exv10w1



 






EXHIBIT 10.1




 





$200,000,000




CREDIT AGREEMENT




among




TODCO,




VARIOUS LENDERS




and




NORDEA BANK FINLAND PLC, NEW YORK BRANCH,




as Administrative Agent and Collateral Agent




 






Dated as of December 29, 2005




 






NORDEA BANK FINLAND PLC, NEW YORK BRANCH,




as Lead Arranger and Book Runner




 





 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	SECTION 1. Amount and Terms of 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 Conversions
	 	 	4	 
	1.07 Pro Rata Borrowings
	 	 	4	 
	1.08 Interest
	 	 	4	 
	1.09 Interest Periods
	 	 	5	 
	1.10 Increased Costs, Illegality, etc.
	 	 	6	 
	1.11 Compensation
	 	 	8	 
	1.12 Change of Lending Office
	 	 	8	 
	1.13 Replacement of Lenders
	 	 	8	 
	 
	 	 	 	 
	SECTION 2. Letters of Credit
	 	 	9	 
	 
	 	 	 	 
	2.01 Letters of Credit
	 	 	9	 
	2.02 Letter of Credit Requests; Minimum Stated Amount
	 	 	10	 
	2.03 Letter of Credit Participations
	 	 	11	 
	2.04 Agreement to Repay Letter of Credit Drawings
	 	 	13	 
	2.05 Increased Costs
	 	 	14	 
	 
	 	 	 	 
	SECTION 3. Commitment Commission; Fees; Reductions of Commitment
	 	 	14	 
	 
	 	 	 	 
	3.01 Commitment Commission
	 	 	14	 
	3.02 Voluntary Termination of Unutilized Commitments
	 	 	15	 
	3.03 Mandatory Reduction of Commitments
	 	 	15	 
	 
	 	 	 	 
	SECTION 4. Prepayments; Payments; Taxes
	 	 	16	 
	 
	 	 	 	 
	4.01 Voluntary Prepayments
	 	 	16	 
	4.02 Mandatory Repayments and Commitment Reductions
	 	 	17	 
	4.03 Method and Place of Payment
	 	 	18	 
	4.04 Net Payments; Taxes
	 	 	18	 
	 
	 	 	 	 
	SECTION 5. Conditions Precedent to the Effective Date
	 	 	21	 
	 
	 	 	 	 
	5.01 Effective Date; Notes
	 	 	21	 
	5.02 Fees, etc.
	 	 	21	 
	5.03 Opinion of Counsel
	 	 	21	 
	5.04 Corporate Documents; Proceedings; etc
	 	 	21	 
	5.05 Shareholders’ Agreements; Management Agreements; Debt Agreements;
Employment Agreements; Tax Sharing Agreements
	 	 	22	 
	5.06 Subsidiaries Guaranty
	 	 	22	 






 









 






	 	 	 	 	 
	 	 	Page	 
	5.07 Pledge and Security Agreement
	 	 	23	 
	5.08 Solvency Certificate
	 	 	23	 
	5.09 Financial Statements
	 	 	23	 
	5.10 Material Adverse Change; Approvals
	 	 	23	 
	5.11 Litigation
	 	 	23	 
	5.12 Appraisal; Rig Status Report
	 	 	24	 
	5.13 Refinancing
	 	 	24	 
	5.14 Assignments of Earnings and Insurances
	 	 	24	 
	5.15 Mortgages; Certificates of Ownership; Searches; Class Certificates; Insurance
	 	 	25	 
	5.16 Environmental Laws
	 	 	26	 
	5.17 Vessel Classification
	 	 	26	 
	5.18 Master Vessel and Trust Agreement
	 	 	26	 
	5.19 No Default; Representations and Warranties
	 	 	26	 
	 
	 	 	 	 
	SECTION 6. Conditions Precedent to All Credit Events
	 	 	26	 
	 
	 	 	 	 
	6.01 Effective Date
	 	 	26	 
	6.02 No Default; Representations and Warranties
	 	 	26	 
	6.03 Notice of Borrowing
	 	 	27	 
	6.04 Opinion of Counsel
	 	 	27	 
	 
	 	 	 	 
	SECTION 7. Representations, Warranties and Agreements
	 	 	27	 
	 
	 	 	 	 
	7.01 Corporate/Limited Liability Company/Limited Partnership Status
	 	 	27	 
	7.02 Corporate Power and Authority
	 	 	28	 
	7.03 No Violation
	 	 	28	 
	7.04 Governmental Approvals
	 	 	28	 
	7.05 Financial Statements; Financial Condition; Undisclosed Liabilities.
	 	 	28	 
	7.06 Litigation
	 	 	29	 
	7.07 True and Complete Disclosure
	 	 	29	 
	7.08 Use of Proceeds; Margin Regulations
	 	 	30	 
	7.09 Tax Returns and Payments
	 	 	30	 
	7.10 Compliance with ERISA
	 	 	30	 
	7.11 The Security Documents
	 	 	32	 
	7.12 Capitalization
	 	 	32	 
	7.13 Subsidiaries
	 	 	32	 
	7.14 Compliance with Statutes, etc.
	 	 	32	 
	7.15 Investment Company Act
	 	 	32	 
	7.16 Public Utility Holding Company Act
	 	 	32	 
	7.17 Pollution and Other Regulations
	 	 	33	 
	7.18 Labor Relations
	 	 	33	 
	7.19 Patents, Licenses, Franchises and Formulas
	 	 	34	 
	7.20 Indebtedness
	 	 	34	 
	7.21 Insurance
	 	 	34	 
	7.22 Concerning the Vessels
	 	 	34	 
	7.23 Citizenship
	 	 	34	 
	7.24 Vessel Classification
	 	 	34	 
	7.25 No Immunity
	 	 	34	 






(ii)









 






	 	 	 	 	 
	 	 	Page	 
	7.26 Fees and Enforcement
	 	 	34	 
	7.27 Form of Documentation
	 	 	35	 
	7.28 Leased Real Property
	 	 	35	 
	7.29 No Default
	 	 	35	 
	7.30 No Burdensome Restrictions
	 	 	35	 
	 
	 	 	 	 
	SECTION 8. Affirmative Covenants
	 	 	35	 
	 
	 	 	 	 
	8.01 Information Covenants
	 	 	36	 
	8.02 Books, Records and Inspections
	 	 	39	 
	8.03 Maintenance of Property; Insurance
	 	 	39	 
	8.04 Corporate Franchises
	 	 	39	 
	8.05 Compliance with Statutes, etc.
	 	 	40	 
	8.06 Compliance with Environmental Laws
	 	 	40	 
	8.07 ERISA
	 	 	40	 
	8.08 End of Fiscal Years; Fiscal Quarters
	 	 	42	 
	8.09 Performance of Obligations
	 	 	42	 
	8.10 Payment of Taxes
	 	 	42	 
	8.11 Further Assurances
	 	 	42	 
	8.12 Deposit of Earnings
	 	 	43	 
	8.13 Ownership of Subsidiaries
	 	 	43	 
	8.14 Flag of Mortgaged Vessels
	 	 	44	 
	8.15 Compliance with Terms of Leasehold....
	 	 	44	 
	8.16 Additional Mortgaged Vessels.
	 	 	44	 
	 
	 	 	 	 
	SECTION 9. Negative Covenants
	 	 	46	 
	 
	 	 	 	 
	9.01 Liens
	 	 	46	 
	9.02 Consolidation, Merger, Sale of Assets, etc.
	 	 	48	 
	9.03 Dividends
	 	 	50	 
	9.04 Indebtedness
	 	 	50	 
	9.05 Advances, Investments and Loans
	 	 	51	 
	9.06 Transactions with Affiliates
	 	 	52	 
	9.07 Minimum Working Capital Ratio
	 	 	53	 
	9.08 Maximum Leverage Ratio
	 	 	53	 
	9.09 Minimum Consolidated Tangible Net Worth
	 	 	53	 
	9.10 Fixed Charge Coverage Ratio
	 	 	53	 
	9.11 Collateral Maintenance
	 	 	53	 
	9.12 Limitation on Modifications of Certificate of Incorporation, By-Laws and
Certain Other Agreements; etc.
	 	 	53	 
	9.13 Limitation on Certain Restrictions on Subsidiaries
	 	 	54	 
	9.14 Limitation on Issuance of Capital Stock
	 	 	54	 
	9.15 Business
	 	 	54	 
	9.16 Sale and Leaseback
	 	 	55	 
	9.17 Negative Pledge Agreements
	 	 	55	 
	9.18 Speculative Transactions
	 	 	55	 
	9.19 Changes in Accounting Conventions
	 	 	55	 
	9.20 Prepayments of Indebtedness
	 	 	55	 






(iii)









 






	 	 	 	 	 
	 	 	Page	 
	9.21 Partnership, Etc
	 	 	55	 
	9.22 Operating Lease Obligations
	 	 	56	 
	 
	 	 	 	 
	SECTION 10. Events of Default
	 	 	56	 
	 
	 	 	 	 
	10.01 Payments
	 	 	56	 
	10.02 Representations, etc.
	 	 	56	 
	10.03 Covenants
	 	 	56	 
	10.04 Default Under Other Agreements
	 	 	56	 
	10.05 Bankruptcy, etc.
	 	 	57	 
	10.06 ERISA
	 	 	57	 
	10.07 Security Documents
	 	 	58	 
	10.08 Subsidiaries Guaranty
	 	 	58	 
	10.09 Judgments
	 	 	58	 
	10.10 Change of Control
	 	 	58	 
	10.11 Transocean Tax Sharing Agreement
	 	 	59	 
	 
	 	 	 	 
	SECTION 11. Definitions and Accounting Terms
	 	 	59	 
	 
	 	 	 	 
	11.01 Defined Terms
	 	 	59	 
	 
	 	 	 	 
	SECTION 12. Agency and Security Trustee Provisions
	 	 	78	 
	 
	 	 	 	 
	12.01 Appointment
	 	 	78	 
	12.02 Nature of Duties
	 	 	78	 
	12.03 Lack of Reliance on the Agents
	 	 	79	 
	12.04 Certain Rights of the Agents
	 	 	79	 
	12.05 Reliance
	 	 	79	 
	12.06 Indemnification
	 	 	79	 
	12.07 The Administrative Agent in its Individual Capacity
	 	 	80	 
	12.08 Holders
	 	 	80	 
	12.09 Resignation by the Administrative Agent
	 	 	80	 
	12.10 The Lead Arranger
	 	 	81	 
	 
	 	 	 	 
	SECTION 13. Miscellaneous
	 	 	81	 
	 
	 	 	 	 
	13.01 Payment of Expenses, etc.
	 	 	81	 
	13.02 Right of Setoff
	 	 	82	 
	13.03 Notices
	 	 	82	 
	13.04 Benefit of Agreement
	 	 	83	 
	13.05 No Waiver; Remedies Cumulative
	 	 	84	 
	13.06 Payments Pro Rata
	 	 	84	 
	13.07 Calculations; Computations
	 	 	85	 
	13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL
	 	 	85	 
	13.09 Counterparts
	 	 	87	 
	13.10 Headings Descriptive
	 	 	87	 
	13.11 Amendment or Waiver; etc.
	 	 	87	 
	13.12 Survival
	 	 	88	 






(iv)









 






	 	 	 	 	 
	 	 	Page	 
	13.13 Domicile of Loans
	 	 	88	 
	13.14 Limitation on Additional Amounts, etc.
	 	 	89	 
	13.15 Confidentiality
	 	 	89	 
	13.16 Register
	 	 	90	 
	13.17 Judgment Currency
	 	 	90	 
	13.18 Language
	 	 	91	 
	13.19 Waiver of Immunity
	 	 	91	 
	13.20 USA PATRIOT Act Notice
	 	 	91	 






	 	 	 	 	 
	SCHEDULE I
	 	—	 	Commitments
	SCHEDULE II
	 	—	 	Lender Addresses
	SCHEDULE III
	 	—	 	Mortgaged Vessels
	SCHEDULE IV
	 	—	 	Existing Liens
	SCHEDULE V
	 	—	 	Indebtedness
	SCHEDULE VI
	 	—	 	Insurance
	SCHEDULE VII
	 	—	 	ERISA
	SCHEDULE VIII
	 	—	 	Subsidiaries
	SCHEDULE IX
	 	—	 	Capitalization
	SCHEDULE X
	 	—	 	Approved Classification Societies
	SCHEDULE XI
	 	—	 	Existing Investments
	SCHEDULE XII
	 	—	 	Leased Real Property
	SCHEDULE XIII
	 	—	 	Existing Contingent Obligations
	SCHEDULE XIV
	 	—	 	Tax Agreements
	SCHEDULE XV
	 	—	 	Unrestricted Subsidiaries
	 
	 	 	 	 
	EXHIBIT A-1
	 	—	 	Notice of Borrowing
	EXHIBIT A-2
	 	—	 	Notice of Conversion/Continuation
	EXHIBIT B
	 	—	 	Note
	EXHIBIT C-1
	 	—	 	Opinion of Gardere Wynne Sewell LLP, special counsel to the Borrower and its Subsidiaries
	EXHIBIT C-2
	 	—	 	Opinion of Randall Stafford, general counsel of the Borrower and its Subsidiaries
	EXHIBIT D
	 	—	 	Officer’s Certificate
	EXHIBIT E
	 	—	 	Subsidiaries Guaranty
	EXHIBIT F
	 	—	 	Pledge Agreement
	EXHIBIT G
	 	—	 	Assignment of Earnings
	EXHIBIT H
	 	—	 	Assignment of Insurances
	EXHIBIT I-1
	 	—	 	Form of U.S. Vessel Mortgage
	EXHIBIT I-2
	 	—	 	Form of Liberian Vessel Mortgage
	EXHIBIT J
	 	—	 	Letter of Credit Request
	EXHIBIT K
	 	—	 	Solvency Certificate
	EXHIBIT L
	 	—	 	Assignment and Assumption Agreement
	EXHIBIT M
	 	—	 	Form of Compliance Certificate
	EXHIBIT N
	 	—	 	Subordination Provisions
	EXHIBIT O
	 	—	 	Form of Section 4.04(b)(ii) Certificate
	EXHIBIT P
	 	—	 	Form of Master Vessel and Trust Agreement






(v)









 





          CREDIT AGREEMENT, dated as of December 29, 2005, among TODCO, a Delaware corporation (the
“Borrower”), the Lenders party hereto from time to time, and NORDEA BANK FINLAND PLC, NEW
YORK BRANCH, as Administrative Agent (in such capacity, the “Administrative Agent”) and as
Collateral Agent under the Security Documents (in such capacity, the “Collateral 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, 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 severally agrees to make at any time on or after the Effective 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 bear interest in accordance with Section
1.08, (ii) shall be denominated in Dollars, (iii) may be repaid and reborrowed in accordance with
the provisions hereof, (iv) except as hereinafter provided, shall, at the option of the Borrower,
be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans,
provided that except as otherwise specifically provided in Section 1.10(c), all Loans
comprising the same Borrowing shall at all times be of the same Type, (v) shall not exceed for any
Lender at any time that aggregate principal amount outstanding which, when added to such Lender’s
Percentage of all Letter of Credit Outstandings (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 and (vi) shall not exceed for all
Lenders at any time that aggregate principal amount outstanding which, when added to the amount of
all Letter of Credit Outstandings (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 Total Commitment at such time.




          1.02 Minimum Amount of Each Borrowing; Limitation on Number of Borrowings. (a) The
aggregate principal amount of each Borrowing of Eurodollar Loans shall not be less than the Minimum
Borrowing Amount.




          (b) More than one Borrowing may occur on the same date, but at no time shall there be
outstanding more than six Borrowings of Eurodollar Loans subject to different Interest Periods.




          1.03 Notice of Borrowing. (a) Whenever the Borrower desires to incur (x) Eurodollar
Loans hereunder, it shall give the Administrative Agent at its Notice Office at least three
Business Days’ prior written notice of each Eurodollar Loan to be incurred hereunder and (y) Base
Rate Loans hereunder, it shall give the Administrative Agent at its Notice Office at least one
Business Day’s prior written notice of each Base Rate Loan to be incurred hereunder,




 









 







provided that 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). Each such written notice (each a “Notice of
Borrowing”), except as otherwise expressly provided in Section 1.10, shall be irrevocable and
shall be given by the Borrower in the form of Exhibit A-1, appropriately completed to specify (i)
the aggregate principal amount of the Loans to be made pursuant to such Borrowing, (ii) the date of
such Borrowing (which shall be a Business Day), (iii) if the Loans being incurred pursuant to such
Borrowing are Eurodollar Loans, the initial Interest Period to be applicable thereto 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 deliver a written Notice of
Borrowing in accordance with Section 1.03(a), the Administrative Agent may act without liability
upon the basis of telephonic notice of such Borrowing, believed by the Administrative Agent in good
faith to be from the President, Chief Executive Officer, Chief Financial Officer or Treasurer of
the Borrower (or any other officer of the Borrower designated in writing to the Administrative
Agent by the President, Chief Executive Officer, Chief Financial Officer or Treasurer of the
Borrower as being authorized to give such notices under this Agreement) prior to receipt of Notice
of Borrowing. 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 of Loans,
absent manifest error.




          1.04 Disbursement of Funds. Except as otherwise specifically provided in the
immediately succeeding sentence, 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 of each such Borrowing requested to be made on such date. All such amounts
shall be made available in Dollars and in immediately available funds at the Payment Office of the
Administrative Agent 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, 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 shall also be entitled to recover on demand from such Lender or the Borrower
(without duplication, in the case of the Borrower, of any interest paid or payable on such amount
pursuant to Section 1.08), as the case may be, interest on such corresponding amount in respect of
each day from the date such corresponding amount was




-2-









 







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, at the overnight Federal Funds Rate
and (ii) if recovered from the Borrower, the rate of interest applicable to the respective
Borrowing, as determined pursuant to Section 1.08. 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, if requested by such Lender, 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”).




          (b) Each Note shall (i) be executed by the Borrower, (ii) be payable to the order of such
Lender that has requested a Note and be dated the Effective Date (or, in the case of Notes issued
after the Effective Date, be dated the date of the issuance thereof), (iii) be in a stated
principal amount equal to the Commitment of such Lender and be payable in the principal amount of
the Base Rate Loans and/or Eurodollar Loans, as the case may be, evidenced thereby, (iv) mature on
the Maturity Date, (v) bear interest as provided in Section 1.08 in respect of the Base Rate Loans
and/or Eurodollar Loans as the case may be, evidenced thereby, (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 will, prior to any transfer of any of its Notes, endorse on the
reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make
any such notation or any error in any 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 be delivered only to Lenders that 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 that 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 Credit
Documents. Any Lender that 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
(including, without limitation, to replace any Note that has been destroyed or lost) when any
Lender requests the delivery of a Note to evidence any of its Loans, the Borrower shall promptly
execute and deliver to such Lender the requested Note in the appropriate amount or amounts to
evidence such Loans provided that, in the case of a substitute or replacement Note, the Borrower
shall have received from such requesting Lender (i) an affidavit of loss or destruction and (ii) a
customary lost/destroyed note indemnity, in each case in form and substance reasonably acceptable
to the Borrower and such requesting Lender, and duly executed by such requesting Lender.




-3-









 








          1.06 Conversions. The Borrower shall have the option to convert, on any Business Day,
all or a portion equal to at least the Minimum Borrowing Amount of the outstanding principal amount
of Loans made pursuant to one or more Borrowings of one or more Types of Loans into a Borrowing of
another Type of Loan, provided that (i) except as otherwise provided in Section 1.10(b),
Eurodollar Loans may be converted into Base Rate Loans only on the last day of an Interest Period
applicable to the Loans being converted and no such partial conversion of Eurodollar Loans shall
reduce the outstanding principal amount of such Eurodollar Loans made pursuant to a single
Borrowing to less than the Minimum Borrowing Amount applicable thereto, and (ii) no conversion
pursuant to this Section 1.06 shall result in a greater number of Borrowings of Eurodollar Loans
than is permitted under Section 1.02. Each such conversion shall be effected by the Borrower by
giving the Administrative Agent at the Notice Office prior to 12:00 Noon (New York time) at least
three Business Days’ prior notice (each, a “Notice of Conversion/Continuation”) in the form
of Exhibit A-2, appropriately completed to specify the Loans to be so converted, the
Borrowing or Borrowings pursuant to which such Loans were incurred and, if to be converted into
Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent
shall give each Lender prompt notice of any such proposed conversion affecting any of its Loans.




          1.07 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.




          1.08 Interest. (a) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Base Rate Loan from the date of Borrowing thereof until the earlier of (i)
the maturity thereof (whether by acceleration or otherwise) and (ii) the conversion of such Base
Rate Loan to a Eurodollar Loan pursuant to Section 1.06 or 1.10, as applicable, at a rate per
annum which shall be equal to the sum of the Applicable Margin plus the Base Rate, each as in
effect from time to time.




          (b) The Borrower agrees to pay interest in respect of the unpaid principal amount of each
Eurodollar Loan from the date of Borrowing thereof until the earlier of (i) the maturity thereof
(whether by acceleration or otherwise) and (ii) the conversion of such Eurodollar Loan to a Base
Rate Loan pursuant to Section 1.06 or 1.10, as applicable, at a rate per annum which shall, during
each Interest Period applicable thereto, be equal to the sum of the Applicable Margin as in effect
from time to time during such Interest Period plus the Eurodollar Rate for such Interest Period.




          (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each
Loan and any other overdue amount payable hereunder shall, in each case, bear interest at a rate
per annum equal to 2% per annum in excess of the rate then borne by such Loans (or, if such overdue
amount is not interest or principal in respect of a Loan, 2.0% in excess of the rate then
applicable to Base Rate Loans as in effect from time to time), in each case with such interest to
be payable on demand.




-4-









 








          (d) Accrued and unpaid interest shall be payable (i) in respect of each Base Rate Loan, on
each Payment Date, (ii) in respect of each Eurodollar Loan, 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 (iii) in
respect of any Loan, on any repayment or prepayment (on the amount repaid or prepaid), at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.




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




          1.09 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 on the third Business Day prior to the expiration of an Interest Period applicable to such Loan
(in the case of any subsequent Interest Period), it shall have the right to elect, by giving 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 one, two,
three or six month period; provided that:





     (i) all Eurodollar Loans comprising a Borrowing shall at all times have the same
Interest Period;




     (ii) the initial Interest Period for any Eurodollar 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 on which the immediately preceding Interest Period applicable
thereto expires;




     (iii) if any Interest Period relating to a Eurodollar 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 Eurodollar 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 one month may be selected at any time when an Event
of Default (or, if the Administrative Agent or the Required Lenders have elected, a Default)
has occurred and is continuing;




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



-5-









 






     (vii) the selection of Interest Periods shall be subject to the provisions of Section
1.02(b).



          If upon the expiration of any Interest Period applicable to a Borrowing of Eurodollar Loans,
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.




          1.10 Increased Costs, Illegality, etc. (a) In the event that any Lender shall have
determined in good faith (which determination shall, absent manifest error, be final and conclusive
and binding upon all parties hereto but, with respect to clause (i) below, may be made only by the
Administrative Agent):





     (i) on any Interest Determination Date that, by reason of any changes arising after the
date of this Agreement affecting the London interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the applicable interest rate on the basis provided for
in the definition of Eurodollar Rate; or




     (ii) at any time, that such Lender shall incur increased costs or reductions in the
amounts received or receivable hereunder with respect to any Base Rate Loan or Eurodollar
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, for
example, but not limited to: (A) a change in the basis of taxation of payment to such
Lender of the principal of or interest on such Loan or any other amounts payable to such
Lender hereunder (except for changes in the rate of tax on, or determined by reference to,
the net income or net profits of such Lender, or any franchise tax based on 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 or any subdivision thereof or therein), but without duplication of
any amounts payable in respect of Taxes pursuant to 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 Effective Date affecting such Lender or the interbank
Eurodollar market or the position of such Lender in such market; or




     (iii) at any time, that the making or continuance by such Lender of any Eurodollar Loan
has been made (x) unlawful by any law or governmental rule, regulation or order, (y)
impossible by compliance by such Lender in good faith with any governmental request (whether
or not having force of law) and/or (z) impracticable as a result of a contingency occurring
after the Effective Date which materially and adversely affects the interbank Eurodollar
market;


then, and in any such event, such Lender (or the Administrative Agent, in the case of clause (i)
above) shall promptly give notice (by telephone promptly confirmed in writing) to the Borrower




-6-









 







and, except in the case of clause (i) above, 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, Eurodollar Loans shall no longer be available until such time
as the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving
rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or
Notice of Conversion/Continuation given by the Borrower with respect to Eurodollar Loans which have
not yet been incurred (including by way of conversion) shall be deemed rescinded by the Borrower,
(y) in the case of clause (ii) above, the Borrower agrees to pay to such Lender, upon such Lender’s
written request 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 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 (z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time
period required by law.




          (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section
1.10(a)(ii), the Borrower may, and in the case of a Eurodollar Loan affected by the circumstances
described in Section 1.10(a)(iii), the Borrower shall, either (x) if the affected Eurodollar Loan
is then being made initially or pursuant to a conversion, cancel such Borrowing by giving the
Administrative Agent telephonic notice (confirmed in writing) on the same date that the Borrower
was notified by the affected Lender or the Administrative Agent pursuant to Section 1.10(a)(ii) or
(iii) or (y) if the affected Eurodollar Loan is then outstanding, upon at least three Business
Days’ written notice to the Administrative Agent, require the affected Lender to convert such
Eurodollar Loan into a Base Rate Loan, provided that, if more than one Lender is affected
at any time, then all affected Lenders must be treated the same pursuant to this Section 1.10(b).




          (c) If any Lender in good faith determines that after the Effective Date the introduction of
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 requested 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, subject to the provisions of Section 13.14 (to the extent applicable and
to the extent not reflected in the definition of Eurodollar Rate), 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 1.10(c) shall, absent
manifest error, but subject to the provisions of Section 13.14 (to the extent applicable), be final
and conclusive and binding on all the parties




-7-









 







hereto. Each Lender, upon determining that any
additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written
notice thereof to the Borrower, which notice shall show in reasonable detail the basis for and
calculation of such additional amounts.




          1.11 Compensation. The Borrower agrees, subject to the provisions of Section 13.14
(to the extent applicable), to compensate each Lender, upon its written request (which request
shall set forth in reasonable detail the basis for requesting and the calculation of such
compensation), for all reasonable losses, expenses and liabilities (including, without limitation,
any such loss, expense or liability incurred by reason of the liquidation or reemployment of
deposits or other funds required by such Lender to fund its Eurodollar Loans but excluding any loss
of anticipated profits) which such Lender may sustain in respect of Eurodollar Loans made to the
Borrower: (i) if for any reason (other than a default by such Lender or the Administrative Agent)
a Borrowing of Eurodollar Loans 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
1.10(a)); (ii) if any prepayment or repayment (including any prepayment or repayment made pursuant
to Section 1.10(a), Section 4.01 or Section 4.02 or as a result of an acceleration of the
Eurodollar Loans pursuant to Section 10) of any of its Eurodollar Loans, or assignment of its
Eurodollar Loans pursuant to Section 1.13, 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 Eurodollar 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 or Event of Default arising as a result of the Borrower’s failure
to repay Eurodollar Loans or make payment on any Note held by such Lender when required by the
terms of this Agreement.




          1.12 Change of Lending Office. Each Lender agrees that on the occurrence of any event
giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c) or Section 4.04 with
respect to such
Lender, it will, if requested by the Borrower, use reasonable good faith 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 1.12 shall affect or postpone any of the obligations of the
Borrower or the rights of any Lender provided in Section 1.10 and Section 4.04.




          1.13 Replacement of Lenders. (x) If any Lender becomes a Defaulting Lender or
otherwise defaults in its obligations to make Loans, (y) upon the occurrence of any event giving
rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c) 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 13.11(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 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”)
reasonably acceptable to the Administrative Agent; provided that:




-8-









 









     (i) at the time of any replacement pursuant to this Section 1.13, the Replacement
Lender shall enter into one or more Assignment and Assumption Agreements pursuant to Section
13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to be paid by the
Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the
Commitments and outstanding Loans of the Replaced Lender and, in connection therewith, shall
pay to the Replaced Lender in respect thereof an amount equal to the sum (without
duplication) of (x) an amount equal to the principal of, and all accrued interest on, all
outstanding Loans of the Replaced Lender, and (y) an amount equal to all accrued, but
unpaid, Commitment Commission owing to the Replaced Lender pursuant to Section 3.01; 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 (i) 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 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06), which
shall survive as to such Replaced Lender and (ii) if so
requested by the Borrower, the Replaced Lender shall deliver all Notes in its possession to
the Borrower.




          SECTION 2. Letters of Credit.




          2.01 Letters of Credit. (a) Subject to and upon the terms and conditions herein set
forth, the Borrower may request that any Issuing Lender issue, at any time on and after the
Effective Date and prior to the day prior to the Maturity Date, for the account of the Borrower,
irrevocable sight standby letters of credit, in a form customarily used by such Issuing Lender or
in such other form as has been approved by such Issuing Lender (each such letter of credit, a
“Letter of Credit”). All Letters of Credit shall be denominated in Dollars and shall be
issued on a sight draft basis.




          (b) Subject to the terms and conditions contained herein, each Issuing Lender hereby agrees
that it will, at any time and from time to time on or after the Effective Date and prior to the 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 in support of such obligations as are
reasonably acceptable to the Issuing Lender and as are permitted to remain outstanding without
giving rise to a Default or Event of Default hereunder, provided that the respective
Issuing Lender shall be under no 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



-9-









 







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
particular or shall impose upon such Issuing Lender with respect to such Letter of Credit
any restriction or reserve or capital requirement (for which such Issuing Lender is not
otherwise compensated) not in effect on the date hereof, or any unreimbursed loss, cost or
expense which was not applicable, in effect or known to such Issuing Lender as of the date
hereof and which such Issuing Lender in good faith deems material to it; or




     (ii) such Issuing Lender shall have received notice from any Lender prior to the
issuance of such Letter of Credit of the type described in the second sentence of Section
2.02(b); or




     (iii) a Lender Default exists, unless such Issuing Lender has entered into arrangements
satisfactory to it and the Borrower to eliminate such Issuing Lender’s risk with respect to
the participation in Letters of Credit of any Defaulting Lender(s), including by cash
collateralizing any such Defaulting Lender’s (or Defaulting Lenders’) Percentage (or
Percentages) of the Letter of Credit Outstandings.



          (c) 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 Letter of Credit Outstandings
(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 Letter of Credit shall be extendible for successive periods
of up to 12 months, but, in each case, not beyond the twentieth Business Day prior to the Maturity
Date, on terms acceptable to the respective Issuing Lender) and (B) twenty Business Days prior to
the Maturity Date; provided that any Letter of Credit may terminate after the Maturity Date
so long as (i) the termination date is no later than the day fifteen days prior to the first
anniversary of the Maturity Date, (ii) the aggregate Stated Amount of all such Letters of Credit,
at such time would not exceed $20,000,000 and (iii) the Borrower shall pay to the Collateral Agent
on the date of issuance of such Letter of Credit an amount of cash or Cash Equivalents satisfactory
to the Issuing Lender at such time, such cash or Cash Equivalents to be held as security for all
obligations of the Borrower under such Letter of Credit and the Credit Documents in a cash
collateral account to be established by the Collateral Agent on terms satisfactory to the relevant
Issuing Lender.




          2.02 Letter of Credit Requests; Minimum Stated Amount. (a) Whenever the Borrower
desires that a Letter of Credit be issued, 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
the respective Issuing Lender) written notice prior to the proposed date of issuance (which shall
be a Business Day). Each notice shall be substantially in the form of Exhibit J (each a
“Letter of Credit Request”).




-10-









 








          (b) The making of each Letter of Credit Request shall be deemed to be a representation and
warranty by the Borrower that such Letter of Credit may be issued in accordance with, and will not
violate the requirements of, Section 2.01(c). Unless the respective Issuing Lender determines
that, or has received notice from any Lender before it issues a Letter of Credit that one or more
of the conditions specified in Section 6 are not then satisfied, or that the issuance of such
Letter of Credit would violate Section 2.01(c) (in which event the Issuing Lender will promptly
give notice of such determination made after receipt of the related Letter of Credit Request, or
such notice from another Lender made after receipt of the related Letter of Credit Request, to the
Borrower), then such Issuing Lender shall issue the requested Letter of Credit for the account of
the Borrower in accordance with such Issuing Lender’s usual and customary practices.




          (c) The initial Stated Amount of each Letter of Credit shall not be less than $100,000 or such
lesser amount as is acceptable to the respective Issuing Lender.




          2.03 Letter of Credit Participations. (a) Immediately upon the issuance by any
Issuing Lender of any Letter of Credit, such Issuing Lender shall be deemed to have sold and
transferred to each Lender other than such Issuing Lender (each such Lender, in its capacity under
this Section 2.03, a “Participant”), and each such 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 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 Sections 1.13 or 13.04, it is
hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there
shall be an automatic adjustment to the participations pursuant to this Section 2.03 to reflect the
new Percentages of the assignor and assignee Lender or of all Lenders, as the case may be.




          (b) In determining whether to pay under any Letter of Credit, such Issuing Lender shall have
no 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. Subject to the
provisions of the immediately preceding sentence, any action taken or omitted to be taken by any
Issuing Lender under or in connection with any Letter of Credit if taken or omitted in the absence
of gross negligence or willful misconduct, as determined by a court of competent jurisdiction,
shall not create for such Issuing Lender any resulting liability to any Credit Party or any Lender.




          (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 2.04(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 the Administrative Agent for the account of such Issuing Lender the
amount of such Participant’s Percentage (as relates to the respective Letter of Credit) 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,




-11-









 







any Participant required to fund a payment
under a Letter of Credit, such Participant shall make available to the Administrative Agent at the
Payment Office for the account of such Issuing Lender in Dollars such Participant’s Percentage (as
relates to the respective Letter of Credit) 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 Administrative Agent for the account of such Issuing
Lender, such Participant agrees to pay to the Administrative Agent for the account of 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 the Administrative Agent for the account of such Issuing
Lender at the overnight Federal Funds Rate for the first three days and at the interest rate
applicable to Loans that are maintained as Base Rate Loans for each day thereafter. The failure of
any Participant to make available to the Administrative Agent for the account of such Issuing
Lender its Percentage of any payment under any Letter of Credit issued by it shall not relieve any
other Participant of its obligation hereunder to make available to the Administrative Agent for the
account of such Issuing Lender its Percentage of any such 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 the Administrative Agent for the account of such Issuing Lender such other
Participant’s Percentage of any such payment.




          (d) Whenever any Issuing Lender receives a payment of a reimbursement obligation as to which
the Administrative Agent has received (for the account of any such Issuing Lender) any payments
from the Participants pursuant to clause (c) above, such Issuing Lender shall forward such payment
to the Administrative Agent, which in turn shall distribute to each Participant which has paid its
Percentage thereof, 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) Each Issuing Lender shall, promptly after the issuance of, or amendment to, a Letter of
Credit give the Administrative Agent and the Borrower written notice of such issuance or amendment,
as the case may be, and such notice shall be accompanied by a copy of the issued Letter of Credit
or amendment, as the case may be. Upon receipt of such notice, the Administrative Agent shall
promptly notify each Participant, in writing, of such issuance or amendment and in the event a
Participant shall so request, the Administrative Agent shall furnish such Participant with a copy
of such issuance or amendment.




          (f) Each Issuing Lender shall deliver to the Administrative Agent, promptly on the first
Business Day of each week, by facsimile transmission, the aggregate daily Stated Amount available
to be drawn under the outstanding Letters of Credit issued by such Issuing Lender for the previous
week. Upon request, the Administrative Agent shall, within 10 days after the last Business Day of
each calendar month, deliver to each Participant a report setting forth for such preceding calendar
month the aggregate daily Stated Amount available to be drawn under all outstanding Letters of
Credit during such calendar month.




          (g) The obligations of the Participants to make payments to the Administrative Agent for the
account of the respective Issuing Lender with respect to Letters of




-12-









 







Credit issued by it 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 Borrower 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 Lender, any Issuing Lender, 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 Borrower or any of its Subsidiaries 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.



          2.04 Agreement to Repay Letter of Credit Drawings. (a) The Borrower hereby 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”), on the date of such payment or disbursement, 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 rate then applicable to Base Rate Loans plus 2%. 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 2.04 to reimburse the respective
Issuing Lender with respect to drawings on Letters of Credit (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 Issuing Lender or Participant
or as Participant), or any non-application or misapplication by the beneficiary of the proceeds of
such Drawing, the respective Issuing Lender’s only obligation to the Borrower being to confirm that
any documents required to be delivered under such Letter of Credit appear to have been delivered
and that they appear to comply on their face with the requirements of




-13-









 







such Letter of Credit.
Subject to the provisions of the immediately preceding sentence, any action taken or omitted to be
taken by any Issuing Lender under or in connection with any Letter of Credit if taken or omitted in
the absence of gross negligence or willful misconduct as determined by a court of competent
jurisdiction, shall not create for such Issuing Lender any resulting liability to the Borrower or
any other Credit Party.




          2.05 Increased Costs. If at any time after the Effective Date, any Issuing Lender or
any Participant determines that the introduction of or any change in any applicable law, rule,
regulation, order, guideline or request or in the interpretation or administration thereof by 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 any such authority (whether
or not having the force of law), shall either (a) 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 (b) 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, then, upon demand to the Borrower by such
Issuing Lender or any Participant (a copy of which demand 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 Lender 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 2.05, will give prompt written notice thereof to the Borrower,
which notice shall include a certificate submitted to such Borrower by such Issuing Lender or such
Participant (a copy of which certificate shall be sent by such Issuing Lender or such Participant
to the Administrative Agent), setting forth in reasonable detail the basis for and the calculation
of such additional amount or amounts necessary to compensate such Issuing Lender or such
Participant, although the failure to give any such notice shall not release or diminish the
Borrower’s obligations to pay additional amounts pursuant to this Section 2.05. The certificate
required to be delivered pursuant to this Section 2.05 shall, if delivered in good faith and absent
manifest error, be final and conclusive and binding on the Borrower.




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




          3.01 Commitment Commission. (a) The Borrower agrees to pay the Administrative Agent
for distribution to each Non-Defaulting Lender a commitment commission (the “Commitment
Commission”) for the period from the Effective Date to and including the Maturity Date (or such
earlier date as the Total Commitment shall have been terminated) computed at a rate for each day
equal to 0.55% multiplied by the daily average Unutilized Commitment of such Non-Defaulting Lender.
Accrued Commitment Commission shall be due and payable quarterly in arrears on each Payment Date
and on the Maturity Date (or such earlier date upon which the Total Commitment is terminated).




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          (b) The Borrower shall pay to the Administrative Agent, for the Administrative Agent’s own
account, such other fees as have been agreed to in writing by the Borrower and the Administrative
Agent.




          (c) 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 for Eurodollar Loans 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 Payment Date and on the Maturity
Date (or such earlier date upon which the Total Commitment is terminated).




          (d) 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 Payment Date (or such earlier date upon which the Total Commitment is
terminated).




          (e) The Borrower agrees to pay, upon each payment (including any partial payment) under,
issuance of, extension of, or amendment to, any Letter of Credit issued hereunder, such amount as
shall at the time of such event be the administrative charge which the respective Issuing Lender is
generally charging (in addition to its regular letter of credit and/or facing fees) in connection
with such occurrence with respect to letters of credit.




          3.02 Voluntary Termination of Unutilized Commitments. Upon at least three Business
Days’ prior notice to the Administrative Agent at its 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 in part, in an aggregate principal amount of at least $5,000,000
and in integral multiples of $1,000,000 in the case of any partial reductions in excess of
$5,000,000, provided that each such reduction shall apply proportionately to permanently
reduce the Commitment of each 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 earlier of (x) January 31, 2006, if the
Effective Date has not occurred on or before such date, and (y) the Maturity Date.




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          (b) In addition to any other mandatory commitment reductions pursuant to this Section 3.03,
the Total Commitment shall be reduced at the times, and in the amounts, required by Section 4.02.




          (c) In addition to any other mandatory commitment reductions pursuant to this Section 3.03,
the Total Commitment shall be terminated on the Collateral Disposition Termination Date.




          (d) Each reduction to the Total Commitment pursuant to this Section 3.03 and Section 4.02
shall be applied proportionately to reduce 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) the Borrower shall give the Administrative Agent prior to 12:00 Noon (New York
time) at its Notice Office at least three Business Days’ prior written notice (or telephonic
notice promptly confirmed in writing) of its intent to prepay such Loans, the amount of such
prepayment and the specific Borrowing or Borrowings pursuant to which made, 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 of a Borrowing which is outstanding, 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 on any date
other than the last day of the Interest Period applicable thereto, the Borrower shall pay
the amounts required pursuant to Section 1.11;




     (iv) except as expressly provided in Section 4.01(b), each prepayment in respect of any
Loans made pursuant to a Borrowing shall be applied pro rata among the Loans
comprising such Borrowing, provided that in connection with any prepayment of Loans
pursuant to this Section 4.01(a), such prepayment shall not be applied to any Loan of a
Defaulting Lender until all other Loans of Non-Defaulting Lenders have been repaid in full;
and




     (v) any prepayment made during the Term-Out Period shall be applied to reduce the then
remaining Scheduled Repayments in inverse order of maturity.



          (b) In the event of certain refusals by a Lender as provided in Section 13.11(b) 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 may, upon five Business Days’ written
notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent
shall promptly transmit to each of the Lenders), prepay all Loans, together




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with accrued and unpaid
interest, Commitment Commission, and other amounts owing to such Lender (or owing to such Lender
with respect to each Loan which gave rise to the need to obtain such Lender’s individual consent)
in accordance with said Section 13.11(b) so long as (A) the Commitment of such Lender (if any) is
terminated concurrently with such prepayment (at which time Schedule I shall be deemed modified to
reflect the changed Commitments) and (B) the consents required by Section 13.11(b) in connection
with the prepayment pursuant to this Section 4.01(b) have been obtained.




          4.02 Mandatory Repayments and Commitment Reductions. (a) On any day on which the
aggregate outstanding principal amount of Loans and the Letter of Credit Outstandings exceeds the
Total Commitment as then in effect, the Borrower shall repay principal of Loans in an amount equal
to such excess. If, after giving effect to the prepayment of all outstanding Loans, the aggregate
amount of the Letter of Credit Outstandings exceeds the Total Commitment as then in effect, the
Borrower shall pay to the Collateral Agent on such date an amount of cash or Cash Equivalents equal
to the amount of such excess (up to a maximum amount equal to the Letter of Credit Outstandings at
such time), such cash or Cash Equivalents to be held as security for all obligations of the
Borrower hereunder in a cash collateral account to be established by the Collateral Agent.




          (b) In addition to any other mandatory repayments or commitment reductions pursuant to this
Section 4.02, but without duplication, on (i) the Business Day following the date of any Collateral
Disposition involving a Mortgaged Vessel (other than a Collateral Disposition constituting an Event
of Loss) and (ii) the earlier of (A) the date which is 180 days following any Collateral
Disposition constituting an Event of Loss involving a Mortgaged Vessel and (B) the Business Day
following the date of receipt by the Borrower, any of its Subsidiaries or the Administrative Agent
of the insurance proceeds relating to such Event of Loss, the Borrower shall be required to reduce
the Total Commitment (or, if during the Term-Out Period, to repay Loans) in an amount equal to the
product of the Total Commitment (or, if during the Term-Out Period, the aggregate principal amount
of Loans outstanding) multiplied by a fraction (A) the numerator of which is equal to 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 5.12 or Section
8.01(c) before giving effect to such Collateral Disposition) of the Mortgaged Vessel or Mortgaged
Vessels which is/are the subject of such Collateral Disposition and (B) the denominator of which is
equal to the Aggregate Mortgaged Vessel 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 5.12 or Section 8.01(c) before giving effect to such Collateral Disposition);
provided that the Borrower, at its option, shall not be required to reduce the Total
Commitment (or, if during the Term-Out Period, to repay Loans) upon a Collateral Disposition in
respect of a Mortgaged Vessel (other than a Collateral Disposition constituting an Event of Loss),
so long as (a) the Aggregate Mortgaged Vessel 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 5.12 or Section 8.01(c) after giving effect to such Collateral
Disposition) exceeds the product of the Total Commitment (or, if during the Term-Out Period, the
aggregate principal amount of Loans outstanding) at such time multiplied by 3.25 and (b)
the aggregate 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
5.12 or




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Section 8.01(c) after giving effect to such Collateral Disposition)) of all barge rigs
which are Mortgaged Vessels does not exceed 35% of the Aggregate Mortgaged Vessel 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 5.12 or Section 8.01(c) after
giving effect to such Collateral Disposition).




          (c) If the Borrower elects the Term-Out Option pursuant to clause (e) below, then following
the Maturity Date, the amount of each repayment required by Section 4.02(b) shall be applied to
reduce the then remaining Scheduled Repayments in inverse order of maturity.




          (d) With respect to each repayment of Loans required by this Section 4.02, the Borrower may
designate the specific Borrowing or Borrowings pursuant to which such Loans were made, provided
that (i) all Loans with Interest Periods ending on such date of required repayment shall be paid in
full prior to the payment of any other Loans and (ii) each repayment of any Loans comprising 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
preceding provisions of this clause (d), make such designation in its sole reasonable discretion
with a view, but no obligation, to minimize breakage costs owing pursuant to Section 1.11.




          (e) Notwithstanding anything to the contrary contained elsewhere in this Agreement, all then
outstanding Loans shall be repaid in full on the Maturity Date; provided that the Borrower
may elect (the “Term-Out Option”) to repay all Loans outstanding on the Maturity Date in
eight equal quarterly installments (each a “Scheduled Repayment”) beginning on the last day
of the third month following the month in which the Maturity Date occurs (the “Term-Out
Period”) so long as (i) not more than 90 days and not less than 30 days, prior to the Maturity
Date, the Borrower provides written notice of such election to the Administrative Agent, (ii) no
Default or Event of Default has occurred and is continuing as of the Maturity Date and (iii) the
Borrower shall pay to the Administrative Agent, for the pro rata distribution to
the Lenders, a fee equal to 0.10% multiplied by the Total Commitment as of the Effective Date (such
fee to be due and payable on the Maturity Date).




          (f) Notwithstanding anything to the contrary contained above, all Loans shall mature on and be
repaid in full on the Collateral Disposition Termination Date.




          4.03 Method and Place of Payment. Except as otherwise specifically provided herein,
all payments under this Agreement or 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 of
the Administrative Agent. 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. (a) All payments made by any Credit Party hereunder or
under any Note will be made without setoff, counterclaim or other defense. Except




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as provided in
Section 4.04(b), 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, levy, impost, duty, fee, assessment or other charge
imposed on or measured by the net income, net profits or any franchise tax based on 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 to such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
(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 agrees to reimburse each Lender, upon the written request of such Lender, for taxes
imposed on or measured by the net income, net profits or any franchise tax based on net income, net
profits or net worth, 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 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.




          (b) Each Lender that is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) agrees to deliver to the Borrower and the Administrative Agent on or prior
to the Effective Date, or in the case of a Replacement Lender or a Lender that is an assignee or
transferee of an interest under this Agreement pursuant to Section 13.04(b) (unless the Replacement
Lender or such assignee or transferee was already a Lender hereunder immediately prior to such
replacement, assignment or transfer), on the date it becomes a Replacement Lender or the date of
such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of
Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption under an
income tax treaty) (or successor forms) certifying to such Lender’s entitlement as of such date to
a complete exemption from United States withholding tax with respect to payments to be made under
this Agreement and under any Note, or (ii) if the Lender is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form W-8ECI or
Form W-8BEN (with respect to a complete exemption under an income tax treaty) pursuant to clause
(i) above, (x) a certificate substantially in the form of Exhibit O (any such certificate, a
“Section 4.04(b)(ii)




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Certificate”) and (y) two accurate and complete original signed copies of
Internal Revenue Service Form W-8BEN (with respect to the portfolio interest exemption) (or
successor form) certifying to such Lender’s entitlement as of such date to a complete exemption
from United
States withholding tax with respect to payments of interest to be made under this Agreement
and under any Note. In addition, each Lender agrees that from time to time after the Effective
Date, when a lapse in time or change in circumstances renders the previous certification obsolete
or inaccurate in any material respect, it will deliver to the Borrower or the Administrative Agent
two new accurate and complete original signed copies of Internal Revenue Service Form W-8ECI, Form
W-8BEN (with respect to the benefits of any income tax treaty), or Form W-8BEN (with respect to the
portfolio interest exemption) and a Section 4.04(b)(ii) Certificate, as the case may be, and such
other forms as may be required in order to confirm or establish the entitlement of such Lender to a
continued exemption from or reduction in United States withholding tax with respect to payments
under this Agreement and any Note, or it shall immediately notify the Borrower and the
Administrative Agent of its inability to deliver any such Form or Certificate, in which case such
Lender shall not be required to deliver any such Form or Certificate pursuant to this Section
4.04(b). Notwithstanding anything to the contrary contained in Section 4.04(a), but subject to
Section 13.04(b) and the immediately succeeding sentence, (x) the Borrower shall be entitled, to
the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by
the United States (or any political subdivision or taxing authority thereof or therein) from
interest, fees or other amounts payable hereunder for the account of any Lender which is not a
United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal
income tax purposes to the extent that such Lender has not provided to the Borrower U.S. Internal
Revenue Service Forms that establish a complete exemption from such deduction or withholding and
(y) the Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross-up payments to
be made to a Lender in respect of income or similar taxes imposed by the United States if (I) such
Lender has not provided the Borrower the Internal Revenue Service Forms required to be provided the
Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment, other than interest, to
a Lender described in clause (ii) above, to the extent that such forms do not establish a complete
exemption from withholding of such taxes. Notwithstanding anything to the contrary contained in
the preceding sentence or elsewhere in this Section 4.04, the Borrower agrees to pay additional
amounts and to indemnify each Lender in the manner set forth in Section 4.04(a) (without regard to
the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts
deducted or withheld by it as described in the immediately preceding sentence as a result of any
changes after the Effective Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting or withholding of
income or similar taxes.




          (c) If the Borrower pays any additional amount under this Section 4.04 to a Lender and such
Lender determines in its sole discretion exercised in good faith that it has actually received or
realized in connection therewith any refund or any reduction of, or credit against, its Tax
liabilities in or with respect to the taxable year in which the additional amount is paid (a
“Tax Benefit”), such Lender shall pay to the Borrower an amount that such Lender shall, in
its sole discretion exercised in good faith, determine is equal to the net benefit, after tax,
which was obtained by such Lender in such year as a consequence of such Tax Benefit;
provided, however, that (i) any Lender may determine, in its sole discretion
exercised in good faith consistent with the policies of such Lender, whether to seek a Tax Benefit,
(ii) any Taxes that are imposed on a Lender as a result of a disallowance or reduction (including
through the expiration of any tax




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credit carryover or carryback of such Lender that otherwise would
not have expired) of any Tax Benefit with respect to which such Lender has made a payment to the
Borrower pursuant to this Section 4.04(c) shall be treated as a Tax for which the Borrower is
obligated to indemnify such
Lender pursuant to this Section 4.04 without any exclusions or defenses, (iii) nothing in this
Section 4.04(c) shall require any Lender to disclose any confidential information to the Borrower
(including, without limitation, its tax returns), and (iv) no Lender shall be required to pay any
amounts pursuant to this Section 4.04(c) at any time during which a Default or Event of Default
exists.




          SECTION 5. Conditions Precedent to the Effective Date. This Agreement shall become
effective on the date (the “Effective Date”) on which the following conditions are
satisfied or waived in accordance with this Agreement:




          5.01 Effective Date; Notes. On or prior to the Effective Date (i) the Borrower, the
Administrative Agent and each of the Lenders who are initially parties hereto shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have delivered the same
to the Administrative Agent or, in the case of the Lenders, shall have given to the Administrative
Agent telephonic (confirmed in writing), written or facsimile notice (actually received) at such
office that the same has been signed and mailed to it and (ii) if requested by a Lender, there
shall have been delivered to the Administrative Agent, for the account of such Lender, the
appropriate Note for such Lender executed by the Borrower, in each case in the amount, maturity and
as otherwise provided herein.




          5.02 Fees, etc. On the Effective Date, the Borrower shall have paid to the
Administrative Agent, the Lead Arranger and the Lenders all costs, fees and expenses (including,
without limitation, reasonable legal fees and expenses) payable to the Administrative Agent, the
Lead Arranger and the Lenders in respect of the transactions contemplated by this Agreement to the
extent then due.




          5.03 Opinion of Counsel. On the Effective Date, the Administrative Agent shall have
received from Randall Stafford, general counsel of the Borrower, an opinion addressed to the
Administrative Agent and each of the Lenders and dated the Effective Date covering the matters set
forth in Exhibit C-2 which shall be in form and substance reasonably acceptable to the
Administrative Agent.




          5.04 Corporate Documents; Proceedings; etc. (a) On the Effective Date, the
Administrative Agent shall have received a certificate, dated the Effective Date, signed by the
President, any Vice President, the Treasurer or an authorized manager, member or general partner of
each Credit Party, and attested to by the Secretary or any Assistant Secretary (or, to the extent
such Credit Party does not have a Secretary or Assistant Secretary, the analogous Person within
such Credit Party) of such Credit Party, as the case may be, in the form of Exhibit D, with
appropriate insertions, together with copies of the Certificate of Incorporation and By-Laws (or
equivalent organizational documents)
of such Credit Party and the resolutions of such Credit Party referred to in such certificate,
and the foregoing shall be reasonably acceptable to the Administrative Agent.




-21-









 








          (b) All corporate, limited liability company, partnership and legal proceedings, and all
material 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 may have reasonably requested in
connection therewith, such documents and papers, where appropriate, to be certified by proper
corporate or governmental authorities.




          5.05 Shareholders’ Agreements; Management Agreements; Debt Agreements; Employment
Agreements; Tax Sharing Agreements. On or prior to the Effective Date, there shall have been
delivered to the Administrative Agent or its counsel true and correct copies of the following
documents:





     (a) all agreements entered into by the Borrower or any of its Subsidiaries governing
the terms and relative rights of their capital stock or membership interests (collectively,
the “Shareholders’ Agreements”);




     (b) all material agreements (other than Employment Agreements) with respect to the
management of the Borrower or any of its Subsidiaries or any of the Vessels (collectively,
the “Management Agreements”);




     (c) all agreements evidencing or relating to Indebtedness of the Borrower or any of its
Subsidiaries in excess of $100,000 which is to remain outstanding (other than the Credit
Documents) after giving effect to the incurrence of Loans on the Effective Date (if any)
(collectively, the “Debt Agreements”);




     (d) all employment agreements entered into by the Borrower or any of its Subsidiaries
with members of management of the Borrower or any of such Subsidiaries (collectively, the
“Employment Agreements”); and




     (e) all tax sharing, tax allocation and other similar agreements entered into by the
Borrower or any of its Subsidiaries (collectively, the “Tax Sharing Agreements”).


It is understood and agreed that any of the foregoing documents required to be delivered pursuant
to this Section 5.05 shall be deemed to have been furnished to the Lenders upon being posted to the
Borrower’s website at www.theoffshoredrillingcompany.com or to the SEC’s website at www.sec.gov
utilizing the Electronic Data Gathering, Analysis and Retrieval system or at another website
identified in a notice delivered to the Lenders and accessible by the Lenders without charge;
provided that upon the request of the Administrative Agent, the Borrower shall promptly
deliver paper copies of any such documents to the Administrative Agent.




          5.06 Subsidiaries Guaranty. On the Effective Date, each Subsidiary Guarantor shall have duly authorized, executed and
delivered to the Administrative Agent the Subsidiaries Guaranty in the form of Exhibit E (as
modified, supplemented or amended from time to time, the “Subsidiaries Guaranty”), and the
Subsidiaries Guaranty shall be in full force and effect.




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          5.07 Pledge and Security Agreement. On the Effective Date, the Borrower and each of
the Subsidiary Guarantors that owns securities of another Subsidiary Guarantor shall have (x) duly
authorized, executed and delivered the Pledge and Security Agreement in the form of Exhibit F (as
modified, supplemented or amended from time to time, the “Pledge Agreement”) and shall have
(A) delivered to the Collateral Agent, as pledgee, all the Pledged Securities referred to therein,
together with executed and undated stock powers in the case of capital stock constituting Pledged
Securities, and (B) otherwise complied with all of the requirements set forth in the Pledge
Agreement and (y) duly authorized, executed and delivered any other related documentation necessary
or advisable to perfect the Lien on the Pledge Agreement Collateral in the respective jurisdictions
of formation of the respective Subsidiary Guarantor or the Borrower, as the case may be.




          5.08 Solvency Certificate. On the Effective Date, the Borrower shall cause to be
delivered to the Administrative Agent a solvency certificate executed on behalf of the Borrower by
the senior financial officer of the Borrower, in the form of Exhibit K, which shall be addressed to
the Administrative Agent and each of the Lenders and dated the Effective Date, setting forth the
conclusion that, after giving effect to the incurrence of all the financings contemplated hereby,
the Borrower individually, 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.




          5.09 Financial Statements. On the Effective Date, the Lenders shall have received
copies of the financial statements and the projections referred to in Sections 7.05(a) and (c),
which financial statements and projections shall be in form and substance reasonably satisfactory
to the Administrative Agent and the Lenders.




          5.10 Material Adverse Change; Approvals. (a) On the Effective Date, nothing shall
have occurred (and the Administrative Agent shall have become aware of no facts or conditions not
previously known to the Administrative Agent) which the Administrative Agent shall determine is
reasonably likely to have a Material Adverse Effect.




          (b) On or prior to the Effective Date, all necessary governmental (domestic and foreign) and
third party approvals and/or consents in connection with the Loans, the other transactions
contemplated hereby and the granting of Liens under the Credit Documents 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
restrains, prevents or imposes materially adverse conditions upon the consummation of this
Agreement or the other transactions contemplated by the Credit Documents or otherwise referred to
herein or therein. On the Effective 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 this Agreement or the other
transactions contemplated by the Credit Documents or otherwise referred to herein or therein.




          5.11 Litigation. On the Effective Date, there shall be no actions, suits or
proceedings pending or threatened (i) with respect to the this Agreement or any other Credit




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Document or (ii) which the Administrative Agent shall determine has had, or could reasonably be
expected to have, a Material Adverse Effect.




          5.12 Appraisal; Rig Status Report. (a) On or prior to the Effective Date, the
Administrative Agent shall have received from R.S. Platou (USA) Inc. the appraisal report with
respect to the Mortgaged Vessels, dated November 15, 2005.




          (b) On or prior to the Effective Date, the Administrative Agent shall have received a monthly
rig status report of a recent date (and in no event dated earlier than 30 days prior to the
Effective Date) in scope, form and substance reasonably satisfactory to the Administrative Agent.




          5.13 Refinancing. (a) On or prior to the Effective Date, the total commitments
pursuant to the Existing Credit Agreement shall have been terminated, and all loans and notes with
respect thereto shall have been repaid in full (together with interest thereon), all letters of
credit issued thereunder shall have been terminated and all other amounts owing pursuant to the
Existing Credit Agreement shall have been repaid in full (the “Refinancing”). The
creditors in respect of the Existing Credit Agreement shall have terminated and released all
security interests in and Liens on the assets of Borrower and its Subsidiaries created pursuant to
the security documentation relating to the Existing Credit Agreement, and such creditors shall have
returned, or agreed to return, all assets (if any) in their possession pursuant to the security
documentation relating to the Existing Credit Agreement to the Borrower, and the Administrative
Agent shall have received evidence, in form and substance reasonably satisfactory to the
Administrative Agent, that the matters set forth in this Section 5.13 have been satisfied as of the
Effective Date.




          (b) On or prior to the Effective Date, the Borrower and its Subsidiaries shall have no
outstanding Indebtedness except for (i) the Loans and (ii) certain other Indebtedness of the
Borrower and its Subsidiaries listed on Schedule V.




          (c) After giving effect to the Refinancing and this Agreement, the financings incurred in
connection herewith and the other transactions contemplated hereby, there shall be no conflict
with, or default under, any material agreement of the Borrower or any of its Subsidiaries.




          5.14 Assignments of Earnings and Insurances. On the Effective Date, each Credit Party
which owns a Mortgaged Vessel on such date shall have duly authorized, executed and delivered an
Assignment of Earnings in the form of Exhibit G (as modified, supplemented or amended from time to
time, the “Assignments of Earnings”) and an Assignment of Insurances in the form of Exhibit
H (as modified, supplemented or amended from time to time, the “Assignments of
Insurances”), together covering all of such Credit Party’s present and future Earnings and
Insurance Collateral, in each case together with:





     (a) an authorization to the Administrative Agent to file Financing Statements (Form
UCC-1) under the UCC in 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 Assignment of Earnings and the Assignment of
Insurances;




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     (b) certified copies of Requests for Information or Copies (Form UCC-11), or equivalent
reports, listing all effective financing statements that name any Credit Party as debtor and
that are filed in the jurisdictions referred to in Section 5.14(a) above, together with
copies of such other financing statements (none of which shall cover the Collateral except
to the extent evidencing Permitted Liens unless in respect of which the Collateral Agent
shall have been authorized by the secured party thereunder to file Form UCC-3 Termination
Statements (or such other termination statements as shall be required by local law); and




     (c) 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 Assignment of Earnings and the Assignment of Insurances have been taken.



          5.15 Mortgages; Certificates of Ownership; Searches; Class Certificates; Insurance.
On the Effective Date:





     (a) Each Credit Party which owns a Mortgaged Vessel shall have duly authorized,
executed and delivered, and caused to be recorded in the appropriate vessel registry a first
preferred mortgage (together with additional first preferred mortgages executed in
connection with a Vessel Exchange, or as provided in Section 8.16, and as any of such
mortgages may be modified, amended or supplemented from time to time in accordance with the
terms thereof and hereof, the “Vessel Mortgages”), substantially in the form of
Exhibit I-1 or I-2, as applicable, with respect to each Vessel listed on Schedule III
(together with Vessels exchanged for a Mortgaged Vessel pursuant to a Vessel Exchange and
Vessels that become subject to a Vessel Mortgage as provided in
Section 8.16, each a “Mortgaged Vessel”) and the Vessel Mortgages shall be
effective to create in favor of the Collateral Agent a legal, valid and enforceable first
priority security interest, in and lien upon such Mortgaged Vessels, 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 perfect and preserve such security interests shall have been duly
effected 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 or
abstracts of title from appropriate authorities showing (or confirmation updating previously
reviewed certificates and indicating) the registered ownership of each Mortgaged Vessel by
the relevant Subsidiary Guarantor and (y) the results of maritime registry searches with
respect to the Mortgaged Vessels, indicating no record liens other than Liens in favor of
the Collateral Agent and Permitted Liens.




     (c) The Administrative Agent shall have received a copy of the Certificate of Financial
Responsibility for each Mortgaged Vessel required by the Minerals Management Service or the
United States Coast Guard to be covered by such a certificate.



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     (d) 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
the Credit Parties in respect of the Mortgaged Vessels, 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
Administrative Agent, the Collateral Agent and/or the Lenders as mortgagee and (ii) conform
with the insurance requirements of the respective Vessel Mortgages.



          5.16 Environmental Laws. On the Effective Date, there shall not exist any condition
or occurrence on or arising from any Vessel or property owned or operated or occupied by the
Borrower or any of its Subsidiaries that (a) results in material noncompliance by the Borrower or
such Subsidiary with any applicable Environmental Law or (b) could reasonably be expected to form
the basis of a material Environmental Claim against the Borrower or any of its Subsidiaries or any
such Vessel or property.




          5.17 Vessel Classification. On the Effective Date, the class of each Mortgaged
Vessel, the classification society issuing such class and the conditions and recommendations of
such classification society with respect to such Mortgaged Vessel shall be satisfactory to the
Administrative Agent in its reasonable discretion.




          5.18 Master Vessel and Trust Agreement. On the Effective Date, Nordea Bank Finland
plc, New York Branch as Agent and as Trustee thereunder, shall have duly authorized, executed and
delivered a Master Vessel and Trust Agreement in the form of Exhibit P (as modified, supplemented
or amended from time to time, the “Master Vessel and Trust Agreement”).




          5.19 No Default; Representations and Warranties. On the Effective Date, the
conditions set forth in Section 6.02 shall be satisfied as if a Credit Event was taking place on
the Effective Date.




          SECTION 6. Conditions Precedent to All Credit Events. The obligation of each Lender
to make Loans and the obligation of any Issuing Lender to issue any Letter of Credit (each a
“Credit Event”), is subject to the satisfaction of the following conditions:




          6.01 Effective Date. The Effective Date shall have occurred on or before the date of
such Credit Event.




          6.02 No Default; Representations and Warranties. At the time of each such 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 or in any other Credit Document shall be
true and correct in all material respects both before and after giving effect to such Credit Event
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





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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).




          6.03 Notice of Borrowing. (a) Prior to the making of each Loan, the Administrative
Agent shall have received the Notice of Borrowing required by 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 2.02.




          6.04 Opinion of Counsel. Prior to the initial Credit Event, the Administrative Agent
shall have received from Gardere Wynne Sewell LLP, special counsel to the Borrower and its
Subsidiaries, an opinion addressed to the Administrative Agent and each of the Lenders and dated
the date of
such Credit Event covering the matters set forth in Exhibit C-1 which shall (x) be in form and
substance reasonably acceptable to the Administrative Agent and (y) cover the perfection of the
security interests granted pursuant to the Security Documents.



The acceptance of the proceeds of each Credit Event shall constitute a representation and warranty
by the Borrower to the Administrative Agent and each of the Lenders that all of the applicable
conditions specified in Section 5 and in this Section 6 and applicable to such Credit Event have
been satisfied as of that time. All of the applicable 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 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 (or participate in) the Letters of
Credit, the Borrower makes the following representations, warranties and agreements, in each case
on the Effective Date, all of which shall survive the execution and delivery of this Agreement and
the Notes and the making of the Loans and issuance of the Letter of Credit, with the occurrence of
each Credit Event on or after the Effective 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 Effective Date and on the date of each 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):




          7.01 Corporate/Limited Liability Company/Limited Partnership Status. The Borrower and
each of its Subsidiaries (i) is a duly organized and validly existing corporation, limited
liability company or limited partnership, as the case may be, in good standing under the laws of
the jurisdiction of its incorporation or formation, (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
currently engaged and (iii) is duly qualified and is authorized to do business and is in good
standing in each jurisdiction where the conduct of its business as currently conducted requires
such qualifications, except for failures to be so qualified which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.





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          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 the legal, valid and binding obligation of
such Credit Party enforceable against such Credit Party 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, will (i) contravene any material provision of any applicable law, statute, rule or
regulation or any applicable order, writ, injunction or decree of any court or governmental
instrumentality, (ii) 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 material properties or assets of the Borrower or any of its Subsidiaries pursuant
to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any
other material agreement, contract or instrument, to which the Borrower or any of its Subsidiaries
is a party or by which it or any of its material property or assets is bound or to which it may be
subject or (iii) violate any provision of the Certificate of Incorporation or By-Laws (or
equivalent organizational documents) of the Borrower or any of its Subsidiaries.




          7.04 Governmental Approvals. No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except as have been obtained or made or
in the case of any filings or recordings in respect of the Security Documents (other than the
Vessel Mortgages), will be made within 10 days of the date such Security Document is required to be
executed pursuant hereto), or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection with, (i) the
execution, delivery and performance by any Credit Party of any Credit Document to which it is a
party or (ii) the legality, validity, binding effect or enforceability of any Credit Document to
which it is a party.




          7.05 Financial Statements; Financial Condition; Undisclosed Liabilities. (a) The
audited consolidated balance sheets of the Borrower as at December 31, 2003 and December 31, 2004
and the unaudited consolidated balance sheets of the Borrower as at September 30, 2005 and the
related consolidated statements of operations and of cash flows for the fiscal years or portion of
the fiscal year, as the case may be, ended on such dates, reported on by and accompanied by, in the
case of the annual financial statements, an unqualified report from Ernst & Young LLP, present
fairly the consolidated financial condition of the Borrower as at such date, and the consolidated
results of its operations and its consolidated cash flows for the respective fiscal years or
quarters, as the case may be, then ended. All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by the aforementioned





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firm of accountants and
disclosed therein). Neither the Borrower nor any of its Subsidiaries has any material guarantee
obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual
forward or long-term commitments, including any interest rate or foreign
currency swap or exchange transaction or other obligation in respect of derivatives, that are
not reflected in the financial statements referred to in the preceding sentence (it being
understood that with respect to guarantee obligations, the underlying debt is so reflected).




          (b) Except as fully disclosed in the financial statements and the notes related thereto
delivered pursuant to Section 7.05(a), there were as of the Effective Date no liabilities or
obligations with respect to the Borrower 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, would be materially adverse to the Borrower and its Subsidiaries
taken as a whole. As of the Effective Date, none of the Credit Parties knows of any basis for the
assertion against it of any liability or obligation of any nature that is not fairly disclosed
(including, without limitation, as to the amount thereof) in the financial statements and the notes
related thereto delivered pursuant to Section 7.05(a) which, either individually or in the
aggregate, could be materially adverse to the Borrower and its Subsidiaries taken as a whole.




          (c) The projections delivered by the Borrower to the Administrative Agent and the Lenders
prior to the Effective Date have been prepared in good faith and are based on reasonable
assumptions, and there are no statements or conclusions in such projections which are based upon or
include information known to the Borrower on the Effective Date to be misleading in any material
respect or which fail to take into account material information known to the Borrower on the
Effective Date regarding the matters reported therein. On the Effective Date, the Borrower
believes that such projections are reasonable and attainable, 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 included in such Projections.




          (d) Since December 31, 2004, nothing has occurred that has had or could reasonably be expected
to have a Material Adverse Effect.




          7.06 Litigation. There are no actions, suits, investigations (conducted by any
governmental or other regulatory body of competent jurisdiction) or proceedings pending or, to the
knowledge of the Borrower, threatened that could reasonably be expected to have a Material Adverse
Effect.




          7.07 True and Complete Disclosure. All factual information (taken as a whole)
furnished by or on behalf of 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 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, it being understood and agreed that






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for
purposes of this Section
7.07, such factual information shall not include any projections or any pro
forma financial information.




          7.08 Use of Proceeds; Margin Regulations. (a) All proceeds of the Loans shall be used
only for the following (i) to effect the Refinancing and (ii) for working capital, Capital
Expenditures and general corporate purposes of the Borrower and its Subsidiaries.




          (b) No part of the proceeds of any Loan 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. To the best knowledge of senior management of the
Borrower (to the extent related to Returns, statements, forms and reports required to be filed
prior to the Effective Date), (a) the Borrower and each of its Subsidiaries has timely filed all
U.S. federal income tax returns, statements, forms and reports for taxes and all other material
U.S. and non-U.S. tax returns, statements, forms and reports for taxes required to be filed by or
with respect to the income, properties or operations of the Borrower and/or any of its Subsidiaries
(the “Returns”), (b) the Returns accurately reflect in all material respects all liability
for taxes of the Borrower and its Subsidiaries as a whole for the periods covered thereby and (c)
the Borrower and each of its Subsidiaries have paid all taxes payable by them other than those
contested in good faith and adequately disclosed and for which adequate reserves have been
established in accordance with GAAP. Except as set forth on Schedule XIV, there is no material
action, suit, proceeding, investigation, audit, or claim now pending or, to the knowledge of the
Borrower or any of its Subsidiaries, threatened by any authority regarding any taxes relating to
the Borrower or any of its Subsidiaries. Except as set forth on Schedule XIV, as of the Effective
Date, neither the Borrower nor any of its Subsidiaries has 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 Borrower or any of its Subsidiaries, or is aware of
any circumstances that would cause the taxable years or other taxable periods of the Borrower or
any of its Subsidiaries not to be subject to the normally applicable statute of limitations.




          7.10 Compliance with ERISA. (a) Schedule VII sets forth each Plan as of the Effective
Date. Except for matters which could not reasonably be expected to have a Material Adverse Effect:
each Plan (and each related trust, insurance contract or fund) is in substantial compliance with
its terms and with all applicable laws, including without limitation ERISA and the Code; each Plan
(and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code
has received a favorable determination letter from the IRS to the effect that it meets the
requirements of Sections 401(a) and 501(a) of the Code covering all tax law changes prior to the
Economic Growth and Tax Relief Reconciliation Act of 2001 or is comprised of a master or prototype
plan
that has received a favorable opinion letter from the IRS; no Reportable Event has occurred;
no Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) is insolvent or
in reorganization; no Plan has an Unfunded Current Liability; no Plan which is subject to Section
412 of the Code or Section 302 of ERISA has an accumulated funding deficiency, within the meaning
of such sections of the Code or ERISA, or has applied for or received a waiver of an accumulated
funding deficiency or an extension of any




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amortization period, within the meaning of Section 412 of
the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a
Plan have been timely made or have been reflected on the most recent consolidated balance sheet
filed prior to the date hereof or accrued in the accounting records of the Borrower and its
Subsidiaries; neither the Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has
incurred any liability (including any indirect, contingent or secondary liability) to or on account
of any Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or
4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such
liability under any of the foregoing sections with respect to any Plan; no condition exists which
presents a risk to the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of
incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and
the Code; no proceedings have been instituted to terminate or appoint a trustee to administer any
Plan which is subject to Title IV of ERISA; 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; there has been no
violation of the applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit
rule of under Section 401(a) of the Code by any fiduciary or disqualified person with respect to
any Plan for which the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate may be
directly or indirectly liable; neither the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate has filed, or is considering filing, an application under the IRS Employee Plans
Compliance Resolution System or the Department of Labor’s Voluntary Fiduciary Correction Program
with respect to any Plan; using actuarial assumptions and computation methods consistent with Part
1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Borrower and its
Subsidiaries and its ERISA Affiliates to all Plans which are multiemployer plans (as defined in
Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the close of
the most recent fiscal year of each such Plan ended prior to the date of the most recent Credit
Event, would not exceed $0; 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
Borrower, any Subsidiary of the Borrower, 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; each group health plan (as defined in 45 Code of Federal Regulations Section 160.103) which
covers or has covered employees or former employees of the Borrower, any Subsidiary of the
Borrower, or any ERISA Affiliate has at all times been operated in compliance with the provisions
of the Health Insurance Portability and Accountability Act of 1996 and the regulations promulgated
thereunder; no lien imposed under the Code or ERISA on the assets of the Borrower or any Subsidiary
of the Borrower or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the
Borrower and its Subsidiaries may cease contributions to or terminate any employee benefit plan
maintained by any of them without incurring any material liability.




          (b) Except for matters which would not reasonably be expected to have a Material Adverse
Effect: each Non-U.S. 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 Non-U.S. Plan have been timely
made; neither the Borrower nor any of its Subsidiaries has incurred any obligation in connection
with the termination of, or withdrawal from, any Non-U.S. Plan; and the present





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value of the accrued benefit liabilities (whether or not vested) under each Non-U.S. Plan, determined as of the
end of the Borrower’s most recently ended fiscal year on the basis of actuarial assumptions, each
of which is reasonable, did not exceed the current value of the assets of such Non-U.S. Plan
allocable to such benefit liabilities.




          7.11 The Security Documents. After the execution and delivery thereof and upon the
taking of the actions mentioned in the second immediately succeeding sentence, each of the Security
Documents creates in favor of the Collateral Agent for the benefit of the Lenders a legal, valid
and enforceable fully perfected first priority security interest in and Lien on all right, title
and interest of the Credit Parties party thereto in the Collateral described therein, subject to no
other Liens except for 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
(i) shall have been made, (ii) in the case of the Security Documents delivered on the Effective
Date, shall be made on or prior to the tenth day after the Effective Date or (iii) in the case of
Security Documents delivered pursuant to Section 8.11 or 8.16, shall be made on or prior to the
tenth day after the execution and delivery of such Security Documents.




          7.12 Capitalization. (a) On the Effective Date, the authorized capital stock of the
Borrower consists of (i) 500,000,000 shares of Common Stock, $0.01 par value per share, no less
than 60,000,000 of which are issued and outstanding and (ii) no shares of preferred stock, $0.01
par value per share, have been issued and outstanding. All such outstanding shares have been duly
and validly issued, are fully paid and non-assessable and have been issued free of preemptive
rights. As of the Effective Date, the Borrower has no 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, commitments or claims of any character relating to, its capital stock,
except (i) as set forth on Schedule IX and (ii) for options, warrants and rights to purchase shares
of the Borrower’s common stock which may be issued from time to time.




          7.13 Subsidiaries. On the Effective Date, the Borrower has no Subsidiaries other than
those Subsidiaries listed on Schedule VIII (which Schedule identifies the correct legal name,
direct owner, percentage ownership and jurisdiction of organization of each such Subsidiary on the
date hereof).




          7.14 Compliance with Statutes, etc.
The Borrower and each of its Subsidiaries is in compliance in all material respects 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, except such noncompliances as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.




          7.15 Investment Company Act. Neither the Borrower, nor any of its Subsidiaries, is 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 Public Utility Holding Company Act. Neither the Borrower, nor any of its
Subsidiaries, is a “holding company,” or a “subsidiary company” of a “holding company,” or an




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“affiliate” of a “holding company” or of a “subsidiary company” of a “holding company” within the
meaning of the Public Utility Holding Company Act of 1935, as amended.




          7.17 Pollution and Other Regulations. (a) Each of the Borrower and its Subsidiaries
is in compliance with all applicable Environmental Laws governing its business, except for such
failures to comply as are not reasonably likely to have a Material Adverse Effect, and neither the
Borrower nor any of its Subsidiaries is liable for any material penalties, fines or forfeitures for
failure to comply with any of the foregoing. All licenses, permits, registrations or approvals
required for the business of the Borrower and each of its Subsidiaries, as conducted as of the
Effective Date, under any Environmental Law have been secured and the Borrower and each of its
Subsidiaries is in substantial compliance therewith, except for such failures to secure or comply
as are not reasonably likely to have a Material Adverse Effect. Neither the Borrower nor any of
its Subsidiaries is in any respect in noncompliance with, breach of or default under any applicable
writ, order, judgment, injunction, or decree to which the Borrower or such Subsidiary is a party or
which would affect the ability of the Borrower or such Subsidiary to operate any Vessel, Real
Property or other facility and no event has occurred and is continuing which, with the passage of
time or the giving of notice or both, would constitute noncompliance, breach of or default
thereunder, except in each such case, such noncompliance, breaches or defaults as are not likely
to, individually or in the aggregate, have a Material Adverse Effect. There are, as of the
Effective Date, no Environmental Claims pending or, to the knowledge of the Borrower, threatened,
against the Borrower or any of its Subsidiaries in respect of which an unfavorable decision, ruling
or finding would be reasonably likely to have a Material Adverse Effect. There are no facts,
circumstances, conditions or occurrences on any Vessel, Real Property or other facility owned or
operated by the Borrower or any of its Subsidiaries that is reasonably likely (i) to form the basis
of an Environmental Claim against the Borrower, any of its Subsidiaries or any Vessel, Real
Property or other facility owned by the Borrower or any of its Subsidiaries, or (ii) to cause such
Vessel, Real Property or other facility to be subject to any restrictions on its ownership,
occupancy, use or transferability under any Environmental Law, except in each such case, such
Environmental Claims or restrictions that individually or in the aggregate are not reasonably
likely to have a Material Adverse Effect.




          (b) Neither the Borrower, nor any of its Subsidiaries, has at any time prior to the date of
this Agreement or any subsequent Credit Event, (i) generated, used, treated or stored Hazardous
Materials on, or transported Hazardous Materials to or from, any Vessel, Real Property or other
facility at any time owned or operated by the Borrower or any of its Subsidiaries or (ii) released
Hazardous Materials on or from any such Vessel, Real Property or other facility, in each case where
such occurrence or event, either individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect.




          7.18 Labor Relations. Neither the Borrower nor any of its Subsidiaries is engaged in
any unfair labor practice that could reasonably be expected to have a Material Adverse Effect and
there is (i) no unfair labor practice complaint pending against the Borrower or any of its
Subsidiaries or, to the Borrower’s knowledge, threatened against any of them before the National
Labor Relations Board, and no material grievance or arbitration proceeding arising out of or under
any collective bargaining agreement is so pending against the Borrower or any of its Subsidiaries
or,





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to the Borrower’s knowledge, threatened against any of them, (ii) no strike, labor dispute,
slowdown or stoppage pending against the Borrower or any of its Subsidiaries or, to the Borrower’s
knowledge, threatened against the Borrower or any of its Subsidiaries and (iii) no union
representation proceeding pending with respect to the employees of the Borrower 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. The Borrower and each of its
Subsidiaries owns, or has the right to use, all material patents, trademarks, permits, service
marks, trade names, copyrights, licenses, franchises and formulas, and has obtained assignments of
all leases and other rights of whatever nature, necessary for the present conduct of its business,
without any known conflict with the rights of others, except for such failures and conflicts which
could not, either individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.




          7.20 Indebtedness. Schedule V sets forth a true and complete list of all Indebtedness
of the Borrower and its Subsidiaries as of the Effective Date and which is to remain outstanding
after giving effect to the Refinancing (the “Existing Indebtedness”), in each case showing
the aggregate principal amount thereof and the name of the borrower and any other entity which
directly or indirectly guarantees such debt.




          7.21 Insurance. Schedule VI sets forth a true and complete listing of all insurance
maintained by each Credit Party as of the Effective Date, with the amounts insured (and any
deductibles) set forth therein with respect to the Mortgaged Vessels.




          7.22 Concerning the Vessels. The name, registered owner, official number, and
jurisdiction of registration of each Mortgaged Vessel as of the Effective Date is set forth on
Schedule III. Each Mortgaged Vessel is and will be operated in material compliance with all
applicable law, rules and regulations.




          7.23 Citizenship. The Borrower and each other Credit Party which owns or operates, or
will own or operate, one or more Mortgaged Vessels will, at all times while owning or operating
such Mortgaged Vessels, be qualified to own and operate such Mortgaged Vessels under the laws of
the jurisdiction of such Mortgaged Vessel’s registry.




          7.24 Vessel Classification. As of the Effective Date, and thereafter, each Mortgaged
Vessel shall comply with the provisions of the applicable Vessel Mortgage regarding classification.




          7.25 No Immunity. The Borrower does not, nor does any other Credit Party or any of
their respective properties, have any right of immunity on the grounds of sovereignty or otherwise
from the jurisdiction of any court or from setoff or any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under
the laws of any jurisdiction. The execution and delivery of the Credit Documents by the Credit
Parties and the performance by them of their respective obligations thereunder constitute
commercial transactions.




          7.26 Fees and Enforcement. No fees or taxes, including, without limitation, stamp,
transaction, registration or similar taxes, are required to be paid to ensure the legality,






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validity, or enforceability of this Agreement or any of the other Credit Documents other than
recording taxes which have been, or will be, paid as and to the extent due. Under the laws of the
relevant Acceptable Flag Jurisdiction, the choice of the laws of the State of New York as set forth
in the Credit Documents which are stated to be governed by the laws of the State of New York is a
valid choice of law, and the irrevocable submission by each Credit Party to jurisdiction and
consent to service of process and, where necessary, appointment by such Credit Party of an agent
for service of process, in each case as set forth in such Credit Documents, is legal, valid,
binding and effective.




          7.27 Form of Documentation. Each of the Credit Documents is in proper legal form
under the laws of the relevant Acceptable Flag Jurisdiction for the enforcement thereof under such
laws, subject only to such matters which may affect enforceability arising under the law of the
State of New York. To ensure the legality, validity, enforceability or admissibility in evidence
of each such Credit Document in the relevant Acceptable Flag Jurisdictions it is not necessary that
any Credit
Document or any other document be filed or recorded with any court or other authority in such
relevant Acceptable Flag Jurisdiction, except as have been made, or will be made, in accordance
with Section 5 and/or Section 8.16. Each Vessel Mortgage, executed and delivered creates in favor
of the Mortgagee (as defined in each Vessel Mortgage) for the benefit of the Lenders a legal,
valid, and enforceable first preferred mortgage lien over the Mortgaged Vessel or Mortgaged Vessels
covered thereby and when duly recorded in accordance with the laws of the Mortgaged Vessel’s flag,
will constitute a “preferred mortgage” within the meaning of Section 31301(6) of Title 46 of the
United States Code, entitled to the benefits accorded a preferred mortgage on a foreign vessel, in
the case of Mortgaged Vessels not registered under the laws and flag of the United States, and in
the case of Mortgaged Vessels registered under the laws and flag of the United States, constitutes
a “preferred mortgage” within the meaning of Section 31301(6) of Title 46 of the United States
Code, entitled to the benefits accorded a preferred mortgage on a registered vessel under the laws
and flag of the United States.




          7.28 Leased Real Property. Set forth on Schedule XII hereto is a complete and
accurate list, as of the Effective Date, of each lease of real property located in the United
States under which any Credit Party or any of its Subsidiaries is the lessee and where the
leasehold interest has an individual market value in excess of $10,000,000 showing as of the
Effective Date the street address, county or other relevant jurisdiction, state, lessor, lessee,
and current annual rental cost thereof.




          7.29 No Default. Neither the Borrower nor any of its Subsidiaries is in default under
or with respect to any of its Contractual Obligations in any respect which has had or is reasonably
likely to have a Material Adverse Effect.




          7.30 No Burdensome Restrictions. On the Effective Date, no Requirement of Law or
Contractual Obligation of the Borrower or any of its Subsidiaries adversely affects the business,
operations or financial condition of the Borrower and its Subsidiaries taken as a whole to an
extent that has had or is reasonably likely to have a Material Adverse Effect.




          SECTION 8. Affirmative Covenants. The Borrower hereby covenants and agrees that on
and after the Effective Date and until the Total Commitments and all Letters of





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Credit have
terminated (or have been cash-collateralized pursuant to Section 2.01(c)) and the Loans, Notes and
Unpaid Drawings, together with interest, Commitment Commission and all other obligations incurred
hereunder and thereunder, are paid in full:




          8.01 Information Covenants. The Borrower will furnish to the Administrative Agent,
with sufficient copies for each of the Lenders:




          (a) Quarterly Financial Statements. Within 45 days after the close of the first three
quarterly accounting periods in each fiscal year of the Borrower, (i) the consolidated balance
sheets of the Borrower and its Subsidiaries as at the end of such quarterly accounting period and
the related consolidated statements of income and cash flows, in each case for such quarterly
accounting period and for the elapsed portion of the fiscal year ended with the last day of such
quarterly accounting period, and in each case, setting forth comparative figures for the related
periods in the prior fiscal year, all of which shall be certified on behalf of the Borrower by the
senior financial officer of the Borrower, subject to normal year-end audit adjustments and (ii)
management’s discussion and analysis of the important operational and financial developments during
the fiscal quarter and year-to-date periods; provided that to the extent the quarterly
financial statements are filed with the SEC in compliance with Section 13 or 15(d) of the
Securities Exchange Act of 1934, such filing will be deemed to satisfy the requirements under this
clause (ii).




          (b) Annual Financial Statements. Within 90 days after the close of each fiscal year
of the Borrower, (i) the consolidated balance sheets of the Borrower and its Subsidiaries as at the
end of such fiscal year and the related consolidated statements of income and retained earnings and
of cash flows for such fiscal year setting forth comparative figures for the preceding fiscal year
and certified by Ernst & Young LLP or another independent certified public accountants of
recognized national standing reasonably acceptable to the Administrative Agent and (ii)
management’s discussion and analysis of the important operational and financial developments during
such fiscal year; provided that to the extent the annual financial statements are filed
with the SEC in compliance with Section 13 or 15(d) of the Securities Exchange Act of 1934, such
filing will be deemed to satisfy the requirements under this clause (ii).




          (c) Appraisal Reports; Rig Status Report. (i) Together with delivery of the financial
statements described in Section 8.01(b) for each fiscal year, and at any other time within 30 days
of the written request of the Administrative Agent, appraisal reports of recent date in form and
substance and from R.S. Platou (USA) Inc. or other independent appraisers reasonably satisfactory
to the Administrative Agent, stating the then current fair market value of each of the Mortgaged
Vessels on an individual charter-free basis. All such appraisals shall be conducted by, and made
at the expense of, the Borrower (it being understood that the Administrative Agent may and, at the
request of the Required Lenders, shall, upon notice to the Borrower, obtain such appraisals and
that the cost of all such appraisals will be for the account of the Borrower); provided
that, unless an Event of Default shall then be continuing, in no event shall the Borrower be
required to pay for more than one appraisal report obtained pursuant to this Section 8.01(c) in any
single fiscal year of the Borrower, with the cost of any such reports in excess thereof to be paid
by the Lenders on a pro rata basis.





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          (ii) Together with delivery of the financial statements described in Section 8.01(b) for each
fiscal year, and at any other time within 30 days of the written request of the Administrative
Agent, monthly rig status reports of recent date in form and substance reasonably satisfactory to
the Administrative Agent. It being understood that the monthly rig status reports shall be deemed
to have been furnished to the Lenders upon being posted to the Borrower’s website at
www.theoffshoredrillingcompany.com or at another website identified in a notice delivered
to the Lenders and accessible by the Lenders without charge; provided that upon the
request of the Administrative Agent, the Borrower shall promptly deliver a paper copy of any
such report to the Administrative Agent.




          (d) Projections, etc. As soon as available but not more than 45 days after the
commencement of each fiscal year of the Borrower beginning with its fiscal year commencing on
January 1, 2006, a budget of the Borrower and its Subsidiaries in reasonable detail (x) for each of
the twelve months and four fiscal quarters of such fiscal year and (y) for the three immediately
succeeding fiscal years.




          (e) Officer’s Compliance Certificates. (i) At the time of the delivery of the
financial statements provided for in Sections 8.01(a) and (b), a certificate executed on behalf of
the Borrower by the senior financial officer of the Borrower in the form of Exhibit M to the effect
that, to the best of such officer’s knowledge, no Default or Event of Default has occurred and is
continuing or, if any Default or Event of Default has occurred and is continuing, specifying the
nature and extent thereof (in reasonable detail), which certificate shall, (x) set forth the
calculations required to establish whether the Borrower was in compliance with the provisions of
Sections 9.07 through 9.11, inclusive, at the end of such fiscal quarter or year, as the case may
be and (y) certify that there have been no changes to any of Schedule VIII and Annexes A through F
of the Pledge Agreement since the Effective Date or, if later, since the date of the most recent
certificate delivered pursuant to this Section 8.01(e)(i), or if there have been any such changes,
a list in reasonable detail of such changes (but, in each case with respect to this clause (y),
only to the extent that such changes are required to be reported to the Collateral Agent pursuant
to the terms of such Security Documents) and to the best of such officer’s knowledge whether the
Borrower and the other Credit Parties have otherwise taken all actions required to be taken by them
pursuant to such Security Documents in connection with any such changes.




          (ii) At the time of a Collateral Disposition or Vessel Exchange in respect of any Mortgaged
Vessel, a certificate of a senior financial officer of the Borrower which certificate shall (x)
certify on behalf of the Borrower the last appraisal received pursuant to Section 8.01(c)
determining the Aggregate Mortgaged Vessel Value after giving effect to such disposition or
exchange, as the case may be, and (y) set forth the calculations required to establish whether the
Borrower is in compliance with the provisions of Section 9.11 after giving effect to such
disposition or exchange, as the case may be.




          (f) Notice of Default, Litigation or Event of Loss. Promptly, and in any event within
three Business Days after a senior officers of the Borrower obtains knowledge thereof, notice of
(i) the occurrence of any event which constitutes a Default or Event of Default which notice shall
specify the nature thereof, the period of existence thereof and what action the Borrower proposes
to take with respect thereto, (ii) any litigation or governmental investigation or proceeding
pending or threatened against the Borrower or any of its Subsidiaries which, if





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adversely
determined, could reasonably be expected to have a Material Adverse Effect and (iii) any Event of
Loss in respect of any Mortgaged Vessel.




          (g) Other Reports and Filings. Promptly, and in any event within ten Business Days of
filing, copies of all financial information, proxy materials and other information and reports, if
any, which the Borrower or any of its Subsidiaries shall file with the SEC (or any successor
thereto) or deliver to holders of its public Indebtedness pursuant to the terms of the
documentation governing such Indebtedness (or any trustee, agent or other representative
therefor). It is understood and agreed that any documents required to be delivered pursuant to
this Section 8.01(g) (to the extent any such documents are included in materials otherwise filed
with the SEC) shall be deemed to have been furnished to the Lenders upon being posted to the
Borrower’s website at www.theoffshoredrillingcompany.com or to the SEC’s website at
www.sec.gov utilizing the Electronic Data Gathering, Analysis and Retrieval system or at
another website identified in a notice delivered to the Lenders and accessible by the Lender
without charge; provided that upon the request of the Administrative Agent, the Borrower
shall promptly deliver paper copies of any such documents to the Administrative Agent.




          (h) Environmental Matters. Promptly upon, and in any event within five Business Days
after, a senior officer of the Borrower obtains knowledge thereof, written notice of any of the
following environmental matters occurring after the Effective Date, except to the extent that such
environmental matters could not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect:





     (i) any Environmental Claim pending or threatened in writing against the Borrower or
any of its Subsidiaries or any Vessel or property owned or operated or occupied by the
Borrower or any of its Subsidiaries;




     (ii) any condition or occurrence on or arising from any Vessel or property owned or
operated or occupied by the Borrower or any of its Subsidiaries that (a) results in
noncompliance by the Borrower or such Subsidiary with any applicable Environmental Law or
(b) could reasonably be expected to form the basis of an Environmental Claim against the
Borrower or any of its Subsidiaries or any such Vessel or property;




     (iii) any condition or occurrence on any Vessel or property owned or operated or
occupied by the Borrower or any of its Subsidiaries that could reasonably be expected to
cause such Vessel or property to be subject to any restrictions on the ownership, occupancy,
use or transferability by the Borrower or such Subsidiary of such Vessel or property under
any Environmental Law; and




     (iv) the taking of any removal or remedial action in response to the actual or alleged
presence of any Hazardous Material on any Vessel or property owned or operated or occupied
by the Borrower or any of its Subsidiaries as required by any Environmental Law or any
governmental or other administrative agency; provided that in any event the Borrower
shall deliver to the Administrative Agent all material notices received by the Borrower or
any of its Subsidiaries from any government or governmental agency under, or pursuant to,
CERCLA or OPA.



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All such notices shall describe in reasonable detail the nature of the claim, investigation,
condition, occurrence or removal or remedial action and the Borrower’s or such Subsidiary’s
response thereto. In addition, the Borrower will provide the Administrative Agent with copies of
all material communications with any government or governmental agency and all material
communications with any Person relating to any Environmental Claim of which notice is required to
be given pursuant to this Section 8.01(h), and such detailed reports of any such
Environmental Claim as may reasonably be requested by the Administrative Agent or the Required
Lenders.




          (i) Other Information. From time to time, such other information or documents
(financial or otherwise) with respect to the Borrower or its Subsidiaries as the Administrative
Agent or the Required Lenders may reasonably request in writing.




          8.02 Books, Records and Inspections. The Borrower will, and will cause each of its
Subsidiaries to, keep proper books of record and account in which full, true and correct entries,
in conformity in all material respects with GAAP and all requirements of law, shall be made of all
dealings and transactions in relation to its business. The Borrower will, and will cause each of
its Subsidiaries to, permit officers and designated representatives of the Administrative Agent and
the Lenders as a group to visit and inspect, during regular business hours and under guidance of
officers of the Borrower or any of its Subsidiaries, any of the properties of the Borrower or its
Subsidiaries, and to examine the books of account of the Borrower or such Subsidiaries and discuss
the affairs, finances and accounts of the Borrower or such Subsidiaries with, and be advised as to
the same by, its and their officers and independent accountants, all upon reasonable advance notice
and at such reasonable times and intervals and to such reasonable extent as the Administrative
Agent or the Required Lenders may request.




          8.03 Maintenance of Property; Insurance. The Borrower will, and will cause each of
its Subsidiaries to, (i) keep all material property necessary in its business in substantially good
working order and condition (ordinary wear and tear and loss or damage by casualty or condemnation
excepted), (ii) maintain insurance on the Mortgaged Vessels in at least such amounts and against at
least such risks as are in accordance with normal industry practice for similarly situated
insureds, (iii) furnish to the Administrative Agent, at the written request of the Administrative
Agent or any Lender, a complete description of the material terms of insurance carried and (iv) at
all times cause insurance of the types described in Schedule VI to (x) be maintained (with the same
scope of coverage as that described in Schedule VI) at levels which are at least, in the aggregate,
three times the Total Commitment and (y) comply with the insurance requirements of the Vessel
Mortgages.




          8.04 Corporate Franchises. The Borrower will, and will cause each of its
Subsidiaries, to do or cause to be done, all things necessary to preserve and keep in full force
and effect its existence and its material rights, franchises, licenses and patents (if any) used in
its business; provided, however, that nothing in this Section 8.04 shall prevent
(i) sales or other dispositions of assets, consolidations or mergers by or involving the Borrower
or any of its Subsidiaries which are permitted in accordance with Section 9.02, (ii) any Subsidiary
Guarantor from changing the jurisdiction of its organization to the extent permitted by Section
9.12 or (iii) the abandonment by the Borrower or any of its Subsidiaries of any rights, franchises,
licenses and patents that could not be reasonably expected to have a Material Adverse Effect.




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          8.05 Compliance with Statutes, etc. The Borrower will, and will cause each of its
Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable
restrictions (including all laws and regulations relating to money laundering) imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property, except such non-compliances as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.




          8.06 Compliance with Environmental Laws. (a) The Borrower will, and will cause each
of its Subsidiaries to, comply in all material respects with all Environmental Laws applicable to
the ownership or use of any Vessel or property now or hereafter owned or operated by the Borrower
or any of its Subsidiaries, will within a reasonable time period pay or cause to be paid all costs
and expenses incurred in connection with such compliance (except to the extent being contested in
good faith), and will keep or cause to be kept all such Vessel or property free and clear of any
Liens imposed pursuant to such Environmental Laws. Neither the Borrower nor any of its
Subsidiaries will generate, use, treat, store, release or dispose of, or permit the generation,
use, treatment, storage, release or disposal of, Hazardous Materials on any Vessel or property now
or hereafter owned or operated or occupied by the Borrower or any of its Subsidiaries, or transport
or permit the transportation of Hazardous Materials to or from any ports or property except in
material compliance with all applicable Environmental Laws and as reasonably required by the trade
in connection with the operation, use and maintenance of any such property or otherwise in
connection with their businesses except for matters as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.




          (b) If (i) there has occurred and is continuing an Event of Default, (ii) the Administrative
Agent or the Required Lenders reasonably and in good faith believe that the Borrower, any of its
Subsidiaries or any such Vessel is not in compliance with Environmental Law and such non-compliance
could reasonably be expected to have a Material Adverse Effect, or (iii) circumstances exist that
reasonably could be expected to form the basis of a material Environmental Claim against the
Borrower or any of its Subsidiaries or any such Vessel, then at the written request of the
Administrative Agent or the Required Lenders at any time and from time to time, the Borrower will
provide, at the Borrower’s sole cost and expense, an environmental assessment of any Vessel by such
Vessel’s classification society (to the extent such classification society is listed on Schedule X
hereto) or another internationally recognized classification society acceptable to the
Administrative Agent. If said classification society, in its assessment, indicates that such
Vessel is not in compliance with the Environmental Laws, said society shall set forth potential
costs of the remediation of such non-compliance. If the Borrower fails to provide the same within
90 days after such request was made, the Administrative Agent may order the same and the Borrower
shall grant and hereby grants to the Administrative Agent and the Lenders and their agents access
to such Vessel, subject to the rights of any third party charter party of such Vessel, to undertake
such an assessment, all at the Borrower’s expense.




          8.07 ERISA. (a) As soon as possible and, in any event, within ten (10) days after the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate knows or has reason to know of the occurrence of
any of the following, the Borrower will deliver to the Administrative Agent a certificate of the
chief financial officer of the Borrower setting forth the full details as to such occurrence and
the action, if any, that the Borrower, such Subsidiary or such ERISA Affiliate is required or




-40-









 







proposes to take, together with any notices required or proposed to be given or filed by such
Borrower, such Subsidiary, the Plan administrator or such ERISA Affiliate to or with the PBGC or
any other government agency, or a Plan participant and any notices received by such Borrower, such
Subsidiary or ERISA Affiliate from the PBGC or any other government agency, or a Plan participant
with respect thereto: that a Reportable Event has occurred (except to the extent that the Borrower
has previously delivered to the Administrative Agent a certificate and notices (if any) concerning
such event pursuant to the next clause hereof); that a contributing sponsor (as defined in Section
4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and
an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section
4043 is reasonably expected to occur with respect to such Plan within the following 30 days; that
an accumulated funding deficiency, within the meaning of Section 412 of the Code or Section 302 of
ERISA, has been incurred or an application may be or has been made for a waiver or modification of
the minimum funding standard (including any required installment payments) or an extension of any
amortization period under Section 412 of the Code or Section 303 or 304 of ERISA with respect to a
Plan; that any contribution required to be made with respect to a Plan or Non-U.S. Plan has not
been timely made; that a Plan has been or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability; that proceedings
may be or have been instituted to terminate or appoint a trustee to administer a Plan which is
subject to Title IV of ERISA; that a proceeding has been instituted pursuant to Section 515 of
ERISA to collect a delinquent contribution to a Plan; that the Borrower, any Subsidiary of the
Borrower or any ERISA Affiliate may be directly or indirectly liable for a violation of the
applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit rule of under
Section 401(a) of the Code by any fiduciary or disqualified person with respect to any Plan; that
the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate will or may incur any liability
(including any indirect, contingent, or secondary liability) to or on account of the termination of
or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with
respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409, 502(i)
or 502(l) of ERISA or with respect to a group health plan (as defined in Section 607(1) of ERISA,
Section 4980B(g)(2) of the Code or 45 Code of Federal Regulations Section 160.103) under Section
4980B of the Code and/or the Health Insurance Portability and Accountability Act of 1996; or that
the Borrower or any Subsidiary of the Borrower may incur any material liability pursuant to any
employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to
retired employees or other former employees (other than as required by Section 601 of ERISA) or any
Plan or any Non-U.S. Plan. The Borrower will deliver to the Administrative Agent copies of any
records, documents or other information that must be furnished to the PBGC with respect to any Plan
pursuant to Section 4010 of ERISA. The Borrower will deliver to the Administrative Agent a copy of
each funding waiver request filed with the IRS or any other government agency with respect to any
Plan and all communications received by the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate from the IRS or any other government agency with respect to each Plan of the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate. The Borrower will also deliver to
the Administrative Agent a complete copy of the annual report (on IRS Form 5500-series) of each
Plan (including, to the extent required, the related financial and actuarial statements and
opinions and other supporting statements, certifications, schedules and information) required to be
filed with the IRS. In addition to any certificates or notices delivered





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to the Administrative
Agent pursuant to the first sentence hereof, copies of annual reports and any records, documents or
other information required to be furnished to the PBGC or any other government agency, and any
material notices received by the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
with respect to any Plan or Non-U.S. Plan shall be delivered to the Administrative Agent no later
than ten (10) days after the date such annual report has been filed with the IRS or such records,
documents and/or information has been furnished to the PBGC or any other government agency or such
notice has been received by the Borrower, the Subsidiary or the ERISA Affiliate, as applicable.




          (b) If, at any time after the Effective Date, the Borrower, any Subsidiary of the Borrower or
any ERISA Affiliate maintains, or contributes to (or incurs an obligation to contribute to), a
pension plan as defined in Section 3(2) of ERISA which is not set forth in Schedule VII as may be
updated from time to time, then the Borrower shall deliver to the Administrative Agent an updated
Schedule VII as soon as possible and, in any event, within ten (10) days after the Borrower, such
Subsidiary or such ERISA Affiliate maintains, or contributes to (or incurs an obligation to
contribute to), such pension plan. Such updated Schedule VII shall supersede and replaced the
existing Schedule VII.




          (c) The Borrower and each of its applicable Subsidiaries shall ensure that all Non-U.S. Plans
administered by it or into which it makes payments obtains or retains (as applicable) registered
status under and as required by applicable law and is administered in a timely manner in all
respects in compliance with all applicable laws except where the failure to do any of the foregoing
would not be reasonably likely to result in a Material Adverse Effect.




          8.08 End of Fiscal Years; Fiscal Quarters. The Borrower shall cause (i) each of its,
and each of its Subsidiaries’, fiscal years to end on December 31 of each year and (ii) each of its
and its Subsidiaries’ fiscal quarters to end on March 31, June 30, September 30 and December 31 of
each year.




          8.09 Performance of Obligations. The Borrower will, and will cause each of its
Subsidiaries to, perform all of its obligations under the terms of each Contractual Obligation by
which it is bound, except such non-performances as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.




          8.10 Payment of Taxes. The Borrower will pay and discharge, and will cause each of
its Subsidiaries to pay and discharge, all material taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior
to the date on
which penalties attach thereto, and all lawful claims for sums that have become due and
payable which, if unpaid, might become a Lien not otherwise permitted under Section 9.01(i),
provided that neither the Borrower nor any of its Subsidiaries shall be required to pay any
such tax, assessment, charge, levy or claim which is being contested in good faith and by proper
proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP.




          8.11 Further Assurances. (a) The Borrower, and each other Credit Party, agrees that
at any time and from time to time, at the expense of the Borrower or such other Credit Party, it
will promptly execute and deliver all further instruments and documents, and take all further




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action that may be reasonably necessary, or that the Administrative Agent may reasonably require,
to perfect and protect any Lien granted or purported to be granted hereby or by the other Credit
Documents, or to enable the Collateral Agent to exercise and enforce its rights and remedies with
respect to any Collateral. Without limiting the generality of the foregoing, the Borrower will
execute and file, or cause to be filed, such financing or continuation statements under the UCC (or
any non-U.S. equivalent thereto), or amendments thereto, such amendments or supplements to the
Vessel Mortgages (including any amendments required to maintain Liens granted by such Vessel
Mortgages pursuant to the effectiveness of this Agreement), and such other instruments or notices,
as may be reasonably necessary, or that the Administrative Agent may reasonably require, to protect
and preserve the Liens granted or purported to be granted hereby and by the other Credit Documents.




          (b) The Borrower hereby authorizes the Collateral Agent to file one or more financing or
continuation statements under the UCC (or any non-U.S. equivalent thereto), and amendments thereto,
relative to all or any part of the Collateral without the signature of the Borrower, where
permitted by law. The Collateral Agent will promptly send the Borrower a copy of any financing or
continuation statements which it may file without the signature of the Borrower and the filing or
recordation information with respect thereto.




          (c) If at any time any Subsidiary of the Borrower or any Subsidiary Guarantor is created,
established or acquired, and such Subsidiary would be considered a Subsidiary Guarantor pursuant to
the definition thereof, such Subsidiary shall be required to execute and deliver counterparts of
the Subsidiaries Guaranty and such Security Documents as would have been entered into by the
respective Subsidiary if same had been a Subsidiary Guarantor on the Effective Date and, in each
case shall take all action in connection therewith as would otherwise have been required to be
taken pursuant to Section 5 if such Subsidiary had been a Subsidiary Guarantor on the Effective
Date.




          8.12 Deposit of Earnings. If directed by the Administrative Agent upon the occurrence
and during the continuance of an Event of Default, each Credit Party shall cause the earnings
derived from each of the respective Mortgaged Vessels, to the extent constituting Earnings and
Insurance Collateral, to be deposited by the respective account debtor in respect of such earnings
into one or more of the Concentration Accounts maintained for such Credit Party or the Borrower
from time to time. Without limiting any Credit Party’s obligations in respect of this Section
8.12, each
Credit Party agrees that, in the event it receives any earnings constituting Earnings and
Insurance Collateral, or any such earnings are deposited other than in one of the Concentration
Accounts after such direction, in each case after its receipt of such direction from the Collateral
Agent, it shall promptly deposit all such proceeds into one of the Concentration Accounts
maintained for such Credit Party or the Borrower from time to time.




          8.13 Ownership of Subsidiaries. (a) Other than “director qualifying shares”, the
Borrower shall at all times directly or indirectly own 100% of the capital stock or other equity
interests of each of the Subsidiary Guarantors.




          (b) Other than “director qualifying shares”, the Borrower shall cause each Subsidiary
Guarantor to at all times be directly owned by one or more Credit Parties.





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          8.14 Flag of Mortgaged Vessels. The Borrower shall, and shall cause each other Credit
Party to, cause each Mortgaged Vessel to be registered under the laws and flag of an Acceptable
Flag Jurisdiction. Notwithstanding the foregoing, any Credit Party may transfer a Mortgaged Vessel
to another Acceptable Flag Jurisdiction pursuant to a Flag Jurisdiction Transfer.




          8.15 Compliance with Terms of Leasehold. The Borrower will, and will cause each other
Credit Party to, make all payments and otherwise perform all obligations in respect of all leases
of real property to which such Credit Party is a party, keep such leases in full force and effect
and not allow such leases to lapse or be terminated or any rights to renew such leases to be
forfeited or cancelled, notify the Administrative Agent of any default by any party with respect to
such leases and cooperate with the Administrative Agent in all respects to cure any such default,
except, in any case, where the failure to do so, either individually or in the aggregate, would not
be reasonably likely to have a Material Adverse Effect.




          8.16 Additional Mortgaged Vessels. The Borrower may, but shall not be obligated to,
cause any Acceptable Additional Vessel or Acceptable Replacement Vessel, not listed on Schedule
III, and which is owned by the Borrower or any other Credit Party, to become subject to a Vessel
Mortgage and to become Collateral hereunder, by delivering to the Administrative Agent the
following items:




          (a) a duly authorized, executed and delivered Assignment of Earnings, an Assignment of
Insurances, together covering all of such Credit Party’s present and future Earnings and Insurance
Collateral with respect to such Vessel, in each case together with:





     (i) authorization to the Administrative Agent to file Financing Statements (Form UCC-1)
under the UCC in 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 Assignment of Earnings and the Assignment of Insurances;




     (ii) certified copies of Requests for Information or Copies (Form UCC-11), or
equivalent reports, listing all effective financing statements that name any Credit Party as
debtor and that are filed in the jurisdictions referred to in Section 8.16(a)(i) above,
together with copies of such other financing statements (none of which shall cover the
Collateral except to the extent evidencing Permitted Liens unless in respect of which the
Collateral Agent shall have been authorized by the secured party thereunder to file Form
UCC-3 Termination Statements (or such other termination statements as shall be required by
local law); and




     (iii) 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 Assignment of Earnings and the Assignment of Insurances and other Security
Documents have been taken;



          (b) a duly authorized, executed and delivered Vessel Mortgage (or supplement to an existing
Vessel Mortgage) in substantially the form of Exhibit I-1 or I-2, as applicable ( or





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such other
form as shall be reasonably satisfactory to the Administrative Agent) with respect to such Vessel
in appropriate form for recording in the appropriate vessel registry and otherwise effective to
create in favor of the Collateral Agent a legal, valid and enforceable first priority security
interest, in and Lien upon such Vessel, subject only to Permitted Liens. All filings, deliveries
of instruments and other actions necessary or desirable in the reasonable opinion of the Collateral
Agent to perfect and preserve such security interests shall have been duly effected and the
Collateral Agent shall have received evidence thereof in form and substance reasonably satisfactory
to the Collateral Agent;




          (c) with respect to each such Vessel:





     (i) certificates of ownership or abstracts of title from appropriate authorities
showing (or confirmation updating previously reviewed certificates and indicating) the
registered ownership of such Vessel by the relevant Credit Party;




     (ii) the results of maritime registry searches with respect to such Vessel indicating
no record liens other than Liens in favor of the Collateral Agent and/or the Lenders and
Permitted Liens;




     (iii) class certificates from a classification society listed on Schedule X
hereto or another internationally recognized classification society acceptable to the
Collateral Agent, indicating that such Vessel meets the criteria specified in clause (i) of
the definition of Acceptable Additional Vessel or Acceptable Replacement Vessel, as
applicable;




     (iv) if such Vessel is being delivered in connection with a Vessel Exchange and
otherwise if requested by the Administrative Agent, an appraisal report from independent
appraisers of such Vessel of recent date in scope, form and substance reasonably
satisfactory to the Administrative Agent; and




     (v) 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 the relevant Credit
Party in respect of such Vessel, together with a certificate from such broker certifying
that such insurances comply with the requirement set forth in Section 8.03 and the relevant
Vessel Mortgage;



          (d) opinions from counsel to such Credit Party reasonably satisfactory to the Administrative
Agent addressed to the Administrative Agent and each of the Lenders which shall (x) be in form and
substance reasonably acceptable to the Administrative Agent and (y) cover the perfection of the
security interests granted pursuant to the relevant Vessel Mortgage and other Security Documents
and such other matters incident thereto as the Administrative Agent may reasonably request; and




          (e) such other documents, certificates and opinions as the Administrative Agent shall have
reasonably requested.




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In addition, if the Subsidiary owning such Vessel is not a Credit Party, (A) such Subsidiary shall
(1) execute and deliver a counterpart of the Pledge Agreement, taking all actions required pursuant
to Section 25 of the Pledge Agreement to become a Pledgor thereunder, and taking any other action
reasonably requested by the Administrative Agent and (2) execute and deliver a counterpart of the
Subsidiaries Guaranty and (B) the Borrower shall pledge and deliver, or cause to be pledged and
delivered, all of the capital stock of such Subsidiary owned by any Credit Party to the Collateral
Agent. Upon satisfaction of the requirements of clauses (A) and (B) above, such Subsidiary shall
be considered a Subsidiary Guarantor under the Credit Documents.




          SECTION 9. Negative Covenants. The Borrower hereby covenants and agrees that on and
after the Effective Date and until all Commitments and all Letters of Credit have terminated (or
have been cash-collateralized pursuant to Section 2.01(c)) and the Loans, Notes and Unpaid
Drawings, together with interest, Commitment Commission and all other Obligations incurred
hereunder and thereunder, are paid in full:




          9.01 Liens. The Borrower will not, and will not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets
(real or personal, tangible or intangible) of the Borrower or any of its Subsidiaries, whether now
owned or hereafter acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets (including sales of
accounts receivable with recourse to the Borrower or any of its Subsidiaries), or assign any right
to receive income or permit the filing of any financing statement under the UCC or any other
similar notice of Lien under any similar recording or notice statute; provided that the
provisions of this Section 9.01 shall not prevent the creation, incurrence, assumption or existence
of the following (Liens described below are herein referred to as “Permitted Liens”):





     (i) inchoate Liens for taxes, assessments or governmental charges or levies not yet due
and payable or Liens for taxes, assessments or governmental charges or levies
being contested in good faith and by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP;




     (ii) Liens imposed by law, which were incurred in the ordinary course of business and
do not secure Indebtedness for borrowed money, such as carriers’, warehousemen’s,
materialmen’s and mechanics’ liens and other similar Liens arising in the ordinary course of
business, and (x) which do not in the aggregate materially detract from the value of such
property or assets and do not materially impair the use thereof in the operation of the
business of the Borrower or such Subsidiary or (y) which are being contested in good faith
by appropriate proceedings, which proceedings (or orders entered in connection with such
proceedings) have the effect of preventing the forfeiture or sale of such property or assets
subject to any such Lien;




     (iii) Liens in existence on the Effective Date which are listed, and the property
subject thereto described, in Schedule IV, including any renewals or extensions of such
Liens, provided that the aggregate principal amount of the Indebtedness, if any,
secured by such Liens does not increase from that amount outstanding on the Effective Date,
less any repayments of principal thereof;



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     (iv) Liens on vessels arising in the event the use or title of such vessel is taken or
requisitioned by any Governmental Authority;




     (v) Liens created pursuant to the Security Documents;




     (vi) Liens arising out of judgments, awards, decrees or attachments with respect to
which the Borrower or any of its Subsidiaries shall in good faith be prosecuting an appeal
or proceedings for review, provided that the aggregate amount of all such judgments,
awards, decrees or attachments shall not constitute an Event of Default under Section 10.09;




     (vii) Liens (including Liens arising as a result of Capitalized Lease Obligations)
placed upon equipment or machinery (including Vessels) acquired after the Effective Date and
used in the ordinary course of business of the Borrower or any of its Subsidiaries and
placed at the time of the acquisition thereof by the Borrower or such Subsidiary or within
90 days thereafter to secure Indebtedness incurred to pay all or a portion of the purchase
price thereof or to secure Indebtedness incurred solely for the purpose of financing the
acquisition of any such equipment or machinery or extensions, renewals or replacements of
any of the foregoing for the same or a lesser amount, provided that (x) the
Indebtedness secured by such Liens is permitted by Section 9.04(iii) and (y) in all events,
the Lien encumbering the equipment or machinery so acquired does not encumber any other
asset of the Borrower or such Subsidiary;




     (viii) Liens (including Liens arising as a result of Capitalized Lease Obligations)
securing obligations not exceeding $10,000,000 in the aggregate at any one time outstanding
on fixed or capital assets (including Vessels) acquired, constructed or improved by the
Borrower or any Subsidiary; provided, that (i) such Liens secure Indebtedness
permitted by Section 9.04, (ii) such Liens and the Indebtedness secured
thereby are incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement, and (iii) such security interests shall not
apply to any other property or assets of the Borrower or any Subsidiary;




     (ix) Liens on cash and Cash Equivalents securing obligations of the Borrower or any
Subsidiary in respect of performance bonds, surety bonds and bid bonds incurred in the
ordinary course of business (exclusive of obligations for the payment of borrowed money);
provided that the aggregate value of all cash and Cash Equivalents at any time
encumbered pursuant to this clause (ix) shall not exceed $30,000,000;




     (x) Liens arising in the ordinary course of the business of the Borrower and its
Subsidiaries viewed as a whole which (x) do not secure Indebtedness and (y) either (A) are
being contested in good faith and with respect to which reserves are being maintained on the
books of the Borrower and its Subsidiaries in conformity with GAAP or (B) in the aggregate
do not have, and are not reasonably likely to have, a Material Adverse Effect and are not
reasonably likely to materially impair the value of the assets of the Borrower and its
Subsidiaries.



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     (xi) easements, rights-of-way, zoning and other restrictions, encroachments and other
similar charges or encumbrances, and minor title deficiencies, in each case not securing
Indebtedness and not materially interfering with the conduct of the business of the Borrower
or any of its Subsidiaries;




     (xii) Liens arising from precautionary UCC financing statement filings regarding
operating leases;




     (xiii) statutory and common law landlords’ liens under leases to which the Borrower or
any of its Subsidiaries is a party; and




     (xiv) Liens (other than Liens imposed under ERISA) incurred in the ordinary course of
business in connection with workers compensation claims, unemployment insurance and social
security benefits and Liens securing the performance of bids, tenders, leases and contracts
in the ordinary course of business, statutory obligations, surety bonds, performance bonds
and other obligations of a like nature incurred in the ordinary course of business and
consistent with past practices (exclusive of obligations in respect of the payment for
borrowed money).


In connection with the granting of Liens described above in this Section 9.01 by the Borrower or
any of its Subsidiaries, the Administrative Agent and the Collateral Agent shall be authorized to
take any actions deemed appropriate by it in connection therewith (including, without limitation,
by executing appropriate lien subordination agreements in favor of the holder or holders of such
Liens, in respect of the item or items of equipment or other assets subject to such Liens).




          9.02 Consolidation, Merger, Sale of Assets, etc. The Borrower will not, and will not
permit any of its Subsidiaries, to wind up, liquidate or dissolve its affairs or enter into any
transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of (or agree to
do any of the foregoing at any future time)
all or substantially all of its property or assets or any of the Collateral, or enter into any
sale-leaseback transactions involving any of the Collateral (or agree to do so at any future time),
except that:





     (i) the Borrower and each of its Subsidiaries may sell, lease or otherwise dispose of
any Mortgaged Vessels, provided that (x)(A) such sale is made at or near fair market
value (as determined in accordance with the appraisal report most recently delivered to the
Administrative Agent (or obtained by the Administrative Agent) pursuant to Section 5.12 or
8.01(c) or delivered at the time of such sale to the Administrative Agent by the Borrower),
(B) at least 80% of the consideration in respect of such sale shall consist of cash or Cash
Equivalents received by the Borrower or the respective Subsidiary Guarantor which owned such
Mortgaged Vessel, on the date of consummation of such sale, and (C) the Net Cash Proceeds of
such sale or other disposition shall be applied, if and as required by Section 4.02, to
permanently reduce the Total Commitment or repay Loans as applicable (and to the extent
required by Section 4.02(a), repay the Loans and/or cash collateralize the Letters of Credit
as applicable) or (y) so long as no Default or Event of Default has occurred and is
continuing (or would arise after giving effect thereto) and so long as all representations
and warranties made by the Borrower pursuant to Section 7 of this Agreement are true and
correct both before and after any



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such exchange, such Mortgaged Vessel is exchanged for an
Acceptable Replacement Vessel pursuant to a Vessel Exchange; provided further that
in the case of both clause (x) and (y) above, that the Borrower shall have delivered to the
Administrative Agent an officer’s certificate, certified on behalf of the Borrower by the
senior financial officer of the Borrower, demonstrating pro forma compliance
(giving effect to such Collateral Disposition and, in the case of calculations involving the
appraised value of Mortgaged Vessels, using valuations consistent with the appraisal report
most recently delivered to the Administrative Agent (or obtained by the Administrative
Agent) pursuant to Section 5.12 or Section 8.01(c)) with each of the covenants set forth in
Sections 9.07 through 9.11, inclusive, for the most recently ended Test Period (or at the
time of such sale, as applicable) and projected compliance with such covenants for the one
year period following such Collateral Disposition, in each case setting forth the
calculations required to make such determination in reasonable detail;




     (ii) the Borrower and its Subsidiaries may sell or discount, in each case without
recourse and in the ordinary course of business, overdue accounts receivable arising in the
ordinary course of business, but only in connection with the compromise or collection
thereof consistent with customary industry practice (and not as part of any bulk sale);




     (iii) (A) any Subsidiary Guarantor may transfer assets or lease to or acquire or lease
assets from the Borrower or any other Subsidiary Guarantor, or any Subsidiary Guarantor may
liquidate, wind up or dissolve, or may be merged into the Borrower or any other Subsidiary
Guarantor, in each case so long as all actions necessary or desirable to preserve, protect
and maintain the security interest and Lien of the Collateral Agent in any property or
assets held by any Person involved in any such transaction are taken to the satisfaction of
the Collateral Agent and (B) any other Subsidiary of the Borrower may transfer assets or
lease to or acquire or lease assets from the Borrower or any other Subsidiary of the
Borrower, or any other Subsidiary of the Borrower may be merged into
the Borrower or any other Subsidiary of the Borrower, in each case so long as all
actions necessary or desirable to preserve, protect and maintain the security interest and
Lien of the Collateral Agent in any assets held by any Person involved in any such
transaction are taken to the satisfaction of the Collateral Agent;




     (iv) any Subsidiary that is not a Subsidiary Guarantor may liquidate, wind up or
dissolve;




     (v) the Borrower and its Subsidiaries may dispose of assets (other than the disposal of
any Mortgaged Vessel or any equity interests owned by any Subsidiary of the Borrower which
owns, directly or indirectly, any of the capital stock of any subsidiary of the Borrower
owning a Mortgaged Vessel) in the ordinary course of business; and




     (vi) the Borrower and its Subsidiaries may sell inventory and obsolete or worn-out
equipment other than Mortgaged Vessels in the ordinary course of business; and




     (vii) the Borrower and its Subsidiaries may charter, lease or rent Vessels and other
equipment in the ordinary course of business; provided that any such action taken



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with respect to a Mortgaged Vessel is in accordance with the applicable provisions of the
Security Documents.


To the extent the Required Lenders waive the provisions of this Section 9.02 with respect to the
sale of any Collateral, or any Collateral is sold as permitted by this Section 9.02, such
Collateral (unless sold to the Borrower or a Subsidiary of the Borrower) shall be sold free and
clear of the Liens created by the Security Documents, and the Administrative Agent and Collateral
Agent shall be authorized to take any actions deemed appropriate in order to effect the foregoing.




          9.03 Dividends. The Borrower shall not, and shall not permit any of its Subsidiaries
to, authorize, declare or pay any Dividends with respect to the Borrower or any of its
Subsidiaries, except that:





     (i) (x) any Subsidiary of the Borrower which is not a Subsidiary Guarantor may pay
Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower and (y) any
Subsidiary Guarantor may pay Dividends to the Borrower or any other Subsidiary Guarantor;
and




     (ii) so long as no Default or Event of Default (both before and after giving effect to
the payment thereof) has occurred and is continuing, the Borrower may pay cash Dividends
provided that both before and after giving effect thereto, Consolidated Net
Indebtedness shall not be greater than zero.



          9.04 Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries to,
contract, create, incur, assume or suffer to exist any Indebtedness, except:





     (i) Indebtedness incurred pursuant to this Agreement and the other Credit Documents;




     (ii) Existing Indebtedness;




     (iii) Indebtedness of the Borrower and the Subsidiary Guarantors evidenced by purchase
money Indebtedness described in Section 9.01(vii), provided that in no event shall the
aggregate principal amount of any such Indebtedness exceed 50% of the cost of the asset
being financed by such Indebtedness;




     (iv) Indebtedness consisting of reimbursement obligations in respect of letters of
credit (other than the Letters of Credit), performance bonds, surety bonds and bid bonds
issued for the account of the Borrower or any Subsidiary Guarantor in an aggregate amount
not exceeding for the Borrower and its Subsidiaries $50,000,000 in aggregate principal
amount at any time outstanding;




     (v) Indebtedness constituting Intercompany Loans to the extent permitted by Section
9.05(iii);




     (vi) Indebtedness incurred by the Borrower or any Subsidiary Guarantor;
provided that (i) such Indebtedness is subordinated in right of payment to the
Obligations hereunder and the other Credit Documents on terms satisfactory to the
Administrative



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Agent and (ii) the other terms and conditions of, and documentation for, such
Indebtedness shall be satisfactory to the Administrative Agent;




     (vii) Indebtedness consisting of reimbursement obligations under the Transocean Tax
Sharing Agreement as in effect on the Effective Date; and




     (viii) so long as no Default or Event of Default then exists or would result therefrom,
additional Indebtedness incurred by the Borrower and Subsidiaries in an aggregate principal
amount not to exceed $20,000,000 at any one time outstanding, which Indebtedness (x) shall
be unsecured and (y) may be pari passu in right of payment to the
Obligations.



          9.05 Advances, Investments and Loans. The Borrower will not, and will not permit any
of its Subsidiaries to, directly or indirectly, lend money or credit or make advances to any
Person, or purchase or acquire any stock, or make any capital contribution to any other Person
(each of the foregoing an “Investment” and, collectively, “Investments”) except
that the following shall be permitted:





     (i) Investments in the form of trade credit in the ordinary course of business;




     (ii) Investments in Cash Equivalents and if consented to by the Administrative Agent,
in marketable securities;




     (iii) Investments (including loans and advances) by the Borrower and its Subsidiaries
in or to the Borrower or any of its Subsidiaries or Unrestricted Subsidiaries;
provided that (x) Investments made by the Borrower and the Subsidiary
Guarantors in such Person that is not a Subsidiary Guarantor shall only be permitted so long
as (1) the aggregate of all such Investments made after the Effective Date does not exceed
$30,000,000 at any one time outstanding or (2) after giving effect to such Investment,
Consolidated Net Indebtedness shall not be greater than zero and (y) any loans or advances
to the Borrower or any Subsidiary Guarantor pursuant to this Section 9.05(iii) shall be
subordinated to the Obligations of the respective Credit Party pursuant to written
subordination provisions in the form of Exhibit N;




     (iv) sales or transfers of assets to the extent permitted by Section 9.02;




     (v) Investments existing on the Effective Date and described on Schedule XI, without
giving effect to any additions thereto or replacement thereof;




     (vi) Investments of foreign currencies or otherwise in time deposits or other
securities of foreign Governmental Authorities or other foreign Persons, if required by the
action of a foreign Governmental Authority or to fund working capital requirements for the
operations of the Borrower or any Subsidiary in the foreign country;




     (vii) Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in good faith settlement of
delinquent obligations of, and other disputes with, customers and suppliers arising in the
ordinary course of business;



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     (viii) loans and advances by the Borrower and its Subsidiaries in the ordinary course
of business to their respective officers, directors and employees so long as the principal
amount thereof at any time outstanding shall not exceed $100,000 for any one officers,
director or employee and shall not exceed in the aggregate $2,000,000 at any one time;




     (ix) obligations of one or more officers or other employees of the Borrower or its
Subsidiaries in connection with such officers’ or employees’ acquisition of shares of common
stock of the Borrower so long as no cash is paid by the Borrower or any of its Subsidiaries
to such officers or employees in connection with the acquisition of any such obligations;




     (x) notes issued by the purchaser of assets in connection with a sale of such assets to
the extent permitted by Section 9.02(i);




     (xi) loans and advances to Delta Towing Holdings, LLC occurring after the Effective
Date and prior to the date upon which Delta Towing Holdings, LLC becomes a Subsidiary
(without giving effect to the last sentence of the definition of “Subsidiary”) in an
aggregate principal amount not to exceed $4,000,000 at any time outstanding; and




     (xii) in addition to Investments permitted by clauses (i) through (xi) of this Section
9.05, the Borrower and its Subsidiaries may make additional loans, advances and other
Investments to or in a Person in an aggregate amount for all loans, advances and other
Investments made pursuant to this clause (xii) (determined without regard to any
write-downs or write-offs thereof), net of cash repayments of principal in the case of
loans, sale proceeds in the case of Investments in the form of debt instruments and cash
equity returns (whether as a distribution, dividend, redemption or sale) in the case of
equity investments, not to exceed $2,500,000.



          9.06 Transactions with Affiliates. The Borrower will not, and will not permit any of
its Subsidiaries to, enter into any transaction or series of related transactions, whether or not
in the ordinary course of business, with any Affiliate of such Person, other than in the ordinary
course of business and on terms and conditions no less favorable to such Person as would be
obtained by such Person at that time in a comparable arm’s-length transaction with a Person other
than an Affiliate, except that:





     (i) Dividends may be paid to the extent provided in Section 9.03;




     (ii) loans and Investments may be made and other transactions may be entered into
between and among the Borrower and its Subsidiaries and Unrestricted Subsidiaries to the
extent permitted by Sections 9.04 and 9.05;




     (iii) the Borrower may pay customary director’s fees; and




     (iv) the Borrower and its Subsidiaries may enter into employment agreements or
arrangements with their respective officers and employees in the ordinary course of
business.



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          9.07 Minimum Working Capital Ratio. The Borrower will not permit the Working Capital
Ratio on the last day of any fiscal quarter of the Borrower to be less than 1.20:1.00 at any time.




          9.08 Maximum Leverage Ratio. The Borrower will not permit the Leverage Ratio on the
last day of any fiscal quarter of the Borrower to be greater than 0.35:1.00.




          9.09 Minimum Consolidated Tangible Net Worth. The Borrower will not permit the
Consolidated Tangible Net Worth at any time to be less than $375,000,000 on the last day of any
fiscal quarter of the Borrower.




          9.10 Fixed Charge Coverage Ratio. If on the last day of a Test Period the Total
Unutilized Commitment is less than $50,000,000, the Borrower will not permit the Fixed Charge
Coverage Ratio for such Test Period to be less than 2.00:1.00.




          9.11 Collateral Maintenance. The Borrower will not permit the aggregate fair market value of all Mortgaged Vessels owned
by the Borrower and its Subsidiaries which have not been sold, transferred, lost or otherwise
disposed of, on an individual charter-free basis, at any time (such value, the “Aggregate
Mortgaged Vessel Value”), as determined by the most recent appraisal delivered by the Borrower
to the Administrative Agent or obtained by the Administrative Agent in accordance with Section 5.12
or Section 8.01(c), to equal less than 300% of the Total Commitment (or, if during the Term-Out
Period, the aggregate principal amount of all Loans outstanding) at such time; provided
that, so long as any default in respect of this Section 9.11 is not caused by any voluntary
Collateral Disposition, such default shall not constitute an Event of Default so long as within 14
days of the occurrence of such default, the Borrower shall either (i) post additional collateral
satisfactory to the Required Lenders, pursuant to security documentation reasonably satisfactory in
form and substance to the Collateral Agent, sufficient to cure such default (and shall at all times
during such period and prior to satisfactory completion thereof, be diligently carrying out such
actions) or (ii) make such reductions of the Total Commitment or repay Loans, as applicable, in an
amount sufficient to cure such default and repay the Loans and/or cash collateralize the Letters of
Credit to the extent required by Section 4.02(a) (it being understood that any action taken in
respect of this proviso shall only be effective to cure such default pursuant to this Section 9.11
to the extent that no Default or Event of Default exists hereunder immediately after giving effect
thereto).




          9.12 Limitation on Modifications of Certificate of Incorporation, By-Laws and Certain
Other Agreements; etc. The Borrower will not, and will not permit any Subsidiary Guarantor to
amend, modify or change its Certificate of Incorporation, Certificate of Formation (including,
without limitation, by the filing or modification of any certificate of designation), By-Laws,
limited liability company agreement, partnership agreement (or equivalent organizational documents)
or any agreement entered into by it with respect to its capital stock or membership interests (or
equivalent equity interests) (including any Shareholders’ Agreement), or enter into any new
agreement with respect to its capital stock or membership interests (or equivalent interests),
other than any amendments, modifications or changes or any such new agreements which are not in any
way materially adverse to the interests of the Lenders.





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          Notwithstanding the foregoing provisions of this Section 9.12, upon not less than 30 days
prior written notice to the Administrative Agent and so long as no Default or Event of Default
exists and is continuing, any Subsidiary Guarantor may change its jurisdiction of organization to
another jurisdiction reasonably satisfactory to the Administrative Agent, provided that
such Subsidiary Guarantor shall promptly take all actions reasonably deemed necessary by the
Collateral Agent to preserve, protect and maintain, without interruption, the security interest and
Lien of the Collateral Agent in any Collateral owned by such Subsidiary Guarantor to the
satisfaction of the Collateral Agent, and such Subsidiary Guarantor shall have provided to the
Administrative Agent and the Lenders such opinions of counsel as may be reasonably requested by the
Administrative Agent to assure itself that the conditions of this proviso have been satisfied.




          9.13 Limitation on Certain Restrictions on Subsidiaries. The Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such Subsidiary to (a) pay dividends or make any other
distributions on its capital stock or any other interest or participation in its profits owned by
the Borrower or any Subsidiary of the Borrower, or pay any Indebtedness owed to the Borrower or a
Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any of the Borrower’s
Subsidiaries or (c) transfer any of its properties or assets to the Borrower or any of the
Borrower’s Subsidiaries, except for such encumbrances or restrictions existing under or by reason
of (i) applicable law, (ii) this Agreement and the other Credit Documents, (iii) customary
provisions restricting subletting or assignment of any lease governing a leasehold interest of the
Borrower or a Subsidiary of the Borrower, (iv) customary provisions restricting assignment of any
agreement entered into by the Borrower or a Subsidiary of the Borrower in the ordinary course of
business, (v) any holder of a Permitted Lien may restrict the transfer of the asset or assets
subject thereto and (vi) restrictions which are not more restrictive than those contained in this
Agreement contained in any documents governing any Indebtedness incurred after the Effective Date
in accordance with the provisions of this Agreement.




          9.14 Limitation on Issuance of Capital Stock. (a) The Borrower will not issue, and
will not permit any Subsidiary to issue, any preferred stock (or equivalent equity interests) other
than Qualified Preferred Stock.




          (b) The Borrower will not permit any Subsidiary Guarantor to issue any capital stock
(including by way of sales of treasury stock) or any options or warrants to purchase, or securities
convertible into, capital stock, except (i) for transfers and replacements of then outstanding
shares of capital stock, (ii) for stock splits, stock dividends and additional issuances which do
not decrease the percentage ownership of the Borrower or any of its Subsidiaries in any class of
the capital stock of such Subsidiary, (iii) for issuances by a Subsidiary Guarantor to the Borrower
or any other Subsidiary Guarantor and (iv) in the case of Foreign Subsidiaries of the Borrower, to
qualify directors to the extent required by applicable law. All capital stock of any Subsidiary
Guarantor issued in accordance with this Section 9.14(b) shall be delivered to the Collateral Agent
pursuant to the Pledge Agreement.




          9.15 Business. The Borrower and its Subsidiaries will not engage in any business
other than the businesses in which they and Delta Towing LLC are engaged in as of the Effective





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Date and activities directly related thereto, similar or related businesses and other businesses
ancillary or complimentary thereto.




          9.16 Sale and Leaseback. The Borrower will not, and will not permit any of its
Subsidiaries to, enter into any arrangement with any Person providing for the leasing by the
Borrower or any Subsidiary of real or personal property which has been or is to be sold or
transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property or rental
obligations of the Borrower or such
Subsidiary except for any such arrangement not constituting a Capitalized Lease Obligation,
provided, aggregate amounts expended or to be expended by Borrower and its Subsidiaries
under any such arrangement described in this proviso shall not exceed $10,000,000 in any fiscal
year.




          9.17 Negative Pledge Agreements. The Borrower will not, and will not permit any of
its Subsidiaries to, enter into or suffer to exist in favor of any Person other than the Agents,
the Lenders and each Issuing Lender any agreement prohibiting the Borrower or any Subsidiary from
entering into or suffering to exist any agreement that prohibits or conditions the creation or
assumption of any Lien upon any of its property or assets except those in favor of such Person (any
such agreement, a “Negative Pledge Agreement”) unless prior to entering into or the
existence of such Negative Pledge Agreement the Agents, the Lenders and each Issuing Lender are
granted in writing substantially similar rights. The foregoing shall not apply to (i) customary
restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be
sold and such sale is permitted hereunder, (ii) customary restrictions or conditions imposed by any
agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Indebtedness or (iii) customary
provisions in leases and other contracts restricting the assignment thereof.




          9.18 Speculative Transactions. The Borrower will not, and will not permit any of its
Subsidiaries to, engage in any transaction involving commodity options or futures contracts or any
similar speculative transactions.




          9.19 Changes in Accounting Conventions. The Borrower will not, and will not permit
any of its Subsidiaries to, make any changes in its fiscal year, or its method of accounting
(except to the extent required under GAAP).




          9.20 Prepayments of Indebtedness. The Borrower will not, and will not permit any of
its Subsidiaries to, prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled
maturity thereof in any manner, or make any payment in violation of any subordination terms of, any
Indebtedness in an aggregate principal amount greater than $5,000,000, except the prepayment of the
Loans in accordance with the terms of this Agreement.




          9.21 Partnership, Etc. The Borrower will not, and will not permit any of its
Subsidiaries to, become a general partner in any general or limited partnership or joint venture,
other than the case of any Subsidiary the sole assets of which consist of its interest in such
partnership or joint venture.





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          9.22 Operating Lease Obligations. The Borrower will not, and will not permit any of its Subsidiary Guarantor to, incur or
suffer to exist any obligation for the payment of scheduled amounts under an operating lease,
singly or in the aggregate, in excess of the sum of $25,000,000.




          SECTION 10. Events of Default. Upon the occurrence of any of the following specified
events (each an “Event of Default”):




          10.01 Payments. The Borrower shall (i) default in the payment when due of any
principal of any Loan or any Note, (ii) default, and such default shall continue unremedied for
three or more Business Days after written notice to the Borrower has been given by the
Administrative Agent of such default in the payment when due of any Unpaid Drawings or (iii)
default, and such default shall continue unremedied for three or more Business Days, in the payment
when due of interest on any Loan or Note, or any Commitment Commission or any other amounts owing
hereunder or thereunder; or




          10.02 Representations, etc. Any representation, warranty or statement made by any
Credit Party herein or in any other Credit Document or in any certificate delivered pursuant hereto
or thereto shall prove to be untrue in any material respect on the date as of which made or deemed
made; or




          10.03 Covenants. Any Credit Party shall (i) default in the due performance or
observance by it of any term, covenant or agreement contained in Section 8.01(f)(i), 8.08, 8.14 or
Section 9 (other than Sections 9.06, 9.12, 9.13, 9.15 and 9.17 through 9.22 inclusive) or (ii)
default in the due performance or observance by it of any other term, covenant or agreement
contained in this Agreement and, in the case of this clause (ii), such default shall continue
unremedied for a period of 20 days after written notice to the Borrower by the Administrative Agent
or any of the Lenders; or




          10.04 Default Under Other Agreements. (i) The Borrower or any of its Subsidiaries
shall default in any payment of any Indebtedness (other than the Obligations) beyond the period of
grace, if any, provided in the instrument or agreement under which such Indebtedness was created or
(ii) the Borrower or any of its Subsidiaries shall default in the observance or performance of any
agreement or condition relating to any Indebtedness (other than the Obligations) or contained in
any instrument or agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such
holder or holders) to cause (determined without regard to whether any notice is required), any such
Indebtedness to become due prior to its stated maturity or (iii) any Indebtedness (other than the
Obligations) of the Borrower or any of its Subsidiaries shall be declared to be due and payable, or
required to be
prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity
thereof, provided that it shall not be a Default or Event of Default under this Section
10.04 unless the aggregate principal amount of all Indebtedness as described in preceding clauses
(i) through (iii), inclusive, exceeds $2,500,000 at any one time; or





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          10.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries shall commence a
voluntary case concerning itself under Title 11 of the United States Code entitled “Bankruptcy,” as
now or hereafter in effect, or any successor thereto (the “Bankruptcy Code”); or an
involuntary case is commenced against the Borrower or any of its Subsidiaries and the petition is
not controverted within 20 days after service of summons, or is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or substantially all of the property of the Borrower or any of its
Subsidiaries or the Borrower or any of its Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the
Borrower or any of its Subsidiaries or there is commenced against the Borrower or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60 days, or the Borrower
or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Borrower or any of its Subsidiaries
suffers any appointment of any custodian or the like for it or any substantial part of its property
to continue undischarged or unstayed for a period of 60 days; or the Borrower or any of its
Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is
taken by the Borrower or any of its Subsidiaries for the purpose of effecting any of the foregoing;
or




          10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding standard required
for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver
of such standard or extension of any amortization period is sought or granted under Section 412 of
the Code or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a contributing
sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall
be subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard
to subparagraph (b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66, .67
or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur with respect to such
Plan within the following 30 days, any Plan which is subject to Title IV of ERISA shall have had or
is likely to have a trustee appointed to administer such Plan, any Plan which is subject to Title
IV of ERISA is, shall have been or is likely to be terminated or to be the subject of termination
proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required
to be made with respect to a Plan or a Non-U.S. Plan has not been timely made, the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate has incurred or is likely to incur any liability
for a violation of the applicable requirements of Section 404 or 405 of ERISA or the exclusive
benefit rule of under Section 401(a) of the Code by any fiduciary or disqualified person with
respect to any Plan, the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate has
incurred or is likely to incur any liability to or on account of a Plan under Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of a group health plan (as
defined in Section 607(1) of ERISA, Section 4980B(g)(2) of the Code or 45 Code of Federal
Regulations Section 160.103) under Section 4980B of the Code and/or the Health Insurance
Portability and Accountability Act of 1996, or the Borrower or any Subsidiary of the Borrower has
incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans
(as defined in Section 3(1) of ERISA) that provide benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or Plans or Non-U.S. Plans, a “default,”
within the meaning of Section





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4219(c)(5) of ERISA, shall occur with respect to any Plan; any
applicable law, rule or regulation is adopted, changed or interpreted, or the interpretation or
administration thereof is changed, in each case after the date hereof, by any governmental
authority or agency or by any court (a “Change in Law”), or, as a result of a Change in Law, an
event occurs following a Change in Law, with respect to or otherwise affecting any Plan; (b) there
shall result from any such event or events the imposition of a lien, the granting of a security
interest, or a liability or a material risk of incurring a liability; and (c) such lien, security
interest or liability, individually, and/or in the aggregate, in the opinion of the Required
Lenders, has had, or could reasonably be expected to have, a Material Adverse Effect upon the
business, operations, condition (financial or otherwise) or prospects of the Borrower or any
Subsidiary of the Borrower; or




          10.07 Security Documents. (a) At any time after the execution and delivery thereof,
any of the Security Documents shall cease to be in full force and effect, or shall cease in any
material respect to give the Collateral Agent for the benefit of the Lenders the Liens, rights,
powers and privileges purported to be created thereby (including, without limitation, a perfected
security interest in, and Lien on, all of the Collateral), in favor of the Collateral Agent,
superior to and prior to the rights of all third Persons (except in connection with Permitted
Liens), and subject to no other Liens (except Permitted Liens), unless the relevant Credit Party
executes such new or curative documents as Administrative Agent may reasonably require; or (b) any
Credit Party shall default in the due performance or observance of any term, covenant or agreement
on its part to be performed or observed pursuant to any of the Security Documents and such default
shall continue beyond any grace period (if any) specifically applicable thereto pursuant to the
terms of such Security Document; or (c) any “event of default” (as defined in any Vessel Mortgage)
shall occur in respect of any Vessel Mortgage; or




          10.08 Subsidiaries Guaranty. (a) After the execution and delivery thereof, the
Subsidiaries Guaranty, or any provision thereof, shall cease to be in full force or effect as to
the relevant Subsidiary Guarantor (unless such Subsidiary Guarantor is no longer a Subsidiary by
virtue of a liquidation, sale, merger or consolidation permitted by Section 9.02) unless the
relevant Subsidiary Guarantor executes such new or curative documents as Administrative Agent may
reasonably require; or (b) any Subsidiary Guarantor (or Person acting by or on behalf of such
Subsidiary Guarantor) shall deny or disaffirm such Subsidiary Guarantor’s obligations under the
Subsidiaries Guaranty, or any Subsidiary Guarantor, shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or observed pursuant to
the Subsidiaries Guaranty beyond any grace period (if any) provided therefor; or




          10.09 Judgments. One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate for the Borrower and its
Subsidiaries a liability (not paid or fully covered by a reputable and solvent insurance company)
and such judgments and decrees either shall be final and non-appealable or shall not be vacated,
discharged or stayed or bonded pending appeal for any period of 60 consecutive days, and the
aggregate amount of all such judgments at any one time, to the extent not covered by insurance,
exceeds $5,000,000; or




          10.10 Change of Control. A Change of Control shall occur and shall continue
unremedied for 30 days; or





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          10.11 Transocean Tax Sharing Agreement. There shall occur any event giving rise to an
acceleration of payments pursuant to Section 4.2(f) or Section 4.2(g) of the Transocean Tax Sharing
Agreement and, after giving effect thereto and to any payments thereof, Consolidated Net
Indebtedness shall be greater than zero;



then, and in any such event, and at any time thereafter, if any Event of Default shall then be
continuing, the Administrative Agent, upon the written request of the Required Lenders, shall by
written notice to the Borrower, take any or all of the following actions, without prejudice to the
rights of the Administrative Agent, any Lender or the holder of any Note to enforce its claims
against any Credit Party (provided that, if an Event of Default specified in Section 10.05
shall occur, the result which would occur upon the giving of written notice by the Administrative
Agent to the Borrower as specified in clauses (i) and (ii) below shall occur automatically without
the giving of any such notice): (i) declare the Total Commitments terminated, whereupon all
Commitments of each Lender shall forthwith terminate immediately and any Commitment Commission
shall forthwith become due and payable without any other notice of any kind; (ii) declare the
principal of and any accrued interest in respect of all Loans and the Notes and all Obligations
owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which are hereby waived by
each Credit Party; (iii) terminate any Letter of Credit that may be terminated in accordance with
its terms; (iv) direct the Borrower to pay (and the Borrower agrees that upon receipt of such
notice, or upon the occurrence and during the continuance of an Event of Default specified in
Section 10.05, it will pay) to the Collateral Agent at the Payment Office such additional amount of
cash, to be held as security by the Collateral Agent, as is equal to the aggregate Stated Amount of
all Letters of Credit issued for the Borrower and then outstanding and (v) enforce, as Collateral
Agent, all of the Liens and security interests created pursuant to the Security Documents.




          SECTION 11. Definitions and Accounting Terms.




          11.01 Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the terms defined):




          “Acceptable Flag Jurisdiction” shall mean each of the United States of America, the
Republic of Liberia, the Marshall Islands, Vanuatu, the Bahamas, Panama and any other jurisdiction
reasonably acceptable to the Administrative Agent.




          “Acceptable Additional Vessel” shall mean any Vessel; provided that such
Vessel must (i) have a class certificate reasonably acceptable to the Administrative Agent, (ii)
must be of an age and type reasonably acceptable to the Administrative Agent and (iii) be
registered in an Acceptable Flag Jurisdiction.




          “Acceptable Replacement Vessel” shall mean, with respect to a Mortgaged Vessel, any
Vessel with an equal or greater fair market value than such Mortgaged Vessel (as determined in
accordance with the appraisal report most recently delivered to the Administrative Agent (or
obtained by the Administrative Agent) pursuant to Section 5.12 (a) or Section 8.01(c) or delivered
pursuant to a Vessel Exchange to the Administrative Agent by the Borrower);




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provided that
such Vessel must (i) have a class certificate reasonably acceptable to the Administrative Agent,
(ii) must be of an age and type reasonably acceptable to the Administrative Agent and (iii) be
registered in an Acceptable Flag Jurisdiction.




          “Administrative Agent” shall have the meaning provided in the first paragraph of this
Agreement, and shall include any successor thereto.




          “Affiliate” shall mean, with respect to any Person, any other Person (including, for
purposes of Section 9.06 only, all directors, officers and partners of such Person) directly or
indirectly controlling, controlled by, or under direct or indirect common control with, such
Person; provided, however, that for purposes of Section 9.06, an Affiliate of the
Borrower shall include any Person that directly or indirectly owns more than 5% of any class of the
capital stock of the Borrower and any officer or director of the Borrower or any of its
Subsidiaries. A Person shall be deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the management and policies
of such other Person, whether through the ownership of voting securities, by contract or otherwise.
Notwithstanding anything to the contrary contained above, for purposes of Section 9.06, neither
the Administrative Agent, nor the Collateral Agent, nor the Lead Arranger nor any Lender (or any of
their respective affiliates) shall be deemed to constitute an Affiliate of the Borrower or its
Subsidiaries in connection with the Credit Documents or its dealings or arrangements relating
thereto.




          “Agents” shall mean, collectively, the Administrative Agent, the Collateral Agent, the
Lead Arranger and each Issuing Lender.




          “Aggregate Mortgaged Vessel Value” shall have the meaning set forth in Section 9.11.




          “Agreement” shall mean this Credit Agreement, as modified, supplemented, amended or
restated from time to time.




          “Applicable Margin” shall mean a percentage per annum equal to in the case of Loans
maintained as (i) Base Rate Loans, 1.25% or (ii) Eurodollar Loans, 1.60%; provided that if
the Borrower shall have elected the Term-Out Option in accordance with Section 4.02(e), then from
and after the Maturity Date, the “Applicable Margin” shall mean a percentage per annum
equal to, in the case of Loans maintained as (i) Base Loans, 1.40% and (ii) Eurodollar Loans,
1.75%.




          “Assignment and Assumption Agreement” shall mean the Assignment and Assumption
Agreement substantially in the form of Exhibit L (appropriately completed).




          “Assignments of Earnings” shall have the meaning provided in Section 5.14.




          “Assignments of Insurances” shall have the meaning provided in Section 5.14.




          “Bankruptcy Code” shall have the meaning provided in Section 10.05.




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          “Base Rate” shall mean for any day, a rate of interest per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Rate for such day plus 1/2
of 1% per annum.




          “Base Rate Loan” shall mean each Loan designated or deemed designated as such by the
Borrower at the time of the incurrence thereof or conversion thereto.




          “Borrower” shall have the meaning provided in the first paragraph of this Agreement.




          “Borrowing” shall mean the borrowing of Loans from all the Lenders (other than any
Lender which has not funded its share of a Borrowing in accordance with this Agreement) having
Commitments on a given date having the same Interest Period.




          “Borrowing Date” shall mean each date on or after the Effective Date and prior to the
Maturity Date on which a Borrowing occurs.




          “Business Day” shall mean any day except Saturday, Sunday and any day which shall be
in New York City or London a legal holiday or a day on which banking institutions are authorized or
required by law or other government action to close.




          “Capital Expenditures” shall mean, with respect to any Person, all expenditures by
such Person which should be capitalized in accordance with GAAP and, without duplication, the
amount of Capitalized Lease Obligations incurred by such Person.




          “Capitalized Lease Obligations” of any Person shall mean all rental obligations which,
under generally accepted accounting principles, are or will be required to be capitalized on the
books of such Person, in each case taken at the amount thereof accounted for as indebtedness in
accordance with such principles.




          “Cash Equivalents” shall mean (i) securities issued or directly and fully guaranteed
or insured by the United States or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having maturities
of not more than one year from the date of acquisition, (ii) time deposits and certificates of
deposit of any commercial bank having, or which is the principal banking subsidiary of a bank
holding company having capital, surplus and undivided profits aggregating in excess of
$200,000,000, with maturities of not more than one year from the date of acquisition by such
Person, (iii) repurchase obligations with a term of not more than 90 days for underlying securities
of the types described in clause (i) above entered into with any bank meeting the qualifications
specified in clause (ii) above, (iv) commercial paper issued by any Person incorporated in the
United States rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody’s and in each case maturing not more than one year after the date of acquisition
by such Person, and (v) investments in money market funds substantially all of whose assets are
comprised of securities of the types described in clauses (i) through (iv) above.




          “CERCLA” shall mean the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as the same may be amended from time to time, 42 U.S.C. § 9601 et
seq.




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          “Change of Control” shall mean (i) the Borrower shall at any time and for any reason
fail to own, directly or indirectly, 100% of the capital stock or other equity interests of each
Subsidiary Guarantor, (ii) the sale, lease or transfer of all or substantially all of the
Borrower’s assets to any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act), (iii) the liquidation or dissolution of the Borrower, (iv) any Person or group (as such term
is used in Section 13(d)(3) of the Exchange Act) shall at any time become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 40% of the outstanding
voting or economic equity interests of the Borrower, (v) the replacement of a majority of the
directors on the board of directors of the Borrower over a two-year period from the directors who
constituted the board of directors of the Borrower at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a majority of the board of directors
of the Borrower then still in office who either were members of such board of directors at the
beginning of such period or whose election as a member of such Board of Directors was previously so
approved or (vi) a “change of control” or similar event shall occur as provided in any outstanding
public Indebtedness (excluding Indebtedness with an aggregate principal amount of less than
$5,000,000) of Borrower or any of its Subsidiaries (or the documentation governing the same).




          “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and
the regulations promulgated and rulings issued thereunder. Section references to the Code are to
the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code,
amendatory thereof, supplemental thereto or substituted therefor.




          “Collateral” shall mean all property (whether real or personal) with respect to which
any security interests have been granted (or purported to be granted) pursuant to any Security
Document, including, without limitation, all Pledge Agreement Collateral, all Earnings and
Insurance Collateral, all Mortgaged Vessels and all cash and Cash Equivalents at any time delivered
as collateral thereunder or as required hereunder.




          “Collateral Agent” shall mean the Administrative Agent acting as mortgagee, security
trustee or collateral agent for the Lenders pursuant to the Security Documents.




          “Collateral Disposition” shall mean (i) the sale, lease, transfer or other disposition
by the Borrower or any of its Subsidiaries to any Person other than the Borrower or a Subsidiary
Guarantor of any Mortgaged Vessel or (ii) any Event of Loss of any Mortgaged Vessel.




          “Collateral Disposition Termination Date” shall mean if the Collateral Disposition
causing the Collateral Disposition Termination Date to occur is one described in clause (i) of the
definition of “Collateral Disposition” on, and (y) if the Collateral Disposition causing the
Collateral Disposition Termination Date to occur is one described in clause (ii) of the definition
of “Collateral Disposition” on the 90th day after, the first date on which the Aggregate
Mortgaged Vessel Value on the Effective Date (as determined in accordance with the appraisal report
delivered to the Administrative Agent pursuant to Section 5.12) of the Mortgaged Vessels (which
Mortgaged Vessels were either Mortgaged Vessels on the Effective Date or which became Mortgaged
Vessels pursuant to a Vessel Exchange) with respect to which the Collateral Disposition has
occurred exceeds 35% of the Aggregate Mortgaged Vessel Value of all





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Mortgaged Vessels on the
Effective Date (as determined in accordance with the appraisal report delivered to the
Administrative Agent pursuant to Section 5.12).




          “Commitment” shall mean, for each Lender, the amount set forth opposite such Lender’s
name in Schedule I hereto as the same may be (x) reduced from time to time pursuant to Sections
3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from
such Lender pursuant to Section 1.13 or 13.04(b).




          “Commitment Commission” shall have the meaning provided in Section 3.01(a).




          “Concentration Account” shall mean an account specified by the Administrative Agent
over which the Collateral Agent shall have a first priority perfected security interest.




          “Consolidated Current Assets” shall mean, at any time, the consolidated current assets
of the Borrower and its Subsidiaries determined in accordance with GAAP.




          “Consolidated Current Liabilities” shall mean, at any time, the consolidated current
liabilities of the Borrower and its Subsidiaries at such time determined in accordance with GAAP
minus the current portion of any Indebtedness under this Agreement to the extent otherwise included
therein.




          “Consolidated EBITDA” shall mean, for any period, Consolidated Net Income for such
period (without giving effect to (x) any extraordinary gains or losses, (y) any non-cash income,
and (z) any gains or losses from sales of assets other than inventory sold in the ordinary course
of business) adjusted by adding thereto (in each case to the extent deducted in determining
Consolidated Net Income for such period), without duplication, the amount of (i) Consolidated Net
Interest Expense (inclusive of amortization of deferred financing fees and other original issue
discount and banking fees, charges and commissions (e.g., letter of credit fees and
commitment fees)), (ii) provision for taxes based on income and foreign withholding taxes for the
Borrower and its Subsidiaries determined on a consolidated basis for such period, (iii) all
depreciation and amortization expense of the Borrower and its Subsidiaries determined on a
consolidated basis for such period, and (iv) in the case of any period including the fiscal
quarter of the Borrower ended December 31, 2005, the amount of all fees and expenses amortized
in connection with this Agreement during such fiscal quarter.




          “Consolidated Indebtedness” shall mean, as at any date of determination, without
duplication the aggregate stated balance sheet amount of all Indebtedness (but including in any
event the then outstanding principal amount of all Loans, all Capitalized Lease Obligations and all
letters of credit outstanding) of the Borrower and its Subsidiaries on a consolidated basis as
determined in accordance with GAAP; provided that (i) Indebtedness outstanding pursuant to
trade payables and accrued expenses incurred in the ordinary course of business, and (ii)
guarantees of operating leases assigned to any of the Borrower or any Wholly-Owned Subsidiary of
the Borrower to the extent such lease is permitted hereunder and such obligation does not exceed
that which would otherwise be attributed to such Person under such operating lease, shall be
excluded in determining Consolidated Indebtedness.




          “Consolidated Net Income” shall mean, for any period, the consolidated net after tax
income of the Borrower and its Subsidiaries determined in accordance with GAAP.





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          “Consolidated Net Indebtedness” shall mean at any time (x) the aggregate principal
amount of Consolidated Indebtedness at such time less (y) the cash and Cash Equivalents of
the Borrower and its Subsidiaries on such date which are not subject to any other Lien (other than
a Lien created pursuant to a Security Document) or to any other restriction.




          “Consolidated Net Interest Expense” shall mean, for any period (i) the total
consolidated interest expense of the Borrower and its Subsidiaries for such period (calculated
without regard to any limitations on the payment thereof) plus, without duplication, that portion
of Capitalized Lease Obligations of the Borrower and its Subsidiaries representing the interest
factor for such period, minus (ii) each interest income of the Borrower and its Subsidiaries for
such period and the amortization of any deferred financing costs incurred in connection with this
Agreement and the Existing Credit Agreement to the extent otherwise included in the calculations
thereof.




          “Consolidated Net Worth” shall mean, with respect to any person, the Net Worth of such
Person and its Subsidiaries determined on a consolidated basis in accordance with GAAP after
appropriate deduction for any minority interests in Subsidiaries.




          “Consolidated Tangible Net Worth” shall mean, with respect to any Person, the
Consolidated Net Worth of such Person and its Subsidiaries on such date less the amount of all
intangible items included therein, including, without limitation, goodwill, franchises, licenses,
patents, trademarks, trade names, copyrights, service marks, brand names and write-ups of assets.




          “Consolidated Total Capitalization” shall mean, at any time of determination, the sum
of Consolidated Indebtedness at such time and Consolidated Net Worth at such time.




          “Contingent Obligation” shall mean, as to any Person, any obligation of such Person
guaranteeing any Indebtedness, leases, dividends or other obligations (“primary
obligations”) of any other Person (the “primary obligor”) in any manner, whether
directly or indirectly, including, without limitation, any obligation of such Person, whether or
not
contingent, (i) to purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (x) for the purchase or payment of any
such primary obligation or (y) to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make payment of such primary obligation
or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in
respect thereof; provided, however, that the term Contingent Obligation shall not
include indemnities, performance guaranties and endorsements of instruments for deposit or
collection in the ordinary course of business and any products warranties extended in the ordinary
course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal
to the stated or determinable amount of the primary obligation in respect of which such Contingent
Obligation is made (or, if the less, the maximum amount of such primary obligation for which such
Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation)
or, if not stated or determinable, the maximum reasonably anticipated liability in





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respect thereof
(assuming such Person is required to perform thereunder) as determined by such Person in good
faith.




          “Contractual Obligation” shall mean, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to which such Person is
a party or by which it or any of its property is bound.




          “Credit Documents” shall mean this Agreement, each Note, each Security Document, the
Subsidiaries Guaranty and, after the execution and delivery thereof, each additional guaranty or
additional security document executed pursuant to Section 8.11 or Section 8.16.




          “Credit Event” shall have the meaning provided in Section 6.




          “Credit Party” shall mean the Borrower, each Subsidiary Guarantor, and any other
Subsidiary of the Borrower which at any time executes and delivers any Credit Document.




          “Debt Agreements” shall have the meaning provided in Section 5.05.




          “Default” shall mean any event, act or condition which with notice or lapse of time,
or both, would constitute an Event of Default.




          “Defaulting Lender” shall mean any Lender with respect to which a Lender Default is in
effect.




          “Dividend” shall mean, with respect to any Person, that such Person has declared or
paid a dividend, distribution or returned any equity capital to its stockholders, partners or
members or authorized or made any other distribution, payment or delivery of property (other than
common Equity Interests of such Person) or cash to its stockholders, partners or members in their
capacity as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly,
for a consideration any shares of any class of its capital stock or any other Equity Interests
outstanding on or after the Effective Date (or any options or warrants issued by such Person with
respect to its capital stock or other Equity Interests), or set aside any funds for any of
the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or
otherwise acquire for a consideration any shares of any class of the capital stock or any other
Equity Interests of such Person outstanding on or after the Effective Date (or any options or
warrants issued by such Person with respect to its capital stock or other Equity Interests).
Without limiting the foregoing, “Dividends” with respect to any Person shall also include all
payments made or required to be made by such Person with respect to any stock appreciation rights,
plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for
the foregoing purposes.




          “Dollars” and the sign “$” shall each mean lawful money of the United States.




          “Drawing” has the meaning provided in Section 2.04(b).




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          “Earnings and Insurance Collateral” shall mean all “Earnings Collateral” and
“Insurance Collateral”, as the case may be, as defined in the respective Assignment of Earnings and
the Assignment of Insurances.




          “Effective Date” shall have the meaning provided in the introductory paragraph of
Section 5.




          “Eligible Transferee” shall mean and include a commercial bank, insurance company,
financial institution, fund or other Person having a tangible net worth or combined capital and
surplus in excess of $1,000,000,000 (or, in the case of a fund that is administered or managed by a
Lender, $250,000,000), which regularly purchases interests in loans and makes extensions of credit
of the types made pursuant to this Agreement.




          “Employment Agreements” shall have the meaning provided in Section 5.05.




          “Environmental Claims” shall mean any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, directives, claims, liens, notices of noncompliance or
violation, investigations or proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law (hereafter, “Claims”),
including, without limitation, (a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and (b) any and all Claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief in connection with
alleged injury or threat of injury to health, safety or the environment due to the presence of
Hazardous Materials.




          “Environmental Law” shall mean any applicable Federal, state, foreign or local
statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and
enforceable written policy and rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, to the extent binding on the Borrower or any of
its Subsidiaries, relating to the environment, and/or Hazardous Materials, including, without
limitation, CERCLA; OPA; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et
seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq.;
the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq. (to the extent it
regulates occupational exposure to
Hazardous Materials); and any state and local or foreign counterparts or equivalents, in each
case as amended from time to time.




          “Environmental Release” shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing or migration into the
environment.




          “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated and rulings issued thereunder. Section
references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent
provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.





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          “ERISA Affiliate” shall mean each person (as defined in Section 3(9) of ERISA) which
together with the Borrower or a Subsidiary of the Borrower would be deemed to be a “single
employer” within the meaning of Section 414(b), (c), (m) or (o) of the Code.




          “Eurodollar Loan” shall mean each Loan designated or deemed designated as such by the
Borrower at the time of the incurrence thereof or conversion thereto.




          “Eurodollar Rate” shall mean with respect to each Interest Period for a Loan, (a) the
offered rate (rounded upward to the nearest 1/16 of one percent) for deposits of Dollars for a
period equivalent to such period at or about 11:00 A.M. (London time) on the second Business Day
before the first day of such period as is displayed on Telerate page 3750 (British Bankers’
Association Interest Settlement Rates) (or such other page as may replace such page 3750 on such
system or on any other system of the information vendor for the time being designated by the
British Bankers’ Association to calculate the BBA Interest Settlement Rate (as defined in the
British Bankers’ Association’s Recommended Terms and Conditions dated August 1985)),
provided that if on such date no such rate is so displayed, the Eurodollar Rate for such
period shall be the rate quoted to the Administrative Agent as the offered rate for deposits of
Dollars in an amount approximately equal to the amount in relation to which the Eurodollar Rate is
to be determined for a period equivalent to such applicable Interest Period by prime banks in the
London interbank Eurodollar market at or about 11:00 A.M. (London time) on the second Business Day
before the first day of such period, in each case divided (and rounded upward to the nearest 1/16
of 1%) by (b) a percentage equal to 100% minus the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency, supplemental, special or
other reserves required by applicable law) applicable to any member bank of the Federal Reserve
System in respect of Eurocurrency funding or liabilities as defined in Regulation D (or any
successor category of liabilities under Regulation D).




          “Event of Default” shall have the meaning provided in Section 10.




          “Event of Loss” shall mean any of the following events: (x) the actual or constructive
total loss of a Vessel or the agreed or compromised total loss of a Vessel; or (y) the capture,
condemnation, confiscation, requisition, purchase, seizure or forfeiture of, or any taking of title
to, a Vessel. An Event of Loss shall be deemed to have occurred: (i) in the event of an actual
loss of a Vessel, at the time and on the date of such loss or if that is not known at noon
Greenwich Mean Time on the date which such Vessel was last heard from; (ii) in the event of
damage which results in a constructive or compromised or arranged total loss of a Vessel, at
the time and on the date of the event giving rise to such damage; or (iii) in the case of an event
referred to in clause (y) above, at the time and on the date on which such event is expressed to
take effect by the Person making the same. Notwithstanding the foregoing, if such Vessel shall
have been returned to the Borrower following any event referred to in clause (y) above prior to the
date upon which payment is required to be made under Section 4.02(b) hereof, no Event of Loss shall
be deemed to have occurred by reason of such event.




          “Existing Credit Agreement” shall mean the Omnibus Credit and Guaranty Agreement,
dated December 30, 2003, among the Borrower, the guarantors named therein, the lenders named
therein, the institution named therein, as issuing bank, Citibank, N.A., as





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administrative agent
and collateral agent and Citigroup Global Markets, Inc., as lead arranger and sole book runner (as
amended, restated, supplemented and/or modified as of the date hereof).




          “Existing Indebtedness” shall have the meaning provided in Section 7.20.




          “Facing Fee” shall have the meaning provided in Section 3.01(d).




          “Federal Funds Rate” shall mean, for any day, an interest rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if
such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a Business Day, the
average of the quotations at approximately 11:00 A.M. (New York time) on such day on such
transactions received by the Administrative Agent from three Federal funds brokers of recognized
standing selected by the Administrative Agent in its sole discretion.




          “Fixed Charge Coverage Ratio” shall mean, for any period, the ratio of (a)
Consolidated EBITDA for such period less Capital Expenditures for such period to (b)
Consolidated Net Interest Expense for such period.




          “Flag Jurisdiction Transfer” shall mean the transfer of the registration and flag of a
Mortgaged Vessel from one Acceptable Flag Jurisdiction to another Acceptable Flag Jurisdiction,
provided that the following conditions are satisfied with respect to such exchange:





     (i) On each Flag Jurisdiction Transfer Date, the Credit Party which is consummating a
Flag Jurisdiction Transfer on such date shall have duly authorized, executed and delivered,
and caused to be recorded in the appropriate vessel registry a Vessel Mortgage,
substantially in the form of Exhibit I-1 or I-2, as applicable (or such other form as shall
be reasonably satisfactory to the Administrative Agent) to the Acceptable Flag Jurisdiction,
with respect to the Mortgaged Vessel being transferred (the “Transferred Vessel”)
and the Vessel Mortgage shall be effective to create in favor of the Collateral Agent and/or
the Lenders a legal, valid and enforceable first priority security interest, in and lien
upon such Transferred Vessel, subject only to Permitted Liens. All filings, deliveries of
instruments and other actions necessary or desirable in the reasonable opinion of the
Collateral Agent to perfect and preserve such security interests
shall have been duly effected and the Collateral Agent shall have received evidence
thereof in form and substance reasonably satisfactory to the Collateral Agent.




     (ii) On each Flag Jurisdiction Transfer Date, the Administrative Agent shall have
received from (A) counsel to the Borrower and each Credit Party reasonably satisfactory to
the Administrative Agent, an opinion addressed to the Administrative Agent and each of the
Lenders and dated such Flag Jurisdiction Transfer Date, which shall (x) be in form and
substance reasonably acceptable to the Administrative Agent and (y) cover the recordation of
the security interests granted pursuant to the Vessel Mortgage(s) to be delivered on such
date and such other matters incident thereto as the Administrative Agent may reasonably
request and (B) local counsel to the Credit Parties consummating the relevant Flag
Jurisdiction Transfer reasonably satisfactory to the



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Administrative Agent practicing in
those jurisdictions in which the Transferred Vessel is registered and/or the Credit Party
owning such Transferred Vessel is organized, which opinions shall be addressed to the
Administrative Agent and each of the Lenders and dated such Flag Jurisdiction Transfer Date,
which shall (x) be in form and substance reasonably acceptable to the Administrative Agent
and (y) cover the perfection of the security interests granted pursuant to the Vessel
Mortgage(s) and such other matters incident thereto as the Administrative Agent may
reasonably request.




     (iii) On each Flag Jurisdiction Transfer Date:




     (A) The Administrative Agent shall have received (x) certificates of ownership
or abstracts of title from appropriate authorities showing (or confirmation updating
previously reviewed certificates and indicating) the registered ownership of the
Transferred Vessel transferred on such date by the relevant Subsidiary Guarantor and
(y) the results of maritime registry searches with respect to the Transferred Vessel
transferred on such date, indicating no record liens other than Liens in favor of
the Collateral Agent and/or the Lenders and Permitted Liens.




     (B) 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 the Credit Party in respect of the
Transferred Vessel transferred on such date, 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 Administrative Agent and/or the Lenders as mortgagee and (ii)
conform with the insurance requirements of the respective Vessel Mortgages.




     (iv) On or prior to each Flag Jurisdiction Transfer Date, the Administrative Agent
shall have received a certificate, dated the Flag Jurisdiction Transfer Date, signed by the
President, any Vice President, the Treasurer or an authorized manager, member or general
partner of the Credit Party commencing such Flag Jurisdiction Transfer,
certifying that (A) all necessary governmental (domestic and foreign) and third party
approvals and/or consents in connection with the Flag Jurisdiction Transfer being
consummated on such date and otherwise referred to herein shall have been obtained and
remain in effect, (B) there exists no judgment, order, injunction or other restraint
prohibiting or imposing materially adverse conditions upon such Flag Jurisdiction Transfer
or the other transactions contemplated by this Agreement and (C) copies of resolutions
approving the Flag Jurisdiction Transfer of such Credit Party and any other matters the
Administrative Agent may reasonably request.



          “Flag Jurisdiction Transfer Date” shall mean the date on which a Flag Jurisdiction
Transfer occurs.





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          “GAAP” shall have the meaning provided in Section 13.07(a).




          “Governmental Authority” shall mean the government of the United States of America,
any other nation or any political subdivision thereof, whether state, provincial or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.




          “Hazardous Materials” shall mean: (a) any petroleum or petroleum products, radioactive
materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; (b) any chemicals, materials or substances defined as or included in the
definition of “hazardous substances,” “hazardous waste,” “hazardous materials,” “extremely
hazardous substances,” “restricted hazardous waste,” “toxic substances,” “toxic pollutants,”
“contaminants,” or “pollutants,” or words of similar import, under any applicable Environmental
Law; and (c) any other chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority under Environmental Laws.




          “Indebtedness” shall mean, as to any Person, without duplication, (i) all indebtedness
(including principal, interest, fees and charges) of such Person for borrowed money or for the
deferred purchase price of property or services, (ii) the maximum amount available to be drawn
under all letters of credit issued for the account of such Person and all unpaid drawings in
respect of such letters of credit, (iii) all Indebtedness of the types described in clause (i),
(ii), (iv), (v), (vi), (vii) or (viii) of this definition secured by any Lien on any property owned
by such Person, whether or not such Indebtedness has been assumed by such Person (to the extent of
the value of the respective property), (iv) all Capitalized Lease Obligations of such Person, (v)
all obligations of such person to pay a specified purchase price for goods or services, whether or
not delivered or accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent
Obligations of such Person, (vii) all obligations under any Interest Rate Protection Agreement or
Other Hedging Agreement or under any similar type of agreement; and (viii) the maximum amount
available to be drawn under all Letters of Credit issued for the account of such Person and all
Unpaid Drawings in respect of such Letters of Credit; provided that Indebtedness shall in any event
not include (x) trade payables and expenses accrued in the ordinary course of business and (y) any
obligation under the Transocean Tax Sharing Agreement as in effect on the Effective Date.




          “Intercompany Loans” shall have the meaning provided in Section 9.05(vi).




          “Interest Determination Date” shall mean, with respect to any Loan, the second
Business Day prior to the commencement of any Interest Period relating to such Loan.




          “Interest Period” shall have the meaning provided in Section 1.09.




          “Interest Rate Protection Agreement” shall mean any interest rate swap agreement,
interest rate cap agreement, interest collar agreement, interest rate hedging agreement, interest
rate floor agreement or other similar agreement or arrangement.




          “Investments” shall have the meaning provided in Section 9.05.




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          “IRS” shall mean the Internal Revenue Service, or any successor thereto.




          “Issuing Lender” shall mean the Administrative Agent and any Lender (which, for
purposes of this definition, also shall include any banking affiliate of any Lender which has
agreed to issue Letters of Credit under this Agreement) which at the request of the Borrower and
with the consent of the Administrative Agent (which consent shall not be unreasonably withheld)
agrees, in such Lender’s sole discretion, to become an Issuing Lender for the purpose of issuing
Letters of Credit pursuant to Section 2.01.




          “Lead Arranger” shall mean Nordea Bank Finland plc, New York Branch, in its capacity
as lead arranger and bookrunner in respect of the credit facility provided for herein.




          “Leaseholds” of any Person means all the right, title and interest of such Person as
lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures.




          “Lender” shall mean each financial institution listed on Schedule I, as well as any
Person which becomes a “Lender” hereunder pursuant to 13.04(b).




          “Lender Default” shall mean (i) the refusal (which has not been retracted) or other
failure (which has not been cured) of a Lender to make available its portion of any Borrowing
required to be made in accordance with the terms of this Agreement as then in effect or (ii) a
Lender having notified in writing the Borrower and/or the Administrative Agent that it does not
intend to comply with its obligations under Sections 1.01 or 2.03.




          “Letter of Credit” shall have the meaning provided in Section 2.01(a).




          “Letter of Credit Fee” shall have the meaning provided in Section 3.01(c).




          “Letter of Credit Outstandings” shall mean, at any time, the sum of (i) the aggregate
Stated Amount of all outstanding Letters of Credit and (ii) the amount of all Unpaid Drawings.




          “Letter of Credit Request” shall have the meaning provided in Section 2.02(a).




          “Leverage Ratio” shall mean, at any date of determination, the ratio of Consolidated
Indebtedness on such date to Consolidated Total Capitalization on such date.




          “Lien” shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or other security
agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or
other title retention agreement, any financing or similar statement or notice filed under the UCC
or any other similar recording or notice statute, and any lease having substantially the same
effect as any of the foregoing).




          “Loan” shall have the meaning provided in Section 1.01.




          “Management Agreements” shall have the meaning provided in Section 5.05.




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          “Margin Stock” shall have the meaning provided in Regulation U.




          “Master Vessel and Trust Agreement” shall have the meaning provided in Section 5.18.




          “Material Adverse Effect” shall mean a material adverse effect on (x) the property,
assets, nature of assets, business, operations, liabilities or condition (financial or otherwise)
of the Borrower and/or its Subsidiaries taken as a whole since December 31, 2004, or (y) the rights
or remedies of the Lenders or the ability of the Credit Parties to perform their Obligations.




          “Maturity Date” shall mean the fourth anniversary of the Effective Date.




          “Minimum Borrowing Amount” shall mean, $1,000,000 .




          “Moody’s” shall mean Moody’s Investors Service, Inc. and its successors.




          “Mortgaged Vessels” shall have the meaning provided in Section 5.15.




          “NAIC” shall mean the National Association of Insurance Commissioners (and its
successors from time to time).




          “Negative Pledge Agreement” shall have the meaning provided in Section 9.17.




          “Net Cash Proceeds” shall mean, with respect to any Collateral Disposition the
aggregate cash payments (including any cash received by way of deferred payment pursuant to a note
receivable issued in connection with such Collateral Disposition or equity issuance, other than the
portion of such deferred payment constituting interest, but only as and when received) received by
the Borrower from such Collateral Disposition, net of (i) reasonable transaction costs (including,
without limitation, reasonable attorney’s fees) and sales commissions and (ii) the estimated
marginal increase in income taxes and any stamp tax payable by the Borrower or any of its
Subsidiaries as a result of such Collateral Disposition.




          “Net Worth” shall mean, as to any Person, the sum of its capital stock, capital in
excess of par or stated value of shares of its capital stock, retained earnings and any other
account which, in accordance with GAAP, constitutes stockholders’ equity, but excluding any
treasury stock.




          “Non-Defaulting Lender” shall mean and include each Lender other than a Defaulting
Lender.




          “Non-U.S. Pension Plan” shall mean any plan, fund (including, without limitation, any
superannuation fund) or other similar program established or maintained outside the United States
of America by the Borrower or any one or more of its Subsidiaries primarily for the benefit of
employees of the Borrower or such Subsidiaries residing outside the United States of America, which
plan, fund or other similar program provides, or results in, retirement income, a deferral of
income in contemplation of retirement or payments to be made upon termination of employment, and
which plan is not subject to ERISA or the Code.




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          “Note” shall have the meaning provided in Section 1.05(a).




          “Notice of Borrowing” shall have the meaning provided in Section 1.03.




          “Notice of Conversion/Continuation” shall have the meaning provided in Section 1.07.




          “Notice Office” shall mean the office of the Administrative Agent located at 437
Madison Avenue, 21st Floor, New York, NY 10022, or such other office within the United
States as the Administrative Agent may hereafter designate in writing as such to the other parties
hereto.




          “Obligations” shall mean all amounts owing to the Administrative Agent, the Collateral
Agent or any Lender, each Issuing Lender pursuant to the terms of this Agreement or any other
Credit Document.




          “OPA” shall mean the Oil Pollution Act of 1990, as amended, 33 U.S.C. § 2701
et seq.




          “Other Hedging Agreement” shall mean any foreign exchange contracts, currency swap
agreements, commodity agreements or other similar agreements or arrangements designed to protect
against the fluctuations in currency or commodity values.




          “Participant” shall have the meaning provided in Section 2.03(a).




          “PATRIOT Act” shall have the meaning provided in Section 13.20.




          “Payment Date” shall mean the last day of each March, June, September and December,
commencing March 31, 2006.




          “Payment Office” shall mean the office of the Administrative Agent located at 437
Madison Avenue, 21st Floor, New York, NY 10022, or such other office as the
Administrative Agent may hereafter designate in writing as such to the other parties hereto.




          “PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to
Section 4002 of ERISA, or any successor thereto.




          “Percentage” of any Lender at any time shall mean a fraction (expressed as a
percentage) the numerator of which is the Commitment of such Lender at such time and the
denominator of which is the Total Commitment at such time, provided that if the Percentage
of any Lender is to be determined after the Total Commitment has been terminated, then the
Percentages of the Lenders shall be determined immediately prior (and without giving effect) to
such termination.




          “Permitted Liens” shall have the meaning provided in Section 9.01.




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          “Person” shall mean any individual, partnership, joint venture, firm, corporation,
association, trust or other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.




          “Plan” shall mean any pension plan as defined in Section 3(2) of ERISA, which is
maintained or contributed to by (or to which there is an obligation to contribute of) the Borrower
or a Subsidiary of the Borrower or any ERISA Affiliate, and each such plan for the five-year period
immediately following the latest date on which the Borrower, or a Subsidiary of the Borrower or any
ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan.




          “Pledge Agreement” shall have the meaning provided in Section 5.07.




          “Pledge Agreement Collateral” shall mean all “Collateral” as defined in the Pledge
Agreement.




          “Pledged Securities” shall mean “Securities” as defined in the Pledge Agreement
pledged (or required to be pledged) pursuant thereto.




          “Prime Rate” shall mean the rate which the Administrative Agent announces from time to
time as its prime lending rate, the Prime Rate to change when and as such prime lending rate
changes. The Prime Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. The Administrative Agent may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.




          “Qualified Preferred Stock” shall mean any preferred stock so long as the terms of any
such preferred stock (i) do not contain any mandatory put, redemption, repayment, sinking fund or
other similar provision occurring prior to one year after the Maturity Date, (ii) do not require
the cash payment of dividends, (iii) do not contain any covenants other than periodic reporting
requirements, (iv) do not grant the holder thereof any voting rights except for voting rights on
fundamental matters such as mergers, consolidations, sales of all or substantially all of the
assets of the issuer thereof, or liquidations involving the issuer thereof and other voting rights
which holders of common stock may have and (v) any other preferred stock that satisfies (i)
and (iii) of this definition of Qualified Preferred Stock and that is otherwise issuable or may be
distributed pursuant to a shareholders’ rights plan of the Borrower; provided
however, any Dividend or similar feature of such Qualified Preferred Stock shall only be
declared and paid in accordance with Section 9.03 of this Agreement.




          “Real Property” of any Person shall mean all the right, title and interest of such
Person in and to land, improvements and fixtures, including Leaseholds.




          “Refinancing” shall have the meaning provided in Section 5.13.




          “Register” shall have the meaning provided in Section 13.16.




          “Regulation D” shall mean Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a portion thereof
establishing reserve requirements.




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          “Regulation T” shall mean Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a portion thereof.




          “Regulation U” shall mean Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a portion thereof.




          “Regulation X” shall mean Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a portion thereof.




          “Replaced Lender” shall have the meaning provided in Section 1.13.




          “Replacement Lender” shall have the meaning provided in Section 1.13.




          “Reportable Event” shall mean an event described in Section 4043(c) of ERISA with
respect to a Plan that is subject to Title IV of ERISA other than those events as to which the
30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation
Section 4043.




          “Required Lenders” shall mean Lenders, the sum of whose outstanding Commitments at
such time represent an amount greater than 50% of the Total Commitment (or if determined after
termination of the Total Commitments, the principal amount of outstanding Loans and the Percentage
of Letter of Credit Outstandings) at such time.




          “Returns” shall have the meaning provided in Section 7.09.




          “S&P” shall mean Standard & Poor’s Rating Services, a division of the McGraw-Hill
Companies, Inc., and its successors.




          “Scheduled Repayment” shall have the meaning provided in Section 4.02(e).




          “SEC” shall mean the Securities and Exchange Commission, or any Governmental Authority
succeeding to any of its principal functions.




          “Securities Act” shall mean the Securities Act of 1933, as amended.




          “Security Documents” shall mean each Pledge Agreement, each Assignment of Earnings,
each Assignment of Insurances, each Vessel Mortgage, each Master Vessel and Trust Agreement and,
after the execution and delivery thereof, each additional security document executed pursuant to
Section 8.11 or Section 8.16.




          “Shareholders’ Agreements” shall have the meaning provided in Section 5.05.




          “Stated Amount” of each Letter of Credit shall, at any time, mean the maximum amount
available to be drawn thereunder (in each case determined without regard to whether any conditions
to drawing could then be met).




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          “Subsidiaries Guaranty” shall have the meaning provided Section 5.06.




          “Subsidiary” shall mean, as to any Person, (i) any corporation more than 50% of whose
stock of any class or classes having by the terms thereof ordinary voting power to elect a majority
of the directors of such corporation (irrespective of whether or not at the time stock of any class
or classes of such corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person
and (ii) any partnership, limited liability company, association, joint venture or other entity in
which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity
interest at the time. Notwithstanding the foregoing, for all purposes of this Agreement (other
than in the definition of “Consolidated Net Indebtedness”, the financial covenants described in
Sections 9.07, 9.08, 9.09 and 9.10 and the definitions used therein), the Unrestricted Subsidiaries
shall not constitute Subsidiaries of the Borrower.




          “Subsidiary Guarantor” shall mean each direct and indirect Subsidiary of the Borrower
which owns a Mortgaged Vessel or which owns, directly or indirectly, any of the capital stock of
any such direct or indirect Subsidiary.




          “Tax Sharing Agreement” shall have the meaning provided in Section 5.05.




          “Taxes” shall have the meaning provided in Section 4.04(a).




          “Term-Out Option” shall have the meaning provided in Section 4.02(e).




          “Term-Out Period” shall have the meaning provided in Section 4.02(e).




          “Test Period” shall mean each period of four consecutive fiscal quarters then last
ended, in each case taken as one accounting period.




          “Total Commitment” shall mean, at any time, the sum of the Commitments of the Lenders
at such time.




          “Total Unutilized Commitment” shall mean, at any time, the sum of the Unutilized
Commitments of the Lenders at such time.




          “Transferred Vessel” shall have the meaning provided in the definition of “Flag
Jurisdiction Transfer” in this Section 11.




          “Transocean Tax Sharing Agreement” shall mean that certain Tax Sharing Agreement,
dated as of February 4, 2004 between Transocean Holdings Inc. and the Borrower.




          “Type” shall mean the type of Loan determined with regard to the interest option
applicable thereto, i.e., whether a Base Rate Loan or a Eurodollar Loan.




          “UCC” shall mean the Uniform Commercial Code as from time to time in effect in the
relevant jurisdiction.




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          “Unfunded Current Liability” of any Plan shall mean the amount, if any, by which the
value of the accumulated plan benefits under the Plan determined on a plan termination basis in
accordance with actuarial assumptions at such time consistent with those prescribed by the PBGC for
purposes of Section 4044 of ERISA, exceeds the fair market value of all plan assets allocable to
such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions).




          “United States” and “U.S.” shall each mean the United States of America.




          “Unpaid Drawing” shall have the meaning provided in Section 2.04(a).




          “Unrestricted Subsidiaries” shall mean each of the subsidiaries listed on Schedule XV
and, upon meeting the criteria of the definition of a Subsidiary of the Borrower, Delta Towing
Holdings, LLC and Delta Towing LLC.




          “Unutilized Commitment” shall mean, with respect to any Lender, at any time, an amount
equal to such Lender’s Commitment at such time, less the aggregate principal amount of Loans made
by such Lender then outstanding plus such Lender’s Percentage of Letter of Credit
Outstandings at such time.




          “Vessel” shall mean, collectively, all drilling rigs, including jackup rigs,
submersible rigs, semi-submersible rigs, barge rigs or drill ships or any other drilling rig
reasonably acceptable to the Administrative Agent, at any time owned by the Borrower and its
Subsidiaries, and, individually, any of such vessels.




          “Vessel Exchange” shall mean the exchange of a Mortgaged Vessel for a Vessel which
constitutes an Acceptable Replacement Vessel, provided that (i) the provisions of Sections
8.16 and 9.02 are satisfied in connection therewith and (ii) the Administrative Agent shall have
received a certificate, dated the Vessel Exchange Date, signed by a senior financial officer of the
Borrower which certificate shall set forth the calculations required to establish whether the
Borrower is in compliance with the provisions of Section 9.11 after giving effect to such Vessel
Exchange and certifying that the replacement Vessel constitutes an Acceptable Replacement Vessel
and that the provisions of Section 8.16 and Section 9.02(i) are satisfied in
connection therewith. Upon the occurrence of a Vessel Exchange, the Collateral Agent shall,
at the request of the Borrower, terminate and release all Liens on the replaced Vessel subject to
such Vessel Exchange.




          “Vessel Exchange Date” shall mean each date on which a Vessel Exchange occurs.




          “Vessel Mortgages” shall have the meaning set forth in Section 5.15.




          “Wholly-Owned Subsidiary” shall mean, as to any Person, (i) any corporation 100% of
whose capital stock is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, limited liability company, association, joint
venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such
Person has a 100% equity interest at such time (other than, in the case of a Foreign Subsidiary of
the Borrower with respect to the preceding clauses (i) and (ii),






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director’s qualifying shares
and/or other nominal amount of shares required to be held by Persons other than the Borrower and
its Subsidiaries under applicable law).




          “Working Capital Ratio” shall mean, at any date of determination, the ratio of (x)
Consolidated Current Assets on such date plus the Total Unutilized Commitment on such date
to (y) Consolidated Current Liabilities on such date.




          SECTION 12. Agency and Security Trustee Provisions.




          12.01 Appointment. (a) The Lenders hereby designate Nordea Bank Finland plc, New York
Branch, as Administrative Agent (for purposes of this Section 12, the term “Administrative
Agent” shall include Nordea Bank Finland plc, New York Branch (and/or any of its affiliates) in
its capacity as Collateral Agent pursuant to the Security Documents and in its capacity as security
trustee pursuant to the Vessel Mortgages) to act as specified herein and in the other Credit
Documents. Each Lender hereby irrevocably authorizes, and each holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize, the Agents to take such action on
its behalf under the provisions of this Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and to exercise such powers and to perform
such duties hereunder and thereunder as are specifically delegated to or required of the Agents by
the terms hereof and thereof and such other powers as are reasonably incidental thereto. The
Agents may perform any of its duties hereunder by or through its respective officers, directors,
agents, employees or affiliates and, may assign from time to time any or all of its rights, duties
and obligations hereunder and under the Security Documents to any of its banking affiliates.




          (b) The Lenders hereby irrevocably appoint Nordea Bank Finland plc, New York Branch as
security trustee solely or the purpose of holding legal title to the Vessel Mortgages on behalf of
the applicable Lenders, from time to time, with regard to the (i) security, powers, rights, titles,
benefits and interests (both present and future) constituted by and conferred on the Lenders or any
of them or for the benefit thereof under or pursuant to the Vessel
Mortgages (including, without limitation, the benefit of all covenants, undertakings,
representations, warranties and obligations given, made or undertaken by any Lender in the Vessel
Mortgages), (ii) all money, property and other assets paid or transferred to or vested in any
Lender or any agent of any Lender or received or recovered by any Lender or any agent of any Lender
pursuant to, or in connection with the Vessel Mortgages, whether from the Borrower or any
Subsidiary Guarantor or any other person and (iii) all money, investments, property and other
assets at any time representing or deriving from any of the foregoing, including all interest,
income and other sums at any time received or receivable by any Lender or any agent of any Lender
in respect of the same (or any part thereof). Nordea Bank Finland plc, New York Branch hereby
accepts such appointment as security trustee.




          12.02 Nature of Duties. The Agents shall have no duties or responsibilities except
those expressly set forth in this Agreement and the Security Documents. None of the Agents nor any
of their respective officers, directors, agents, employees or affiliates shall be liable for any
action taken or omitted by it or them hereunder or under any other Credit Document or in connection
herewith or therewith, unless caused by such Person’s gross negligence or willful misconduct (any
such liability limited to the applicable Agent to whom





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such Person relates). The duties of each of
the Agents shall be mechanical and administrative in nature; none of the Agents shall have by
reason of this Agreement or any other Credit Document any fiduciary relationship in respect of any
Lender or the holder of any Note; and nothing in this Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose upon any Agents any
obligations in respect of this Agreement or any other Credit Document except as expressly set forth
herein or therein.




          12.03 Lack of Reliance on the Agents. Independently and without reliance upon the
Agents, each Lender and the holder of each Note, to the extent it deems appropriate, has made and
shall continue to make (i) its own independent investigation of the financial condition and affairs
of the Borrower and its Subsidiaries in connection with the making and the continuance of the Loans
and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the
creditworthiness of the Borrower and its Subsidiaries and, except as expressly provided in this
Agreement, none of the Agents shall have any duty or responsibility, either initially or on a
continuing basis, to provide any Lender or the holder of any Note with any credit or other
information with respect thereto, whether coming into its possession before the making of the Loans
or at any time or times thereafter. None of the Agents shall be responsible to any Lender or the
holder of any Note for any recitals, statements, information, representations or warranties herein
or in any document, certificate or other writing delivered in connection herewith or for the
execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility,
priority or sufficiency of this Agreement or any other Credit Document or the financial condition
of the Borrower and its Subsidiaries or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this Agreement or any
other Credit Document, or the financial condition of the Borrower and its Subsidiaries or the
existence or possible existence of any Default or Event of Default.




          12.04 Certain Rights of the Agents. If any of the Agents shall request instructions
from the Required Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any other Credit Document, the Agents shall be entitled to
refrain from such act or taking such action unless and until the Agents shall have received
instructions from the Required Lenders; and the Agents shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, no Lender or the holder of any Note shall
have any right of action whatsoever against the Agents as a result of any of the Agents acting or
refraining from acting hereunder or under any other Credit Document in accordance with the
instructions of the Required Lenders.




          12.05 Reliance. Each of the Agents shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex,
teletype or telecopier message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by any Person that the applicable Agent believed to be the proper Person, and,
with respect to all legal matters pertaining to this Agreement and any other Credit Document and
its duties hereunder and thereunder, upon advice of counsel selected by the Administrative Agent.




          12.06 Indemnification. To the extent any of the Agents is not reimbursed and
indemnified by the Borrower, the Lenders will reimburse and indemnify the applicable Agents, in
proportion to their respective “percentages” as used in determining the Required Lenders






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(without
regard to the existence of any Defaulting Lenders), for and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or
disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by
such Agents in performing their respective duties hereunder or under any other Credit Document, in
any way relating to or arising out of this Agreement or any other Credit Document; provided
that no Lender shall be liable in respect to an Agent for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from such Agent’s gross negligence or willful misconduct.




          12.07 The Administrative Agent in its Individual Capacity. With respect to its
obligation to make Loans under this Agreement, each of the Agents shall have the rights and powers
specified herein for a “Lender” and may exercise the same rights and powers as though it were not
performing the duties specified herein; and the term “Lenders,” “Required Lenders”, “holders of
Notes” or any similar terms shall, unless the context clearly otherwise indicates, include each of
the Agents in their respective individual capacity. Each of the Agents may accept deposits from,
lend money to, and generally engage in any kind of banking, trust or other business with any Credit
Party or any Affiliate of any Credit Party as if it were not performing the duties specified
herein, and may accept fees and other consideration from the Borrower or any other Credit Party for
services in connection with this Agreement and otherwise without having to account for the same to
the Lenders.




          12.08 Holders. The Administrative Agent may deem and treat the payee of any Note as
the owner thereof for all purposes hereof unless and until a written notice of the assignment,
transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative
Agent. Any request, authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or of any
Note or Notes issued in exchange therefor.




          12.09 Resignation by the Administrative Agent. (a) The Administrative Agent may
resign from the performance of all its functions and duties hereunder and/or under the other Credit
Documents at any time by giving 15 Business Days’ prior written notice to the Borrower and the
Lenders. Such resignation shall take effect upon the appointment of a successor Administrative
Agent pursuant to clauses (b) and (c) below or as otherwise provided below.




          (b) Upon any such notice of resignation by the Administrative Agent, the Required Lenders
shall appoint a successor Administrative Agent hereunder or thereunder who shall be a commercial
bank or trust company reasonably acceptable to the Borrower.




          (c) If a successor Administrative Agent shall not have been so appointed within such 15
Business Day period, the Administrative Agent, with the consent of the Borrower (which shall not be
unreasonably withheld or delayed), shall then appoint a commercial bank or trust company with
capital and surplus of not less than $500,000,000 as successor Administrative Agent who shall serve
as Administrative Agent hereunder or thereunder until such time, if any, as the Lenders appoint a
successor Administrative Agent as provided above.





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          (d) If no successor Administrative Agent has been appointed pursuant to clause (b) or (c)
above by the 25th Business Day after the date such notice of resignation was given by the
Administrative Agent, the Administrative Agent’s resignation shall become effective and the
Required Lenders shall thereafter perform all the duties of the Administrative Agent hereunder
and/or under any other Credit Document until such time, if any, as the Required Lenders appoint a
successor Administrative Agent as provided above.




          12.10 The Lead Arranger. Notwithstanding any other provision of this Agreement or any
provision of any other Credit Document, the Lead Arranger is named as such for recognition purposes
only, and in its capacity as such shall have no powers, duties, responsibilities or liabilities
with respect to this Agreement or the other Credit Documents or the transactions contemplated
hereby and thereby; it being understood and agreed that the Lead Arranger shall be entitled to all
indemnification and reimbursement rights in favor of any of the Agents as provided for under
Sections 12.06 and 13.01. Without limitation of the foregoing, the Lead Arranger shall not, solely
by reason of this Agreement or any other Credit Documents, have any fiduciary relationship in
respect of any Lender or any other Person.




          SECTION 13. Miscellaneous.




          13.01 Payment of Expenses, etc. The Borrower agrees that it shall: (i) whether or
not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs
and expenses of each of the Agents (including, without limitation, the reasonable fees and
disbursements of White & Case LLP, Royston, Rayzor, Vickery & Williams, L.L.P., other counsel to
the Administrative Agent and the Lead Arrangers and local counsel) in connection with the
preparation, execution and delivery of this Agreement and the other Credit Documents and the
documents and instruments referred to herein and therein and any amendment, waiver or consent
relating hereto or thereto, of the Agents in connection with their respective syndication efforts
with respect to this Agreement and of the Agents and each of the Lenders in connection with the
enforcement of this Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein (including, without limitation, the reasonable fees and
disbursements of outside counsel for each of the Agents and for each of the Lenders); (ii) pay and
hold each of the Lenders harmless from and against any and all present and future stamp,
documentary, transfer, sales and use, value added, excise and other similar taxes with respect to
the foregoing matters and save each of the Lenders harmless from and against any and all
liabilities with respect to or resulting from any delay or omission (other than to the extent
attributable to such Lender) to pay such taxes; and (iii) indemnify the Agents, the Collateral
Agent and each Lender, and each of their respective officers, directors, trustees, employees,
representatives and agents from and hold each of them harmless against any and all liabilities,
obligations (including removal or remedial actions), losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses and disbursements (including reasonable attorneys’ and
consultants’ fees and disbursements) incurred by, imposed on or assessed against any of them as a
result of, or arising out of, or in any way related to, or by reason of, (a) any investigation,
litigation or other proceeding (whether or not any of the Agents, the Collateral Agent or any
Lender is a party thereto) related to the entering into and/or performance of this Agreement or any
other Credit Document or the proceeds of any Loans hereunder or the consummation of any
transactions contemplated herein, or in any other Credit Document or the exercise of any of their
rights or remedies provided herein or in the other Credit Documents, or (b) the actual or alleged





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presence of Hazardous Materials on any Vessel or in the air, surface water or groundwater or on the
surface or subsurface of any property at any time owned or operated by the Borrower or any of its
Subsidiaries, the generation, storage, transportation, handling, disposal or Environmental Release
of Hazardous Materials at any location, whether or not owned or operated by the Borrower or any of
its Subsidiaries, the non-compliance of any Vessel or property with foreign, federal, state and
local laws, regulations, and ordinances (including applicable permits thereunder) applicable to any
Vessel or property, or any Environmental Claim asserted against the Borrower, any of its
Subsidiaries or any Vessel or property at any time owned or operated by the Borrower or any of its
Subsidiaries, including, in each case, without limitation, the reasonable fees and disbursements of
counsel and other consultants incurred in connection with any such investigation, litigation or
other proceeding (but excluding any losses, liabilities, claims, damages, penalties, actions,
judgments, suits, costs, disbursements or expenses to the extent incurred by reason of the gross
negligence or willful misconduct of the Person to be
indemnified). To the extent that the undertaking to indemnify, pay or hold harmless each of
the Agents or any Lender set forth in the preceding sentence may be unenforceable because it
violates any law or public policy, the Borrower shall make the maximum contribution to the payment
and satisfaction of each of the indemnified liabilities which is permissible under applicable law.




          13.02 Right of Setoff. In addition to any rights now or hereafter granted under
applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence
and during the continuance of an Event of Default, each Lender is hereby authorized at any time or
from time to time, without presentment, demand, protest or other notice of any kind to any
Subsidiary or the Borrower or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by such Lender (including, without limitation, by branches
and agencies of such Lender wherever located) to or for the credit or the account of the Borrower
or any Subsidiary but in any event excluding assets held in trust for any such Person against and
on account of the Obligations and liabilities of the Borrower or such Subsidiary, as applicable, to
such Lender under this Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations purchased by such Lender pursuant to Section 13.06(b), and
all other claims of any nature or description arising out of or connected with this Agreement or
any other Credit Document, irrespective of whether or not such Lender shall have made any demand
hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent
or unmatured.




          13.03 Notices. Except as otherwise expressly provided herein, all notices and other
communications provided for hereunder shall be in writing (including telexed, telegraphic or
telecopier communication) and mailed, telexed, telecopied or delivered: if to the Borrower, at the
Borrower’s address specified under its signature below; if to any Lender, at its address specified
opposite its name on Schedule II below; and if to the Administrative Agent, at its Notice Office;
or, as to any other Credit Party, at such other address as shall be designated by such party in a
written notice to the other parties hereto and, as to each Lender, at such other address as shall
be designated by such Lender in a written notice to the Borrower and the Administrative Agent. All
such notices and communications shall, (i) when mailed, be effective three Business Days after
being deposited in the mails, prepaid and properly addressed for delivery, (ii) when sent by
overnight courier, be effective one Business Day after delivery to the




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overnight courier prepaid
and properly addressed for delivery on such next Business Day, or (iii) when sent by telex or
telecopier, be effective when sent by telex or telecopier, except that notices and communications
to the Administrative Agent shall not be effective until received by the Administrative Agent.




          13.04 Benefit of Agreement. (a) This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of the parties hereto;
provided, however, that (i) no Credit Party may assign or transfer any of its rights, obligations
or interest hereunder
or under any other Credit Document without the prior written consent of the Lenders, (ii)
although any Lender may transfer, assign or grant participations in its rights hereunder, such
Lender shall remain a “Lender” for all purposes hereunder (and may not transfer or assign all or
any portion of its Commitments hereunder except as provided in Section 13.04(b)) and the
transferee, assignee or participant, as the case may be, shall not constitute a “Lender” hereunder
and (iii) no Lender shall transfer or grant any participation under which the participant shall
have rights to approve any amendment to or waiver of this Agreement or any other Credit Document
except to the extent such amendment or waiver would (x) extend the final scheduled maturity of any
Loan or Note in which such participant is participating, or reduce the rate or extend the time of
payment of interest or Commitment Commission thereon (except in connection with a waiver of
applicability of any post-default increase in interest rates) or reduce the principal amount
thereof, or increase the amount of the participant’s participation over the amount thereof then in
effect (it being understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Total Commitments shall not constitute a change in the terms of such
participation, and that an increase in any Commitment or Loan shall be permitted without the
consent of any participant if the participant’s participation is not increased as a result
thereof), (y) consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement or (z) release all or substantially all of the Collateral under
all of the Security Documents (except as expressly provided in the Credit Documents) securing the
Loans hereunder in which such participant is participating. In the case of any such participation,
the participant shall not have any rights under this Agreement or any of the other Credit Documents
(the participant’s rights against such Lender in respect of such participation to be those set
forth in the agreement executed by such Lender in favor of the participant relating thereto) and
all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold
such participation.




          (b) Notwithstanding the foregoing, any Lender (or any Lender together with one or more other
Lenders) may (x) assign all or a portion of its Commitment (and related outstanding Obligations
hereunder), to its (i) parent company and/or any affiliate of such Lender which is at least 50%
owned by such Lender or its parent company or (ii) in the case of any Lender that is a fund that
invests in bank loans, any other fund that invests in bank loans and is managed or advised by the
same investment advisor of such Lender or by an Affiliate of such investment advisor or (iii) to
one or more Lenders or (y) assign with the consent of the Borrower (which consent shall not be (i)
required if a Default or Event of Default has occurred and is continuing and (ii) unreasonably
withheld or delayed) all, or if less than all, a portion equal to at least $5,000,000 in the
aggregate for the assigning Lender or assigning Lenders, of such Commitments, hereunder to one or
more Eligible Transferees (treating any fund that invests in bank loans and any other fund that
invests in bank loans and is managed or advised by the same investment advisor of such fund or by
an Affiliate of such investment advisor as a single Eligible





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Transferee), each of which assignees
shall become a party to this Agreement as a Lender by execution of an Assignment and Assumption
Agreement, provided that (i) at such time Schedule I shall be deemed modified to reflect the
Commitments of such new Lender and of the existing Lenders, (ii) new Notes will be issued, at the
Borrower’s expense, to such new Lender and to the assigning Lender upon the request of such new
Lender or assigning Lender, such new Notes to be in conformity with the requirements of Section
1.05 (with appropriate modifications) to the extent needed to reflect the revised Commitments,
(iii) the consent of the Administrative Agent shall be required in connection with any assignment
pursuant to preceding clause (y) (which
consent shall not be unreasonably withheld or delayed), and (iv) the Administrative Agent
shall receive at the time of each such assignment, from the assigning or assignee Lender, the
payment of a non-refundable assignment fee of $3,000. To the extent of any assignment pursuant to
this Section 13.04(b), the assigning Lender shall be relieved of its obligations hereunder with
respect to its assigned Commitments (it being understood that the indemnification provisions under
this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06)
shall survive as to such assigning Lender). To the extent that an assignment of all or any portion
of a Lender’s Commitments and related outstanding Obligations pursuant to Section 1.13 or this
Section 13.04(b) would, at the time of such assignment, result in increased costs under Section
1.10, 1.11 or 4.04 from those being charged by the respective assigning Lender prior to such
assignment, then the Borrower shall not be obligated to pay such increased costs (although the
Borrower shall be obligated to pay any other increased costs of the type described above resulting
from changes after the date of the respective assignment).




          (c) Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans and
Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such
Federal Reserve Bank and, with the consent of the Administrative Agent, any Lender which is a fund
may pledge all or any portion of its Notes or Loans to a trustee for the benefit of investors and
in support of its obligation to such investors.




          13.05 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Administrative Agent or any Lender or any holder of any Note in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing between the
Borrower or any other Credit Party and the Administrative Agent or any Lender or the holder of any
Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or under any other Credit Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder.
The rights, powers and remedies herein or in any other Credit Document expressly provided are
cumulative and not exclusive of any rights, powers or remedies which the Administrative Agent or
any Lender or the holder of any Note would otherwise have. No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or
any Lender or the holder of any Note to any other or further action in any circumstances without
notice or demand.




          13.06 Payments Pro Rata. (a) Except as otherwise provided in this Agreement, the
Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of
the Borrower in respect of any Obligations hereunder, it shall distribute such payment to the
Lenders (other than any Lender that has consented in writing to waive its pro rata
share of





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any such payment) pro rata based upon their respective shares, if any, of
the Obligations with respect to which such payment was received.




          (b) Each of the Lenders agrees that, if it should receive any amount hereunder (whether by
voluntary payment, by realization upon security, by the exercise of the right of
setoff or banker’s lien, by counterclaim or cross action, by the enforcement of any right
under the Credit Documents, or otherwise), which is applicable to the payment of the principal of,
or interest on, the Loans or Commitment Commission, of a sum which with respect to the related sum
or sums received by other Lenders is in a greater proportion than the total of such Obligation then
owed and due to such Lender bears to the total of such Obligation then owed and due to all of the
Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall
purchase for cash without recourse or warranty from the other Lenders an interest in the
Obligations of the respective Credit Party to such Lenders in such amount as shall result in a
proportional participation by all the Lenders in such amount; provided that if all or any
portion of such excess amount is thereafter recovered from such Lender, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but without interest.




          (c) Notwithstanding anything to the contrary contained herein, the provisions of the preceding
Sections 13.06(a) and (b) shall be subject to the express provisions of this Agreement which
require, or permit, differing payments to be made to Non-Defaulting Lenders as opposed to
Defaulting Lenders.




          13.07 Calculations; Computations. (a) The financial statements to be furnished to
the Lenders pursuant hereto shall be made and prepared in accordance with generally accepted
accounting principles in the United States consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to
the Lenders). In addition, all computations determining compliance with Sections 9.07 through
9.11, inclusive, shall utilize accounting principles and policies in conformity with those used to
prepare the historical financial statements delivered to the Lenders for the first fiscal year of
the Borrower ended December 31, 2004 (with the foregoing generally accepted accounting principles,
subject to the preceding proviso, herein called “GAAP”). Unless otherwise noted, all
references in this Agreement to “generally accepted accounting principles” shall mean generally
accepted accounting principles as in effect in the United States.




          (b) All computations of interest for Eurodollar Loans and Commitment Commission hereunder
shall be made on the basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest or Commitment
Commission are payable and all computations of interest for Base Rate Loans shall be made on the
basis of a year of 365 or 366 days, as the case may be.




          13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a) 
THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE PROVIDED IN CERTAIN OF THE VESSEL MORTGAGES, BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO
ITS CONFLICT OF LAWS RULES (OTHER THAN TITLE 14





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OF ARTICLE 5 OF THE GENERAL OBLIGATIONS LAW). ANY
LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF
THE STATE OF NEW YORK LOCATED IN THE CITY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH
OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, ANY LENDER OR THE
HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION. IF AT ANY
TIME DURING WHICH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT REMAINS IN EFFECT, THE BORROWER DOES
NOT MAINTAIN A REGULARLY FUNCTIONING OFFICE IN NEW YORK CITY, IT WILL DULY APPOINT, AND AT ALL
TIMES MAINTAIN, AN AGENT IN NEW YORK CITY FOR THE SERVICE OF PROCESS OR SUMMONS, AND WILL PROVIDE
TO THE ADMINISTRATIVE AGENT AND THE LENDERS WRITTEN NOTICE OF THE IDENTITY AND ADDRESS OF SUCH
AGENT FOR SERVICE OF PROCESS OR SUMMONS; PROVIDED THAT ANY FAILURE ON THE PART OF THE
BORROWER TO COMPLY WITH THE FOREGOING PROVISIONS OF THIS SENTENCE SHALL NOT IN ANY WAY PREJUDICE OR
LIMIT THE SERVICE OF PROCESS OR SUMMONS IN ANY OTHER MANNER DESCRIBED ABOVE IN THIS SECTION 13.08
OR OTHERWISE PERMITTED BY LAW.




          (b) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a)
ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.




          (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.





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          13.09 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent.




          13.10 Headings Descriptive. The headings of the several sections and subsections of
this Agreement are inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.




          13.11 Amendment or Waiver; etc. (a) Neither this Agreement nor any other Credit
Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless
such change, waiver, discharge or termination is in writing signed by the respective Credit Parties
party thereto and the Required Lenders, provided that no such change, waiver, discharge or
termination shall, without the consent of each Lender (other than a Defaulting Lender) (with
Obligations being directly affected in the case of following clause (i)) and in the case of the
following clause (vi), to the extent (in the case of the following clause (vi)) that any such
Lender would be required to make a Loan in excess of its pro rata portion provided
for in this Agreement or would receive a payment or prepayment of Loans or a commitment reduction
that (in any case) is less than its pro rata portion provided for in this
Agreement, in each case, as a result of any such amendment, modification or waiver referred to in
the following clause (vi)), (i) extend the final scheduled maturity of any Loan or Note, in the
event that the Borrower elects the Term-Out Option, extend the timing for or reduce the principal
amount of any Scheduled Repayment, or reduce the rate or extend the time of payment of interest on
any Loan or Note or Commitment Commission or Letter of Credit Fee (except in connection with the
waiver of applicability of any post-default increase in interest rates) or reduce the principal
amount thereof (except to the extent repaid in cash), (ii) release all or substantially all of the
Collateral (except as expressly provided in the Credit Documents) under all the Security Documents,
(iii) amend, modify or waive any provision of this Section 13.11, (iv) reduce the percentage
specified in the definition of Required Lenders (it being understood that, with the consent of the
Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the
determination of the Required Lenders on substantially the same basis as the extensions of Loans
and Commitments are included on the Effective Date), (v) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement, (vi) amend, modify or waive
Section 1.06 or amend, modify or waive any other provision in this Agreement to the extent
providing for payments or prepayments of Loans or reductions in Commitments, in each case, to be
applied pro rata among the Lenders entitled to such payments or prepayments of
Loans or reductions in Commitments (it being understood that the provision of additional extensions
of credit pursuant to this Agreement, or the waiver of any mandatory commitment reduction or any
mandatory prepayment of Loans by the Required Lenders shall not constitute an amendment,
modification or waiver for purposes of this clause (vi)), or (vii) release any Subsidiary Guarantor
from a Subsidiaries Guaranty to the extent same owns a Mortgaged Vessel (other than as provided in
the Subsidiaries Guaranty); provided, further, that no such change, waiver,
discharge or termination
shall (t) increase the Commitments of any Lender over the amount thereof then in effect
without the consent of such Lender (it being understood that waivers or modifications of conditions
precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Commitments
shall not constitute an increase of the Commitment




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of any Lender, and that an increase in the
available portion of any Commitment of any Lender shall not constitute an increase in the
Commitment of such Lender), (u) without the consent of each Issuing Lender, amend, modify or waive
any provision of Section 2 or alter its rights or obligations with respect to Letters of Credit,
(v) without the consent of each Agent, amend, modify or waive any provision of Section 12 as same
applies to such Agent or any other provision as same relates to the rights or obligations of such
Agent or (w) without the consent of the Collateral Agent, amend, modify or waive any provision
relating to the rights or obligations of the Collateral Agent.




          (b) If, in connection with any proposed change, waiver, discharge or termination to any of the
provisions of this Agreement as contemplated by clauses (i) through (v), inclusive, of the first
proviso to Sections 13.11(a), the consent of the Required Lenders is obtained but the consent of
one or more of such other Lenders whose consent is required is not obtained, then the Borrower
shall have the right, so long as all non-consenting Lenders whose individual consent is required
are treated as described in either clauses (A) or (B) below, to either (A) replace each such
non-consenting Lender or Lenders (or, at the option of the Borrower if the respective Lender’s
consent is required with respect to less than all Loans (or related Commitments), to replace only
the respective Commitments and/or Loans of the respective non-consenting Lender which gave rise to
the need to obtain such Lender’s individual consent) with one or more Replacement Lenders pursuant
to Section 1.13 so long as at the time of such replacement, each such Replacement Lender consents
to the proposed change, waiver, discharge or termination or (B) terminate such non-consenting
Lender’s Commitment (if such Lender’s consent is required as a result of its Commitment), and/or
repay outstanding Loans and terminate any outstanding Commitments of such Lender which gave rise to
the need to obtain such Lender’s consent, in accordance with Sections 4.01(b), provided
that, unless the Commitments are terminated, and Loans repaid, pursuant to preceding clause (B) are
immediately replaced in full at such time through the addition of new Lenders or the increase of
the Commitments and/or outstanding Loans of existing Lenders (who in each case must specifically
consent thereto), then in the case of any action pursuant to preceding clause (B) the Required
Lenders (determined before giving effect to the proposed action) shall specifically consent
thereto, provided, further, that in any event the Borrower shall not have the right
to replace a Lender, terminate its Commitment or repay its Loans solely as a result of the exercise
of such Lender’s rights (and the withholding of any required consent by such Lender) pursuant to
the second proviso to Section 13.11(a).




          13.12 Survival. All indemnities set forth herein including, without limitation, in
Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06 shall, subject to Section 13.14 (to the extent
applicable), survive the execution, delivery and termination of this Agreement and the Notes and
the making and repayment of the Loans.




          13.13 Domicile of Loans. Each Lender may transfer and carry its Loans at, to or for the account of any office,
Subsidiary or Affiliate of such Lender. Notwithstanding anything to the contrary contained herein,
to the extent that a transfer of Loans pursuant to this Section 13.13 would, at the time of such
transfer, result in increased costs under Section 1.10, 1.11, 2.05 or 4.04 from those being charged
by the respective Lender prior to such transfer, then the Borrower shall not be obligated to pay
such increased costs (although the Borrower shall be





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obligated to pay any other increased costs of
the type described above resulting from changes after the date of the respective transfer).




          13.14 Limitation on Additional Amounts, etc. Notwithstanding anything to the contrary
contained in Sections 1.10, 1.11, 2.05 or 4.04 of this Agreement, unless a Lender gives notice to
the Borrower that it is obligated to pay an amount under any such Section within one year after the
later of (x) the date the Lender incurs the respective increased costs, Taxes, loss, expense or
liability, reduction in amounts received or receivable or reduction in return on capital or (y) the
date such Lender has actual knowledge of its incurrence of the respective increased costs, Taxes,
loss, expense or liability, reductions in amounts received or receivable or reduction in return on
capital, then such Lender shall only be entitled to be compensated for such amount by the Borrower
pursuant to said Section 1.10, 1.11, 2.05 or 4.04, as the case may be, to the extent the costs,
Taxes, loss, expense or liability, reduction in amounts received or receivable or reduction in
return on capital are incurred or suffered on or after the date which occurs one year prior to such
Lender giving notice to the Borrower that it is obligated to pay the respective amounts pursuant to
said Section 1.10, 1.11, 2.05 or 4.04, as the case may be. This Section 13.14 shall have no
applicability to any Section of this Agreement other than said Sections 1.10, 1.11, 2.05 and 4.04.




          13.15 Confidentiality. (a) Subject to the provisions of clause (b) of this Section
13.15, each Lender agrees that it will not disclose without the prior consent of the Borrower
(other than to its employees, auditors, advisors or counsel or to another Lender if the Lender or
such Lender’s holding or parent company or board of trustees in its sole discretion determines that
any such party should have access to such information, provided such Persons shall be subject to
the provisions of this Section 13.15 to the same extent as such Lender) any information with
respect to the Borrower or any of its Subsidiaries which is now or in the future furnished pursuant
to this Agreement or any other Credit Document, provided that any Lender may disclose any
such information (i) as has become generally available to the public other than by virtue of a
breach of this Section 13.15(a) by the respective Lender, (ii) as may be required in any report,
statement or testimony submitted to any municipal, state or Federal regulatory body having or
claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal
Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere)
or their successors, (iii) as may be required in respect to any summons or subpoena or in
connection with any litigation, (iv) in order to comply with any law, order, regulation or ruling
applicable to such Lender, (v) to the Administrative Agent or the Collateral Agent and (vi) to any
prospective or actual transferee or participant in connection with any contemplated transfer or
participation of any of the Notes or Commitments or any interest therein by such Lender,
provided that such
prospective transferee expressly agrees to be bound by the confidentiality provisions
contained in this Section 13.15.




          (b) The Borrower hereby acknowledges and agrees that each Lender may share with any of its
affiliates any information related to the Borrower or any of its Subsidiaries (including, without
limitation, any nonpublic customer information regarding the creditworthiness of the Borrower or
its Subsidiaries), provided such Persons shall be subject to the provisions of this Section 13.15
to the same extent as such Lender.




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          13.16 Register. The Borrower hereby designates the Administrative Agent to serve as
the Borrower’s agent, solely for purposes of this Section 13.16, to maintain a register (the
“Register”) on which it will record the Commitments from time to time of each of the
Lenders, the Loans made by each of the Lenders and each repayment and prepayment in respect of the
principal amount of the Loans of each Lender. Failure to make any such recordation, or any error
in such recordation shall not affect the Borrower’s obligations in respect of such Loans. With
respect to any Lender, the transfer of the Commitments of such Lender and the rights to the
principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective
until such transfer is recorded on the Register maintained by the Administrative Agent with respect
to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the
transferor with respect to such Commitments and Loans shall remain owing to the transferor. The
registration of assignment or transfer of all or part of any Commitments and Loans shall be
recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative
Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section
13.04(b). Coincident with the delivery of such an Assignment and Assumption Agreement to the
Administrative Agent for acceptance and registration of assignment or transfer of all or part of a
Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the
Note evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal
amount shall be issued to the assigning or transferor Lender and/or the new Lender. The Borrower
agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages
and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the
Administrative Agent in performing its duties under this Section 13.16, except to the extent caused
by the Administrative Agent’s own gross negligence or willful misconduct.




          13.17 Judgment Currency. If for the purposes of obtaining judgment in any court it is
necessary to convert a sum due from the Borrower hereunder or under any of the Notes in the
currency expressed to be payable herein or under the Notes (the “specified currency”) into
another currency, the parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which in accordance with normal banking procedures
the Administrative Agent could purchase the specified currency with such other currency at the
Administrative Agent’s New York office on the Business Day preceding that on which final judgment
is given. The obligations of the Borrower in respect of any sum due to any Lender or the
Administrative Agent hereunder or under any Note shall, notwithstanding any judgment in a currency
other than the
specified currency, be discharged only to the extent that on the Business Day following
receipt by such Lender or the Administrative Agent (as the case may be) of any sum adjudged to be
so due in such other currency such Lender or the Administrative Agent (as the case may be) may in
accordance with normal banking procedures purchase the specified currency with such other currency;
if the amount of the specified currency so purchased is less than the sum originally due to such
Lender or the Administrative Agent, as the case may be, in the specified currency, the Borrower
agrees, to the fullest extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent, as the
case may be, against such loss, and if the amount of the specified currency so purchased exceeds
the sum originally due to any Lender or the Administrative Agent, as the case may be, in the
specified currency, such Lender or the Administrative Agent, as the case may be, agrees to remit
such excess to the Borrower.




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          13.18 Language. All correspondence, including, without limitation, all notices,
reports and/or certificates, delivered by any Credit Party to the Administrative Agent, the
Collateral Agent or any Lender shall, unless otherwise agreed by the respective recipients thereof,
be submitted in the English language or, to the extent the original of such document is not in the
English language, such document shall be delivered with a certified English translation thereof.




          13.19 Waiver of Immunity. The Borrower, in respect of itself, each other Credit
Party, its and their process agents, and its and their properties and revenues, hereby irrevocably
agrees that, to the extent that the Borrower, any other Credit Party or any of its or their
properties has or may hereafter acquire any right of immunity from any legal proceedings, whether
in the United States, any other Acceptable Flag Jurisdiction or elsewhere, to enforce or collect
upon the Obligations of the Borrower or any other Credit Party related to or arising from the
transactions contemplated by any of the Credit Documents, including, without limitation, immunity
from service of process, immunity from jurisdiction or judgment of any court or tribunal, immunity
from execution of a judgment, and immunity of any of its property from attachment prior to any
entry of judgment, or from attachment in aid of execution upon a judgment, the Borrower, for itself
and on behalf of the other Credit Parties, hereby expressly waives, to the fullest extent
permissible under applicable law, any such immunity, and agrees not to assert any such right or
claim in any such proceeding, whether in the United States, any other Acceptable Flag Jurisdiction
or elsewhere.




          13.20 USA PATRIOT Act Notice. Each Lender hereby notifies each Credit Party that
pursuant to the requirements of the USA PATRIOT Act (Title III of Pub.: 107-56 (signed into law
October 26, 2001)) (the “PATRIOT Act”), it is required to obtain, verify, and record
information that identifies each Credit Party, which information includes the name of each Credit
Party and other information that will allow such Lender to identify each Credit Party in accordance
with the PATRIOT Act, and each Credit Party agrees to provide such information from time to time to
any Lender.




* * *




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          IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute
and deliver this Agreement as of the date first above written.




	 	 	 	 	 	 	 
	 	 	TODCO,	 	 
	 

	 	 	 	as Borrower	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Dale Wilhelm	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title: Vice President	 	 
	 

	 	 	 	Address:	 	 
	 

	 	 	 	Telephone:	 	 
	 

	 	 	 	Facsimile:	 	 
	 
	 	 	 	 	 	 
	 	 	NORDEA BANK FINLAND PLC, NEW YORK BRANCH, as Administrative
Agent and as Lead Arranger

	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 






 









 






	 	 	 	 	 	 	 
	 	 	NORDEA BANK NORGE ASA, GRAND CAYMAN BRANCH

	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 






 









 






	 	 	 	 	 	 	 
	 	 	SIGNATURE PAGE TO THE CREDIT AGREEMENT DATED AS OF DECEMBER 29, 2005, AMONG
TODCO., THE LENDERS PARTY HERETO FROM TIME TO TIME, NORDEA BANK FINLAND PLC,
NEW YORK BRANCH, AS ADMINISTRATIVE AGENT AND COLLATERAL AGENT AND NORDEA BANK
FINLAND PLC, NEW YORK BRANCH, AS LEAD ARRANGER AND BOOK RUNNER
	 
	 	 	 	 	 	 
	 	 	NAME OF INSTITUTION:
	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 







 









 






SCHEDULE I




COMMITMENTS




	 	 	 	 	 
	Lender	 	Commitments	 
	NORDEA BANK NORGE ASA, GRAND CAYMAN BRANCH
	 	$	85,000,000.00	 
	HSH NORDBANK AG
	 	$	30,000,000.00	 
	NIBC BANK N.V.
	 	$	30,000,000.00	 
	AMEGY BANK NATIONAL ASSOCIATION
	 	$	30,000,000.00	 
	NATEXIS BANQUES POPULAIRES
	 	$	25,000,000.00	 
	 
	 	 	 	 
	Total
	 	$	200,000,000.00	 
	 
	 	 	 






 









 






EXHIBIT B




FORM OF NOTE




			
	$                    
	 	New York, New York
	 
	 	                         ,         






          FOR VALUE RECEIVED, TODCO, a Delaware corporation (the “Borrower”), hereby promises to
pay to [                    ] or its registered assigns (the “Lender”), in lawful money of the United
States of America in immediately available funds, at the Payment Office (as defined in the
Agreement referred to below) initially located at 437 Madison Avenue, 21st Floor, New
York, NY 10022 on the Maturity Date (as defined in the Agreement) (or if the Term-Out Option (as
defined in the Agreement) has been exercised by the Borrower, on the last day of the Term-Out
Period (as defined in the Agreement)) the principal sum of                      DOLLARS ($                    ) or, if
less, the unpaid principal amount of all Loans (as defined in the Agreement) made by the Lender
pursuant to the Agreement, payable at such times and in such amounts as are specified in the
Agreement.




          The Borrower also promises to pay interest on the unpaid principal amount of each Loan made by
the Lender in like money at said office from the date hereof until paid at the rates and at the
times provided in Section 1.08 of the Agreement.




          This Note is one of the Notes referred to in the Credit Agreement, dated as of December 29,
2005, among the Borrower, the lenders from time to time party thereto (including the Lender), and
Nordea Bank Finland plc, New York Branch, as Administrative Agent and Collateral Agent (as amended,
restated, modified and/or supplemented from time to time, the “Agreement”) and is entitled
to the benefits thereof and of the other Credit Documents (as defined in the Agreement). This Note
is secured by the Security Documents (as defined in the Agreement) and is entitled to the benefits
of the Subsidiaries Guaranty (as defined in the Agreement). As provided in the Agreement, this
Note is subject to voluntary prepayment and mandatory repayment prior to the Maturity Date, in
whole or in part, and Loans may be converted from one Type (as defined in the Agreement) into the
other Type to the extent provided in the Agreement.




          In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the
principal of and accrued interest on this Note may be declared to be due and payable in the manner
and with the effect provided in the Agreement.




          The Borrower hereby waives presentment, demand, protest or notice of any kind in connection
with this Note.




 









 








Exhibit B

Page 2




          THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW
YORK.




	 	 	 	 	 
	 	TODCO

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 









 






	 	 	 	 	 



EXHIBIT E




SUBSIDIARIES GUARANTY




          SUBSIDIARIES GUARANTY, dated as of December 29, 2005 (as amended, modified, restated and/or
supplemented from time to time, this “Guaranty”), made by each of the undersigned
guarantors (each a “Guarantor” and, together with any other entity that becomes a guarantor
hereunder pursuant to Section 25 hereof, the “Guarantors”). Except as otherwise defined
herein, capitalized terms used herein and defined in the Credit Agreement (as defined below) shall
be used herein as therein defined.




W I T N E S S E T H:




          WHEREAS, TODCO (the “Borrower”), the lenders from time to time party thereto (the
“Lenders”), Nordea Bank Finland plc, New York Branch, as Administrative Agent and as
Collateral Agent (in such capacity, together with any successor Administrative Agent, the
“Administrative Agent”), have entered into a Credit Agreement, dated as of December 29,
2005 (as amended, modified, restated and/or supplemented from time to time, the “Credit
Agreement”), providing for the making of Loans to the Borrower as contemplated therein (the
Lenders, the Collateral Agent and the Administrative Agent are herein called the “Secured
Creditors”);




          WHEREAS, each Guarantor is a direct or indirect Subsidiary of the Borrower;




          WHEREAS, it is a condition to the making of Loans to the Borrower under the Credit Agreement
that each Guarantor shall have executed and delivered this Guaranty; and




          WHEREAS, each Guarantor will obtain benefits from the incurrence of Loans to the Borrower
under the Credit Agreement and, accordingly, desires to execute this Guaranty in order to satisfy
the conditions described in the preceding paragraph;




          NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each
Guarantor, the receipt and sufficiency of which are hereby acknowledged, each Guarantor hereby
makes the following representations and warranties to the Secured Creditors and hereby covenants
and agrees with each Secured Creditor as follows:




          1. Each Guarantor, jointly and severally, irrevocably, absolutely and unconditionally
guarantees to the Secured Creditors the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of (x) the principal of, premium, if any, and interest on
the Notes issued by, and the Loans made to, the Borrower under the Credit Agreement, and (y) all
other obligations (including obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due), liabilities and indebtedness owing by the Borrower to the
Secured Creditors (in the capacities referred to in the definition of
Secured Creditors) under the Credit Agreement and each other Credit Document to which the
Borrower is a party (including, without limitation, indemnities, fees and interest thereon
(including any interest accruing after the commencement of any bankruptcy, insolvency,




 









 








Exhibit E

Page 2



receivership
or similar proceeding at the rate provided for in the Credit Agreement, whether or not such
interest is an allowed claim in any such proceeding)), whether now existing or hereafter incurred
under, arising out of or in connection with the Credit Agreement and any such other Credit Document
and the due performance and compliance by the Borrower with all of the terms, conditions and
agreements contained in all such Credit Documents (all such principal, premium, interest,
liabilities, indebtedness and obligations being herein collectively called the “Guaranteed
Obligations”). Each Guarantor understands, agrees and confirms that the Secured Creditors may
enforce this Guaranty up to the full amount of the Guaranteed Obligations against such Guarantor
without proceeding against any other Guarantor or the Borrower against any security for the
Guaranteed Obligations, or under any other guaranty covering all or a portion of the Guaranteed
Obligations.




          2. Additionally, each Guarantor, jointly and severally, unconditionally, absolutely and
irrevocably, guarantees the payment of any and all Guaranteed Obligations whether or not due or
payable by the Borrower upon the occurrence in respect of the Borrower of any of the events
specified in Section 10.05 of the Credit Agreement, and unconditionally and irrevocably, jointly
and severally, promises to pay, upon the occurrence of any such event, such Guaranteed Obligations
to the Secured Creditors, or order, on demand. This Guaranty shall constitute a guaranty of
payment, and not of collection.




          3. The liability of each Guarantor hereunder is primary, absolute, joint and several, and
unconditional and is exclusive and independent of any security for or other guaranty of the
indebtedness of the Borrower whether executed by such Guarantor, any other Guarantor, any other
guarantor or by any other party, and the liability of each Guarantor hereunder shall not be
affected or impaired by any circumstance or occurrence whatsoever, including, without limitation:
(a) any direction as to application of payment by the Borrower or by any other party, (b) any other
continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party
as to the Guaranteed Obligations, (c) any payment on or in reduction of any such other guaranty or
undertaking, (d) any dissolution, termination or increase, decrease or change in personnel by the
Borrower, (e) to the extent permitted by applicable law, any payment made to any Secured Creditor
on the indebtedness which any Secured Creditor repays the Borrower pursuant to court order in any
bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each
Guarantor waives any right to the deferral or modification of its obligations hereunder by reason
of any such proceeding, (f) any action or inaction by the Secured Creditors as contemplated in
Section 5 hereof or (g) any invalidity, irregularity or unenforceability of all or any part of the
Guaranteed Obligations or of any security therefor.




          4. The obligations of each Guarantor hereunder are independent of the obligations of any
other Guarantor, any other guarantor or the Borrower, and a separate action or actions may be
brought and prosecuted against each Guarantor whether or not action is brought against any other
Guarantor, any other guarantor or the Borrower and whether or not any other Guarantor, any other
guarantor or the Borrower be joined in any such action or actions. Each Guarantor waives, to the
fullest extent permitted by law, the benefits of any statute of limitations affecting its liability
hereunder or the enforcement thereof. Any payment by the Borrower or
other circumstance which operates to toll any statute of limitations as to the Borrower shall
operate to toll the statute of limitations as to each Guarantor.




 









 








Exhibit E

Page 3




          5. Any Secured Creditor may, if and to the extent permitted by the Credit Documents, at any
time and from time to time without the consent of, or notice to, any Guarantor, without incurring
responsibility to such Guarantor, without impairing or releasing the obligations of such Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:




          (a) change the manner, place or terms of payment of, and/or change, increase or extend the
time of payment of, renew or alter, any of the Guaranteed Obligations (including any increase or
decrease in the rate of interest thereon or the principal amount thereof), any security therefor,
or any liability incurred directly or indirectly in respect thereof, and the guaranty herein made
shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered;




          (b) take and hold security for the payment of the Guaranteed Obligations and sell, exchange,
release, surrender, impair, realize upon or otherwise deal with in any manner and in any order any
property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the
Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or
indirectly in respect thereof or hereof, and/or any offset there against;




          (c) exercise or refrain from exercising any rights against the Borrower, any other Credit
Party, any Subsidiary thereof or otherwise act or refrain from acting;




          (d) release or substitute any one or more endorsers, Guarantors, other guarantors, the
Borrower, or other obligors;




          (e) settle or compromise any of the Guaranteed Obligations, any security therefor or any
liability (including any of those hereunder) incurred directly or indirectly in respect thereof or
hereof, and may subordinate the payment of all or any part thereof to the payment of any liability
(whether due or not) of the Borrower to creditors of the Borrower;




          (f) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities
of the Borrower to the Secured Creditors regardless of what liabilities of the Borrower remain
unpaid;




          (g) consent to or waive any breach of, or any act, omission or default under the Credit
Documents or any of the instruments or agreements referred to therein, or otherwise amend, modify
or supplement (in accordance with their terms) any of the Credit Documents or any of such other
instruments or agreements;




          (h) act or fail to act in any manner which may deprive such Guarantor of its right to
subrogation against the Borrower to recover full indemnity for any payments made pursuant to this
Guaranty; and/or




          (i) take any other action which would, under otherwise applicable principles of common law,
give rise to a legal or equitable discharge of such Guarantor from its liabilities under this
Guaranty.




 









 








Exhibit E

Page 4




          6. This Guaranty is a continuing one and all liabilities to which it applies or may apply
under the terms hereof shall be conclusively presumed to have been created in reliance hereon. No
failure or delay on the part of any Secured Creditor in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. The rights and remedies herein expressly specified are
cumulative and not exclusive of any rights or remedies which any Secured Creditor would otherwise
have hereunder. No notice to or demand on any Guarantor in any case shall entitle such Guarantor
to any other further notice or demand in similar or other circumstances or constitute a waiver of
the rights of any Secured Creditor to any other or further action in any circumstances without
notice or demand. It is not necessary for any Secured Creditor to inquire into the capacity or
powers of the Borrower or the officers, directors, partners or agents acting or purporting to act
on its or their behalf, and any indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.




          7. Any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby
subordinated to the indebtedness of the Borrower to the Secured Creditors, and such indebtedness of
the Borrower to any Guarantor, if the Administrative Agent or the Collateral Agent, after the
occurrence and during the continuance of an Event of Default, so requests, shall be collected,
enforced and received by such Guarantor as trustee for the Secured Creditors and be paid over to
the Secured Creditors on account of the indebtedness of the Borrower to the Secured Creditors, but
without affecting or impairing in any manner the liability of such Guarantor under the other
provisions of this Guaranty. Without limiting the generality of the foregoing, each Guarantor
hereby agrees with the Secured Creditors that it will not exercise any right of subrogation which
it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section
509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been irrevocably
paid in full in cash.




          8. (a) Each Guarantor waives any right (except as shall be required by applicable law and
cannot be waived) to require the Secured Creditors to: (i) proceed against the Borrower, any other
Guarantor, any other guarantor of the Guaranteed Obligations or any other party; (ii) proceed
against or exhaust any security held from the Borrower, any other Guarantor, any other guarantor of
the Guaranteed Obligations or any other party; or (iii) pursue any other remedy in the Secured
Creditors’ power whatsoever. Each Guarantor waives any defense based on or arising out of any
defense of the Borrower, any other Guarantor, any other guarantor of the Guaranteed Obligations or
any other party other than payment in full of the Guaranteed Obligations, including, without
limitation, any defense based on or arising out of the disability of the Borrower, any other
Guarantor, any other guarantor of the Guaranteed Obligations or any other party, or the
unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation
from any cause of the liability of the Borrower other than payment in full of the Guaranteed
Obligations. The Secured Creditors may, at their election, foreclose on any security held by the
Administrative Agent, the Collateral Agent or the other Secured Creditors by one or more judicial
or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable, or exercise any other right or remedy the Secured Creditors may have
against the Borrower or any other party, or any security, without affecting or impairing in any way
the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been
paid in full in cash. Each Guarantor waives any defense arising out of any such




 









 








Exhibit E

Page 5



election by the
Secured Creditors, even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any
other party or any security.




          (b) Each Guarantor waives all presentments, promptness, diligence, demands for performance,
protests and notices, including, without limitation, notices of nonperformance, notices of protest,
notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation
or incurring of new or additional indebtedness. Each Guarantor assumes all responsibility for
being and keeping itself informed of the Borrower’s financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the
nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees
that the Secured Creditors shall have no duty to advise any Guarantor of information known to them
regarding such circumstances or risks.




          Each Guarantor warrants and agrees that each of the waivers set forth above in this Section 8
is made with full knowledge of its significance and consequences and that if any of such waivers
are determined to be contrary to any applicable law or public policy, such waivers shall be
effective only to the maximum extent permitted by law.




          9. (a) The Secured Creditors agree that this Guaranty may be enforced only by the action of
the Administrative Agent or the Collateral Agent, in each case acting upon the instructions of the
Lenders and that no other Secured Creditors shall have any right individually to seek to enforce or
to enforce this Guaranty, it being understood and agreed that such rights and remedies may be
exercised by the Administrative Agent or the Collateral Agent, as the case may be, for the benefit
of the Secured Creditors upon the terms of this Guaranty. The Secured Creditors further agree that
this Guaranty may not be enforced against any director, officer, employee, partner, member or
stockholder of any Guarantor (except to the extent such partner, member or stockholder is also a
Guarantor hereunder).




          (b) The Administrative Agent and Collateral Agent will hold in accordance with this Guaranty
all collateral at any time received under this Guaranty. It is expressly understood and agreed by
each Secured Creditor that by accepting the benefits of this Guaranty each such Secured Creditor
acknowledges and agrees that the obligations of the Administrative Agent and Collateral Agent as
enforcer of this Guaranty and interests herein are only those expressly set forth in this Guaranty
and in Section 12 of the Credit Agreement. The Administrative Agent and the Collateral Agent shall
act hereunder on the terms and conditions set forth herein and in Section 12 of the Credit
Agreement.




          10. In order to induce the Lenders to make Loans to the Borrower pursuant to the Credit
Agreement, each Guarantor represents, warrants and covenants that:




          (a) Such Guarantor (i) is a duly organized and validly existing corporation, limited
partnership or limited liability company, as the case may be, in good standing under the
laws of the jurisdiction of its incorporation or formation, (ii) has the corporate or other
applicable power and authority, as the case may be, to own its property and assets and to transact
the business in which it is currently engaged and (iii) is duly qualified and is authorized to do
business and is in good standing in each jurisdiction where the conduct of its business as




 









 








Exhibit E

Page 6



currently conducted requires such qualification, except for failures to be so qualified which,
individually or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.




          (b) Such Guarantor has the corporate or other applicable power and authority to execute,
deliver and perform the terms and provisions of this Guaranty and each other Credit Document to
which it is a party and has taken all necessary corporate or other applicable action to authorize
the execution, delivery and performance by it of this Guaranty and each such other Credit Document.
Such Guarantor has duly executed and delivered this Guaranty and each other Credit Document to
which it is a party, and this Guaranty and each such other Credit Document constitutes the legal,
valid and binding obligation of such Guarantor enforceable against such Guarantor in accordance
with its terms, except to the extent that the enforceability hereof or 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).




          (c) Neither the execution, delivery or performance by such Guarantor of this Guaranty or any
other Credit Document to which it is a party, nor compliance by it with the terms and provisions
hereof and thereof, will (i) contravene any provision of any applicable law, statute, rule or
regulation or any applicable order, writ, injunction or decree of any court or governmental
instrumentality, (ii) 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 material properties or assets of such Guarantor or any of its Subsidiaries pursuant
to the terms of any indenture, mortgage, deed of trust, loan agreement or credit agreement, or any
other material agreement, contract or instrument, to which such Guarantor or any of its
Subsidiaries is a party or by which it or any of its material property or assets is bound or to
which it may be subject or (iii) violate any provision of the Certificate of Incorporation or
By-Laws (or equivalent organizational documents) of such Guarantor or any of its Subsidiaries.




          (d) No order, consent, approval, license, authorization or validation of, or filing,
recording or registration with (except as have been obtained or made or, in the case of any filings
or recordings of the Security Documents (other than the Vessel Mortgages) executed on or before the
Effective Date, will be made within 10 days of the Effective Date), or exemption by, any
governmental or public body or authority, or any subdivision thereof, is required to authorize, or
is required in connection with, (i) the execution, delivery and performance of this Guaranty by
such Guarantor or any other Credit Document to which such Guarantor is a party or (ii) the
legality, validity, binding effect or enforceability of this Guaranty or any other Credit Document
to which such Guarantor is a party.




          11. Each Guarantor covenants and agrees that on and after the Effective Date and until the
termination of the Commitments and until such time as no Notes remain outstanding
and all Guaranteed Obligations have been paid in full, such Guarantor will comply, and will
cause each of its Subsidiaries to comply, with all of the provisions, covenants and agreements
contained in Sections 8 and 9 of the Credit Agreement and applicable to such Guarantor, and will
take, or will refrain from taking, as the case may be, all actions that are necessary to be taken
or




 









 








Exhibit E

Page 7



not taken so that it is not in violation of any provision, covenant or agreement contained in
Section 8 or 9 of the Credit Agreement, and so that no Default or Event of Default is caused by the
actions of such Guarantor or any of its Subsidiaries.




          12. The Guarantors hereby jointly and severally agree to pay all reasonable out-of-pocket
costs and expenses of (i) each Secured Creditor in connection with the enforcement of this Guaranty
(including, without limitation, the reasonable fees and disbursements of outside counsel employed
by each Secured Creditor) and (ii) the Administrative Agent in connection with any amendment,
waiver or consent relating hereto (including, without limitation, the reasonable fees and
disbursements of outside counsel employed by the Administrative Agent).




          13. This Guaranty shall be binding upon each Guarantor and its successors and assigns and
shall inure to the benefit of the Secured Creditors and their successors and assigns.




          14. Neither this Guaranty nor any provision hereof may be changed, waived, discharged or
terminated except with the written consent of each Guarantor directly affected thereby and with the
written consent of the Administrative Agent (or, to the extent required by Section 13.11 of the
Credit Agreement, with the written consent of the Required Lenders).




          15. Each Guarantor acknowledges that an executed (or conformed) copy of each of the Credit
Documents has been made available to a senior officer of such Guarantor and such officer is
familiar with the contents thereof.




          16. In addition to any rights now or hereafter granted under applicable law (including,
without limitation, Section 151 of the New York Debtor and Secured Creditor Law) and not by way of
limitation of any such rights, upon the occurrence and during the continuance of an Event of
Default each Secured Creditor is hereby authorized, at any time or from time to time, without
notice to any Guarantor or to any other Person, any such notice being expressly waived, to set off
and to appropriate and apply any and all deposits (general or special) and any other indebtedness
at any time held or owing by such Secured Creditor to or for the credit or the account of such
Guarantor, against and on account of the obligations and liabilities of such Guarantor to such
Secured Creditor under this Guaranty, irrespective of whether or not such Secured Creditor shall
have made any demand hereunder and although said obligations, liabilities, deposits or claims, or
any of them, shall be contingent or unmatured.




          17. Except as otherwise expressly provided herein, all notices and other communications
provided for hereunder shall be in writing (including telexed, telegraphic or telecopier
communication) and mailed, telexed, telecopied or delivered: if to any Guarantor, at [                                        ],
Telephone No.: [                                        ], Telecopier No.: [                                        ]; if to any Secured Creditor, at its
address specified opposite its name on Schedule II to the Credit Agreement; and if to the
Administrative Agent, at its address specified opposite its name on [Schedule II] to the Credit
Agreement; or, as to any other Credit Party, at such other address as shall be designated by such
party in a written notice to the other parties hereto. All such notices
and communications shall, (i) when mailed, be effective three Business Days after being
deposited in the mails, prepaid and properly addressed for delivery, (ii) when sent by overnight
courier, be effective one Business Day after delivery to the overnight courier prepaid and properly
addressed for delivery on such next Business Day, or (iii) when sent by telex or




 









 








Exhibit E

Page 8



telecopier, be
effective when sent by telex or telecopier, except that notices and communications to the
Administrative Agent or any Guarantor shall not be effective until received by the Administrative
Agent or such Guarantor, as the case may be.




          18. If claim is ever made upon any Secured Creditor for repayment or recovery of any amount
or amounts received in payment or on account of any of the Guaranteed Obligations and any of the
aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order
of any court or administrative body having jurisdiction over such payee or any of its property or
(ii) any settlement or compromise of any such claim effected by such payee with any such claimant
(including the Borrower) then and in such event each Guarantor agrees that any such judgment,
decree, order, settlement or compromise shall be binding upon such Guarantor, notwithstanding any
revocation hereof or other instrument evidencing any liability of the Borrower , and such Guarantor
shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered
to the same extent as if such amount had never originally been received by any such payee.




          19. (a) THIS SUBSIDIARIES GUARANTY AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE PROVIDED IN CERTAIN
OF THE VESSEL MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF
NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAWS RULES (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE
GENERAL OBLIGATIONS LAW). Any legal action or proceeding with respect to this Guaranty or any
other Credit Document to which any Guarantor is a party may be brought in the courts of the State
of New York or of the United States of America for the Southern District of New York in each case
which are located in the City of New York, and, by execution and delivery of this Guaranty, each
Guarantor hereby irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby further
irrevocably waives (to the fullest extent permitted by applicable law) any claim that any such
court lacks personal jurisdiction over such Guarantor, and agrees not to plead or claim in any
legal action or proceeding with respect to this Guaranty or any other Credit Document to which such
Guarantor is a party brought in any of the aforesaid courts that any such court lacks personal
jurisdiction over such Guarantor. Each Guarantor further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such Guarantor at its address
set forth in Section 17 hereof, such service to become effective 30 days after such mailing. Each
Guarantor hereby irrevocably waives (to the fullest extent permitted by applicable law) any
objection to such service of process and further irrevocably waives and agrees not to plead or
claim in any action or proceeding commenced hereunder or under any other Credit Document to which
such Guarantor is a party that such service of process was in any way invalid or ineffective.
Nothing herein shall affect the right of any of the Secured Creditors to serve process in any other
manner permitted by law or to
commence legal proceedings or otherwise proceed against each Guarantor in any other
jurisdiction.




          (b) Each Guarantor hereby irrevocably waives (to the fullest extent permitted by applicable
law) any objection which it may now or hereafter have to the laying of venue of any




 









 








Exhibit E

Page 9



of the
aforesaid actions or proceedings arising out of or in connection with this Guaranty or any other
Credit Document to which such Guarantor is a party brought in the courts referred to in clause (a)
above and hereby further irrevocably waives (to the fullest extent permitted by applicable law) and
agrees not to plead or claim in any such court that such action or proceeding brought in any such
court has been brought in an inconvenient forum.




          (c) EACH GUARANTOR AND EACH SECURED CREDITOR (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS
GUARANTY) HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS TO WHICH SUCH
GUARANTOR IS A PARTY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.




          20. In the event that all of the capital stock or other equity interests of one or more
Guarantors is sold or otherwise disposed of or liquidated in compliance with the requirements of
Section 9.02 of the Credit Agreement (or such sale or other disposition has been approved in
writing by the Required Lenders (or all the Lenders if required by Section 13.11 of the Credit
Agreement)) and the proceeds of such sale, disposition or liquidation are applied in accordance
with the provisions of the Credit Agreement, to the extent applicable, such Guarantor shall upon
consummation of such sale or other disposition (except to the extent that such sale or disposition
is to the Borrower or another Subsidiary thereof) be released from this Guaranty automatically and
without further action and this Guaranty shall, as to each such Guarantor or Guarantors, terminate,
and have no further force or effect (it being understood and agreed that the sale of one or more
Persons that own, directly or indirectly, all of the capital stock or other equity interests of any
Guarantor shall be deemed to be a sale of such Guarantor for the purposes of this Section 20).




          21. At any time a payment in respect of the Guaranteed Obligations is made under this
Guaranty, the right of contribution of each Guarantor against each other Guarantor shall be
determined as provided in the immediately following sentence, with the right of contribution of
each Guarantor to be revised and restated as of each date on which a payment (a “Relevant
Payment”) is made on the Guaranteed Obligations under this Guaranty. At any time that a
Relevant Payment is made by a Guarantor that results in the aggregate payments made by such
Guarantor in respect of the Guaranteed Obligations to and including the date of the Relevant
Payment exceeding such Guarantor’s Contribution Percentage (as defined below) of the aggregate
payments made by all Guarantors in respect of the Guaranteed Obligations to and including the date
of the Relevant Payment (such excess, the “Aggregate Excess Amount”), each such Guarantor
shall have a right of contribution against each other Guarantor who has made payments in respect of
the Guaranteed Obligations to and including the date of the Relevant Payment in an aggregate amount
less than such other Guarantor’s Contribution Percentage of the aggregate payments made to and
including the date of the Relevant Payment by all Guarantors in respect of the Guaranteed
Obligations (the aggregate amount of such deficit, the “Aggregate 
Deficit Amount”) in an amount equal to (x) a fraction the numerator of which is the
Aggregate Excess Amount of such Guarantor and the denominator of which is the Aggregate Excess
Amount of all Guarantors multiplied by (y) the Aggregate Deficit Amount of such other Guarantor. A
Guarantor’s right of contribution pursuant to the preceding sentences shall arise at the time of
each computation, subject to adjustment to the time of each computation; provided




 









 








Exhibit E

Page 10



that no
Guarantor may take any action to enforce such right until the Guaranteed Obligations have been paid
in full in cash, it being expressly recognized and agreed by all parties hereto that any
Guarantor’s right of contribution arising pursuant to this Section 21 against any other Guarantor
shall be expressly junior and subordinate to such other Guarantor’s obligations and liabilities in
respect of the Guaranteed Obligations and any other obligations owing under this Guaranty. As used
in this Section 21: (i) each Guarantor’s “Contribution Percentage” shall mean the
percentage obtained by dividing (x) the Adjusted Net Worth (as defined below) of such Guarantor by
(y) the aggregate Adjusted Net Worth of all Guarantors; (ii) the “Adjusted Net Worth” of
each Guarantor shall mean the greater of (x) the Net Worth (as defined below) of such Guarantor and
(y) zero; and (iii) the “Net Worth” of each Guarantor shall mean the amount by which the
fair saleable value of such Guarantor’s assets on the date of any Relevant Payment exceeds its
existing debts and other liabilities (including contingent liabilities, but without giving effect
to any Guaranteed Obligations arising under this Guaranty) on such date. All parties hereto
recognize and agree that, except for any right of contribution arising pursuant to this Section 21,
each Guarantor who makes any payment in respect of the Guaranteed Obligations shall have no right
of contribution or subrogation against any other Guarantor in respect of such payment until all of
the Guaranteed Obligations have been irrevocably paid in full in cash. Each of the Guarantors
recognizes and acknowledges that the rights to contribution arising hereunder shall constitute an
asset in favor of the party entitled to such contribution. In this connection, each Guarantor has
the right to waive its contribution right against any Guarantor to the extent that after giving
effect to such waiver such Guarantor would remain solvent, in the determination of the Required
Lenders.




          22. Each Guarantor and each Secured Creditor (by its acceptance of the benefits of this
Guaranty) hereby confirms that it is its intention that this Guaranty not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act,
the Uniform Fraudulent Transfer Act or any similar Federal or state law. To effectuate the
foregoing intention, each Guarantor and each Secured Creditor (by its acceptance of the benefits of
this Guaranty) hereby irrevocably agrees that the Guaranteed Obligations guaranteed by such
Guarantor shall be limited to such amount as will, after giving effect to such maximum amount and
all other (contingent or otherwise) liabilities of such Guarantor that are relevant under such laws
and after giving effect to any rights to contribution pursuant to any agreement providing for an
equitable contribution among such Guarantor and the other Guarantors, result in the Guaranteed
Obligations of such Guarantor in respect of such maximum amount not constituting a fraudulent
transfer or conveyance.




          23. This Guaranty may be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which when so executed and delivered shall be an original
(including if delivered by facsimile transmission or electronic mail), but all of which shall
together constitute one and the same instrument. A set of counterparts executed by all the parties
hereto shall be lodged with the Guarantors and the Administrative Agent.




          24. (a) All payments made by any Guarantor hereunder will be made without setoff,
counterclaim or other defense, will be made in the currency or currencies in which the respective
Guaranteed Obligations are then due and payable and will be made on the same basis as payments are
made by the Borrower under Sections 4.03 and 4.04 of the Credit Agreement.




 









 








Exhibit E

Page 11




          (b) The Guarantors’ obligations hereunder to make payments in the respective currency or
currencies in which the respective Guaranteed Obligations are required to be paid (such currency
being herein called the “Obligation Currency”) shall not be discharged or satisfied by any
tender or recovery pursuant to any judgment expressed in or converted into any currency other than
the Obligation Currency, except to the extent that such tender or recovery results in the effective
receipt by the Administrative Agent, the Collateral Agent or the respective other Secured Creditor
of the full amount of the Obligation Currency expressed to be payable to the Administrative Agent,
the Collateral Agent or such other Secured Creditor under this Guaranty or the other Credit
Documents as applicable. If for the purpose of obtaining or enforcing judgment against any
Guarantor in any court or in any jurisdiction, it becomes necessary to convert into or from any
currency other than the Obligation Currency (such other currency being hereinafter referred to as
the “Judgment Currency”) an amount due in the Obligation Currency, the conversion shall be
made, at the rate of exchange (quoted by the Administrative Agent, determined, in each case, as of
the date immediately preceding the day on which the judgment is given (such Business Day being
hereinafter referred to as the “Judgment Currency Conversion Date”).




          (c) If there is a change in the rate of exchange prevailing between the Judgment Currency
Conversion Date and the date of actual payment of the amount due, the Guarantors jointly and
severally covenant and agree to pay, or cause to be paid, such additional amounts, if any (but in
any event not a lesser amount), as may be necessary to ensure that the amount paid in the Judgment
Currency, when converted at the rate of exchange prevailing on the date of payment, will produce
the amount of the Obligation Currency which could have been purchased with the amount of Judgment
Currency stipulated in the judgment or judicial award at the rate or exchange prevailing on the
Judgment Currency Conversion Date.




          (d) For purposes of determining the Relevant Currency Equivalent or any other rate of
exchange for this Section 24, such amounts shall include any premium and costs payable in
connection with the purchase of the Obligation Currency.




          25. It is understood and agreed that any Subsidiary of the Borrower that is required to
execute a counterpart of this Guaranty after the date hereof pursuant to the Credit Agreement shall
automatically become a Guarantor hereunder by executing a counterpart hereof and/or a Subsidiary
assumption agreement, in each case in form and substance satisfactory to the Administrative Agent,
and delivering the same to the Administrative Agent.




* * *




 









 








Exhibit E

Page 12




          IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered as of
the date first above written.




	 	 	 	 	 
	 	[                                                                                                    ],

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 









 






	 	 	 	 	 



Exhibit E

Page 13




	 	 	 	 	 	 	 
	Accepted and Agreed to:	 	 
	NORDEA BANK FINLAND PLC, NEW YORK BRANCH,	 	 
	 	 	as Administrative Agent	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 







 









 






EXHIBIT F




FORM OF PLEDGE AND SECURITY AGREEMENT




          PLEDGE AND SECURITY AGREEMENT (as amended, modified, restated and/or supplemented from time to
time, this “Agreement”), dated as of December 29, 2005 made by each of the undersigned
pledgors, including the Borrower (as defined below) (each a “Pledgor” and, together with
any other entity that becomes a pledgor hereunder pursuant to Section 25 hereof, the
“Pledgors”) to, NORDEA BANK FINLAND PLC, New York Branch, as collateral agent (in such
capacity, together with any successor collateral agent, the “Collateral Agent”), for the
benefit of the Secured Creditors (as defined below).




WITNESSETH:




          WHEREAS, TODCO (the “Borrower”), the various lenders from time to time party thereto
(the “Lenders”), Nordea Bank Finland plc, New York Branch, as Administrative Agent (in such
capacity, together with any successor Administrative Agent, the “Administrative Agent”) and
as Collateral Agent under the Security Documents (in such capacity, the “Collateral
Agent”), have entered into a Credit Agreement, dated as of December 29, 2005 (as amended,
modified, restated and/or supplemented from time to time, the “Credit Agreement”),
providing for the making of Loans to, and the issuance of, and participation in, Letters of Credit
for the account of the Borrower, all as contemplated therein (the Lenders, each Issuing Lender, the
Administrative Agent and the Collateral Agent, in each of the aforementioned capacities, are herein
called the “Secured Creditors”);




          WHEREAS, it is a condition precedent to the making of Loans to the Borrower and the issuance
of, and participation in, Letters of Credit for the account of the Borrower under the Credit
Agreement that each Pledgor shall have executed and delivered to the Collateral Agent this
Agreement; and




          WHEREAS, each Pledgor desires to enter into this Agreement in order to satisfy the condition
described in the preceding paragraph;




          NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each Pledgor,
the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby makes the
following representations and warranties to the Collateral Agent for the benefit of the Secured
Creditors and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured
Creditors as follows:




          1. SECURITY FOR OBLIGATIONS




          1.1. Security. This Agreement is made by each Pledgor for the benefit of the Secured
Creditors to secure:





     (i) the full and prompt payment when due (whether at the stated maturity, by
acceleration or otherwise) of all obligations, liabilities and indebtedness (including,
without limitation, principal, premium, interest, fees and indemnities (including, without
limitation, to the extent permitted by law, all interest that accrues after the commencement
of any case, proceeding or other action relating to the bankruptcy, insolvency,
reorganization or similar proceeding of any Pledgor at the rate provided for in the Credit
Documents to which such



 









 





Exhibit F

page 2





Pledgor is a party, whether or not a claim for post-petition interest is allowed in any such
proceeding)) of such Pledgor to the Secured Creditors whether now existing or hereafter
incurred under, arising out of, or in connection with, the Credit Agreement and the other
Credit Documents to which such Pledgor is a party (including, in the case of each Pledgor
that is a Subsidiary Guarantor, all such obligations, liabilities and indebtedness of such
Pledgor under the Subsidiaries Guaranty) and the due performance and compliance by such
Pledgor with all of the terms, conditions and agreements contained in the Credit Agreement
and in such other Credit Documents (all such obligations, liabilities and indebtedness under
this clause (i), being herein collectively called the “Credit Document
Obligations”);




     (ii) any and all sums advanced by the Collateral Agent in order to preserve the
Collateral (as hereinafter defined) or preserve its security interest in the Collateral;




     (iii) in the event of any proceeding for the collection or enforcement of any
indebtedness, obligations or liabilities of such Pledgor referred to in clauses (i) and (ii)
above, after an Event of Default shall have occurred and be continuing, the reasonable
expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights
hereunder, together with reasonable attorneys’ fees and court costs; and




     (iv) all amounts paid by any Secured Creditor as to which such Secured Creditor has the
right to reimbursement under Section 11 of this Agreement;


all such obligations, liabilities, sums and expenses set forth in clauses (i) through (iv) of this
Section 1.1 being herein collectively called the “Obligations,” it being acknowledged and
agreed that the “Obligations” shall include extensions of credit of the types described
above, whether outstanding on the date of this Agreement or extended from time to time after the
date of this Agreement pursuant to the Credit Documents.




          2. DEFINITIONS. (a) Unless otherwise defined herein, all capitalized terms used herein and
defined in the Credit Agreement shall be used herein as therein defined. Reference to singular
terms shall include the plural and vice versa.




          (b) The following capitalized terms used herein shall have the definitions specified below:




          “Administrative Agent” has the meaning set forth in the Recitals hereto.




          “Adverse Claim” has the meaning given such term in Section 8-102(a)(1) of the UCC.




          “Agreement” has the meaning set forth in the first paragraph hereof.




          “Borrower” has the meaning set forth in the Recitals hereto.




          “Certificated Security” has the meaning given such term in Section 8-102(a)(4) of the
UCC.




 









 








Exhibit F

page 3




          “Clearing Corporation” has the meaning given such term in Section 8-102(a)(5) of the
UCC.




          “Collateral” has the meaning set forth in Section 3.1 hereof.




          “Collateral Agent” has the meaning set forth in the first paragraph hereof.




          “Credit Agreement” has the meaning set forth in the Recitals hereto.




          “Credit Document Obligations” has the meaning set forth in Section 1.1(i) hereof.




          “Earnings Collateral” shall mean, collectively, all of the collateral granted, sold,
conveyed, assigned, transferred, mortgaged and pledged pursuant to, and in accordance with, each
Assignment of Earnings.




          “Event of Default” means any Event of Default under, and as defined in, the Credit
Agreement.




          “Indemnitees” has the meaning set forth in Section 11 hereof.




          “Lenders” has the meaning set forth in the Recitals hereto.




          “Limited Liability Company Assets” means all assets, whether tangible or intangible
and whether real, personal or mixed (including, without limitation, all limited liability company
capital and interest in other limited liability companies), at any time owned or represented by any
Limited Liability Company Interest.




          “Limited Liability Company Interests” means the entire limited liability company
membership interest at any time owned by any Pledgor in any limited liability company.




          “Obligations” has the meaning set forth in Section 1.1 hereof.




          “Partnership Assets” means all assets, whether tangible or intangible and whether
real, personal or mixed (including, without limitation, all partnership capital and interest in
other partnerships), at any time owned or represented by any Partnership Interest.




          “Partnership Interest” shall mean the entire general partnership interest or limited
partnership interest at any time owned by any Pledgor in any general partnership or limited
partnership.




          “Person” means any individual, partnership, joint venture, firm, corporation,
association, limited liability company, trust or other enterprise or any government or political
subdivision or any agency, department or instrumentality thereof.




          “Pledgor” has the meaning set forth in the first paragraph hereof.




          “Primary Obligations” has the meaning set forth in Section 9(b) hereof.




          “Proceeds” has the meaning given such term in Section 9-102(64) of the UCC.




 









 








Exhibit F

page 4




          “Pro Rata Share” has the meaning set forth in Section 9(b) hereof.




          “Required Secured Creditors” means the Required Lenders (or, to the extent provided in
Section 13.11 of the Credit Agreement, each of the Lenders).




          “Secondary Obligations” has the meaning set forth in Section 9(b) hereof.




          “Secured Creditors” has the meaning set forth in the Recitals hereto.




          “Secured Debt Agreements” means and includes this Agreement and the other Credit
Documents.




          “Securities Act” means the Securities Act of 1933, as amended, as in effect from time
to time.




          “Security” and “Securities” has the meaning given such term in Section
8-102(a)(15) of the UCC and shall in any event also include all Stock.




          “Security Entitlement” has the meaning given such term in Section 8-102(a)(17) of the
UCC.




          “Stock” means all of the issued and outstanding shares of capital stock of any
corporation at any time owned by any Pledgor.




          “Termination Date” has the meaning set forth in Section 20 hereof.




          “UCC” means the Uniform Commercial Code as in effect in the State of New York on the
date hereof.




          “Uncertificated Security” has the meaning given such term in Section 8-102(a)(18) of
the UCC.




          3. PLEDGE OF STOCK, ACCOUNTS, ETC.




          3.1 Pledge. To secure the Obligations now or hereafter owed or to be performed by
such Pledgor, each Pledgor does hereby grant and pledge to the Collateral Agent for the benefit of
the Secured Creditors, and does hereby create a continuing first priority security interest in
favor of the Collateral Agent for the benefit of the Secured Creditors in, all of the right, title
and interest in and to the following, whether now existing or hereafter from time to time acquired
(collectively, the “Collateral”):





     (a) all Stock of any Subsidiary Guarantor owned by such Pledgor from time to time and
all options and warrants owned by such Pledgor from time to time to purchase Stock of any
such Subsidiary Guarantor;




     (b) all Limited Liability Company Interests in any Subsidiary Guarantor owned by such
Pledgor from time to time and all of its right, title and interest in each limited liability
company to which each such interest relates, whether now existing or hereafter



 









 





Exhibit F

page 5





acquired, including, without limitation, to the fullest extent permitted under the
terms and provisions of the documents and agreements governing such Limited Liability
Company Interests and applicable law:




     (A) all the capital thereof and its interest in all profits, losses, Limited
Liability Company Assets and other distributions to which such Pledgor shall at any
time be entitled in respect of such Limited Liability Company Interests;




     (B) all other payments due or to become due to such Pledgor in respect of
Limited Liability Company Interests, whether under any limited liability company
agreement or otherwise, whether as contractual obligations, damages, insurance
proceeds or otherwise;




     (C) all of such Pledgor’s claims, rights, powers, privileges, authority,
options, security interests, liens and remedies, if any, under any limited liability
company agreement or operating agreement, or at law or otherwise in respect of such
Limited Liability Company Interests;




     (D) all present and future claims, if any, of such Pledgor against any such
limited liability company for moneys loaned or advanced, for services rendered or
otherwise;




     (E) all of such Pledgor’s rights under any limited liability company agreement
or operating agreement or at law to exercise and enforce every right, power, remedy,
authority, option and privilege of such Pledgor relating to such Limited Liability
Company Interests, including any power to terminate, cancel or modify any limited
liability company agreement or operating agreement, to execute any instruments and to
take any and all other action on behalf of and in the name of such Pledgor in respect
of such Limited Liability Company Interests and any such limited liability company,
to make determinations, to exercise any election (including, but not limited to,
election of remedies) or option or to give or receive any notice, consent, amendment,
waiver or approval, together with full power and authority to demand, receive,
enforce, collect or receipt for any of the foregoing or for any Limited Liability
Company Asset, to enforce or execute any checks, or other instruments or orders, to
file any claims and to take any action in connection with any of the foregoing; and




     (F) all other property hereafter delivered in substitution for or in addition to
any of the foregoing, all certificates and instruments representing or evidencing
such other property and all cash, securities, interest, dividends, rights and other
property at any time and from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all thereof;




     (c) all Partnership Interests in any Subsidiary Guarantor owned by such Pledgor from
time to time and all of its right, title and interest in each partnership to which each such
interest relates, whether now existing or hereafter acquired, including, without limitation,
to



 









 





Exhibit F

page 6





the fullest extent permitted under the terms and provisions of the documents and
agreements governing such Partnership Interests and applicable law:




     (A) all the capital thereof and its interest in all profits, losses, Partnership
Assets and other distributions to which such Pledgor shall at any time be entitled in
respect of such Partnership Interests;




     (B) all other payments due or to become due to such Pledgor in respect of such
Partnership Interests, whether under any partnership agreement or otherwise, whether
as contractual obligations, damages, insurance proceeds or otherwise;




     (C) all of its claims, rights, powers, privileges, authority, options, security
interests, liens and remedies, if any, under any partnership agreement or operating
agreement, or at law or otherwise in respect of such Partnership Interests;




     (D) all present and future claims, if any, of such Pledgor against any such
partnership for moneys loaned or advanced, for services rendered or otherwise;




     (E) all of such Pledgor’s rights under any partnership agreement or operating
agreement or at law to exercise and enforce every right, power, remedy, authority,
option and privilege of such Pledgor relating to such Partnership Interests,
including any power to terminate, cancel or modify any partnership agreement or
operating agreement, to execute any instruments and to take any and all other action
on behalf of and in the name of any of such Pledgor in respect of such Partnership
Interests and any such partnership, to make determinations, to exercise any election
(including, but not limited to, election of remedies) or option or to give or receive
any notice, consent, amendment, waiver or approval, together with full power and
authority to demand, receive, enforce, collect or receipt for any of the foregoing or
for any Partnership Asset, to enforce or execute any checks, or other instruments or
orders, to file any claims and to take any action in connection with any of the
foregoing; and




     (F) all other property hereafter delivered in substitution for or in addition to
any of the foregoing, all certificates and instruments representing or evidencing
such other property and all cash, securities, interest, dividends, rights and other
property at any time and from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all thereof; and




     (d) all Proceeds of any and all of the foregoing.



          3.2. Procedures. (a) To the extent that any Pledgor at any time or from time to
time owns, acquires or obtains any right, title or interest in any Collateral, such Collateral
shall, to the extent permitted by law, automatically (and without the taking of any action by such
Pledgor) be pledged pursuant to Section 3.1 of this Agreement and, in addition thereto, such
Pledgor shall (to the extent provided below) take, or, in the case of Section 3.2(a)(v), authorize
the Collateral Agent to take, the following actions as set forth below (as promptly as practicable
and, in any event, within 10 days after it obtains such Collateral) for the benefit of the
Collateral Agent and the Secured Creditors:




 









 








Exhibit F

page 7





     (i) with respect to a Certificated Security (other than a Certificated Security
credited on the books of a Clearing Corporation), such Pledgor shall deliver such
Certificated Security to the Collateral Agent with powers executed in blank;




     (ii) with respect to an Uncertificated Security (other than an Uncertificated Security
credited on the books of a Clearing Corporation), such Pledgor shall cause the issuer of
such Uncertificated Security (or, in the case of an issuer that is not a Subsidiary of such
Pledgor, will use reasonable efforts to cause such issuer) to duly authorize and execute,
and deliver to the Collateral Agent, an agreement for the benefit of the Collateral Agent
and the other Secured Creditors substantially in the form of Annex G hereto (appropriately
completed to the reasonable satisfaction of the Collateral Agent and with such
modifications, if any, as shall be reasonably satisfactory to the Collateral Agent) pursuant
to which such issuer agrees to comply with any and all instructions originated by the
Collateral Agent without further consent by the registered owner and not to comply with
instructions regarding such Uncertificated Security originated by any other Person other
than a court of competent jurisdiction;




     (iii) with respect to a Certificated Security, Uncertificated Security, Partnership
Interest that is a Security or Limited Liability Company Interest that is a Security
credited on the books of a Clearing Corporation (including a Federal Reserve Bank,
Participants Trust Company or The Depository Trust Company), such Pledgor shall promptly
notify the Collateral Agent thereof and shall promptly take all actions required (i) to
comply in all material respects with the applicable rules of such Clearing Corporation and
(ii) to perfect the security interest of the Collateral Agent under applicable law
(including, in any event, under Sections 9-314(a), (b) and (c), 9-106 and 8-106(d) of the
UCC). Such Pledgor further agrees to take such actions as the Collateral Agent deems
reasonably necessary to effect the foregoing;




     (iv) with respect to a Partnership Interest or a Limited Liability Company Interest
(other than a Partnership Interest or Limited Liability Interest credited on the books of a
Clearing Corporation), (1) if such Partnership Interest or Limited Liability Company
Interest is represented by a certificate and is a Security for purposes of the UCC, the
procedure set forth in Section 3.2(a)(i) hereof, and (2) if such Partnership Interest or
Limited Liability Company Interest is not represented by a certificate or is not a Security
for purposes of the UCC, the procedure set forth in Section 3.2(a)(ii) hereof; and




     (v) with respect to cash proceeds from any of the Collateral described in Section 3.1
hereof which are not released to such Pledgor in accordance with Section 6 hereof, shall be
placed in an Operating Account of such Pledgor.




     (b) In addition to the actions required to be taken pursuant to Section 3.2(a) hereof,
each Pledgor shall take the following additional actions with respect to the Collateral:




     (i) with respect to all Collateral of such Pledgor whereby or with respect to which the
Collateral Agent may obtain “control” thereof within the meaning of Section 8-106 of
the UCC (or under any provision of the UCC as same may be amended or supplemented from time
to time, or under the laws of any relevant State other than the State of New York), such



 









 





Exhibit F

page 8





Pledgor shall take all actions as may be reasonably requested from time to time by the
Collateral Agent so that “control” of such Collateral is obtained and at all times
held by the Collateral Agent; and




     (ii) each Pledgor shall from time to time cause appropriate financing statements (on
Form UCC-1 or other appropriate form) under the Uniform Commercial Code as in effect in the
various relevant states and any other relevant jurisdictions, covering all Collateral
hereunder (with the form of such financing statements to be satisfactory to the Collateral
Agent), to be filed in the relevant filing offices so that at all times the Collateral Agent
has a security interest in all Collateral which is perfected by the filing of such financing
statements (in each case to the maximum extent perfection by filing may be obtained under
the laws of the relevant states, including, without limitation, Section 9-312(a) of the
UCC).



          3.3. Subsequently Acquired Collateral. If any Pledgor shall acquire (by purchase,
stock dividend or similar distribution or otherwise) any additional Collateral at any time or from
time to time after the date hereof, such Collateral shall automatically (and without any further
action being required to be taken) be subject to the pledge and security interests created pursuant
to Section 3.1 hereof and, furthermore, such Pledgor will promptly thereafter take (or cause to be
taken) all action with respect to such Collateral in accordance with the procedures set forth in
Section 3.2 hereof, and will promptly thereafter deliver to the Collateral Agent (i) a certificate
executed by a principal executive officer of such Pledgor describing such Collateral and certifying
that the same has been duly pledged in favor of the Collateral Agent (for the benefit of the
Secured Creditors) hereunder and (ii) supplements to Annexes A through F hereto as are reasonably
necessary to cause such annexes to be complete and accurate at such time.




          3.4. Transfer Taxes. Each pledge of Collateral under Section 3.1 or Section 3.3
hereof shall be accompanied by any transfer tax stamps required in connection with the pledge of
such Collateral.




          3.5. Certain Representations and Warranties Regarding the Collateral. Each Pledgor
represents and warrants that on the date hereof: (i) the jurisdiction of organization of such
Pledgor, and such Pledgor’s organizational or registration identification number, if applicable, is
listed on Annex A hereto; (ii) each Subsidiary of such Pledgor that is a Subsidiary Guarantor is
listed in Annex B hereto; (iii) the Stock (and any warrants or options to purchase Stock) of any
Subsidiary Guarantor held by such Pledgor consists of the number and type of shares of the stock
(or warrants or options to purchase any stock) of the corporations as described in Annex C hereto;
(iv) such Stock constitutes that percentage of the issued and outstanding capital stock of the
respective Subsidiary Guarantors as is set forth in Annex C hereto; (v) the Limited Liability
Company Interests in any and all Subsidiary Guarantors held by such Pledgor consist of the number
and type of interests of the respective Subsidiary Guarantors described in Annex D hereto; (vi)
each such Limited Liability Company Interest constitutes that percentage of the issued and
outstanding equity interest of the respective Subsidiary Guarantors as set forth in Annex D hereto;
(vii) the Partnership Interests held by such Pledgor in any and all Subsidiary Guarantors consist
of the number and type of interests of the respective Subsidiary Guarantors described in Annex E
hereto; (viii) each such Partnership Interest constitutes that percentage or portion of the entire
partnership interest of the Partnership as set forth in Annex E hereto; (ix) to the extent
applicable, such Pledgor has complied with the respective procedure set forth in Section 3.2(a)
hereof with respect to each item of Collateral described in




 









 








Exhibit F

page 9



Annexes B through E hereto; and (xi) on the date hereof, such Pledgor owns no other Stock,
Limited Liability Company Interests or Partnership Interests of, in each case, any Subsidiary
Guarantor.




          4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. If and to the extent necessary to enable
the Collateral Agent to perfect its security interest in any of the Collateral or to exercise any
of its remedies hereunder, the Collateral Agent shall have the right to appoint one or more
sub-agents for the purpose of retaining physical possession of the Collateral, which may be held
(in the discretion of the Collateral Agent) in the name of the relevant Pledgor, endorsed or
assigned in blank or in favor of the Collateral Agent or any nominee or nominees of the Collateral
Agent or a sub-agent appointed by the Collateral Agent.




          5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until there shall have occurred and
be continuing an Event of Default, each Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Collateral owned by it, and to give consents, waivers
or ratifications in respect thereof; provided that, in each case, no vote shall be cast or
any consent, waiver or ratification given or any action taken or omitted to be taken which would
violate or be inconsistent with any of the terms of any Secured Debt Agreement, or which could
reasonably be expected to have the effect of impairing the value of the Collateral or any part
thereof or the position or interests of the Collateral Agent or any other Secured Creditor in the
Collateral unless expressly permitted by the terms of the Secured Debt Agreements. All such rights
of each Pledgor to vote and to give consents, waivers and ratifications shall cease during the
continuance of an Event of Default, during which period Section 7 hereof shall be applicable.




          6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall have occurred and be
continuing an Event of Default, all cash dividends, cash distributions, cash Proceeds and other
cash amounts payable in respect of the Collateral shall be paid to the Pledgors. The Collateral
Agent shall be entitled to receive directly, and to retain as part of the Collateral:





     (i) all other or additional stock, notes, limited liability company interests,
partnership interests, instruments or other securities or property (including, but not
limited to, cash dividends other than as set forth above in the first sentence of this
Section 6) paid or distributed by way of dividend or otherwise in respect of the Collateral;




     (ii) all other or additional stock, notes, limited liability company interests,
partnership interests, instruments or other securities or property (including, but not
limited to, cash) paid or distributed in respect of the Collateral by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar rearrangement; and




     (iii) all other or additional stock, notes, limited liability company interests,
partnership interests, instruments or other securities or property (including, but not
limited to, cash) which may be paid in respect of the Collateral by reason of any
consolidation, merger, exchange of stock, conveyance of all or substantially all the assets
of a Pledgor, liquidation or similar corporate or other reorganization not permitted by the
terms of the Credit Agreement.


All dividends, distributions or other payments which are received by any Pledgor contrary to the
provisions of this Section 6 and Section 7 hereof shall be segregated from other property or funds
of




 









 








Exhibit F

page 10



such Pledgor and shall be forthwith paid over and/or delivered to the Collateral Agent as
Collateral in the same form as so received (with any necessary endorsement).




          7. REMEDIES IN CASE OF AN EVENT OF DEFAULT. During the continuance of an Event of Default,
the Collateral Agent shall be entitled to exercise all of the rights, powers and remedies (whether
vested in it by this Agreement, any other Secured Debt Agreement or by law) for the protection and
enforcement of its rights in respect of the Collateral, and the Collateral Agent shall be entitled
to exercise all the rights and remedies of a secured party under the Uniform Commercial Code as in
effect in any relevant jurisdiction and also shall be entitled, without limitation, to the extent
permitted under the Credit Documents and applicable law, to exercise the following rights, which
each Pledgor hereby agrees to be commercially reasonable:





     (i) to receive all amounts payable in respect of the Collateral otherwise payable under
Section 6 hereof to the Pledgors;




     (ii) to vote all or any part of the Collateral (whether or not transferred into the
name of the Collateral Agent) and give all consents, waivers and ratifications in respect of
the Collateral and otherwise act with respect thereto as though it were the outright owner
thereof (each Pledgor hereby irrevocably constituting and appointing the Collateral Agent
the proxy and attorney-in-fact of such Pledgor, with full power of substitution to do so);




     (iii) at any time and from time to time to sell, assign and deliver, or grant options
to purchase, all or any part of the Collateral, or any interest therein, at any public or
private sale, without demand of performance, advertisement or notice of intention to sell or
of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which
are hereby waived by each Pledgor, to the extent permitted by law), for cash, on credit or
for other property, for immediate or future delivery without any assumption of credit risk,
and for such price or prices and on such terms as the Collateral Agent in its absolute
discretion may determine, provided that at least 10 days’ written notice of the time
and place of any such public sale or the date after which any such private sale will be held
shall be given to the Pledgors. The Collateral Agent shall not be obligated to make any
such sale of Collateral regardless of whether any such notice of sale has theretofore been
given. Each Pledgor hereby waives and releases to the fullest extent permitted by law any
right or equity of redemption with respect to the Collateral, whether before or after sale
hereunder, and all rights, if any, of marshalling the Collateral and any other security for
the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the
Collateral Agent on behalf of the Secured Creditors may bid for and purchase all or any part
of the Collateral so sold free from any such right or equity of redemption. To the extent
permitted by law, neither the Collateral Agent nor any other Secured Creditor shall be
liable for failure to collect or realize upon any or all of the Collateral or for any delay
in so doing nor shall any of them be under any obligation to take any action whatsoever with
regard thereto;




     (iv) to set-off any and all Collateral against any and all Obligations; and




     (v) apply any monies constituting collateral or proceeds thereof (including, without
limitation, amounts on deposit in the Operating Accounts) in accordance with the provisions
of Section 9.



 









 





Exhibit F

page 11




          8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and remedy of the Collateral
Agent provided for in this Agreement or in any other Secured Debt Agreement, or now or hereafter
existing at law or in equity or by statute shall be cumulative and concurrent and shall be in
addition to every other such right, power or remedy. The exercise or beginning of the exercise by
the Collateral Agent of any one or more of the rights, powers or remedies provided for in this
Agreement or any other Secured Debt Agreement or now or hereafter existing at law or in equity or
by statute or otherwise shall not preclude the simultaneous or later exercise by the Collateral
Agent of all such other rights, powers or remedies, and no failure or delay on the part of the
Collateral Agent to exercise any such right, power or remedy shall operate as a waiver thereof. No
notice to or demand on any Pledgor in any case shall entitle it to any other or further notice or
demand in similar or other circumstances or constitute a waiver of any of the rights of the
Collateral Agent or any other Secured Creditor to any other or further action in any circumstances
without notice or demand. The Secured Creditors agree that this Agreement may be enforced only by
the action of the Collateral Agent, in each case acting upon the instructions of the Required
Secured Creditors and that no other Secured Creditor shall have any right individually to seek to
enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being
understood and agreed that such rights and remedies may be exercised by the Collateral Agent for
the benefit of the Secured Creditors upon the terms of this Agreement.




          9. APPLICATION OF PROCEEDS. (a) All monies collected by the Collateral Agent pursuant to
Section 7 hereof or upon any other sale or other disposition of the Collateral of each Pledgor and
any other collateral under any other Security Document (including, without limitation, the Vessel
Mortgages, Assignments of Earnings, Assignments of Insurance, together with all other monies
received by the Collateral Agent hereunder and under any other Security Document (except to the
extent released in accordance with the applicable provisions of this Agreement or any other Credit
Document), shall be applied to the payment of the Obligations as follows:





     (i) first, to the payment of all amounts owing the Collateral Agent of the type
described in clauses (ii) and (iii) of Section 1.1;




     (ii) second, to the extent proceeds remain after the application pursuant to the
preceding clause (i), an amount equal to the outstanding Primary Obligations (as defined
below) constituting Credit Document Obligations shall be paid to the Lenders as provided in
Section 9(d) hereof, with each Lender receiving an amount equal to such outstanding Primary
Obligations constituting Credit Document Obligations or, if the proceeds are insufficient to
pay in full all such Primary Obligations constituting Credit Document Obligations, its Pro
Rata Share (as defined below) of the amount remaining to be distributed;




     (iii) third, to the extent proceeds remain after the application pursuant to the
preceding clauses (i) through (ii), inclusive, an amount equal to the outstanding Secondary
Obligations shall be paid to the Secured Creditors as provided in Section 9(d) hereof, with
each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations or,
if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata
Share of the amount remaining to be distributed; and




     (iv) fourth, to the extent proceeds remain after the application pursuant to the
preceding clauses (i) through (iii), inclusive, and following the termination of this
Agreement



 









 





Exhibit F

page 12





pursuant to Section 20 hereof, to the relevant Pledgor or to whomever may be lawfully
entitled to receive such surplus.



          (b) For purposes of this Agreement, (x) “Pro Rata Share” shall mean, when calculating
a Secured Creditor’s portion of any distribution or amount, that amount (expressed as a percentage)
equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor’s
Primary Obligations or Secondary Obligations, as the case may be, and the denominator of which is
the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may
be, (y) “Primary Obligations” shall mean all principal of, and interest on, all Loans and
all fees, costs and expenses incurred under the Credit Agreement with respect thereto and (z)
“Secondary Obligations” shall mean all Obligations other than Primary Obligations.




          (c) When payments to Secured Creditors are based upon their respective Pro Rata Shares, the
amounts received by such Secured Creditors hereunder shall be applied (for purposes of making
determinations under this Section 9 only) (i) first, to their Primary Obligations and (ii) second,
to their Secondary Obligations. If any payment to any Secured Creditor of its Pro Rata Share of
any distribution would result in overpayment to such Secured Creditor, such excess amount shall
instead be distributed in respect of the unpaid Primary Obligations or Secondary Obligations, as
the case may be, of the other Secured Creditors, with each Secured Creditor whose Primary
Obligations or Secondary Obligations, as the case may be, have not been paid in full to receive an
amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid
Primary Obligations or Secondary Obligations, as the case may be, of such Secured Creditor and the
denominator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may
be, of all Secured Creditors entitled to such distribution.




          (d) All payments required to be made hereunder shall be made if to the Secured Creditors, to
the Administrative Agent under the Credit Agreement for the account of the Secured Creditors.




          (e) For purposes of applying payments received in accordance with this Section 9, the
Collateral Agent shall be entitled to rely upon the Administrative Agent under the Credit Agreement
(which the Administrative Agent and each Secured Creditor agrees to provide upon request of the
Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the
Secured Creditors. Unless it has actual knowledge (including by way of written notice from a
Secured Creditor) to the contrary, the Administrative Agent, in furnishing information pursuant to
the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume
that no Secondary Obligations are outstanding.




          (f) It is understood and agreed that each Pledgor shall remain jointly and severally liable to
the extent of any deficiency between the amount of the proceeds of the Collateral pledged by it
hereunder and the aggregate amount of the Obligations of such Pledgor.




          10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Collateral Agent
hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or
otherwise), the receipt of the Collateral Agent or the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser
or purchasers shall not be obligated to see to the application of any part of the purchase money
paid





 









 








Exhibit F

page 13



over to the Collateral Agent or such officer or be answerable in any way for the
misapplication or nonapplication thereof.




          11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to indemnify and hold harmless
the Collateral Agent and each other Secured Creditor and their respective successors, assigns,
employees, agents and affiliates (individually an “Indemnitee,” and collectively the
“Indemnitees”) from and against any and all claims, demands, losses, judgments and
liabilities (including liabilities for penalties) of whatsoever kind or nature, and (ii) to
reimburse each Indemnitee for all reasonable costs and expenses, including reasonable attorneys’
fees, in each case growing out of or resulting from this Agreement or the exercise by any
Indemnitee of any right or remedy granted to it hereunder or under any other Secured Debt Agreement
(but excluding any claims, demands, losses, judgments and liabilities or expenses to the extent
incurred by reason of gross negligence or willful misconduct of such Indemnitee (as determined by a
court of competent jurisdiction in a final and non-appealable decision)). In no event shall the
Collateral Agent be liable, in the absence of gross negligence or willful misconduct on its part,
for any matter or thing in connection with this Agreement other than to account for monies actually
received by it in accordance with the terms hereof. If and to the extent that the obligations of
any Pledgor under this Section 11 are unenforceable for any reason, such Pledgor hereby agrees to
make the maximum contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.




          12. COLLATERAL AGENT NOT A PARTNER OR LIMITED LIABILITY COMPANY MEMBER. (a) Nothing herein
shall be construed to make the Collateral Agent or any other Secured Creditor liable as a member of
any limited liability company or as a partner of any partnership and neither the Collateral Agent
nor any other Secured Creditor by virtue of this Agreement or otherwise (except as referred to in
the following sentence) shall have any of the duties, obligations or liabilities of a member of any
limited liability company or partnership. The parties hereto expressly agree to the extent
permitted by law that, unless the Collateral Agent shall become the absolute owner of Collateral
consisting of a Limited Liability Company Interest or Partnership Interest pursuant hereto, this
Agreement shall not be construed as creating a partnership or joint venture among the Collateral
Agent, any other Secured Creditor, any Pledgor and/or any other Person.




          (b) Except as provided in the last sentence of paragraph (a) of this Section 12, the
Collateral Agent, by accepting this Agreement, did not intend to become a member of any limited
liability company or a partner of any partnership or otherwise be deemed to be a co-venturer with
respect to any Pledgor, any limited liability company, partnership and/or any other Person either
before or after an Event of Default shall have occurred. The Collateral Agent shall have only
those powers set forth herein and the Secured Creditors shall assume none of the duties,
obligations or liabilities of a member of any limited liability company or as a partner of any
partnership or any Pledgor except as provided in the last sentence of paragraph (a) of this Section
12.




          (c) To the extent permitted by law, the Collateral Agent and the other Secured Creditors shall
not be obligated to perform or discharge any obligation of any Pledgor as a result of the pledge
hereby effected.




 









 








Exhibit F

page 14




          (d) To the extent permitted by law, the acceptance by the Collateral Agent of this Agreement,
with all the rights, powers, privileges and authority so created, shall not at any time or in any
event obligate the Collateral Agent or any other Secured Creditor to appear in or defend any action
or proceeding relating to the Collateral to which it is not a party, or to take any action
hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any
obligation, duty or liability under the Collateral.




          13. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) Each Pledgor agrees that it will join with
the Collateral Agent in executing, if appropriate, and, at such Pledgor’s own expense, file and
refile under the Uniform Commercial Code or other applicable law such financing statements,
continuation statements and other documents in such offices as the Collateral Agent may deem
reasonably necessary and wherever required by law in order to perfect and preserve the Collateral
Agent’s security interest in the Collateral and hereby authorizes the Collateral Agent to file
financing statements and amendments thereto relative to all or any part of the Collateral where
permitted by law, and agrees to do such further acts and things and to execute and deliver to the
Collateral Agent such additional conveyances, assignments, agreements and instruments as the
Collateral Agent may reasonably require or deem necessary to carry into effect the purposes of this
Agreement or to further assure and confirm unto the Collateral Agent its rights, powers and
remedies hereunder.




          (b) Each Pledgor hereby appoints the Collateral Agent such Pledgor’s attorney-in-fact, with
full authority in the place and stead of such Pledgor and in the name of such Pledgor or otherwise,
to act from time to time solely after the occurrence and during the continuance of an Event of
Default in the Collateral Agent’s reasonable discretion to take any action and to execute any
instrument which the Collateral Agent may deem reasonably necessary or advisable to accomplish the
purposes of this Agreement.




          14. THE COLLATERAL AGENT AS AGENT. The Collateral Agent will hold in accordance with this
Agreement all items of the Collateral at any time received under this Agreement. It is expressly
understood and agreed by each Secured Creditor that by accepting the benefits of this Agreement
each such Secured Creditor acknowledges and agrees that the obligations of the Collateral Agent as
holder of the Collateral and interests therein and with respect to the disposition thereof, and
otherwise under this Agreement, are only those expressly set forth in this Agreement and in Section
12 of the Credit Agreement. The Collateral Agent shall act hereunder on the terms and conditions
set forth herein and in Section 12 of the Credit Agreement.




          15. TRANSFER BY THE PLEDGORS. No Pledgor will sell or otherwise dispose of, grant any option
with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest
therein (except as may be permitted in accordance with the terms of the Secured Debt Agreements).




          16. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS. Each Pledgor represents,
warrants and covenants that:





     (i) it is the legal, beneficial and record owner of, and has good and indefeasible
title to, all Collateral pledged by such Pledgor hereunder and that it has sufficient
interest in all Collateral pledged by such Pledgor hereunder in which a security interest is
purported to



 









 





Exhibit F

page 15





be created hereunder for such security interest to attach (subject, in each case, to no
pledge, lien, mortgage, hypothecation, security interest, charge, option, Adverse Claim or
other encumbrance whatsoever, except the liens and security interests created by this
Agreement and Permitted Liens);




     (ii) it has the corporate, limited partnership or limited liability company power and
authority, as the case may be, to pledge all the Collateral pledged by it pursuant to this
Agreement;




     (iii) this Agreement has been duly authorized, executed and delivered by such Pledgor
and constitutes a legal, valid and binding obligation of such Pledgor enforceable against
such Pledgor in accordance with its terms, except to the extent that the enforceability
hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws generally affecting creditors’ rights (and by the judicial application of
foreign laws or governmental action affecting the rights of creditors generally) and by
equitable principles (regardless of whether enforcement is sought in equity or at law);




     (iv) except to the extent already obtained or made, or, in the case of any filings or
recordings of the Security Documents executed on or before the Effective Date, to be made
within 10 days of the Effective Date, no consent of any other party (including, without
limitation, any stockholder, partner, member or creditor of such Pledgor or any of its
Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any governmental authority
is required to be obtained by such Pledgor in connection with (a) the execution, delivery or
performance by such Pledgor of this Agreement, (b) the legality, validity, binding effect or
enforceability of this Agreement, (c) the perfection or enforceability of the Collateral
Agent’s security interest in the Collateral pledged by such Pledgor hereunder or (d) except
for compliance with or as may be required by applicable securities laws, the exercise by the
Collateral Agent of any of its rights or remedies provided herein;




     (v) the execution, delivery and performance of this Agreement will not violate any
provision of any applicable law or regulation or of any order, judgment, writ, award or
decree of any court, arbitrator or governmental authority, U.S. or non-U.S., applicable to
such Pledgor, or of the memorandum of association, certificate or articles of incorporation,
certificate of formation, operating agreement, limited liability company agreement,
partnership agreement or by-laws of such Pledgor, as applicable, or of any securities issued
by such Pledgor or any of its Subsidiaries, or of any mortgage, deed of trust, indenture,
lease, loan agreement, credit agreement or other contract, agreement or instrument or
undertaking to which such Pledgor or any of its Subsidiaries is a party or which purports to
be binding upon such Pledgor or any of its Subsidiaries or upon any of their respective
assets and will not result in the creation or imposition of (or the obligation to create or
impose) any lien or encumbrance on any of the assets of such Pledgor or any of its
Subsidiaries which are Credit Parties, except as contemplated by this Agreement or the
Credit Agreement;




     (vi) all of the Collateral has been duly and validly issued and acquired, is fully paid
and non-assessable and is subject to no options to purchase or similar rights;



 









 





Exhibit F

page 16





     (vii) the pledge and collateral assignment to, and possession by, the Collateral Agent
of the Collateral pledged by such Pledgor hereunder consisting of Certificated Securities
pursuant to this Agreement creates a valid and perfected first priority security interest in
such Certificated Securities, and the proceeds thereof, subject to no prior Lien or to any
agreement purporting to grant to any third party a Lien on the property or assets of such
Pledgor which would include the Certificated Securities, except for Permitted Liens, and the
Collateral Agent is entitled to all the rights, priorities and benefits afforded by the UCC
or other relevant law as enacted in any relevant jurisdiction to perfect security interests
in respect of such Collateral; and;




     (viii) “control” (as defined in Section 8-106 of the UCC) has been obtained by
the Collateral Agent over all Collateral pledged by such Pledgor hereunder consisting of
Stock with respect to which such “control” may be obtained pursuant to Section 8-106
of the UCC.



          (b) Each Pledgor covenants and agrees that it will defend the Collateral Agent’s right, title
and security interest in and to the Collateral and the proceeds thereof against the claims and
demands of all persons whomsoever; and each Pledgor covenants and agrees that it will have like
title to and right to pledge any other property at any time hereafter pledged to the Collateral
Agent as Collateral hereunder and will likewise defend the right thereto and security interest
therein of the Collateral Agent and the Secured Creditors.




          17. JURISDICTION OF ORGANIZATION; CHIEF EXECUTIVE OFFICE; RECORDS. The jurisdiction of
organization of each Pledgor is specified in Annex A hereto. The chief executive office of each
Pledgor is located at the address specified in Annex F hereto. Each Pledgor will not change the
jurisdiction of its organization or of its chief executive office except to such new jurisdiction
as such Pledgor may establish in accordance with the last sentence of this Section 17. The
originals of all documents in the possession of such Pledgor evidencing all Collateral, including
but not limited to all Limited Liability Company Interests and Partnership Interests, and the only
original books of account and records of such Pledgor relating thereto are, and will continue to
be, kept at such chief executive office as specified in Annex F hereto, or at such new locations as
such Pledgor may establish in accordance with the last sentence of this Section 17. All Limited
Liability Company Interests and Partnership Interests are, and will continue to be, maintained at,
and controlled and directed (including, without limitation, for general accounting purposes) from,
such chief executive office as specified in Annex F hereto, or such new locations as such Pledgor
may establish in accordance with the last sentence of this Section 17. No Pledgor shall establish
a new jurisdiction of organization or the location for such chief executive offices in a new
jurisdiction until (i) it shall have given to the Collateral Agent not less than 30 days’ prior
written notice of its intention so to do, providing clear details of such new jurisdiction, and
providing such other information in connection therewith as the Collateral Agent may reasonably
request, and (ii) with respect to such new jurisdiction, it shall have taken all action,
satisfactory to the Collateral Agent (and, to the extent applicable, in accordance with Section 3.2
hereof), to maintain the security interest of the Collateral Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect. Promptly after
establishing a new jurisdiction of organization or in which its chief executive offices are located
in accordance with the immediately preceding sentence, the respective Pledgor shall deliver to the
Collateral Agent a supplement to Annex A hereto or Annex F hereto, as the case may be, so as to
cause such Annex A or F, as the case may be, to be complete and accurate.




 









 








Exhibit F

page 17




          18. PLEDGORS’ OBLIGATIONS ABSOLUTE, ETC. To the extent permitted by law, the obligations of
each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full
force and effect without regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation:
(i) any renewal, extension, amendment or modification of or addition or supplement to or deletion
from any Secured Debt Agreement or any other instrument or agreement referred to therein, or any
assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other
action or inaction under or in respect of any such agreement or instrument including, without
limitation, this Agreement; (iii) any furnishing of any additional security to the Collateral Agent
or its assignee or any acceptance thereof or any release of any security by the Collateral Agent or
its assignee; (iv) any limitation on any party’s liability or obligations under any such instrument
or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or
agreement or any term thereof; or (v) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to any Pledgor or any
Subsidiary of any Pledgor, or any action taken with respect to this Agreement by any trustee or
receiver, or by any court, in any such proceeding, whether or not such Pledgor shall have notice or
knowledge of any of the foregoing (it being understood and agreed that the enforcement hereof may
be limited by applicable bankruptcy, insolvency, restructuring, moratorium or other similar laws
generally affecting creditors’ rights and by equitable principles and by the possible judicial
application of foreign laws or governmental action affecting the rights of creditors generally).




          19. REGISTRATION, ETC. If at any time when the Collateral Agent shall determine to exercise
its right to sell all or any part of the Collateral consisting of Stock, Limited Liability Company
Interests or Partnership Interests pursuant to Section 7 hereof, and the Collateral or the part
thereof to be sold shall not, for any reason whatsoever, be effectively registered under the
Securities Act, as then in effect, the Collateral Agent may, in its sole and absolute discretion,
sell such Collateral, as the case may be, or part thereof by private sale in such manner and under
such circumstances as the Collateral Agent may deem necessary or advisable in order that such sale
may legally be effected without such registration. Without limiting the generality of the
foregoing, in any such event the Collateral Agent, in its sole and absolute discretion (i) may
proceed to make such private sale notwithstanding that a registration statement for the purpose of
registering such Collateral or part thereof shall have been filed under such Securities Act, (ii)
may approach and negotiate with a single possible purchaser to effect such sale, and (iii) may
restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing
for its own account, for investment, and not with a view to the distribution or sale of such
Collateral or part thereof. In the event of any such sale, the Collateral Agent shall incur no
responsibility or liability for selling all or any part of the Collateral at a price which the
Collateral Agent, in its sole and absolute discretion, in good faith deems reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price might be realized
if the sale were deferred until after registration as aforesaid.




          20. TERMINATION; RELEASE. (a) After the Termination Date, this Agreement and the security
interest created hereby shall terminate (provided that all indemnities set forth herein including,
without limitation, in Section 11 hereof shall survive any such termination), and the Collateral
Agent, at the request and expense of any Pledgor, will as promptly as practicable (i) execute and
deliver to such Pledgor a proper instrument or instruments acknowledging the




 









 








Exhibit F

page 18



satisfaction and termination of this Agreement, and (ii) will duly assign, transfer and
deliver to such Pledgor (without recourse and without any representation or warranty) such of the
Collateral as has not theretofore been sold or otherwise applied or released pursuant to this
Agreement or any other Credit Document, together with any monies at the time held by the Collateral
Agent or any of its sub-agents hereunder. As used in this Agreement, “Termination Date”
shall mean the date upon which the Total Commitment under the Credit Agreement has been terminated,
no Note under the Credit Agreement is outstanding and all Loans thereunder have been repaid in
full, all Letters of Credit issued under the Credit Agreement have been terminated and all
Obligations then due and payable have been paid in full.




          (b) In the event that any part of the Collateral is sold in connection with a sale permitted
by the Secured Debt Agreements (other than a sale to any Pledgor or any Subsidiary thereof) or is
otherwise released with the consent of the Required Secured Creditors and the proceeds of such sale
or sales or from such release are applied in accordance with the provisions of the Credit
Agreement, to the extent required to be so applied, the Collateral Agent, at the request and
expense of the respective Pledgor, will duly assign, transfer and deliver to such Pledgor (without
recourse and without any representation or warranty) such of the Collateral (and releases therefor)
as is then being (or has been) so sold or released and has not theretofore been released pursuant
to this Agreement.




          (c) At any time that a Pledgor desires that the Collateral Agent assign, transfer and deliver
Collateral (and releases therefor) as provided in Section 20(a) or (b) hereof, it shall deliver to
the Collateral Agent a certificate signed by a principal executive officer of such Pledgor stating
that the release of the respective Collateral is permitted pursuant to such Section 20(a) or (b).




          (d) The Collateral Agent shall have no liability whatsoever to any other Secured Creditor as a
result of any release of Collateral by it in accordance with this Section 20.




          21. NOTICES, ETC. Except as otherwise expressly provided herein, all notices and other
communications provided for hereunder shall be in writing (including telegraphic or telecopier
communication) and mailed, telecopied or delivered: if to any Pledgor, at 2000 West Sam Houston
Parkway South, Suite 800, Houston, Texas, 77042, if to any Secured Creditor, at its address
specified opposite its name on Schedule II to the Credit Agreement; and if to the Collateral Agent,
at its Notice Office. All such notices and communications shall, (i) when mailed, be effective
three Business Days after being deposited in the mails, prepaid and properly addressed for
delivery, (ii) when sent by overnight courier, be effective one Business Day after delivery to the
overnight courier prepaid and properly addressed for delivery on such next Business Day, or (iii)
when sent by telecopier, be effective when sent by telecopier, except that notices and
communications to the Collateral Agent or any Pledgor shall not be effective until received by the
Collateral Agent or such Pledgor, as the case may be.




          22. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed,
waived, modified or varied in any manner whatsoever except in writing duly signed by each Pledgor
directly affected thereby and the Collateral Agent (with the written consent of the Required
Secured Creditors).




 









 








Exhibit F

page 19




          23. MISCELLANEOUS. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE SECURED
CREDITORS AND THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAWS RULES (OTHER
THAN TITLE 14 OF ARTICLE 5 OF THE GENERAL OBLIGATIONS LAW). ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE CITY
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PLEDGOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH
PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED MAIL,
POSTAGE PREPAID, TO EACH PLEDGOR AT ITS RESPECTIVE ADDRESS SET FORTH IN ANNEX F, SUCH SERVICE TO
BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
COLLATERAL AGENT UNDER THIS AGREEMENT OR ANY SECURED PARTY TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PLEDGOR IN ANY
OTHER JURISDICTION. IF AT ANY TIME DURING WHICH THIS AGREEMENT REMAINS IN EFFECT, EACH PLEDGOR
DOES NOT MAINTAIN A REGULARLY FUNCTIONING OFFICE IN NEW YORK CITY, IT WILL DULY APPOINT, AND AT ALL
TIMES MAINTAIN, AN AGENT IN NEW YORK CITY FOR THE SERVICE OF PROCESS OR SUMMONS, AND WILL PROVIDE
TO THE COLLATERAL AGENT AND THE SECURED PARTIES WRITTEN NOTICE OF THE IDENTITY AND ADDRESS OF SUCH
AGENT FOR SERVICE OF PROCESS OR SUMMONS; PROVIDED THAT ANY FAILURE ON THE PART OF SUCH PLEDGOR TO
COMPLY WITH THE FOREGOING PROVISIONS OF THIS SENTENCE SHALL NOT IN ANY WAY PREJUDICE OR LIMIT THE
SERVICE OF PROCESS OR SUMMONS IN ANY OTHER MANNER DESCRIBED ABOVE IN THIS SECTION 23 OR OTHERWISE
PERMITTED BY LAW.




          (b) EACH PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a)
ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.




          (c) EACH PLEDGOR AND EACH SECURED CREDITOR (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS
AGREEMENT) HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.




 









 








Exhibit F

page 20




          24. RECOURSE. This Agreement is made with full recourse to the Pledgors and pursuant to and
upon all the representations, warranties, covenants and agreements on the part of the Pledgors
contained herein and in the other Credit Documents and otherwise in writing in connection herewith
or therewith.




          25. ADDITIONAL PLEDGORS. It is understood and agreed that any Subsidiary of the Borrower that
is required to become a party to this Agreement after the date hereof pursuant to the requirements
of the Credit Agreement shall automatically become a Pledgor hereunder by (x) executing a
counterpart hereof and/or a Subsidiary assumption agreement, in each case in form and substance
satisfactory to the Collateral Agent, (y) delivering supplements to Annexes A through F hereto as
are necessary to cause such Annexes to be complete and accurate with respect to such additional
Pledgor on such date and (z) taking all actions as specified in Section 3 of this Agreement as
would have been taken by such Pledgor had it been an original party to this Agreement, in each case
with all documents required above to be delivered to the Collateral Agent and with all actions
required to be taken above to be taken to the reasonable satisfaction of the Collateral Agent.




          26. RELEASE OF GUARANTORS. In the event any Pledgor which is a Subsidiary of the Borrower is
released from its obligations pursuant to the Subsidiaries Guaranty, such Pledgor (so long as not
the Borrower) shall be released from this Agreement and this Agreement shall, as to such Pledgor
only, have no further force or effect.




* * *




 









 








Exhibit F

page 21




          IN WITNESS WHEREOF, each Pledgor and the Collateral Agent have caused this Agreement to be
executed by their duly elected officers duly authorized as of the date first above written.




	 	 	 	 	 	 	 	 	 
	 	 	 	 	TODCO,	 	 
	 	 	 	 	     as a Pledgor	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	[                                        ]	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 
	Accepted and Agreed to:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	NORDEA BANK FINLAND PLC,	 	 	 	 	 	 
	 

	 	NEW YORK BRANCH,	 	 	 	 	 	 
	 

	 	as Collateral Agent	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 






 









 






ANNEX A

to

Pledge and Security Agreement




EXACT LEGAL NAME OF EACH PLEDGOR AND JURISDICTION OF

ORGANIZATION




	 	 	 	 	 
	 	 	 	 	Organizational ID /
	Name of Pledgor	 	Jurisdiction of Organization	 	Registration Number
	TODCO
	 	Delaware	 	 
	 	 	 	 	 
	[                                        ]
	 	[                                        ]
	 	[                                        ]






 









 






ANNEX B

to

Pledge and Security Agreement




LIST OF SUBSIDIARY GUARANTORS




	 	 	 
	Pledgor	 	Subsidiary Guarantors
	[                                        ]
	 	[                                        ]






 









 






ANNEX C

to

Pledge and Security Agreement




LIST OF STOCK





 









 








ANNEX D

to

Pledge and Security Agreement




LIST OF LIMITED LIABILITY COMPANY INTERESTS




	 	 	 	 	 	 	 
	Name of Limited

Liability Company
	 	Type of Interest
	 	Percentage

Owned
	 	Sub-clause of

Section 3.2(a) of

Borrower/Subsidiary

Pledge and Security

Agreement






 









 






ANNEX E

to

Pledge and Security Agreement




LIST OF PARTNERSHIP INTERESTS





 









 








ANNEX F

to

Pledge and Security Agreement




LIST OF CHIEF EXECUTIVE OFFICES




	 	 	 
	Name of Pledgor	 	Address
	[                                        ]
	 	[                                        ]






 









 






ANNEX G

to

Pledge and Security Agreement




Form of Agreement Regarding Uncertificated Securities, Limited Liability

Company Interests and Partnership Interests




          AGREEMENT (as amended, modified or supplemented from time to time, this “Agreement”),
dated as of _________ ___, ___, among the undersigned pledgor (the “Pledgor”), NORDEA BANK
FINLAND PLC, New York Branch, not in its individual capacity but solely as collateral agent (the
“Collateral Agent”), and ___, as the issuer of the Uncertificated Securities,
Limited Liability Company Interests and/or Partnership Interests (each as defined below) (the
“Issuer”).




WITNESSETH:




          WHEREAS, the Pledgor, certain of its affiliates and the Collateral Agent have entered into a
Pledge and Security Agreement, dated as of December 29, 2005 (as amended, amended and restated,
modified or supplemented from time to time, the “Pledge Agreement”), under which, among
other things, in order to secure the payment of the Obligations (as defined in the Pledge
Agreement), the Pledgor will pledge to the Collateral Agent for the benefit of the Secured
Creditors (as defined in the Pledge Agreement), and grant a first priority security interest in
favor of the Collateral Agent for the benefit of the Secured Creditors in, all of the right, title
and interest of the Pledgor in and to any and all (1) “uncertificated securities” (as
defined in Section 8-102(a)(18) of the Uniform Commercial Code, as adopted in the State of New
York) (“Uncertificated Securities”), (2) Partnership Interests (as defined in the Pledge
Agreement) that are Securities and (3) Limited Liability Company Interests (as defined in the
Pledge Agreement) that are Securities, in each case issued from time to time by the Issuer, whether
now existing or hereafter from time to time acquired by the Pledgor (with all of such
Uncertificated Securities, Partnership Interests and Limited Liability Company Interests being
herein collectively called the “Issuer Pledged Interests”); and




          WHEREAS, the Pledgor desires the Issuer to enter into this Agreement in order to protect the
security interest of the Collateral Agent under the Pledge Agreement in the Issuer Pledged
Interests, to vest in the Collateral Agent control of the Issuer Pledge Interests and to provide
for the rights of the parties under this Agreement;




          NOW THEREFORE, in consideration of the premises and the mutual promises and agreements
contained herein, and for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:




          1. The Pledgor hereby irrevocably authorizes and directs the Issuer, and the Issuer hereby
agrees, to comply with any and all instructions and orders originated by the Collateral Agent (and
its successors and assigns) regarding any and all of the Issuer Pledged Interests without the
further consent by the registered owner (including the Pledgor), and, after receiving a notice from
the Collateral Agent stating that an “Event of Default” has occurred and is continuing,
until such notice is rescinded by the Collateral Agent, not to comply with any instructions or
orders regarding




 









 








ANNEX G

Page 2



any or all of the Issuer Pledged Interests originated by any person or entity other than the
Collateral Agent (and its successors and assigns) or a court of competent jurisdiction.




          2. The Issuer hereby certifies that (i) no notice of any security interest, lien or other
encumbrance or claim affecting the Issuer Pledged Interests (other than the security interest of
the Collateral Agent) has been received by it, and (ii) the security interest of the Collateral
Agent in the Issuer Pledged Interests has been registered in the books and records of the Issuer.




          3. The Issuer hereby represents and warrants that (i) the pledge by the Pledgor of, and the
granting by the Pledgor of a security interest in, the Issuer Pledged Interests to the Collateral
Agent, for the benefit of the Secured Creditors, does not violate the charter, by-laws, partnership
agreement, membership agreement or any other agreement governing the Issuer or the Issuer Pledged
Interests, and (ii) the Issuer Pledged Interests are fully paid and nonassessable.




          4. All notices, statements of accounts, reports, prospectuses, financial statements and other
communications to be sent to the Pledgor by the Issuer in respect of the Issuer will also be sent
to the Collateral Agent at the following address:



Nordea Bank Finland plc,

     New York Branch

437 Madison Avenue, 21st Floor

New York, New York 10022

Attn: Hans Kjelsrud

Telephone: (212) 318-9634

Facsimile: (212) 421-4420




          5. Until the Collateral Agent shall have delivered written notice to the Issuer that all of
the Obligations have been paid in full and this Agreement is terminated, the Issuer will, upon
receiving notice from the Collateral Agent stating that an “Event of Default” has occurred
and is continuing, until such notice is rescinded by the Collateral Agent, send any and all
redemptions, distributions, interest or other payments in respect of the Issuer Pledged Interests
from the Issuer for the account of the Pledgor only by wire transfers to such account as the
Collateral Agent shall instruct.




          6. Except as expressly provided otherwise in Sections 4 and 5, all notices, shall be sent or
delivered by mail, telegraph, telecopy or overnight courier service and all such notices and
communications shall, when mailed, telegraphed, telecopied or sent by overnight courier, be
effective when deposited in the mails, delivered to the telegraph company or courier, as the case
may be, or sent by telecopier, except that notices and communications to the Collateral Agent, the
Pledgor or the Issuer shall not be effective until received by the Collateral Agent, the Pledgor or
the Issuer, as the case may be. All notices and other communications shall be in writing and
addressed as follows:




 









 








ANNEX G

Page 3



(a) if to any Pledgor, to it:



__________________



__________________



__________________



with copies to:



__________________



__________________



__________________



(b) if to the Collateral Agent, at:



Nordea Bank Finland plc,

     New York Branch

437 Madison Avenue, 21st Floor

New York, New York 10022

Attn: Hans Kjelsrud

Telephone: (212) 318-9634

Facsimile: (212) 421-4420



(c) if to the Issuer, at:



________________________



________________________



________________________



or at such other address as shall have been furnished in writing by any Person described above to
the party required to give notice hereunder.




          7. This Agreement shall be binding upon the successors and assigns of the Pledgor and the
Issuer and shall inure to the benefit of and be enforceable by the Collateral Agent and its
successors and assigns. This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which shall constitute one instrument. In the event that
any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be
deemed to be severable from the other provisions of this Agreement which shall remain binding on
all parties hereto. None of the terms and conditions of this Agreement may be changed, waived,
modified or varied in the manner whatsoever except in writing signed by the Collateral Agent, the
Issuer and the Pledgor.




          8. This Agreement shall be governed by and construed in accordance with the laws of the State
of New York.




* * *




 









 








ANNEX G

Page 4




          IN WITNESS WHEREOF, the Pledgor, the Collateral Agent and the Issuer have caused this
Agreement to be executed by their duly elected officers duly authorized as of the date first above
written.




	 	 	 	 	 	 	 
	 	 	[                                        ],  
	 	 	     as Pledgor
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	NORDEA BANK FINLAND PLC, NEW YORK BRANCH,
	 

	 	 	 	not in its individual capacity but solely as Collateral Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	[                                        ],
	 	 	     the Issuer
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 







 










 






Exhibit G




ASSIGNMENT OF EARNINGS




THE OFFSHORE DRILLING COMPANY




     THE OFFSHORE DRILLING COMPANY, a corporation organized and existing under the laws of the
State of Delaware, United States of America (the “Assignor”), in consideration of One
Dollar ($1) lawful money of the United States of America, and other good and valuable
consideration, the receipt of which is hereby acknowledged, has sold, assigned, transferred and set
over and by this instrument does sell, assign, transfer and set over unto Nordea Bank Finland Plc,
New York Branch (the “Assignee”), as Collateral Agent (the “Agent”) for the benefit
of the Lenders (the “Lenders”) defined under that certain Credit Agreement, dated as of
December ___, 2005 (as such agreement may be amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”) among, TODCO, a Delaware corporation (the
“Borrower”), the Lenders party thereto from time to time, and the Assignee, as
Administrative Agent and Collateral Agent, and unto the Assignee’s successors and assigns, to its
and its successors’ and assigns’ own proper use and benefit and does hereby grant to the Assignee a
security interest in all the right, title, interest, claim and demand of the Assignor in and to
(the following clauses (i) through (iv), collectively, the “Earnings Collateral”) (i) all
freights, hire and other moneys earned and to be earned, due or to become due, or paid or payable
to, or for the account of, the Assignor, of whatsoever nature, arising out of or as a result of the
use, operation, pooling or chartering by the Assignor or its agents of the vessels documented and
flagged as listed on Schedule I attached hereto (the “Vessels”), including, without
limitation, all rights arising out of the owner’s lien on cargoes and subfreights thereunder, (ii)
all moneys and claims for moneys due and to become due to the Assignor, and all claims for damages,
arising out of the breach of any and all present and future drilling contracts, charter parties,
pooling arrangements, bills of lading, contracts and other engagements of affreightment or for the
carriage or transportation of cargo, and operations of every kind whatsoever of any Vessel and in
and to any and all claims and causes of action for money, loss or damages that may accrue or belong
to the Assignor, its successors or assigns, arising out of or in any way connected with the present
or future use, operation, pooling or chartering of any Vessel or arising out of or in any way
connected with any and all present and future requisitions, drilling contracts, charter parties,
pooling arrangements, bills of lading, contracts and other engagements of affreightment or for the
carriage or transportation of cargo, and other operations of any Vessel, (iii) all moneys and
claims due and to become due to the Assignor, and all claims for damages and all insurances and
other proceeds, in respect of the actual or constructive total loss of or requisition of use of or
title to any Vessel, and (iv) any proceeds of any of the foregoing and all interest and earnings
from the investment of any of the foregoing and the proceeds thereof. Capitalized terms used
herein and not otherwise defined shall be used herein as defined in the Credit Agreement.



     Section 1. Recital. This Assignment is given as security for all of the obligations
of the Assignor and all other obligations of the Borrower under the Credit Agreement and the other
Credit Documents, and the payment of all other sums of money (whether for principal, premium, if
any, interest, fees, expenses or otherwise) from time to time payable by the Assignor under this
Assignment and the other Credit Documents to which it is a party (collectively, the
“Obligations”), and to secure as well the performance and observance of all agreements,
covenants and provisions contained in this Assignment and the Credit Documents.



- 1 -









 





     Section 2. Representations and Warranties. The Assignor hereby represents and
warrants to the Assignee, as an inducement to the Assignee to accept this Assignment, that neither
the whole nor any part of the right, title and interest hereby assigned is the subject of any
present assignment, security interest or pledge other than any assignments for the benefit of the
Assignee.



     Section 3. Covenants. The Assignor hereby covenants to the Assignee that:



     (a) If an Event of Default (as defined in that certain First Preferred Fleet Mortgage of even
date herewith, between the Assignor and Nordea Bank Finland Plc, New York Branch, as
Trustee, in respect of United States documented vessels (the “United States Mortgage”)
or that certain First Preferred Fleet Mortgage of even date herewith, between the Assignor and
Nordea Bank Finland Plc, New York Branch, as Trustee, in respect of Liberian documented
vessels (the “Liberian Mortgage”)(collectively, the United States Mortgage and the Liberian
Mortgage hereinafter referred to as the “Mortgages”)) shall have occurred and has not been
cured, and without derogation of the rights of the Assignee under Section 5 hereof to issue
instructions to the charterers and other obligors directly, the Assignor shall specifically
authorize and direct each charterer or other obligor to make payment of all of the freights, hire
and other moneys hereby assigned directly to the Assignee in accordance with the Credit Documents,
and shall deliver to the Assignee the written acknowledgment of such charterer or other obligor of
such instructions. Notwithstanding anything to the contrary, the Assignor and the Assignee hereby
agree that so long as no Event of Default shall have occurred and be continuing, the Assignor shall
be entitled to receive and retain any and all moneys otherwise assigned hereunder.



     (b) (i) In connection with any charter party (other than a charter party to a Credit Party)
having an indicated duration of at least twelve (12) months (including any optional extensions or
renewals), the Assignor shall, at its own cost and expense, promptly and duly execute and deliver
to the Assignee a charter assignment in respect of such charter party substantially in the form
attached hereto as Exhibit A (the “Charter Assignment”), and will use its commercially
reasonable efforts to cause the charterer under such charter party to execute and deliver to the
Assignee a consent to the Charter Assignment substantially in the form attached hereto as Exhibit B
(the “Consent”). In addition to the Charter Assignment, the Assignor shall execute any
further assignments of its rights, titles and interests pursuant to any and all agreements referred
to in this paragraph (i) of Section 3(b), as the Assignee may, in its sole discretion, require.



     (ii) To the extent commercially available, the Assignor will grant the Assignee an assignment,
substantially in the form of the Charter Assignment, mutatis mutandis, respecting
each drilling contract it enters into having an indicated duration exceeding twelve (12) months
(including any optional renewals or extensions) and will use its commercially reasonable efforts to
cause all parties to each drilling contract to deliver to the Assignee a consent to the Charter
Assignment substantially in the form attached hereto as Exhibit B, mutatis mutandis.



     (c) So long as this Assignment is in effect, the Assignor shall not assign, grant a security
interest in or pledge the whole or any part of the right, title and interest hereby assigned to
anyone other than the Assignee, its successors, endorsees and/or assigns without the prior written
consent of the Assignee and it shall not take or omit to take any action, the taking or



- 2 -









 





omission of which might result in any material alteration or impairment of this Assignment or
any of the rights created by this Assignment.



     (d) The Assignor covenants and agrees with the Assignee that the Assignor will (i) duly
perform and observe all of the terms and provisions of any drilling contract, charter, contract of
affreightment or pooling arrangement on the part of the Assignor to be performed or observed; and
(ii) clearly record on the books and records of the Assignor notations of this Assignment.



     (e) At any time and from time to time, upon the written request of the Assignee, the Assignor
shall promptly and duly execute and deliver any and all such further instruments and documents as
the Assignee may reasonably request in order to obtain the full benefits of this Assignment and of
the rights and powers herein granted.



     (f) Whenever requested by the Assignee, the Assignor shall deliver letters to each of its
agents and representatives into whose hands or control may come any earnings, moneys and property
hereby assigned, informing each such addressee of this Assignment and instructing such addressee to
remit or deliver promptly to the Assignee all earnings, moneys and property hereby assigned which
may come into the addressee’s hands or control and to continue to make such remittances or delivery
until such time as the addressee may receive written notice or instructions to the contrary direct
from the Assignee. Each such addressee shall acknowledge directly to the Assignee receipt of the
Assignor’s letter of notification and instructions.



     Section 4. Freedom of Assignee from Obligations. It is hereby expressly agreed that
anything herein contained to the contrary notwithstanding, the Assignee shall have no obligation or
liability under any drilling contract, charter, contract of affreightment or pooling arrangement by
reason of or arising out of this Assignment, nor shall the Assignee be required or obligated in any
manner to perform or to fulfill any obligations of the Assignor under or pursuant to any drilling
contract, charter, contract of affreightment or pooling arrangement nor to make any payment, nor to
make any inquiry as to the nature or sufficiency of any payment received by the Assignee or to
present or file any claim, or to take any other action to collect or enforce the payment of any
amounts which may have been assigned to it or which it may be entitled to hereunder at any time or
times.



     Section 5. Payment Directions to Charterers; Power of Attorney; Financing Statements.
Upon the occurrence and continuance of an Event of Default and issuance of notice thereof to the
Assignor, the Assignee shall be entitled to direct the charterers and other obligors to pay all
moneys assigned hereunder to such bank account in New York City or elsewhere as the Assignee may
from time to time designate. Upon request of the Assignor, the Assignee shall furnish the Assignor
with information from time to time as to the accounts into which moneys assigned hereunder are
paid, the amounts and sources of such payments and the amounts and application of moneys withdrawn
therefrom. The Assignee, its successors and assigns, are hereby constituted lawful attorneys of
the Assignor, irrevocably, with full power (in the name of the Assignor or otherwise), to ask,
require, demand, receive, compound and give acquittance for any and all moneys, claims, property
and rights hereby assigned, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings which the Assignee
may deem to be necessary or advisable in the premises.



- 3 -









 





Any action or proceeding brought by the Assignee pursuant to any of the provisions hereof or
of any drilling contract, charter, contract of affreightment, pooling arrangement or otherwise, and
any claim made by the Assignee hereunder or under any drilling contract, charter, contract of
affreightment or pooling arrangement, may be compromised, withdrawn or otherwise dealt with by the
Assignee without any notice to, or approval of, the Assignor. The Assignor hereby irrevocably
authorizes the Assignee to file, at any time and from time to time, at the Assignor’s expense, such
financing and continuation statements or papers of similar purpose or effect relating to this
Assignment, without the Assignor’s signature, as the Assignee at its option may deem appropriate
and appoints the Assignee as the Assignor’s attorney-in-fact to execute any such statements in the
Assignor’s name and to perform all other acts which the Assignee may deem appropriate to perfect
and continue the security interest conferred hereby.



     Section 6. Irrevocable Assignment. The powers and authority granted to the Assignee
herein have been given for a valuable consideration and are hereby declared to be irrevocable and
may not be amended or waived except by an instrument in writing signed by the party against whom
enforcement is sought.



     Section 7. Governing Law; Waiver of Jury Trial.



     (a) THIS ASSIGNMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED
IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS
CONFLICT OF LAWS RULES (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE GENERAL OBLIGATIONS LAW). ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS ASSIGNMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
NEW YORK LOCATED IN THE CITY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS ASSIGNMENT, THE ASSIGNOR HEREBY IRREVOCABLY ACCEPTS
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE ASSIGNOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED MAIL, POSTAGE PREPAID, TO THE ASSIGNOR AT ITS ADDRESS SET FORTH IN THE CREDIT AGREEMENT,
SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF THE ASSIGNEE UNDER THIS ASSIGNMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE ASSIGNOR IN ANY OTHER JURISDICTION. IF
AT ANY TIME DURING WHICH THIS ASSIGNMENT REMAINS IN EFFECT, THE ASSIGNOR DOES NOT MAINTAIN A
REGULARLY FUNCTIONING OFFICE IN NEW YORK CITY, IT WILL DULY APPOINT, AND AT ALL TIMES MAINTAIN, AN
AGENT IN NEW YORK CITY FOR THE SERVICE OF PROCESS OR SUMMONS, AND WILL PROVIDE TO THE ASSIGNEE
WRITTEN NOTICE OF THE IDENTITY AND ADDRESS OF SUCH AGENT FOR SERVICE OF PROCESS OR SUMMONS;
PROVIDED THAT ANY FAILURE ON THE PART OF THE ASSIGNOR TO COMPLY WITH THE



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FOREGOING PROVISIONS OF THIS SENTENCE SHALL NOT IN ANY WAY PREJUDICE OR LIMIT THE SERVICE OF
PROCESS OR SUMMONS IN ANY OTHER MANNER DESCRIBED ABOVE IN THIS SECTION 7 OR OTHERWISE PERMITTED BY
LAW.



     (b) THE ASSIGNOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS ASSIGNMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.



     (c) EACH OF THE PARTIES TO THIS ASSIGNMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS ASSIGNMENT, THE
CREDIT AGREEMENT OR THE MORTGAGES OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.



     Section 8. Notices. All notices or other communications required or permitted to be
made or given hereunder shall be made in writing, in English, and personally delivered to an
officer or other responsible employee of the addressee, or sent, by registered air mail, return
receipt requested, postage prepaid, facsimile transmission, or other direct written electronic
means to the applicable address set forth under such party’s name below, or to such other address
as any party hereto may from time to time designate to the others in such manner:



	 	 	 	 	 
	 

	 	If to the Assignee:
	 	Nordea Bank Finland Plc, New York Branch
	 

	 	 	 	437 Madison Avenue
	 

	 	 	 	21st Floor
	 

	 	 	 	New York, New York 10022
	 

	 	 	 	Attention: Hans Kjelsrud
	 

	 	 	 	Facsimile: (212) 421-4420
	 
	 	 	 	 
	 

	 	If to the Assignor:
	 	The Offshore Drilling Company
	 

	 	 	 	2000 West Sam Houston Parkway South, Suite 800
	 

	 	 	 	Houston, TX 77042-3615
	 

	 	 	 	Attention: T. Scott O’Keefe
	 

	 	 	 	Facsimile: (713) 278-6107






     Any communication personally delivered shall be deemed to have been validly and effectively
given or delivered on the date of such delivery. Any communication transmitted by facsimile, or
other direct written electronic means shall be deemed to have been validly and effectively given or
delivered on the day when received. Any communication transmitted by registered air mail shall be
deemed to have been validly and effectively given or delivered three (3) business days after
mailing.



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     Section 9. Headings. The division of this Assignment into sections and the insertion
of headings are for convenience of reference only and shall not affect the interpretation or
construction of this Assignment.



     Section 10. Termination. This Assignment shall terminate, and be of no further force
and effect, upon the payment in full of all of the Obligations, the termination or expiration of
the Credit Agreement and all letters of credit issued thereunder, and the performance and
observance of all agreements, covenants and provisions contained in the Credit Agreement, the
Mortgages and the other Credit Documents, and the absence of any further actual or contingent
liability in respect of any thereof.



[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.]





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     IN
WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed this ___ day
of December, 2005.



	 	 	 	 	 	 	 
	 	 	THE OFFSHORE DRILLING COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 
 

	 	 
	 

	 	 	 	Dale Wilhelm, Vice President	 	 






 









 






The terms and conditions of

this Assignment are hereby




ACCEPTED BY:




Nordea Bank Finland Plc, New York Branch, as Collateral Agent




	 	 	 	 	 
	By:

	 	 
 

	 	 
	Name:
	 	 	 	 
	Title:
	 	 	 	 






 









 






Schedule I

Description of Vessels

Owner: The Offshore Drilling Company




	 	 	 	 	 	 	 	 	 
	Vessel Name	 	Official Number	 	 	Flag of Documentation	 
	 
	 	 	 	 	 	 	 	 





 









 






Exhibit A




ASSIGNMENT OF [TIME] CHARTER




[Vessel Name]




     THE OFFSHORE DRILLING COMPANY, a corporation organized and existing under the laws of the
State of Delaware, United States of America (the “Assignor”), in consideration of one
dollar ($1.00) lawful money of the United States of America and other good and valuable
consideration, the receipt of which is hereby acknowledged, has sold, assigned, transferred and set
over, and does hereby sell, assign, transfer and set over unto Nordea Bank Finland Plc, New York
Branch (the “Assignee”), as Collateral Agent (the “Agent”) for the benefit of the
Lenders under that certain Credit Agreement, dated as of December ___, 2005 (as such agreement may
be amended, restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”) among TODCO, a Delaware corporation (the “Borrower”), the Lenders party
thereto from time to time, and the Assignee, as Administrative Agent and Collateral Agent, and unto
the Assignee’s successors and assigns, to its and its successors’ and assigns’ own proper use and
benefit to secure all of the obligations of the Assignor and all other obligations of the Borrower
under the Credit Agreement and the other Credit Documents, and the payment of all other sums of
money (whether for principal, premium, if any, interest, fees, expenses or otherwise) from time to
time payable by the Assignor under this Assignment and the other Credit Documents to which it is a
party (collectively, the “Obligations”), and to secure as well the performance and
observance of all agreements, covenants and provisions contained in this Assignment and the Credit
Documents, all the right, title and interest of the Assignor in and to: (i) that certain [Time]
Charter Party dated ___, ___, between the Assignor and [Charterer], a [State of
incorporation] company, as charterer (the “Charterer”), with respect to the Assignor’s
___ flag vessel [vessel name] (said vessel or any vessel hereafter substituted therefor under
said [Time] Charter Party being herein called the “Vessel”), as said [Time] Charter Party
may heretofore or hereafter be amended from time to time or extended or renewed (said [Time]
Charter Party as heretofore or hereafter amended or extended or renewed being hereinafter called
the “Charter”), including, without limitation, within such assignment the right to receive
all moneys due and to become due under the Charter and all rights arising out of the owner’s lien
on cargoes and subfreights thereunder, all claims for damages arising out of the breach thereof and
the right of the Assignor to terminate the Charter, to perform thereunder and to compel performance
of the terms thereof; and (ii) all moneys and claims for moneys due and to become due to the
Assignor, and all claims for damages and all insurance and other proceeds in respect of, the actual
or constructive loss of, or the requisition (whether of title or use), condemnation, sequestration,
seizure, forfeiture or other taking of, the Vessel.



     It is expressly agreed that anything herein contained to the contrary notwithstanding, (i) the
Assignor shall remain liable under the Charter to perform all the obligations assumed by it
thereunder, (ii) the obligations of the Assignor under the Charter may be performed by the Assignee
or its nominee or other assignee from the Assignee without releasing the Assignor therefrom and
(iii) the Assignee shall have no obligation or liability under the Charter by reason of, or arising
out of, this Assignment and shall not be obligated to perform any of the obligations of the
Assignor under the Charter, or to make any payment or to make any inquiry of the



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sufficiency of any payment received by it, or to present or file any claim or to take any
other action to collect or enforce any payment assigned hereunder.



     The Assignor does hereby constitute the Assignee, its successors and assigns, the Assignor’s
true and lawful attorney, irrevocably, with full power (in the name of the Assignor or otherwise)
to ask, require, demand, receive, compound and give acquittance for any and all moneys and claims
for money due and to become due under, or arising out of, the Charter or otherwise assigned
hereunder, to endorse any checks or other instruments or orders in connection therewith and to file
any claims or take any action or institute any proceedings in connection therewith all as and to
the extent permitted in the Credit Agreement.



     Notwithstanding anything to the contrary, so long as no Event of Default (as defined in that
certain First Preferred Fleet Mortgage dated
[___], 200___, between the Assignor and Nordea
Bank Finland Plc, New York Branch, as Trustee, in respect of United States documented vessels
(the “United States Mortgage”) and that certain First Preferred Fleet Mortgage dated
[___], 200___, between the Assignor
and Nordea Bank Finland Plc, New York Branch, as
Trustee, in respect of Liberian documented vessels (the “Liberian
Mortgage”)(collectively, the United States Mortgage and the Liberian Mortgage hereinafter
referred to as the “Mortgages”)) shall have occurred and be continuing, the Assignor shall
be entitled to receive and retain any and all moneys otherwise assigned hereunder. If an Event of
Default shall have occurred and has not been cured, the Assignor shall specifically authorize and
direct the Charterer or other obligor to make payment of all of the moneys hereby assigned directly
to the Assignee in accordance with the Credit Agreement and Credit Documents, and shall deliver to
the Assignee the written acknowledgment of the Charterer or obligor of such instructions.



     The Assignor agrees that at any time and from time to time, upon the written request of the
Assignee, the Assignor will promptly and duly execute and deliver any and all such further
instruments and documents as the Assignee may reasonably request or as shall be necessary for the
Assignee to obtain the full benefits of this Assignment and of the rights and powers herein
granted, including, without limitation, the execution and delivery of such Uniform Commercial Code
financing and continuation statements and the filing thereof in such jurisdictions as shall be
appropriate. To the extent permitted by applicable law, the Assignor hereby authorizes the
Assignee to execute and file any such financing or continuation statements without necessity of the
signature of the Assignor.



     The Assignor does hereby represent and warrant that the Charter is in full force and effect
and is enforceable in accordance with the terms thereof, that the Charterer has no claims against
the Assignor thereunder and the Assignor is not in default thereunder. The Assignor does hereby
further represent and warrant that there is not now in effect any assignment or pledge of, and
hereby covenants that the Assignor will not assign, pledge, or suffer to exist any lien, charge,
security interest, or encumbrance, or any other type of preferential arrangement, upon or with
respect to, so long as this instrument of Assignment shall remain in effect, the whole or any part
of the rights hereby assigned, to anyone other than the Assignee, its successors or assigns.



     Upon payment in full of all of the Obligations, the termination or expiration of the Credit
Agreement and all letters of credit issued thereunder, and the performance and observance of all
agreements, covenants and provisions contained in the Credit Agreement and the Mortgage and



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the Credit Documents, and when the Assignor and the other Credit Parties are under no further
actual or contingent liability in respect of any thereof, the Assignee will at the request and cost
of the Assignor reassign the Charter and its interest in all other rights assigned to the Assignee
hereunder to the Assignor or as the Assignor shall direct, without any representation, warranty or
recourse by or to the Assignee.



     This Assignment and the Agreement and the Consent to Assignment annexed hereto may be executed
by the Assignor and the Charterer under the Charter in separate counterparts without in any way
adversely affecting the validity of said Agreement and Consent to Assignment. Prior to entering
into the Charter, the Assignor has caused the Charterer to execute and deliver to the Assignee such
Agreement and Consent to Assignment.



     THIS ASSIGNMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT
OF LAWS RULES (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE GENERAL OBLIGATIONS LAW). ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS ASSIGNMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK LOCATED IN THE CITY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND, BY EXECUTION AND DELIVERY OF THIS ASSIGNMENT, THE ASSIGNOR HEREBY IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE ASSIGNOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED MAIL, POSTAGE PREPAID, TO THE ASSIGNOR AT ITS ADDRESS SET FORTH IN THE CREDIT AGREEMENT,
SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF THE ASSIGNEE UNDER THIS ASSIGNMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE ASSIGNOR IN ANY OTHER JURISDICTION. IF
AT ANY TIME DURING WHICH THIS ASSIGNMENT REMAINS IN EFFECT, THE ASSIGNOR DOES NOT MAINTAIN A
REGULARLY FUNCTIONING OFFICE IN NEW YORK CITY, IT WILL DULY APPOINT, AND AT ALL TIMES MAINTAIN, AN
AGENT IN NEW YORK CITY FOR THE SERVICE OF PROCESS OR SUMMONS, AND WILL PROVIDE TO THE ASSIGNEE
WRITTEN NOTICE OF THE IDENTITY AND ADDRESS OF SUCH AGENT FOR SERVICE OF PROCESS OR SUMMONS;
PROVIDED THAT ANY FAILURE ON THE PART OF THE ASSIGNOR TO COMPLY WITH THE FOREGOING
PROVISIONS OF THIS SENTENCE SHALL NOT IN ANY WAY PREJUDICE OR LIMIT THE SERVICE OF PROCESS OR
SUMMONS IN ANY OTHER MANNER DESCRIBED ABOVE IN THIS PARAGRAPH OR OTHERWISE PERMITTED BY LAW. THE
ASSIGNOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
ASSIGNMENT BROUGHT IN THE COURTS



- 3 -









 





REFERRED TO ABOVE IN THIS PARAGRAPH AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES TO THIS ASSIGNMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS ASSIGNMENT, THE CREDIT AGREEMENT OR THE MORTGAGES OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.



     Capitalized terms used herein and not otherwise defined shall be used herein as defined in the
Credit Agreement.



[Remainder of page intentionally left blank]




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     IN WITNESS WHEREOF, the Assignor has caused this instrument of Assignment to be duly executed
as of the [___] day of [___], 200___.



	 	 	 	 	 	 	 
	 	 	THE OFFSHORE DRILLING COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 
 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 






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Exhibit B




Notice of Assignment of [Time] Charter




and




AGREEMENT AND CONSENT TO ASSIGNMENT




To: [Charterer]




[VESSEL NAME]




We refer to the [time] charter party dated _________, ___, as amended, made between us,
[Assignor] (the “Assignor”), and you, [Charterer], by which we agreed to let and you agreed
to take on [time] charter for the period and on the terms and conditions set out in the Charter the
[VESSEL NAME] of about [___] net tons and [___] gross tons registered in our name under the
[name of flag] flag.



We hereby give you notice of the following, and you by your execution and delivery of this
Agreement and Consent to Assignment hereby agree to the following:




	1.	 	By an assignment (the “Assignment”, the defined terms therein being used herein as
therein defined) dated ______(a copy of which is attached hereto) made between us and
the Agent referred to therein, we have sold, assigned, transferred and set over unto the Agent
all our right, title and interest in and to the Charter (as such term is defined in the
attached Assignment) and in and to certain moneys and claims for moneys due and to become due
to us (all as more fully described in the Assignment).
	 
	2.	 	You are hereby irrevocably authorized and instructed, upon your receipt of written notice
from the Agent, to pay, and agree that you will make payment of, all such moneys payable by
you under the Charter to such place as the Agent may from time to time direct.
	 
	3.	 	We shall remain liable to perform all our obligations under the Charter and the Agent shall
not be under any obligation under the Charter, but should the Agent exercise its right to
perform, or cause performance by its designee of, our obligations under the Charter, you
agree, without thereby releasing us from our obligations under the Charter, to accept such
performance.
	 
	4.	 	You consent to such assignment, and agree that, upon receipt of written notice from the
Agent, you will make payment of all moneys due and to become due under the Charter, without
setoff or deduction for any claim not arising under the Charter, direct to the Account of the
Agent or such other account specified by the Agent at such address as the Agent shall request
the undersigned in writing until receipt of written notice from the Agent that all obligations
of the Assignor to it have been paid in full. You agree that you shall not seek the recovery
of any payment actually made by you to the Agent pursuant to this Charterer’s Consent and
Agreement once such payment has been made. You hereby




- 1 -









 






	 	 	waive the right to assert against the Agent, as assignee of the Assignor, any claim,
defense, counterclaim or setoff that you could assert against the Assignor under the
Charter. This provision shall not be construed to relieve the Assignor of any liability to
the Charterer.
	 
	5.	 	You agree that the Agent shall be entitled to exercise any and all rights and remedies of the
Assignor under the Charter in accordance with the terms of the Assignment and the First
Preferred Fleet Mortgage dated [___], 200___(the “Mortgage”) by the Assignor to
Nordea Bank Finland Plc, New York Branch, as Trustee, and you shall comply in all respects
with such exercise. You agree that the Charter, including, without limitation, all of your
liens thereunder, shall be subordinated in all respects to the lien of the Mortgage in favor
of the Trustee on the Vessel, and, at the option of the Agent, foreclosure under the Mortgage
shall terminate such Charter and such liens and divest you and your subcharterers of all
right, title and interest in and to the Vessel. You agree that each subcharter of the Vessel
shall be subordinate in all respects to the lien of the Mortgage.
	 
	6.	 	You hereby agree that, so long as the Obligations shall be outstanding:






	 	(a)	 	Upon the request of the Agent from time to time, you shall provide to the Agent
such information as the Agent may reasonably request regarding the Vessel and its use,
including but not limited to the terms of each subcharter thereof, the subcharter
party, the routes plied and to be plied by such Vessel and its scheduled arrival and
departure from each port on such route.
	 
	 	(b)	 	You covenant and agree with the Agent that you will (i) duly perform and
observe all of the terms and provisions of any charter or contract of affreightment on
your part to be performed or observed; and (ii) clearly record on your books and
records notations of the Assignment.
	 
	 	(c)	 	At any time and from time to time, upon the written request of the Agent, you
shall promptly and duly execute and deliver any and all such further instruments and
documents as the Agent may reasonably request in order to obtain the full benefits of
the Assignment and of the rights and powers herein granted.
	 
	 	(d)	 	Whenever requested by the Agent, you shall deliver letters to each of your
agents and representatives into whose hands or control may come any earnings, moneys
and property assigned by the Assignment, informing each such addressee of such
assignment and, if any Event of Default has occurred, instructing such addressee to
remit or deliver promptly to the Agent all earnings, moneys and property hereby
assigned which may come into the addressee’s hands or control and to continue to make
such remittances or delivery until such time as the addressee may receive written
notice or instructions to the contrary direct from the Agent. Each such addressee
shall acknowledge directly to the Agent receipt of your letter of notification and
instructions.




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	7.	 	Your acknowledgement and consent hereunder, and your agreements herein contained, are for the
benefit of the Agent and the Lenders and shall be enforceable by the Agent for its benefit and
the benefit of the Lenders.
	 
	8.	 	This Agreement and Consent to Assignment shall terminate, and be of no further force and
effect, upon the payment in full of all of the Obligations, the termination or expiration of
the Credit Agreement and all letters of credit issued thereunder, and the performance and
observance of all agreements, covenants and provisions contained in the Credit Agreement and
the Mortgage and the Credit Documents, and the absence of any further actual or contingent
liability in respect of any thereof.





The authorizations and instructions by us in this Agreement and Consent to Assignment cannot be
revoked or varied by us without the Agent’s prior written consent.



[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]




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For and on behalf of




THE OFFSHORE DRILLING COMPANY




	 	 	 	 	 
	By:

	 	 
 

	 	 
	Name:
	 	 	 	 
	Title:
	 	 	 	 
	 
	 	 	 	 
	Dated:
	 	 	 	 






- 4 -









 






To: THE OFFSHORE DRILLING COMPANY AND NORDEA BANK FINLAND PLC, NEW YORK BRANCH




In consideration of the Time Charter, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, we hereby agree to the terms set out above and consent to, and agree
to be bound by, the Assignment.



For and on behalf of




[CHARTERER]




	 	 	 	 	 
	By:

	 	 
 

	 	 
	Name:
	 	 	 	 
	Title:
	 	 	 	 
	 
	 	 	 	 
	Dated:
	 	 	 	 







- 5 -










 






Exhibit H




ASSIGNMENT OF INSURANCES




THE OFFSHORE DRILLING COMPANY




     THE OFFSHORE DRILLING COMPANY, a corporation organized and existing under the laws of the
State of Delaware, United States of America (the “Assignor”), the owner of the vessels
listed on Schedule I attached hereto (the “Vessels”), in consideration of One Dollar ($1)
lawful money of the United States of America and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, has sold, assigned, transferred and set over, and
by this instrument does sell, assign, transfer and set over unto Nordea Bank Finland Plc, New York
Branch (the “Assignee”), as Collateral Agent (the “Agent”) for the benefit of the
Lenders (the “Lenders”) defined under that certain Credit Agreement, dated as of December
___, 2005 (as such agreement may be amended, restated, supplemented or otherwise modified from time
to time, the “Credit Agreement”) among TODCO, a Delaware corporation (the
“Borrower”), the Lenders party thereto from time to time, and the Assignee, as
Administrative Agent and Collateral Agent, and unto the Assignee’s successors and assigns, to its
and its successors’ and assigns’ own proper use and benefit, as security for all of the obligations
of the Assignor and all other obligations of the Borrower under the Credit Agreement and the other
Credit Documents, and the payment of all other sums of money (whether for principal, premium, if
any, interest, fees, expenses or otherwise) from time to time payable by the Assignor under this
Assignment and the other Credit Documents to which it is a party, and to secure the performance and
observance of all agreements, covenants and provisions contained in this Assignment and the other
Credit Documents (collectively, the “Obligations”), all right, title and interest of the
Assignor under, in and to (the following clauses (i) through (iv), collectively, the “Insurance
Collateral”) (i) all insurances in respect of the Vessels, whether heretofore, now or hereafter
effected, and all renewals of or replacements for the same (the “Insurances”), (ii) all
claims, returns of premium and other moneys and claims for moneys due and to become due under or in
respect of the Insurances, (iii) all other rights of the Assignor under or in respect of the
Insurances and (iv) any proceeds of any of the foregoing. Capitalized terms used herein and not
otherwise defined are used herein as defined in the Credit Agreement.



     Section 1. Representations, Warranties and Covenants. The Assignor hereby
warrants and represents that each of the Insurances is in full force and effect and is enforceable
in accordance with its terms, and that the Assignor is not in default thereunder. The Assignor
hereby further warrants and represents that it has not assigned, pledged or in any way created or
suffered to be created any security interest in the whole or any part of the right, title and
interest hereby assigned, except for the assignment to the Assignee. The Assignor hereby covenants
that, without the prior written consent thereto of the Assignee, so long as this Assignment shall
remain in effect, it will not assign or pledge the whole or any part of the right, title and
interest hereby assigned to anyone other than the Assignee, its successors or assigns, and it will
not take or omit to take any action, the taking or omission of which might result in an alteration
or impairment of the Insurances in any material respect, or of this Assignment or of any of the
rights created by the Insurances or this Assignment.



     The Assignor hereby further covenants and agrees to procure that notice of this Assignment
shall be duly given to all underwriters and that where the consent of any underwriter



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is required pursuant to any of the insurances assigned hereby it shall be obtained and
evidence thereof shall be given to the Assignee, or, in the alternative, that in the case of
protection and indemnity coverage the Assignor shall obtain, with the Assignee’s approval, a letter
of undertaking by the underwriters or clubs, and that there shall be duly endorsed upon all slips,
cover notes, policies, certificates of entry or other instruments issued or to be issued in
connection with the insurances assigned hereby such clauses as to named assured or loss payees as
the Assignee may require or approve. In all cases (except in the case of protection and indemnity
coverage), unless otherwise agreed in writing by the Assignee, such slips, cover notes, notices,
certificates of entry or other instruments shall show the Assignee as named assured and shall
provide that there will be no recourse against the Assignee for payment of premiums, calls or
assessments.



     The Assignor agrees that at any time and from time to time, upon the written request of the
Assignee, its successors and assigns, the Assignor will promptly and duly execute and deliver any
and all such further instruments and documents as the Assignee, its successors and assigns may
reasonably request in order to obtain the full benefits of this Assignment and of the rights and
powers herein granted.



     Any payments made pursuant to the terms hereof shall be made to such account as may, from time
to time, be designated by the Assignee.



     Section 2. Freedom of Assignee from Obligations. It is hereby expressly
agreed that anything herein contained to the contrary notwithstanding, the Assignor shall remain
liable under the Insurances to perform all of the obligations assumed by it thereunder and the
Assignee shall have no obligation or liability (including, without limitation, any obligation or
liability with respect to the payment of premiums, calls or assessments) under the Insurances by
reason of or arising out of this Assignment, nor shall the Assignee be required or obligated in any
manner to perform or fulfill any obligations of the Assignor under or pursuant to the Insurances or
to make any payment or to make any inquiry as to the nature or sufficiency of any payment received
by the Assignee or to present or file any claim, or to take any other action to collect or enforce
the payment of any amounts which may have been assigned to it or to which it may be entitled
hereunder at any time or times.



     Section 3. Power of Attorney; Financing Statements. The Assignee, its
successors and assigns, are hereby constituted lawful attorneys, irrevocably, with full power (in
the name of the Assignor or otherwise) to ask, require, demand, receive, compound and give
acquittance for any and all moneys and claims for moneys due and to become due under or arising out
of the Insurances, to endorse any check or other instruments or orders in connection therewith and
to file any claims or take any action or institute any proceedings which the Assignee may deem to
be necessary or advisable in the premises. Any action or proceeding brought by the Assignee
pursuant to any of the provisions hereof or of the Insurances or otherwise, and any claim made by
the Assignee hereunder or under the Insurances, may be compromised, withdrawn or otherwise dealt
with by the Assignee without any notice to, or approval of the Assignor. The Assignor hereby
irrevocably authorizes the Assignee, at the Assignor’s expense, to file, at any time and from time
to time, such financing and continuation statements or papers of similar purpose or effect relating
to this Assignment, without the Assignor’s signature, as the Assignee at its option may deem
appropriate and appoints the Assignee as the Assignor’s attorney-in-fact to



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execute any such statements in the Assignor’s name and to perform all other acts which the
Assignee may deem appropriate to perfect and continue the security interests conferred hereby.



     Section 4. Irrevocable Assignment. The powers and authority granted to the
Assignee herein have been given for a valuable consideration and are hereby declared to be
irrevocable and may not be amended or waived except by an instrument in writing signed by the party
against whom enforcement is sought.



     Section 5. Conditions of Assignment. Unless and until an event of default
shall have occurred and be continuing under that certain First Preferred Fleet Mortgage dated
[___], 200___, in respect of United States documented vessels (the “United States
Mortgage”) and under that certain First Preferred Fleet Mortgage dated [___], 200___, in
respect of the Liberian documented vessels (the “Liberian Mortgage”) (collectively, the
United States Mortgage and the Liberian Mortgage hereinafter referred to as the
“Mortgages”) by the Assignor to Nordea Bank Finland Plc, New York Branch, as Trustee, the
Assignor shall be entitled to exercise all its rights under the Insurances (subject to the
provisions of this Assignment) in all respects as if this Assignment had not been made.



     Section 6. Governing Law.



     (a) THIS ASSIGNMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED
IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS
CONFLICT OF LAWS RULES (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE GENERAL OBLIGATIONS LAW). ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS ASSIGNMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK LOCATED IN THE CITY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT
OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS ASSIGNMENT, THE ASSIGNOR HEREBY IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE ASSIGNOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED MAIL, POSTAGE PREPAID, TO THE ASSIGNOR AT ITS ADDRESS SET FORTH IN THE CREDIT
AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE ASSIGNEE UNDER THIS ASSIGNMENT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE ASSIGNOR IN ANY
OTHER JURISDICTION. IF AT ANY TIME DURING WHICH THIS ASSIGNMENT REMAINS IN EFFECT, THE ASSIGNOR
DOES NOT MAINTAIN A REGULARLY FUNCTIONING OFFICE IN NEW YORK CITY, IT WILL DULY APPOINT, AND AT ALL
TIMES MAINTAIN, AN AGENT IN NEW YORK CITY FOR THE SERVICE OF PROCESS OR SUMMONS, AND WILL PROVIDE
TO THE ASSIGNEE WRITTEN NOTICE OF THE IDENTITY AND ADDRESS OF SUCH AGENT FOR SERVICE OF PROCESS OR
SUMMONS; PROVIDED THAT ANY



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FAILURE ON THE PART OF THE ASSIGNOR TO COMPLY WITH THE FOREGOING PROVISIONS OF THIS SENTENCE
SHALL NOT IN ANY WAY PREJUDICE OR LIMIT THE SERVICE OF PROCESS OR SUMMONS IN ANY OTHER MANNER
DESCRIBED ABOVE IN THIS SECTION 6 OR OTHERWISE PERMITTED BY LAW.



     (b) THE ASSIGNOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS ASSIGNMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.



     (c) EACH OF THE PARTIES TO THIS ASSIGNMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS ASSIGNMENT, THE
CREDIT AGREEMENT OR THE MORTGAGES OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.



     Section 7. Notices. All notices or other communications required or
permitted to be made or given hereunder shall be made in writing, in English, and personally
delivered to an officer or other responsible employee of the addressee, or sent, by registered air
mail, return receipt requested, postage prepaid, facsimile transmission, or other direct written
electronic means to the applicable address set forth under such party’s name below, or to such
other address as any party hereto may from time to time designate to the others in such manner:



	 	 	 	 	 
	 

	 	If to the Assignee:
	 	Nordea Bank Finland Plc, New York Branch
	 

	 	 	 	437 Madison Avenue
	 

	 	 	 	21st Floor
	 

	 	 	 	New York, New York 10022
	 

	 	 	 	Attention: Hans Kjelsrud
	 

	 	 	 	Facsimile: (212) 421-4420
	 
	 	 	 	 
	 

	 	If to the Shipowner:
	 	The Offshore Drilling Company
	 

	 	 	 	2000 West Sam Houston Pkwy. South, Suite 800
	 

	 	 	 	Houston, Texas 77042-3615
	 

	 	 	 	ATTN: T. Scott O’Keefe, President
	 

	 	 	 	Facsimile: (713) 278-6107






     Any communication personally delivered shall be deemed to have been validly and effectively
given or delivered on the date of such delivery. Any communication transmitted by facsimile, or
other direct written electronic means shall be deemed to have been validly and effectively given or
delivered on the day when received. Any communication transmitted by registered air mail shall be
deemed to have been validly and effectively given or delivered three (3) business days after
mailing.



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     Section 8. Headings. The division of this Assignment into sections and the
insertion of headings are for convenience of reference only and shall not affect the interpretation
or construction of this Assignment.



     Section 9. Termination. This Assignment shall terminate, and be of no
further force and effect, upon the payment in full of all of the Obligations, the termination or
expiration of the Credit Agreement and all letter of credit issued thereunder, and the performance
and observance of all agreements, covenants and provisions contained in the Credit Agreement and
the Mortgages and the other Credit Documents, of the Assignor under the Credit Agreement and the
absence of any further actual or contingent liability in respect of any thereof.



[Remainder of page intentionally left blank]




 









 








     IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed this ___day
of December, 2005.



	 	 	 	 	 
	 	THE OFFSHORE DRILLING COMPANY

 	 
	 	By:  	 	 
	 	 	Dale Wilhelm, Vice President 	 
	 	 	 	 



 









 






	 	 	 	 	 



The terms and conditions of

this Assignment are hereby




ACCEPTED BY:




Nordea Bank Finland Plc, New York Branch, as Agent




	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:
	 	 	 	 






 









 






Schedule I

Description of Vessels

Owner: The Offshore Drilling Company




	 	 	 	 	 
	Vessel Name

	 	Official Number
	 	Flag of Documentation






 









 






NOTICE OF ASSIGNMENT




[Insurers]




     THE OFFSHORE DRILLING COMPANY. (the “Owner”), owner of the vessels listed on Schedule
I attached hereto (the “Vessels”), HEREBY GIVES NOTICE that by an Assignment dated
[___], 200___and made by the Owner to Nordea Bank Finland Plc, New York Branch (the
“Assignee”), as Collateral Agent pursuant to, and for the benefit of the Lenders as defined
under, that certain Credit Agreement, dated as of December ___, 2005 (as such agreement may be
amended, restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”) among TODCO, a Delaware corporation (the “Borrower”), the Lenders party
thereto from time to time, and the Assignee, as Administrative Agent and Collateral Agent, the
Owner assigned to the Assignee all of the Owner’s right, title and interest in and to all
insurances and the benefit of all insurances heretofore, now or hereafter taken out in respect of
the Vessels. This Notice and the attached Loss Payable Clauses are to be endorsed on all policies
and certificates of entry evidencing such insurances.



	 	 	 	 	 	 	 
	 	 	THE OFFSHORE DRILLING COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 






 









 






Schedule I

Description of Vessels

Owner: The Offshore Drilling Company




	 	 	 	 	 
	Vessel Name

	 	Official Number
	 	Flag of Documentation






 









 






LOSS PAYABLE CLAUSES




Hull and War Risks




     Loss, if any, payable to Nordea Bank Finland Plc, New York Branch, in its capacity as Agent
pursuant to, and for the benefit of the Lenders (the “Lenders”) defined under that certain
Credit Agreement, dated as of December ___, 2005 (as such agreement may be amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”) among TODCO,
a Delaware corporation (the “Borrower”), the Lenders party thereto from time to time, and
the Assignee, as Administrative Agent and Collateral Agent, relating to that certain First
Preferred Fleet Mortgage dated [___], 200___(the “Mortgage”) by THE Offshore Drilling
Company (the “Owner”) to Nordea Bank Finland Plc, New York Branch, as Trustee (the
“Mortgagee”) for distribution by it to the Mortgagee and then to the Owner as their
respective interests may appear, or order, except that, unless the underwriters have been otherwise
instructed by notice in writing from the Mortgagee in the case of any loss involving any damage to
any Vessel or liability of any Vessel, the underwriters may pay directly for the repair, salvage,
liability or other charges involved or, if the Owner shall have first fully repaired the damage and
paid the cost thereof, or discharged the liability or paid all of the salvage or other charges,
then the underwriters may pay the Owner as reimbursement therefor, provided, however, that if such
damage involves a loss in excess of U.S. $1,000,000 or its equivalent the underwriters shall not
make such payment without first obtaining the written consent thereto of the Mortgagee.



     In the event of an actual or constructive total loss or a compromised or arranged total loss
or requisition of title, all insurance payments therefor shall be paid to the Mortgagee, for
distribution by it in accordance with the terms of the Mortgage.




 










 






Exhibit I-1



FIRST PREFERRED FLEET MORTGAGE


by


THE OFFSHORE DRILLING COMPANY


to


NORDEA BANK FINLAND PLC, NEW YORK BRANCH, AS TRUSTEE


Dated December ___, 2005


United States Vessels




 









 








     FIRST PREFERRED FLEET MORTGAGE (this “Mortgage”) made this ___day of December, 2005,
by THE OFFSHORE DRILLING COMPANY, a Delaware corporation (the “Shipowner”) with an address
at: c/o Capitol Services, Inc., 615 South DuPont Highway, Dover, Delaware 19901, USA, to
NORDEA BANK FINLAND PLC, NEW YORK BRANCH, with an address at 437 Madison Avenue,
21st Floor New York, New York 10022, not in its individual capacity, but solely as
Trustee (together with its successors in trust and assigns, the “Mortgagee”), pursuant to
that certain Master Vessel and Trust Agreement dated as of the date hereof (as the same may be
amended, supplemented or otherwise modified from time to time, the “Master Vessel and Trust
Agreement”) between Nordea Bank Finland Plc, New York Branch, as Collateral Agent
under the Credit Agreement (as defined below) and Nordea Bank Finland Plc, New York
Branch, as Trustee, a copy of a form of which, including exhibits thereto, is annexed hereto
as Exhibit A, and made a part hereof. Capitalized terms used herein and not otherwise defined are
used herein as defined in the Credit Agreement (as defined below), a copy of a form of which,
including exhibits, is annexed hereto as Exhibit B and made a part hereof.



     WHEREAS:



     1. Pursuant to the Master Vessel Trust Agreement, the Mortgagee has agreed to act as Trustee
for the Secured Creditors (as defined below) and hold this Mortgage;



     2. The Shipowner, as a Guarantor, is a party to the Credit Agreement, dated as of December ___,
2005 (as the same may be amended, restated, supplemented or otherwise modified from time to time,
the “Credit Agreement”), among TODCO, a Delaware corporation (the “Borrower”), the
Lenders party thereto from time to time, and Nordea Bank Finland plc, New York Branch, as
Administrative Agent (in such capacity, the “Administrative Agent”) and as Collateral Agent
(in such capacity, the “Collateral Agent”), pursuant to which the Lenders have agreed from
time to time to extend credit and/or issue letters of credit for the benefit of the Borrower in an
aggregate amount up to Two Hundred Million United States Dollars (US$200,000,000.00);



     3. The Shipowner and each other Guarantor is a wholly owned subsidiary of the Borrower.
Pursuant to the Credit Agreement, the Shipowner has guaranteed all obligations of the Borrower
under the Credit Agreement and the other Credit Documents.



     4. The Shipowner is the sole owner of the whole of the United States flag vessels and barges
(collectively, the “Vessels”) each duly documented in the name of the Shipowner under the
laws and flag of the United States of America, each qualified to engage in the trade specified,
which Vessels are further described on Schedule I attached hereto and made a part hereof; and



     5. The Shipowner, in order to secure its obligations and all obligations of the Borrower under
the Credit Agreement and the other Credit Documents, and the payment of all other sums of money
(whether for principal, premium, if any, interest, fees, expenses or otherwise) from time to time
payable by the Shipowner under this Mortgage and the other Credit Documents to which it is a party,
and to secure the performance and observance of all agreements, covenants and provisions contained
in this Mortgage and the other Credit



- 1 -









 




Documents (collectively, the “Obligations”), has duly authorized the execution and
delivery of this Mortgage.




     NOW, THEREFORE, to secure the prompt payment of the Obligations and the performance and
observance of all agreements, covenants and provisions of the Shipowner and the Borrower contained
in the Credit Agreement, this Mortgage and the other Credit Documents, the Shipowner has granted,
conveyed, mortgaged, pledged, confirmed, assigned, transferred and set over, and by these presents
does grant, convey, mortgage, pledge, confirm, assign, transfer and set over unto the Mortgagee the
whole of each of the Vessels, together with all of the boilers, engines, machinery, masts, spars,
sails, boats, anchors, cables, chains, rigging, tackle, apparel, furniture, fittings, equipment,
spares and all other appurtenances thereunto appertaining or belonging (whether onboard or ashore),
and also any and all additions, improvements and replacements hereafter made in or to each such
Vessel, or any part thereof, or in or to her equipment and appurtenances aforesaid;



     TO HAVE AND TO HOLD all and singular the above mortgaged and described property unto the
Mortgagee and its successors and assigns, to its and its successors’ and assigns’ own use, benefit
and behoof forever;



     PROVIDED, HOWEVER, and these presents are upon the condition that, if the Shipowner or its
successors or assigns shall pay or cause to be paid or there shall otherwise be paid in full, the
Obligations in accordance with the terms hereof and of the Credit Agreement and the other Credit
Documents, and shall perform and observe or cause to be performed and observed all of the
agreements, covenants and provisions contained in this Mortgage and the Credit Agreement and the
other Credit Documents, and the Credit Agreement and all letters of credit issued thereunder shall
terminate or expire, this Mortgage and the estate and rights hereby granted shall cease to be
binding and be void, otherwise to remain in full force and effect.



     IT IS HEREBY COVENANTED, DECLARED AND AGREED that the property above described is to be held
subject to the further covenants, conditions, provisions, terms and uses hereinafter set forth.



ARTICLE I




COVENANTS OF THE SHIPOWNER




     The Shipowner covenants and agrees with the Mortgagee as follows:



     SECTION 1.1. The Shipowner will make payment when due of all Obligations from time to time
payable by the Shipowner under the Credit Agreement and the other Credit Documents and will
observe, perform and comply with the covenants, terms and conditions herein and in the Credit
Agreement and the other Credit Documents, express or implied, on its part to be observed, performed
or complied with.



     SECTION 1.2. The Shipowner was duly organized and is now duly existing as a corporation under
the laws of the State of Delaware; it is duly authorized to mortgage the Vessels; all corporate and
shareholder action necessary and required by law for the execution and delivery of this Mortgage
has been duly and effectively taken; the Credit Agreement and the



- 2 -









 




other Credit Documents and this Mortgage are and will be valid and enforceable obligations of
the Shipowner in accordance with their respective terms except as that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors’ rights generally and by general equitable principles; the Shipowner
shall at all times maintain its corporate existence and right to carry on its business to the
extent required by Section 8.04 of the Credit Agreement; and the Shipowner is and shall remain duly
qualified to own and operate the Vessels documented under the laws of the United States pursuant to
46 U.S.C. §§ 12102, as amended, and the regulations in effect thereunder from time to time, as
amended.




     SECTION 1.3. The Shipowner lawfully owns and is lawfully possessed of each Vessel free from
any lien, charge or encumbrance whatsoever (except for (i) the lien of this Mortgage, and (ii)
liens for current crew’s wages, if any), and will warrant and defend the title and possession
thereto and to every part thereof for the benefit of the Mortgagee against the claims and demands
of all persons whomsoever.



     SECTION 1.4. The Shipowner has caused this Mortgage to be duly recorded and will comply with
and satisfy all of the provisions and requirements of Chapter 313 of Title 46 of the United States
Code and the regulations in effect thereunder from time to time, as amended, in order to establish,
perfect and maintain this Mortgage as a valid, enforceable and duly perfected first preferred
mortgage lien thereunder upon the Vessels and upon all renewals, replacements and improvements made
in or to the same for the amount of the Obligations.



     SECTION 1.5. The Shipowner will not cause or permit the Vessels to be operated in any manner
contrary to law and the Shipowner will not engage in any unlawful trade or violate any law or carry
any cargo that will expose any Vessel to penalty, confiscation, forfeiture, capture or
condemnation, and will not do, or suffer or permit to be done, anything which can or may
injuriously affect the registration or enrollment of any of the Vessels under the laws and
regulations of the United States and will at all times keep each Vessel duly documented as an
United States flag vessel under Chapter 121 of Title 46 of the United States Code, as amended, and
the regulations in effect thereunder from time to time, as amended.



     SECTION 1.6. The Shipowner will pay and discharge when due and payable, from time to time,
all taxes, assessments, governmental charges, fines and penalties lawfully imposed on any Vessel or
any income therefrom unless the Shipowner is contesting the amount, applicability or validity
thereof in good faith and by appropriate proceedings.



     SECTION 1.7. Neither the Shipowner, any charterer, the Master of any Vessel nor any other
person has or shall have any right, power or authority to create, incur or permit to be placed or
imposed or continued upon the Vessels any lien whatsoever other than for crew’s wages and salvage.



     SECTION 1.8. The Shipowner will place, and at all times and places will retain, a properly
certified copy of this Mortgage on board each Vessel with her papers and will cause such certified
copy and such Vessel’s marine document to be exhibited to any and all persons having business
therewith which might give rise to any lien thereon other than liens for crew’s wages and salvage,
and to any representative of the Mortgagee; and will place and keep



- 3 -









 




prominently displayed in the chart room and in the Master’s cabin of each Vessel, or in the
case of a barge, in a prominent place aboard the barge, or in such location as the barge’s papers
are kept, a framed printed notice in plain type reading as follows:




“NOTICE OF MORTGAGE





     This Vessel is covered by a First Preferred Fleet Mortgage to Nordea Bank
Finland Plc, New York Branch, as Trustee. Under the terms of said Mortgage,
neither the Owner, any charterer, the Master of this Vessel nor any other person has
any right, power or authority to create, incur or permit to be imposed upon this
Vessel any lien whatsoever other than for crew’s wages and salvage.”



     SECTION 1.9. Except for the lien of this Mortgage, the Shipowner will not suffer to be
continued any lien, encumbrance or charge on any Vessel for longer than 30 days, and in due course
and in any event within 30 days (or 15 days after a request by the Mortgagee to discharge such
lien, encumbrance or charge) after the same becomes due and payable, the Shipowner will pay or
cause to be discharged or make adequate provision for the satisfaction or discharge of all claims
or demands (except to the extent that the same shall concurrently be contested by the Shipowner in
good faith by appropriate proceedings and shall not affect the continued release of the relevant
Vessel), or will cause the relevant Vessel to be released or discharged from any lien, encumbrance
or charge therefor.



     SECTION 1.10. (a) If a libel or complaint be filed against any Vessel or any Vessel be
otherwise attached, arrested, levied upon or taken into custody under process or color of legal
authority for any cause whatsoever, the Shipowner will promptly notify the Mortgagee by facsimile,
confirmed by letter, at its address, as specified in this Mortgage, and within 10 days will cause
such Vessel to be released and all liens thereon other than this Mortgage to be discharged (except
to the extent that the claim giving rise to such lien shall concurrently be contested by the
Shipowner in good faith by appropriate proceedings and shall not affect the release of such Vessel)
and will promptly notify the Mortgagee thereof in the manner aforesaid.



     (b) If the Shipowner shall fail or neglect to furnish proper security or otherwise to release
such Vessel from libel, arrest, levy, seizure or attachment, the Mortgagee or any person acting on
behalf of the Mortgagee may furnish security to release such Vessel and by so doing shall not be
deemed to cure the default of the Shipowner.



     SECTION 1.11. (a) The Shipowner will at all times and without cost or expense to the
Mortgagee maintain and preserve, or cause to be maintained and preserved, each Vessel (i) in good
running order and repair consistent with each Vessel’s operational status, so that each Vessel
shall be, insofar as due diligence can make her so, tight, staunch, strong and well and
sufficiently tackled, apparelled, furnished, equipped and in every respect seaworthy and (ii) will
keep each classed Vessel, or cause her to be kept, in such condition as will entitle her to
maintain the existing ABS Maltese Cross A-1 classification rating for each classed Vessel in
service. The Shipowner will furnish the Mortgagee on the date hereof and annually thereafter a
certificate by such classification society that such classification is maintained. The classed
Vessels are currently classed by the American Bureau of Shipping and the current classification of
each classed Vessel is ABS Maltese Cross A-1.



- 4 -









 





     (b) The Mortgagee shall have the right at any time, on reasonable notice, to inspect or
survey each Vessel to ascertain its condition and to satisfy itself that each Vessel is being
properly repaired and maintained consistent with the Vessel’s operational status, and the Shipowner
shall cause to be made all such reasonable repairs, without expense to the Mortgagee, as such
inspection or survey may show to be required. The Shipowner shall also permit the Mortgagee to
inspect each Vessel’s logs, whenever requested, on reasonable notice, and shall promptly furnish
the Mortgagee with full information regarding any casualties or other accidents or damage to each
Vessel involving an amount in excess of $2,000,000.



     (c) Each Vessel shall, and the Shipowner covenants that it will, at all times comply with all
applicable laws, rules and regulations, and each Vessel shall have on board as and when required
thereby certificates showing compliance therewith. The Shipowner shall take, or cause to be taken,
all reasonable precautions to (i) prevent illegal drugs or drug paraphernalia from being used or
kept on board the Vessels and (ii) otherwise comply with the Zero Tolerance anti-drug policy of the
United States Government, and participate in anti-drug programs for vessels sponsored by the United
States Government.



     (d) The Shipowner will not make, or permit to be made, any substantial change in the
structure or type of any Vessel or change in the rig of any Vessel, if any such change would or
could reasonably be expected to have a material adverse effect on the rights or interest of the
Mortgagee to any of the terms in any of the instruments of insurance referred to in Section 1.15 or
materially diminish the value of the Vessels.



     (e) The Shipowner may, in the ordinary course of maintenance, repair or overhaul of each
Vessel, remove any item of property constituting a part of such Vessel, provided such item of
property is replaced as promptly as possible by an item of property which, immediately prior to the
time of replacement, is free and clear of all security interests, liens, encumbrances and rights of
others, is in as good operating condition, leaves such Vessel as seaworthy and has a value and
utility at least equal to the item of property being replaced, assuming compliance by the Shipowner
with all the terms of this Mortgage. Any such replacement item of property, shall, without
necessity of further act, become part of such Vessel and subject to this Mortgage.



     SECTION 1.12. The Shipowner will at all reasonable times afford the Mortgagee or its
authorized representatives full and complete access to the Vessels for the purpose of inspecting
the Vessels and their cargo and papers and, at the request of the Mortgagee, the Shipowner will
deliver for inspection copies of all contracts and documents relating to the Vessels, whether on
board or not.



     SECTION 1.13. The Shipowner will not transfer or change the flag or port of documentation of
the Vessels without the prior written consent of the Mortgagee.



     SECTION 1.14. The Shipowner will not sell, mortgage or transfer any Vessel without the prior
written consent of the Mortgagee, except as provided in Section 9.02(i) of the Credit Agreement.
The Shipowner will not (except to a Credit Party) charter on a bareboat basis any Vessel for a
period (including any optional extensions or renewals) exceeding three (3) years unless (i) the
Shipowner obtains the prior written consent of the Mortgagee and (ii) the



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Shipowner assigns such charter to the Mortgagee. No charter shall relieve the Shipowner of
any of its obligations hereunder.




     SECTION 1.15. (a) The Shipowner will at all times and at its own cost and expense cause to be
carried and maintained in respect of the Vessels insurance payable in United States Dollars in
amounts, against risks (including, without limitation, marine hull and machinery (including excess
value) insurance, marine protection and indemnity insurance, drilling, towage, repossession, loss
of hire, war risks insurance and liability arising out of pollution and the spillage or leakage of
cargo and cargo liability insurance) and in forms which are substantially equivalent to the
coverage reflecting the customary and prudent practice of other responsible and experienced
companies engaged in the operation of vessels similar to the Vessels and placed through brokers and
with insurance companies, underwriters, funds, mutual insurance associations or clubs of recognized
standing, in each case reasonably satisfactory to the Mortgagee. No such insurance shall provide
for a deductible amount in excess of $10,000,000 per occurrence. Unless otherwise agreed to in
writing by the Mortgagee, such insurance shall include the following terms and conditions:



     (i) while being operated, each Vessel shall always be covered against marine perils according
to the English or American or Norwegian hull clauses with reasonable deductibles as determined by
the Shipowner but in no event in excess of $10,000,000. When and while a Vessel is laid up, in
lieu of the aforesaid hull insurance, port risk insurance may be taken out thereon by the Shipowner
under forms of policies approved by the Mortgagee for such Vessel;



     (ii) except with respect to a Vessel situated within the Gulf of Mexico or Caribbean basin,
each Vessel shall be covered against war risks (including risks, whether or not regarded as war
risks, excluded by the “Free of Capture and Seizure” clauses in the standard form of marine policy)
in accordance with the London Institute War Clauses and incorporating Protection and Indemnity
clause and with crew war risk insurance being effected separately, and all Vessels, including
Vessels situated in the Gulf of Mexico or Caribbean basin, shall be covered for “strikes, riots,
and civil commotion” risks. The aforesaid risks may, at the option of the Shipowner, be insured by
entering the Vessels in such war risk association or club reasonably agreeable to the Mortgagee
against all risks covered under the rules of such association or club and with reasonable
deductibles therein provided;



     (iii) each Vessel shall be also insured against the risk of pollution and spillage or leakage
of oil or other cargo caused by such Vessel, unless such risk is fully covered by the entry of the
Vessels in a protection and indemnity association or club as required by Subsection (vi) of this
Section;



     (iv) for the purposes of insurance against total loss, each Vessel, her equipment,
appurtenances, etc., shall be insured for and valued at an amount at least equal to the higher of
(x) the most recent appraised value determined in accordance with Section 8.01(c)(i) of the Credit
Agreement, (y) the fair market value thereof from time to time and (z) the insured value for each
Vessel, as set forth in Schedule II hereto;



     (v) at any time at the Mortgagee’s discretion Mortgagee may give the Shipowner notice that
Mortgagee requires mortgagee’s interest insurance and mortgagee’s additional perils



- 6 -









 




(pollution) insurance, and upon receipt of such notice the Shipowner shall place such
insurance for the benefit of the Mortgagee at the Shipowner’s expense upon such terms as may be
described in the Mortgagee’s notice. In the event such insurance is not in place within ten (10)
days after such notice from the Mortgagee, such insurance may be placed directly by the Mortgagee
at the cost of the Shipowner;




     (vi) for each Vessel, protection and indemnity insurance and insurance against liability for
pollution or the spillage or leakage of cargo shall be in an amount from time to time obtainable
for vessels of the same type, size, age and flag as such Vessel and carried by, and reflecting the
customary and prudent practice of other responsible and experienced companies engaged in the
operation of vessels similar to such Vessel, but in any event shall be in an amount of not less
than $100,000,000 per occurrence, including excess pollution coverage; and



     (vii) if any of the insurances referred to in Section 1.15 (a) form part of a fleet cover, the
Shipowner shall procure that the brokers shall undertake to the Mortgagee that such brokers shall
neither set off against any claims in respect of a Vessel any premiums due in respect of other
vessels under such fleet cover or any premiums due for other insurances, nor cancel the insurance
for reason of non-payment of premiums for other vessels under such fleet cover or of premiums for
such other insurances.



     In the case of all marine and war risk hull and machinery policies and all protection and
indemnity insurance (including insurance against liability for pollution or the spillage or leakage
of cargo), the Shipowner will cause the Mortgagee to be named an additional insured without
liability for premiums or calls payable under such policies. The Mortgagee shall not be liable
under such policies for payment of any premium, club call, assessment or advance.



     The Shipowner shall pay to the Mortgagee on demand the cost (as conclusively certified by the
Mortgagee) of any mortgagee’s interest insurance (including mortgagee’s interest insurance -
additional perils (pollution) coverage) which the Mortgagee may from time to time effect in respect
any Vessel upon such terms and in such amounts as the Mortgagee shall deem desirable.



     (b) Intentionally Omitted



     (c) (i) The Shipowner will cause all policies and certificates of entry with respect to
insurance required hereby for each Vessel to contain a loss payable clause which shall be on
substantially the terms set forth in Schedule III hereto, in the case of all marine and war risk
hull and machinery (including excess values) policies, and the terms set forth in Schedule III
hereto (or, if such terms are not obtainable, then such terms as shall, in the opinion of the
broker referred to in Section 1.15(f)(iii) below be the best otherwise attainable), in the case of
all protection and indemnity and liability and oil pollution liability insurance, and which shall:
(A) in the case of protection and indemnity insurance, provide for payment to the Shipowner or its
order unless the payment is to indemnify the Mortgagee from or reimburse the Mortgagee for any
loss, damage or expense incurred by it or unless and until the insurers or associations receive
notice from the Mortgagee that the Shipowner is in default hereunder, in which event all payments
shall be made to the Mortgagee, provided, that the insurer may in all events make payments directly
to third parties to whom liability has been established in discharge of



- 7 -









 




guaranties issued by the insurer or claims against the Shipowner or insurer, and (B) in the
case of all other insurance, provide for payment in accordance with the terms of subsection (d) of
this Section 1.15.




     (ii) In addition, the Shipowner will, at its cost and expense, (a) assign to the Collateral
Agent, by an Assignment of Insurances, all of the Shipowner’s right, title and interest in and to
each policy and contract of insurance (including all entries in protection and indemnity or war
risk associations) with respect to the insurance required hereby and furnish, or cause its brokers
to furnish, written notice of such assignment to all insurers, underwriters, clubs and associations
with respect to such insurance, and (b) cause the insurance brokers and club managers to hold to
the order of the Mortgagee the originals of all policies, contracts, binders, insurance slips,
cover notes and certificates of entry relating to the Vessels and to deliver certified copies
thereof on request and to execute and deliver to the Mortgagee a letter of undertaking in
connection with the above mentioned insurances and entries.



     (d) The proceeds of any insurances or entries referred to in Subsections (a) through (c) of
this Section 1.15 shall be applied as follows:



     (i) Until the occurrence and continuance of an Event of Default:



     (a) any claim under any such insurance (other than in respect of an Event of Loss), whether
such claim is under the terms of the relevant loss payable clause payable directly to the Shipowner
or not, shall be applied by the Shipowner in making good the loss or damage in respect of which it
has been paid or paid to the Shipowner in reimbursement of moneys expended by it for such purpose,
except that any loss in excess of $250,000 shall be paid as directed by the
Mortgagee so long as an Event of Default shall have occurred and be continuing;



     (b) any claim in respect of protection and indemnity insurance shall be paid directly to the
person, firm or company to which the liability covered by such insurance was incurred or to the
Shipowner in reimbursement of moneys expended by it in satisfaction of such liability.



     (ii) Upon the occurrence and continuance of an Event of Default, any claim under any such
insurance and entry (other than in respect of an Event of Loss) shall be paid to the Mortgagee and
shall be applied by the Mortgagee in accordance with terms of the Pledge Agreement, as defined in
the Credit Agreement and the form of which is attached as an exhibit to the Credit Agreement.



     (iii) Any claim under any such insurance and entry in respect of an Event of Loss shall be
paid to the Mortgagee and shall be applied by the Mortgagee, after payment of the costs of
collecting such claim, in accordance with the terms of the Pledge Agreement. The Mortgagee shall
have the right, but not the obligation, to negotiate any claim in respect of an Event of Loss.



     (iv) For purposes of this Mortgage, “Event of Loss” means any of the following events
respecting the Vessels: (x) the actual or constructive total loss of a Vessel or the agreed or
compromised total loss of a Vessel; or (y) the capture, condemnation, confiscation, requisition,
purchase, seizure or forfeiture of, or any taking of title to, a Vessel. An Event of Loss shall be
deemed to have occurred (i) in the event of an actual loss of a Vessel, at noon Greenwich Mean Time
on the date of such loss or if that is not known at noon Greenwich Mean Time on the date



- 8 -









 




which such Vessel was last heard from; (ii) in the event of damage which results in a
constructive or compromised or arranged total loss of a Vessel, at the time and on the date of the
event giving rise to such damage; or (iii) in the case of an event referred to in clause (y) above,
at the time and on the date on which such event is expressed to take effect by the Person making
the same. Notwithstanding the foregoing, if a Vessel shall have been returned to the Shipowner
following any event referred to in clause (y) above prior to the date upon which payment is
required to be made under Section 4.02(b) of the Credit Agreement, no Event of Loss shall be deemed
to have occurred by reason of such event.




     Any loss covered by this paragraph (d) which is paid to the Mortgagee but which might have
been paid, in accordance with the provisions of this subsection, directly to the Shipowner or
others, shall be paid by the Mortgagee to or as directed by the Shipowner, and all other payments
to the Mortgagee of losses covered by this subsection shall be applied by the Mortgagee in
accordance with the terms of the Pledge Agreement, as applicable.



     (e) in the event that any claim or lien is asserted against any Vessel for loss, damage or
expense which is covered by insurance required hereunder (other than in the event of an actual,
constructive or compromised total loss of such Vessel), and it is necessary for the Shipowner to
obtain a bond or supply other security to prevent arrest of such Vessel or to release such Vessel
from arrest on account of such claim or lien, the Mortgagee, on request of the Shipowner or its
agent, shall, so long as no Event of Default shall have occurred and be continuing, assign to any
person, firm or corporation executing a surety or guaranty bond or other agreement to save or
release such Vessel from such arrest, all right, title and interest of the Mortgagee in and to said
insurance (excluding any protection and indemnity insurance under which the Mortgagee is a named
insured) covering said loss, damage or expense, as collateral security to indemnify against
liability under said bond or other agreement.



     (f) (i) Forthwith upon the effecting of any insurances and entries, referred to in
Subsections (a) through (c) of this Section 1.15, the Shipowner will give notice thereof in writing
to the Mortgagee stating the full particulars (including the dates and amount thereof) and will
duly pay all premiums, calls and contributions and any other sums of money from time to time
payable in respect of any such insurance or entry or renewal thereof and, when requested by the
Mortgagee, will produce the receipts for the same.



     (ii) The Shipowner will cause its insurance brokers to agree to advise the Mortgagee as soon
as is reasonably practicable by facsimile addressed to it at its address, as specified in this
Mortgage, of any lapse of any such insurance by expiration, termination, failure to renew or
otherwise and of any default in payment of any premium in respect of any insurance on any Vessel.
The Mortgagee shall not be deemed to have knowledge of any such lapse of insurance in the absence
of receipt of notice from such brokers. The Shipowner will also cause such brokers to agree to
mark their records and to advise the Mortgagee, by facsimile, addressed as provided above in this
subsection, at least seven business days prior to the expiration date of any insurance carried
pursuant to this Mortgage, whether such insurance has been renewed or replaced with new insurance
which complies with the provisions of this Section 1.15. In addition, the Shipowner will cause
each insurance company, underwriter, club or fund (or an authorized agent thereof) with respect to
all insurance required hereby to agree in writing for the benefit of the Mortgagee that each policy
or contract issued by such insurance company, underwriter, club or



- 9 -









 




fund shall not lapse, expire, terminate or be cancelled for any reason whatsoever without at
least seven business days’ prior facsimile or cable notice to the Mortgagee addressed as provided
above in this subsection.




     (iii) The Shipowner, at its own expense, shall furnish to the Mortgagee simultaneously with
the execution and delivery hereof, and thereafter at intervals of not more than 12 calendar months,
a detailed report (which shall set forth, without limitation, with respect to each type of
insurance coverage, each policy or certificate of entry, its form, its number, its amount, each
direct or indirect or participating insurer or underwriter, the type of risk covered and the
expiration date), signed by either a firm of independent insurance brokers or the company or
companies which have issued such coverage, with respect to the insurance carried and maintained on
the Vessels, together with the opinion of such brokers (or of an independent insurance consultant
of recognized standing approved by the Mortgagee) substantially to the effect that (A) such
insurances are in such amounts and for such limits, against such risks, in such form and with such
insurance companies, underwriters or underwriting associations as are necessary and reasonable for
the protection of the Shipowner’s and the Mortgagee’s respective interests, (B) are arranged in the
broadest form generally available in the United States, British, or Scandinavian insurance markets,
and (C) as to the compliance of such insurance with the provisions of this Section 1.15.



     (g) The Shipowner agrees that it will not do or permit or willingly allow to be done any act
by which any insurance or entry required by the terms of this Mortgage may be suspended, impaired
or cancelled, and that it will not permit or allow any Vessel to undertake any voyage or run any
risk or transport any cargo which may not be permitted by the policies in force, without having
previously insured such Vessel by additional coverage to extend to such voyages, risks or cargoes.



     (h) The Shipowner will not cause or permit any Vessel to operate or undertake a voyage to or
to sail in any area which has been declared a war area by the relevant underwriters and insurance
companies and has been included in the list of exclusions from time to time in effect attached to
the War Risks Insurance Policies in the form of the War Risks Trading Warranties, without first
notifying thereof the Mortgagee and the War Risks underwriters of such Vessel and paying any
additional insurance premiums required. The Shipowner agrees that it will promptly furnish to the
Mortgagee, upon request by the Mortgagee, evidence of payment of such additional premiums.



     (i) The Shipowner will comply with and satisfy all of the provisions of any applicable law,
convention, regulation, proclamation or order concerning financial responsibility for liabilities
imposed on the Shipowner or the Vessels with respect to pollution by any state or nation or
political subdivision thereof and will maintain all certificates or other evidence of financial
responsibility as may be required by any such law, convention, regulation, proclamation or order
with respect to the trade which each Vessel are from time to time engaged in and the cargo carried
by it.



     (j) The Shipowner will deliver to the Mortgagee copies or, if requested by the Mortgagee at
any time and from time to time, the originals of all cover notes, binders, policies



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and certificates of entry in protection and indemnity associations, and all endorsements and
riders amendatory thereof, in respect of insurance maintained in connection with the Vessels.




     (k) Any insurance placed through a “captive” insurer or cover reinsured will be in form and
substance satisfactory to the Mortgagee and in any event such insurance will:




     (i) be on the same terms as the original insurances and will include the provisions of
this Section 1.15;




     (ii) provide that notwithstanding any bankruptcy, insolvency, liquidation, dissolution
or similar proceedings of or affecting the reinsured that the reinsurers’ liability will be
to make such payments as would have fallen due under the relevant policy of reinsurance if
the reinsured had (immediately before such bankruptcy, insolvency, liquidation, dissolution
or similar proceedings) discharged its obligations in full under the original insurance
policies in respect of which the then relevant policy of reinsurance has been effected; and




     (iii) contain a “cut-through” clause in the following form (or a form otherwise
satisfactory to the Mortgagee):




     “It is hereby declared and agreed that if [___], a
[___] corporation (“___”), as Insurer (or any successor to
[___] as insurer) under the insurance policy (the “Policy”)
between [___], as Insurer, and            Nordea Bank Finland Plc, New
York Branch, as Trustee and Agent, as Assureds, fails for any reason to pay
in full all or any portion of any losses payable in respect of the insured
vessels (the “Vessels”) under the Policy, or in any event upon
written notice by the said Assureds of an Event of Default under the
Mortgage, then all such losses (or such portion thereof) shall be paid
directly by the reinsurers identified from time to time under any and all
reinsurance agreements (the “Reinsurance Agreements”) providing for
reinsurance under the Policy with respect to the Vessels (collectively, the
“Reinsurers”) to such Assureds, as the respective interests of the
Assureds may appear under the Policy, but only for the proportions
subscribed by the Reinsurers and provided that the Reinsurers have not
already made payment in full for their proportion in accordance with the
terms of the Reinsurance Agreements and the Policy.”



     SECTION 1.16. The Shipowner will reimburse the Mortgagee promptly, with interest at a rate
equal to the default rate payable pursuant to Section 1.08 of the Credit Agreement, for any and all
expenditures which the Mortgagee may from time to time reasonably make, lay out or expend in
providing such protection in respect of insurance, discharge or purchase of liens, taxes, dues,
assessments, governmental charges, fines and penalties lawfully imposed, repairs, attorneys’ fees
and other matters as the Shipowner is obligated herein to provide, but fails to provide. Such
obligation of the Shipowner to reimburse the Mortgagee shall be an additional indebtedness due from
the Shipowner, secured by this Mortgage, and shall be payable by the Shipowner on demand. The
Mortgagee, though privileged so to do, shall be under no obligation



- 11 -









 




to the Shipowner to make any such expenditures, nor shall the making thereof relieve the
Shipowner of any default in that respect.




     SECTION 1.17. The Shipowner will fully perform any and all charter parties and drilling
contracts which are or may be entered into with respect to the Vessels.



     SECTION 1.18. In the event that at any time and from time to time this Mortgage or the Credit
Agreement or any provisions hereof or thereof shall be deemed invalidated in whole or in part by
reason of any present or future law or any decision of any authoritative court, or if the documents
at any time held by the Mortgagee shall be deemed by the Mortgagee for any reason insufficient to
carry out the true intent and spirit of this Mortgage, then the Shipowner, forthwith upon the
request of the Mortgagee, will execute, on its own behalf, such other and further assurances and
documents as requested by the Mortgagee to more effectually subject the Vessels to the payment of
the principal sum of the Obligations, as in this Mortgage provided, and the performance of the
terms and provisions of this Mortgage.



     SECTION 1.19. In the event of the requisition (whether of title or use), condemnation,
sequestration, seizure or forfeiture of any Vessel by any governmental or purported authority or by
anyone else, the Shipowner will give prompt written notice to the Mortgagee of all such events and,
upon an Event of Default, any payments in respect thereof shall be paid, and the Shipowner shall
cause any such payment to be paid, to the Mortgagee and applied in accordance with the terms of the
Pledge Agreement.



     SECTION 1.20. The Shipowner will fully perform any and all covenants and undertakings in the
Credit Agreement, this Mortgage and the other Credit Documents, which are applicable to it.



     SECTION 1.21. The Shipowner will, without cost or expense to the Mortgagee, irrevocably and
unconditionally instruct and authorize the Classification Society of each Vessel as follows, and
use its best efforts to obtain from each such Classification Society a written undertaking to the
Mortgagee:



     (a) to send to the Mortgagee, following receipt of a written request from the Mortgagee,
certified true copies of all original class records held by the Classification Society relating to
such Vessel;



     (b) to allow the Mortgagee (or its agents), at any time and from time to time, to inspect the
original class and related records of the Shipowner and such Vessel at the offices of the
Classification Society and to take copies of them;



     (c) following receipt of a written request from the Mortgagee:




     (i) to advise of any facts or matters which may result in or have resulted in a change,
suspension, discontinuance, withdrawal or expiry of such Vessel’s class under the rules or
terms and conditions of the Shipowner’s or such Vessel’s membership of the Classification
Society; and



- 12 -









 






     (ii) to confirm that the Shipowner is not in default of any of its contractual
obligations or liabilities to the Classification Society and, without limiting the
foregoing, that it has paid in full all fees or other charges due and payable to the
Classification Society; and




     (iii) if the Shipowner is in default of any of its contractual obligations or
liabilities to the Classification Society, to specify to the Mortgagee in reasonable detail
the facts and circumstances of such default, the consequences thereof, and any remedy period
agreed or allowed by the Classification Society;




     (iv) to notify the Mortgagee immediately in writing if the Classification Society
receives notification from the Shipowner or any other person that any Vessel’s
Classification Society is to be changed.



     Notwithstanding the above instructions and undertaking given for the benefit of the Mortgagee,
the Shipowner shall continue to be responsible to the Classification Society for the performance
and discharge of all its obligations and liabilities relating to or arising out of or in connection
with the contract it has with the Classification Society, and nothing herein or therein shall be
construed as imposing any obligation or liability of the Mortgagee to the Classification Society in
respect thereof.



     The Shipowner shall further notify the Classification Society that all the foregoing
instructions and authorizations shall remain in full force and effect until revoked or modified by
written notice to the Classification Society received from the Mortgagee, and that the Shipowner
shall reimburse the Classification Society for all its costs and expenses incurred in complying
with the foregoing instructions.



ARTICLE
II


EVENTS OF DEFAULT AND REMEDIES




     SECTION 2.1. In case any one or more of the following events, herein termed “Events of
Default”, shall happen:



     (a) the statements in Sections 1.2 and 1.3 of Article I hereto shall prove to have been untrue
when made; or



     (b) a default in the due and punctual observance and performance of any of the provisions of
Sections 1.4, 1.5, 1.9, 1.10, 1.11, 1.12, 1.13, 1.14, 1.15, 1.16, 1.19, 1.20 or 1.21 of Article I
hereof shall have occurred and be continuing; or



     (c) a default in the due and punctual observance of any of the other covenants and conditions
herein required to be kept and performed by the Shipowner which default shall remain unremedied for
thirty (30) days; or



     (d) an “Event of Default” shall have occurred and be continuing as defined in the Credit
Agreement;



- 13 -









 




then, in each and every such case, the Mortgagee shall have the right to:




     (1) declare immediately due and payable all of the Obligations (in which case all of the same
shall be immediately due), and bring suit at law, in equity or in admiralty, as it may be advised,
to recover judgment for the Obligations and collect the same out of any and all property of the
Shipowner whether covered by this Mortgage or otherwise;



     (2) exercise all of the rights and remedies in foreclosure and otherwise given to mortgagees
by the provisions of applicable law, including but not limited to, the provisions of Chapter 313 of
Title 46 of the United States Code and the regulations in effect thereunder from time to time, as
amended;



     (3) take and enter into possession of the Vessels, at any time, wherever the same may be,
without court decision or other legal process and without being responsible for loss or damage, and
the Shipowner or other person in possession forthwith upon demand of the Mortgagee shall surrender
to the Mortgagee possession of the Vessels and the Mortgagee may, without being responsible for
loss or damage, hold, lay up, lease, charter, operate or otherwise use such Vessels for such time
and upon such terms as it may deem to be for its best advantage, and demand, collect and retain all
hire, freights, earnings, issues, revenues, income, profits, return premiums, salvage awards or
recoveries, recoveries in general average, and all other sums due or to become due in respect of
such Vessels or in respect of any insurance thereon from any person whomsoever, accounting only for
the net profits, if any, arising from such use of the Vessels and charging upon all receipts from
the use of the Vessels or from the sale thereof by court proceedings or pursuant to subsection (4)
next following, all costs, expenses, charges, damages or losses by reason of such use; and if at
any time the Mortgagee shall avail itself of the right herein given it to take the Vessels, the
Mortgagee shall have the right to dock or store the Vessels for a reasonable time at any dock, pier
or other premises of the Shipowner without charge, or to dock or store them at any other place at
the cost and expense of the Shipowner, and the Mortgagee shall have the right to require the
Shipowner to deliver, and the Shipowner shall on demand, at its own cost and expense, deliver to
the Mortgagee the Vessels as demanded; and the Shipowner hereby irrevocably instructs the Masters
of the Vessels so long as this Mortgage is outstanding to deliver the Vessels to the Mortgagee as
demanded; and/or



     (4) take and enter into possession of the Vessels, at any time, wherever the same may be,
without legal process, and if it seems desirable to the Mortgagee and without being responsible for
loss or damage, sell such Vessels, at any place and at such time as the Mortgagee may specify and
in such manner and such place (whether by public or private sale) as the Mortgagee may deem
advisable (without necessity of bringing the Vessels to the place designated for such sale), free
from any claim by the Shipowner in admiralty, in equity, at law or by statute, after first giving
notice of the time and place of any public sale with a general description of the property in the
following manner:



     (i) by publishing such notice for 10 consecutive days in a daily newspaper of general
circulation published in New York City;



     (ii) if the place of sale should not be New York City, then also by publication of a similar
notice in a daily newspaper, if any, published at the place of sale; and



- 14 -









 





     (iii) by mailing a similar notice to the Shipowner at its last known address on the day of
first publication; and notice of the time and place of any private sale by mailing such notice to the Shipowner at its
last known address.




     SECTION 2.2. Any sale of any Vessel or any share therein made in pursuance of this Mortgage,
whether under the power of sale hereby granted or any judicial proceedings, shall operate to divest
all right, title and interest of any nature whatsoever of the Shipowner therein and thereto and
shall bar any claim from the Shipowner, its successors and assigns, and all persons claiming by,
through or under them. No purchaser shall be bound to inquire whether notice has been given, or
whether any default has occurred, or as to the propriety of the sale, or as to the application of
the proceeds thereof. In the case of any such sale, the Mortgagee shall be entitled, for the
purpose of making settlement or payment for the property purchased, to use and apply the
Obligations in order that there may be credited against the amount remaining due and unpaid thereon
the sums payable out of the net proceeds of such sale with respect to the Obligations after
allowing for the costs and expense of sale and other charges; and thereupon such purchaser shall be
credited, on account of such purchase price, with the net proceeds that shall have been so credited
with respect to the Obligations. At any such sale, the Mortgagee may bid for and purchase such
property and upon compliance with the terms of sale may hold, retain and dispose of such property
without further accountability therefor.



     SECTION 2.3. The Mortgagee is hereby appointed attorney-in-fact of the Shipowner to execute
and deliver to any purchaser aforesaid, and is hereby vested with full power and authority to make,
in the name and on behalf of the Shipowner, a good conveyance of the title to each Vessel so sold.
In the event of any sale of any Vessel, under any power herein contained, the Shipowner will, if
and when required by the Mortgagee, execute such form of conveyance of such Vessel and other
related documents, as the Mortgagee may direct or approve. The powers and authority granted to the
Mortgagee herein have been given for a valuable consideration and are hereby declared to be
irrevocable.



     SECTION 2.4. The Mortgagee is hereby appointed attorney-in-fact of the Shipowner in the name
of the Shipowner to demand, collect, receive, compromise and sue for, so far as may be permitted by
law, all freights, hire, earnings, issues, revenues, income and profits of each Vessel and all
amounts due from underwriters under any insurance thereon as payments of losses or as return
premiums or otherwise, salvage awards and recoveries, recoveries in general average or otherwise,
and all other sums, due or to become due at the time of the occurrence of any Event of Default, or
in respect of any insurance thereon, from any person whomsoever, and to make, give and execute in
the name of the Shipowner acquittances, receipts, releases or other discharges for the same,
whether under seal or otherwise, and to endorse and accept in the name of the Shipowner all checks,
notes, drafts, warrants, agreements and other instruments in writing with respect to the foregoing.
The powers and authority granted to the Mortgagee herein have been given for a valuable
consideration and are hereby declared to be irrevocable.



     SECTION 2.5. Whenever any right to enter and take possession of any Vessel accrues to the
Mortgagee, it may require the Shipowner to deliver, and the Shipowner shall on demand, at its own
cost and expense, deliver to the Mortgagee such Vessel as demanded. If any legal



- 15 -









 




proceedings shall be taken to enforce any right under this Mortgage, the Mortgagee shall be
entitled as a matter of right to the appointment of a receiver of such Vessel and of the freights,
hire, earnings, issues, revenues, income and profits due or to become due and arising from the
operation thereof.




     SECTION 2.6. The Shipowner authorizes and empowers the Mortgagee or its appointees or any of
them to appear in the name of the Shipowner, its successors and assigns, in any court of any
country or nation of the world where a suit is pending against any Vessel because of or on account
of an alleged lien against such Vessel from which such Vessel has not been released and to take
such proceedings as to them or any of them may seem proper towards the defense of such suit and the
purchase or discharge of such lien, and all expenditures made or incurred by them or any of them
for the purpose of such defense or purchase or discharge shall be a debt due from the Shipowner,
its successors and assigns, to the Mortgagee, and shall be secured by the lien of this Mortgage in
like manner and extent as if the amount and description thereof were written herein.



     SECTION 2.7. The Shipowner covenants that at any time that any Obligations shall be due and
payable (whether by acceleration or otherwise), the Mortgagee may demand the payment thereof; and
in case the Shipowner shall fail to pay the same forthwith upon such demand, the Mortgagee shall be
entitled to recover judgment for the whole amount so due and unpaid, together with such further
amounts as shall be sufficient to cover the reasonable compensation to the Mortgagee’s agents,
attorneys and counsel and any necessary advances, expenses and liabilities made or incurred by it
hereunder. All moneys collected by the Mortgagee under this Section 2.7 shall be applied by the
Mortgagee in accordance with the terms of the Pledge Agreement.



     SECTION 2.8. Each and every power and remedy herein given to the Mortgagee shall be
cumulative and shall be in addition to every other power and remedy herein given or now or
hereafter existing at law, in equity, in admiralty or by statute, and each and every power and
remedy whether herein given or otherwise existing may be exercised from time to time and as often
and in such order as may be deemed expedient by the Mortgagee, and the exercise or the beginning of
the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise
at the same time or thereafter any other power or remedy. No delay or omission by the Mortgagee in
the exercise of any right or power or in the pursuance of any remedy accruing upon any Event of
Default shall impair any such right, power or remedy or be construed to be a waiver of any such
Event of Default or to be an acquiescence therein; nor shall the acceptance by the Mortgagee of any
security or of any payment of or on account of the Obligations after any Event of Default or of any
payment on account of any past Event of Default be construed to be a waiver of any right to take
advantage of any future Event of Default or of any past Event of Default not completely cured
thereby.



     SECTION 2.9. If at any time after an Event of Default and prior to the actual sale of any
Vessel by the Mortgagee or prior to any foreclosure proceedings, the Shipowner offers completely to
cure all Events of Default and to pay all expenses, advances and damages to the Mortgagee
consequent on such Events of Default, with interest at the rate provided in Section 1.16 of Article
I hereof, then the Mortgagee may, but shall be under no obligation to, accept such offer, cure and
payment and restore the Shipowner to its former position, but such action shall not affect any
subsequent Event of Default or impair any rights consequent thereon.



- 16 -









 





     SECTION 2.10. In case the Mortgagee shall have proceeded to enforce any right, power or
remedy under this Mortgage by foreclosure, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined adversely to the Mortgagee,
then and in every such case the Shipowner and the Mortgagee shall be restored to their former
positions and rights hereunder with respect to the property subject or intended to be subject to
this Mortgage, and all rights, remedies and powers of the Mortgagee shall continue as if no such
proceedings had been taken.



     SECTION 2.11. The proceeds of any sale of any Vessel and the net earnings of any charter
operation received by the Mortgagee or other use of any Vessel by the Mortgagee under any of the
powers herein specified in this Article II, as well as any and all other moneys received by the
Mortgagee pursuant to or under any of the provisions of Article I hereof or this Article II or in
any proceedings pursuant to this Article II, shall be held and applied by the Mortgagee from time
to time as provided in the Pledge Agreement. In the event that the proceeds and amounts referred
to above received by the Mortgagee are insufficient to pay in full the Obligations, the Mortgagee
shall be entitled to collect the balance from the Shipowner or from any other person or entity
liable therefor.



     SECTION 2.12. Unless and until one or more Events of Default shall occur and be continuing,
the Shipowner (a) shall be suffered and permitted to retain actual possession and use of the
Vessels and (b) shall have the right, from time to time, in its discretion, and without application
to the Mortgagee, and without obtaining a release thereof by the Mortgagee, to dispose of, free
from the lien hereof, any boilers, engines, machinery, masts, spars, sails, rigging, boats,
anchors, cables, chains, tackle, apparel, furniture, fittings, equipment, spares or any other
appurtenances of the Vessels that are no longer useful, necessary, profitable or advantageous in
the operation of the Vessels, first or simultaneously replacing the same by new boilers, engines,
machinery, masts, spars, sails, rigging, boats, anchors, cables, chains, tackle, apparel,
furniture, fittings, equipment, spares or other appurtenances of substantially equal value to the
Shipowner, which shall forthwith become subject to the lien of this Mortgage as a first preferred
mortgage thereon.



ARTICLE
III


SUNDRY PROVISIONS




     SECTION 3.1. The maximum principal amount that may be outstanding under this Mortgage at any
time is Two Hundred Million United States Dollars (US$200,000,000), and for purposes of recording
this Mortgage, the total amount of this Mortgage is Two Hundred Million United States Dollars
(US$200,000,000), plus interest, expenses and fees and performance of mortgage covenants. There is
no separate discharge amount for each Vessel.



     SECTION 3.2. All of the covenants, promises, stipulations and agreements of the Shipowner in
this Mortgage contained shall bind the Shipowner and its successors and assigns and shall inure to
the benefit of the Mortgagee and its successors and assigns. In the event of any assignment of
this Mortgage, the term “Mortgagee” as used in this Mortgage shall be deemed to mean any
such assignee.



- 17 -










 





     SECTION 3.3. Wherever and whenever herein any right, power or authority is granted or given
to the Mortgagee, such right, power or authority may be exercised in all cases by the Mortgagee or
such agent or agents as it may appoint, and the act or acts of such agent or agents when taken
shall constitute the act of the Mortgagee hereunder.



     SECTION 3.4. (a) In the event that any provision of this Mortgage shall be deemed invalid or
unenforceable by reason of any present or future law or any decision of any court of competent
jurisdiction, the validity and enforceability of any other provision hereof shall not be affected
thereby. Any such invalidity or unenforceability of any provision of this Mortgage in any
jurisdiction or nation shall not render such provision invalid or unenforceable under the laws of
any other jurisdiction or nation.



     (b) In the event that this Mortgage or any of the documents or instruments which may from time
to time be delivered hereunder or any provision hereof shall be deemed invalidated by present or
future law of any nation or by decision of any court, this shall not affect the validity and/or
enforceability of all or any other parts of this Mortgage, or such documents or instruments and, in
any such case, the Shipowner covenants and agrees that, on demand, it will execute and deliver such
other and further agreements and/or documents and/or instruments and do such things as the
Mortgagee in its sole discretion may deem to be necessary to carry out the true intent of this
Mortgage.



     (c) Anything herein to the contrary notwithstanding, it is intended that nothing herein shall
waive the preferred status of this Mortgage and that, if any provision of this Mortgage or portion
thereof shall be construed to waive the preferred status of this Mortgage, then such provision to
such extent shall be void and of no effect and shall cease to be a part of this Mortgage, without
affecting the remaining provisions, which shall remain in full force and effect.



     SECTION 3.5. The Shipowner irrevocably submits itself to the non-exclusive jurisdiction of
any New York State or Federal court sitting in New York County and any appellate court from any
thereof, for the purposes of (and solely for the purposes of) any suit, action or other proceeding
arising out of, or relating to, this Mortgage or any of the transactions contemplated hereby,
hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard in
such New York State or Federal court and hereby irrevocably waives, and agrees not to assert, by
way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of the above-named courts for any reason
whatsoever, that such suit, action or proceeding is brought in an inconvenient forum, or that the
venue of such suit, action or proceeding is improper, or that this Mortgage or the subject matter
hereof may not be enforced in or by such courts. The Shipowner irrevocably consents to the service
of any and all process in any such suit, action or proceeding by the mailing of copies of such
process to the Shipowner at 2000 West Sam Houston Pkwy. South, Suite 800, Houston Texas 77042-3615,
Attention: T. Scott O’Keefe, President. The Shipowner agrees that a final judgment in any such
action, suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law. Nothing in this Section 3.5 shall affect
the right of the Mortgagee to serve legal process in any other manner permitted by law or affect
the right of the Mortgagee to bring any action or proceeding against the Shipowner or its property
in the courts of any other jurisdiction.



- 18 -









 





     SECTION 3.6. This Mortgage may be executed in any number of counterparts, each of which shall
be an original; but such counterparts shall together constitute but one and the same instrument.



     SECTION 3.7. The term “Dollars” or the symbol “$” as used herein shall mean
Dollars in any coin or currency of the United States of America which at the time of payment shall
be legal tender for public and private debts.



     SECTION 3.8. Upon the termination of this Mortgage pursuant to the proviso to the Habendum
Clause hereof, the Mortgagee, forthwith upon the request of the Shipowner, will execute, on its own
behalf, such other and further assurances and documents as requested by the Shipowner to effect
such termination and to remove the lien of record of this Mortgage, all at the cost and expense of
the Shipowner.



     SECTION 3.9. THE SHIPOWNER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS MORTGAGE.



     SECTION 3.10. All notices or other communications required or permitted to be made or given
hereunder shall be made in writing and personally delivered to an officer or other responsible
employee of the addressee, or sent, by registered air mail, return receipt requested, postage
prepaid, facsimile transmission, or other direct written electronic means to the applicable address
set forth under such party’s name below, or to such other address as each party hereto may from
time to time designate to the others in such manner:



	 	 	 	 	 
	 

	 	If to the Mortgagee:
	 	Nordea Bank Finland Plc, New York Branch
	 

	 	 	 	437 Madison Avenue
	 

	 	 	 	21st Floor
	 

	 	 	 	New York, New York 10022
	 

	 	 	 	ATTN: Hans Kjelsrud
	 

	 	 	 	Facsimile: (212) 421-4420
	 
	 	 	 	 
	 

	 	If to the Shipowner:
	 	The Offshore Drilling Company
	 

	 	 	 	2000 West Sam Houston Pkwy. South, Suite 800
	 

	 	 	 	Houston, Texas 77042-3615
	 

	 	 	 	ATTN: T. Scott O’Keefe, President
	 

	 	 	 	Facsimile: (713) 278-6107






     Any communication personally delivered shall be deemed to have been validly and effectively
given or delivered on the date of such delivery. Any communication transmitted by facsimile, or
other direct written electronic means, shall be deemed to have been validly and effectively given
or delivered on the day when received. Any communication transmitted by registered air mail shall
be deemed to have been validly and effectively given or delivered three (3) business days after
mailing.



[The rest of this page has been left intentionally blank.]





- 19 -









 








     IN WITNESS WHEREOF, the Shipowner has executed this Mortgage on the day and year first above
written.



	 	 	 	 	 
	 

	 	 	 	THE OFFSHORE DRILLING COMPANY
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	 	 	Dale Wilhelm, Vice President






	 	 	 	 	 
	STATE OF TEXAS

	 	 	)	 
	 
	 	 	)	  ss. : 
	COUNTY OF HARRIS

	 	 	)	 






     On this ___day of December, 2005, before me personally appeared Dale Wilhelm, to me known, who
being by me duly sworn, did depose and say that his address is 2000 W. Sam Houston Pkwy. S., Suite
800, Houston, Texas 77042; that he is an authorized individual of THE OFFSHORE DRILLING COMPANY,
the corporation described in and which executed the foregoing instrument; and that he signed his
name thereto by order of the Board of Directors of said corporation and that said instrument is the
act and deed of said corporation.



                                                                                                    




Notary Public




 









 





EXHIBIT A

TO

FIRST PREFERRED MORTGAGE


[Copy of the Master Vessel and Trust Agreement]




 










 








EXHIBIT B



TO


FIRST PREFERRED MORTGAGE




[Copy of the Credit Agreement]




 









 








SCHEDULE I




TO FIRST PREFERRED MORTGAGE




DESCRIPTION OF THE VESSELS




OWNER: THE OFFSHORE DRILLING COMPANY




	 	 	 
	Vessel Name	 	Official Number
	 
	 	 





 









 






SCHEDULE II




TO FIRST PREFERRED MORTGAGE




INSURED VALUES




	 	 	 
	Vessel Name	 	Insured Value
	 	 	 





 









 






SCHEDULE III

TO FIRST PREFERRED MORTGAGE




LOSS PAYABLE CLAUSES




Hull and War Risks




     Loss, if any, payable to Nordea Bank Finland Plc, New York Branch, in its capacity as Agent
pursuant to, and for the benefit of the Lenders (the “Lenders”) defined under that certain
Credit Agreement, dated as of December ___, 2005 (as the same may be amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among TODCO, a Delaware
corporation (the “Borrower”), the Lenders party thereto from time to time, and Nordea Bank
Finland plc, New York Branch, as Administrative Agent (in such capacity, the “Administrative
Agent”) and as Collateral Agent (in such capacity, the “Collateral Agent”), relating to
that certain First Preferred Fleet Mortgage dated ___, 200___(the “Mortgage”) by The
Offshore Drilling Company (the “Owner”) to Nordea Bank Finland Plc, New York Branch, as
Trustee (the “Mortgagee”) for distribution by it to the Mortgagee and then to the Owner as
their respective interests may appear, or order, except that, unless the underwriters have been
otherwise instructed by notice in writing from the Mortgagee in the case of any loss involving any
damage to any Vessel or liability of any Vessel, the underwriters may pay directly for the repair,
salvage, liability or other charges involved or, if the Owner shall have first fully repaired the
damage and paid the cost thereof, or discharged the liability or paid all of the salvage or other
charges, then the underwriters may pay the Owner as reimbursement therefor, provided, however, that
if such damage involves a loss in excess of U.S.$1,000,000 or its equivalent the underwriters shall
not make such payment without first obtaining the written consent thereto of the Mortgagee.



     In the event of an actual or constructive total loss or a compromised or arranged total loss
or requisition of title, all insurance payments therefor shall be paid to the Mortgagee, for
distribution by it in accordance with the terms of the Mortgage.




 









 






EXHIBIT L




FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT




DATE: ________ __, ____




          Reference is made to the Credit Agreement described in Item 2 of Annex I annexed hereto (as
such Credit Agreement may hereafter be amended, modified or supplemented from time to time, the
“Credit Agreement”). Unless defined in Annex I attached hereto, capitalized terms defined
in the Credit Agreement are used herein as therein defined.                                          (the “Assignor”)
and                                          (the “Assignee”) hereby agree as follows:




          1. The Assignor hereby sells and assigns to the Assignee without recourse and without
representation or warranty (other than as expressly provided herein), and the Assignee hereby
purchases and assumes from the Assignor, that interest in and to all of the Assignor’s rights and
obligations under the Credit Agreement as of the date hereof which represents the percentage
interest specified in Item 4 of Annex I attached hereto (the “Assigned Share”) of all of
the outstanding rights and obligations under the Credit Agreement relating to each of the
Facilities listed in Item 4 of Annex I attached hereto, including, without limitation (x) in the
case of any assignment of all or any portion of the Assignor’s outstanding Loans, all rights and
obligations with respect to the Assigned Share of such outstanding Loans and (y) in the case of any
assignment of all or any portion of the Assignor’s Commitment, all rights and obligations with
respect to the Assigned Share of the Total Commitment.




          2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and clear of any adverse
claims; (ii) makes no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the Credit Agreement or the
other Credit Documents or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or the other Credit Documents or any other instrument
or document furnished pursuant thereto; and (iii) makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower or any of its
Subsidiaries or the performance or observance by the Borrower or any of its Subsidiaries of any of
their respective obligations under the Credit Agreement or the other Credit Documents or any other
instrument or document furnished pursuant thereto.




          3. The Assignee (i) confirms that it is an Eligible Transferee, (ii) confirms that it has
received a copy of the Credit Agreement and the other Credit Documents, together with copies of the
financial statements referred to therein and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this Assignment and
Assumption Agreement, (iii) agrees that it will, independently and without reliance upon the
Administrative Agent, the Collateral Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit Agreement, (iv) appoints and authorizes
the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to
exercise such powers under the Credit Agreement and the other Credit Documents as are delegated to
the Administrative Agent and the Collateral Agent, as the case may be, by the terms thereof,
together with such powers as are reasonably incidental thereto, and




 









 








EXHIBIT L

Page 2



(v) agrees that it will perform in accordance with their terms all of the obligations which by
the terms of the Credit Agreement are required to be performed by it as a Lender.




          4. Following the execution of this Assignment and Assumption Agreement by the Assignor and
the Assignee, an executed original hereof (together with all attachments) will be delivered to the
Administrative Agent. The effective date of this Assignment and Assumption Agreement shall be the
date of execution hereof by the Assignor and the Assignee, the receipt of the consent of the
Administrative Agent and the Borrower (in each case) to the extent required by the Credit
Agreement, receipt by the Administrative Agent of the assignment fee referred to in Section
13.04(b) of the Credit Agreement, and the recordation by the Administrative Agent of the assignment
effected hereby in the Register, unless otherwise specified in Item 5 of Annex I attached hereto
(the “Settlement Date”).




          5. Upon the delivery of a fully executed original hereof to the Administrative Agent, as of
the Settlement Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Assumption Agreement, have the rights and obligations of a Lender
thereunder and under the other Credit Documents and (ii) the Assignor shall, to the extent provided
in this Assignment and Assumption Agreement, relinquish its rights and be released from its
obligations under the Credit Agreement and the other Credit Documents.




          6. It is agreed that upon the effectiveness hereof, the Assignee shall be entitled to (x) all
interest on the Assigned Share of the Loans at the rates specified in Item 6 of Annex I attached
hereto and (y) all Commitment Commission (if applicable) on the Assigned Share of the Total
Commitment, as the case may be, at the rate specified in Item 7 of Annex I attached hereto, which,
in each case, accrues on and after the Settlement Date, such interest and, if applicable,
Commitment Commission, to be paid by the Administrative Agent directly to the Assignee. It is
further agreed that all payments of principal made on the Assigned Share of the Loans which occur
on and after the Settlement Date will be paid directly by the Administrative Agent to the Assignee.
Upon the Settlement Date, the Assignee shall pay to the Assignor an amount specified by the
Assignor in writing which represents the Assigned Share of the principal amount of the respective
Loans made by the Assignor pursuant to the Credit Agreement which are outstanding on the Settlement
Date, net of any closing costs, and which are being assigned hereunder. The Assignor and the
Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods
prior to the Settlement Date directly between themselves.




          7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.




 









 








EXHIBIT L

Page 3




          IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption Agreement to
be executed by their respective officers thereunto duly authorized, as of the date first above
written, such execution also being made on Annex I attached hereto.




	 	 	 	 	 	 	 
	 	 	[NAME OF ASSIGNOR],	 	 
	 	 	as Assignor	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	[NAME OF ASSIGNEE],	 	 
	 	 	as Assignee	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 






	 	 	 	 	 
	Acknowledged and Agreed:	 	 
	 
	 	 	 	 
	[NORDEA BANK FINLAND PLC, NEW YORK BRANCH,	 	 
	as Administrative Agent	 	 
	 
	 	 	 	 
	By
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:]2	 	 








 




			
	2	 	Insert only if assignment is being made
pursuant to Section 13.04(b)(y) of the Credit Agreement.




 









 










EXHIBIT L

Page 4




	 	 	 	 	 
	TODCO	 	 
	 
	 	 	 	 
	By
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:]3	 	 








 




			
	3	 	Insert only if assignment is being made
pursuant to Section 13.04(b)(y) of the Credit Agreement.




 









 










ANNEX I




ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT

ANNEX I





	1.	 	The Borrower: TODCO (the “Borrower”).
	 
	2.	 	Name and Date of Credit Agreement:
	 
	 	 	Credit Agreement, dated as of December 29, 2005, among the Borrower, the lenders from time
to time party thereto, and Nordea Bank Finland PLC, New York Branch, as Administrative Agent
and as Collateral Agent (as amended, restated, modified and/or supplemented from time to
time, the “Credit Agreement”).
	 
	3.	 	Date of Assignment Agreement:
	 
	4.	 	Amounts (as of date of item #3 above):





	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Outstanding	 	 
	 	 	 	 	Principal of	 	 
	 	 	 	 	Loans	 	Commitments
	a.
	 	Aggregate Amount for all Lenders	 	$	                    	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 	 	 
	b.
	 	Assigned Share	 	 	                    	%	 	 	                    	%
	 
	 	 	 	 	 	 	 	 	 	 
	c.
	 	Amount of Assigned Share	 	$	                    	 	 	$	                    	 







	5.	 	Settlement Date:
	 
	6.	 	Rate of Interest
to the Assignee: As set forth in Section 1.08 of the Credit Agreement
	 
	7.	 	Commitment Commission:






(i) Commitment
Commission
to the Assignee (as applicable): As set forth in Section
3.01(a) of the Credit
Agreement4





 




			
	4	 	Insert “Not Applicable” in lieu of
text if no portion of the Total Commitment is being assigned or if Total
Commitment has been terminated.




 









 










Annex I

Page 2




	 	 	 	 	 
	8.           Notice:

	 	ASSIGNEE:	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Attention:	 	 
	 

	 	Reference:	 	 
	 
	 	 	 	 
	Payment Instructions:

	 	ASSIGNEE:	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Attention:	 	 
	 

	 	Reference:	 	 
	 
	 	 	 	 
	Accepted and Agreed:
	 	 	 	 






	 	 	 	 	 	 	 	 	 	 	 
	[NAME OF ASSIGNEE]	 	 	 	[NAME OF ASSIGNOR]	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	 	 	 
	 	By	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	 	 	 	 	Name:	 	 
	 

	 	Title:
	 	 	 	 	 	Title:	 	 







 









 






EXHIBIT N




FORM OF SUBORDINATION PROVISIONS




          Section 1.01. Subordination of Liabilities. [Name of Payor] (the “Payor”), for
itself, its successors and assigns, covenants and agrees, and each holder of the Note to which this
Annex ___is attached (the “Note”) by its acceptance thereof likewise covenants and agrees, that the
payment of the principal of, interest on, and all other amounts owing in respect of, the Note (the
“Subordinated Indebtedness”) is hereby expressly subordinated, to the extent and in the manner set
forth below, to the prior payment in full in cash of all Senior Indebtedness (as defined in Section
1.07 of this Annex ___). The provisions of this Annex ___shall constitute a continuing offer to all
persons or other entities who, in reliance upon such provisions, become holders of, or continue to
hold, Senior Indebtedness, and such holders are made obligees hereunder the same as if their names
were written herein as such, and they and/or each of them may proceed to enforce such provisions.




          Section 1.02. Payor Not to Make Payments with Respect to Subordinated Indebtedness in
Certain Circumstances. (a) Upon the maturity of any Senior Indebtedness (including interest
thereon or fees or any other amounts owing in respect thereof), whether at stated maturity, by
acceleration or otherwise, all Obligations (as defined in Section 1.07 of this Annex ___) owing in
respect of the Senior Indebtedness shall first be paid in full in cash in accordance with the terms
thereof, before any payment of any kind or character, whether in cash, property, securities or
otherwise, is made on account of the Subordinated Indebtedness.




          (b) The Payor may not, directly or indirectly (and no person or other entity on behalf of the
Payor may), make any payment of any Subordinated Indebtedness and may not acquire any Subordinated
Indebtedness for cash or property until all Senior Indebtedness has been paid in full in cash if
any Default (as defined in the Credit Agreement identified in Section 1.07 herein) or Event of
Default (as defined in the Credit Agreement identified in Section 1.07 herein) under the Credit
Agreement (as defined in Section 1.07 of this Annex ___) has occurred and is continuing or would
result therefrom. Each holder of the Note hereby agrees that, so long as any such Default or Event
of Default in respect of any issue of Senior Indebtedness has occurred and is continuing, it will
not sue for, or otherwise take any action to enforce the Payor’s obligations to pay, amounts owing
in respect of the Note. Each holder of the Note understands and agrees that to the extent that
clause (a) of this Section 1.02 or this clause (b) prohibits the payment of any Subordinated
Indebtedness, such unpaid amount shall not constitute a payment default under the Note and the
holder of the Note may not sue for, or otherwise take action to enforce the Payor’s obligation to
pay such amount, provided that such unpaid amount shall remain an obligation of the Payor
to the holder of the Note pursuant to the terms of the Note. Notwithstanding the foregoing, so
long as a Default or Event of Default has not occurred, Payor will be entitled to make (and any
person or other entity on behalf of the Payor shall be entitled to make) and a holder of any Note
will be entitled to receive scheduled payments of principal and interest under the Subordinated
Indebtedness.




          (c) In the event that, notwithstanding the provisions of the preceding subsections (a) and (b)
of this Section 1.02, the Payor (or any Person on behalf of the Payor) shall make (or the holder of
the Note shall receive) any payment on account of the Subordinated





 









 








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Indebtedness at a time when payment is not permitted by said subsection (a) or (b), such
payment shall be held by the holder of the Note, in trust for the benefit of, and shall be paid
forthwith over and delivered to, the holders of Senior Indebtedness or their representative or the
trustee under the indenture or other agreement pursuant to which any instruments evidencing any
Senior Indebtedness may have been issued, as their respective interests may appear (including by
giving effect to any intercreditor or subordination arrangements among such holders), for
application pro rata to the payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in cash in accordance with the terms of such
Senior Indebtedness, after giving effect to any concurrent payment or distribution to or for the
holders of Senior Indebtedness.




          Section 1.03. Subordination to Prior Payment of All Senior Indebtedness on Dissolution,
Liquidation or Reorganization of Payor. Upon any distribution of assets of the Payor upon
dissolution, winding up, liquidation or reorganization of the Payor (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of creditors or
otherwise):





     (a) the holders of all Senior Indebtedness shall first be entitled to receive payment
in full in cash of all Senior Indebtedness in accordance with the terms thereof (including,
without limitation, post-petition interest at the rate provided in the documentation with
respect to the Senior Indebtedness, whether or not such post-petition interest is an allowed
claim against the debtor in any bankruptcy or similar proceeding) before the holder of the
Note is entitled to receive any payment of any kind or character on account of the
Subordinated Indebtedness;




     (b) any payment or distributions of assets of the Payor of any kind or character,
whether in cash, property or securities to which the holder of the Note would be entitled
except for the provisions of this Annex                     , shall be paid by the liquidating trustee or
agent or other person making such payment or distribution, whether a trustee in bankruptcy,
a receiver or liquidating trustee or other trustee or agent, directly to the holders of
Senior Indebtedness or their representative or representatives, or to the trustee or
trustees under any indenture under which any instruments evidencing any such Senior
Indebtedness may have been issued as their respective interests may appear (including by
giving effect to any intercreditor or subordination arrangements among such holders), to the
extent necessary to make payment in full in cash of all Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness; and




     (c) in the event that, notwithstanding the foregoing provisions of this Section 1.03,
any payment or distribution of assets of the Payor of any kind or character, whether in
cash, property or securities, shall be received by the holder of the Note on account of
Subordinated Indebtedness before all Senior Indebtedness is paid in full in cash in
accordance with the terms thereof, such payment or distribution shall be received and held
in trust for and shall be paid over to the holders of the Senior Indebtedness remaining
unpaid or their representative or representatives, or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior Indebtedness may have
been issued, as their respective interests may appear (including



 









 





Exhibit N

Page 3





by giving effect to any intercreditor or subordination arrangements among such holders)
for application to the payment of such Senior Indebtedness until all such Senior
Indebtedness shall have been paid in full in cash in accordance with the terms thereof,
after giving effect to any concurrent payment or distribution to the holders of such Senior
Indebtedness.



          Section 1.04. Subrogation. Subject to the prior payment in full in cash of all
Senior Indebtedness in accordance with the terms thereof, the holder of the Note shall be
subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions
of assets of the Payor applicable to the Senior Indebtedness until all amounts owing on the Note
shall be paid in full, and for the purpose of such subrogation no payments or distributions to the
holders of the Senior Indebtedness by or on behalf of the Payor or by or on behalf of the holder of
the Note by virtue of this Annex                      which otherwise would have been made to the holder of the Note
shall, as between the Payor, its creditors other than the holders of Senior Indebtedness, and the
holder of the Note, be deemed to be payment by the Payor to or on account of the Senior
Indebtedness, it being understood that the provisions of this Annex ___are and are intended solely
for the purpose of defining the relative rights of the holder of the Note, on the one hand, and the
holders of the Senior Indebtedness, on the other hand.




          Section 1.05. Obligation of the Payor Unconditional. Nothing contained in this Annex
___or in the Note is intended to or shall impair, as between the Payor and the holder of the Note,
the obligation of the Payor, which is absolute and unconditional, to pay to the holder of the Note
the principal of and interest on the Note as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative rights of the holder of
the Note and creditors of the Payor other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the holder of the Note from exercising all remedies otherwise
permitted by applicable law upon an event of default under the Note, subject to the provisions of
this Annex ___and the rights, if any, under this Annex ___of the holders of Senior Indebtedness in
respect of cash, property, or securities of the Payor received upon the exercise of any such
remedy. Upon any distribution of assets of the Payor referred to in this Annex ___, the holder of
the Note shall be entitled to rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are
pending, or a certificate of the liquidating trustee or agent or other person making any
distribution to the holder of the Note, for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of
the Payor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Annex ___.




          Section 1.06. Subordination Rights Not Impaired by Acts or Omissions of Payor or Holders
of Senior Indebtedness. No right of any present or future holders of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired
by any act or failure to act on the part of the Payor or by any act or failure to act in good faith
by any such holder, or by any noncompliance by the Payor with the terms and provisions of the Note,
regardless of any knowledge thereof which any such holder may have or be otherwise charged with.
The holders of the Senior Indebtedness may, without in any way affecting the obligations of the
holder of the Note with respect hereto, at any time or from time to time and in their absolute
discretion, change the manner, place or terms of payment of, change




 









 








Exhibit N

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or extend the time of payment of, or renew, increase or otherwise alter, any Senior
Indebtedness or amend, modify or supplement any agreement or instrument governing or evidencing
such Senior Indebtedness or any other document referred to therein, or exercise or refrain from
exercising any other of their rights under the Senior Indebtedness including, without limitation,
the waiver of default thereunder and the release of any collateral securing such Senior
Indebtedness, all without notice to or assent from the holder of the Note.




          Section 1.07. Senior Indebtedness. The term “Senior Indebtedness” shall mean all
Obligations (as defined below) (i) of the Payor under, or in respect of, (x) the Credit Agreement
(as amended, modified, supplemented, extended, restated, refinanced, replaced or refunded from time
to time, the “Credit Agreement”), dated as of December 29, 2005, by and among TODCO, the lenders
from time to time party thereto, Nordea Bank Finland plc, New York Branch, as Administrative Agent,
and any renewal, extension, restatement, refinancing or refunding thereof and (y) each other Credit
Document (as defined in the Credit Agreement) to which the Payor is a party, (ii) of the Payor
under, or in respect of (including by reason of any Subsidiaries Guaranty (as defined in the Credit
Agreement) to which the Payor is a party), any Interest Rate Protection Agreements or Other Hedging
Agreements (each as defined in the Credit Agreement), and (iii) of the Payor under, or in respect
of (including by reason of any guaranty of) the Note (as defined in the Credit Agreement). As used
herein, the term “Obligation” shall mean any principal, interest, premium, penalties, fees,
expenses, indemnities and other liabilities and obligations (including guaranties of the foregoing
liabilities and obligations) payable under the documentation governing any Senior Indebtedness
(including post-petition interest at the rate provided in the documentation with respect to such
Senior Indebtedness, whether or not such interest is an allowed claim against the debtor in any
bankruptcy or similar proceeding).