Exhibit
10.4
EXECUTION COPY
TAX SUPPORT AGREEMENT
This TAX SUPPORT AGREEMENT (this “ Agreement ”)
is entered into as of August 4, 2009, between Pride
International, Inc., a Delaware corporation (“ Pride
”), and Seahawk Drilling, Inc., a Delaware corporation
(“ Seahawk ”). Capitalized terms used herein and
not otherwise defined herein shall have the meanings ascribed to
such terms in the Master Separation Agreement referred to
below.
RECITALS
WHEREAS, the Board of Directors of Pride has determined that it
would be appropriate and desirable for Pride to distribute (the
“ Distribution ”) on a pro rata basis to the
holders of outstanding shares of common stock, par value $.01 per
share, of Pride all of the outstanding shares of common stock, par
value $.01 per share, of Seahawk owned by Pride;
WHEREAS, in order to effectuate the foregoing, Pride and Seahawk
have entered into a Master Separation Agreement, dated as of the
date hereof (the “ Master Separation Agreement
”), which provides, among other things, upon the terms and
subject to the conditions thereof, for the separation of the
respective businesses of Pride and Seahawk and the Distribution,
and the execution and delivery of certain other agreements,
including this Agreement, in order to facilitate and provide for
the foregoing;
WHEREAS, Seahawk has received certain tax assessments from the
Mexican Hacienda (as defined below) for past tax years, and Seahawk
is contesting such tax assessments pursuant to proceedings that are
pending as of the date hereof;
WHEREAS, such tax assessments are Seahawk Liabilities, and Seahawk
intends to continue to contest such tax assessments from and after
the Distribution Time;
WHEREAS, Seahawk is required to provide security in favor of the
Mexican Hacienda while certain of such contest proceedings are
pending and is expected to be required to provide additional
security in favor of the Mexican Hacienda at a future date; and
WHEREAS, Pride is willing to provide credit support for such
required security on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties, intending
to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions . As used in this Agreement, the
following terms have the meanings specified below:
“ Aggregate Credit Support Exposure ” means, at
any time, the sum of the Credit Support Exposures under all Pride
Credit Support Instruments outstanding at such time.
“ Cash Collateral Account ” means a blocked
deposit account or accounts to be established and maintained in the
name of Pride at the office of one or more financial institutions
selected by Pride, as collateral security for all Obligations.
“ Category 1 Tax Assessment Obligations ” means
all payment obligations of Seahawk and/or any of its Subsidiaries
in respect of the Category 1 Tax Assessments.
“ Category 2 Tax Assessment Obligations ” means
all payment obligations of Seahawk and/or any of its Subsidiaries
in respect of the Category 2 Tax Assessments.
“ Category 3 Tax Assessment Obligations ” means
all payment obligations of Seahawk and/or any of its Subsidiaries
in respect of the Category 3 Tax Assessments.
“ Category 4 Tax Assessment Obligations ” means
all payment obligations of Seahawk and/or any of its Subsidiaries
in respect of the Category 4 Tax Assessments.
“ Category 1 Tax Assessments ” mean the Tax
Assessments described under the heading “Category 1 Tax
Assessments” on Schedule 1 hereto (including any ordinary
course increases for penalties and interest and other changes to
such Tax Assessments as from time to time may be made by the
Mexican Hacienda to the extent that such changes arise from the
same statutory issues that formed the basis for the Mexican
Hacienda’s original imposition of such Tax Assessments), as
such Tax Assessments may be renumbered from time to time after the
date hereof.
“ Category 2 Tax Assessments ” mean the Tax
Assessments described under the heading “Category 2 Tax
Assessments” on Schedule 1 hereto (including any ordinary
course increases for penalties and interest and other changes to
such Tax Assessments as from time to time may be made by the
Mexican Hacienda to the extent that such changes arise from the
same statutory issues that formed the basis for the Mexican
Hacienda’s original imposition of such Tax Assessments), as
such Tax Assessments may be renumbered from time to time after the
date hereof.
“ Category 3 Tax Assessments ” mean the Tax
Assessments described under the heading “Category 3 Tax
Assessments” on Schedule 1 hereto (including any ordinary
course increases for penalties and interest and other changes to
such Tax Assessments as from time to time may be made by the
Mexican Hacienda to the extent that such changes arise from the
same statutory issues that formed the basis for the Mexican
Hacienda’s original imposition of such Tax Assessments), as
such Tax Assessments may be renumbered from time to time after the
date hereof.
“ Category 4 Tax Assessments ” mean the Tax
Assessments described under the heading “Category 4 Tax
Assessments” on Schedule 1 hereto (including any ordinary
course increases for penalties and interest and other changes to
such Tax Assessments as from time to time may be made by the
Mexican Hacienda to the extent that such changes arise from the
same statutory issues that formed the basis for the Mexican
Hacienda’s original imposition of such Tax Assessments), as
such Tax Assessments may be renumbered from time to time after the
date hereof.
2
“ Change in Circumstance ” means, with respect
to any Seahawk Credit Support Instrument with respect to which
Seahawk has requested pursuant to Section 2.2(a) that any
Pride Credit Support Instrument be issued, any of the following
events: (a) any of the events or conditions described in
Section 3.1(f) or (g) occurs with respect to the Seahawk
Credit Support Provider that has issued or has proposed issuing
such Seahawk Credit Support Instrument; (b) such Seahawk
Credit Support Provider changes the terms on which it is willing to
issue such Seahawk Credit Support Instrument in any material
respect, including a change to the type or types of Pride Credit
Support Instruments that such Seahawk Credit Support Provider is
willing to accept; or (c) there shall occur a material
disruption of, or a material adverse change in, financial, banking,
surety or capital market conditions.
“ Continuing Directors ” means, as of any date
of determination, any member of the board of directors (or persons,
committees or other group performing similar functions) of Seahawk
who (i) was a member of such board of directors (or persons,
committee or other group performing similar functions) on the
Distribution Date or (ii) was nominated for election or
elected to such board of directors (or persons, committees or other
group performing similar functions) with the approval of a majority
of the Continuing Directors who were members of such board of
directors (or persons, committees or other group performing similar
functions) at the time of such nomination or election.
“ Credit Support Availability Period ” means the
period from the Distribution Date to the date that is sixty
(60) days prior to the Credit Support Termination Date.
“ Credit Support Exposure ” means, with respect
to any outstanding Pride Credit Support Instrument provided in
favor of any Seahawk Credit Support Provider at any time of
determination, the maximum amount payable by Pride to such Seahawk
Credit Support Provider under such Pride Credit Support Instrument
(or, in the case of any Pride Credit Support Instrument of the type
described in clause (c) or, if applicable, clause (d) of
the definition thereof, the maximum amount payable by Pride to the
issuer of such Pride Credit Support Instrument in order to
reimburse such issuer for amounts it pays to such Seahawk Credit
Support Provider) at such time. For the avoidance of doubt, Pride
will have Credit Support Exposure under any Pride Credit Support
Instrument provided in favor of any Seahawk Credit Support Provider
until either (i) such Seahawk Credit Support Provider agrees
to the termination or cancellation of, and/or releases Pride from
all of its obligations under, such Pride Credit Support Instrument
(and, in the case of any Pride Credit Support Instrument of the
type described in clause (c) or, if applicable, clause
(d) of the definition thereof, such Seahawk Credit Support
Provider returns such Pride Credit Support Instruments to Pride),
or (ii) the Seahawk Credit Support Instrument with respect to
which such Pride Credit Support Instrument has been provided has
been canceled or terminated and returned by the Mexican Hacienda to
such Seahawk Credit Support Provider.
“ Credit Support Fee ” has the meaning set forth
in Section 2.7(a).
“ Credit Support Instrument ” means any letter
of credit, surety bond or other similar financial instrument.
“ Credit Support Termination Date ” means the
sixth anniversary of the Distribution Date.
3
“ Designated Subsidiaries ” means, collectively,
as of any date of determination, (a) each of the entities
identified in Schedule 1 hereto that is a Subsidiary of Seahawk and
is subject to an unresolved Tax Assessment on such date, and
(b) each Subsidiary of Seahawk that, on such date, would be a
“significant subsidiary” as defined in Article 1, Rule
1-02 of Regulation S-X, promulgated pursuant to the Securities Act,
as such Regulation is in effect on the date hereof.
“ Event of Default ” has the meaning set forth
in Section 3.1.
“ Existing Credit Support Instruments ” means
the letters of credit and surety bonds issued in favor of the
Mexican Hacienda that are outstanding as of the date hereof, as
more fully described on Schedule 2 hereto.
“ LIBO Business Day ” means any day that is
(i) a Business Day and (ii) a day on which dealings in
deposits in U.S. dollars are conducted by and between banks in the
London interbank eurodollar market.
“ LIBO Rate ” means, for any date of
determination, the rate per annum (expressed as a percentage) equal
to the British Bankers Association LIBOR Rate (“ BBA
LIBOR ”), as published by Reuters (or other commercially
available source providing quotations of BBA LIBOR from time to
time), at approximately 11:00 a.m., London time, two LIBO Business
Days prior to such day, for deposits in U.S. dollars (for delivery
on such day), with a term of six (6) months commencing on such
day. If such rate is not commercially available as set forth above
on any date of determination for any reason, then the LIBO Rate for
such day shall be the rate per annum (expressed as a percentage)
for deposits in U.S. dollars that is described as the six-month
“London interbank offered rate” in the Money Rates
section of The Wall Street Journal for the second LIBO
Business Day immediately preceding such day. If neither of the
preceding rates is available on any date of determination for any
reason, then the LIBO Rate for such day shall be the product of
(i) the rate per annum (expressed as a percentage) for
deposits in U.S. dollars that is described as the six-month
“London interbank offered rate” in the Money Rates
section of The Wall Street Journal most recently published
on or prior to such day, multiplied by (ii) 1.25. To the
extent that the LIBO Rate is being determined on any date of
determination by reference to the Money Rates section of The
Wall Street Journal and more than one “London interbank
offered rate” for a six-month period is published in such
section, the highest of such rates will be the rate used for such
day.
“ Mexican Hacienda ” means the Servicio de
Administración Tributaria, an agency of the
Secretaría de Hacienda y Crédito Público of
Mexico.
“ Obligations ” means all obligations
(liquidated, contingent or otherwise) from time to time owed by
Seahawk to Pride pursuant to, or arising under, this Agreement,
including all obligations to reimburse Pride for any Pride
Payments, all accrued and unpaid interest (including interest which
accrues during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), all accrued and unpaid
fees, and all obligations to pay expenses, reimbursements,
indemnities and other amounts.
4
“ Pride Credit Support Instrument ” means, with
respect to a Seahawk Credit Support Instrument, any of the
following: (a) a guarantee by Pride of all amounts payable by
Seahawk or any of its Subsidiaries to the applicable Seahawk Credit
Support Provider in the event such Seahawk Credit Support Provider
makes any payment under such Seahawk Credit Support Instrument,
(b) an agreement by Pride to indemnify such Seahawk Credit
Support Provider for any amounts paid by such Seahawk Credit
Support Provider under such Seahawk Credit Support Instrument,
(c) a letter of credit, surety bond or other similar financial
instrument issued by any third party for the account of Pride or
any of its Subsidiaries, which backstops all or a portion of such
Seahawk Credit Support Instrument, or (d) any agreement or
instrument that is similar to any of the foregoing which has the
effect of assuring the applicable Seahawk Credit Support Provider
of reimbursement for any amounts it pays under such Seahawk Credit
Support Instrument.
“ Pride Payment ” has the meaning set forth in
Section 2.3.
“ Proposed Credit Support Delivery Date ” has
the meaning set forth in Section 2.2(a).
“ Seahawk Change of Control ” means the
occurrence of any of the following events:
(a) any acquisition pursuant to which any Person or
group (as defined in Section 13(d)(3) or 14(d)(2) of the
Exchange Act) has become the direct or indirect beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) of more than 35%
of the Voting Stock of Seahawk;
(b) Seahawk is merged with or into or consolidated with
another Person and, immediately after giving effect to the merger
or consolidation, less than a majority of the outstanding voting
securities entitled to vote generally in the election of directors
or persons who serve similar functions of the surviving or
resulting Person are then beneficially owned (within the meaning of
Rule 13d-3 of the Exchange Act) in the aggregate by (i) the
stockholders of Seahawk immediately prior to such merger or
consolidation, or (ii) if the record date has been set to
determine the stockholders of Seahawk entitled to vote on such
merger or consolidation, the stockholders of Seahawk as of such
record date;
(c) Seahawk, either individually or in conjunction with
one or more of its Subsidiaries, sells, conveys, transfers or
leases, or its Subsidiaries sell, convey, transfer or lease, all or
substantially all of the assets of Seahawk and its Subsidiaries,
taken as a whole (either in one transaction or a series of related
transactions), including equity interests of its Subsidiaries, to
any Person other than Seahawk of one or more or if
Subsidiaries;
(d) the liquidation or dissolution of Seahawk; or
(e) a majority of the individuals who constitute the
board of directors of Seahawk are not Continuing Directors;
provided that, if the definition of “Change of
Control” (or any comparable term) in the Seahawk Credit
Agreement (or any defined term used in such definition) is amended
in a manner that results in events in addition to those described
in clauses (a) through (e) above constituting a
5
“Change of
Control” (or any comparable term) under the Seahawk Credit
Agreement, then the term Seahawk Change of Control shall
automatically be deemed to include, in addition to the events
described in clauses (a) through (e) above, such
additional events.
“ Seahawk Credit Agreement ” means that certain
Revolving Credit Agreement dated as of August 4, 2009 among
Seahawk as Borrower, certain subsidiaries thereof, as Guarantors,
the Lenders from time to time party thereto, as Lenders, and
Natixis, New York Branch as Administrative Agent, Issuing Bank,
Lead Arranger and Sole Bookrunner, as amended, supplemented,
restated, modified, renewed, refunded, replaced or refinanced
(including refinancing with any capital markets transaction) from
time to time.
“ Seahawk Indebtedness ” means Indebtedness of
Seahawk or any of its Subsidiaries in an aggregate principal amount
(including undrawn committed or available amounts and including
amounts owing to all creditors under any combined or syndicated
credit agreement) exceeding the Threshold Amount.
“ Seahawk Credit Support Instrument ” means any
Credit Support Instrument (including the Existing Credit Support
Instruments) issued for the account of Seahawk or any of its
Subsidiaries, which Credit Support Instrument is issued for the
benefit of the Mexican Hacienda in connection with any Specified
Tax Assessment Contest.
“ Seahawk Credit Support Provider ” means a
financial institution or other Person not an Affiliate of Seahawk
or Pride that issues a Seahawk Credit Support Instrument (including
the issuers of the Existing Credit Support Instruments).
“ Specified Seahawk Indebtedness ” means
Indebtedness of Seahawk or any of its Subsidiaries in an aggregate
outstanding principal amount (including amounts owing to all
creditors under any combined or syndicated credit agreement, but
excluding undrawn committed or available amounts) exceeding the
Threshold Amount.
“ Specified Tax Assessments ” means the Category
1 Tax Assessments, the Category 2 Tax Assessments, the Category 3
Tax Assessments and the Category 4 Tax Assessments.
“ Specified Tax Assessment Contests ” means the
contests by Seahawk and/or certain of its Subsidiaries of the
Specified Tax Assessments, which are pending as of the date
hereof.
“ Tax Assessment ” means any of the tax
assessments levied against Seahawk and/or certain of its
Subsidiaries in 2006, 2007 and February 2009 by the Mexican
Hacienda related to the tax years 2001 through 2004.
“ Threshold Amount ” means $2,500,000;
provided that, if the “cross-default threshold”
in the Seahawk Credit Agreement is amended to be an amount other
than $2,500,000, the Threshold Amount shall automatically be deemed
to be such other amount.
“ Voting Stock ” means, with respect to any
entity, equity interests of such entity of any class or classes,
the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of members of the
board of directors (or persons, committees or groups performing
similar functions) of such entity.
6
Section 1.2 Terms Generally . The
definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed
to be followed by the phrase “without limitation”. The
word “will” shall be construed to have the same meaning
and effect as the word “shall”. The word
“or” is not exclusive. Unless the context requires
otherwise, (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed
as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or
modifications set forth herein), (b) any reference herein to
any Person shall be construed to include such Person’s
successors and assigns, (c) the words “herein”,
“hereof” and “hereunder”, and words of
similar import, shall be construed to refer to this Agreement in
its entirety and not to any particular provision hereof, and
(d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement. In the computation
of periods of time from a specified date to a later specified date,
the word “from” means “from and including”;
the words “to” and “until” each mean
“to but excluding”; and the word “through”
means “to and including”.
ARTICLE II
PRIDE CREDIT SUPPORT
Section 2.1 Pride Credit Support Instruments
. Subject to the terms and conditions set forth herein,
in connection with any Specified Tax Assessment Contest, Pride
agrees to provide, from time to time during the Credit Support
Availability Period upon the request of Seahawk in accordance with
Section 2.2, one or more Pride Credit Support Instruments in
favor of any Seahawk Credit Support Provider that has issued one or
more Seahawk Credit Support Instruments in connection with such
Specified Tax Assessment Contest; provided that:
(a) Pride shall determine in its sole discretion the
type or types of Pride Credit Support Instruments it will provide
in favor of such Seahawk Credit Support Provider, provided
that such type or types of Pride Credit Support Instruments must be
reasonably acceptable to such Seahawk Credit Support Provider;
(b) the Credit Support Exposure with respect to such
Pride Credit Support Instruments shall not exceed the aggregate
amount payable by such Seahawk Credit Support Provider to the
Mexican Hacienda under the Seahawk Credit Support Instruments
supported by such Pride Credit Support Instruments;
(c) Pride shall have no obligation to provide any Pride
Credit Support Instrument if the Credit Support Exposure in respect
thereof is not subject to a specified monetary cap;
7
(d) Seahawk shall not be entitled to request that any
Pride Credit Support Instruments be provided in support of any
Seahawk Credit Support Instruments that secure any Category 1 Tax
Assessment Obligations if the Proposed Credit Support Delivery Date
therefor is on or after May 31, 2012;
(e) Seahawk shall not be entitled to request that any
Pride Credit Support Instruments be provided in support of any
Seahawk Credit Support Instruments that secure any Category 2 Tax
Assessment Obligations if the Proposed Credit Support Delivery Date
therefor is on or after May 31, 2013;
(f) Seahawk shall not be entitled to request that any
Pride Credit Support Instruments be provided in support of any
Seahawk Credit Support Instruments that secure any Category 3 Tax
Assessment Obligations if the Proposed Credit Support Delivery Date
therefor is on or after May 31, 2014.
For the avoidance of doubt, Pride has no obligation to provide any
credit support for any Credit Support Instruments that Seahawk may
post in favor of the Mexican Hacienda in connection with any
proceedings maintained by Seahawk or any of its Subsidiaries
contesting tax assessments other than the Specified Tax
Assessments.
Section 2.2 Requests for Pride Credit Support
Instruments .
(a) In order to request that Pride provide a Pride
Credit Support Instrument to a Seahawk Credit Support Provider,
Seahawk shall submit a written request to Pride at least 45 days
prior to the date on which Seahawk desires that Pride provide such
Pride Credit Support Instrument (the “ Proposed Credit
Support Delivery Date ”), which written request shall
include the following information:
(i) an identification of the applicable Specified Tax
Assessment Contest;
(ii) a description of the Seahawk Credit Support
Instrument or proposed Seahawk Credit Support Instrument with
respect to which Seahawk requests that such Pride Credit Support
Instrument be issued, including a description of the type of such
Seahawk Credit Support Instrument, the applicable Seahawk Credit
Support Provider, the expiration or maturity date thereof, the
amounts that may be payable by such Seahawk Credit Support Provider
to the Mexican Hacienda thereunder and any other material terms of
such Seahawk Credit Support Instrument;
(iii) an identification of the types of Pride Credit
Support Instruments that the applicable Seahawk Credit Support
Provider reasonably deems acceptable to be provided in its favor to
support the applicable Seahawk Credit Support Instrument it has
issued or proposes to issue; and
(iv) the Proposed Credit Support Delivery Date, which
shall be a Business Day during the Credit Support Availability
Period and shall comply with the terms of Section 2.1.
8
(b) So long as (i) the type and terms of the
Seahawk Credit Support Instrument that Seahawk has posted or
proposes to post are acceptable to Pride, (ii) the issuer
thereof is acceptable to Pride, (iii) Seahawk has provided to
Pride all the information specified in Section 2.2(a) and, if
any, all other information timely requested by Pride pursuant to
Section 2.2(c) and (iv) no Event of Default then exists
(and Seahawk certifies in writing that no Event of Default then
exists), Pride shall deliver to the applicable Seahawk Credit
Support Provider on the Proposed Credit Support Delivery Date (or,
if reasonably required by such Seahawk Credit Support Provider and
if it is commercially reasonable for Pride to do so, on a day not
more than three Business Days prior to the Proposed Credit Support
Delivery Date) one or more Pride Credit Support Instruments that
support Seahawk’s or any of its Subsidiaries’ payment
obligations in respect of such Seahawk Credit Support
Instrument.
(c) If (i) the type or terms of the Seahawk Credit
Support Instrument that Seahawk has posted or proposes to post are
not acceptable to Pride, (ii) the issuer of such Seahawk
Credit Support Instrument or Instruments is not acceptable to Pride
and/or (iii) Pride requires any information other than as
specified in Section 2.2(a) which it reasonably believes is
necessary for it to issue the requested Pride Credit Support
Instrument, then Pride shall notify Seahawk (in writing or by way
of a telephone call to an officer of Seahawk, which telephone call
shall be promptly followed by a confirmatory writing to Seahawk),
within 10 days after Pride’s receipt of the applicable
request made by Seahawk pursuant to Section 2.2(a), of the
type of Seahawk Credit Support Instrument, or the changes in the
terms thereof, that would be acceptable to Pride, the names of
potential issuers of Seahawk Credit Support Instruments that would
be acceptable to Pride, and/or such other information that Pride
reasonably believes is necessary for it to issue the requested
Pride Credit Support Instrument, as applicable. If
(1)(x) Seahawk does not receive a writing or telephone call of
the nature described in the preceding sentence within 10 days after
Pride’s receipt of a request made by Seahawk pursuant to
Sec
