CREDIT AGREEMENT

EXHIBIT 10.2

 

 

 

CREDIT AGREEMENT
among

ATWOOD OCEANICS, INC.,
ATWOOD OCEANICS PACIFIC LIMITED,
VARIOUS LENDERS
and

NORDEA BANK FINLAND PLC, NEW YORK BRANCH,

as Administrative Agent,
Lead Arranger and Book Runner
__________________________________

Dated as of November 25, 2008

__________________________________

$280,000,000
 
 

  TABLE OF CONTENTS

                                                                                                                                                   Page

SECTION 1. Amount and Term Credit Facility.................................................................................1                                     

1.01     The Commitments.................................................................................................1

1.02     Minimum Amount of Each Borrowing; Limitation on Number of Borrowings...........1

1.03     Notice of Borrowing..............................................................................................1

1.04     Disbursement of Funds..........................................................................................2    

1.05     Notes....................................................................................................................3  

1.06     Pro Rata Borrowings.............................................................................................3  

1.07     Interest..................................................................................................................4

1.08     Interest Periods......................................................................................................4

1.09     Increased Costs, Illegality, etc................................................................................5

1.10     Compensation........................................................................................................8

1.11     Change of Lending Office.......................................................................................8     

1.12     Replacement of Lenders.........................................................................................8 

1.13     Incremental Commitments.......................................................................................9 

SECTION 2. Letters of Credit..........................................................................................................11    

2.01     Letters of Credit....................................................................................................11     

2.02     Maximum Letters of Credit Outstanding; Maturities................................................12

2.03     Letter of Credit Requests; Minimum Stated Amount...............................................12

2.04     Letter of Credit Participations................................................................................13

2.05     Agreement to Repay Letter of Credit Drawings......................................................15

2.06     Increased Costs.....................................................................................................15

SECTION 3. Commitment Commission; Fees; Reductions of  Commitment......................................16

3.01     Fees........................................................................................................................16

3.02     Voluntary Termination of Unutilized Commitments....................................................17

3.03     Mandatory Reduction of Commitments....................................................................18

SECTION 4. Prepayments; Payments; Taxes...................................................................................18

4.01     Voluntary Prepayments............................................................................................18

4.02     Mandatory Repayments...........................................................................................19

4.03     Method and Place of Payment.................................................................................20

4.04     Net Payments; Taxes...............................................................................................20

SECTION 5. Conditions Precedent to Credit Events on the Initial Borrowing Date.............................21

5.01     Effective Date; Notes................................................................................................21

5.02     Fees, etc...................................................................................................................21

5.03     Officer’s Certificate...................................................................................................21

5.04     Opinions of Counsel..................................................................................................21

TABLE OF CONTENTS

(continued)

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5.05     Corporate Documents; Proceedings; etc....................................................................21

5.06     Outstanding Indebtedness..........................................................................................22

5.07     Subsidiaries Guaranties..............................................................................................22

5.08     Pledge Agreements....................................................................................................23

5.09     Assignment of Insurances, Assignment of Earnings and Security Agreements...............24

5.10     Collateral Rig Mortgage; Certificates of Ownership; Searches; Appraisal Reports;

            Insurance...................................................................................................................25     

5.11     Vessel Acquisition Agreement....................................................................................26

5.12     Adverse Change; Approvals......................................................................................27

5.13     Litigation...................................................................................................................27

5.14     Solvency Certificate...................................................................................................27

5.15     Financial Statements; Projections; Monthly Fleet Report.............................................27

5.16     Intercompany Subordination Agreement.....................................................................27

5.17     Intercreditor Agreement.............................................................................................28

SECTION 6. Conditions Precedent to All Credit Events......................................................................28     

6.01     No Default; Representations and Warranties...............................................................28

6.02     Notice of Borrowing; Letter of Credit Request............................................................28

SECTION 7. Representations, Warranties and Agreements..................................................................28  

7.01     Corporate/Limited Liability Company/Limited Partnership Status..................................29

7.02     Corporate Power and Authority...................................................................................29

7.03     No Violation................................................................................................................29

7.04     Governmental Approvals..............................................................................................29

7.05     Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc.........30

7.06     Litigation......................................................................................................................31

7.07     True and Complete Disclosure......................................................................................31

7.08     Use of Proceeds; Margin Regulations............................................................................31

7.09     Tax Returns and Payments............................................................................................32

7.10     Compliance with ERISA...............................................................................................32

7.11     The Security Documents...............................................................................................33

7.12     Capitalization................................................................................................................33

7.13     Subsidiaries..................................................................................................................34

7.14     Compliance with Statutes, etc.......................................................................................34

7.15     Investment Company Act.............................................................................................34

7.16     Legal Names; Type of Organization (and Whether a Registered Organization);

            Jurisdiction of Organization; etc....................................................................................34

7.17     Environmental Matters.................................................................................................34

7.18     Labor Relations...........................................................................................................35

7.19     Patents, Licenses, Franchises and Formulas..................................................................35

7.20     Indebtedness...............................................................................................................35

TABLE OF CONTENTS

(continued)

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7.21     Insurance....................................................................................................................36

7.22     Collateral Rigs.............................................................................................................36

7.23     Properties....................................................................................................................36

7.24     Anti-Terrorism.............................................................................................................36

SECTION 8. Affirmative Covenants.....................................................................................................37

8.01     Information Covenants................................................................................................37

8.02     Books, Records and Inspections.................................................................................41

8.03     Maintenance of Property; Insurance............................................................................42

8.04     Existence; Franchises..................................................................................................42

8.05     Compliance with Statutes, etc......................................................................................43

8.06     Compliance with Environmental Laws..........................................................................43

8.07     ERISA.......................................................................................................................44

8.08     End of Fiscal Years; Fiscal Quarters...........................................................................44

8.09     Performance of Obligations.........................................................................................44

8.10     Payment of Taxes.......................................................................................................45

8.11     Additional Security; Additional Guarantors; Further Assurances...................................45

8.12     Use of Proceeds.........................................................................................................47

8.13     Ownership..................................................................................................................47

8.14     Letter of Credit Back-Stop Arrangements...................................................................47

SECTION 9. Negative Covenants.......................................................................................................47

9.01     Liens..........................................................................................................................47

9.02     Consolidation, Merger, or Sale of Assets, etc..............................................................49

9.03     Dividends...................................................................................................................51

9.04     Indebtedness..............................................................................................................52

9.05     Advances, Investments and Loans..............................................................................54

9.06     Transactions with Affiliates..........................................................................................55

9.07     Maximum Leverage Ratio...........................................................................................56

9.08     Interest Expense Coverage Ratio................................................................................56

9.09     Collateral Maintenance...............................................................................................56

9.10     Certificate of Incorporation, By-Laws and Certain Other Agreements, etc...................56

9.11     Limitation on Certain Restrictions on Subsidiaries........................................................57

9.12     Limitation on Issuance of Capital Stock......................................................................58

9.13     Change of Registry; Class; Management; Legal Names; Type of Organization

            (and whether a Registered Organization); Jurisdiction of Organization etc....................58

9.14     Business....................................................................................................................59

9.15     ERISA......................................................................................................................59

TABLE OF CONTENTS

(continued)

                                                                                                                                          Page

SECTION 10. Events of Default........................................................................................................59

10.01     Payments................................................................................................................59

10.02     Representations, etc................................................................................................59

10.03     Covenants..............................................................................................................59

10.04     Default Under Other Agreements............................................................................60

10.05     Bankruptcy, etc......................................................................................................60

10.06     ERISA...................................................................................................................61

10.07     Security Documents................................................................................................61

10.08     Guaranties..............................................................................................................61

10.09     Judgments..............................................................................................................61

10.10     Change of Control..................................................................................................61

10.11     Existing Credit Agreement......................................................................................61

SECTION 11. Definitions and Accounting Terms..............................................................................62

11.01     Defined Terms.......................................................................................................62

SECTION 12. The Administrative Agent..........................................................................................80

12.01     Appointment.........................................................................................................81

12.02     Nature of Duties...................................................................................................81

12.03     Lack of Reliance on the Administrative Agent........................................................81

12.04     Certain Rights of the Administrative Agent.............................................................82

12.05     Reliance................................................................................................................82

12.06     Indemnification......................................................................................................82

12.07     The Administrative Agent in its Individual Capacity.................................................82

12.08     Holders.................................................................................................................83

12.09     Resignation by the Administrative Agent.................................................................83

SECTION 13. Parent Guaranty........................................................................................................84

13.01     Guaranty...............................................................................................................84

13.02     Bankruptcy...........................................................................................................84

13.03     Nature of Liability.................................................................................................84

13.04     Independent Obligation.........................................................................................85

13.05     Authorization........................................................................................................85

13.06     Reliance...............................................................................................................86

13.07     Subordination.......................................................................................................86

13.08     Waiver.................................................................................................................86

13.09     Payment...............................................................................................................87

SECTION 14. Miscellaneous..........................................................................................................87

14.01     Payment of Expenses, etc.....................................................................................87

14.02     Right of Setoff .....................................................................................................88

14.03     Notices................................................................................................................89

TABLE OF CONTENTS

(continued)

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14.04     Benefit of Agreement; Assignments; Participations.................................................89

14.05     No Waiver; Remedies Cumulative........................................................................91

14.06     Payments Pro Rata...............................................................................................91

14.07     Calculations; Computations...................................................................................92

14.08     GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;

              WAIVER OF JURY TRIAL................................................................................92

14.09     Counterparts........................................................................................................94

14.10     Effectiveness........................................................................................................94

14.11     Headings Descriptive............................................................................................94

14.12     Amendment or Waiver; etc...................................................................................94

14.13     Survival................................................................................................................96

14.14     Domicile of Loans.................................................................................................96

14.15     Register................................................................................................................96

14.16     Confidentiality.......................................................................................................97

14.17     Insurance Proceeds...............................................................................................98

14.18     Rights Plan............................................................................................................98

 

SCHEDULE I      -     Commitments
SCHEDULE II     -     Lender Addresses
SCHEDULE III    -     Subsidiary Guarantors
SCHEDULE IV    -     Foreign Pledge Agreements and Pledgors
SCHEDULE V     -     Tax Matters
SCHEDULE VI    -     ERISA
SCHEDULE VII   -     Subsidiaries
SCHEDULE VIII  -     Existing Indebtedness
SCHEDULE IX    -      Insurance
SCHEDULE X     -      Collateral Rigs

SCHEDULE XI    -      Legal Name; Type of Organization and Whether a Registered Organization; Jurisdiction of Organization; Etc.

SCHEDULE XII   -      Existing Liens
SCHEDULE XIII  -      Existing Investments
SCHEDULE XIV  -      Vessel Acquisition Agreement

EXHIBIT A   Notice of Borrowing

EXHIBIT B   Note

EXHIBIT C   Letter of Credit Request

EXHIBIT D-I  Opinion of Strasburger & Price, LLP

EXHIBIT D-II  Opinion of Maples & Calder, local Cayman Island counsel to each of the Credit Parties

EXHIBIT D-III  Opinion of Allens Arthur Robinson, special Australian counsel to the Borrower and AOA

EXHIBIT D-IV  Opinion of Gardere Wynne Sewell, LLP, special maritime counsel to the Administrative Agent

TABLE OF CONTENTS

(continued)

 

EXHIBIT E   Officers’ Certificate

EXHIBIT F   U.S. Subsidiaries Guaranty

EXHIBIT G   U.S. Pledge Agreement

EXHIBIT H   Assignment of Insurances

EXHIBIT I     Assignment of Earnings

EXHIBIT J     Security Agreement

EXHIBIT K-I  Collateral Rig Mortgage – Marshall Islands

EXHIBIT K-II  Collateral Rig Mortgage – Australia

EXHIBIT L   Vessel Acquisition Agreement Assignment

EXHIBIT M  Solvency Certificate

EXHIBIT N   Compliance Certificate

EXHIBIT O   Assignment and Assumption Agreement

EXHIBIT P    Joinder Agreement

EXHIBIT Q   Intercompany Subordination Agreement

EXHIBIT R    Intercreditor Agreement

EXHIBIT S    Form of Incremental Commitment Agreement

 

CREDIT AGREEMENT, dated as of November 25, 2008, among ATWOOD OCEANICS, INC., a Texas corporation (the “ Parent ”), ATWOOD OCEANICS PACIFIC LIMITED, a company organized under the laws of the Cayman Islands and a Wholly-Owned Subsidiary of the Parent (the “ Borrower ”), the Lenders party hereto from time to time, and NORDEA BANK FINLAND PLC, NEW YORK BRANCH, a national banking association organized under the laws of the Republic of Finland, as Administrative Agent (in such capacity, the “ Administrative Agent ”). All capitalized terms used herein and defined in Section 11 are used herein as therein defined.

W I T N E S S E T H:

WHEREAS, the Borrower has requested that the Lenders extend credit in the form of Loans and Letters of Credit at any time on or after the Effective Date and from time to time prior to the Maturity Date, in an aggregate principal amount of $280.0 million (plus Incremental Commitments, if any);

WHEREAS, subject to and upon the terms and conditions herein set forth, the Lenders are willing to make available to the Borrower the credit facility provided for herein;

NOW, THEREFORE, IT IS AGREED:

SECTION 1.       Amount and Terms of Credit Facility .

1.01      The Commitments . Subject to and upon the terms and conditions set forth herein, each Lender with a Commitment severally agrees to make, at any time and from time to time on or after the Initial Borrowing Date and prior to the Maturity Date, a revolving loan or revolving loans (each, a “ Loan ” and, collectively, the “ Loans ”) to the Borrower, which Loans (i) shall be denominated in Dollars, (ii) shall bear interest in accordance with Section 1.07, (iii) may be repaid and reborrowed in accordance with the provisions hereof, and (iv) shall not exceed for any such Lender at any time outstanding that aggregate principal amount which, when added to the product of (x) such Lender’s Percentage and (y) the aggregate amount of all Letters of Credit Outstanding (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Loans) at such time, equals the Commitment of such Lender at such time.

1.02      Minimum Amount of Each Borrowing; Limitation on Number of Borrowings . The aggregate principal amount of each Borrowing of Loans shall not be less than $1,000,000 in each case. More than one Borrowing may occur on the same date, but at no time shall there be outstanding more than ten (10) Borrowings of Loans.

1.03      Notice of Borrowing . (a)   Whenever the Borrower desires to incur Loans hereunder, an Authorized Representative of the Borrower shall give the Administrative Agent at the Notice Office at least four Business Days’ prior written notice (or telephonic notice promptly confirmed in writing) of each Loan to be incurred hereunder, provided that, (in each case) any such notice shall be deemed to have been given on a certain day only if given before 11:00 a.m. (New York time) on such day. Each such written notice or written confirmation of telephonic notice (each, a “ Notice of Borrowing ”), except as otherwise expressly provided in Section 1.09, shall be irrevocable and shall be given in writing by the Borrower in the form of Exhibit A , appropriately completed to specify (i) the aggregate

principal amount of the Loans to be incurred pursuant to such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (iii) the initial Interest Period to be applicable to such Borrowing and (iv) to which account the proceeds of such Loans are to be deposited. The Administrative Agent shall promptly give each Lender which is required to make Loans notice of such proposed Borrowing, of such Lender’s proportionate share thereof and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing.

(b)     Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice of any Borrowing or prepayment of Loans, the Administrative Agent may act without liability upon the basis of telephonic notice of such Borrowing or prepayment, as the case may be, believed by the Administrative Agent in good faith to be from an Authorized Representative of the Borrower prior to receipt of written confirmation. In each such case, the Borrower hereby waives the right to dispute the Administrative Agent’s record of the terms of such telephonic notice of such Borrowing or prepayment of Loans, as the case may be, absent manifest error.

 

1.04      Disbursement of Funds . No later than 12:00 Noon (New York time) on the date specified in each Notice of Borrowing, each Lender with a Commitment will make available its pro rata portion (determined in accordance with Section 1.06) of each such Borrowing requested to be made on such date. All such amounts will be made available in Dollars and in immediately available funds at the Payment Office and the Administrative Agent will make available to the Borrower (prior to 1:00 p.m. (New York time) on such day to the extent of funds actually received by the Administrative Agent prior to 12:00 Noon (New York time) on such day) at the Payment Office, in the account specified in the applicable Notice of Borrowing, the aggregate of the amounts so made available by the Lenders. Unless the Administrative Agent shall have been notified by any Lender prior to the date of Borrowing that such Lender does not intend to make available to the Administrative Agent such Lender’s portion of any Borrowing to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date of Borrowing and the Administrative Agent may (but shall not be obligated to), in reliance upon such assumption, make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent also shall be entitled to recover on demand from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower until the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (i) if recovered from such Lender, the overnight Federal Funds Rate for the first three days and at the interest rate otherwise applicable to such Loans for each day thereafter and

 (ii) if recovered from the Borrower, the rate of interest applicable to the respective Borrowing, as determined pursuant to Section 1.07. Nothing in this Section 1.04 shall be deemed to relieve any Lender from its obligation to make Loans hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any failure by such Lender to make Loans hereunder.

1.05      Notes . (a)   The Borrower’s obligation to pay the principal of, and interest on, the Loans made by each Lender shall be evidenced in the Register maintained by the Administrative Agent pursuant to Section 14.15 and shall, if requested by such Lender as provided below, also be evidenced by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B , with blanks appropriately completed in conformity herewith (each a “ Note ” and, collectively, the “ Notes ”). Coincident with the delivery of an Incremental Commitment Agreement for acceptance and registration of the provision of an Incremental Commitment, or as soon thereafter as practicable, new Notes, as the case may be, shall be issued to the respective Incremental Lender at the request of such Incremental Lender.

 

(b)      The Note issued to each Lender that has a Commitment or outstanding Loans shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender or its registered assigns and be dated the Initial Borrowing Date (or, in the case of Notes issued after the Initial Borrowing Date, be dated the date of the issuance thereof), (iii) be in a stated principal amount equal to the Commitment of such Lender (or, if issued after the termination thereof, be in a stated principal amount equal to the outstanding Loans of such Lender at such time) and be payable in the outstanding principal amount of the Loans evidenced thereby, (iv) mature on the Maturity Date, (v) bear interest as provided in Section 1.07, (vi) be subject to voluntary prepayment and mandatory repayment as provided in Sections 4.01 and 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents.

 

(c)      Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and, prior to any transfer of any of its Notes, will endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation or any error in such notation or endorsement shall not affect the Borrower’s obligations in respect of such Loans.

 

(d)     Notwithstanding anything to the contrary contained above in this Section 1.05 or elsewhere in this Agreement, Notes shall only be delivered to Lenders which at any time specifically request the delivery of such Notes. No failure of any Lender to request or obtain a Note evidencing its Loans to the Borrower shall affect or in any manner impair the obligations of the Borrower to pay the Loans (and all related Obligations) incurred by the Borrower which would otherwise be evidenced thereby in accordance with the requirements of this Agreement, and shall not in any way affect the security or guaranties therefor provided pursuant to the various Credit Documents. Any Lender which does not have a Note evidencing its outstanding Loans shall in no event be required to make the notations otherwise described in preceding clause (c). At any time when any Lender requests the delivery of a Note to evidence any of its Loans, the Borrower shall (at its expense) promptly execute and deliver to the respective Lender the requested Note in the appropriate amount or amounts to evidence such Loans.

 

1.06    Pro Rata Borrowings . All Borrowings of Loans under this Agreement shall be incurred from the Lenders pro rata on the basis of their Commitments. It is understood that no Lender shall be responsible for any default by any other Lender of its obligation to make Loans hereunder and that each Lender shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder.

 

1.07    Interest . (a)   The Borrower agrees to pay interest in respect of the unpaid principal amount of each Loan from the date of Borrowing thereof until the maturity (whether by acceleration or otherwise) of such Loan at a rate per annum which shall, during each Interest Period applicable thereto, be equal to (except as otherwise provided in Section 1.09(a)) the sum of the Applicable Margin plus the Eurodollar Rate for such Interest Period.

 

(b)     Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan shall, in each case, bear interest at a rate per annum equal to 2.00% per annum in excess of the rate then borne by such Loans, and all other overdue amounts payable hereunder and under any other Credit Document shall bear interest at a rate per annum equal to the rate which is 2.00% in excess of the Base Rate, as in effect from time to time, plus the Applicable Margin as in effect from time to time. Interest that accrues under this Section 1.07(b) shall be payable on demand.

 

(c)     Accrued (and theretofore unpaid) interest shall be payable (x) on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period, and (y) on the date of any repayment or prepayment (on the amount repaid or prepaid), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand.

 

(d)    Upon each Interest Determination Date, the Administrative Agent shall determine the Eurodollar Rate for each Interest Period applicable to the respective Loans and shall promptly notify the Borrower and the Lenders thereof. Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto.

 

1.08    Interest Periods . At the time the Borrower gives any Notice of Borrowing in respect of the making of any Loan (in the case of the initial Interest Period applicable thereto) or prior to 11:00 a.m. (New York time) on the fourth Business Day prior to the expiration of an Interest Period applicable to such Loan (in the case of any subsequent Interest Period), the Borrower shall have the right to elect, by having an Authorized Representative of the Borrower give the Administrative Agent notice thereof, the interest period (each an “ Interest Period ”) applicable to such Loan, which Interest Period shall, at the option of the Borrower, be a three or six-month period, with additional periods available with the consent of all Lenders (it being understood, however , that during the one month period preceding the Maturity Date, the Borrower, with the consent of the Administrative Agent, may select an Interest Period of less than one month so long as such Interest Period ends no later than the Maturity Date); provided that:

(i)

all Loans comprising a Borrowing shall at all times have the same Interest Period;

 

(ii)

the initial Interest Period for any Loan shall commence on the date of Borrowing of such Loan and each Interest Period occurring thereafter in respect of such Loan shall commence on the day immediately following the day on which the immediately preceding Interest Period applicable thereto expires;

(iii)

if any Interest Period for a Loan begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month;

 

(iv)

if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the first succeeding Business Day; provided , however , that if any Interest Period for a Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day;

 

(v)

no Interest Period longer than three months may be selected at any time when a Default or an Event of Default is then in existence;

 

(vi)

no Interest Period in respect of any Borrowing of Loans shall be selected which extends beyond the Maturity Date; and

 

(vii)

the selection of Interest Periods shall be subject to the provisions of Section 1.02.

 

If by 11:00 a.m. (New York time) on the fourth Business Day preceding the expiration of any Interest Period applicable to a Borrowing, the Borrower has failed to elect a new Interest Period to be applicable to such Loans as provided above, the Borrower shall be deemed to have elected a one month Interest Period to be applicable to such Loans effective as of the expiration date of such current Interest Period.

1.09    Increased Costs, Illegality, etc . (a)   In the event that any Lender shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto):

 

(i)     at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Loan because of (x) any change since the Effective Date in any applicable law or governmental rule, regulation, order, guideline or request (whether or not having the force of law) or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, order, guideline or request, such as but not limited to: (A) a change subjecting any Lender to any tax, duty or other charge with respect to any Loan, Notes or Letter of Credit, or its obligation to make such Loan or issue such Letter of Credit, or a change in the basis of taxation of payment to any Lender of the principal of or interest on the Loans or the Notes or any other amounts payable hereunder (except for changes in the rate of tax on, or determined by reference to, the net income or net profits of such Lender pursuant to the laws of the jurisdiction in which such Lender is organized or in which such Lender’s principal office or applicable lending office is located), but without duplication of any increased costs with respect to Taxes which are addressed in Section 4.04, or (B) a change in official reserve requirements, but, in all events, excluding

 

reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate, and/or (y) other circumstances arising since the Initial Borrowing Date affecting such Lender, the interbank Eurodollar market or the position of such Lender in such market; or

(ii)   at any time, that the making or continuance of any Loan has been made (x) unlawful by any law or governmental rule, regulation or order, and/or (y) impossible by compliance by any Lender in good faith with any governmental request (whether or not having force of law);

then, and in any such event, such Lender shall promptly give notice (by telephone promptly confirmed in writing) to the Borrower, which written notice shall set forth such Lender’s basis for asserting its right under this Section 1.09(a) and the calculation, in reasonable detail, of such additional amounts claimed hereunder, and, to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Lenders). Thereafter (x) in the case of clause (i) above, the Borrower agrees to pay to such Lender, upon such Lender’s written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as shall be required to compensate such Lender for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing in reasonable detail the basis for and the calculation thereof, submitted to the Borrower by such Lender shall, absent manifest error, be final and conclusive and binding on all the parties hereto) and (y) in the case of clause (ii) above, such Lender shall so notify the Administrative Agent and the Borrower (and the Administrative Agent shall give notice thereof to the other Lenders) and thereafter the Commitment of such Lender shall be permanently reduced by an amount sufficient to alleviate such circumstance arising pursuant to clause (ii)(x) or (y) above, or shall be terminated in its entirety if all of such Lender’s Loans are so affected, and the Borrower shall prepay in full the affected Loans of such Lender, together with accrued and unpaid interest thereon and, in the event of a termination of such Lender’s Commitment, any accrued and unpaid Commitment Commission which may be due to such Lender under this Agreement (and, in the event all of such Lender’s Loans are being repaid, any other amounts which may be owing to such Lender hereunder), on either the last day of the then current Interest Period applicable to each such affected Loan (if such Lender may lawfully continue to maintain and fund such Loans to such day) or immediately (if such Lender may not lawfully continue to maintain and fund such Loans to such day). The Administrative Agent and each Lender (to the extent it continues to be a Lender hereunder) agree that if any of them gives notice to the Borrower of any of the events described in clause (ii) above, it shall promptly notify the Borrower and the Administrative Agent, if such event ceases to exist. If any such event described in clause (ii) above ceases to exist as to a Lender (to the extent it continues at such time to be a Lender hereunder), the obligations of such Lender to make Loans on the terms and conditions contained herein shall to the extent of such Lender’s outstanding Loans and Commitments as in effect at such time, be immediately reinstated.

(b)     If any Lender determines that after the Effective Date the introduction or effectiveness of or any change in any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law) concerning capital adequacy, or any change in interpretation or administration thereof by the NAIC or any governmental authority, central bank or comparable agency will have the effect of increasing the amount of capital required or expected to be maintained by such Lender or any

corporation controlling such Lender based on the existence of such Lender’s Commitments hereunder or its obligations hereunder, then the Borrower agrees to pay to such Lender, upon its written demand therefor, such additional amounts as shall be required to compensate such Lender or such other corporation for the increased cost to such Lender or such other corporation or the reduction in the rate of return to such Lender or such other corporation as a result of such increase of capital. In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that, such Lender’s determination of compensation owing under this Section 1.09(b) shall, absent manifest error, be final and conclusive and binding on all the parties hereto. Each Lender, upon determining that any additional amounts will be payable pursuant to this Section 1.09(b), will give prompt written notice thereof to the Borrower, which notice shall show in reasonable detail the basis for calculation of such additional amounts.

(c)  If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on each Lender's share of that Loan for the Interest Period shall be the percentage rate per annum which is the sum of:

(i)

the Applicable Margin; and

 

(ii)

the rate which is the arithmetic average of the rates (rounded upward to the nearest 1/16 of one percent) determined by the Reference Banks on the Interest Determination Date for such Interest Period to be that which expresses as a percentage rate per annum the cost to each such Reference Bank of funding its participation in that Loan for a period equivalent to such Interest Period from whatever source it may reasonably select; provided that (x) in the event that none or only one of the Reference Banks supplies a rate to the Administrative Agent as contemplated by this clause (ii), the rate for each Lender for such Interest Period shall be the rate determined on the Interest Determination Date for such Interest Period by such Lender to be that which expresses as a percentage rate per annum the cost to such Lender of funding its participation in that Loan for a period equivalent to such Interest Period from whatever source it may reasonably select, and (y) the rate provided by a Reference Bank or Lender pursuant to this clause (ii) shall, absent manifest error, be final and conclusive and binding on all the parties hereto and shall not be disclosed to any other Lender and shall be held as confidential by the Administrative Agent and the Borrower.

 

(d)     If a Market Disruption Event occurs and the Administrative Agent or the Borrower so requires, the Administrative Agent and the Borrower shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for determining the rate of interest. Any alternative basis agreed pursuant to the immediately preceding sentence shall, with the prior consent of all the Lenders and the Borrower, be binding on all parties. If no agreement is reached pursuant to this clause (d), the rate provided for in clause (c) above shall apply for the entire Interest Period .

 

(e)  If any Reference Bank ceases to be a Lender under this Agreement, (x) it shall cease to be a Reference Bank and (y) the Administrative Agent shall, with the approval (which shall not be unreasonably withheld) of the Parent, nominate as soon as reasonably practicable another Lender to be a Reference Bank in place of such Reference Bank.

1.10    Compensation . The Borrower agrees to compensate each Lender, upon its written request (which request shall set forth in reasonable detail the basis for requesting such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Loans but excluding loss of anticipated profits) which such Lender may sustain: (i) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing does not occur on a date specified therefor in a Notice of Borrowing (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.09(a)); (ii) if any prepayment or repayment (including any prepayment or repayment made pursuant to Section 1.09(a), Section 4.01, Section 4.02 or as a result of an acceleration of the Loans pursuant to Section 10) of any of its Loans, or assignment of any of its Loans pursuant to Section 1.12, occurs on a date which is not the last day of an Interest Period with respect thereto; (iii) if any prepayment of any of its Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of any other default by the Borrower to repay Loans or make payment on any Note held by such Lender when required by the terms of this Agreement.

1.11    Change of Lending Office . Each Lender agrees that upon the occurrence of any event giving rise to the operation of Section 1.09(a)(ii) or (iii), Section 1.09(b), Section 2.06 or Section 4.04 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans or Letters of Credit affected by such event, provided that, such designation is made on such terms that such Lender and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section. Nothing in this Section 1.11 shall affect or postpone any of the obligations of the Borrower or the right of any Lender provided in Sections 1.09, 2.06 and 4.04.

1.12    Replacement of Lenders . (x)  If any Lender becomes a Defaulting Lender or otherwise defaults in its obligations to make Loans or fund Unpaid Drawings, (y) upon the occurrence of any event giving rise to the operation of Section 1.09(a)(ii) or (iii), Section 1.09(b) or Section 4.04 with respect to any Lender which results in such Lender charging to the Borrower increased costs in excess of those being generally charged by the other Lenders, or (z) as provided in Section 14.12(b) in the case of certain refusals by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders, the Borrower shall have the right, if no Default or Event of Default then exists (or, in the case of preceding clause (z), will exist immediately after giving effect to the respective replacement), to replace such Lender (the “ Replaced Lender ”) with one or more other Eligible Transferee or Eligible Transferees, none of whom shall constitute a Defaulting Lender at the time of such replacement (collectively, the “ Replacement Lender ”) and each of whom shall be required to be reasonably acceptable to the Administrative Agent, provided that:

 

(i)     at the time of any replacement pursuant to this Section 1.12, the Replacement Lender shall enter into one or more Assignment and Assumption Agreements pursuant to Section 14.04(b) (and with all fees payable pursuant to said Section 14.04(b) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Loans of, and in each case participations in Letters of Credit by, the Replaced Lender and, in connection therewith, shall pay to (x) the Replaced Lender in respect thereof an amount equal to the sum of (I) an amount equal to the principal of, and all accrued and unpaid interest on, all outstanding Loans of the Replaced Lender, (II) an amount equal to all Unpaid Drawings that have been funded by (and not reimbursed to) such Replaced Lender, together with all then accrued and unpaid interest with respect thereto at such time, and (III) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Lender pursuant to Section 3.01 and (y) each Issuing Lender an amount equal to such Replaced Lender’s Percentage of any Unpaid Drawing (which at such time remains an Unpaid Drawing) to the extent such amount was not theretofore funded by such Replaced Lender to such Issuing Lender, together with all then accrued and unpaid interest with respect thereto at such time; and

 

(ii)     all obligations of the Borrower due and owing to the Replaced Lender at such time (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Lender concurrently with such replacement.

 

Upon the execution of the respective Assignment and Assumption Agreement, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Lender, delivery to the Replacement Lender of the appropriate Note or Notes executed by the Borrower, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.09, 1.10, 2.06, 4.04, 12.06 and 14.01), which shall survive as to such Replaced Lender.

1.13    Incremental Commitments . (a) The Borrower shall have the right, upon written notice to and consent of the Administrative Agent, and in coordination with the Administrative Agent as to all of the matters set forth below in this Section 1.13 , but without requiring the consent of any of the Lenders, to request that one or more Lenders (and/or one or more other Eligible Transferees and which will become Lenders) provide Incremental Commitments to the Borrower, provided that:

 

(i)     no Lender shall be obligated to provide an Incremental Commitment as a result of any such request by the Borrower, and until such time, if any, as such Lender has agreed in its sole discretion to provide an Incremental Commitment and executed and delivered to the Administrative Agent and the Borrower an Incremental Commitment Agreement as provided in clause (b) of this Section 1.13 , the Incremental Commitment of such Lender shall not be effective;

(ii)    any Lender (including any Eligible Transferees who will become a Lender) may so provide an Incremental Commitment without the consent of any other Lender;

 

(iii)   the provision of Incremental Commitments pursuant to this Section 1.13 on a given date pursuant to a particular Incremental Commitment Agreement shall be in a minimum aggregate amount (for all Lenders and other Eligible Transferees who will become Lenders pursuant thereto) of $5,000,000;

 

(iv)   such Incremental Commitments shall not exceed $20,000,000 in the aggregate;

 

(v)  no Default or Event of Default exists at the time of the effectiveness of an Incremental Commitment after giving effect thereto;

 

(vi)  the up front fees payable to each Incremental Lender in respect of each Incremental Commitment shall be separately agreed to by the Borrower, the Administrative Agent and each such Incremental Lender; and

 

(vii)  the Loans incurred and Letters of Credit issued pursuant to an Incremental Commitment shall constitute Loans and Letters of Credit for all purposes of this Agreement and the other Credit Documents and as a consequence all such Loans and Letters of Credit (and all interest, fees and other amounts payable thereon) shall be Obligations under this Agreement and the other applicable Credit Documents and shall be secured by the Security Documents, and receive the benefit of the Guarantees, on a pari passu basis with all other Obligations secured by the Security Documents and receiving the benefit of the Guarantees.

(b)     At the time of any provision of Incremental Commitments pursuant to this Section 1.13 ,

 

(i)     the Borrower, the Administrative Agent and each such Lender or other Eligible Transferee (each an “ Incremental Lender ”) which agrees to provide an Incremental Commitment shall execute and deliver to the Administrative Agent an Incremental Commitment Agreement substantially in the form of Exhibit S (appropriately completed) (each an “ Incremental Commitment Agreement ”), with the effectiveness of such Incremental Lender’s Incremental Commitment to occur on the date set forth in such Incremental Commitment Agreement;

 

(ii)    the Borrower and each Credit Party shall have delivered such amendments, modifications and/or supplements to the Credit Documents as are necessary or in the reasonable opinion of the Administrative Agent, desirable to insure that the additional Obligations to be incurred pursuant to the Incremental Commitments are secured by, and entitled to the benefits of, the Security Documents and the Guarantees;

 

(iii)   the Administrative Agent shall have received evidence satisfactory to it that the additional Obligations to be incurred on such date pursuant to the Incremental Commitments are permitted by the terms of the outstanding Indebtedness of the Borrower and its Subsidiaries;

(iv)   if reasonably requested by the Administrative Agent, the Borrower shall deliver to the Administrative Agent an opinion or opinions, in form and substance reasonably satisfactory to the Administrative Agent, from counsel to the Borrower reasonably satisfactory to the Administrative Agent covering such matters as the Administrative Agent may reasonably request.

 

(v)   the Borrower and the other Credit Parties shall deliver to the Administrative Agent such other officers’ certificates, board of director resolutions and evidence of existence and good standing, where applicable, as the Administrative Agent shall reasonably request; and

 

(vi)  the Administrative Agent shall promptly notify each Lender as to the effectiveness of each Incremental Commitment Agreement.

(c)     On the effective date of any increase in the Commitments pursuant to this Section 1.13, the Borrower shall, in coordination with the Administrative Agent, repay outstanding Loans of certain of the Lenders and incur additional Loans from certain other Lenders, in each case to the extent necessary so that all of the Lenders participate in each outstanding Borrowing of Loans pro rata on the basis of their respective Commitments (after giving effect to any increase in the Total Commitment pursuant to this Section 1.13) and with the Borrower being obligated to pay to the respective Lenders the costs of the type referred to in Section 1.10 in connection with any such repayment and/or Borrowing.

 

SECTION 2.       Letters of Credit .

2.01      Letters of Credit. (a)   Subject to and upon the terms and conditions set forth herein, the Borrower may request that an Issuing Lender issue, at any time and from time to time on and after the Initial Borrowing Date and prior to the 60th day prior to the Maturity Date, for the account of the Borrower, an irrevocable standby letter of credit, in a form customarily used by such Issuing Lender or in such other form as is reasonably acceptable to such Issuing Lender (each such letter of credit, a “ Letter of Credit ” and, collectively, the “ Letters of Credit ”). All Letters of Credit shall be denominated in Dollars and shall be issued on a sight basis only.

 

(b)     Subject to and upon the terms and conditions set forth herein, each Issuing Lender agrees that it will, at any time and from time to time on and after the Initial Borrowing Date and prior to the 60th day prior to the Maturity Date, following its receipt of the respective Letter of Credit Request, issue for the account of the Borrower, one or more Letters of Credit as are permitted to remain outstanding hereunder without giving rise to a Default or an Event of Default. Notwithstanding the foregoing, no Issuing Lender shall be under any obligation to issue any Letter of Credit of the types described above if at the time of such issuance:

 

(i)     any order, judgment or decree of any governmental authority or arbitrator shall purport by its terms to enjoin or restrain such Issuing Lender from issuing such Letter of Credit or any requirement of law applicable to such Issuing Lender or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over such Issuing Lender shall prohibit, or request that such Issuing Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in

(ii)    such Issuing Lender shall have received from the Borrower, any other Credit Party or the Required Lenders prior to the issuance of such Letter of Credit notice of the type described in the second sentence of Section 2.03(b); or

 

(iii)     any Lender is a Defaulting Lender, unless such Issuing Lender has entered into arrangements with the Borrower or such Defaulting Lender satisfactory to such Issuing Lender and the Borrower to eliminate such Issuing Lender’s risk with respect to such Defaulting Lender, including by requiring the Borrower to cash collateralize such Defaulting Lender’s Percentage of Letters of Credit Outstanding (any such arrangements, the “ Letter of Credit Back-Stop Arrangements ”).

 

2.02      Maximum Letters of Credit Outstanding; Maturities . Notwithstanding anything to the contrary contained in this Agreement, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letters of Credit Outstanding (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) at such time would exceed either (x) $30,000,000 or (y) when added to the aggregate principal amount of all Loans then outstanding, an amount equal to the Total Commitment at such time, and (ii) each Letter of Credit shall by its terms terminate on or before the earlier of (A) the date which occurs 12 months after the date of the issuance thereof (although any such standby Letter of Credit shall be extendible for successive periods of up to 12 months, but, in each case, not beyond the tenth Business Day prior to the Maturity Date, on terms acceptable to the respective Issuing Lender) and (B) 10 Business Days prior to the Maturity Date.

2.03      Letter of Credit Requests; Minimum Stated Amount . (a)   Whenever the Borrower desires that a Letter of Credit be issued for its account, the Borrower shall give the Administrative Agent and the respective Issuing Lender at least five Business Days’ (or such shorter period as is acceptable to such Issuing Lender) written notice thereof (including by way of facsimile). Each notice shall be in the form of Exhibit C , appropriately completed (each a “ Letter of Credit Request ”).

 

(b)     The making of each Letter of Credit Request shall be deemed to be a representation and warranty by the Borrower to the Lenders that such Letter of Credit may be issued in accordance with, and will not violate the requirements of, Section 2.02. Unless the respective Issuing Lender has received notice from the Borrower, any other Credit Party or the Required Lenders before it issues a Letter of Credit that one or more of the conditions specified in Section 5 or 6 are not then satisfied, or that the issuance of such Letter of Credit would violate Section 2.02, then such Issuing Lender shall, subject to the terms and conditions of this Agreement, issue the requested Letter of Credit for the account of the Borrower in accordance with such Issuing Lender’s usual and customary practices. Upon the

issuance of or modification or amendment to any Letter of Credit, each Issuing Lender shall promptly notify the Borrower and the Administrative Agent, in writing of such issuance, modification or amendment and such notice shall be accompanied by a copy of such Letter of Credit or the respective modification or amendment thereto, as the case may be. Promptly after receipt of such notice the Administrative Agent shall notify the Participants, in writing, of such issuance, modification or amendment.

(c)     The initial Stated Amount of each Letter of Credit shall not be less than $20,000 or such lesser amount as is acceptable to the respective Issuing Lender.

2.04   Letter of Credit Participations . (a)   Immediately upon the issuance by an Issuing Lender of any Letter of Credit, such Issuing Lender shall be deemed to have sold and transferred to each Lender, and each such Lender (in its capacity under this Section 2.04, a “ Participant ”) shall be deemed irrevocably and unconditionally to have purchased and received from such Issuing Lender, without recourse or warranty, an undivided interest and participation, to the extent of such Participant’s Percentage, in such Letter of Credit, each drawing or payment made thereunder and the obligations of the Borrower under this Agreement with respect thereto, and any security therefor or guaranty pertaining thereto. Upon any change in the Commitments or Percentages of the Lenders pursuant to Section 1.12 or 14.04(b), it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings relating thereto, there shall be an automatic adjustment to the participations pursuant to this Section 2.04 to reflect the new Percentages of the assignor and assignee Lender, as the case may be.

 

(b)     In determining whether to pay under any Letter of Credit, no Issuing Lender shall have any obligation relative to the other Lenders other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to substantially comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by an Issuing Lender under or in connection with any Letter of Credit issued by it shall not create for such Issuing Lender any resulting liability to the Borrower, any other Credit Party, any Lender or any other Person unless such action is taken or omitted to be taken with gross negligence or willful misconduct on the part of such Issuing Lender (as determined by a court of competent jurisdiction in a final and non-appealable decision).

 

(c)    In the event that any Issuing Lender makes any payment under any Letter of Credit issued by it and the Borrower shall not have reimbursed such amount in full to such Issuing Lender pursuant to Section 2.05(a), such Issuing Lender shall promptly notify the Administrative Agent, which shall promptly notify each Participant of such failure, and each Participant shall promptly and unconditionally pay to such Issuing Lender the amount of such Participant’s Percentage of such unreimbursed payment in Dollars and in same day funds. If the Administrative Agent so notifies, prior to 11:00 a.m. (New York time) on any Business Day, any Participant required to fund a payment under a Letter of Credit, such Participant shall make available to the respective Issuing Lender in Dollars such Participant’s Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its Percentage of the amount of such payment available to the respective Issuing Lender, such Participant agrees to pay to such

Issuing Lender, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to such Issuing Lender at the overnight Federal Funds Rate for the first three days and at the Base Rate plus 2.00% for each day thereafter. The failure of any Participant to make available to an Issuing Lender its Percentage of any payment under any Letter of Credit issued by such Issuing Lender shall not relieve any other Participant of its obligation hereunder to make available to such Issuing Lender its Percentage of any payment under any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to such Issuing Lender such other Participant’s Percentage of any such payment.

(d)   Whenever an Issuing Lender receives a payment of a reimbursement obligation as to which it has received any payments from the Participants pursuant to clause (c) above, such Issuing Lender shall pay to each such Participant which has paid its Percentage thereof, in Dollars and in same day funds, an amount equal to such Participant’s share (based upon the proportionate aggregate amount originally funded by such Participant to the aggregate amount funded by all Participants) of the principal amount of such reimbursement obligation and interest thereon accruing after the purchase of the respective participations.

 

(e)   Upon the request of any Participant, each Issuing Lender shall furnish to such Participant copies of any standby Letter of Credit issued by it and such other documentation as may reasonably be requested by such Participant.

 

(f)   The obligations of the Participants to make payments to each Issuing Lender with respect to Letters of Credit shall be irrevocable and not subject to any qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances:

(i)     any lack of validity or enforceability of this Agreement or any of the other Credit Documents;

 

(ii)   the existence of any claim, setoff, defense or other right which the Parent or any of its Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, any Participant, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Parent or any Subsidiary of the Parent and the beneficiary named in any such Letter of Credit);

 

(iii)   any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

 

(iv)   the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or

 

(v)    the occurrence of any Default or Event of Default.

 

2.05      Agreement to Repay Letter of Credit Drawings . (a)   The Borrower agrees to reimburse each Issuing Lender, by making payment to the Administrative Agent in immediately available funds at the Payment Office, for any payment or disbursement made by such Issuing Lender under any Letter of Credit issued by it (each such amount, so paid until reimbursed, an “ Unpaid Drawing ”), not later than one Business Day following receipt by the Borrower of notice of such payment or disbursement ( provided that, no such notice shall be required to be given if a Default or an Event of Default under Section 10.05 shall have occurred and be continuing, in which case the Unpaid Drawing shall be due and payable immediately without presentment, demand, protest or notice of any kind (all of which are hereby waived by the Borrower)), with interest on the amount so paid or disbursed by such Issuing Lender, to the extent not reimbursed prior to 12:00 Noon (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but excluding the date such Issuing Lender was reimbursed by the Borrower therefor at a rate per annum equal to the Base Rate, as in effect from time to time, plus the Applicable Margin as in effect from time to time minus 1.00%; provided , however , to the extent such amounts are not reimbursed prior to 12:00 Noon (New York time) on the third Business Day following the receipt by the Borrower of notice of such payment or disbursement or following the occurrence of a Default or an Event of Default under Section 10.05, interest shall thereafter accrue on the amounts so paid or disbursed by such Issuing Lender (and until reimbursed by the Borrower) at a rate per annum equal to the Base Rate in effect from time to time plus the Applicable Margin as in effect from time to time plus 1%, with such interest to be payable on demand. Each Issuing Lender shall give the Borrower prompt written notice of each Drawing under any Letter of Credit issued by it, provided that, the failure to give any such notice shall in no way affect, impair or diminish the Borrower’s obligations hereunder.

 

(b)      The obligations of the Borrower under this Section 2.05 to reimburse each Issuing Lender with respect to drafts, demands and other presentations for payment under Letters of Credit issued by it (each a “ Drawing ”) (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against any Lender (including in its capacity as an Issuing Lender or as a Participant), including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit or any nonapplication or misapplication by the beneficiary of the proceeds of such Drawing; provided , however , that the Borrower shall not be obligated to reimburse any Issuing Lender for any wrongful payment made by such Issuing Lender under a Letter of Credit issued by it as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Issuing Lender (as determined by a court of competent jurisdiction in a final and non-appealable decision).

 

2.06     Increased Costs . If at any time after the Effective Date, the introduction or effectiveness of or any change in any applicable law, rule, regulation, order, guideline or request or in the interpretation or administration thereof by the NAIC or any governmental authority charged with the interpretation or administration thereof, or compliance by any Issuing Lender or any Participant with any request or directive by the NAIC or by any such governmental authority (whether or not having the force of law), shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against letters of credit issued by any Issuing Lender or participated in by any Participant, or (ii) impose on any Issuing Lender or any Participant any other conditions relating, directly or indirectly, to this Agreement or any Letter of Credit; and the result of any of the foregoing is to increase the cost to any Issuing Lender or any Participant of issuing, maintaining or participating in any Letter of Credit, or reduce the amount of any sum received or receivable by

any Issuing Lender or any Participant hereunder or reduce the rate of return on its capital with respect to Letters of Credit (except for changes in the rate of tax on, or determined by reference to, the net income or net profits of such Issuing Lender or such Participant pursuant to the laws of the jurisdiction in which it is organized or in which its principal office or applicable lending office is located or any subdivision thereof or therein), then, upon the delivery of the certificate referred to below to the Borrower by any Issuing Lender or any Participant (a copy of which certificate shall be sent by such Issuing Lender or such Participant to the Administrative Agent), the Borrower agrees to pay to such Issuing Lender or such Participant such additional amount or amounts as will compensate such Issuing Lender or such Participant for such increased cost or reduction in the amount receivable or reduction on the rate of return on its capital. Any Issuing Lender or any Participant, upon determining that any additional amounts will be payable pursuant to this Section 2.06, will give prompt written notice thereof to the Borrower, which notice shall include a certificate submitted to the Borrower by such Issuing Lender or such Participant (a copy of which certificate shall be sent by the Issuing Lender or such Participant to the Administrative Agent), setting forth in reasonable detail the basis for the calculation of such additional amount or amounts necessary to compensate such Issuing Lender or such Participant. The certificate required to be delivered pursuant to this Section 2.06 shall, absent manifest error, be final and conclusive and binding on the Borrower.

SECTION 3.       Commitment Commission; Fees; Reductions of Commitment .

3.01     Fees . (a)   The Borrower agrees to pay to the Administrative Agent for distribution to each Non-Defaulting Lender, a commitment commission (the “ Commitment Commission ”) for the period from and including the Effective Date to and including the Maturity Date (or such earlier date on which the Total Commitment has been terminated), computed at a rate per annum equal to 0.75% multiplied by the Unutilized Commitment of such Non-Defaulting Lender as in effect from time to time. Accrued Commitment Commission shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the Maturity Date (or such earlier date upon which the Total Commitment is terminated).

 

(b)      The Borrower agrees to pay to the Administrative Agent for distribution to each Lender (based on each such Lender’s respective Percentage), a fee in respect of each Letter of Credit (the “ Letter of Credit Fee ”) for the period from and including the date of issuance of such Letter of Credit to and including the date of termination or expiration of such Letter of Credit, computed at a rate per annum equal to the Applicable Margin then in effect from time to time on the daily Stated Amount of each such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the Maturity Date (or such earlier date upon which the Total Commitment is terminated and upon which no Letters of Credit remain outstanding).

 

(c)      The Borrower agrees to pay directly to each Issuing Lender, for its own account, a facing fee in respect of each Letter of Credit issued by it (the “ Facing Fee ”) for the period from and including the date of issuance of such Letter of Credit to and including the date of termination or expiration of such Letter of Credit, computed at a rate per annum equal to 1/8 of 1% on the daily Stated Amount of such Letter of Credit, provided that, in any event the minimum amount of Facing Fees payable in any twelve-month period for each Letter of Credit shall be not less than $500; it being agreed that, on the day of issuance of any Letter of Credit and on each anniversary thereof prior to the termination or expiration of such Letter of Credit, if $500 will exceed the amount of Facing Fees that will accrue with

respect to such Letter of Credit for the immediately succeeding twelve-month period, the full $500 shall be payable on the date of issuance of such Letter of Credit and on each such anniversary thereof. Except as otherwise provided in the proviso to the immediately preceding sentence, accrued Facing Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day on or after the termination of the Total Commitment upon which no Letters of Credit remain outstanding.

(d)     The Borrower agrees to pay to each Issuing Lender, for its own account, upon each payment under, issuance of, or amendment to, any Letter of Credit issued by it, such amount as shall at the time of such event be the administrative charge and the reasonable expenses which such Issuing Lender is generally imposing in connection with such occurrence with respect to letters of credit.

 

(e)     The Borrower agrees to pay to the Administrative Agent such fees as may be agreed to in writing from time to time by the Parent and/or the Borrower and the Administrative Agent.

3.02    Voluntary Termination of Unutilized Commitments . (a)   Upon at least four Business Days’ prior written notice from an Authorized Representative of the Borrower to the Administrative Agent at the Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, at any time or from time to time, without premium or penalty, to terminate the Total Unutilized Commitment in whole, or reduce it in part, pursuant to this Section 3.02(a), in an amount which shall not be less than $5,000,000 and shall be an integral multiple of $1,000,000 thereafter in the case of any partial reductions of the Total Unutilized Commitment, provided that, each such reduction shall apply proportionately to permanently reduce the Commitment of each Lender.

 

(b)     In the event of a refusal by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders as (and to the extent) provided in Section 14.12(b), the Borrower may, subject to its compliance with the requirements of Section 14.12(b) and upon five Business Days’ prior written notice to the Administrative Agent at the Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), terminate all of the Commitments of such Lender, so long as all Loans, together with accrued and unpaid interest, Fees and all other amounts, owing to such Lender (including all amounts, if any, owing pursuant to Section 1.10) are repaid concurrently with the effectiveness of such termination pursuant to Section 4.01(b) (at which time Schedule I shall be deemed modified to reflect such changed amounts) and such Lender’s Percentage of all outstanding Letters of Credit is cash collateralized in a manner satisfactory to the Administrative Agent

and the respective Issuing Lenders, and at such time, such Lender shall no longer constitute a “Lender” for purposes of this Agreement, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.09, 1.10, 2.06, 4.04, 12.06 and 14.01), which shall survive as to such repaid Lender.

3.03     Mandatory Reduction of Commitments . (a)   In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Commitment (and the Commitment of each Lender) shall terminate in its entirety on the Maturity Date.

 

(b)     In addition to any other mandatory commitment reductions pursuant to this Section 3.03, commencing on the first Quarterly Payment Date to occur following the earlier of (x) the date that is three months after the first delivery of either of the Newbuilding Rigs and (y) December 31, 2011 (the “ Amortization Commencement Date ”) and on each Quarterly Payment Date following the Amortization Commencement Date, the Total Commitment shall be reduced by $7,000,000 (plus $25,000 for each $1,000,000 of Incremental Commitments which become effective pursuant to Section 1.13) (each such reduction, a “ Scheduled Commitment Reduction ”).

 

(c)     In addition to any other mandatory commitment reductions pursuant to this Section 3.03, on the date of any Collateral Disposition, the Total Commitment shall be permanently reduced by a percentage thereof, expressed as a fraction, equal to (x) the appraised value (as determined in accordance with the most recent appraisal report delivered to the Administrative Agent (or obtained by the Administrative Agent) pursuant to Section 8.01(c)) of the Collateral Rig or Collateral Rigs which is/are the subject of such Collateral Disposition divided by (y) the Aggregate Collateral Rig Value (as determined by the sum of the appraisals set forth in the most recent appraisal report related to each respective Collateral Rig and delivered to the Administrative Agent (or obtained by the Administrative Agent) pursuant to Section 8.01(c) before giving effect to such Collateral Disposition).

 

(d)     Each reduction to, Scheduled Commitment Reduction of, or termination of, the Total Commitment pursuant to this Section 3.03 shall be applied to proportionately reduce or terminate, as the case may be, the Commitment of each Lender.

SECTION 4.       Prepayments; Payments; Taxes .

4.01    Voluntary Prepayments . (a)   The Borrower shall have the right to prepay the Loans, without premium or penalty, in whole or in part at any time and from time to time on the following terms and conditions:

 

(i)     an Authorized Representative of the Borrower shall give the Administrative Agent prior to 12:00 Noon (New York time) at the Notice Office at least four Business Days prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay such Loans, which notice (in each case) shall specify the amount of such prepayment and the specific Borrowing or Borrowings pursuant to which such Loans were made, and which notice the Administrative Agent shall promptly transmit to each of the Lenders;

 

(ii)    each prepayment shall be in an aggregate principal amount of at least $1,000,000 (or such lesser amount as is acceptable to the Administrative Agent), provided that, no partial prepayment of Loans made pursuant to any Borrowing shall reduce the outstanding Loans made pursuant to such Borrowing to an amount less than $1,000,000;

 

(iii)    at the time of any prepayment of Loans pursuant to this Section 4.01(a) on any date other than the last day of the Interest Period applicable thereto, the Borrower shall pay the amounts required to be paid pursuant to Section 1.10; and

 

(iv)    each prepayment pursuant to this Section 4.01(a) in respect of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans, provided that, at the Borrower’s election in connection with any prepayment of Loans pursuant to this Section 4.01(a), such prepayment shall not, so long as no Default or Event of Default then exists, be applied to any Loan of a Defaulting Lender.

 

(b)     In the event of a refusal by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders as (and to the extent) provided in Section 14.12(b), the Borrower may, upon five Business Days’ prior written notice by an Authorized Representative of the Borrower to the Administrative Agent at the Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders) repay all Loans (including all amounts, if any, owing pursuant to Section 1.10), together with accrued and unpaid interest, Fees and all other amounts owing to such Lender in accordance with, and subject to the requirements of, said Section 14.12(b), so long as (A) all Commitments of such Lender are terminated concurrently with such prepayment pursuant to Section 3.02(b) (at which time Schedule I shall be deemed modified to reflect the changed Commitments), (B) such Lender’s Percentage of all outstanding Letters of Credit is cash collateralized in a manner satisfactory to the Administrative Agent and the respective Issuing Lenders, and (C) the consents, if any, required under Section 14.12(b) in connection with the prepayment pursuant to this clause (b) have been obtained.

 

4.02      Mandatory Repayments . (a)   On any day on which the sum of (I) the aggregate outstanding principal amount of Loans (after giving effect to all other repayments thereof on such date) and (II) the aggregate amount of all Letters of Credit Outstanding exceeds the Total Commitment at such time, the Borrower shall repay on such date the principal of Loans in an amount equal to such excess. If, after giving effect to the repayment of all outstanding Loans, the aggregate amount of the Letters of Credit Outstanding exceeds the Total Commitment at such time, the Borrower shall pay to the Administrative Agent at the Payment Office on such day an amount of cash and/or Cash Equivalents equal to the amount of such excess (up to a maximum amount equal to the Letters of Credit Outstanding at such time), such cash and/or Cash Equivalents to be held as security for all obligations of the Borrower to the Issuing Lenders and the Lenders hereunder in a cash collateral account to be established by the Administrative Agent.

 

(b)     With respect to each repayment of Loans required by this Section 4.02, the Borrower may designate the specific Borrowing or Borrowings, provided that, (i) repayments of Loans pursuant to this Section 4.02 may only be made on the last day of an Interest Period applicable thereto unless all Loans with Interest Periods ending on such date of required repayment have been paid in full and (ii) each repayment of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans. In the absence of a

designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion.

(c)     Notwithstanding anything to the contrary contained elsewhere in this Agreement, all then outstanding Loans shall be repaid in full on the Maturity Date.

4.03      Method and Place of Payment . Except as otherwise specifically provided herein, all payments under this Agreement and under any Note shall be made to the Administrative Agent for the account of the Lender or Lenders entitled thereto not later than 12:00 Noon (New York time) on the date when due and shall be made in Dollars in immediately available funds at the Payment Office. Any payments under this Agreement or under any Note which are made later than 12:00 Noon (New York time) on any day shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension.

4.04      Net Payments; Taxes . All payments made by any Credit Party hereunder or under any other Credit Document will be made without setoff, counterclaim or other defense. All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income or net profits of a Lender pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect hereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as “ Taxes ”). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower shall be obligated to reimburse each Lender, upon the written request of such Lender, for taxes imposed on or measured by the net income or net profits of such Lender pursuant to the laws of the jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located and for any withholding of taxes as such Lender shall determine are payable by, or withheld from,

 such Lender, in respect of such amounts so paid to or on behalf of such Lender pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Lender pursuant to this sentence. The Borrower will furnish to the Administrative Agent within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower. The Borrower agrees to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender.

SECTION 5.       Conditions Precedent to Credit Events on the Initial Borrowing Date . The obligation of each Lender to make Loans, and the obligation of each Issuing Lender to issue Letters of Credit, on the Initial Borrowing Date, is subject at the time of the making of such Loans or the issuance of such Letters of Credit to the satisfaction of the following conditions:

5.01      Effective Date; Notes . On or prior to the Initial Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall have been delivered to the Administrative Agent, for the account of each of the Lenders that has requested same, a Note executed by the Borrower, in each case in the amount, maturity and as otherwise provided herein.

5.02      Fees, etc. On the Initial Borrowing Date, the Borrower shall have paid to the Administrative Agent and each Lender all costs, fees and expenses (including, without limitation, legal fees and expenses) and other compensation contemplated hereby payable to the Administrative Agent or such Lender to the extent then due.

5.03      Officer’s Certificate . On the Initial Borrowing Date, the Administrative Agent shall have received a certificate, dated the Initial Borrowing Date, and signed on behalf of the Borrower by the chairman of the board, the chief executive officer, the president or any vice president of the Borrower certifying on behalf of the Borrower that all of the conditions set forth in Sections 5.12, 5.13 and 6.01 have been satisfied on such date.

5.04      Opinions of Counsel . (a)   On the Initial Borrowing Date, the Administrative Agent shall have received from Strasburger & Price, L.L.P., special counsel to each Credit Party, an opinion addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date covering the matters set forth in Exhibit D-I .

 

(b)     On the Initial Borrowing Date, the Administrative Agent shall have received from Maples & Calder, special Cayman Islands counsel to the Borrower and AOA, an opinion addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date covering the matters set forth in Exhibit D-II .

 

(c)     On the Initial Borrowing Date, the Administrative Agent shall have received from Allens Arthur Robinson, special Australian counsel to the Borrower and AOA, an opinion addressed to the Administrative Agent and dated the Initial Borrowing Date covering the matters set forth in Exhibit D-III.

 

(d)   On the Initial Borrowing Date, the Administrative Agent shall have received from Gardere Wynne Sewell, LLP, special maritime counsel to the Administrative Agent, an opinion addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date covering the matters set forth in Exhibit D-IV .

5.05      Corporate Documents; Proceedings; etc. (a)   On the Initial Borrowing Date, the Administrative Agent shall have received a certificate from each Credit Party or, where applicable, the general partner of such Credit Party, dated the Initial Borrowing Date, signed by the chairman of the board, the chief executive officer, the president, any vice president, or any other Authorized Representative of such Person, and attested to by the secretary, any assistant secretary or any other Authorized Representative of such Person

other than the Authorized Representative signing such certificate of such Person, in the form of Exhibit E, with appropriate insertions, together with copies of the certificate of incorporation and by-laws (or equivalent organizational documents), as applicable, of such Credit Party and the resolutions of such Credit Party (or, where applicable, the general partner of such Credit Party) referred to in such certificate, and each of the foregoing shall be in form and substance reasonably acceptable to the Administrative Agent.

(b)     On the Initial Borrowing Date, all corporate, limited liability company, partnership and legal proceedings, and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Credit Documents, shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate, limited liability company and partnership proceedings, governmental approvals, good standing certificates and bring-down telegrams or facsimiles, if any, which the Administrative Agent reasonably may have requested in connection therewith, such documents and papers, where appropriate, to be certified by proper partnership, corporate or governmental authorities.

 

5.06      Outstanding Indebtedness. After giving effect to the consummation of the Transaction, neither the Parent nor any of its Subsidiaries shall have any outstanding Indebtedness except (i) the Obligations and (ii) such other Indebtedness as is permitted to remain outstanding pursuant to Section 9.04.

5.07      Subsidiaries Guaranties . On the Initial Borrowing Date, each Subsidiary Guarantor (other than any Subsidiary Guarantor which is a Foreign Subsidiary where the Administrative Agent determines, based on advice of local counsel, that it would be preferable for the respective Subsidiary Guarantor not to execute and deliver the U.S. Subsidiaries Guaranty, but only to execute and deliver a Foreign Subsidiaries Guaranty as contemplated below) shall have duly authorized, executed and delivered the U.S. Subsidiaries Guaranty in the form of Exhibit F (as modified, amended or supplemented from time to time, the “ U.S. Subsidiaries Guaranty ”) and the U.S. Subsidiaries Guaranty shall be in full force and effect. With respect to any Subsidiary Guarantor which is a Foreign Subsidiary of the Parent, if the Administrative Agent determines (based on advice of local counsel) that it would be in the interests of the Lenders that (x) the respective Subsidiary Guarantor execute both the U.S. Subsidiaries Guaranty and a guaranty governed by the law of the jurisdiction in which the respective Foreign Subsidiary is organized or (y) the respective Subsidiary Guarantor execute only a guaranty governed by the laws of the jurisdiction in which the respective Subsidiary Guarantor is organized then the respective Subsidiary Guarantor shall take the actions contemplated by clauses (x) or (y), as the case may be, above (and, in the case of clause (y) above, shall not execute the U.S. Subsidiaries Guaranty). Each guaranty to be executed and delivered by Foreign Subsidiaries of the Parent pursuant to the immediately

 preceding sentence (each, as modified, amended or supplemented from time to time, a “Foreign Subsidiaries Guaranty”) shall be prepared by local counsel satisfactory to the Administrative Agent and be in form and substance satisfactory to the Administrative Agent, and shall conform as nearly as possible (as to the obligations guaranteed and the rights intended to be granted thereunder) to the U.S. Subsidiaries Guaranty, taking into account variations necessary or desirable under applicable local law. Each Foreign Subsidiaries Guaranty shall be in full force and effect. Schedule III sets forth a list of all Subsidiaries of the Parent which shall have executed and delivered a Subsidiaries Guaranty on or prior to the Initial Borrowing Date.

5.08      Pledge Agreements . On or before the Initial Borrowing Date, each Pledgor (excluding any Foreign Pledgor where the Administrative Agent determines, based on advice of local counsel, that it would be preferable for the respective Foreign Pledgor not to execute and deliver the U.S. Pledge Agreement, but to execute and deliver one or more Foreign Pledge Agreements as contemplated below) shall have duly authorized, executed and delivered the U.S. Pledge Agreement in the form of Exhibit G (as amended, modified or supplemented from time to time, the “ U.S. Pledge Agreement ”). With respect to (A) any Foreign Pledgor, if the Administrative Agent determines (based on advice of local counsel) that it would be in the interests of the Lenders that the respective Foreign Pledgor authorize, execute and deliver a pledge agreement governed by the laws of the jurisdiction in which such Foreign Pledgor is organized and (B) any Pledgor (whether organized under the laws of the United States or a non-U.S. jurisdiction) which is pledging equity interests in one or more Persons organized under the laws of a different jurisdiction from the jurisdiction of organization of the respective Pledgor, if the Administrative Agent determines (based on advice of local counsel) that it would be in the interests of the Lenders that the respective Pledgor authorize, execute and deliver one or more additional pledge agreements governed by the laws of the jurisdiction or jurisdictions in which the Person or Persons whose equity interests are being pledged is (or are) organized, then the respective Pledgor shall take the actions contemplated by clause (A) and/or (B), as the case may be, above (and, in the case of clause (A) above, shall not execute the U.S. Pledge Agreement). Each pledge agreement to be executed and delivered by one or more Credit Parties pursuant to the immediately preceding sentence (as modified, amended or supplemented from time to time, the “ Foreign Pledge Agreements ” and each, a “ Foreign Pledge Agreement ”) shall be prepared by local counsel satisfactory to the Administrative Agent and be in form and substance satisfactory to the Administrative Agent, and shall conform as nearly as possible (as to the obligations secured thereby and the rights intended to be granted thereunder) to the U.S. Pledge Agreement, taking into account variations necessary or desirable under applicable local law. In connection with the execution and delivery of the Foreign Pledge Agreements, the respective Credit Parties shall take such actions as may be necessary or desirable under local law (as advised by local counsel) to create, maintain, effect, perfect, preserve, maintain and protect the security interests granted (or purported to be granted) thereby. The U.S. Pledge Agreement and each Foreign Pledge Agreement listed on Section A of Schedule IV shall be in full force and effect. Each Pledgor is listed on Section B of Schedule IV . Furthermore, in connection with the execution and delivery of the U.S. Pledge Agreement and each Foreign Pledge Agreement (where applicable), the following shall be provided by the respective Credit Party:

 

(i)     to the Collateral Agent, as pledgee, all of the Pledge Agreement Collateral referred to therein, accompanied by executed and undated endorsements for transfer;

 

(ii)     in the case of the U.S. Pledge Agreement, proper financing statements (Form UCC-1) for filing under the UCC or in other appropriate filing offices of each jurisdiction as may be necessary or, in the reasonable opinion of the Collateral Agent desirable, to perfect the security interests purported to be created by the U.S. Pledge Agreement;

 

(iii)    in the case of the U.S. Pledge Agreement, certified copies of requests for information or copies (Form UCC-11), or equivalent reports, listing all effective financing statements that name such Pledgor as debtor and that are filed in the jurisdictions referred to in Section 5.08(ii), together with copies of such other financing statements that name such Pledgor as debtor (none of which shall cover the Collateral except (x) to the extent evidencing Permitted Liens or (y) in respect of which the Collateral Agent shall have received Form UCC-3 Termination Statements (or such other termination statements as shall be required by local law) fully executed for filing); and

 

(iv)    evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent desirable, to perfect and protect the security interests purported to be created by the respective Pledge Agreement have been taken.

5.09      Assignment of Insurances, Assignment of Earnings and Security Agreements . On or before the Initial Borrowing Date, each Credit Party which holds an ownership interest in any Collateral Rig shall have duly authorized, executed and delivered (x) an Assignment of Insurances in the form of Exhibit H (each, as amended, modified or supplemented from time to time, an “Assignment of Insurances” and, together with any additional assignment of insurances executed and delivered pursuant to Section 8.11(c), the “ Assignments of Insurances ”) covering all such Credit Party’s Insurance Collateral, (y) an Assignment of Charter Hire, Drilling Contract, Revenues and Earnings in the form of Exhibit I (each, as amended, modified or supplemented from time to time, an “ Assignment of Earnings ” and, together with any additional assignment of charter hire, drilling contract, revenues and earnings executed and delivered pursuant to Section 8.11(c), the “ Assignments of Earnings ”), covering all of such Credit Party’s Earnings Collateral and (z) a Security Agreement in the form of Exhibit J (each, as amended, modified or supplemented from time to time, a “ U.S. Security Agreement ” and, together with any additional security agreements executed and delivered pursuant to Section 8.11(c), the “ U.S. Security Agreements ”); provided that AOA shall not be required to enter into a Security Agreement pursuant to this Section 5.09, in each case together with:

 

(i)     proper financing statements (Form UCC-1 or the equivalent) for filing under the UCC or other appropriate filing offices of each jurisdiction as may be necessary or, in the reasonable opinion of the Collateral Agent desirable, to perfect the security interests purported to be created by each Assignment of Insurances, each Assignment of Earnings and each Security Agreement, in each case executed and delivered on or before the Initial Borrowing Date;

 

(ii)    certified copies of requests for information or copies (Form UCC-11), or equivalent reports as of a recent date, listing all effective financing statements that name any Credit Party as debtor and that are filed in the jurisdictions referred to in Section

(iii)    evidence of the provision of notice of assignment of insurances to all underwriters, together with the receipt of any consents required by such underwriters to the extent set forth in the respective Assignment of Insurances; and

 

(iv)    evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect and protect the security interests purported to be created by each Assignment of Insurances, each Assignment of Earnings and each Security Agreement executed and delivered on or before the Initial Borrowing Date have been taken;

and each Assignment of Earnings, each Assignment of Insurances and each Security Agreement shall be in full force and effect.

5.10      Collateral Rig Mortgage; Certificates of Ownership; Searches; Appraisal Reports; Insurance . (a) On or before the Initial Borrowing Date (or within thirty (30) days after the date that the Borrower takes delivery of the ATWOOD AURORA with respect to such Rig), each Credit Party which holds an ownership interest in any Collateral Rig shall have duly authorized, executed and delivered to the Administrative Agent for recording in the appropriate rig registry, a first preferred mortgage (as modified, amended or supplemented from time to time in accordance with the terms thereof and hereof, a “ Collateral Rig Mortgage ” and, together with any additional collateral rig mortgages executed and delivered pursuant to Section 8.11(c) or (d), the “ Collateral Rig Mortgages ”), substantially in the form of Exhibit K-I or K-II , as appropriate, with respect to each of the Collateral Rigs and such Collateral Rig Mortgage shall be effective to create in favor of the Collateral Agent, for the benefit of the Lenders, a legal, valid and enforceable first priority security interest in, and Lien upon, such Collateral Rigs, subject only to Permitted Liens. Except as specifically provided above, all filings, deliveries of instruments and other actions necessary or desirable in the reasonable opinion of the Collateral Agent to protect and preserve such security interests shall have been duly effected (or, in each case, arrangements satisfactory to the Administrative Agent shall have been made) and the Collateral Agent shall have received evidence thereof in form and substance reasonably satisfactory to the Collateral Agent.

 

(b)     The Administrative Agent shall have received (x) certificates of ownership from appropriate authorities showing (or confirmation updating previously reviewed certificates and indicating) the registered ownership of each Collateral Rig by the relevant Credit Party and (y) the results of maritime registry searches with respect to the Collateral Rig, indicating no record Liens other than Liens in favor of the Collateral Agent or Liens which shall be released on or before the Initial Borrowing Date; provided that with respect to the

ATWOOD AURORA, such deliveries shall be made within thirty (30) days after the Borrower takes delivery of such Rig.

(c)     The Administrative Agent shall have received class certificates from a classification society recognized by the United State Coast Guard or another internationally recognized classification society acceptable to the Administrative Agent, indicating that each Collateral Rig meets the criteria specified in Section 7.22(c) and is free of recommendations affecting class; provided that with respect to the ATWOOD AURORA, such deliveries shall be made within thirty (30) days after the Borrower takes delivery of such Rig.

 

(d)     On or before the Initial Borrowing Date, the Administrative Agent shall have received two appraisal reports of recent date in scope, form and substance, and from two independent appraisers, reasonably satisfactory to the Administrative Agent, stating the then current fair market value of each of the Collateral Rigs on an individual charter-free basis (or an estimation thereof on an “as built” basis with respect to ATWOOD AURORA), the results of such appraisal reports (i) shall be reasonably satisfactory to the Administrative Agent and (ii) demonstrate, to the reasonable satisfaction of the Administrative Agent, that the Aggregate Collateral Rig Value on the Initial Borrowing Date is equal to or greater than $450,000,000.

 

(e)     On or before the Initial Borrowing Date (or within thirty (30) days after the date that the Borrower takes delivery of the ATWOOD AURORA), the Administrative Agent shall have received a report, in form and scope reasonably satisfactory to the Administrative Agent, from a firm of independent marine insurance brokers reasonably acceptable to the Administrative Agent, with respect to the insurance maintained by each Credit Party in respect of the Collateral Rig in which it holds an ownership interest (if any), together with a certificate from such broker certifying that such insurances (i) are placed with such insurance companies and/or underwriters and/or clubs, in such amounts, against such risks, and in such form, as are customarily insured against by similarly situated insureds for the protection of the Collateral Agent as mortgagee and (ii) otherwise conform with the insurance requirements of the respective Collateral Rig Mortgages.

5.11      Vessel Acquisition Agreement . (a)  On or before the Initial Borrowing Date, the Administrative Agent shall have received copies of the material documentation in existence on the date of this Agreement for the acquisition of the ATWOOD AURORA (such contracts and agreements listed on Schedule XIV hereto, the “ Vessel Acquisition Agreement ”), and all shall be in full force and effect.

 

(b)    On or before the Initial Borrowing Date, the Borrower shall have (x) duly authorized, executed and delivered the Vessel Acquisition Agreement Assignment substantially in the form of Exhibit L hereto (as modified, supplemented or amended from time to time, the “ Vessel Acquisition Agreement Assignment ”) (it being understood that such assignment shall become effective only when the requisite consents thereto shall have become effective), (y) taken all actions necessary or advisable to perfect the Lien on the collateral described therein and (z) used its commercially reasonable efforts to obtain and deliver the consents substantially in the form of Exhibit A to Exhibit L (required for the assignment of each of the Vessel Acquisition Agreement to the Collateral Agent pursuant to the Vessel Acquisition Agreement Assignment).

5.12      Adverse Change; Approvals . (a)   Since June 30, 2008, nothing shall have occurred (and neither the Administrative Agent nor any of the Lenders shall have become aware of any facts or conditions not previously known to it or them) which the Administrative Agent or the Required Lenders shall determine has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

(b)     On or prior to the Initial Borrowing Date, all necessary governmental (domestic and foreign) and third party approvals and/or consents in connection with the Transaction and the other transactions contemplated hereby shall have been obtained and remain in effect, and all applicable waiting periods with respect thereto shall have expired without any action being taken by any competent authority which, in the judgment of the Administrative Agent, restrains, prevents or imposes materially adverse conditions upon the consummation of the Transaction or the other transactions contemplated by the Credit Documents or otherwise referred to herein or therein. On the Initial Borrowing Date, there shall not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially adverse conditions upon the Transaction or the other transactions contemplated by the Credit Documents or otherwise referred to herein or therein.

 

5.13      Litigation . On the Initial Borrowing Date, there shall be no actions, suits, investigations or proceedings pending or threatened by any entity (private or governmental) (i)  with respect to the Transaction, this Agreement or any other Credit Document or (ii) which the Administrative Agent or the Required Lenders shall determine has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

5.14      Solvency Certificate . On or before the Initial Borrowing Date, the Administrative Agent shall have received a solvency certificate from the chief financial officer of the Parent, in the form of Exhibit M , which shall be addressed to the Administrative Agent and each of the Lenders and dated the Initial Borrowing Date, setting forth the conclusion that, after giving effect to the Transaction and the incurrence of all the financings contemplated hereby, each of the Parent and the Borrower, on an individual basis, the Parent and its Subsidiaries, taken as a whole, and the Borrower and its Subsidiaries, taken as a whole, are not insolvent and will not be rendered insolvent by the incurrence of such indebtedness, and will not be left with unreasonably small capital with which to engage in their respective businesses and will not have incurred debts beyond their ability to pay such debts as they mature.

5.15      Financial Statements; Projections; Monthly Fleet Report . On or prior to the Initial Borrowing Date, the Administrative Agent shall have received copies of the financial statements, Projections and the Monthly Fleet Report as of September 2008, referred to in Sections 7.05(a), (d) and (e), respectively, which historical financial statements, Projections and Monthly Fleet Report shall be in form and substance satisfactory to the Administrative Agent.

5.16      Intercompany Subordination Agreement . On or before the Initial Borrowing Date, the obligor and obligee in respect of any loan, advance or other extension of credit (including, without limitation, pursuant to guarantees thereof or security thereof) which are made to a Credit Party by the Parent or any Subsidiary of the Parent shall have duly authorized, executed and delivered the Intercompany Subordination Agreement in the form of Exhibit Q (as modified, supplemented or amended from time to time, the “ Intercompany

Subordination Agreement”), and the Intercompany Subordination Agreement shall be in full force and effect.

5.17      Intercreditor Agreement . On or before the Initial Borrowing Date, each Credit Party, the Collateral Agent (for and on behalf of the Secured Creditors) and the administrative agent under the Existing Credit Agreement shall have duly authorized, executed and delivered the Intercreditor Agreement in the form of Exhibit R (as amended, modified, restated and/or supplemented from time to time, the “ Intercreditor Agreement ”) and the Intercreditor Agreement shall be in full force and effect.

SECTION 6.       Conditions Precedent to All Credit Events . The obligation of each Lender to make Loans (including Loans made on the Initial Borrowing Date), and the obligation of each Issuing Lender to issue Letters of Credit (including Letters of Credit issued on the Initial Borrowing Date) is subject, at the time of each such Credit Event (except as hereinafter indicated), to the satisfaction of the following conditions:

6.01      No Default; Representations and Warranties . At the time of each Credit Event and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein and in each other Credit Document shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on the date of such Credit Event (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date).

6.02      Notice of Borrowing; Letter of Credit Request . (a)   Prior to the making of each Loan, the Administrative Agent shall have received the Notice of Borrowing meeting the requirements of Section 1.03(a).

 

(b)     Prior to the issuance of each Letter of Credit, the Administrative Agent and the respective Issuing Lender shall have received a Letter of Credit Request meeting the requirements of Section 2.03(a).

 

The acceptance of the benefits of each Credit Event shall constitute a representation and warranty by each of the Parent and the Borrower to the Administrative Agent and each of the Lenders that all the conditions specified in Section 5 (with respect to Credit Events occurring on the Initial Borrowing Date) and in this Section 6 (with respect to Credit Events occurring on or after the Initial Borrowing Date) and applicable to such Credit Event are satisfied as of that time. All of the Notes, certificates, legal opinions and other documents and papers referred to in Section 5 and in this Section 6, unless otherwise specified, shall be delivered to the Administrative Agent at the Notice Office for the account of each of the Lenders and, except for the Notes, in sufficient counterparts or copies for each of the Lenders and shall be in form and substance reasonably satisfactory to the Administrative Agent.

SECTION 7.       Representations, Warranties and Agreements . In order to induce the Lenders to enter into this Agreement and to make the Loans and issue and/or participate in the Letters of Credit as provided herein, each of the Parent and the Borrower makes the following representations, warranties and agreements, in each case after giving effect to the Transaction as consummated on the Initial Borrowing Date, all of which shall survive the execution and delivery of this Agreement and the Notes and the making of the

Loans and the issuance of the Letters of Credit, with the occurrence of each Credit Event on or after the Initial Borrowing Date being deemed to constitute a representation and warranty that the matters specified in this Section 7 are true and correct in all material respects on and as of the Initial Borrowing Date and on the date of each such other Credit Event (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date).

7.01      Corporate/Limited Liability Company/Limited Partnership Status . Each of the Parent and its Subsidiaries (other than any Inactive Subsidiary) (i) is a duly organized and validly existing corporation, limited liability company, limited partnership or other business entity, as the case may be, in good standing under the laws of the jurisdiction of its organization, (ii) has the corporate or other applicable power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where the ownership, leasing or operation of its property or the conduct of its business requires such qualifications, except for failures to be so qualified which, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

7.02      Corporate Power and Authority . Each Credit Party has the corporate or other applicable power and authority to execute, deliver and perform the terms and provisions of each of the Credit Documents to which it is party and has taken all necessary corporate or other applicable action to authorize the execution, delivery and performance by it of each of such Credit Documents. Each Credit Party has duly executed and delivered each of the Credit Documents to which it is party, and each of such Credit Documents constitutes its legal, valid and binding obligation enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law).

7.03     No Violation . Neither the execution, delivery or performance by any Credit Party of the Credit Documents to which it is a party, nor compliance by it with the terms and provisions thereof, (i) will contravene any provision of any law, statute, rule or regulation or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the properties or assets any Credit Party pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other agreement, contract or instrument, in each case to which any Credit Party is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will violate any provision of the certificate or articles of incorporation or by-laws (or equivalent organizational documents) of any Credit Party.

7.04      Governmental Approvals . No order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except for those that have otherwise been obtained or made on or prior to the Initial Borrowing Date), or exemption by,

any governmental or public body or authority, or any subdivision thereof, is required to be obtained or made by, or on behalf of, any Credit Party to authorize, or is required to be obtained or made by, or on behalf of, any Credit Party in connection with, (i) the execution, delivery and performance of any Credit Document or (ii) the legality, validity, binding effect or enforceability of any Credit Document.

7.05      Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc.   (a)   The consolidated balance sheet of the Parent and its Subsidiaries for the Parent’s fiscal year ended on September 30, 2007, and the consolidated balance sheet of the Parent and its Subsidiaries for the Parent’s fiscal quarter ended on June 30, 2008 and (in each case) the related consolidated statements of income, cash flows and shareholders’ equity of the Parent and its Subsidiaries for such fiscal year or fiscal quarter ended on such dates, as the case may be, copies of which have been furnished to the Administrative Agent and the Lenders prior to the Initial Borrowing Date, present fairly in all material respects the consolidated financial position of the Parent and its Subsidiaries at the dates of such balance sheets and the consolidated results of the operations of the Parent and its Subsidiaries for the periods covered thereby. All of the foregoing historical financial statements have been prepared in accordance with GAAP consistently applied (except, in the case of the aforementioned quarterly financial statements, for normal year-end audit adjustments and the absence of footnotes).

 

(b)     On and as of the Initial Borrowing Date, and after giving effect to the Transaction and to all Indebtedness (including the Loans) being incurred or assumed and Liens created by the Credit Parties in connection therewith, (i) the sum of the assets, at a fair valuation, of each of the Parent and the Borrower, on an individual basis, of the Parent and its Subsidiaries, taken as a whole, and of the Borrower and its Subsidiaries, taken as a whole, will exceed their respective debts, (ii) each of the Parent and the Borrower, on an individual basis, the Parent and its Subsidiaries, taken as a whole, and the Borrower and its Subsidiaries, taken as a whole, have not incurred and do not intend to incur, and do not believe that they will incur, debts beyond their respective ability to pay such debts as such debts mature, and (iii) each of the Parent and the Borrower, on an individual basis, the Parent and its Subsidiaries, taken as a whole, and the Borrower and its Subsidiaries, taken as a whole, will have sufficient capital with which to conduct their respective businesses. For purposes of this Section 7.05(b), “debt” means any liability on a claim, and “claim” means (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

(c)     Except as fully disclosed in the financial statements referred to in Section 7.05(a), there were as of the Initial Borrowing Date no liabilities or obligations with respect to the Parent or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in the aggregate, could reasonably be expected to be material to the Parent and its Subsidiaries taken as a whole. As of the Initial Borrowing Date, the Credit Parties know of no

reasonable basis for the assertion against it or any of its Subsidiaries of any liability or obligation of any nature whatsoever that is not fully disclosed in the financial statements or referred to in Section 7.05(a) which, either individually or in the aggregate, could reasonably be expected to be material to the Parent and its Subsidiaries taken as a whole.

(d)     On and as of the Initial Borrowing Date, the Projections which have been delivered to the Administrative Agent and the Lenders prior to the Initial Borrowing Date have been prepared in good faith and are based on reasonable assumptions, and there are no statements or conclusions in any of the Projections which are based upon or include information known to the Parent or the Borrower to be misleading in any material respect or which fail to take into account material information known to the Parent or the Borrower regarding the matters reported therein; it being recognized by the Lenders, however , that projections as to future events are not to be viewed as facts and that the actual results during the period or periods covered by the Projections may differ from the projected results.

 

(e)     Each monthly fleet employment report (each such report, a “ Monthly Fleet Report ”) delivered to the Administrative Agent and the Lenders prior to, on or after the Initial Borrowing Date sets forth as of the date of such report, the location, charter, term and rate for all Rigs owned and operated by the Parent and its Subsidiaries (including, without limitation, the Collateral Rigs).

 

(f)     Since September 30, 2007, there has been no change in the property, assets, operations, liabilities, financial condition or prospects of the Parent or any of its Subsidiaries that has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

7.06      Litigation . There are no actions, suits or proceedings pending or, to the knowledge of the Parent or the Borrower, threatened (i) with respect to the Transaction or any Credit Document or (ii) that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

7.07      True and Complete Disclosure . All factual information (taken as a whole) furnished by or on behalf of the Parent or the Borrower in writing to the Administrative Agent or any Lender (including, without limitation, all information contained in the Credit Documents) for purposes of or in connection with this Agreement, the other Credit Documents or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of the Parent or the Borrower in writing to the Administrative Agent or any Lender will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided.

7.08      Use of Proceeds; Margin Regulations . (a)   All proceeds of all Loans shall be used and all Letters of Credit shall be issued for, and the proceeds of all Drawings under all Letters of Credit shall be utilized in connection with (i) the construction of the

 Newbuilding Rigs, (ii) the payment of fees and expenses incurred in connection with the Transaction and (iii) the Parent’s and its Subsidiaries’ general corporate and working capital purposes.

(b)     No part of any Credit Event (or the proceeds thereof) will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Loan nor the use of the proceeds thereof nor the occurrence of any other Credit Event will violate or be inconsistent with the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

 

7.09      Tax Returns and Payments. The Parent and each of its Subsidiaries have timely filed with the appropriate taxing authority all returns, statements, forms and reports for taxes (the “ Returns ”) required to be filed by, or with respect to the income, properties or operations of, the Parent and/or any of its Subsidiaries. The Returns accurately reflect in all material respects all liability for taxes of the Parent and its Subsidiaries as a whole for the periods covered thereby. Each of the Parent and each of its Subsidiaries have paid all taxes and assessments payable by it, other than those that are being contested in good faith and adequately disclosed and fully provided for on the financial statements of the Parent and its Subsidiaries in accordance with GAAP. There is no action, suit, proceeding, investigation, audit or claim now pending or, to the best knowledge of the Parent or any of its Subsidiaries, threatened by any authority regarding any taxes relating to the Parent or any of its Subsidiaries that could have, or could reasonably be expect to have, a Material Adverse Effect. Except as set forth on Schedule V , neither the Parent nor any of its Subsidiaries have entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of the Parent or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of the Parent or any of its Subsidiaries not to be subject to the normally applicable statute of limitations. Except as set forth on Schedule V , neither the Parent nor any of its Subsidiaries have incurred, or will incur, any material tax liability in connection with the Transaction or any other transactions contemplated hereby (it being understood that the representation contained in this sentence does not cover any future tax liabilities of the Parent or any of its Subsidiaries arising as a result of the operation of their businesses in the ordinary course of business).

7.10      Compliance with ERISA . (a)    Schedule VI sets forth, as of the Initial Borrowing Date, the name of each Plan. Neither the Parent nor any Subsidiary of the Parent nor any ERISA Affiliate has ever sponsored, maintained, made any contributions to or has any liability in respect of any Plan which is subject to Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code; each Plan has been maintained and operated in compliance in all materials respects with the provisions of ERISA and, to the extent applicable, the Code, including but not limited to the provisions thereunder respecting prohibited transactions. No action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, expected or threatened. Except as would not result in a material liability, each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of the Parent, any Subsidiary of the Parent, or any ERISA Affiliate has at all times been operated in compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code. Under each Plan which is an employee welfare benefit plan within the meaning of Section 3(1) or Section 3(2)(B) of ERISA, no benefits are due thereunder unless the event giving rise to the benefit entitlement occurs prior to plan termination (except as required by Title I, Part 6 of ERISA). Any of the Parent, any Subsidiary of the Parent or any ERISA

 Affiliate, as appropriate, may terminate each such Plan at any time (or at any time subsequent to the expiration of any applicable bargaining agreement) in the discretion of such Person without liability to any Person. Each of the Parent and each of its Subsidiaries may cease contributions to or terminate any employee benefit plan maintained by any of them without incurring any material liability.

(b)     Each Foreign Pension Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. All contributions required to be made with respect to a Foreign Pension Plan have been timely made. Neither the Parent nor any of its Subsidiaries have incurred any obligation in connection with the termination of, or withdrawal from, any Foreign Pension Plan. The present value of the accrued benefit liabilities (whether or not vested) under each Foreign Pension Plan, determined as of the end of the Parent's most recently ended fiscal year on the basis of then current actuarial assumptions, each of which is reasonable, did not exceed the current value of the assets of such Foreign Pension Plan allocable to such benefit liabilities.

 

7.11      The Security Documents . Each of the Security Documents creates in favor of the Collateral Agent for the benefit of the Secured Creditors a legal, valid and enforceable first priority security interest and, upon any necessary filings, a fully perfected security interest, in and Lien on all right, title and interest of the Credit Parties in the Collateral described therein, subject to no other Liens other than Permitted Liens. No filings or recordings are required in order to perfect the security interests created under any Security Document except for filings or recordings which shall have been made on or prior to the Initial Borrowing Date or, with respect to the Collateral Rigs, filings or recordings which shall have been made on or prior to the Initial Borrowing Date or promptly thereafter.

7.12       Capitalization . On the Initial Borrowing Date, the authorized Capital Stock of (a) the Parent consists of (i) 90,000,000 shares of common stock, $1.00 par value per share, of which 64,030,030 shares were issued and outstanding as of July 31, 2008 and (ii) 1,000,000 shares of preferred stock (of which 500,000 shares have been designated as Series A Junior Participating Preferred), no par value per share, none of which shares are issued and outstanding, (b) the Borrower consists of 1,000 shares of ordinary stock and 1,000 shares of Class A stock, $1.00 par value per share, of which 261 shares of ordinary stock and 209 Class A shares of stock are issued and outstanding, and (c) AOA consists of 5,000,000 shares of ordinary stock and 15,000,000 Class A shares of stock, AUD$1.00 par value per share, of which 10,000 shares of ordinary stock and 14,990,901 Class A shares of stock are issued and outstanding. All such outstanding equity interests have been duly and validly issued, are fully paid and non-assessable and have been issued free of preemptive rights. Except for (x) rights in respect of the equity interests of the Parent that are convertible at the option of the holder thereof into common stock of the Parent and (y) rights to receive equity interests of the Parent in accordance with the Rights Plan,

neither the Parent nor the Borrower has any outstanding securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of, or any calls in respect of, the capital stock of the Parent or the Borrower, as the case may be.

7.13       Subsidiaries . On the Initial Borrowing Date, the Parent will have no Subsidiaries other than those Subsidiaries listed on Schedule VII (which Schedule identifies the correct legal name, direct owner, percentage ownership, each Subsidiary which is a Material Subsidiary and jurisdiction of organization of each such Subsidiary on the Initial Borrowing Date).

7.14      Compliance with Statutes, etc . Each of the Parent and each of its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including, without limitation, applicable statutes, regulations, orders and restrictions relating to environmental standards and controls), except such noncompliance as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

7.15      Investment Company Act . Neither the Parent nor any of its Subsidiaries are an “investment company” or a company “controlled” by an “investment company, ” within the meaning of the Investment Company Act of 1940, as amended.

7.16      Legal Names; Type of Organization (and Whether a Registered Organization); Jurisdiction of Organization; etc. Schedule XI sets forth, as of the Initial Borrowing Date, the legal name of the Parent, the Borrower and each Subsidiary Guarantor, the type of organization of the Parent, the Borrower and each Subsidiary Guarantor, whether or not the Parent and each Subsidiary Guarantor that is a Domestic Subsidiary is a registered organization, the jurisdiction of organization of the Parent, the Borrower and each Subsidiary Guarantor and the organizational identification number (if any) of the Parent and each Subsidiary Guarantor that is a Domestic Subsidiary.

7.17      Environmental Matters .  (a) Each of the Parent and its Subsidiaries is in compliance with all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws except for such failures which could not reasonably be expected to have a Material Adverse Effect. There are no pending or, to the knowledge of the Parent or the Borrower, threatened Environmental Claims against the Parent or any of its Subsidiaries or any Rig, Real Property or other facility owned, leased or operated by the Parent or any of its Subsidiaries (including any such claim arising out of the ownership, lease or operation by the Parent or any of its Subsidiaries of any Rig, Real Property or other facility formerly owned, leased or operated by the Parent or any of its Subsidiaries but no longer owned, leased or operated by the Parent or any of its Subsidiaries). All licenses, permits, registrations or approvals required for the business of the Parent and each of its Subsidiaries under any Environmental Law have been secured and the Parent and each of its Subsidiaries is in compliance therewith. To the best knowledge of the Parent and its Subsidiaries, there are no facts, circumstances, conditions or occurrences in respect of any Rig, Real Property or other facility owned or operated by the Parent or any of its Subsidiaries that is reasonably likely (i) to form the basis of an Environmental Claim against the Parent, any of its Subsidiaries or any Rig, Real Property or other facility owned by the Parent or any of its Subsidiaries, or (ii) to cause such Rig, Real Property or other facility to be subject to any

 restrictions on its ownership, occupancy, use or transferability under any Environmental Law.

(b)     Hazardous Materials have not at any time been generated, used, treated or stored on, or transported to or from, or Released on or from, any Rig, Real Property or other facility owned, leased or operated by the Parent or any of its Subsidiaries during the time of such ownership, lease or operation by the Parent or any of its Subsidiaries or, to the knowledge of the Parent or any of its Subsidiaries, prior or subsequent to the time of such ownership, lease or operation by the Parent or any of its Subsidiaries, in each case where such occurrence or event, either individually or in the aggregate, could not reasonably be likely to have a Material Adverse Effect. To the knowledge of the Parent and its Subsidiaries, Hazardous Materials have not at any time been generated, used, treated or stored on, or transported to or from, or Released on or from, any property adjoining or adjacent to any Real Property or other facility, where such generation, use, treatment, storage, transportation or Release has violated or could be reasonably expected to violate any applicable Environmental Law or give rise to an Environmental Claim.

 

(c)     All of the Rigs comply with all applicable international conventions, national, federal, state and other governmental laws and regulations. The Parent and its Subsidiaries have made all required payments and contributions to statutory environmental insurance schemes and other environmental insurance schemes applicable to the Parent and its Subsidiaries and customary for the business and operations conducted by them.

7.18      Labor Relations . Neither the Parent nor any of its Subsidiaries are engaged in any unfair labor practice that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. There is (i) no unfair labor practice complaint pending against the Parent or any of its Subsidiaries or, to the Parent’s or the Borrower’s knowledge, threatened against any of them before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Parent or any of its Subsidiaries or, to the Parent’s or the Borrower’s knowledge, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against the Parent or any of its Subsidiaries or, to the Parent’s or the Borrower’s knowledge, threatened against the Parent or any of its Subsidiaries and (iii) no union representation proceeding pending with respect to the employees of the Parent or any of its Subsidiaries, except (with respect to the matters specified in clauses (i), (ii) and (iii) above) as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

7.19      Patents, Licenses, Franchises and Formulas . Each of the Parent and each of its Subsidiaries owns, or has the right to use, all material patents, trademarks, trade secrets, service marks, trade names, copyrights, licenses