and all other action that may be necessary,
appropriate, or advisable in furtherance of the purposes of the Company.
In addition, the Company shall reimburse the Manager, on a monthly
basis, for all reasonable out-of-pocket transportation, lodging and
entertainment expenses, incurred in connection with the business of the
Company, consistent with the normal reimbursement policies of the Member
which is providing the individual to be Manager of the Company.
8.4 Standard of Care. In the performance of their respective duties
under this Agreement, the Representatives and the Manager shall use
reasonable efforts to conduct the business of the Company in a good and
businesslike manner and in accordance with good practice within the
industry. Notwithstanding any provision of this Agreement to the contrary,
however, neither any Representative nor the Manager shall be held liable or
responsible to any Member or to the Company for any losses sustained, or
liabilities incurred, in connection with, or attributable to, errors in
judgment, negligence, or other fault of such individual, except that which
is caused by such Person's bad faith or willful misconduct.
8.5 Indemnification of the Representatives and the Manager. The
Company hereby agrees to defend, indemnify and hold harmless the
Representatives and the Manager from and against any and all claims,
damages, liabilities, costs (including, without limitation, the costs of
litigation and reasonable attorneys' fees), damages, and causes of action
arising out of, resulting from, or attributable to the Representatives' and
the Manager's management of the Company affairs, except where the claim at
issue is based upon the bad faith or willful misconduct of the
Representative in question or the Manager. The indemnification rights
herein contained shall be (i) cumulative of, and in addition to, any and
all rights, remedies, and recourses to which the Representatives and the
Manager shall be entitled at law or in equity, and (ii) shall only be for
the benefit of the Company, the Representatives, and the Manager, to the
exclusion of all other purported third party beneficiaries.
ARTICLE IX
VOLUNTARY WITHDRAWAL
9.1 Resignation by Member.
Each of the Members acknowledges:
(i) the unique nature of the business the Company will
engage in and the expertise and skills each of the Members
brings to the business and management of the Company;
(ii) the commitment of the Company to fully perform the
terms and conditions of the Drilling Contracts and the
Purchase Note; and
(iii) the need for the Company to enter into the Purchase Note and
to assure any lenders of the Company's commitment to the
business of the Company.
In furtherance of those objectives, the Members agree that no Member will
have the right to, and each Member agrees that it will not, resign or
withdraw from the Company prior to the expiration of the Base Term. In the
event any Member, prior to the expiration of the Base Term, resigns from
the Company, or otherwise takes any action having the effect of a
withdrawal or termination of its participation as a Member of the Company
(a "Wrongful Withdrawal"), such withdrawal shall be null and void and such
Member shall remain fully liable as a Member hereunder. In the event the
Company is required by law to recognize a Wrongful Withdrawal, the
withdrawing Member will:
(w) pay to the Company the withdrawing Member's Sharing Ratio of
the Company's then known, outstanding and due obligations
and liabilities, including amounts then due and owing under
the Purchase Note, at the time of such Wrongful Withdrawal;
(x) as they thereafter become known, pay to the Company its Sharing
Ratio of the Company's liabilities that arose, or resulted from
activities of the Company, prior to the Wrongful Withdrawal;
(y) forfeit its Membership Interest in the Company to the other
Members on a pro-rata basis based on their respective Sharing
Ratios; and
(z) be liable for all damages attributable to the withdrawing
Member's breach of this Agreement.
Pursuant to Section 18-603 of the Act, the Members agree that no Member may
resign from the Company prior to the expiration of the Base Term, and
thereafter any Member may resign from the Company in accordance with this
Agreement.
9.2 Wrongful Withdrawal. If a Wrongful Withdrawal occurs, then within
a reasonable time after the expiration of the Base Term, there will be a
winding up of the Company and a distribution of the assets in accordance
with Section 11.2 of this Agreement, provided that, (i) the non-withdrawing
Member will act as the liquidating trustee under Section 11.2, (ii) no
adjustment will be made to the capital account of the Member who wrongfully
withdrew, and (iii) the wrongfully withdrawing Member's Membership Interest
in the Company to be forfeited to the other Members will be valued to the
non-withdrawing Member at the amount of such withdrawing Member's
contributions to the Company pursuant to Sections 5.1 and 5.2 hereof.
ARTICLE X
[INTENTIONALLY DELETED]
ARTICLE XI
DISSOLUTION; RECONSTITUTION; WINDING UP
11.1 Events Deemed to Cause Dissolution. Unless the business of the
Company is continued either by the consent of all remaining Members within
90 days following the occurrence of any such event or pursuant to a right
to continue provided under this Agreement, the Company shall be dissolved
upon the first to occur of the following:
(a) The expiration of the term provided in Section 3.4;
(b) The resignation of a Member upon 365 days prior written
notice given after the expiration of the Base Term, provided
however, the Company shall not be dissolved if the Non-
Resigning Member exercises its rights under Section 4.8;
(c) the Bankruptcy of a Member;
(d) The sale of all or substantially all of the assets of the
Company;
(e) The unanimous vote of the Members to dissolve the Company;
(f) Unless the Members otherwise agree in writing, the failure
of one or more of the events set out in Section 15.1 to
occur on or before April 30, 1997;
(g) By order of a court of competent jurisdiction pursuant to
Section 18-802 of the Act, at such time as specified in such
order; or
(h) Upon the dissolution of either Member or any other event
that terminates the membership of a Member in the Company.
or otherwise as provided in Section 9.1 with respect to a Wrongful
Withdrawal. Subject to the provisions of Section 9.1 with respect to
Wrongful Withdrawal, dissolution of the Company shall be effective on
the day on which the event occurs giving rise to such dissolution, but
the Company shall not terminate until the assets of the Company have
been distributed as provided in Section 11.2.
11.2 Distribution of Assets. If the Company is dissolved pursuant to
this Article XI, an accounting of the Company assets, liabilities, and
operations through the last day of the month in which the dissolution
occurs shall be made by the Company's Independent Accountants, and the
affairs of the Company shall be wound up and terminated. The Members
Committee shall serve as the liquidating trustee. The liquidating trustee
shall be responsible for winding up and terminating the affairs of the
Company and shall determine all matters in connection therewith (including,
without limitation, the arrangements to be made with creditors, whether and
to what extent and under what terms of assets of the Company are to be sold
or distributed in kind to the Members, and, after consultation with the
Company's Independent Accountants, the amount or necessity of cash reserves
to cover contingent liabilities) as the liquidating trustee deems advisable
and proper; provided, however, that all decisions of the liquidating
trustee shall be made in accordance with the fiduciary duty owed by the
liquidating trustee to the Company and to each of the Members.
All assets remaining after the payment (or provision for payment) of
Company obligations to third parties shall be distributed to the Members
(i) first, in such amounts and proportions as may be necessary to effect
and carry out the provisions of Sections 5.5(b)(iv), 14.1 and 14.12, (ii)
second, in such amounts and proportions as may be necessary to cause the
ratios of the Members' respective capital accounts to be equal to the
Members' respective Sharing Ratios, and (iii) third, in the proportion of
the Members' respective Sharing Ratios then in effect.
The distribution (if any) to the Members of an interest in the Company
assets may be subject to such liens, encumbrances, and restrictions, and to
such leases, contracts, and agreements as in effect on the date of such
distribution.
11.3 Termination. After all of the assets of the Company have been
distributed, the Company shall terminate, and the Members shall (i) cause a
certificate of cancellation to be filed with the Delaware Secretary of
State, and (ii) file appropriate documentation reflecting such termination
in all other jurisdictions in which the Company may be qualified to do
business.
ARTICLE XII
[INTENTIONALLY DELETED]
ARTICLE XIII
INSURANCE
13.1 Insurance Coverage. The Company shall carry the following
insurance or such other insurance as the Members Committee may deem
appropriate (to the extent in each case that same is obtainable on
reasonably commercial terms) for the protection of the Company and the
Members:
(a) Insurance which shall comply with all applicable worker's
compensation and occupational disease laws and which shall cover all
employees of the Company engaged in operations under this Agreement;
if applicable, such insurance shall include coverage for claims under
the United States Longshoremen's and Harbor Worker's Act;
(b) Employer's liability insurance with a limit of not less than
$500,000 per occurrence , including maritime employer's liability
coverage with respect to the ▇▇▇▇▇ Act, and general maritime liability
(if not covered by the protection & indemnity coverage referred to in
Section 13.1(f) below);
(c) Comprehensive general liability insurance with a combined
single limit of not less than $1,000,000 per occurrence;
(d) Automobile liability insurance with a combined single limit
of not less than $1,000,000 per occurrence;
(e) Marine "all risk" hull and machinery insurance (including
war risks, confiscation, nationalization and deprivation coverage for
operations outside the United States of America) to the full value of
the Drillship;
(f) Marine protection and indemnity insurance, or equivalent
coverage, including war risk protection and indemnity insurance for
operations outside the United States of America, to the full value of
the Drillship;
(g) Excess liability insurance (over the insurances set forth in
subparagraphs (b), (c), (d) and (f) above) with limits of not less
than $50,000,000 per occurrence;
(h) Contingent Operators Extra Expense Energy Exploration and
Development (well control and blowout) insurance including costs to
regain control of a well including underground blowout; costs to
restore or redrill a well as a result of a blowout, crater, or fire;
costs to remove, clean up, or contain pollution and contaminating
substances emanating from a well; legal liability costs for bodily
injury and/or loss of life, damage to, or loss to use of property
caused by contaminating substances from a well; with limits of not
less than $50,000,000; and
(i) Such other insurance as the Members Committee may deem
necessary, appropriate, or advisable in furtherance of the purposes of
the Company.
13.2 Certain Requirements. All insurance shall be placed through
underwriters and/or insurance companies which are financially sound and
responsible, and licensed to do business in all jurisdictions where such
licensing is required. Each policy of insurance [except that policy
referred to in Section 13.1(a)] shall, to the extent that the Members
Committee deems same practicable, either on its face or by appropriate
endorsement, (i) name the Company as a named insured and each Member as an
additional named assured, (ii) provide for reasonable deductibles
acceptable to the Members Committee, (iii) provide that it shall not be
cancelled or amended or its coverage reduced except upon thirty days prior
notice to the Company (seven (7) days in the case of war risk coverages),
and (iv) contain waiver of subrogation provisions pursuant to which each
underwriter and/or insurer waives all express and implies rights of
subrogation against the Company and each Member.
13.3 The types, limits and terms of insurance coverages set out in
this Article may be modified as deemed appropriate by the Members
Committee.
ARTICLE XIV
MISCELLANEOUS
14.1 Offset. In the event that any sum is payable to any Member
pursuant to this Agreement, any amounts owed by said Member to the Company
shall be deducted from said sum before payment to said Member.
14.2 Choice of Law; Submission to Jurisdiction. This Agreement shall
be subject to and governed by the laws of the State of Delaware, excluding
any conflicts-of-law rule or principle that might refer to the construction
or interpretation of this Agreement to the laws of another state. Each
Member hereby submits to the jurisdiction of the state and federal courts
in the State of Delaware and to venue in Wilmington, New Castle County,
Delaware.
14.3 Notices. All notices or requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and
must be given by depositing same in the United States mail, addressed to
the Person to be notified, postpaid, and registered or certified with
return receipt requested or by delivering such notice in person to such
party. Notices given or served pursuant hereto shall be effective upon
receipt by the Person to be notified. All notices to be sent to the
Members shall be sent to or made at the addresses given under the
respective parties' signatures below, or such other addresses as such
parties may stipulate to the other parties in the manner provided in this
Section 14.3.
14.4 Entire Agreement. This Agreement constitutes the entire
agreement of the Members relating to the matters contained herein,
superseding all prior contracts or agreements, whether oral or written.
14.5 Effect of Waiver or Consent. No waiver or consent, express or
implied, by any Member to or of any breach or default by any Person in the
performance by such Person of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in
the performance by such Person of the same or any other obligations of such
Person hereunder. Failure on the part of a Member to complain of any act
of any Person or to declare any Person in default, irrespective of how long
such failure continues, shall not constitute a waiver by such Member of its
rights hereunder until the applicable statute of limitation period has run.
14.6 Amendment or Modification. This Agreement may be amended or
modified from time to time only by the unanimous vote of all the Members.
Each such instrument shall be reduced to writing and shall be designated on
its face an "Amendment" or an "Addendum" to this Agreement.
14.7 Binding Effect; Joinder of Additional Parties. Subject to the
restrictions on Dispositions set forth herein, this Agreement shall be
binding upon and shall inure to the benefit of the Members and their
respective successors and assigns.
14.8 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signatory parties had signed
the same document. All counterparts shall be construed together and shall
constitute one and the same instrument.
14.9 Severability. It is the express intention of the Members that,
except to the extent a provision of this Agreement expressly incorporates
federal income tax rules by reference to the Code or is expressly
prohibited or ineffective under the Act, this Agreement shall govern the
relations among the Members in their capacities as such. If any provision
of this Agreement or the application thereof to any Member or circumstance
shall be held invalid or unenforceable to any extent, (a) such provision
shall be ineffective to the extent, and only to the extent, of such
unenforceability or prohibition and shall be enforced to the extent
permitted by law; (b) such unenforceability or prohibition in any
jurisdiction shall not invalidate or render unenforceable such provision as
applied (i) to any other Member or circumstance or (ii) in any other
jurisdiction; and (c) such unenforceability or prohibition shall not
affect or invalidate any other provision of this Agreement. To the extent
any provision of this Agreement is prohibited or ineffective under the Act,
this Agreement shall be considered amended to the least degree possible in
order to make this Agreement effective under the Act. In the event the Act
is subsequently amended or interpreted in such a way as to make valid any
provision of this Agreement that was formerly invalid, such provision shall
be considered to be valid from the effective date of such interpretation or
amendment. To the extent any provision of this Agreement is held invalid
or unenforceable, the Members shall negotiate, in good faith, concerning an
amendment to the Agreement that will achieve, to the extent possible
consistent with applicable law, the intended effect of the invalid or
unenforceable provision.
14.10 Headings. The headings in this Agreement are inserted for
convenience and identification only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement
or any provision hereof.
14.11 Gender; Articles and Sections. Whenever the context
requires, the gender of all words used in this Agreement shall include the
masculine, feminine, and neuter, and the number of all words shall include
the singular and the plural. All references to article and section numbers
refer to articles and sections of this Agreement.
14.12 Indemnity. Each Member hereby agrees to defend, indemnify,
and hold harmless the Company and the other Members from and against any
and all losses, costs (including, without limitation, the costs of
litigation and attorneys' fees), claims, causes of action, damages, and
liabilities that are attributable to the breach by the indemnifying Member
of any of the provisions of this Agreement (including, without limitation,
the provisions of Section 9.1 hereof); provided however, the indemnity
provided in this Section 14.12 shall be only for the benefit of the Company
and other Members, to the exclusion of all other purported third party
beneficiaries.
14.13 Further Assurances. In connection with this Agreement, as
well as all transactions contemplated by this Agreement, each signatory
party hereto agrees to execute and deliver such additional documents and
instruments and to perform such additional acts as may be necessary or
appropriate to effect, carry out, and perform all of the terms, provisions,
and conditions of this Agreement and all such transactions.
14.14 Independent Conduct. The Representatives and the Manager
shall not be required to manage the Company as their sole and exclusive
function and such Manager and Representatives and Affiliates of any Member
may have other business interests and may engage in other investments or
activities in addition to those relating to the Company, irrespective of
whether some may be in competition with the business and activities of the
Company. Neither the Company nor any Member shall have any right, by
virtue of this Agreement, to share or participate in such other business
interests, investments or activities of a Manager or a Representative or an
Affiliate of a Member, or to the income or proceeds derived therefrom. No
Manager or Representative shall incur liability to the Company or to any
Member solely by reason of engaging in any such other business, investment
or activity. Nothing in this Agreement shall affect any obligations and
liabilities of a Member Representative to the Member that selected such
Member Representative.
14.15 Deemed Assent. The failure of a Representative to respond,
within the response period set forth in the request in question (which
response period shall not be less than seven (7) business days nor more
than twenty (20) business days for from the date on which the
Representative in question is deemed to have received such request pursuant
to Section 14.3) either in the affirmative or in the negative, to any
request it receives from another Representative relating to a proposed act
in respect of which such Representative is entitled to vote pursuant to
this Agreement, shall conclusively be deemed for all purposes to be a vote
by such Representative in favor of any act set forth in such request.
14.16 Signing Members; Certificate of Authority. The Members
Committee shall designate from time to time one or more of the Members to
execute (when requested to do so by the Manager) documents on behalf of the
Company. Each Member agrees to execute (and acknowledge, if requested) and
deliver such documents and instruments as the Members Committee may request
to evidence and confirm to third parties the power, authority, and right of
the Members Committee, the Manager, and the Members designated pursuant to
the immediately preceding sentence to act on behalf of and bind the Company
(but only to the extent, in each case, that the action in question is one
that the Members Committee or Manager or Member in question is entitled to
take pursuant to, and not in violation of, this Agreement).
14.17 Withholding or Granting of Consent. Each Member and the
Members Committee may, with respect to any consent or approval that it is
entitled to grant pursuant to this Agreement, grant or withhold such
consent or approval in its sole and uncontrolled discretion, with or
without cause, and subject to such conditions as it shall deem appropriate.
14.18 Waiver of Certain Rights. Each Member irrevocably waives
the right it might have to maintain any action for partition of the
property of the Company.
14.19 U.S. Currency. All sums and amounts payable or to be
payable pursuant to the provisions of this Agreement shall be payable in
coin or currency of the United States of America that, at the time of
payment, is legal tender for the payment of public and private debts in the
United States of America.
14.20 Dispute Resolution. In the event the Members Committee
cannot reach a decision as to any matter concerning the business of the
Company and remains unable to do so with respect to any such matter for a
period of not less than 30 days, it shall refer such matter to the
Designated Representative of each of the Members for resolution.
14.21 Proprietary Information. Each of the Members acknowledges
and agrees that, to the extent in the performance of this Agreement and the
conduct of the business and operations of the Company, it receives
Proprietary Information from the other Member, it will exert reasonable
efforts to hold such Proprietary Information confidential and not disclose
the same to any third party without the prior written consent of the other
Member hereto. Neither Member shall by virtue of this Agreement acquire
any right, title or interest in the Proprietary Information belonging to
the other Member.
14.22 Publicity. Except as otherwise required by applicable
federal or state securities laws, regulations or rules or the rules of any
national stock exchange, neither of the Members will issue any press
release or other form of publicity without the prior written consent of the
other Member, such consent not to be unreasonably withheld.
ARTICLE XV
DISSOLUTION
15.1 Dissolution. Unless the Members otherwise agree in writing, and
as provided in Section 11.1(f), the Company shall be dissolved if on or
before April 30, 1997 all of the following events have not occurred:
a. The execution and delivery of this Agreement have been ratified
by the board of directors of Conoco, and Conoco shall have
notified Reading & ▇▇▇▇▇ in writing of such ratification;
b. The execution and delivery of this Agreement have been ratified
by the board of directors of Reading & ▇▇▇▇▇, and Reading & ▇▇▇▇▇
shall have notified Conoco in writing of such ratification;
c. The execution and delivery of an assignment of all rights, title
and interests of Deepwater Drilling L.L.C. in and to the
Shipbuilding Contract (together with the related Unit Rate Letter
Agreement dated February 7, 1997 between the Builder and
Deepwater Drilling L.L.C. and the Commission Agreement of the
same date between Samsung Heavy Industries Co., Ltd. and
Deepwater Drilling L.L.C.) to the Company; and
d. Conoco Drilling Inc. and Reading & ▇▇▇▇▇ Corporation shall have
entered into the Drilling Contracts with the Company.
15.2 Ancillary Agreements. Upon the last to occur of the events set
out in Sections 15.1.a, 15.1.b, 15.1.c and 15.1.d above, the Company shall
enter into the following agreements:
a. the Marine Services Agreement with Conoco Shipping Company, or
one of its Affiliates, in substantially the form attached as
Exhibit "G" to this Agreement; and
b. the Drilling Services Agreement with Reading & ▇▇▇▇▇ Drilling
Co., or one of its Affiliates, substantially in the form
attached as Exhibit "H" to this Agreement.
EXECUTED on this 30th day of April, 1997.
MEMBERS
CONOCO DEVELOPMENT II INC.
By:
Its:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
RB DEEPWATER EXPLORATION II INC.
By:
Its:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
STATE OF TEXAS
COUNTY OF ▇▇▇▇▇▇
BEFORE me, , a Notary Public, on this day personally
appeared , , of
Conoco Development II Inc., a corporation, known to me to be the person
whose name is subscribed to the foregoing instrument, and acknowledged to
me that he executed said instrument for the purposes and consideration
therein expressed.
Given under my hand and seal of office this day of ,
1997 in .
My commission expires:
Notary Public
STATE OF TEXAS
COUNTY OF ▇▇▇▇▇▇
BEFORE me, , a Notary Public, on this day personally
appeared , , of
RB Deepwater Exploration II Inc., a corporation, known to me to be the
person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed said instrument for the purposes and
consideration therein expressed.
Given under my hand and seal of office this day of ,
1997 in .
My commission expires:
Notary Public
EXHIBIT "A" - DESCRIPTION OF DRILLSHIP
EXHIBIT "B" - INDEMNIFICATION AGREEMENTS
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") dated as of
April 30, 1997, is made by CONOCO INC., a Delaware corporation ("Conoco")
in favor of RB DEEPWATER EXPLORATION II INC., a Nevada corporation ("RB").
WHEREAS, RB and Conoco Development II Inc., a Delaware
corporation ("CDC") have entered into a Limited Liability Company Agreement
(the "LLC Agreement") dated of even date with respect to the formation of
Deepwater Drilling II L.L.C. (the "Company") herewith;
WHEREAS, RB has requested Conoco execute and deliver this
Indemnification Agreement as partial consideration for RB's entering into
the LLC Agreement.
NOW THEREFORE, in consideration of the premises and in order to
induce RB to enter into the LLC Agreement, Conoco hereby agrees as follows:
SECTION 1. Indemnification. Conoco hereby agrees to pay,
protect, indemnify, hold harmless and defend RB from any failure of CDC to
make any equity contribution to the Company, as and when required under
Sections 5.1 and 5.2 of the LLC Agreement, and agrees that in the event of
such failure, Conoco will promptly pay on behalf of CDC any such amounts
due under Sections 5.1 or 5.2 of the LLC Agreement. No payment required to
be made by Conoco under this Section 1 shall be subject to any right of set
off, counterclaim, defense, abatement, suspension, deferment or reduction.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings ascribed to them in the LLC Agreement.
SECTION 2. Representations and Warranties. Conoco represents
and warrants to RB as follows:
(a) Conoco (i) is a corporation duly organized, validly existing
and in good standing under the law of its jurisdiction of
incorporation and is in good standing in all jurisdictions in which
failure to be or remain in good standing would have a material adverse
effect upon its ability to perform its duties, obligations or
liabilities hereunder and (ii) has all requisite corporate power to
conduct its business and to execute and deliver and perform its
obligations under this Indemnification Agreement.
(b) The execution, delivery and performance by Conoco of this
Indemnification Agreement has been duly authorized and approved by all
necessary corporate action on the part of Conoco. This
Indemnification Agreement constitutes the legal, valid and binding
obligation of Conoco and is enforceable against Conoco in accordance
with its terms, except insofar as enforceability may be limited by
applicable debtor relief laws or subject to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(c) No order, consent, approval, license, permit, franchise,
waiver, exemption, authorization of or validation of, or filing,
recording or registration with (except those that have been heretofore
obtained or made and of which RB has heretofore been given written
notice) or exemption by, any person or tribunal is required to
authorize, or is required in connection with, the execution, delivery,
performance, legality, validity, binding effect or enforceability of
this Indemnification Agreement.
(d) No bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
with respect to Conoco or any of its subsidiaries has been commenced
in any jurisdiction.
(e) There are no actions, suits or proceedings pending or to
Conoco's knowledge, threatened against or affecting Conoco or any of
its subsidiaries before any court or arbitrator which is reasonably
likely to have a material adverse effect on the financial condition,
business or operations of Conoco and its subsidiaries, taken as a
whole, or would impair the validity or enforceability of this
Agreement.
SECTION 3. Amendments, Etc. No amendment or waiver of any
provision of this Indemnification Agreement nor consent to any departure by
Conoco therefrom shall in any event be effective unless the same shall be
in writing and signed by RB, and each such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
SECTION 4. Notices, Etc. All notices and other communications
provided for herein shall be given or made in writing and addressed, if to
Conoco, at its address set forth under its signature below, or if to RB, at
its address set forth under its signature below, such notice or notices to
be effective only upon receipt by the party to which such notice is
addressed.
SECTION 5. No Waiver; Remedies. No failure on the part of RB to
exercise, and no delay in exercising, any right hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of
any other right. No course of dealing between Conoco and RB shall operate
as a waiver of any right of RB. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law, admiralty,
equity or otherwise.
SECTION 6. Separability. Should any clause, sentence,
paragraph, sub-section or Section of this Indemnification Agreement be
judicially declared to be invalid, unenforceable or void, such decision
will not have the effect of invalidating or voiding the remainder of this
Indemnification Agreement, and Conoco agrees that the part or parts of the
Indemnification Agreement so held to be invalid, unenforceable or void will
be deemed to have been stricken herefrom and the remainder will have the
same force and effectiveness as if such part or parts had never been
included herein.
SECTION 7. Captions. The captions in this Indemnification
Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Indemnification Agreement.
SECTION 8. Successors and Assigns; Assignment. This
Indemnification Agreement shall (a) remain in full force and effect until
CDC has met its obligations under Sections 5.1 and 5.2 of the LLC
Agreement; (b) be binding upon Conoco, its successors and assigns; provided
that Conoco's rights and obligations hereunder may not be assigned without
the prior written consent of RB; and (c) inure to the benefit of and be
enforceable only by RB and its successors and assigns.
SECTION 9. Limitation by Law. All rights, remedies and powers
provided in this Indemnification Agreement may be exercised only to the
extent that the exercise thereof does not violate any applicable provision
of law, and all the provisions of this Indemnification Agreement are
intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they
will not render the Indemnification Agreement invalid, unenforceable, in
whole or in part, or not entitled to be recorded, registered or filed under
the provisions of any applicable law.
SECTION 10. Survival of Covenants, Representations and
Warranties. All covenants, representations and warranties contained in
this Indemnification Agreement shall survive the execution and delivery of
this Indemnification Agreement and shall continue until CDC has met all of
its obligations under Sections 5.1 and 5.2 of the LLC Agreement. Any
investigation by RB shall not diminish in any respect whatsoever its right
to rely on such covenants, representations and warranties.
SECTION 11. Fees and Expenses. Conoco shall pay all costs, fees
and expenses (including, but not limited to, reasonable attorneys' fees and
disbursements) incurred by RB in collecting or enforcing Conoco's
obligations or RB's rights or remedies under this Indemnification
Agreement.
SECTION 12. Governing Law. This Indemnification Agreement shall
be governed by and construed in accordance with the laws of the state of
Delaware, without regard to principles of conflict of laws.
SECTION 13. Final Agreement. This Indemnification Agreement
represents the final agreement between RB and Conoco with respect to the
subject matter hereof. Each of Conoco and RB hereby represents and
warrants that it is not relying on any statement, representation, warranty,
covenant or agreement of any kind except for those set forth in this
Indemnification Agreement.
IN WITNESS WHEREOF, Conoco has caused this Indemnification
Agreement to be duly executed by its officer thereunto duly authorized, as
of the date first above written.
CONOCO INC.
By:
Name:
Title:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention:
Telecopier No. (281)
ACCEPTED THIS 30TH DAY
OF APRIL 1997.
RB DEEPWATER EXPLORATION II INC.
By:
Name:
Title:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") dated as of
April 30, 1997, is made by READING & ▇▇▇▇▇ CORPORATION, a Delaware
corporation ("RB") in favor of CONOCO DEVELOPMENT II INC., a Delaware
corporation ("Conoco").
WHEREAS, Conoco and RB Deepwater Exploration II Inc., a Nevada
corporation ("Reading & ▇▇▇▇▇") have entered into a Limited Liability
Company Agreement (the "LLC Agreement") dated of even date herewith with
respect to the formation of Deepwater Drilling II L.L.C. (the "Company");
WHEREAS, Conoco has requested RB execute and deliver this
Indemnification Agreement as partial consideration for Conoco's entering
into the LLC Agreement.
NOW THEREFORE, in consideration of the premises and in order to
induce Conoco to enter into the LLC Agreement, RB hereby agrees as follows:
SECTION 1. Indemnification. RB hereby agrees to pay, protect,
indemnify, hold harmless and defend Conoco from any failure of Reading &
▇▇▇▇▇ to make any equity contribution to the Company, as and when required
under Sections 5.1 and 5.2 of the LLC Agreement, and agrees that in the
event of such failure, RB will promptly pay on behalf of Reading & ▇▇▇▇▇
any such amounts due under Sections 5.1 or 5.2 of the LLC Agreement. No
payment required to be made by RB under this Section 1 shall be subject to
any right of set off, counterclaim, defense, abatement, suspension,
deferment or reduction. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the LLC Agreement.
SECTION 2. Representations and Warranties. RB represents and
warrants to Conoco as follows:
(a) RB (i) is a corporation duly organized, validly existing and
in good standing under the law of its jurisdiction of incorporation
and is in good standing in all jurisdictions in which failure to be or
remain in good standing would have a material adverse effect upon its
ability to perform its duties, obligations or liabilities hereunder
and (ii) has all requisite corporate power to conduct its business and
to execute and deliver and perform its obligations under this
Indemnification Agreement.
(b) The execution, delivery and performance by RB of this
Indemnification Agreement has been duly authorized and approved by all
necessary corporate action on the part of RB. This Indemnification
Agreement constitutes the legal, valid and binding obligation of RB
and is enforceable against RB in accordance with its terms, except
insofar as enforceability may be limited by applicable debtor relief
laws or subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
(c) No order, consent, approval, license, permit, franchise,
waiver, exemption, authorization of or validation of, or filing,
recording or registration with (except those that have been heretofore
obtained or made and of which Conoco has heretofore been given written
notice) or exemption by, any person or tribunal is required to
authorize, or is required in connection with, the execution, delivery,
performance, legality, validity, binding effect or enforceability of
this Indemnification Agreement.
(d) No bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding
with respect to RB or any of its subsidiaries has been commenced in
any jurisdiction.
(e) There are no actions, suits or proceedings pending or to
RB's knowledge, threatened against or affecting RB or any of its
subsidiaries before any court or arbitrator which is reasonably likely
to have a material adverse effect on the financial condition, business
or operations of RB and its subsidiaries, taken as a whole, or would
impair the validity or enforceability of this Agreement.
SECTION 3. Amendments, Etc. No amendment or waiver of any
provision of this Indemnification Agreement nor consent to any departure by
RB therefrom shall in any event be effective unless the same shall be in
writing and signed by Conoco, and each such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
SECTION 4. Notices, Etc. All notices and other communications
provided for herein shall be given or made in writing and addressed, if to
RB, at its address set forth under its signature below, or if to Conoco, at
its address set forth under its signature below, such notice or notices to
be effective only upon receipt by the party to which such notice is
addressed.
SECTION 5. No Waiver; Remedies. No failure on the part of
Conoco to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. No course of dealing between RB and Conoco
shall operate as a waiver of any right of Conoco. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law,
admiralty, equity or otherwise.
SECTION 6. Separability. Should any clause, sentence,
paragraph, sub-section or Section of this Indemnification Agreement be
judicially declared to be invalid, unenforceable or void, such decision
will not have the effect of invalidating or voiding the remainder of this
Indemnification Agreement, and RB agrees that the part or parts of the
Indemnification Agreement so held to be invalid, unenforceable or void will
be deemed to have been stricken herefrom and the remainder will have the
same force and effectiveness as if such part or parts had never been
included herein.
SECTION 7. Captions. The captions in this Indemnification
Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Indemnification Agreement.
SECTION 8. Successors and Assigns; Assignment. This
Indemnification Agreement shall (a) remain in full force and effect until
Reading & ▇▇▇▇▇ has met its obligations under Sections 5.1 and 5.2 of the
LLC Agreement; (b) be binding upon RB, its successors and assigns; provided
that RB's rights and obligations hereunder may not be assigned without the
prior written consent of Conoco; and (c) inure to the benefit of and be
enforceable only by Conoco and its successors and assigns.
SECTION 9. Limitation by Law. All rights, remedies and powers
provided in this Indemnification Agreement may be exercised only to the
extent that the exercise thereof does not violate any applicable provision
of law, and all the provisions of this Indemnification Agreement are
intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they
will not render the Indemnification Agreement invalid, unenforceable, in
whole or in part, or not entitled to be recorded, registered or filed under
the provisions of any applicable law.
SECTION 10. Survival of Covenants, Representations and
Warranties. All covenants, representations and warranties contained in
this Indemnification Agreement shall survive the execution and delivery of
this Indemnification Agreement and shall continue until Reading & ▇▇▇▇▇ has
met all of its obligations under Sections 5.1 and 5.2 of the LLC Agreement.
Any investigation by Conoco shall not diminish in any respect whatsoever
its right to rely on such covenants, representations and warranties.
SECTION 11. Fees and Expenses. RB shall pay all costs, fees and
expenses (including, but not limited to, reasonable attorneys' fees and
disbursements) incurred by Conoco in collecting or enforcing RB's
obligations or Conoco's rights or remedies under this Indemnification
Agreement.
SECTION 11. Governing Law. This Indemnification Agreement shall
be governed by and construed in accordance with the laws of the state of
Delaware, without regard to principles of conflict of laws.
SECTION 12. Final Agreement. This Indemnification Agreement
represents the final agreement between Conoco and RB with respect to the
subject matter hereof. Each of RB and Conoco hereby represents and
warrants that it is not relying on any statement, representation, warranty,
covenant or agreement of any kind except for those set forth in this
Indemnification Agreement.
IN WITNESS WHEREOF, RB has caused this Indemnification Agreement
to be duly executed by its officer thereunto duly authorized, as of the
date first above written.
READING & ▇▇▇▇▇ CORPORATION
By:
Name:
Title:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
ACCEPTED THIS 30TH DAY
OF APRIL 1997.
CONOCO DEVELOPMENT II INC.
By:
Name:
Title:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopier No. (281)
EXHIBIT "C" - SHARING RATIOS
Conoco Development II Inc. 0.40 (40%)
RB Deepwater Exploration II Inc. 0.60 (60%)
EXHIBIT "D" - CERTIFICATE OF FORMATION
CERTIFICATE OF FORMATION
OF
DEEPWATER DRILLING II L.L.C.
The Certificate of Formation of Deepwater Drilling II L.L.C. (the
"Company") is being executed by the undersigned for the purpose of forming
a limited liability company pursuant to the Delaware Limited Liability
Company Act.
(a) The name of the Company is Deepwater Drilling II L.L.C.
(b) The address of the registered office of the Company in Delaware is
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Company's
registered agent at that address is The Corporation Trust Company.
(c) Any rights of indemnification or guaranties provided for or referred
to in the Company's Limited Liability Company Agreement shall only be
for the benefit of the Company, the Members, the Members'
Representatives or the Manager, as applicable, to the exclusion of all
other purported third party beneficiaries.
IN WITNESS WHEREOF, the undersigned, each an authorized person of the
Company, have caused this Certificate of Formation to be duly executed as
of the day of , 1997.
RB DEEPWATER EXPLORATION II INC., CONOCO DEVELOPMENT II INC.,
An Authorized Person An Authorized Person
By: By:
Name: Name:
Title: Title:
EXHIBIT "E" - FORM OF DEMAND PROMISSORY NOTE
DEMAND PROMISSORY NOTE
$ [Houston, Texas]
[ , 1997]
This Demand Promissory Note is given the day and year first above
written and made and executed by
("Maker"), a corporation. Capitalized terms used herein and
not defined herein will have the respective meanings assigned thereto in
the Limited Liability Company Agreement dated April 30, 1997 between Conoco
Development II Inc. and RB Deepwater Exploration II Inc. (the "Agreement").
For value received, Maker hereby promises to pay to the order of
Deepwater Drilling II L.L.C. ("Payee"), on the earlier of (i) demand, as
set out in the Agreement, or (ii) February 28, 1999, or (iii) one business
day prior to delivery of the Drillship (in each case the "Maturity"), the
principal amount of Dollars ($ ). Payee may
make demand for the entire principal amount or for any part thereof, and if
only a part thereof is demanded, Payee shall be entitled to make subsequent
demand(s) for the balance, or any portion thereof prior to Maturity, with
the remaining balance, if any, due on Maturity. All amounts due hereunder
will paid to Payee in New York, New York, at such bank as Payee may
designate by written notice to Maker, as provided in the Agreement.
No interest shall accrue under this Demand Promissory Note unless or
until the earlier of demand or Maturity, and if a demand is made only with
respect to a portion of the principal amount, interest shall accrue only
with respect to that portion not paid on demand. Any interest accruing
under this Demand Promissory Note shall accrue at the lesser of (i) the
interest rate publicly quoted by Texas Commerce Bank, N.A., Houston, Texas,
as its prime commercial rate, plus five percent (5%), or (ii) the maximum
non-usurious interest rate permitted by applicable law. Such interest will
accrue only if payment of the principal amount hereunder, or in the event
of a demand for a portion thereof, such portion, is not paid forthwith by
Maker, and such interest will continue to accrue thereafter until such time
as the unpaid amount has been paid.
This Demand Promissory Note is delivered in accordance with the terms
and the conditions of the Agreement.
THIS DEMAND PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Maker
By:
Name:
Its:
EXHIBIT "F"
PROMISSORY NOTE
$ Houston, Texas
April , 1997
This Promissory Note is given the day and year first above written and
made and executed by Deepwater Drilling II L.L.C. ("Maker"), a Delaware
limited liability company. Capitalized terms used herein and not defined
herein will have the respective meanings assigned thereto in the Limited
Liability Company Agreement dated April 30, 1997 between Conoco Development
II Inc. and RB Deepwater Exploration II Inc. ("Agreement").
For value received, Maker hereby promises to pay to the order of
[Insert name of Payee]("Payee"), on the earlier of (i) the date the Maker
receives construction financing proceeds with respect to the Drillship,
(ii) the date the Maker receives the applicable refund of prior
installment(s) from the Builder following termination of the Shipbuilding
Contract for the Drillship, or (iii) October 15, 1997 (in each case the
"Maturity"), the principal amount of Dollars
($ ). All amounts due hereunder will paid to Payee in New
York, New York, at such bank as Payee may designate by written notice to
Maker.
No interest shall accrue under this Promissory Note unless or until
Maturity. After Maturity, interest on the amount or amounts outstanding
shall accrue at the lesser of (x) the interest rate publicly quoted by
Texas Commerce Bank, N.A., Houston, Texas, as its prime commercial rate,
plus five percent (5%), or (y) the maximum non-usurious interest rate
permitted by applicable law, until such time as the unpaid amount, and
accrued interest thereon, has been paid.
This Promissory Note is delivered in accordance with the terms and the
conditions of the Agreement.
THIS DEMAND PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
DEEPWATER DRILLING II L.L.C.
Maker
By:
Name:
Its:
EXHIBIT "G"
MARINE SERVICES AGREEMENT
This Agreement is made as of April 30, 1997, by and between
DEEPWATER DRILLING II L.L.C., a limited liability company under the laws of
the state of Delaware and having an office in Houston, Texas, hereinafter
called "the Company", and CONOCO SHIPPING COMPANY, a corporation
incorporated under the laws of Liberia with a registered office at ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, hereinafter called "Contractor".
WITNESSETH
WHEREAS, the Company desires to provide offshore drilling services to
the oil and gas industry utilizing the dynamically positioned drillship
under construction by Samsung Heavy Industries Co., Ltd. and Samsung
Corporation at Koje Island, Korea, Builder's Hull No. 1231, hereinafter
called "the Drilling Unit", to be delivered to the Company upon completion
of such construction;
WHEREAS, the Company intends to enter into drilling contracts with
Conoco Drilling Inc. ("Conoco") and Reading & ▇▇▇▇▇ Corporation ("Reading &
▇▇▇▇▇") having a term of two and one-half (2-1/2) years, or an aggregate of
five (5) years, plus options as further set out therein, hereinafter called
the "Drilling Contracts", to provide drilling services utilizing the
Drilling Unit upon completion of construction and mobilization of the
Drilling Unit to a U.S. Gulf of Mexico port;
WHEREAS, the group of companies of which Contractor is a member has
been engaged in operating tankers and other vessels for many years and has
acquired a qualified and experienced operational, marketing, technical and
administrative staff with the knowledge, skill and experience to assist the
Company in the marine aspects of the construction and operations of the
Drilling Unit;
WHEREAS, the Company desires to avail itself of certain operational,
marketing, technical and administrative staff of Contractor and has
requested Contractor to provide certain services and personnel to the
Company; and
WHEREAS, Contractor has agreed to provide such services and personnel
to the Company in accordance with the following terms and conditions.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Services to be Provided by Contractor
Pursuant to the terms of this Agreement Contractor agrees to
provide the following services as requested from time to time by
the Company.
A. Engineering and related technical services in the
mechanical, electrical, structural and marine engineering
disciplines, pertaining to the construction, installation,
testing, commissioning and operation of the marine systems
applicable to the Drilling Unit.
B. Assistance to the Company for the procurement and delivery
of necessary equipment, spare parts and supplies applicable
to the marine system of the Drilling Unit in a timely
manner.
C. Policies, procedures and systems for project management,
management information, safety, preventive maintenance and
inventory control applicable to the marine systems of the
Drilling Unit.
D. Assistance in the recruitment of qualified and experienced
marine personnel for the Drilling Unit by the Company and
for the training of marine personnel to be assigned to the
Drilling Unit.
E. Project management, inspection and related technical
assistance services applicable to the marine systems of the
Drilling Unit prior to delivery of the Drilling Unit from
the shipyard.
If Contractor is unable to provide the services requested for
whatever reason, (i) Contractor shall promptly advise Company of
same in writing, (ii) Contractor will owe no further obligation
to Company with respect to Contractor providing the requested
services, and (iii) Contractor agrees that it will at the
Company's request provide assistance to the Company in
identifying and procuring direct for the Company's account other
contractors who may be able to provide such services.
All services provided by Contractor under this Agreement shall be
in conformance with good and accepted marine practice and
standard operating procedures and practices of the industry.
2. Personnel
Contractor agrees to provide, or cause to be provided, to the
Company all marine and support personnel in the categories set
out in Exhibit A to this Agreement, as may be reasonably
requested by the Company from time to time, to assist the Company
in connection with the construction, installation, testing and
commissioning and operation of the marine system of the Drilling
Unit, and in order for the Company to meet the requirements of
any drilling contract for the Drilling Unit. With respect to the
Drilling Contracts, Contractor agrees to provide at the request
of the Company the marine personnel set out in Appendix B of the
Drilling Contracts.
If Contractor is unable to provide the personnel requested for
whatever reason, (i) Contractor shall promptly advise Company of
same in writing, (ii) Contractor will owe no further obligation
to Company with respect to Contractor providing such personnel,
and (iii) Contractor agrees that it will at the Company's request
provide assistance to the Company in identifying and procuring
direct for the Company's account other contractors who may be
able to provide such personnel.
3. Other Services
Contractor further agrees to provide, or assist the Company in
procuring for its own account, administrative, financial,
technical, marketing and other support services as the Company
may request in connection with the Company's business and as
Contractor may be able to reasonably provide.
4. Remuneration
A. In consideration of the services being provided hereunder,
the Company agrees to pay Contractor, on a monthly basis in
arrears, a sum not to exceed U.S. $1,000 per day commencing on
the Commencement Date of the Drilling Contract under which the
Drilling Unit first commences operation and continuing for the
duration of the Drilling Contracts, such rate to be based
initially on the level of services Company has requested and
Contractor is providing, and such rate to be adjusted quarterly
based on changes in the Consumer Price Index, as published in the
Survey of Current Business Bulletin by the U.S. Department of
Labor, commencing with the index for the month of March, 1999.
The parties agree to negotiate, in good faith, adjustments in
such rate from time to time, based on the level of marine
services Contractor provides to Company and the level of marine
services provided to Contractor by third parties.
B. The Company agrees to reimburse Contractor for:
(1) Any and all payroll and payroll burden costs incurred
by Contractor in providing personnel to the Company
pursuant to Section 2 of this Agreement from and
after April 25, 1997, such payroll and payroll burden
costs to be in conformance with Contractor's normal
accounting practices and employee benefits in effect
from time to time;
(2) Any and all third party costs incurred by Contractor
in the procurement of equipment, materials, supplies,
spare parts or personnel requested by the Company,
including all relevant transportation, travel and
insurance costs.
C. As additional consideration for the services provided
hereunder, the Company agrees to pay, on a monthly basis in
arrears, to Contractor an amount equal to one percent (1%)
of the monthly revenues accruing to Company under the
Drilling Contracts excluding, however, amounts for which
Company is entitled to cost reimbursement under the terms of
the Drilling Contracts.
5. Payment
A. The Company shall pay all amounts due to Contractor under
this Agreement by wire transfer, in freely available funds,
to a bank to be designated by Contractor in ,
for credit to Contractor's account.
B. All such amounts shall be paid within twenty days following
receipt by the Company of monthly invoices supported by
reasonable documentation. All amounts not paid when due
shall earn interest until paid at the rate of 50 basis
points over the 3 month LIBOR in effect, from time to time,
as published in the "Wall Street Journal".
6. Confidential Information
Any proprietary or confidential information, documents, manuals,
systems, designs, drawings or other like or unlike material or
information made available to the Company by Contractor is for the use
only by the Company for use with the services to be provided by
Contractor pursuant to this Agreement and shall be so designated at
the time of disclosure. Title to all such material and information
shall at all times be in Contractor, and the Company shall not have
any rights with respect to such material and information except the
use provided by this Agreement. During the term of this Agreement and
thereafter for five years after the expiration or earlier termination
thereof or the date of disclosure of such information, whichever is
earlier, the Company will not permit the use of any such information
by a third party and will at all times keep it in the strictest
confidence. Upon the expiration or earlier termination of this
Agreement, the Company shall return to Contractor all such material
received from Contractor or prepared by Contractor pursuant to this
Agreement and shall neither retain any copy of such material nor
thereafter use any such information. It is expressly agreed that the
obligation of the Company under this section will continue and survive
any expiration or earlier termination of this Agreement, provided that
this section shall not apply to information which is:
A. Contained in a publication of general circulation;
B. Disclosed in good faith by a third party not in privity with
the party originally disclosing such information which has a
bona fide right to disclose such information; or
C. Information substantially acquired or developed for, or
from, the operations or maintenance of the Drilling Unit;
save that the Company shall be entitled, after reasonable prior notice
to Contractor, to disclose any such confidential information, report
or document:
(a) in connection with any proceedings arising out of or in
connection with this Agreement to the extent necessary to
protect its interests;
(b) to any prospective assignee of any interest in the Company
subject to it obtaining an undertaking from such prospective
assignee in the terms of this section;
(c) if required to do so by an order of any court of competent
jurisdiction;
(d) in pursuance of any procedure for discovery of documents in
any proceedings before any such court;
(e) pursuant to any law or regulation having the force of law or
any national stock exchange requirement;
(f) pursuant to a requirement of any authority being an
authority with whose requirement, of the nature and to the
extent in question, it is accustomed to comply; or
(g) to the technical or legal advisers of the Company subject to
it obtaining an undertaking from such advisers in the terms
of this section;
and the Company shall be entitled so to disclose or use any such
information, report or document if the information contained therein
shall have emanated in conditions free from confidentiality bona fide
from some person other than Contractor or the agent of Contractor and
such party would, but for the preceding provisions of this sub-
section, be free so to disclose or use the same; provided that the
Company shall use all reasonable endeavors to avoid disclosure to any
third party in accordance with sub-sections (c) (d) (e) and (f) above.
7. Term
A. This Agreement shall remain in effect until the expiration
or earlier termination of the Drilling Contracts as same may
be amended or extended from time to time, and shall be
automatically renewed on an annual basis thereafter unless
either party gives six months' prior written notice of its
intention to terminate this Agreement or renegotiate its
terms to the other party. If such notice is given, the
parties agree to meet promptly and discuss in good faith
such termination or renegotiation, as the case may be, and
if mutual agreement is not reached regarding same, this
Agreement may be terminated by either party, effective upon
expiration of such six month period.
B. In case of termination of this Agreement, Contractor shall
be entitled to any payments with respect to services
performed or costs or expenses incurred prior to such
termination.
C. If either party materially defaults in the fulfillment of
any obligation under this Agreement without reasonable
justification therefor, the other party will not have any
further obligation to fulfil its obligations until such
default has been cured. If such default continues for a
period of more than 30 days, the non-defaulting party shall
have the option to terminate this Agreement, without
prejudice to any other rights it may have.
8. Taxes
The remuneration payable under Sections 3.A and 3.B has been
calculated on the basis that Contractor will be liable for all federal
and state income and franchise taxes on the profits arising to it
under this Agreement but no other taxes. Any and all such other taxes
that may be imposed by any governmental authority shall be borne by
the Company.
9. Assignment
Neither party shall assign or transfer any of its right, title or
interest in or to this Agreement (except to a successor to
substantially all of such party's business or to a corporation owned
by or under common ownership with such party which agrees to assume
all obligations of such party, provided that the assigning party shall
not thereby be released from its obligations hereunder) without the
prior written consent of the other party, and any such attempt to
assign or transfer without such consent shall have no effect.
Contractor may subcontract for any services requested by Company
hereunder, provided Company has approved any such subcontract, such
approval not to be unreasonably withheld.
10. Notices
Any notice or other communication for which this Agreement
provides shall be in writing and will be delivered to the addressee
thereof or sent to the address thereof by electronic facsimile
communication or by registered or certified mail, return receipt
requested, or by other method which will constitute adequate evidence
of delivery, as follows:
If to the Company:
Deepwater Drilling II L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Manager
If to Contractor:
Conoco Shipping Company
% Conoco Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
or addressed at such other address as the addressee thereof may have
designated for that purpose by written notice given as above provided.
Any notice given in conformance with this clause will be considered as
received for all purposes on the date of delivery.
11. Governing Law
This Agreement shall be governed by and construed in accordance
with the general maritime law of the United States and to the extent
state law may be applicable by the internal laws of Texas and the
parties hereto submit to the non-exclusive jurisdiction of the federal
and state courts in ▇▇▇▇▇▇ County, Texas.
12. Consequential Damages
In no event shall either party to this Agreement be liable to the
other party for loss of profits or other incidental, consequential or
special damages.
13. Indemnity
A. Contractor agrees to defend, indemnify and hold harmless the
Company, to the extent the Company is not insured or
otherwise indemnified, for all losses, claims, liabilities,
obligations or the like incurred by the Company or any
member in the Company either directly or through the Company
arising from Contractor's failure to perform its obligations
hereunder according to good marine practice and consistent
with the standard operating procedures and practices of the
industry, whether such obligations are to be performed by
itself or through an affiliate or sub-contractor appointed
by it. Further, it is agreed that Contractor's liability,
if any, under this paragraph shall not in any event exceed
U.S. $100,000.00 per occurrence, not to exceed U.S.
$1,000,000 in any one year.
B. Notwithstanding the foregoing it is agreed that Contractor
shall have no liability to the Company for pollution, well
control costs, reservoir or underground damage or loss of
hole, regardless of how caused, including, but not limited
to, the sole, joint or concurrent negligence, or gross
negligence of Contractor, its employees or sub-contractors.
14. Additional Insured and Waiver of Subrogation
The Company agrees to cause the relevant insurance policies and
cover notes being maintained at the expense of the Company for the
benefit of both parties to include both parties as named insureds and
to cause the interested underwriters to waive all rights of
subrogation against the parties hereto.
15. Force Majeure
The obligations (other than any obligations to pay money) of
either party to the Agreement shall be suspended (and failure to carry
out the same shall not constitute a breach of this Agreement) to the
extent, and during the period, that such party is prevented from
carrying out is obligations by virtue of any act or event outside the
reasonable control of that party.
16. Amendment
This Agreement may be amended, from time to time, only by mutual
agreement of the parties in writing.
IN WITNESS WHEREOF, the parties thereto have caused this Agreement to
be executed by its duly authorized representatives in Houston, Texas on
April 30, 1997.
CONOCO SHIPPING AND MARINE
DEVELOPMENT COMPANY
By:
Its:
DEEPWATER DRILLING II L.L.C.
By:
Its:
EXHIBIT "H"
DRILLING SERVICES AGREEMENT
This Agreement is made as of April 30, 1997, by and between DEEPWATER
DRILLING II L.L.C., a limited liability company under the laws of the state
of Delaware and having an office in Houston, Texas, hereinafter called "the
Company", and READING & ▇▇▇▇▇ DRILLING CO., a corporation incorporated
under the laws of Oklahoma and having an office in Houston, Texas,
hereinafter called "Contractor".
WITNESSETH
WHEREAS, the Company desires to provide offshore drilling services to
the oil and gas industry utilizing the dynamically positioned drillship
under construction by Samsung Heavy Industries Co., Ltd. and Samsung
Corporation at Koje Island, Korea, Builder's Hull No. 1231, hereinafter
called "the Drilling Unit", to be delivered to the Company upon completion
of such construction;
WHEREAS, the Company intends to enter into drilling contracts with
Conoco Drilling Inc. ("Conoco") and Reading & ▇▇▇▇▇ Corporation ("Reading &
▇▇▇▇▇") having a term of two and one-half years (2-1/2), or an aggregate of
five (5) years, plus options as further set out therein, hereinafter called
the "Drilling Contracts", to provide offshore drilling services utilizing
the Drilling Unit upon completion of construction and mobilization of the
Drilling Unit to a U.S. Gulf of Mexico port;
WHEREAS, the group of companies of which Contractor is a member has
been engaged in operating offshore drilling units for many years and has
acquired a qualified and experienced operational, marketing, technical and
administrative staff with the knowledge, skill and experience to assist the
Company in the drilling aspects of the construction and operations of the
Drilling Unit;
WHEREAS, the Company desires to avail itself of certain operational,
marketing, technical and administrative staff of Contractor and has
requested Contractor to provide certain services and personnel to the
Company; and
WHEREAS, Contractor has agreed to provide such services and personnel
to the Company in accordance with the following terms and conditions.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Services to be Provided by Contractor
Pursuant to the terms of this Agreement Contractor agrees to
provide the following services as requested from time to time by
the Company.
A. Engineering and related technical services in the
mechanical, electrical, structural and marine engineering
disciplines, pertaining to the construction, installation,
testing, commissioning and operation of the drilling and
topsides systems of the Drilling Unit.
B. Assistance to the Company's purchasing organization for the
procurement and delivery of necessary equipment, spare parts
and supplies applicable to the marine system of the Drilling
Unit in a timely manner.
C. Policies, procedures and systems for project management,
management information, safety, preventive maintenance and
inventory control applicable to the drilling and topsides
systems of the Drilling Unit.
D. Assistance in the recruitment of qualified and experienced
drilling personnel for the Drilling Unit by the Company and
for the training of drilling personnel to be assigned to the
Drilling Unit.
E. Project management, inspection and related technical
assistance services applicable to the drilling systems of
the Drilling Unit prior to delivery of the Drilling Unit
from the shipyard.
If Contractor is unable to provide the services requested for
whatever reason, (i) Contractor shall promptly advise Company of
same in writing, (ii) Contractor will owe no further obligation
to Company with respect to Contractor providing the requested
services, and (iii) Contractor agrees that it will at the
Company's request provide assistance to the Company in
identifying and procuring direct for the Company's account other
contractors who may be able to provide such services.
All services provided by Contractor under this Agreement shall be in
conformance with good and accepted oilfield practice and standard
operating procedures and practices of the industry.
2. Personnel
Contractor agrees to provide, or cause to be provided, to the
Company all drilling and support personnel in the categories set
out in Exhibit A to this Agreement, as may be reasonably
requested by the Company from time to time, to assist the Company
in connection with the construction, installation, testing,
commissioning and operation of the drilling and topsides systems
of the Drilling Unit, and in order for the Company to meet the
requirements of any drilling contract for the Drilling Unit.
With respect to the Drilling Contracts, Contractor agrees to
provide at the request of the Company the drilling and support
personnel set out in Appendix B of the Drilling Contracts.
If Contractor is unable to provide the personnel requested for
whatever reason, (i) Contractor shall promptly advise Company of
same in writing, (ii) Contractor will owe no further obligation
to Company with respect to Contractor providing such personnel,
and (iii) Contractor agrees that it will at the Company's request
provide assistance to the Company in identifying and procuring
direct for the Company's account other contractors who may be
able to provide such personnel.
3. Other Services
Contractor further agrees to provide, or assist the Company in
procuring for its own account, administrative, financial,
technical, marketing and other support services as the Company
may request in connection with the Company's business and as
Contractor may be able to reasonably provide.
3. Remuneration
A. In consideration of the services being provided hereunder,
the Company agrees to pay Contractor, on a monthly basis in
arrears, a sum not to exceed U.S. $2,500 per day commencing on
the Commencement Date of the Drilling Contract under which the
Drilling Unit first commence operations and continuing for the
duration of the Drilling Contracts, such rate to be based
initially on the level of services Company has requested and
Contractor is providing, and such rate to be adjusted quarterly
based on changes in the Consumer Price Index, as published in the
Survey of Current Business Bulletin by the U.S. Department of
Labor, commencing with the index for the month of March, 1999.
The parties agree to negotiate, in good faith, adjustments to
such rate based on the level of drilling services Contractor
provides to Company as compared to drilling services obtained by
the Company from third parties.
B. The Company agrees to reimburse Contractor for:
(1) Any and all payroll and payroll burden costs incurred
by Contractor in providing personnel to the Company
pursuant to the Section 2 of this Agreement from and
after April 25, 1997, such payroll and payroll burden
costs to be in conformance with Contractor's normal
accounting practices and employee benefits in effect
from time to time;
(2) Any and all third party costs incurred by Contractor
in the procurement of equipment, materials, supplies,
spare parts or personnel requested by the Company,
including all relevant transportation, travel and
insurance costs.
C. As additional consideration for the services provided in
construction hereunder the Company agrees to pay, on a
monthly basis in arrears, to Contractor an amount equal to
one percent (1%) of the monthly revenues accruing to Company
under the Drilling Contract (excluding, however, amounts for
which Company is entitled to cost reimbursement under the
terms of the Drilling Contracts).
5. Payment
A. The Company shall pay all amounts due to Contractor under
this Agreement by wire transfer, in freely available funds,
to a bank to be designated by Contractor in New York, New
York for credit to Contractor's account.
B. All such amounts shall be paid within twenty days following
receipt by the Company of monthly invoices supported by
reasonable documentation. All amounts not paid when due
shall earn interest until paid at the rate of 50 basis
points over the 3 month LIBOR in effect, from time to time,
as published in the "Wall Street Journal".
6. Confidential Information
Any proprietary or confidential information, documents, manuals,
systems, designs, drawings or other like or unlike material or
information made available to the Company by Contractor is for the use
only by the Company for use with the services to be provided by
Contractor pursuant to this Agreement and shall be so designated at
the time of disclosure. Title to all such material and information
shall at all times be in Contractor, and the Company shall not have
any rights with respect to such material and information except the
use provided by this Agreement. During the term of this Agreement and
thereafter for five years after the expiration or earlier termination
thereof or the date of disclosure of such information, whichever is
earlier, the Company will not permit the use of any such information
by a third party and will at all times keep it in the strictest
confidence. Upon the expiration or earlier termination of this
Agreement, the Company shall return to Contractor all such material
received from Contractor or prepared by Contractor pursuant to this
Agreement and shall neither retain any copy of such material nor
thereafter use any such information. It is expressly agreed that the
obligation of the Company under this section will continue and survive
any expiration or earlier termination of this Agreement, provided that
this section shall not apply to information which is:
A. Contained in a publication of general circulation;
B. Disclosed in good faith by a third party not in privity with
the party originally disclosing such information which has a
bona fide right to disclose such information; or
C. Information substantially acquired or developed for, or
from, the operations or maintenance of the Drilling Unit;
save that the Company shall be entitled, after reasonable prior notice
to Contractor, to disclose any such confidential information, report
or document:
(a) in connection with any proceedings arising out of or in
connection with this Agreement to the extent necessary to
protect its interests;
(b) to any prospective assignee of any interest in the Company
subject to it obtaining an undertaking from such prospective
assignee in the terms of this section;
(c) if required to do so by an order of any court of competent
jurisdiction;
(d) in pursuance of any procedure for discovery of documents in
any proceedings before any such court;
(e) pursuant to any law or regulation having the force of law or
any national stock exchange requirement;
(f) pursuant to a requirement of any authority being an
authority with whose requirement, of the nature and to the
extent in question, it is accustomed to comply; or
(g) to the technical or legal advisers of the Company subject to
it obtaining an undertaking from such advisers in the terms
of this section;
and the Company shall be entitled so to disclose or use any such
information, report or document if the information contained therein
shall have emanated in conditions free from confidentiality bona fide
from some person other than Contractor or the agent of Contractor and
such party would, but for the preceding provisions of this sub-
section, be free so to disclose or use the same; provided that the
Company shall use all reasonable endeavors to avoid disclosure to any
third party in accordance with sub-sections (c) (d) (e) and (f) above.
7. Term
A. This Agreement shall remain in effect until the expiration
or earlier termination of the Drilling Contracts, as same
may be amended or extended from time to time, and shall be
automatically renewed on an annual basis thereafter unless
either party gives six months' prior written notice of its
intention to terminate this Agreement or renegotiate its
terms to the other party. If such notice is given, the
parties agree to meet promptly and discuss in good faith
such termination or renegotiation, as the case may be, and
if mutual agreement is not reached regarding same, this
Agreement may be terminated by either party, effective upon
expiration of such six month period.
B. In case of termination of this Agreement, Contractor shall
be entitled to any payments with respect to services
performed or costs or expenses incurred prior to such
termination.
C. If either party materially defaults in the fulfillment of
any obligation under this Agreement without reasonable
justification therefor, the other party will not have any
further obligation to fulfil its obligations until such
default has been cured. If such default continues for a
period of more than 30 days, the non-defaulting party shall
have the option to terminate this Agreement, without
prejudice to any other rights it may have.
8. Taxes
The remuneration payable under Sections 3.A and 3.B has been
calculated on the basis that Contractor will be liable for all federal
and state income and franchise taxes on the profits arising to it
under this Agreement but no other taxes. Any and all such other taxes
that may be imposed by any governmental authority shall be borne by
the Company.
9. Assignment
Neither party shall assign or transfer any of its right, title or
interest in or to this Agreement (except to a successor to
substantially all of such party's business or to a corporation owned
by or under common ownership with such party which agrees to assume
all obligations of such party, provided that the assigning party shall
not thereby be released from its obligations hereunder) without the
prior written consent of the other party, and any such attempt to
assign or transfer without such consent shall have no effect.
Contractor may subcontract for any services requested by the Company
hereunder, provided Company has approved any such subcontract, such
approval not to be unreasonably withheld.
10. Notices
Any notice or other communication for which this Agreement
provides shall be in writing and will be delivered to the addressee
thereof or sent to the address thereof by electronic facsimile
communication or by registered or certified mail, return receipt
requested, or by other method which will constitute adequate evidence
of delivery, as follows:
If to the Company:
Deepwater Drilling II L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Manager
If to Contractor:
Reading & ▇▇▇▇▇ Drilling Co.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
or addressed at such other address as the addressee thereof may have
designated for that purpose by written notice given as above provided.
Any notice given in conformance with this clause will be considered as
received for all purposes on the date of delivery.
11. Governing Law
This Agreement shall be governed by and construed in accordance
with the general maritime law of the United States and to the extent
state law may be applicable by the internal laws of Texas and the
parties hereto submit to the non-exclusive jurisdiction of the federal
and state courts in ▇▇▇▇▇▇ County, Texas.
12. Consequential Damages
In no event shall either party to this Agreement be liable to the
other party for loss of profits or other incidental, consequential or
special damages.
13. Indemnity
A. Contractor agrees to defend, indemnify and hold harmless the
Company, to the extent the Company is not insured or
otherwise indemnified, for all losses, claims, liabilities,
obligations or the like incurred by the Company or any
member in the Company either directly or through the Company
arising from Contractor's failure to perform its obligations
hereunder according to good oil field practice and
consistent with the standard operating procedures and
practices of the industry, whether such obligations are to
be performed by itself or through an affiliate or sub-
contractor appointed by it. Further, it is agreed that
Contractor's liability, if any, under this paragraph shall
not in any event exceed U.S. $100,000.00 per occurrence, not
to exceed U.S. $1,000,000 in any one year.
B. Notwithstanding the foregoing it is agreed that Contractor
shall have no liability to the Company for pollution, well
control costs, reservoir or underground damage or loss of
hole, regardless of how caused, including, but not limited
to, the sole, joint or concurrent negligence, or gross
negligence of Contractor, its employees or sub-contractors.
14. Additional Insured and Waiver of Subrogation
The Company agrees to cause the relevant insurance policies and
cover notes being maintained at the expense of the Company for the
benefit of both parties to include both parties as named insureds and
to cause the interested underwriters to waive all rights of
subrogation against the parties hereto.
15. Force Majeure
The obligations (other than any obligations to pay money) of
either party to the Agreement shall be suspended (and failure to carry
out the same shall not constitute a breach of this Agreement) to the
extent, and during the period, that such party is prevented from
carrying out is obligations by virtue of any act or event outside the
reasonable control of that party.
16. Amendment
This Agreement may be amended, from time to time, only by mutual
agreement of the parties in writing.
IN WITNESS WHEREOF, the parties thereto have caused this Agreement to
be executed by its duly authorized representatives in Houston, Texas on
April 30, 1997.
READING & ▇▇▇▇▇ DRILLING CO.
By:
Its:
DEEPWATER DRILLING II L.L.C.
By:
Its:
