Document:

exv10w38

 

Exhibit 10.38

EXECUTION COPY

 

THIRD AMENDMENT

TO

5-YEAR REVOLVING CREDIT AGREEMENT

dated as of

May 31, 2006

among

VALERO LOGISTICS OPERATIONS, L.P.,

as Borrower,

VALERO L.P.,

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent,

and

The Lenders Party Hereto

 

 

 

THIRD AMENDMENT TO 5-YEAR REVOLVING CREDIT AGREEMENT

     THIS THIRD AMENDMENT TO 5-YEAR REVOLVING CREDIT AGREEMENT (this “Third Amendment”)
dated as of May 31, 2006, is among VALERO LOGISTICS OPERATIONS, L.P., a Delaware limited
partnership (the “Borrower”); VALERO L.P., a Delaware limited partnership (the
“MLP”); JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, together with
its successors in such capacity, the “Administrative Agent”) for the lenders party to the
Credit Agreement referred to below (collectively, the “Lenders”); and the undersigned
Lenders.

R E C I T A L S

     A. The Borrower, the Administrative Agent and the Lenders are parties to that certain 5-Year
Revolving Credit Agreement dated as of December 20, 2004 (as amended by the First Amendment to
5-Year Revolving Credit Agreement dated as of June 30, 2005 and the Second Amendment to 5-Year
Revolving Credit Agreement dated as of May 15, 2006, each among the Borrower, the MLP, the
Administrative Agent and the Lenders party thereto, the “Credit Agreement”), pursuant to
which the Lenders have made certain extensions of credit available to the Borrower.

     B. The Borrower has requested and the Lenders have agreed to amend certain provisions of the
Credit Agreement.

     C. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

     Section 1. Defined Terms. Each capitalized term used herein but not otherwise defined
herein has the meaning given such term in the Credit Agreement. Unless otherwise indicated, all
references to Sections in this Third Amendment refer to Sections of the Credit Agreement.

     Section 2. Amendments to Credit Agreement.

     2.1 Amendments to Section 1.01.

     (a) The definition of “Agreement” is hereby amended in its entirety to read as
follows:

     “Agreement” means this 5-Year Revolving Credit Agreement, as amended by
the First Amendment, the Second Amendment and the Third Amendment, as the same may
be amended, modified, supplemented or restated from time to time in accordance
herewith.

 

 

     (b) The grid in the definition of “Applicable Rate” is hereby amended in its
entirety to read as follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	ABR	 	Eurodollar	 	Facility Fee
	Index Debt Ratings:	 	Spread	 	Spread	 	Rate
	Tier 1
	 	 	 	 	 	 	 	 	 	 	 	 
	Greater than BBB or Baa2
	 	 	0.00	%	 	 	0.270	%	 	 	0.080	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Tier 2
	 	 	 	 	 	 	 	 	 	 	 	 
	BBB or Baa2
	 	 	0.00	%	 	 	0.400	%	 	 	0.100	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Tier 3
	 	 	 	 	 	 	 	 	 	 	 	 
	BBB- or Baa3
	 	 	0.000	%	 	 	0.500	%	 	 	0.125	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Tier 4
	 	 	 	 	 	 	 	 	 	 	 	 
	BB+ or Ba1
	 	 	0.000	%	 	 	0.575	%	 	 	0.175	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Tier 5
	 	 	 	 	 	 	 	 	 	 	 	 
	Less than BB+ or Ba1
	 	 	0.000	%	 	 	0.700	%	 	 	0.200	%

     (c) The definition of “Consolidated EBITDA” is hereby amended in its entirety
to read as follows:

     “Consolidated EBITDA” means, without duplication, as to the MLP and its
Subsidiaries, on a consolidated basis for each Rolling Period, the amount equal to
Consolidated Operating Income for such period (a) plus the following to the extent
deducted from Consolidated Operating Income in such period: (i) depreciation,
amortization and other non-cash charges for such period and (ii) cash distributions
received by the Borrower from Skelly-Belvieu Pipeline Company, and similar joint
ventures, during such period; (b) minus all non-cash income added to Consolidated
Operating Income in such period; and (c) plus any Material Project EBITDA
Adjustments for such period; provided that (i) Consolidated EBITDA shall be
adjusted from time to time as necessary to give pro forma effect to permitted
acquisitions or Investments (other than Joint Venture Interests) or sales of
property by the MLP and its Subsidiaries and (ii) Consolidated EBITDA shall be
adjusted to take into account pro forma synergies as a result of the Acquisition in
an amount equal to (A) $17,500,000 for the Rolling Period ending on September 30,
2005, (B) $15,000,000 for the Rolling Period ending on December 31, 2005, (C)
$10,000,000 for the Rolling Period ending on March 31, 2006 and (D) $5,000,000 for
the Rolling Period ending on June 30, 2006.

     (d) The definition of “Maturity Date” is hereby amended in its entirety to read
as follows:

2

 

     “Maturity Date” means May 31, 2011, and for any Lender agreeing to
extend its Maturity Date pursuant to Section 2.20, the date on May 31 in each year
thereafter pursuant to which the Maturity Date has been extended, but in no event
later than May 31, 2013.

     (e) The following definitions are hereby added where alphabetically appropriate to read
as follows:

     “Consenting Lenders” has the meaning set forth in Section 2.20(b).

     “Extension Confirmation Date” has the meaning set forth in Section
2.20(b).

     “Extension Effective Date” has the meaning set forth in Section
2.20(b).

     “Material Project” means each new pipeline, storage facility,
processing plant or other capital expansion project wholly owned by the MLP or its
Subsidiaries, the construction of which commenced after May 31, 2006 and which has a
budgeted capital cost exceeding $25,000,000.

     “Material Project EBITDA Adjustments” means, with respect to each
Material Project, (a) for any Rolling Period ending on or prior to the last day of
the fiscal quarter during which the Material Project is completed, a percentage
(based on the then-current completion percentage of the Material Project) of an
amount to be approved by the Required Lenders as the projected Consolidated EBITDA
attributable to such Material Project (such amount to be determined based on
contracts relating to such Material Project, the creditworthiness of the other
parties to such contracts and projected revenues from such contracts, capital costs
and expenses, scheduled completion, and other factors deemed appropriate by the
Lenders) shall be added to actual Consolidated EBITDA for the MLP and its
Subsidiaries for the fiscal quarter in which construction of such Material Project
commences and for each fiscal quarter thereafter until completion of the Material
Project (net of any actual Consolidated EBITDA attributable to such Material Project
following its completion), provided that if construction of the Material
Project is not completed by the scheduled completion date, then the foregoing amount
shall be reduced by the following percentage amounts depending on the period of
delay for completion (based on the period of actual delay or then-estimated delay,
whichever is longer): (i) longer than 90 days, but not more than 180 days, 25%, (ii)
longer than 180 days but not more than 270 days, 50%, and (iii) longer than 270
days, 100%; and (b) for each Rolling Period ending on the last day of the first,
second and third fiscal quarters, respectively, immediately following the fiscal
quarter during which the Material Project is completed, an amount equal to the
projected Consolidated EBITDA attributable to the Material Project for the period
from but excluding the end of such Rolling Period through and including the last day
of the fourth fiscal quarter following the fiscal quarter during which the Material
Project is completed shall be added to Consolidated EBITDA for such Rolling Period
(net of any actual Consolidated

3

 

EBITDA attributable to the Material Project for the period from and including
the date of completion through and including the last day of the fiscal quarter
during which the Material Project is completed). Notwithstanding the foregoing, (i)
no such additions shall be allowed with respect to any Material Project unless not
later than 45 days prior to commencement of construction thereof, the Borrower shall
have delivered to the Administrative Agent and the Lenders written pro forma
projections of Consolidated EBITDA attributable to such Material Project and such
other information and documentation as the Administrative Agent or any Lender may
reasonably request, all in form and substance satisfactory to the Administrative
Agent and the Required Lenders, and (ii) the aggregate amount of all Material
Project EBITDA Adjustments during any period shall be limited to 20% of the total
actual Consolidated EBITDA of the MLP and its Subsidiaries for such period (which
total actual Consolidated EBITDA shall be determined without including any Material
Project EBITDA Adjustments or any adjustments in respect of any acquisitions or
dispositions as provided in the definition of Consolidated EBITDA).

     “Responsible Officer” means, as to any Person, the Chief Executive
Officer, the President, any Financial Officer or any Vice President of such Person.
Unless otherwise specified, all references to a Responsible Officer herein shall
mean a Responsible Officer of the Borrower.

     “Third Amendment” means the Third Amendment to 5-Year Revolving Credit
Agreement dated as of May 31, 2006 among the Borrower, the MLP, the Administrative
Agent and the Lenders party thereto.

     (f) The definitions of “Consolidated Interest Coverage Ratio” and
“Consolidated Interest Expense” are hereby deleted.

     2.2 Amendment to Section 2.11(c). Section 2.11(c) is hereby amended in its entirety
to read as follows:

     “(c) The Borrower agrees to pay to the Administrative Agent for the account of each
Lender a utilization fee which shall accrue at a per annum rate equal to 0.100% on the daily
amount of such Lender’s Revolving Credit Exposure during the time the sum of the total
Revolving Credit Exposures equals or exceeds 50% of the total Commitments. Utilization fees
shall be computed on the basis of a year of 360 days and shall be payable in arrears on the
last day of March, June, September and December of each year.”

     2.3 Amendment to Section 2.18(b). Section 2.18(b) is hereby amended by inserting the
words “, or if any Lender shall fail to agree to extend the Maturity Date pursuant to Section 2.20
if the Required Lenders have agreed to do so,” after the word “hereunder,” and before the word
“then” in the fourth line thereof.

     2.4 Amendment to Article II. Article II is hereby amended to add the following new
Section 2.20 to read as follows:

4

 

     “Section 2.20. Extension of Maturity Date.

     (a) Not earlier than 90 days prior to, nor later than 30 days prior to, each
anniversary of May 31, 2006, and on not more than two occasions, the Borrower may, upon
notice to the Administrative Agent (which shall promptly notify the Lenders), request a
one-year extension of the Maturity Date then in effect. Within 30 days of delivery of such
notice, each Lender shall notify the Administrative Agent whether or not it consents to such
extension (which consent may be given or withheld in such Lender’s sole and absolute
discretion). Any Lender not responding within the above time period shall be deemed not to
have consented to such extension. The Administrative Agent shall promptly notify the
Borrower and the Lenders of the Lenders’ responses.

     (b) The Maturity Date shall be extended only if the Required Lenders (calculated
excluding any Lender in default in its obligation to fund Loans hereunder and prior to
giving effect to any replacements of Lenders permitted herein) (the “Consenting
Lenders”) have consented thereto. If so extended, the Maturity Date, as to the
Consenting Lenders, shall be extended to the same date in the year following the Maturity
Date then in effect (such existing Maturity Date being the “Extension Effective
Date”). The Administrative Agent and the Borrower shall promptly confirm to the Lenders
such extension, specifying the date of such confirmation (the “Extension Confirmation
Date”), the Extension Effective Date, and the new Maturity Date (after giving effect to
such extension). As a condition precedent to such extension, the Borrower shall deliver to
the Administrative Agent a certificate of the Borrower dated as of the Extension
Confirmation Date (in sufficient copies for each Lender) signed by a Responsible Officer of
the Borrower (i) certifying and attaching the resolutions adopted by the Borrower approving
or consenting to such extension and (ii) certifying that, (A) before and after giving effect
to such extension, the representations and warranties contained in Article III made by it
are true and correct on and as of the Extension Confirmation Date, except to the extent that
such representations and warranties specifically refer to an earlier date, (B) before and
after giving effect to such extension no Default exists or will exist as of the Extension
Confirmation Date, and (C) since December 31, 2003, no event, development or circumstance
that has had or could reasonably be expected to have a Material Adverse Effect has occurred.
The Borrower shall prepay any Loans outstanding on the Extension Effective Date (and pay
any additional amounts required pursuant to Section 2.15) to the extent necessary to keep
outstanding Loans ratable with any revised and new Applicable Percentages of all the Lenders
effective as of the Extension Effective Date.”

     2.5 Amendment to Section 6.01(f). Section 6.01(f) is hereby amended by:

     (a) deleting the words “(i) the Consolidated Interest Coverage Ratio set forth in
Section 6.11(a) and (ii)”; and

     (b) changing the reference to “Section 6.11(b)” therein to “Section 6.11”.

     2.6 Amendments to Section 6.04(f) and (g). Section 6.04(f) and (g) are each hereby
amended by:

5

 

     (a) deleting the words “, (ii) the Consolidated Interest Coverage Ratio set forth in
Section 6.11(a),”;

     (b) renumbering “(iii)” to “(ii)”; and

     (c) changing the reference to “Section 6.11(b)” therein to “Section 6.11”.

     2.7 Amendment to Section 6.11. Section 6.11 is hereby amended in its entirety to read
as follows:

     “Section 6.11. Financial Condition Covenants. The MLP will not permit at any
time its Consolidated Debt Coverage Ratio to be in excess of (a) 5.00 to 1.00 for any
Rolling Period ending on or before June 30, 2006 and (b) 4.75 to 1.00 for any Rolling Period
ending on or subsequent to September 30, 2006; provided that if at any time the MLP or any
of its Subsidiaries consummates an acquisition (including the Acquisition) for which the MLP
or any of its Subsidiaries has paid aggregate net consideration of at least $100,000,000,
then, for the two Rolling Periods the last day of which immediately follow the date on which
such acquisition is consummated, the numerator of the maximum Consolidated Debt Coverage
Ratio otherwise permitted above shall be increased by 0.5; thereafter, compliance shall be
determined by reverting back to clause (a) or (b) above, as applicable.”

     2.8 Amendment to Section 10.02(b). Clause (v) of Section 10.02(b) is hereby amended
by inserting the words “or Section 2.20” after the words “Section 4.01” and before the word “or” in
the first line of such clause (v).

     Section 3. Conditions Precedent. This Third Amendment shall not become effective
until the date on which each of the following conditions is satisfied (or waived in accordance with
Section 10.02 of the Credit Agreement) (the “Effective Date”):

     3.1 The Administrative Agent and the Lenders shall have received all fees and other amounts
due and payable, if any, in connection with this Third Amendment on or prior to the Effective Date.

     3.2 The Administrative Agent shall have received from all of the Lenders, the Borrower and the
MLP, counterparts (in such number as may be requested by the Administrative Agent) of this Third
Amendment signed on behalf of such Persons.

     3.3 The Administrative Agent shall have received such other documents as the Administrative
Agent or special counsel to the Administrative Agent may reasonably request.

     3.4 No Default shall have occurred and be continuing, after giving effect to the terms of this
Third Amendment.

6

 

     Section 4. Miscellaneous.

     4.1 Confirmation. The provisions of the Credit Agreement, as amended by this Third
Amendment, shall remain in full force and effect following the effectiveness of this Third
Amendment.

     4.2 Ratification and Affirmation; Representations and Warranties. The Borrower and
the MLP each hereby (a) acknowledges the terms of this Third Amendment; (b) ratifies and affirms
its obligations under, and acknowledges, renews and extends its continued liability under, each
Loan Document to which it is a party and agrees that each Loan Document to which it is a party
remains in full force and effect, except as expressly amended hereby, notwithstanding the
amendments contained herein and (c) represents and warrants to the Lenders that as of the date
hereof, after giving effect to the terms of this Third Amendment: (i) all of the representations
and warranties contained in each Loan Document to which it is a party are true and correct, unless
such representations and warranties are stated to relate to a specific earlier date, in which case,
such representations and warranties shall continue to be true and correct as of such earlier date
and (ii) no Default has occurred and is continuing. 

     4.3 Loan Document. This Third Amendment is a “Loan Document” as defined and described
in the Credit Agreement and all of the terms and provisions of the Credit Agreement relating to
Loan Documents shall apply hereto.

     4.4 Counterparts. This Third Amendment may be executed by one or more of the parties
hereto in any number of separate counterparts, and all of such counterparts taken together shall be
deemed to constitute one and the same instrument. Delivery of this Third Amendment by facsimile
transmission shall be effective as delivery of a manually executed counterpart hereof.

     4.5 NO ORAL AGREEMENT. THIS THIRD AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS EXECUTED IN CONNECTION HEREWITH AND THEREWITH REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR UNWRITTEN ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

     4.6 GOVERNING LAW. THIS THIRD AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY
AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.

[SIGNATURES BEGIN NEXT PAGE]

7

 

     IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be duly executed as
of the date first written above.

	 	 	 	 	 	 	 	 	 	 
	 	 	VALERO LOGISTICS OPERATIONS, L.P.
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Valero GP, Inc., its General Partner
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/
	 	Steven A. Blank
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Steven A. Blank
	 

	 	 	 	 	 	 	 	Senior Vice President and
	 

	 	 	 	 	 	 	 	Chief Financial Officer
	 
	 	 	 	 	 	 	 	 
	 	 	VALERO L.P.
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Riverwalk Logistics, L.P., its General Partner
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Valero GP, LLC, its General Partner
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/
	 	Steven A. Blank
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Steven A. Blank
	 

	 	 	 	 	 	 	 	Senior Vice President and
	 

	 	 	 	 	 	 	 	Chief Financial Officer

S-1

 

	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A., 

individually and as Administrative Agent

 	 
	 	By  	/s/ Robert Traband
 	 
	 	 	Name:  	Robert Traband 	 
	 	 	Title:  	Vice President 	 

S-2

 

	 	 	 	 	 

	 	 	 	 	 
	 	SUNTRUST BANK, 

individually and as Syndication Agent

 	 
	 	By  	/s/ Peter Panos
 	 
	 	 	Name:  	Peter Panos 	 
	 	 	Title:  	Vice President 	 

S-3

 

	 	 	 	 	 

	 	 	 	 	 
	 	BARCLAYS BANK PLC, 

individually and as Co-Documentation Agent

 	 
	 	By  	/s/ Peter Harrington
 	 
	 	 	Name:  	Peter Harrington 	 
	 	 	Title:  	Director 	 

S-4

 

	 	 	 	 	 

	 	 	 	 	 
	 	MIZUHO CORPORATE BANK (USA), 

individually and as Co-Documentation Agent

 	 
	 	By  	/s/ Raymond Ventura
 	 
	 	 	Name:  	Raymond Ventura 	 
	 	 	Title:  	Senior Vice President 	 

S-5

 

	 	 	 	 	 

	 	 	 	 	 
	 	ROYAL BANK OF CANADA, 

individually and as Co-Documentation Agent

 	 
	 	By  	/s/ Don J. McKinnerney
 	 
	 	 	Name:  	Don J. McKinnerney 	 
	 	 	Title:  	Authorized Signatory 	 

S-6

 

	 	 	 	 	 

	 	 	 	 	 
	 	THE BANK OF TOKYO-MITSUBISHI, LTD., 

individually and as Co-Managing Agent

 	 
	 	By  	/s/ Kelton Glasscock
 	 
	 	 	Name:  	Kelton Glasscock 	 
	 	 	Title:  	Vice President & Manager 	 

S-7

 

	 	 	 	 	 

	 	 	 	 	 
	 	BANK OF AMERICA, N.A., 

individually and as Co-Managing Agent

 	 
	 	By  	/s/ Clair Liu
 	 
	 	 	Name:  	Claire Liu 	 
	 	 	Title:  	Senior Vice President 	 

S-8

 

	 	 	 	 	 

	 	 	 	 	 
	 	THE BANK OF NOVA SCOTIA, 

individually and as Co-Managing Agent

 	 
	 	By  	/s/ N. Bell
 	 
	 	 	Name:  	N. Bell 	 
	 	 	Title:  	Senior Manager 	 

S-9

 

	 	 	 	 	 

	 	 	 	 	 
	 	BNP PARIBAS, 

individually and as Co-Managing Agent

 	 
	 	By  	/s/ Mark A. Cox
 	 
	 	 	Name:  	Mark A. Cox 	 
	 	 	Title:  	Director 	 

	 	 	 	 	 
	 	By  	                         /s/ Larry Robinson
 	 
	 	 	Name:  	Larry Robinson 	 
	 	 	Title:  	Director 	 

S-10

 

	 	 	 	 	 

	 	 	 	 	 
	 	CITIBANK, N.A., 

individually and as Co-Managing Agent

 	 
	 	By  	/s/ Amy Pincu
 	 
	 	 	Name:  	Amy K. Pincu 	 
	 	 	Title:  	Attorney-in-Fact 	 

S-11

 

	 	 	 	 	 

	 	 	 	 	 
	 	THE ROYAL BANK OF SCOTLAND plc,

individually and as Co-Managing Agent

 	 
	 	By  	/s/ Matthew Main
 	 
	 	 	Name:  	Matthew Main 	 
	 	 	Title:  	Managing Director 	 

S-12

 

	 	 	 	 	 

This page intentionally left blank.

S-13

 

	 	 	 	 	 
	 	KEYBANK NATIONAL ASSOCIATION,

individually and as Co-Managing Agent

 	 
	 	By  	/s/ Thomas Rajan
 	 
	 	 	Name:  	Thomas Rajan 	 
	 	 	Title:  	Senior Vice President 	 

S-14

 

	 	 	 	 	 

	 	 	 	 	 
	 	SUMITOMO MITSUI BANKING CORPORATION,

individually and as Co-Managing Agent

 	 
	 	By  	/s/ William M. Ginn
 	 
	 	 	Name:  	William M. Ginn 	 
	 	 	Title:  	General Manager 	 

S-15

 

	 	 	 	 	 

This page intentionally left blank.

S-16

 

	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION, 

individually and as Co-Managing Agent

 	 
	 	By  	/s/ Jo Ann Vasquez
 	 
	 	 	Name:  	Jo Ann Vasquez 	 
	 	 	Title:  	Vice President 	 

S-17

 

	 	 	 	 	 

	 	 	 	 	 
	 	LEHMAN BROTHERS BANK, FSB

 	 
	 	By  	/s/ Janine M. Shugan
 	 
	 	 	Name:  	Janine M. Shugan 	 
	 	 	Title:  	Authorized Signatory 	 

S-18

 

	 	 	 	 	 

	 	 	 	 	 
	 	UBS LOAN FINANCE LLC

 	 
	 	By:  	/s/ Richard L. Tavrow
 	 
	 	 	Name:  	Richard L. Tavrow 	 
	 	 	Title:  	Director, Banking Products Services, US 	 

	 	 	 	 	 
	 	By:  	/s/ Irja R. Otsa
 	 
	 	 	Name:  	Irja R. Otsa 	 
	 	 	Title:  	Associate Director, Banking Products Services, US 	 

S-19

 

	 	 	 	 	 

	 	 	 	 	 
	 	COMPASS BANK

 	 
	 	By  	/s/ Payton K. Swope
 	 
	 	 	Name:  	Payton K. Swope 	 
	 	 	Title:  	Vice President 	 

S-20

 

	 	 	 	 	 

	 	 	 	 	 
	 	BANK HAPOALIM B.M.

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

	 	 	 	 	 
	 	By  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

S-21exv10w1

 

ASSET PURCHASE AGREEMENT

by and between

THE SHELL PETROLEUM DEVELOPMENT COMPANY OF NIGERIA LIMITED

and

PARKER DRILLING OFFSHORE INTERNATIONAL, INC.

 

 

Dated: June 8, 2006.

 

 

SCHEDULES:

Schedule 2.1(a) — Purchased Assets

Schedule 2.1(b) — Excluded Assets

Schedule 2.3 — Purchase Price Allocation

Schedule 4.3 — No Violation

Schedule 4.8 — Litigation

Schedule 5.3 — Consents

EXHIBITS:

Exhibit A — Barge Rig Bill of Sale

Exhibit B — Protocol of Delivery and Acceptance

Exhibit C — Transition Services Agreement

Exhibit D — Termination and Release Agreement

ii

 

ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT (this “Agreement”) by and between THE SHELL PETROLEUM
DEVELOPMENT COMPANY OF NIGERIA LIMITED, a Nigerian limited liability company (“Buyer”), and PARKER
DRILLING OFFSHORE INTERNATIONAL, INC., a corporation formed under the laws of the Cayman Islands,
British West Indies (“Seller”), is made this
8th day of June, 2006. Buyer and Seller may be
referred to herein individually as a “Party,” and collectively as the “Parties.” Except as
otherwise provided herein, capitalized terms used herein shall have that meaning specified in
Article 1.

RECITALS:

     WHEREAS, Seller owns two barge drilling rigs registered in the Republic of Panama with the
respective names “Parker Rig 73” and “Parker Rig 75,” each more fully described on Schedule
1.1(a) hereto (the “Barge Rigs”), which Barge Rigs are used by Seller in its business of
providing contract drilling and drilling-related services in Nigeria; and

     WHEREAS, Seller desires to transfer to Buyer, and Buyer desires to acquire from Seller, the
Barge Rigs and certain related assets used by Seller in its business, on the terms and conditions
specified herein.

AGREEMENT:

     NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in
consideration of the representations, warranties, and covenants contained herein, the Parties each
agree as follows:

ARTICLE 1

DEFINITIONS

     “Affiliate” with respect to any specified Person, means a Person that, directly or
indirectly, through one or more intermediaries, controls or is controlled by, or is under common
control with, such specified Person. For the purpose of this definition a particular company is:

(i)     directly controlled by a company or companies if the latter beneficially holds 50% (fifty
per cent) or more of the shares carrying the right to vote at a general meeting (or its
equivalent) of the particular company, and

(ii)     indirectly controlled by a company or companies (the “parent company or companies”) if a
series of companies can be specified beginning with the parent company or companies and
ending with the particular company, so related that each company of the series, except the
parent company or companies, is directly controlled by one or more companies earlier in the
series.

     “Agreement” is defined in the preamble to this Agreement.

 

 

     “Barge Rigs” is defined in the recitals to this Agreement.

     “Bills of Sale” is defined in Section 3.3(a).

     “Business Day” means Monday through Friday, excluding official holidays recognized by the
United Kingdom.

     “Buyer Indemnified Parties” is defined in Section 10.2(a).

     “Cap” is defined in Section 10.2(c).

     “Closing” is defined in Section 3.1.

     “Closing Date” is defined in Section 3.1.

     “Confidential Information” means (a) any proprietary information concerning the Purchased
Assets except for information that (i) is already known by the Party receiving the information,
(ii) is already in possession of the public or becomes available to the public other than through
the act of the Party receiving the information, or (iii) is acquired or developed independently
either through unrelated internal efforts or from a third party that has no confidentiality
obligation (directly or indirectly) to the Party disclosing the information, and (b) the material
terms and provisions of this Agreement and the Exhibits and Schedules hereto.

     “Contracts” means any vendor, supplier, or third party contracts associated with the Barge
Rigs, or which are incidental to the Shell Contracts, including, but not limited to, any
warranties, equipment leases, guarantees, bonds, Permits, utility reservations or allocations,
arrangements and/or commitments.

     “Damages” means all damages, losses, Liabilities, payments, amounts paid in settlement,
obligations, fines, penalties, costs, expenses (including reasonable fees and expenses of legal
counsel) of any kind or nature whatsoever, but excluding diminution in value.

     “Deposit” is defined in Section 2.2(b).

     “Effective Time” means the date and time, as designated in the Protocol of Delivery and
Acceptance, on which title to the Purchased Assets is transferred to Buyer, which shall be deemed
to be the Closing Date unless the Parties otherwise agree in writing.

     “Encumbrance” means any Order, security interest, lien, contract, easement, privilege,
covenant, community property interest, equitable interest, right of first refusal, or restriction
of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of
any other attribute of ownership, but shall not include the following: (a) liens for taxes or
assessments not yet due and payable, (b) mechanics’, materialmen’s, carriers’, workers’, repairers’
and other similar liens arising or incurred in the ordinary and usual course of business relating
to obligations as to which there is no material default or the validity of which are being
contested in good faith or for which reasonable reserves have been established, (c) any liens,
encumbrances and other matters created or suffered by any landlord, sublandlord, grantor, or
licensor, as applicable, with an interest therein, and (d) such other encumbrances and
encroachments which are immaterial in nature and amount.

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     “Excluded Assets” is defined in Section 2.1.

     “Fair Market Value” means, with respect to a Purchased Asset, an Unavailable Asset as defined
in Section 3.4(a) or pursuant to Section 8.1(f), the “fair market value” as agreed by the Parties
based on its current market value. If the Parties are unable to agree on a “fair market value”
within five (5) Business Days, the Parties shall submit the issue to a mutually acceptable
appraisal firm (the “Appraiser”). The Appraiser shall act as an expert and not as an arbitrator.
Each Party shall submit to the Appraiser its proposed “fair market value.” The Appraiser shall,
within fifteen (15) days following receipt of the Parties’ proposals, advise the Parties as to its
determination of the Fair Market Value for purposes hereof. The costs of retaining the Appraiser
shall be borne equally by the Parties.

     “Governmental Authority” means any legislature, agency, bureau, branch, department, division,
commission, court, tribunal, magistrate, justice, multi-national organization, quasi-governmental
body, or other similar recognized organization or body of any federal, state, county, municipal,
local, or foreign government or other similar recognized organization or body exercising similar
powers or authority.

     “Indemnification Claim” means any claim for indemnification by an Indemnitee against an
Indemnitor under this Agreement.

     “Indemnitee” means Buyer, acting on behalf of itself and the Buyer Indemnified Parties, or
Seller, acting on behalf of itself and the Seller Indemnified Parties, as applicable.

     “Indemnitor” means any Party having any Liability to any Indemnitee under this Agreement.

     “Knowledge” means:

	 	(a)	 	with respect to Seller, the actual knowledge of the President and any Vice
President of Seller; and
	 
	 	(b)	 	with respect to Buyer, the actual knowledge of the Managing Director and
Technical Director of the Buyer.

     “Law” means any law (statutory, common or otherwise), constitution, treaty, convention,
ordinance, equitable principle, code, rule, regulation, executive order, or other similar authority
enacted, adopted, promulgated, or applied by any Governmental Authority, each as amended and now in
effect.

     “Liability” means any liability, duty, or obligation, whether known or unknown, asserted or
unasserted, absolute or contingent, matured or unmatured, conditional or unconditional, latent or
patent, accrued or unaccrued, liquidated or unliquidated, or due or to become due, including any
liability that gives rise, or could give rise upon the passage of time, to a lien, claim or
encumbrance on a Purchased Asset, including any claims for personal injury, death or damage to
property, whether based on sole or concurrent negligence, fault or the alleged unseaworthiness of any vessel.

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     “Order” means any order, ruling, decision, verdict, decree, writ, subpoena, mandate, precept,
command, directive, consent, approval, award, judgment, injunction, or other similar determination
or finding by, before, or under the supervision of any Governmental Authority, arbitrator, or
mediator.

     “Parties” is defined in the preamble to this Agreement.

     “Permit” means any permit, license, certificate, approval, consent, notice, waiver, franchise,
registration, filing, accreditation, or other similar authorization required by any Law or
Governmental Authority.

     “Person” means any individual, partnership, limited liability company, corporation,
association, joint stock company, trust, joint venture, labor organization, unincorporated
organization, or Governmental Authority.

     “Protocol” is defined in Section 3.3(a).

     “Purchased Assets” is defined in Section 2.1.

     “Seller Indemnified Parties” is defined in Section 10.3(a).

     “Shell Contracts” means Contract No. W-02330 between Buyer, Seller and Parker Drilling
(Nigeria) Limited (“PDNL”) and Contract No. S10971 between Buyer, Seller, PDNL and Specialty
Drilling Fluids, Ltd. (“SDFL”).

     “Transition Services Agreement” means the contract pursuant to which Seller agrees to provide
certain transitional services to Buyer as set forth in Exhibit C.

     “Termination and Release Agreements” means the Termination and Release Agreements pursuant to
which Buyer releases Seller from any further obligations under the Shell Contracts and SDFL
releases Seller from any further obligations under Contract No. S10971 as set forth in Exhibit
D.

     “Transaction Documents” means this Agreement, the Bills of Sale, the Transition Services
Agreement and the Termination and Release Agreements.

ARTICLE 2

PURCHASE AND SALE OF ASSETS

	2.1	 	Purchase and Sale of Assets. At the Closing, on the terms and subject to the conditions set
forth in this Agreement, Seller will sell, convey, transfer, assign and deliver (subject to
Section 2.2) to Buyer the Barge Rigs and all of the other assets and properties of
Seller listed on Schedule 2.1(a) hereto subject to consumption and replenishment by
Seller in the ordinary course of business (collectively, the “Purchased Assets”) and Buyer
shall purchase on the Closing Date the Purchased Assets free and clear of any Encumbrances.
The Purchased Assets include all of the material assets currently utilized by Seller in

4

 

	 	 	direct support of its on-going drilling
operations in Nigeria except as otherwise
indicated herein, but shall not include, and
Seller shall retain all right, title and interest
in and to, all assets of any nature whatsoever of
Seller not listed on Schedule 2.1(a), including,
without limitation, the assets described on
Schedule 2.1(b) (the “Excluded Assets”).
2.2 Purchase Price; Deposit.

	 	(a)	 	The aggregate purchase price to be paid by Buyer to Seller for the Purchased
Assets shall be Forty-five Million Nine Hundred Fifty Thousand United States Dollars
(US$45,950,000.00)(including the Deposit, as defined below) (the “Purchase Price”).
	 
	 	(b)	 	On the date of execution of this Agreement, Buyer shall deposit Four Million
Five Hundred Ninety-five Thousand United States Dollars ($4,595,000.00) (the “Deposit”)
to Seller, to be held and applied by Seller pursuant to the terms of this Agreement.

	2.3	 	Allocation Reporting. Unless otherwise agreed in writing by the Parties, (a) Schedule
 2.3 hereto sets forth the allocations established by Buyer and Seller of the Purchase
Price among the Purchased Assets; (b) the allocations set forth on Schedule 2.3
hereto will be used by Buyer and Seller as the basis for reporting asset values and other
items for purposes of all required tax returns; and (c) Buyer and Seller shall not assert, in
connection with any audit or other proceeding with respect to taxes, any asset values or other
items inconsistent with the allocations set forth on Schedule 2.3 hereto.
	 
	2.4	 	Taxes. Buyer shall be liable for any transfer taxes, stamp taxes, sales and use and similar
taxes, assessments, levies, tariffs, imposts, duties, tolls, export and import fees and
charges, value added taxes and similar costs relating to the sale or purchase of the Purchased
Assets hereunder and for any related interest and penalties. For the purpose of this clause
“similar” shall mean taxes or charges that are of the same type and/or nature as the specific
taxes or charges listed. The Parties shall use commercially reasonable efforts to minimize
the amounts of such taxes and other costs, to the extent reasonably practicable; provided that
no Party shall be required to take any action that, in such Party’s reasonable belief, would
be detrimental to its tax position.

ARTICLE 3

CLOSING

	3.1	 	The Closing. Subject to the terms and provisions of Articles 8 and 9, the closing
of the transactions contemplated by this Agreement (the “Closing”) shall take place as
promptly as practicable (but in any event within two (2) Business Days) following the date on
which the last of the conditions set forth in Article 8 is fulfilled or waived, or at
such other time and place as the parties shall agree in writing; provided; however, in no
event shall the Closing be later than the fourteenth (14th) calendar day after the
date of execution of this Agreement unless agreed to otherwise in writing by the parties. The
date on which the Closing occurs is referred to in this Agreement as the “Closing
Date.”

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	3.2	 	Delivery of Purchased Assets. Upon completion of the Closing, title, ownership, possession
and risk of loss of the Purchased Assets shall pass to Buyer and Buyer shall take possession
of the Purchased Assets wherever they are located at the Effective Time.

	3.3	 	Procedure at the Closing.

	 	(a)	 	At the Closing, Seller shall deliver, or cause to be delivered, to Buyer:

	 	(i)	 	for each Barge Rig, a Bill of Sale in the form attached as
Exhibit A hereto, in form suitable for recording with such Barge Rig’s
present flag (the “Bills of Sale”);
	 
	 	(ii)	 	all of Seller’s books and records relating solely to the
Purchased Assets;
	 
	 	(iii)	 	a Confirmation of Class Certificate for each Barge Rig from
the American Bureau of Shipping showing it as of the Closing Date to be in
class and free of recommendations affecting the class;
	 
	 	(iv)	 	a Protocol of Delivery and Acceptance, in the form attached as
Exhibit B hereto, for each Barge Rig (the “Protocols”), duly executed
by Seller;
	 
	 	(v)	 	the Transition Services Agreement, substantially in the form
attached hereto as Exhibit C, and effective as of the Closing Date,
duly executed by Seller;
	 
	 	(vi)	 	Termination and Release Agreements, substantially in the form
attached hereto as Exhibit D, duly executed by Seller and PDNL; and
	 
	 	(vii)	 	such other instruments and documents as Buyer may reasonably
require.

	 	(b)	 	At the Closing, Buyer shall deliver, or cause to be delivered, to Seller:

	 	(i)	 	the balance of the Purchase Price, in cash by wire transfer to
an account designated by Seller;
	 
	 	(ii)	 	the Protocols, duly executed by Buyer in relation hereto;
	 
	 	(iii)	 	any notice or consent required by Schedule 5.3;
	 
	 	(iv)	 	Termination and Release Agreements substantially in the form
attached hereto as Exhibit D, duly executed by Buyer and, in the case
of Shell Contract No. S10971, SDFL; and
	 
	 	(v)	 	such other instruments and documents as Seller may reasonably
require.

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	3.4	 	Loss of or Damage to Purchased Assets.

	 	(a)	 	If, between the date of execution of this Agreement and the Closing Date,
Seller transfers or suffers the destruction, material damage or loss of, any assets
designated as Purchased Assets (“Unavailable Assets”), then the Purchase Price shall be
reduced by the value ascribed to such Unavailable Asset(s) as determined pursuant to
this Section 3.4(a); provided, however, that this Section 3.4(a) shall
not apply in the case of (i) reasonable wear and tear on the Purchased Assets occurring
prior to the Closing Date, or (ii) repairs required to be made by Seller under the
Transition Services Agreement. For the purposes of this Section 3.4(a) an
Unavailable Asset that is transferred, destroyed, materially damaged or lost shall be
valued at an amount equal to the value set forth in Schedule 2.3, or, if not
scheduled therein, its Fair Market Value. If any Unavailable Asset is partially, but
not totally, destroyed, the Purchase Price shall be reduced by the cost to repair such
asset up to the value set forth in Schedule 2.3 or, if such asset is not
scheduled therein, its Fair Market Value. The adjustment mechanism described in this
Section 3.4(a) will not be applied with respect to any asset that has been
replaced by Seller by a similar asset of comparable value.
	 
	 	(b)	 	The adjustment mechanism described in Section 3.4(a) will be applied
and the Parties will be required to proceed with the Closing so long as the estimated
adjustment pursuant to Section 3.4(a) would not exceed Five Million and No/100
Dollars ($5,000,000.00). If the estimated adjustment pursuant to Section
3.4(a) would exceed Five Million and No/100 Dollars ($5,000,000.00), Buyer may, at
its option, either continue to apply the adjustment mechanism and proceed with the
Closing or terminate this Agreement without consummating the transactions contemplated
hereby.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SELLER

	 	 	Seller represents and warrants to Buyer as follows:

	4.1	 	Status of Seller. Seller is a corporation duly incorporated, validly existing, and in good
standing under the Laws of the Cayman Islands, British West Indies. There is no pending or,
to the Knowledge of Seller, threatened, action for the dissolution, liquidation, insolvency,
or rehabilitation of Seller, nor does Seller have any Knowledge of any facts that could be the
basis for any such action.
	 
	4.2	 	Power and Authority; Enforceability. Seller has the power and authority to execute and
deliver each Transaction Document to which Seller is a party, and to perform and consummate
the transactions contemplated thereby. Seller has taken all actions necessary to authorize
the execution and delivery of each Transaction Document to which it is party, the performance
of its obligations thereunder, and the consummation of the transactions contemplated thereby.
Each Transaction Document to which Seller is a party has been duly authorized, executed, and
delivered by, and is enforceable against, Seller, except as such enforceability may be subject
to the effects of bankruptcy,

7

 

	 	 	insolvency, reorganization, moratorium, or other Laws relating to or affecting the rights of
creditors, and general principles of equity. The Parties agree that a voluntary
reorganization would not be a defense to enforceability.

	4.3	 	No Violation. The execution and the delivery of the Transaction Documents by Seller and the
performance and consummation of the transactions contemplated thereby by Seller will not (a)
breach in any material respect any Law or Order to which Seller is subject or any provision of
its memorandum of association or articles of association, (b) breach in any material respect
any contract, Order, or Permit to which Seller is a party or by which Seller is bound or to
which any of Seller’s assets is subject, or (c) require the giving of notice to, or the
consent of, any Person, except for any such notices or consents specifically set forth on
Schedule 4.3.

	4.4	 	Brokers’ Fees. Seller does not have any Liability to pay any compensation to any broker,
finder, or agent with respect to the transactions contemplated hereby for which Buyer could
become directly or indirectly liable.
	 
	4.5	 	Purchased Assets.

	 	(a)	 	Seller has good and marketable title to the Purchased Assets, free and clear of
all Encumbrances.
	 
	 	(b)	 	EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR THE TRANSITION SERVICES
AGREEMENT, ALL OF THE PURCHASED ASSETS CONVEYED ON THE CLOSING DATE ARE HEREBY BEING
CONVEYED “AS IS,” “WHERE IS” AND “WITH ALL FAULTS.” EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT OR THE TRANSITION SERVICES AGREEMENT, SELLER MAKES NO REPRESENTATION OR
WARRANTY WHATSOEVER WHETHER EXPRESSED, IMPLIED OR STATUTORY WITH RESPECT TO THE KIND,
SIZE, QUALITY, DESCRIPTION, MERCHANTABILITY, CONDITION (INCLUDING, WITHOUT LIMITATION,
ENVIRONMENTAL CONDITION), USE OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE PURCHASED
ASSETS. BUYER AGREES, BY ITS EXECUTION HEREOF, THAT THERE ARE NO REPRESENTATIONS AND
WARRANTIES EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT OR THE TRANSITION
SERVICES AGREEMENT, AND BUYER DOES FURTHER AGREE THAT IT IS NOT RELYING ON ANY
REPRESENTATION OR WARRANTY OF SELLER WITH RESPECT TO THE FITNESS OF THE PURCHASED
ASSETS FOR ANY PURPOSE INTENDED BY BUYER, AND THAT BUYER HAS EXAMINED AND IS FAMILIAR
WITH THE PURCHASED ASSETS AND IS ACQUIRING THE PURCHASED ASSETS “AS IS,” “WHERE IS” AND
“WITH ALL FAULTS” AND WITHOUT ANY EXPRESSED OR IMPLIED WARRANTIES OF ANY KIND, EXCEPT
AS SPECIFICALLY SET FORTH IN THIS AGREEMENT OR THE TRANSITION SERVICES AGREEMENT,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES RELATED TO MATERIALS, WORKMANSHIP,
MERCHANTABILITY, CONDITION

8

 

	 	 	 	(INCLUDING WITHOUT LIMITATION, ENVIRONMENTAL CONDITION), USE, OR FITNESS FOR ANY
PARTICULAR PURPOSE, AND SELLER HEREBY DISCLAIMS ANY SUCH WARRANTIES.

	4.6	 	Contracts. Seller has not, and to the Knowledge of Seller, no other party has, repudiated
any material provision of any Contracts.
	 
	4.7	 	Intentionally omitted.
	 
	4.8	 	Litigation. Except as provided in Schedule 4.8, there is no litigation, proceeding,
claim or governmental investigation affecting or relating to the Purchased Assets pending or,
to the Knowledge of Seller, threatened, which seeks damages in excess of $10,000.00.
	 
	4.9	 	Taxes. Seller (i) has caused to be timely filed with the appropriate federal, state, local,
foreign and other Governmental Authorities, all material returns and reports, including any
related or supporting information, with respect to income taxes or similar assessments or any
sales, excise, occupation, use, ad-valorem, property, production, severance, transportation,
employment, payroll, franchise or other tax imposed by any federal, state, local or foreign
taxing authority, including any interest, penalties or additions attributable thereto,
required to be filed with respect to the Purchased Assets or the conduct of the business
associated therewith for periods immediately preceding the Closing Date, and (ii) has paid, or
caused to be paid, all taxes due or claimed to be due from or with respect to such returns and
reports, except for any taxes which Seller is contesting in good faith or taxes that are not
yet due and for which adequate reserves have been established.
	 
	4.10	 	Disclaimer of Additional and Implied Warranties. Except as and to the extent set forth in
this Agreement, Seller makes no representations or warranties whatsoever to Buyer or any of
its Affiliates or representatives and hereby disclaims all Liability and responsibility for
any representation, warranty, statement, or information made, communicated, or furnished
(orally or in writing) to Buyer (including without limitation any opinion, information,
projection, or advice that may have been or may be provided to Buyer by any director, officer,
employee, agent, consultant, or representative of Seller or any of its Affiliates).

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller as follows:

	5.1	 	Entity Status. Buyer is a limited liability company duly created, formed or organized,
validly existing and in good standing under the Laws of the Federal Republic of Nigeria.
There is no pending or, to the Knowledge of Buyer, threatened, action for the dissolution,
liquidation, insolvency, or rehabilitation of Buyer, nor does Buyer have any Knowledge of any
facts that could be the basis for such an action.

9

 

	5.2	 	Power and Authority; Enforceability. Buyer has the power and authority to execute and
deliver each Transaction Document to which it is party, and to perform and consummate the
transactions contemplated thereby. Buyer has taken all action necessary to authorize the
execution and delivery of each Transaction Document to which it is party. Each Transaction
Document to which Buyer is party has been duly authorized, executed and delivered by, and is
enforceable against, Buyer, except as such enforceability may be subject to the effects of
bankruptcy, insolvency, reorganization, moratorium, or other Laws relating to or affecting the
rights of creditors, and general principles of equity.
	 
	5.3	 	No Violation. The execution and delivery of the Transaction Documents to which Buyer is
party and the performance and consummation of the transactions contemplated thereby by Buyer
will not (a) breach in any material respect any Law or Order to which Buyer is subject or any
provision of its organizational documents, (b) breach in any material respect any contract,
loan agreement or other agreement evidencing any indebtedness, Order, or Permit to which Buyer
is a party or by which it is bound or to which any of its assets is subject, or (c) require
the giving of notice to, or the consent of, any Person, except for the notices and consents
which are referenced in Schedule 5.3.
	 
	5.4	 	Brokers’ Fees. Buyer has no Liability to pay any compensation to any broker, finder, or
agent with respect to the transactions contemplated hereby for which Seller could become
liable.

ARTICLE 6

PRE-CLOSING COVENANTS

     The Parties agree as follows with respect to the period between the date of execution of this
Agreement and the Closing Date:

	6.1	 	General. Each Party will use commercially reasonable efforts to take all actions and to do
all things necessary, proper, or advisable to consummate, make effective, and comply with all
of the terms of this Agreement and the transactions contemplated hereby (including
satisfaction, but not waiver, of the Closing conditions set forth in Article 8).
	 
	6.2	 	Operation of Business Pending Closing. Seller will not engage in any practice, take any
action, or enter into any transaction outside its ordinary course of business and will
continue to operate the Purchased Assets in a manner consistent with Seller’s past practices
and accepted oilfield practice, including maintenance and repair of the Barge Rigs and related
equipment. Without limiting the foregoing:

	 	(a)	 	other than as a result of a forced sale because of loss, Seller will not sell,
transfer or assign any of the Purchased Assets;
	 
	 	(b)	 	Seller will not impose or permit to be imposed any Encumbrance upon any of the
Purchased Assets that will not be fully released at Closing;

10

 

	 	(c)	 	Seller will inform Buyer as promptly as practicable of the occurrence of any
destruction, material damage or loss or transfer of any Purchased Asset; and
	 
	 	(d)	 	Seller will continue to purchase supplies and replenish inventory in the
ordinary course of business consistent with its past practices.

	6.3	 	Full Access. Seller will permit representatives of Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal business operations
of Seller, to the Purchased Assets for the purpose of performing technical due diligence,
which the Parties intend shall be undertaken as soon as is practicable after the date of
execution of this Agreement and in any event prior to Closing. Buyer shall bear all costs and
expenses it incurs in connection with said due diligence. Buyer shall defend, indemnify and
hold Seller harmless from and against any claims, actions or causes of action which may be
brought or asserted by Buyer (including its officers, directors, employees, and any appointed
agents or representatives of Buyer, “claimant” herein) for loss or damage to property of
claimant or for personal injury or death of the claimant or legal representative directly
arising out of the sole or concurrent negligence (whether active or passive), fault or any
actions of Buyer during the inspection of the Purchased Assets, except where caused by the
gross negligence of Seller.
	 
	6.4	 	Publicity; Confidentiality. The Parties shall consult with each other prior to issuing any
press release or any written public statement with respect to this Agreement or the
transactions contemplated hereby and shall not issue any such press release or written public
statement prior to such consultation, provided that Seller and Buyer shall be permitted to
make any disclosure which Seller or Buyer is required to make pursuant to any rule or
requirement of Law, the Securities and Exchange Commission or other Governmental Authority, or
the New York Stock Exchange. Except as may be required by Law or as otherwise expressly
contemplated herein, neither Party nor any of its Affiliates, employees, agents, or
representatives shall disclose to any third party this Agreement, the subject matter or terms
hereof or any Confidential Information without the prior written consent of the other Party;
provided, however, that a Party may disclose any such Confidential Information as follows: (a)
to such Party’s Affiliates and its or its Affiliates’ employees, lenders, counsel, or
accountants which have agreed to be subject to the requirements of this Section 6.4
and (b) to comply with any applicable Law or Order, provided that prior to making any such
disclosure such Party notifies the other Party of any action or proceeding of which it is
aware which may result in disclosure and uses its commercially reasonable efforts to limit or
prevent such disclosure.

ARTICLE 7

POST-CLOSING COVENANTS

The Parties agree as follows with respect to the period following the Closing:

	7.1	 	General. In case at any time after the Closing any further action is necessary or desirable
to carry out the purposes of this Agreement, each Party will take such further action
(including the execution and delivery of such further instruments and documents) as the

11

 

	 	 	other Party reasonably may request, all at the requesting Party’s sole cost and expense
(unless the requesting Party is entitled to indemnification therefor under Article
10).

	7.2	 	Litigation Support. So long as any Party actively is contesting or defending against any
action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand in
connection with (a) the transactions contemplated hereby or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving any Purchased
Assets, the other Party will cooperate with such Party and such Party’s counsel in the contest
or defense, make available their personnel, and provide such testimony and access to their
non-privileged books and records as shall be necessary in connection with the contest or
defense, at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under Article
10).
	 
	7.3	 	Confidentiality. Both Parties will treat and hold as confidential all of the Confidential
Information, and refrain from using any of the Confidential Information except in connection
with this Agreement and the operation of the Purchased Assets. If either Party is requested
or required (by oral question or request for information or documents in any action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand) to disclose any
Confidential Information, the disclosing Party will notify the non-disclosing Party promptly
of the request or requirement so that non-disclosing Party may seek an appropriate protective
Order or waive compliance with this Section 7.3. If, in the absence of a protective
Order or the receipt of a waiver hereunder, the disclosing Party is, on the written advice of
counsel, compelled to disclose any Confidential Information to any Governmental Authority,
arbitrator, or mediator or else stand liable for contempt, the disclosing Party may disclose
the Confidential Information to the Governmental Authority, arbitrator, or mediator; provided,
however, that the disclosing Party shall use commercially reasonable efforts to obtain, at
the reasonable request and expense of the non-disclosing Party, an Order or other assurance
that confidential treatment will be accorded to such portion of the Confidential Information
required to be disclosed as the non-disclosing Party shall designate. Notwithstanding the
foregoing provisions of Section 7.3 above, neither Party shall be required to obtain the prior
consent of the other in respect of disclosure of information:

	 	(a)	 	to officers, directors, employees, and representatives of such Party and their
Affiliates; provided that such Party shall use reasonable endeavours to ensure
that such persons and entities maintain the confidentiality of such information on the
same terms as are provided in this Section 7.3;
	 
	 	(b)	 	to lawyers, accountants, consultants and other professional persons engaged by
or on behalf of such Party; provided that such Persons shall be required by
such Party to undertake to keep such information confidential and that such Party shall
use reasonable endeavours to secure compliance with such undertaking by said
professional persons;

12

 

	 	(c)	 	to any governmental department or any governmental or regulatory agency having
jurisdiction over such Party but only to the extent that such Party is required by law
to make such disclosure;

	 	(d)	 	(i)     to any lending or other financial institution in connection with the
financing of such Party’s operations; or

	 	(ii)	 	to any bona fide intended assignee or transferee of the whole
or any part of the rights and interests of the disclosing Party under this
Agreement;

but (in either case) only to the extent required in connection with obtaining such
finance or in respect of such proposed assignment and subject to such institution
or intended assignee or transferee first agreeing with such Party to be bound by
confidentiality provisions substantially the same as those contained in this
Section 7.3; or

	 	(e)	 	to any arbitrator appointed pursuant to and under the terms of this Agreement.

	7.4	 	Tax Matters. After the Closing, the Parties will cooperate fully with each other, on a
commercially reasonable basis, in connection with the preparation, signing, and filing of tax
returns and in any administrative, judicial or other proceeding involving taxes relating to
the Purchased Assets, including but not limited to the furnishing or making available of
records, books of account or other materials necessary.
	 
	7.5	 	Access to Books and Records. For a period of three (3) years following the Closing Date,
each Party shall give the other Party reasonable access at all reasonable times (and the right
to make copies at the sole expense of the Party requesting such access) to the records of the
non-requesting Party which relate to the Purchased Assets prior to the Closing Date, provided
that any access pursuant to this Section 7.5 shall be conducted in such manner as not
to interfere unreasonably with the operations of the non-requesting Party following the
Closing Date. Notwithstanding the foregoing, Buyer shall not have access to the Parker
Drilling Company’s consolidated U.S. federal income tax returns and Seller shall not have
access to the Buyer’s Joint Venture accounts. Following such three (3) year period, a Party
may destroy such records unless the other Party has provided written notice, no later than
sixty (60) days prior to the end of such three (3) year period, that it wishes to obtain, at
its sole cost and expense, copies of such records.
	 
	7.6	 	Removal of Marks. Promptly following the Closing, but in any event within sixty (60) days
after the Closing Date, Buyer shall remove, or cause to be removed, from the Purchased Assets,
any markings bearing the name “Parker” (including any variations or derivations thereof, e.g.
“Parker Drilling,” “Parker Drilling Company,” the “Pd” logo, “Quail Tools”) or any trademarks,
trade names or logos of Seller or any of its Affiliates.

13

 

ARTICLE 8

CLOSING CONDITIONS

	8.1	 	Conditions Precedent to Obligation of Buyer. The obligations of Buyer with respect to
actions to be taken on the Closing Date are subject to the satisfaction or waiver in writing
on or prior to the Closing Date of all of the following conditions. Buyer shall have the
right to waive any condition not so satisfied.

	 	(a)	 	Accuracy of Representations and Warranties. Each representation and
warranty set forth in Article 4 must be accurate and complete in all material
respects as of the Closing Date, as if made on the Closing Date, except that those
representations and warranties which address matters as of a particular date only shall
be required to be true and correct as of such date.
	 
	 	(b)	 	Compliance with Obligations. Seller shall have performed and complied
with all of its covenants to be performed or complied with at or prior to Closing
(singularly and in the aggregate) in all material respects.
	 
	 	(c)	 	Consents. All necessary authorizations and/or consents, Permits or
approvals of and filings with any Governmental Authority or any other third party (as
applicable) relating to the consummation of the transactions contemplated herein shall
have been obtained and made. All authorizations, consents and approvals set forth on
Schedule 4.3 shall have been obtained.
	 
	 	(d)	 	Settlement of the Idisi Case. The execution and delivery of a
Settlement Agreement by Chief Humphrey Idisi (“Chief Idisi”) with respect to the
litigation set forth on Schedule 4.8 hereto (the “Idisi Case”), in a form satisfactory
to Seller; provided, however, if this Agreement is terminated because this condition
has not been satisfied or waived by the Closing Date, Seller shall be entitled to
retain the Deposit in accordance with Section 9.2(b).
	 
	 	(e)	 	Withdrawal of the Economic and Financial Crimes Commission (“EFCC”) Stay
Action. The EFCC shall have withdrawn its stay action issued to Buyer by letter No
CR:3000/EFCC/LS/G1.TE/VOL. 1/341, dated May 8, 2006; provided, however, if the Idisi
Case is not settled prior to the Closing Date, this condition shall be deemed
automatically waived by the Buyer.
	 
	 	(f)	 	Technical Diligence. The Buyer shall have completed its due diligence
by the Closing Date and, subject to Section 3.4, determined that the Purchased Assets
are in good operating condition consistent with Seller’s maintenance and operating
obligations under the Shell Contracts; provided, however, if the damage or loss to the
Purchased Assets (not including any Unavailable Assets pursuant to Section 3.4)
discovered by Buyer during its due diligence is less than $200,000 in the aggregate,
Seller may agree in writing, at its discretion, to either (i) repair the damaged
Purchased Assets as soon as practicable after the Closing Date consistent with Seller’s
repair obligations under the Transition Services Agreement, or (ii) allow Buyer to
reduce the Purchase Price by the Fair Market

14

 

	 	 	 	Value of such damages. If Seller makes either election, this condition shall be
deemed to be satisfied;

	 	(f)	 	Deliveries of Seller. Seller shall have delivered, or be standing
ready to deliver, to Buyer, the documents required to be delivered by Seller pursuant
to Section 3.3(a).
	 
	 	(g)	 	Buyer shall have received a certificate executed on behalf of Seller by the
President or a Vice President of Seller with respect to (a) and (b) above.

	8.2	 	Conditions Precedent to Obligation of Seller. The obligations of Seller with respect to
actions to be taken on the Closing Date are subject to the satisfaction or waiver in writing
on or prior to the Closing Date of all of the following conditions. Seller shall have the
right to waive any condition not so satisfied.

	 	(a)	 	Accuracy of Representations and Warranties. Each representation and
warranty set forth in Article 4 must be accurate and complete in all material
respects as of the Closing Date, as if made on the Closing Date, except that those
representations and warranties which address matters as of a particular date only shall
be required to be true and correct as of such date.
	 
	 	(b)	 	Compliance with Obligations. Buyer must have performed and complied
with all its covenants and obligations required by this Agreement to be performed or
complied with at or prior to Closing (singularly and in the aggregate) in all material
respects.
	 
	 	(c)	 	Consents. All necessary authorizations and/or consents, permits or
approvals of and filings with any Governmental Authority or any other third party (as
applicable) relating to the consummation of the transactions contemplated herein shall
have been obtained and made. All authorizations, consents and approvals set forth on
Schedule 5.3 shall have been obtained.
	 
	 	(d)	 	Deliveries of Buyer. Buyer shall have delivered, or be standing by
ready to deliver, to Seller, the documents required to be delivered by Buyer pursuant
to Section 3.3(b).
	 
	 	(e)	 	Seller shall have received a certificate executed on behalf of Buyer with
respect to (a) and (b) above.

ARTICLE 9

TERMINATION

	9.1	 	Termination of Agreement. This Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the Closing in the following manner:

	 	(a)	 	The Seller shall have the right to terminate this Agreement:

15

 

	 	(i)	 	if the representations and warranties of Buyer shall fail to be
true and correct in all material respects on and as of the date made or, except
in the case of any such representations and warranties made as of a specified
date, on and as of any subsequent date as if made at and as of such subsequent
date and such failure shall not have been cured in all material respects within
the earlier of (x) 10 calendar days after written notice of such failure is
given to Buyer by the Seller, or (y) the fourteenth (14) calendar day following
the execution of this Agreement;
	 
	 	(ii)	 	if the transactions contemplated hereby are not completed by
the fourteenth (14) calendar day following the execution of this Agreement
(provided that the right to terminate this Agreement under this Section
9.1(a)(ii) shall not be available to the Seller if the failure of the
Seller to fulfill any obligation to Buyer under or in connection with this
Agreement has been the cause of or resulted in the failure of the transactions
contemplated hereby to occur on or before such date);
	 
	 	(iii)	 	if Buyer (A) fails to perform in any material respect any of
its covenants in this Agreement and (B) does not cure such default in all
material respects within the earlier of (x) 10 calendar days after written
notice of such failure is given to Buyer by Seller, or (y) the fourteenth (14)
calendar day following the execution of this Agreement; or
	 
	 	(iv)	 	if Buyer fails to deliver the Deposit to the Escrow Agent in
accordance with Section 2.2(b).

	 	(b)	 	Buyer shall have the right to terminate this Agreement;

	 	(i)	 	if the representations and warranties of the Seller shall fail
to be true and correct in all material respects on and as of the date made or,
except in the case of any such representations and warranties made as of a
specified date, on and as of any subsequent date as if made at and as of such
subsequent date and such failure shall not have been cured in all material
respects within the earlier of (x) 10 calendar days after written notice of
such failure is given to Seller by Buyer, or (y) the fourteenth (14) calendar
day following the execution of this Agreement;
	 
	 	(ii)	 	if the transactions contemplated hereby are not completed by
the fourteenth (14) calendar day following the execution of this Agreement
(provided that the right to terminate this Agreement under this Section
9.1(b)(ii) shall not be available to Buyer if the failure of Buyer to
fulfill any obligation to Seller under or in connection with this Agreement has
been the cause of or resulted in the failure of the transactions contemplated
hereby to occur on or before such date);
	 
	 	(iii)	 	if Seller (A) fails to perform in any material respect any of
its covenants in this Agreement and (B) does not cure such default in all
material respects

16

 

	 	 	 	within the earlier of (x) 10 calendar days after written notice of such
failure is given to Seller by Buyer, or (y) the fourteenth (14) calendar day
following the execution of this Agreement; or

	 	(iv)	 	pursuant to Section 3.4(b) upon delivery of written
notice to Seller;

	 	(c)	 	Buyer and Seller mutually agree in writing.

	9.2	 	Effect of Termination.

	 	(a)	 	Subject to Section 9.2(b) and (c) below, if this Agreement is
terminated by either Buyer or Seller pursuant to Section 9.1 Buyer shall be
entitled to a refund of the Deposit, together with all interest accrued thereon, if
any, and this Agreement shall forthwith become void and there shall be no further
obligations on the part of the Seller, Buyer or their stockholders, directors,
officers, employees, agents or representatives (except as set forth in this Section
9.2 and Sections 6.4, 11.5, 11.8, and
11.11, each of which shall survive termination in its entirety).
	 
	 	(b)	 	If this Agreement is terminated either (i) by Seller pursuant to Section
9.1(a), or (ii) by Buyer pursuant to Section 9.1(b)(ii), Seller shall be
entitled, as liquidated damages for the loss of a bargain and not as a penalty, to
retain the Deposit, together with all interest accrued thereon, if any, and this
Agreement shall forthwith become void and there shall be no further obligations on the
part of the Seller, Buyer or their stockholders, directors, officers, employees, agents
or representatives (except as set forth in this Section 9.2 and Sections
6.4, 11.5, 11.8, and 11.11, each of which shall survive
termination in its entirety). Notwithstanding the foregoing sentence, Seller shall not
be entitled to retain the Deposit, and the Deposit shall be returned to Buyer within
seven (7) days after receipt of notice from Buyer, together with all interest earned
thereon, if this Agreement is terminated by Seller pursuant to Section 9.1(a)(ii) or by
Buyer pursuant to Section 9.1(b)(ii) and, at the time of the termination, either (i)
the closing condition set forth in Section 8.1(e) has not been satisfied or
waived or (ii) the closing condition set forth in Section 8.1(f) has not been
satisfied or waived.
	 
	 	(c)	 	The Parties agree that inasmuch as actual damages, if any, resulting from
termination of this Agreement would be speculative and difficult to ascertain, the
payments described in Sections 9.2(a) and (b) shall be the sole and
exclusive remedies of the Parties upon termination of this Agreement pursuant to
Article 9.

	9.3	 	Extensions; Waiver. At any time prior to the Closing Date, either Party may (a) extend
the time for the performance of any of the obligations or other acts of the other Party, (b) waive
any inaccuracies in the representations and warranties contained herein or in any document
delivered pursuant thereto and (c) waive compliance with any of the agreements or conditions
herein. Any agreement on the part of a Party to any such extension or waiver shall be valid if set
forth in an instrument in writing signed on behalf of such Party.

17

 

ARTICLE 10

INDEMNIFICATION

	10.1	 	Survival of Representations, Warranties and Indemnification Obligations. All of the
representations and warranties contained in this Agreement shall survive the Closing and
continue in full force and effect until twenty-four (24) months after the Closing Date;
provided, however, that the representations and warranties set forth in Section 4.5(a)
(Purchased Assets) shall survive the Closing for six (6) years following the Closing Date.
The indemnification obligations of Seller pursuant to Section 10.2(a)(i) and of Buyer
pursuant to Section 10.3(a)(i) shall survive the Closing for twenty-four (24) months;
provided, however, that Seller’s indemnification obligations pursuant to Section
10.2(a)(i), to the extent such obligations relate to or result from breach of the
representations and warranties set forth in Section 4.5(a) (Purchased Assets), shall
survive the Closing for six (6) years. The indemnification obligations of Seller pursuant to
Sections 10.2(a)(ii) through (iv), and of Buyer pursuant to Sections
10.3(a)(ii) through (v), shall survive the Closing for six (6) years. No Party
will have any claim or recourse against the other Party, under Article 10 of this
Agreement or otherwise, for Damages resulting from, arising out of, relating to or caused by,
any breach by such other Party of any of its representations, warranties, covenants or other
agreements contained herein of which the Party seeking indemnification had Knowledge at any
time prior to the Closing.
	 
	10.2	 	Indemnification Provisions for Buyer’s Benefit.

	 	(a)	 	Seller will defend, indemnify, and hold Buyer and its Affiliates (the “Buyer
Indemnified Parties”) harmless from and pay any and all Damages, directly or
indirectly, resulting from, relating to, arising out of, or attributable to any one of
the following:

	 	(i)	 	any breach of any representation or warranty Seller has made in
the Transaction Documents;
	 
	 	(ii)	 	any breach by Seller of any covenant or obligation of Seller in
the Transaction Documents;
	 
	 	(iii)	 	except as otherwise provided in, and subject to the terms of,
the Shell Contracts, the operation and ownership of the Purchased Assets at or
prior to the Effective Time;
	 
	 	(iv)	 	any Liabilities (including third party claims) of Seller;
provided, such Liabilities shall not include Liabilities of Buyer pursuant to
the terms of the Shell Contracts, the Transition Services Agreement or this
Agreement.

	 	(b)	 	Seller will have no liability to and no obligation to indemnify the Buyer
Indemnified Parties pursuant to this Section 10.2 until the aggregate amount of
all Damages suffered by the Buyer Indemnified Parties exceeds $125,000, in which case
Seller shall be liable to the Buyer Indemnified Parties for all Damages in

18

 

	 	 	 	excess of, but not including, such amount; provided, further that the foregoing
limitation shall not be applicable to any indemnification obligations pursuant to
Section 10.2(a)(i) to the extent such obligations relate to or result from
breach of the representations and warranties set forth in Section 4.5(a)
(Purchased Assets).

	 	(c)	 	Seller’s obligation to indemnify the Buyer Indemnified Parties shall not exceed
an aggregate amount equal to $10,000,000 (the “Cap”), except in the case of
indemnification obligations pursuant to Section 10.2(a)(i) to the extent such
obligations relate to or result from breach of the representations and warranties set
forth in Section 4.5(a) (Purchased Assets), in which event the Buyer
Indemnified Parties shall be entitled to recover the full amount of their Damages up to
an aggregate sum equal to the Purchase Price; provided, however, that in the event of a
breach of the representations and warranties set forth in Section 4.5(a) with
respect to any Purchased Asset, Buyer shall not be entitled to recover amounts in
excess of the value set forth on Schedule 2.3 for the Purchased Asset(s) in
question, or, in the absence of such scheduled value, the Fair Market Value of such
Purchased Asset.
	 
	 	(d)	 	Seller shall have no liability with respect to Section 10.2 unless the
Buyer Indemnified Parties shall have, before the expiration of the applicable
representation or warranty pursuant to Section 10.1 of this Agreement,
previously made a claim by delivering a notice of such claim to Seller, setting out in
reasonable detail the basis of the claim.

	10.3	 	Indemnification Provisions for Seller’s Benefit.

	 	(a)	 	Buyer will defend, indemnify, and hold Seller and its Affiliates (the “Seller
Indemnified Parties”) harmless from and pay any and all Damages, directly or
indirectly, resulting from, relating to, arising out of, or attributable to any of the
following:

	 	(i)	 	any breach of any representation or warranty Buyer has made in
the Transaction Documents;
	 
	 	(ii)	 	any breach by Buyer of any covenant or obligation of Buyer in
the Transaction Documents;
	 
	 	(iii)	 	any cause of action, claim, demand or suit which Buyer, its
employees, contractors, auditors, legal counsel or other representatives
(collectively, “Buyer Representatives”) may have against any Seller Indemnified
Party as a result of any property damage and/or bodily injury sustained by a
Buyer Representative while on any premises or rigs of Seller prior to the
Closing Date, regardless of the cause of the loss or claims, to the extent
Buyer has assumed such liability or agreed to indemnify Seller under the terms
of the Shell Contracts;

19

 

	 	(iv)	 	except as otherwise provided in, and subject to the terms of
the Transition Services Agreement, the operation and ownership of the Purchased
Assets after the Effective Time; and
	 
	 	(v)	 	any Liabilities of Buyer; provided, such Liabilities shall not
include Liabilities of Seller pursuant to the terms of the Shell Contracts, the
Transition Services Agreement or this Agreement.

	 	(b)	 	Buyer will have no obligation to indemnify the Seller Indemnified Parties
pursuant to this Section 10.3 until the aggregate amount of all Damages
suffered by the Seller Indemnified Parties exceeds $125,000; in which case Buyer shall
be liable to the Seller Indemnified Parties for all Damages in excess of, but not
including, such amount.
	 
	 	(c)	 	Buyer’s obligation to indemnify the Seller Indemnified Parties shall not exceed
an aggregate amount equal to the Cap. The limitations in Section 10.3(b) and
this Section 10.3(c) shall not apply in the event of a failure of
consideration.
	 
	 	(d)	 	Buyer shall have no liability with respect to Section 10.3 unless the
Seller Indemnified Parties shall have, before the expiration of the applicable
representation or warranty pursuant to Section 10.1 of this Agreement,
previously made a claim by delivering a notice of such claim to Buyer.

	10.4	 	Indemnification Claim Procedures.

	 	(a)	 	If any action or proceeding is commenced in which any Indemnitee is a party
which may give rise to a claim for indemnification against any Indemnitor then such
Indemnitee shall promptly give written notice to the Indemnitor. Failure to notify
promptly (but in no event more than thirty (30) days) the Indemnitor will not relieve
the Indemnitor of any Liability that it may have to the Indemnitee, except to the
extent the defense of such action or proceeding is materially and irrevocably
prejudiced by the Indemnitee’s failure to give such notice.
	 
	 	(b)	 	An Indemnitor will have the right to defend against an Indemnification Claim
with counsel of its choice reasonably satisfactory to the Indemnitee if within thirty
(30) days following the receipt of notice of the Indemnification Claim, the Indemnitor
notifies the Indemnitee in writing that the Indemnitor will assume the defense of such
Indemnification Claim. So long as the Indemnitor is conducting the defense of the
Indemnification Claim, (i) the Indemnitee may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Indemnification Claim and (ii)
the Indemnitee will not consent to the entry of any Order with respect to the
Indemnification Claim without the prior written consent of the Indemnitor. The
Indemnitor will not enter into any settlement with respect to the Indemnification Claim
without the prior written consent of the Indemnitee (not to be withheld or delayed
unreasonably) unless such settlement (A) requires solely the payment of money damages
by the Indemnitor and (B) includes as an unconditional term thereof the release by the
claimant or the plaintiff of the

20

 

	 	 	 	Indemnitee and the Persons for whom the Indemnitee is acting from all liability in
respect of the proceeding giving rise to the Indemnification Claim.

	10.5	 	Other Matters.

	 	(a)	 	Each Indemnitee shall use commercially reasonable efforts to mitigate any
Damages that such Indemnitee claims under this Article 10. In the event that
an Indemnitee shall fail to use such commercially reasonable efforts to mitigate any
Damages, then notwithstanding anything else to the contrary contained herein, the
Indemnitor shall not be required to indemnify any Indemnitee for any Damages that could
reasonably be expected to have been avoided if the Indemnitee had made such efforts.
	 
	 	(b)	 	The amount of any Damages for which indemnification is provided under this
Article 10 shall be reduced by any net amounts recovered from an unaffiliated
third party by the Indemnitee under insurance policies and arrangements with respect to
such Damages.
	 
	 	(c)	 	The determination of the dollar amount of any Damages shall be based solely on
the actual dollar value of such Damages, on a dollar-for-dollar basis, and shall not
take into account any multiplier valuations, including any multiple based on earnings
or other financial indicia.
	 
	 	(d)	 	Any claim for indemnification under this Agreement shall, to the extent
practicable, describe the claim in reasonable detail, include copies of any material
written evidence thereof and indicate the estimated amount of such claim within thirty
(30) Business Days of the commencement of the proceeding giving rise to the claim.
	 
	 	(e)	 	Any Liability for indemnification hereunder shall be determined without
duplication of recovery by reason of the state of facts giving rise to such Liability
constituting a breach of more than one representation, warranty, covenant or agreement.
	 
	 	(f)	 	No Party shall have any right to set-off any Damages against any payments to be
made by either of them pursuant to this Agreement or otherwise.

	10.6	 	Exclusive Remedies.

	 	(a)	 	Save as provided in Section 11.5, the Parties agree that the sole and
exclusive remedy of any Party hereto or their respective Affiliates with respect to the
Transaction Documents or any other claims relating to the Purchased Assets, the events
giving rise to this Agreement and the other transactions contemplated hereby shall be
limited to the indemnification provisions set forth in this Article 10.

21

 

	 	(b)	 	The Parties hereto intend that, even though indemnification and other
obligations appear in various sections and articles of this Agreement, the
indemnification procedures and limitations contained in this Article 10 shall
be the exclusive basis of the Parties for (i) any breach of a representation or
warranty herein, (ii) any failure of a party to comply with any obligation, covenant,
agreement or condition herein or (iii) any other Damages relating to or arising out of
the Transaction Documents.
	 
	 	(c)	 	IN NO EVENT SHALL ANY PARTY BE LIABLE UNDER THIS ARTICLE 10 OR
OTHERWISE IN RESPECT OF THIS AGREEMENT FOR EXEMPLARY, SPECIAL, PUNITIVE, INDIRECT,
REMOTE, SPECULATIVE OR CONSEQUENTIAL DAMAGES EXCEPT TO THE EXTENT ANY SUCH PARTY
SUFFERS SUCH DAMAGES TO AN UNAFFILIATED THIRD PARTY IN CONNECTION WITH A THIRD PARTY
CLAIM, IN WHICH EVENT SUCH DAMAGES SHALL BE RECOVERABLE. ALL RELEASES, DISCLAIMERS,
LIMITATIONS ON LIABILITY, AND INDEMNITIES IN THIS AGREEMENT, INCLUDING THOSE IN THIS
ARTICLE 10, SHALL APPLY EVEN IN THE EVENT OF THE SOLE, JOINT, AND/OR CONCURRENT
NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF THE PARTY WHOSE LIABILITY IS RELEASED,
DISCLAIMED, LIMITED, OR INDEMNIFIED. WHERE A PARTY HAS AN INDEMNIFICATION OBLIGATION
UNDER THIS ARTICLE 10 AS TO A MATTER AND APPLICABLE LAW MAY IMPOSE STRICT
LIABILITY UPON THE OTHER PARTY FOR THAT MATTER SOLELY BY VIRTUE OF SUCH OTHER PARTY’S
STATUS AS AN OWNER OR OPERATOR (AS SUCH TERMS ARE USED UNDER APPLICABLE ENVIRONMENTAL
LAWS), THE APPLICATION OF SUCH STRICT LIABILITY SHALL NOT AFFECT INDEMNIFICATION
LIABILITY UNDER THIS ARTICLE 10 AND SUCH PARTY SHALL BE SOLELY LIABLE AS
PROVIDED IN THIS ARTICLE 10 NOTWITHSTANDING SUCH OTHER PARTY’S STRICT
LIABILITY.

ARTICLE 11

MISCELLANEOUS

	11.1	 	Entire Agreement. This Agreement, together with the Exhibits and Schedules hereto and the
certificates, documents, instruments and writings that are delivered pursuant hereto,
constitutes the entire agreement and understanding of the Parties in respect of its subject
matter and supersedes all prior understandings, agreements or representations by or among the
Parties, written or oral, to the extent they relate in any way to the subject matter hereof or
the transactions contemplated hereby, but specifically excluding the Confidentiality Agreement
which shall remain in full force and effect.

22

 

	11.2	 	Successors; Third Parties. Except with respect to an Indemnification Claim by an Indemnitee,
all of the terms, agreements, covenants, representations, warranties, and conditions of this
Agreement are binding upon, and inure to the benefit of and are enforceable by, the Parties
and their respective successors in title/interest. This Agreement is intended solely for the
benefit of the Parties and nothing in this Agreement shall be construed to create any rights
or benefit to, any person not a Party to the Agreement.

	11.3	 	Assignments. No Party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other Party, which consent
shall not be unreasonably withheld or delayed; provided, however, that Buyer may (a) assign
any or all of its rights and interests hereunder to one or more of its Affiliates and (b)
designate one or more of its Affiliates to perform its obligations hereunder without the prior
written consent of Seller, but in any such case Buyer nonetheless shall remain responsible for
the performance of all of its obligations hereunder.

	11.4	 	Notices. All notices, requests, demands, claims and other communications hereunder will be
in writing. Any notice, request, demand, claim or other communication hereunder shall be
deemed duly given ten (10) Business Days after it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended recipient as set
forth below:

If to Buyer:
 

The
Shell Petroleum Development Company of Nigeria Limited

Industrial Area, P.O.B 263

Rumuobiakani, Port Harcourt

Nigeria

Attn: Hans Flikkema

Tel: 234- 844-22406

Fax: 234-84-237210

 

with a copy to (which shall not constitute notice):

 

The Head, Legal services

The Shell Petroleum Development Company of Nigeria Limited

Industrial Area

P.O.B. 263

Rumuobiakani, Port Harcourt

Nigeria

Tel: 234-844-21645
 

23

 

If
to Seller:

 

Parker Drilling Offshore International, Inc.
 

1401
Enclave Parkway

Suite 600

Houston, Texas 77077

Attn: Ronald C. Potter

Tel: (281) 406-2192

Fax: (281) 406-2193
 

with
a copy to (which shall not constitute notice):

 

Locke Liddell & Sapp LLP

600 Travis

3400 JPMorgan Chase Tower

Houston, Texas 77002

Attn: Joseph A. Perillo

Tel: (713) 226-1284

Fax: (713) 229-2610

Any Party may send any notice, request, demand, claim, or other communication hereunder to
the intended recipient at the address set forth above using any other means (including
personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other Party written
notice in the manner herein set forth.

	11.5	 	Specific Performance. Each Party acknowledges and agrees that the other Party would be
damaged irreparably if any provision of this Agreement is not performed in accordance with its
specific terms or is otherwise breached. Accordingly, each Party agrees that the other Party
will be entitled to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and its terms and provisions in any
action instituted in the courts of England in addition to any other remedy to which they may
be entitled, at Law or in equity.
	 
	11.6	 	Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which together will constitute one and the same
instrument.
	 
	11.7	 	Headings. The article and section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation of this
Agreement.
	 
	11.8	 	Governing Law; Dispute Resolution.

	 	(a)	 	This Agreement and the performance of the transactions contemplated hereby and
obligations of the Parties hereunder will be governed by and construed in accordance
with the Laws of England, including the maritime Laws of England, without giving effect
to any choice of Law principles.

24

 

	 	(b)	 	Any dispute arising out of or in connection with this Agreement shall be
referred to and finally resolved by arbitration under the Rules of the United Nations
Convention on International Trade Law (UNCITRAL). The arbitration tribunal shall
consist of three arbitrators and the place of arbitration shall be London. Each Party
shall appoint one arbitrator and the two such arbitrators shall appoint a third
arbitrator; provided, that if all three arbitrators have not been appointed
within 30 days after the Party submitting the Dispute has notified the other Party of
such submission, either Party may apply to the Secretariat of the Centre for Expertise
of the International Chamber of Commerce who shall be requested to make the appointment
of the remaining arbitrators within 30 days and, in so doing, may take such independent
advice as he thinks fit. No arbitrator appointed pursuant to this Section 11.8
shall be an employee, agent, contractor, competitor or former employee, agent or
contractor of, or have or have had any material interest (directly or indirectly) in
the business of or in any Party or any of their Affiliates. The language of the
arbitration shall be English. Each Party hereby agrees that any process in connection
with a dispute arising out of or in connection with this Agreement may be served on it
personally or by certified mail at such Party’s address set forth in Section
11.4. The Parties hereby submit to the exclusive jurisdiction of the courts of
England for the purpose of the enforcement of arbitration under this Section
11.8 and any arbitration award, interim or final; provided that the submission to
jurisdiction hereunder shall not prevent a Party from enforcing any arbitration award
in any part of the world. To the extent permitted by Law, the jurisdiction of the
English courts to review any decision or award, interim or final, by arbitrators is
hereby excluded. The Parties expressly agree that the courts of the U.S. and Nigeria
will not have any jurisdiction over any action, claim, or proceeding (whether at law or
in equity) that is brought in regard to the construction, interpretation or enforcement
of this Agreement, and the Parties agree that any attempt to seek a remedy in the U.S.
or Nigerian courts shall be deemed a material default under the terms of this
Agreement, except with regard to enforcement of arbitral awards or equitable relief
that is specifically authorized pursuant to Sections 11.8(b) and 11.5,
respectively. The Parties further understand and agree that should either Party seek a
remedy in the U.S. or Nigerian courts, except to enforce an arbitral award or equitable
relief specifically authorized by Section 11.8(b) or 11.5, the Party
against whom such action, claim or proceeding is brought shall be presumed to have
suffered irreparable harm and as a result the Parties agree that equitable relief would
be appropriate to enjoin any such proceeding, claim or proceeding.

	11.9	 	Amendments and Waivers. No amendment, modification, replacement, termination or cancellation
of any provision of this Agreement will be valid, unless the same shall be in writing and
signed by Buyer and Seller. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, may be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising because of any prior or subsequent such
occurrence.

25

 

	11.10	 	Severability. The provisions of this Agreement shall be deemed severable and the invalidity
or unenforceability of any provision shall not affect the validity or enforceability of the
other provisions hereof; provided that any provision of this Agreement that is invalid or
unenforceable in any situation or in any jurisdiction will not affect the enforceability of
the remaining terms and provisions hereof or the enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
	 
	11.11	 	Expenses. Except as otherwise expressly provided in this Agreement, each Party will bear
its own costs and expenses incurred in connection with the preparation, execution and
performance of this Agreement and the transactions contemplated hereby including all fees and
expenses of agents, representatives, financial advisors, legal counsel and accountants.
	 
	11.12	 	Construction. The Parties have participated jointly in the negotiation and drafting of this
Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party because of the authorship of any provision of
this Agreement. Any reference to any federal, state, local, or foreign Law shall be deemed
also to refer to such Law, as amended as of the date of the applicable reference, and all
rules and regulations promulgated thereunder, unless the context requires otherwise. The word
“including” means “including without limitation.” The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance.
	 
	11.13	 	Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this
Agreement are incorporated herein by reference and made a part hereof.
	 
	11.14	 	Currency. Unless otherwise stated, all dollar amounts specified in this Agreement shall be
in U.S. dollars.
	 
	8.15	 	Survival. The Parties agree that the confidentiality provisions of this Agreement shall
survive the termination of this Agreement.

     IN WITNESS WHEREOF, the authorized representatives of the Parties have executed this Agreement
as of the date first above written.

	 	 	 
	PARKER DRILLING OFFSHORE

INTERNATIONAL, INC.
 

By:
/s/ M. M. Woodman

 

Name: M. M. Woodman

Title: Vice President

	 	THE SHELL PETROLEUM DEVELOPMENT

COMPANY OF NIGERIA
 

By:
/s/ M. R. Corner

 

Name: M. R. Corner

Title: Deputy Managing Director

26

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