EX-4.1 2 d357418dex41.htm SECOND AMENDMENT AND RESTATEMENT AGREEMENT Second Amendment and Restatement Agreement

Exhibit 4.1

SECOND AMENDMENT AND RESTATEMENT AGREEMENT IN RESPECT OF THE

PROJECT FACILITIES AGREEMENT AND THE INTERCREDITOR AGREEMENT

among

PACIFIC BORA LTD., PACIFIC MISTRAL LTD. and PACIFIC SCIROCCO LTD.

as the Borrowers

PACIFIC SANTA ANA LTD.

as the Resigning Borrower

PACIFIC DRILLING LIMITED

as the Guarantor

PACIFIC SANTA ANA S.A R.L.

as the Acceding Obligor

DNB BANK ASA, CREDIT AGRICOLE CORPORATE & INVESTMENT BANK,

CITIBANK, N.A., DVB BANK SE, NORDIC BRANCH, FOKUS BANK

(NORWEGIAN BRANCH OF DANSKE BANK A/S), NIBC BANK N.V., NORDEA

BANK FINLAND PLC, NEW YORK BRANCH and SKANDINAVISKA ENSKILDA

BANKEN AB (PUBL.)

as the Mandated Lead Arrangers

THE COMMERCIAL FACILITY LENDERS LISTED IN SCHEDULE 1

as the Commercial Facility Lenders

THE NORWEGIAN GOVERNMENT, REPRESENTED BY THE MINISTRY OF

TRADE AND INDUSTRY

as the GIEK Facility Lender

THE EXPORT-IMPORT BANK OF KOREA

as the KEXIM Facility Lender

THE HEDGING PARTIES LISTED IN SCHEDULE 2

as the Hedging Parties

DNB BANK ASA

as the Commercial Facility Agent and GIEK Facility Agent

CREDIT AGRICOLE CORPORATE & INVESTMENT BANK

as the KEXIM Facility Agent

DNB BANK ASA

as the Security Trustee, Intercreditor Agent and Accounts Bank

and

CITIBANK, N.A. (NEW YORK BRANCH)

as the Operating Accounts Bank


TABLE OF CONTENTS

 

     Page  

1. INTERPRETATION

     2   

2. AMENDMENT AND RESTATEMENT OF THE PROJECT FACILITIES AGREEMENT AND AMENDMENT OF THE INTERCREDITOR AGREEMENT

     3   

3. GUARANTOR AND SECURITY CONFIRMATION

     4   

4. REPRESENTATIONS AND WARRANTIES

     5   

5. ACCESSION AND RESIGNATION

     5   

6. MISCELLANEOUS

     6   

7. GOVERNING LAW

     6   

SCHEDULE 1 COMMERCIAL FACILITY LENDERS

     7   

SCHEDULE 2 HEDGING PARTIES

     8   

SCHEDULE 3 CONDITIONS PRECEDENT

     9   

SCHEDULE 4 AMENDED AND RESTATED PROJECT FACILITIES AGREEMENT

     14   

SCHEDULE 5 AMENDMENTS TO INTERCREDITOR AGREEMENT

     15   

SCHEDULE 6 FORM OF ISDA NOVATION AGREMENT

     18   


THIS SECOND AMENDMENT AND RESTATEMENT AGREEMENT (this “Agreement”) is dated 30 March 2012 and made between:

 

(1) PACIFIC BORA LTD., PACIFIC MISTRAL LTD. and PACIFIC SCIROCCO LTD., each a corporation organised and existing under the laws of Liberia (together, the “Borrowers”);

 

(2) PACIFIC SANTA ANA LTD., a corporation organised and existing under the laws of Liberia (as the “Resigning Borrower”)

 

(3) PACIFIC DRILLING LIMITED, a corporation organised and existing under the laws of Liberia (as the “Guarantor”);

 

(4) PACIFIC SANTA ANA S.A R.L., a private limited company (société à responsabilité) incorporated under the laws of the Grand-Duchy of Luxembourg (as the “Acceding Obligor”);

 

(5) DNB BANK ASA, CREDIT AGRICOLE CORPORATE & INVESTMENT BANK, CITIBANK, N.A., DVB BANK SE, NORDIC BRANCH, FOKUS BANK (NORWEGIAN BRANCH OF DANSKE BANK A/S), NIBC BANK N.V., NORDEA BANK FINLAND PLC, NEW YORK BRANCH and SKANDINAVISKA ENSKILDA BANKEN AB (PUBL.) (as the “Mandated Lead Arrangers”);

 

(6) THE COMMERCIAL FACILITY LENDERS LISTED IN SCHEDULE 1 (as the “Commercial Facility Lenders”);

 

(7) THE NORWEGIAN GOVERNMENT, REPRESENTED BY THE MINISTRY OF TRADE AND INDUSTRY (as the “GIEK Facility Lender”);

 

(8) THE EXPORT-IMPORT BANK OF KOREA (as the “KEXIM Facility Lender”);

 

(9) THE HEDGING PARTIES LISTED IN SCHEDULE 2 (as the “Hedging Parties”);

 

(10) DNB BANK ASA (as the “Commercial Facility Agent”);

 

(11) DNB BANK ASA (as the “GIEK Facility Agent”);

 

(12) CREDIT AGRICOLE CORPORATE & INVESTMENT BANK (as the “KEXIM Facility Agent”);

 

(13) DNB BANK ASA (on behalf of each of the Secured Parties) (as the “Security Trustee”);

 

(14) DNB BANK ASA (as the “Intercreditor Agent”);

 

(15) DNB BANK ASA (as the “Accounts Bank”); and

 

(16) CITIBANK, N.A. (NEW YORK BRANCH) (as the “Operating Accounts Bank”),

 

(each a “Party” and together the “Parties”).

WHEREAS:

 

(A)

the Borrowers, the Resigning Borrower, the Guarantor, the Mandated Lead Arrangers, the Commercial Facility Lenders, the GIEK Facility Lender, the KEXIM Facility Lender, the Hedging Parties, the Commercial Facility Agent, the GIEK Facility Agent, the KEXIM Facility Agent, the Security Trustee, the Intercreditor Agent, the Accounts Bank and the Operating Accounts Bank are all party to (x) a project facilities agreement dated 9 September


  2010, (as amended on 16 November 2010 and as further amended and restated on 30 March 2011, the “Project Facilities Agreement”) and (y) an intercreditor agreement dated 9 September 2010 (and as amended on 30 March 2011, the “Intercreditor Agreement”); and

 

(B) the Parties have agreed to enter into this agreement in order further to amend and restate the terms of the Project Facilities Agreement and further to amend the terms of the Intercreditor Agreement, each in the manner set out below and for the Acceding Obligor to accede to the Project Facilities Agreement on the terms set out below.

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and adequacy of which are acknowledged, the Parties agree as follows:

 

1. INTERPRETATION

 

1.1 Definitions

In this Agreement:

“Amended and Restated Project Facilities Agreement” means the Project Facilities Agreement as, amended and restated by this Agreement and as set out in Schedule 4 (Amended and Restated Project Facilities Agreement);

“Effective Date” means the date upon which the Intercreditor Agent (acting on the instructions of Facility Agents representing one hundred per cent. of the Lenders) notifies each Facility Agent and the Guarantor that all of the other conditions precedent listed in Schedule 3 (Conditions precedent) have been satisfied or waived;

“ISDA Novation Agreement” means each ISDA novation agreement substantially in the form set out in Schedule 6 (Form of ISDA Novation Agreement) or such other form as is agreed between the parties thereto and is satisfactory to the Intercreditor Agent (acting on the instructions of the requisite Secured Parties) entered into between, respectively:

 

  (a) the Acceding Obligor as transferee, the Resigning Obligor as transferor and Citibank, N.A. as remaining party;

 

  (b) the Acceding Obligor as transferee, the Resigning Obligor as transferor and Danske Bank A/S as remaining party;

 

  (c) the Acceding Obligor as transferee, the Resigning Obligor as transferor and DNB Bank ASA as remaining party;

 

  (d) the Acceding Obligor as transferee, the Resigning Obligor as transferor and NIBC Bank N.V. as remaining party;

 

  (e) the Acceding Obligor as transferee, the Resigning Obligor as transferor and Skandinaviska Enskilda Banken AB (publ.) as remaining party; and

 

  (f) the Acceding Obligor as transferee, the Resigning Obligor as transferor and Crédit Agricole Corporate & Investment Bank as remaining party; and

“Restructuring Consent Request Letter” means the letter dated on or about 13 March 2012 signed by the Resigning Borrower and the Guarantor requesting, among other things, that the Resigning Borrower be released from its obligations as a Borrower under the Project Facilities Agreement and the Intercreditor Agreement and the waiver of and amendment to certain requirements and provisions of the Project Facilities Agreement in so far as they relate to the ownership, operation and management of the Pacific Santa Ana.

 

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1.2 Construction

 

  (a) Except as otherwise expressly provided in this Agreement, capitalised terms used in this Agreement shall have the meanings given to them in the Amended and Restated Project Facilities Agreement. To the extent such terms are defined by reference to any other Transaction Document (other than the Intercreditor Agreement) for the purposes of this Agreement, such terms shall continue to have their original definitions (but shall be subject to and interpreted in accordance with the governing law of this Agreement) notwithstanding any termination, expiration or amendment of any such Transaction Document, except to the extent the Parties agree to the contrary. To the extent such terms are defined by reference to the Intercreditor Agreement, for the purposes of this Agreement, such terms shall have the meanings given to them in the Intercreditor Agreement, as the Intercreditor Agreement shall be further amended in accordance with this Agreement and as set out in Schedule 5 (Amendments to the Intercreditor Agreement).

 

  (b) Clause 1.2 (Interpretation) of the Amended and Restated Project Facilities Agreement will be deemed to be set out in full in this Agreement, save that references therein to “this Agreement” shall be construed as references to this Agreement.

 

  (c) With effect from (and including) the Effective Date and unless the context otherwise requires, references in the Project Facilities Agreement to “this Agreement” shall be references to the Project Facilities Agreement as amended and restated by this Agreement and words such as “herein”, “hereof, “hereunder”, “hereafter”, “hereby” and “hereto”, where they appear in the Amended and Restated Project Facilities Agreement, shall be construed accordingly.

 

  (d) With effect from the date of this Agreement and unless the context otherwise requires, references in the Intercreditor Agreement to “this Agreement” shall be references to the Intercreditor Agreement as amended by this Agreement and words such as “herein”, “hereof”, “hereunder”, “hereafter”, “hereby” and “hereto”, where they appear in the Intercreditor Agreement, shall be construed accordingly.

 

1.3 Deed

The Parties intend that this Agreement shall take effect as a deed, notwithstanding that a party to it may only execute it under hand.

 

2. AMENDMENT AND RESTATEMENT OF THE PROJECT FACILITIES AGREEMENT AND AMENDMENT OF THE INTERCREDITOR AGREEMENT

 

2.1 Amendment of the Project Facilities Agreement

With effect from (and including) the Effective Date, the Project Facilities Agreement shall be amended and restated as set out in Schedule 4 (Amended and Restated Project Facilities Agreement).

 

2.2 Amendment of the Intercreditor Agreement

With effect from (and including) the date of this Agreement, the Intercreditor Agreement shall be amended as set out in Schedule 5 (Amendments to the Intercreditor Agreement).

 

2.3 Continuing effect

Except as varied by the terms of this Agreement,

 

3


  (a) the Project Facilities Agreement will remain in full force and effect and, with effect from (and including) the Effective Date, any reference in any of the Project Facilities Agreement or any other Finance Document to the Project Facilities Agreement or to any provision of the Project Facilities Agreement will be construed as a reference to the Amended and Restated Project Facilities Agreement or that provision of the Project Facilities Agreement as amended and restated by this Agreement; and

 

  (b) the Intercreditor Agreement will remain in full force and effect and any reference in the amended Intercreditor Agreement or any other Finance Document to the Intercreditor Agreement or to any provision of the Intercreditor Agreement will be construed as a reference to the amended Intercreditor Agreement, or that provision of the Intercreditor Agreement, as amended by this Agreement.

 

2.4 Further assurance

Each Obligor shall, at the request of the Intercreditor Agent and at its own expense, do all such acts and things necessary or desirable to give effect to the amendments effected or to be effected pursuant to this Agreement.

 

2.5 Finance Documents

The Parties agree that this Agreement is designated as a Finance Document.

 

3. GUARANTOR AND SECURITY CONFIRMATION

 

3.1 Guarantee confirmation

The Guarantor confirms that, with effect from (and including) the Effective Date, the guarantees and indemnities set out in clause 15 (Guarantee) of the Amended and Restated Project Facilities Agreement shall:

 

  (a) continue to apply in respect of the obligations of each Borrower under the Finance Documents; and

 

  (b) extend to all new obligations of any Borrower and the Acceding Obligor under the Finance Documents arising from the amendments effected by this Agreement.

 

3.2 Guarantor waiver of defences

The Guarantor hereby waives any defences or counterclaims it may have to its obligations under clause 15 (Guarantees) of the Amended and Restated Project Facilities Agreement as a result of the transactions contemplated by this Agreement.

 

3.3 Security confirmation

 

  (a) Each Obligor confirms that, with effect from (and including) the Effective Date, the liabilities and obligations arising in respect of the Senior Debt, howsoever arising, owed by the Obligors and, for the avoidance of doubt, the Acceding Obligor under the Amended and Restated Project Facilities Agreement or owed under any other Finance Document to which that Obligor is a party shall form part of (but do not limit) the Senior Debt Obligations.

 

  (b) Each Obligor hereby confirms the terms of each Security Document to which it is a party and acknowledges and agrees that each such Security Document is, and shall remain, the valid and enforceable obligation of such Obligor and is, and shall remain in full force and effect.

 

4


3.4 No novation

Except as otherwise agreed to under Clause 5.2 (Novation to Acceding Obligor) below, each Party confirms that the amendment and restatement of the Project Facilities Agreement and the amendment of the Intercreditor Agreement pursuant to this Agreement shall not constitute a novation of either the Project Facilities Agreement or the Intercreditor Agreement.

 

4. REPRESENTATIONS AND WARRANTIES

Each Obligor makes each of the Repeating Representations relating to it for the benefit of the Secured Parties as of the date of this Agreement, and such representations and warranties (as amended and restated by this Agreement) shall be deemed to be repeated on the Effective Date by reference to the facts and circumstances existing on that date.

 

5. ACCESSION AND RESIGNATION

 

5.1 Accession to the Project Facilities Agreement and the Intercreditor Agreement

 

  (a) The Parties agree that this Agreement is designated as an Obligor Accession Deed, in each case, for the purposes of Clause 13.12 of the amended Intercreditor Agreement and shall be accepted as an Obligor Accession Deed by the Intercreditor Agent.

 

  (b) The Acceding Obligor agrees to become a party to the Amended and Restated Project Facilities Agreement as a Borrower, undertakes to perform all the obligations expressed to be assumed by a Borrower under the Amended and Restated Project Facilities Agreement and agrees that it shall be bound by all the provisions of the Amended and Restated Project Facilities Agreement as if it has been an original party to the Amended and Restated Project Facilities Agreement. The Acceding Obligor is a company duly incorporated under the laws of the Grand Duchy of Luxembourg (“Luxembourg”), with registered office at 37 Rue d’Anvers, L-1130 Luxembourg, in the process of being registered with the Luxembourg Register of Commerce and Companies, having a share capital of USD 20,000.

 

  (c) The Acceding Obligor agrees to become a party to the amended Intercreditor Agreement as a Borrower, undertakes to perform all the obligations expressed to be assumed by a Borrower under the amended Intercreditor Agreement and agrees that is shall be bound by all the provisions of the amended Intercreditor Agreement as if it has been an original party to the Intercreditor Agreement.

 

5.2 Novation and Release

 

  (a) With effect from (and including) the Effective Date:

 

  (i) the Resigning Borrower shall hereby transfer by novation to the Acceding Obligor all of the Resigning Borrower’s rights and obligations as a Borrower under the Project Facilities Agreement and the Intercreditor Agreement; and

 

  (ii) pursuant to the terms of each ISDA Novation Agreement, the Resigning Borrower shall transfer by novation to the Acceding Obligor all of the Resigning Borrower’s rights and obligations under the Interest Hedging Instruments to which it is a party.

 

  (b) Pursuant to Clause 5.2(a) above, the Lenders and each Agent confirm and agree that:

 

5


  (i) the Acceding Obligor shall assume all of the rights and obligations of the Resigning Borrower under the Project Facilities Agreement and the Intercreditor Agreement; and

 

  (ii) the Resigning Borrower shall:

 

  (A) be released from its obligations as a Borrower under the Project Facilities Agreement and the Intercreditor Agreement;

 

  (B) cease to be a Borrower; and

 

  (C) have no further rights and obligations under the Project Facilities Agreement and the Intercreditor Agreement as a Borrower.

 

6. MISCELLANEOUS

 

6.1 Counterparts

This Agreement may be executed in one or more counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Deed.

 

6.2 Incorporation of terms

Each Party agrees that the provisions of clauses 1.3 (Third party rights), 36.2 (Jurisdiction), 36.3 (Service of process), 37.1 (Notices), 37.4 (Amendments), 37.6 (Delay and waiver), 37.7 (Entire agreement), 37.8 (Successors and assigns), 37.9 (Severability), 37.10 (Reinstatement), 37.12 (Termination), 37.13 (No partnership), 37.14 (No reliance), 37.15 (English language) and 37.16 (Waiver of Immunity) of the Project Facilities Agreement are incorporated into this Agreement as if such provisions were set out, mutatis mutandis, in this Agreement.

 

7. GOVERNING LAW

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.

IN WITNESS whereof this Agreement has been duly executed as a deed on the date first above written.

 

6


SCHEDULE 1

COMMERCIAL FACILITY LENDERS

ABN AMRO Bank N.V., Oslo Branch

Citibank, N.A.

Crédit Agricole Corporate & Investment Bank

DNB Bank ASA

DVB Bank SE, Nordic Branch

Fokus Bank (Norwegian Branch of Danske Bank A/S)

NIBC Bank N.V.

Nordea Bank Finland Plc, New York Branch

Skandinaviska Enskilda Banken AB (publ.)


SCHEDULE 2

HEDGING PARTIES

Citibank, N.A.

Danske Bank A/S

DNB Bank ASA

NIBC Bank N.V.

Skandinaviska Enskilda Banken AB (publ.)

Credit Agricole Corporate & Investment Bank


SCHEDULE 3

CONDITIONS PRECEDENT

 

1. FINANCE DOCUMENTS AND MATERIAL AGREEMENTS

There shall have been delivered to the Intercreditor Agent by or on behalf of the Obligors, the Resigning Borrower, the Acceding Obligor, PDI, PDMS and PDOL (as applicable) executed originals or, as the case may be, true copies of the originals certified as such in the relevant Officer’s Certificate (in sufficient copies for each Facility Agent) of:

 

  (a) in respect of each Obligor, this Agreement;

 

  (b) in respect of each Borrower, a confirmation from GIEK that each GIEK Guarantee shall remain in full force and effect notwithstanding the amendments effected by the Agreement;

 

  (c) in respect of the Guarantor:

 

  (i) the Amendment and Restatement Fee Letter dated the date of this Agreement; and

 

  (ii) the Direct Agreement to which it is a party;

 

  (d) in respect of the Acceding Obligor:

 

  (i) this Agreement;

 

  (ii) the Account Pledge Agreement to which it is a party;

 

  (iii) the Account Control Agreement to which it is a party;

 

  (iv) the Share Pledge to which it is a party;

 

  (v) each Direct Agreement to which it is a party;

 

  (vi) a New York law collateral assignment of insurances between the Acceding Obligor and the Security Trustee;

 

  (vii) a New York law pledge and assignment agreement in respect of the Santa Ana Bareboat Charter between the Acceding Obligor and the Security Trustee;

 

  (viii) an English law assignment of contract between the Acceding Obligor and the Security Trustee;

 

  (ix) each ISDA Novation Agreement to which it is a party;

 

  (x) each Interest Hedging Instrument to which it is a party;

 

  (xi) an executed original of the Mortgage in respect of its Vessel;

 

  (xii) the Santa Ana Bareboat Charter;

 

  (xiii) the Contribution Agreement; and


  (xiv) a novation agreement to be entered into between the Resigning Borrower, the Acceding Obligor and the Shipbuilder in respect of the Shipbuilding Contract for the Pacific Santa Ana;

 

  (e) in respect of PDI:

 

  (i) the Account Pledge Agreement to which it is a party;

 

  (ii) the Account Control Agreement to which it is a party;

 

  (iii) each Direct Agreement to which it is a party;

 

  (iv) a New York law collateral assignment of insurances between PDI and the Security Trustee;

 

  (v) a New York law pledge and assignment agreement in respect of the Santa Ana Bareboat Charter and the Chevron Drilling Contract between PDI and the Security Trustee;

 

  (vi) the Santa Ana Bareboat Charter; and

 

  (vii) the Assignment and Assumption Agreement;

 

  (f) in respect of Resigning Borrower:

 

  (i) this Agreement;

 

  (ii) the Share Pledge to which it is a party;

 

  (iii) each Direct Agreement to which it is a party;

 

  (iv) each ISDA Novation Agreement to which it is a party;

 

  (v) the Assignment and Assumption Agreement;

 

  (vi) the Contribution Agreement;

 

  (vii) a deed of termination and release to be entered into between the Resigning Borrower, PDOL, the Accounts Bank and the Operating Accounts Bank and the Security Trustee in respect of, inter alia, the Vessel Management Agreement for the Pacific Santa Ana; and

 

  (viii) a novation agreement to be entered into between the Resigning Borrower, the Acceding Obligor and the Shipbuilder in respect of the Shipbuilding Contract for the Pacific Santa Ana;

 

  (g) in respect of PDMS:

 

  (i) the Share Pledge to which it is a party; and

 

  (ii) the Direct Agreement to which it is a party;

 

  (h) in respect of PDOL, a deed of termination and release to be entered into between the Resigning Obligor, PDOL, the Accounts Bank and the Operating Accounts Bank and the Security Trustee in respect of, inter alia, the Vessel Management Agreement in respect of the Pacific Santa Ana;

 

10


  (i) in respect of Pacific Mistral Ltd., an executed original of an amendment to the Mortgage in respect of its Vessel;

 

  (j) in respect of Pacific Bora Ltd., an executed original of an amendment to the Mortgage in respect of its Vessel; and

 

  (k) in respect of Pacific Scirocco Ltd., and executed original of an amendment to the Mortgage in respect of its Vessel,

each of which shall have been duly authorised by each Obligor that is party hereto or thereto, the Resigning Borrower, the Acceding Obligor, PDI, PDMS and PDOL (as applicable) and which shall have been executed and delivered by the parties hereto or thereto and shall be in full force and effect and accompanied by an Officer’s Certificate of the Guarantor certifying the foregoing.

 

2. CORPORATE AUTHORITY OF OBLIGORS

 

  (l) Each Obligor, the Resigning Borrower, the Acceding Obligor, PDI, PDMS and PDOL shall have delivered to the Intercreditor Agent, a copy of one or more resolutions or other authorisations of such Obligor, the Resigning Borrower, the Acceding Obligor, PDI, PDMS and PDOL, certified by an Authorised Representative of such Obligor, the Acceding Obligor, PDI, PDMS and PDOL as being in full force and effect on the date of this Agreement, authorising:

 

  (i) the execution, delivery and performance of each document described in paragraph 1 above to which it is a party; and

 

  (ii) a specified Person or Persons (including any applicable attorney) to execute and deliver the agreements described in paragraph 2(a)(i) above to which it is a party.

 

  (m) Each Obligor, the Resigning Borrower, the Acceding Obligor, PDI, PDMS and PDOL shall have delivered to the Intercreditor Agent a specimen of the signature of each Person authorised by the resolution referred to in paragraph 2(a) above and any other relevant authorisations including any applicable powers of attorney.

 

  (n) Each Obligor, the Resigning Borrower, the Acceding Obligor, PDI, PDMS and PDOL shall have delivered to the Intercreditor Agent a certificate of good standing or an equivalent document.

 

3. KYC REQUIREMENTS

All of the information and documentation set out in Schedule 12 of the Amended and Restated Project Facilities Agreement shall have been delivered to the Intercreditor Agent.

 

4. SECURITY

 

  (a) Except in respect of any Security not required to be provided and perfected until a later date in accordance with the Finance Documents and as agreed by the Intercreditor Agent, the Security Trustee shall be the beneficiary of all Security granted or purported to be granted pursuant to the Security Documents, with first ranking priority and all necessary action shall have been taken to register and perfect such Security.

 

  (b)

The Intercreditor Agent shall have received an Officer’s Certificate from each of Pacific Drillship S.à r.l., Pacific Gibco, PDOL, PIDWAL and QPML signed by an

 

11


  Authorised Representative of Pacific Drillship S.à r.l., Pacific Gibco, PDOL, PIDWAL and QPML confirming the Security granted or purported to be granted pursuant to the Security Documents to which each of Pacific Drillship S.à r.l., Pacific Gibco, PDOL, PIDWAL and QPML is a party.

 

5. SERVICE OF PROCESS

Each Obligor, the Resigning Borrower, the Acceding Obligor, PDI and PDMS shall have appointed an agent to receive service of process in respect of each document described in paragraph 1 above to which it is a party and shall have provided evidence to the Intercreditor Agent of the acceptance of each such appointment by the relevant agent.

 

6. OPINIONS

The Intercreditor Agent shall have received electronic copies of each of the following opinions in form and substance satisfactory to it and in each case consistent with the scope of the relevant opinions as set out in schedule 15 of the Amended and Restated Project Facilities Agreement:

 

  (a) an English law enforceability legal opinion of Latham & Watkins (London) LLP;

 

  (b) a New York law capacity and enforceability legal opinion of Latham & Watkins LLP;

 

  (c) a Liberian law capacity and enforceability legal opinion of Blank Rome;

 

  (d) a Luxembourg law capacity and enforceability legal opinion of Allen & Overy Luxembourg;

 

  (e) a New York law enforceability legal opinion of Vinson & Elkins LLP; and

 

  (f) a BVI law capacity legal opinion of Maples & Calder.

 

7. ACCOUNTS

 

  (a) The Acceding Obligor shall have opened Accounts in accordance with clause 26.1 (Establishment of Accounts) of the Amended and Restated Project Facilities Agreement; and

 

  (b) PDI shall have opened the PDI Collection Account in accordance with clause 26.1 (Establishment of Accounts) of the Amended and Restated Project Facilities Agreement.

 

8. EVENTS OF DEFAULT

No Event of Default or Potential Event of Default shall have occurred and be continuing.

 

9. CONSENTS

Each Obligor, the Resigning Borrower, the Acceding Obligor, PDI and PDMS shall have obtained each Consent then required and applicable to it and shall have provided copies of the same to the Intercreditor Agent.

 

10. INSURANCE CONSULTANT’S CONFIRMATION

The Insurance consultant shall have delivered to the Intercreditor Agent written confirmation from the Insurance Consultant addressed to the Intercreditor Agent and the Facility Agents

 

12


(for the benefit of all Lenders from time to time) in respect of the insurances for the Pacific Santa Ana including confirmation that the Required Insurances that are to be obtained by the Acceding Obligor and PDI are adequate, together with a bring-down reliance letter in respect of such report dated as of the Effective Date.

 

11. TECHNICAL REPORT

The Intercreditor Agent shall have received an updated technical due diligence report of the Technical Consultant in respect of the Pacific Santa Ana.

 

12. FINANCIAL MODEL

The Guarantor shall have delivered to the Intercreditor Agent an up to date electronic copy of the Financial Model in form and substance satisfactory to the Intercreditor Agent.

 

13. OTHER DOCUMENTS

The Guarantor shall have provided to the Intercreditor Agent copies of:

 

  (a) such documents relating to the Pacific Santa Ana as the Lenders reasonably may require including any document relating to the registration, class, insurance or valuation of the Pacific Santa and any document relating to the Acceptable Charter or Alternative Charter entered into in respect of the Pacific Santa Ana, the Acceptable Charterer and the manager of the Pacific Santa Ana; and

 

  (b) such other documents, authorisations, opinions and assurances as the Lenders reasonably may require.

 

14. FEES, COSTS AND EXPENSES

The Guarantor shall have provided evidence to the Intercreditor Agent that all fees, costs and expenses then due from any Obligor, the Resigning Borrower and/or the Acceding Obligor to any Secured Party pursuant to the Finance Documents have been paid in full.

 

15. SECURITY MEMORANDUM

The Intercreditor Agent shall have received a memorandum from Latham & Watkins (London) LLP providing an overview of the main credit and security considerations for the Secured Parties that arise as a consequence of the terms of the Restructuring Consent Request Letter.

 

16. CONSENT TO RESTRUCTURING CONSENT REQUEST LETTER

The requisite Secured Parties have consented to the waivers and other terms and conditions set out in the Restructuring Consent Request Letter.

 

13


SCHEDULE 4

AMENDED AND RESTATED PROJECT FACILITIES AGREEMENT

 

14


AMENDED AND RESTATED PROJECT FACILITIES AGREEMENT

among

PACIFIC BORA LTD., PACIFIC MISTRAL LTD., PACIFIC SCIROCCO LTD.

and PACIFIC SANTA ANA S.A R.L.

as the Borrowers

PACIFIC DRILLING LIMITED

as the Guarantor

DNB BANK ASA, CREDIT AGRICOLE CORPORATE & INVESTMENT BANK,

CITIBANK, N.A., DVB BANK SE, NORDIC BRANCH, FOKUS BANK (NORWEGIAN

BRANCH OF DANSKE BANK A/S), NIBC BANK N.V., NORDEA BANK FINLAND PLC,

NEW YORK BRANCH and SKANDINAVISKA ENSKILDA BANKEN AB (PUBL.)

as the Mandated Lead Arrangers

THE COMMERCIAL FACILITY LENDERS LISTED IN SCHEDULE 3

as the Commercial Facility Lenders

THE NORWEGIAN GOVERNMENT REPRESENTED BY THE MINISTRY OF TRADE

AND INDUSTRY

as the GIEK Facility Lender

THE EXPORT-IMPORT BANK OF KOREA

as the KEXIM Facility Lender

DNB BANK ASA

as the Commercial Facility Agent and the GIEK Facility Agent

CREDIT AGRICOLE CORPORATE & INVESTMENT BANK

as the KEXIM Facility Agent

EACH HEDGING PARTY SET OUT IN SCHEDULE 39 AND EACH OTHER HEDGING

PARTY THAT HAS ACCEDED TO THIS AGREEMENT AS A HEDGING PARTY

DNB BANK ASA

as the Security Trustee, the Intercreditor Agent and the Accounts Bank

and

CITIBANK, N.A. (NEW YORK BRANCH)

as the Operating Accounts Bank

 

1


TABLE OF CONTENTS

 

          Page  
1.    DEFINITIONS AND INTERPRETATION      2   
   1.1     Definitions      2   
   1.2     Interpretation      2   
   1.3     Third party rights      4   
2.    THE FACILITIES      5   
   2.1     Term Loan Facility and Tranches      5   
   2.2     Secured Parties’ rights and obligations      6   
   2.3     Borrowers’ obligations      6   
   2.4     Obligors’ agent      7   
   2.5     Purpose      7   
   2.6     Monitoring      7   
   2.7     No further Utilisation      7   
3.    CONDITIONS OF UTILISATION      7   
   3.1     Conditions precedent to the Financing Date      7   
   3.2     Conditions precedent to each Utilisation      8   
4.    UTILISATION      8   
   4.1     Delivery of Utilisation Requests and Advance Notice      8   
   4.2     Completion of a Utilisation Request      8   
   4.3     Currency and amount      9   
   4.4     Cost Certificate      10   
   4.5     Lenders’ participation      10   
5.    REPAYMENT, PREPAYMENT AND CANCELLATION      10   
   5.1     General payment terms      10   
   5.2     Repayment      10   
   5.3     Reborrowing      11   
   5.4     Voluntary prepayments      11   
   5.5     Voluntary cancellation      11   
   5.6     Availability Period, Acceptable Charters, Alternative Charters and automatic cancellation      11   
   5.7     Illegality      12   
   5.8     Change of control      13   
   5.9     Exceptional events      13   
   5.10   Reduction in Total Project Costs      14   
   5.11   Prepayment from TPDI Put Option Account      14   
   5.12   Fair Market Value prepayments      15   
   5.13   GIEK/KEXIM put option      15   
   5.14   Assignment by Charterer      15   
   5.15   Prepayment and cancellation – miscellaneous      16   
   5.16   Right of replacement or repayment and cancellation in relation to a single Lender      17   

 

i


   5.17   Release of one Vessel      19   
6.    INTEREST      21   
   6.1     Calculation of interest      21   
   6.2     CIRR Interest Rate      21   
   6.3     Payment of interest      21   
   6.4     Default interest      21   
   6.5     Notification of rates of interest      22   
   6.6     Determination of Applicable Margin      22   
7.    INTEREST PERIODS      22   
   7.1     Selection of Interest Periods      22   
   7.2     Non-Business Days      23   
   7.3     Consolidation of Loans      23   
8.    CHANGES TO THE CALCULATION OF INTEREST      23   
   8.1     Absence of quotations      23   
   8.2     Market disruption      23   
   8.3     Alternative basis of interest or funding      24   
   8.4     Break Costs      24   
9.    FEES      24   
   9.1     Commitment fee      24   
   9.2     Agency fee      25   
10.    TAX GROSS UP AND INDEMNITIES      25   
   10.1   Definitions      25   
   10.2   Tax gross-up      25   
   10.3   Tax indemnity      26   
   10.4   Tax Credit      27   
   10.5   Stamp taxes      27   
   10.6 VAT      27   
11.    INCREASED COSTS      28   
   11.1   Increased costs      28   
   11.2   Increased cost claims      28   
   11.3   Exceptions      28   
12.    OTHER INDEMNITIES      28   
   12.1   Currency indemnity      28   
   12.2   General indemnity      29   
   12.3   Other indemnities      29   
   12.4   Indemnity of Agents      30   
13.    MITIGATION BY THE LENDERS      30   
   13.1   Mitigation      30   
   13.2   Limitation of liability      30   
14.    COSTS AND EXPENSES      30   
   14.1   Transaction expenses      30   

 

ii


   14.2  Amendment costs      31   
   14.3  Enforcement costs      31   
15.    GUARANTEE      31   
   15.1  Guarantee and indemnity      31   
   15.2  Continuing guarantee      31   
   15.3  Reinstatement      31   
   15.4  Waiver of defences      32   
   15.5  Immediate recourse      32   
   15.6  Appropriations      32   
   15.7  Deferral of Guarantor’s rights      33   
   15.8  Additional security      33   
16.    EQUITY AND COST OVERRUNS      33   
   16.1  Equity Undertaking      33   
   16.2  Cost Overrun Undertaking      33   
   16.3  Refund of Equity following Vessel delivery and entry into Acceptable Charter or Alternative Charter      34   
   16.4  Reallocation of Equity      35   
   16.5  Charterer Furnished Items      35   
17.    REPRESENTATIONS AND WARRANTIES      36   
   17.1  General      36   
   17.2  Organisation      36   
   17.3  Authorisation      36   
   17.4  Legality, validity and enforceability      37   
   17.5  Compliance with Legal Requirements and Consents      37   
   17.6  Consent      37   
   17.7  No proceedings      37   
   17.8  Financial Statements and Summary Financial Statements      37   
   17.9  Security Interests      38   
   17.10 Existing defaults      38   
   17.11 Governing law and enforcement      38   
   17.12 Deduction of Tax      39   
   17.13 No filing or stamp taxes      39   
   17.14 Taxes      39   
   17.15 No other business      40   
   17.16 Capital stock      40   
   17.17 Representations and warranties      40   
   17.18 Information Memorandum      40   
   17.19 Pari passu ranking      41   
   17.20 No default      41   
   17.21 No conflict      41   
   17.22 Environment      41   
   17.23 Immunity      41   
   17.24 No sharing of earnings      42   

 

iii


   17.25 Insolvency      42   
   17.26 No amendment      42   
   17.27 No Termination      42   
   17.28 No Assignment      42   
   17.29 No Force Majeure Notice      42   
   17.30 Consolidated Subsidiaries of PDSA      43   
18.    FINANCIAL COVENANTS      43   
   18.1 Projected DSCR      43   
   18.2 Historical DSCR      43   
   18.3 Maximum leverage      43   
   18.4 Minimum liquidity      43   
   18.5 Times for testing covenants      43   
   18.6 Calculation of Projected DSCR      44   
19.    AFFIRMATIVE COVENANTS      44   
   19.1 Use of Proceeds      44   
   19.2 Existence, conduct of business      44   
   19.3 Accounts and operation of Accounts and other bank accounts of the Guarantor      45   
   19.4 Annual and interim Financial Statements and compliance certificates      45   
   19.5 Security assurance      46   
   19.6 Legal Requirements      46   
   19.7 Consents      46   
   19.8 Books, accounts and records      46   
   19.9 Construction Budgets, Annual Operating Budgets and associated Technical Consultant’s reports      47   
   19.10 Insurances      48   
   19.11 Notices and other information      48   
   19.12 Taxes      49   
   19.13 Material Agreements      49   
   19.14 Proper legal form      49   
   19.15 Management of interest rate risk      50   
   19.16 Registration of Vessel      50   
  

19.17 Customary Industry Practice

     50   
  

19.18 Maintenance of classification

     50   
  

19.19 Vessel Management

     50   
  

19.20 ISM Code

     51   
  

19.21 ISPS Code

     51   
  

19.22 Safety and compliance documentation

     51   
  

19.23 Acceptable Charter Direct Agreements

     51   
  

19.24 Payment instructions

     52   
  

19.25 Obligation to rebuild or repair

     52   
  

19.26 “Know your customer” checks

     52   
  

19.27 Notice under Acceptable Charter Direct Agreement

     53   
  

19.28 Delivery Date obligations

     53   

 

iv


   19.29 Fair Market Value      54   
   19.30 Acceptable Letter of Credit      56   
   19.31 Delivery Obligations      56   
   19.32 Cost overrun letter of credit      56   
   19.33 Access to Vessel      56   
   19.34 Major Casualty Event      56   
20.    NEGATIVE COVENANTS      57   
   20.1 Business and constitutional documents      57   
   20.2 Additional obligations      57   
   20.3 Other accounts      58   
   20.4 Affiliate transaction      58   
   20.5 Merger      58   
   20.6 Limitations on Security      58   
   20.7 Material Agreements and Hurricane/Emergency Preparedness Plan      58   
   20.8 Incurrence of Financial Indebtedness and investments      58   
   20.9 Asset sales      59   
   20.10 Distributions and loans      59   
   20.11 Sovereign immunity      59   
   20.12 Change of flag, registry or class certification      59   
   20.13 Transfer of shares      59   
   20.14 Replacement of Manager      59   
   20.15 Interest Hedging Instruments and Other Hedging Instruments      59   
   20.16 New waters and Insurance Policies      61   
21.    ADDITIONAL COVENANTS OF GUARANTOR      61   
   21.1 Shareholding in Pacific Santa Ana Ltd. and in each Borrower and shareholding in, and control of, PDSI and PDOL      61   
   21.2 Guarantor Equity Account      61   
   21.3 Incurrence of Financial Indebtedness and investments      62   
   21.4 Guarantor Distributions      62   
   21.5 Released Vessel and set off rights      62   
   21.6 Financial statements of PSDA      63   
22.    EVENTS OF DEFAULT      63   
   22.1 Non-payment      63   
   22.2 Insurance covenants      63   
   22.3 Financial covenants      63   
   22.4 Acceptable Letters of Credit      63   
   22.5 Guarantor and QPML Undertakings and covenants      63   
   22.6 Use of Proceeds      63   
   22.7 Negative covenants      63   
   22.8 Breach of other provisions of Finance Documents      63   
   22.9 Acceptable Charterers, Acceptable Charters and Alternative Charters      63   
  

22.10 Cross default

     64   
  

22.11 Judgments

     65   

 

v


   22.12 Finance Documents      65   
   22.13 Unlawfulness      65   
   22.14 Repudiation      65   
   22.15 Security Documents      65   
   22.16 Insolvency      65   
   22.17 Insolvency proceedings      66   
   22.18 Creditors’ process      66   
   22.19 Misrepresentation      66   
   22.20 Breach of Material Agreements      66   
   22.21 Material adverse change      67   
   22.22 Change of control      67   
   22.23 Delayed Vessel delivery      67   
23.    REMEDIES      67   
24.    CONSULTANTS AND REPORTS      68   
25.    INSURANCE      68   
   25.1 Scope of Required Insurances for each Vessel      68   
   25.2 Permitted insurers      70   
   25.3 Undertakings regarding Required Insurances      70   
   25.4 Market Availability      72   
   25.5 Mortgagee’s interest insurance      73   
26.    ACCOUNTS      74   
   26.1 Establishment of Accounts      74   
   26.2 Control of Accounts      75   
   26.3 Deposit of funds      76   
   26.4 Disbursement Account      76   
   26.5 Collection Account      77   
   26.6 Debt Service Account      78   
   26.7 Debt Service Reserve Account      79   
   26.8 Operating Accounts      79   
   26.9 Required balances      80   
   26.10 Distributions      81   
   26.11 Payments from Accounts      82   
   26.12 Guarantor Equity Account      84   
   26.13 Funds standing to credit of Accounts      84   
   26.14 Permitted Investments      85   
   26.15 Acceptable Letters of Credit      86   
   26.16 Local Accounts      88   
   26.17 Intercompany loans      88   
   26.18 Proceeds Retention Accounts      89   
27.    SECURITY TRUST AND ENFORCEMENT OF SECURITY      90   
   27.1 Appointment of Security Trustee and power of attorney      90   
   27.2 Security interests held in trust      91   
   27.3 Liability of the Obligors      91   

 

vi


  

27.4 Release of Security

     91   
  

27.5 Indemnity; limitations on enforcement

     91   
  

27.6 Security Trustee may file proofs of claim

     92   
  

27.7 Security Trustee may enforce claims

     92   
  

27.8 Acceptable Letters of Credit and Acceptable Guarantees

     92   
  

27.9 Enforcement expenses

     92   
  

27.10 Insurance by Security Trustee

     92   
  

27.11 Custodians and nominees

     93   
  

27.12 Limitation on Security Trustee’s duties in respect of Secured Collateral

     93   
   27.13 Right to initiate judicial proceedings, etc.      93   
   27.14 Exculpatory provisions      94   
   27.15 Power of attorney      94   
   27.16 Miscellaneous      94   
28.    INSTRUCTIONS AND VOTING      94   
   28.1 General      94   
   28.2 Requisite Approval      97   
   28.3 Administrative aspects of the Finance Documents      102   
29.    CLAIMS OF SECURED PARTIES      102   
   29.1 Initiation of Claims      102   
   29.2 No direct enforcement by Lenders      102   
30.    CHANGES TO THE LENDERS AND OBLIGORS      103   
   30.1 Assignments and transfers by the Lenders      103   
   30.2 Conditions of assignment or transfer      104   
   30.3 Assignment or transfer fee      104   
   30.4 Limitation of responsibility of Existing Lenders      105   
   30.5 Procedure for transfer      105   
   30.6 Procedure for assignment      106   
   30.7 Copy of Transfer Certificate or Assignment Agreement to Obligors      107   
   30.8 Security over Lenders’ rights      107   
   30.9 Pro rata interest settlement      107   
   30.10 Assignments and transfer by Obligors      108   
   30.11 Prohibition on Debt Purchase Transactions by the Group      108   
   30.12 Disenfranchisement on Debt Purchase Transactions entered into by Investor   
   Affiliates      108   
31.    THE AGENTS      109   
   31.1 Appointment of the Agents      109   
   31.2 Duties of the Agents      109   
   31.3 Role of the Mandated Lead Arrangers      110   
   31.4 No fiduciary duties      110   
   31.5 Business with the Group      111   
   31.6 Rights and discretions of the Agents      111   
   31.7 Delegation      112   
   31.8 Additional Agents      112   

 

vii


   31.9  Responsibility for documentation      112   
   31.10 Exclusion of liability      113   
   31.11 Lenders’ indemnity to the Agents      114   
   31.12 Exceptional duties      114   
   31.13 Information      114   
   31.14 Miscellaneous      114   
   31.15 Secured Party action      115   
   31.16 Resignation of an Agent      115   
   31.17 Confidentiality      116   
   31.18 Facility Agents’ relationship with the Lenders      116   
   31.19 Credit appraisal by the Lenders      117   
   31.20 Reference Banks      117   
   31.21 Agents’ costs and expenses      118   
   31.22 Deduction from amounts payable by the Agents      118   
32.    CONDUCT OF BUSINESS BY THE SECURED PARTIES      118   
33.    PAYMENT MECHANICS      118   
   33.1  Payments to the Agents      118   
   33.2  Distributions by the Agents      118   
   33.3  Distributions to an Obligor      118   
   33.4  Clawback      118   
   33.5  Impaired Agent      119   
   33.6  Partial payments      119   
   33.7  Set-off by Obligors      120   
   33.8   Disruption to payment systems etc.      120   
34.    SET-OFF      120   
35.    DEFAULTING LENDERS      121   
   35.1  Disenfranchisement of Defaulting Lenders and Defaulting Hedging Parties      121   
   35.2  Replacement of a Defaulting Lender      121   
36.    GOVERNING LAW AND JURISDICTION      122   
   36.1  Governing law      122   
   36.2  Jurisdiction      122   
   36.3  Service of process      123   
37.    MISCELLANEOUS      123   
   37.1  Notices      123   
   37.2  Use of websites      124   
   37.3  Communication when Agent is Impaired Agent      125   
   37.4  Amendments      125   
   37.5  Accession Deeds      126   
   37.6  Delay and waiver      126   
   37.7  Entire agreement      126   
   37.8  Successors and assigns      126   
   37.9  Severability      127   

 

viii


37.10 Reinstatement

     127   

37.11 Counterparts

     127   

37.12 Termination

     127   

37.13 No partnership

     127   

37.14 No reliance

     127   

37.15 English language

     127   

37.16 Waiver of Immunity

     128   

37.17 Publicity

     128   

37.18 Confidential Information

     128   

37.19 Disclosure of Confidential Information

     128   

37.20 Survival and continuing obligations

     130   

 

ix


This AMENDED AND RESTATED PROJECT FACILITIES AGREEMENT (this “Agreement”), is dated 9 September 2010 (as amended and restated on 30 March 2011, and as further amended and restated on 30 March 2012), and made between:

 

(1) PACIFIC BORA LTD., PACIFIC MISTRAL LTD. and PACIFIC SCIROCCO LTD. each a corporation organised and existing under the laws of Liberia, and PACIFIC SANTA ANA S.A R.L., a private limited liability company (société à responsabilité limitée) incorporated under the laws of the Grand Duchy of Luxembourg with registered office at rue d’Anvers, L-2310, Luxembourg, currently in the process of registration with the Luxembourg Register of Commerce and Companies, with a share capital of USD 20,000 (each a “Borrower” and together the “Borrowers”);

 

(2) PACIFIC DRILLING LIMITED, a corporation organised and existing under the laws of Liberia (the “Guarantor”);

 

(3) DNB BANK ASA, CREDIT AGRICOLE CORPORATE & INVESTMENT BANK, CITIBANK, N.A., DVB BANK SE, NORDIC BRANCH, FOKUS BANK (NORWEGIAN BRANCH OF DANSKE BANK A/S), NIBC BANK N.V., NORDEA BANK FINLAND PLC, NEW YORK BRANCH and SKANDINAVISKA ENSKILDA BANKEN AB (PUBL.) (as the “Mandated Lead Arrangers”);

 

(4) THE COMMERCIAL FACILITY LENDERS LISTED IN SCHEDULE 3 (the “Commercial Facility Lenders”);

 

(5) THE NORWEGIAN GOVERNMENT REPRESENTED BY THE MINISTRY OF TRADE AND INDUSTRY (the “GIEK Facility Lender”);

 

(6) THE EXPORT-IMPORT BANK OF KOREA (the “KEXIM Facility Lender”);

 

(7) DNB BANK ASA (as the “Commercial Facility Agent”);

 

(8) DNB BANK ASA (as the “GIEK Facility Agent”);

 

(9) CREDIT AGRICOLE CORPORATE & INVESTMENT BANK (as the “KEXIM Facility Agent”);

 

(10) each HEDGING PARTY set out in Schedule 39 and each other HEDGING PARTY that is party to this Agreement from time to time (each a “Hedging Party”);

 

(11) DNB BANK ASA (as the “Security Trustee”);

 

(12) DNB BANK ASA (as the “Intercreditor Agent”);

 

(13) DNB BANK ASA (as the “Accounts Bank”); and

 

(14) CITIBANK N.A. (NEW YORK BRANCH) (as the “Operating Accounts Bank”), each a “Party” and together the “Parties”.

 

WHEREAS:

 

(A) Each Borrower is a direct or indirect wholly owned subsidiary of the Guarantor. Each Borrower, other than Pacific Santa Ana S.à r.l. is party to a Shipbuilding Contract in respect of its Vessel. Pacific Santa Ana Ltd. has contributed the Pacific Santa Ana as capital and share premium by way of a contribution agreement to its wholly owned Subsidiary Pacific Santa Ana S.à r.l.


(B) Amounts raised under the Finance Documents shall be used to finance the construction, operation and other costs and expenses associated with the Vessels.

 

(C) The Borrowers, the Guarantor, the Facility Agents, the Hedging Parties, the Security Trustee, the Intercreditor Agent, the Accounts Bank and others have entered into on or about the date of this Agreement, or shall enter into, the Intercreditor Agreement that governs the relationship between the Secured Parties and regulates the claims of the Secured Parties against the Borrowers and the Guarantor and the enforcement by the Secured Parties of the Security.

 

(D) Each of the Manager, the Borrowers, the Guarantor, Pacific Santa Ana Ltd., QPML, PDI, Pacific Drilling S.à r.l., PDMS, PIDWAL and Pacific Gibco have granted, or will grant, certain Security pursuant to the Security Documents.

 

(E) The Parties desire to enter into this Agreement in order to set out certain provisions including: (a) the procedure for utilising the loan facilities to be made available in accordance with this Agreement; (b) the conditions precedent to drawdowns under such loan facilities; (c) the repayment, prepayment and cancellation of such loan facilities; (d) details of the guarantee to be provided by the Guarantor in favour of the Secured Parties; (e) the representations and warranties of the Obligors; and (f) covenants, Events of Default and remedies in relation to such loan facilities.

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and adequacy of which are acknowledged, the Parties agree as follows:

 

1. DEFINITIONS AND INTERPRETATION

 

1.1 Definitions

Except as otherwise expressly provided in this Agreement, capitalised terms used in this Agreement shall have the meanings given to them in 0. To the extent such terms are defined by reference to any other Transaction Document (other than the Intercreditor Agreement), for the purposes of this Agreement, such terms shall continue to have their original definitions (but shall be subject to and interpreted in accordance with the governing law of this Agreement) notwithstanding any termination, expiration or amendment of any such Transaction Document except to the extent the Parties agree to the contrary. To the extent such terms are defined by reference to the Intercreditor Agreement, for the purposes of this Agreement, such terms shall have the meanings given to them in the Intercreditor Agreement, as amended, from time to time.

 

1.2 Interpretation

 

  (a) In this Agreement, except to the extent specified to the contrary or where the context otherwise requires:

 

  (i) the table of contents and headings are for convenience only and shall not affect the interpretation of this Agreement;

 

  (ii) references to “Clauses”, “Schedules” and “Appendices” are references to clauses of, and schedules and appendices to, this Agreement;

 

  (iii) references to “assets” includes present and future properties, revenues and rights of every description (whether real, personal or mixed and whether tangible or intangible);

 

2


  (iv) references to an “amendment” includes a variation, supplement, replacement, novation, restatement or re-enactment and “amended” is to be construed accordingly;

 

  (v) references to any document or agreement, including this Agreement, shall be deemed to include references to such document or agreement as amended, from time to time in accordance with its terms and (where applicable) subject to compliance with the requirements set forth in the Finance Documents;

 

  (vi) references to any Party, party or to any other Person (other than a Current Participant) shall include its successors, permitted assigns and permitted transferees;

 

  (vii) references to “indebtedness” include any obligation (whether incurred as principal or surety) for the payment or repayment of money, whether present, future, actual or contingent;

 

  (viii) in respect of any Borrower, references to “its Vessel” or “such Borrower’s Vessel” or similar phrases are to the Vessel owned by it;

 

  (ix) in respect of any Borrower, references to “its Term Loan” or similar phrases are to the Term Loan made available to such Borrower, each in accordance with this Agreement and references to “its Shipbuilding Contract” or similar phrases are to the Shipbuilding Contract to which it is a party, and references to “its Term Loan” or similar phrases in the case of Pacific Santa Ana S.à r.l. are references to the Santa Ana Term Loan, and references to “its Shipbuilding Contract” or similar phrases in the case of Pacific Santa Ana S.à r.l. are references to the Shipbuilding Contract to which Pacific Santa Ana Ltd. is a party;

 

  (x) words importing the singular include the plural and vice versa;

 

  (xi) words importing the masculine include the feminine and vice versa;

 

  (xii) accounting terms have the meanings assigned to them by IFRS or US GAAP, as applicable;

 

  (xiii) the words “include”, “includes” and “including” are not limiting;

 

  (xiv) references to “days” shall mean calendar days, unless the term “Business Days” is used;

 

  (xv) references to “months” shall mean calendar months and references to “years” (other than references to “fiscal years”) shall mean calendar years;

 

  (xvi) unless the contrary indication appears, a reference to a time of day is a reference to the time of day in New York;

 

  (xvii) the word “or” is not exclusive;

 

  (xviii) a reference to a Legal Requirement is a reference to such Legal Requirement as the same may be amended from time to time;

 

  (xix) a Potential Event of Default is “continuing” if it has not been remedied or waived;

 

  (xx) an Event of Default is “continuing” if:

 

3


  (A) following the delivery of an Enforcement Direction in accordance with this Agreement in respect of such Event of Default, such Event of Default has not been waived; or

 

  (B) otherwise if it has not been remedied or waived;

 

  (xxi) a liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrator receiver, administrator or similar officer includes any:

 

  (A) juge-commissaire and/or insolvency receiver (curateur) appointed under the Luxembourg Commercial Code;

 

  (B) liquidateur appointed under Articles 141 to 151 of the Luxembourg act of 10 August 1915 on commercial companies, as amended;

 

  (C) juge-commissaire and/or liquidateur appointed under Article 203 of the Luxembourg act dated 10 August 1915 on commercial companies, as amended;

 

  (D) commissaire appointed under the Grand-Ducal decree of 24 May 1935 on the controlled management regime or under Articles 593 to 614 of the Luxembourg Commercial Code; and

 

  (E) juge délégué appointed under the Luxembourg act of 14 April 1886 on the composition to avoid bankruptcy, as amended;

 

  (xxii) a “winding-up”, “administration” or “dissolution” includes, without limitation, bankruptcy (faillite), liquidation, composition with creditors (concordat préventif de faillite), moratorium or reprieve from payment (sursis de paiement) and controlled management (gestion contrôlée); and

 

  (xxiii) a person being unable to pay its debts includes that person being in a state of cessation of payments (cessation de paiements).

 

  (b) This Agreement and the other Finance Documents are the result of negotiations among, and have been reviewed by, all parties thereto and their respective counsel. Accordingly, this Agreement and the other Finance Documents shall be deemed to be the product of all parties thereto, and no ambiguity shall be construed in favour of or against any party thereto.

 

  (c) For the purposes of any Finance Document, “payment in full” or “paid in full” or “satisfied”, in each case, as used with respect to any Senior Debt Obligations means the receipt of cash equal to the full amount of such Senior Debt Obligations.

 

  (d) Unless a contrary intention appears, a term used in any Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

 

  (e) English terms used in this Agreement may not correspond to Luxembourg legal concepts.

 

1.3 Third party rights

 

  (a) Unless expressly provided to the contrary in a Finance Document, a Person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 (the “Third Parties Act”) to enforce or to enjoy the benefit of any term of this Agreement.

 

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  (b) Notwithstanding any term of any Finance Document, the consent of any Person that is not a Party is not required to rescind or amend this Agreement at any time.

 

2. THE FACILITIES

 

2.1 Term Loan Facility and Tranches

 

  (a) Subject to the terms of this Agreement, the Lenders make available to the Borrowers a Dollar denominated term loan facility (the “Term Loan Facility”) in an amount equal to the Total Commitments.

 

  (b) Subject to Clause 2.1(a), the maximum aggregate amount available to, and available to be drawn by, Pacific Bora Ltd., under the Term Loan Facility shall be 450,000,000 Dollars (the “Bora Term Loan”) as such amount may be reduced in accordance with this Agreement (including pursuant to Clause 4.3(c), Clause 5.6 or Clause 5.10). The Bora Term Loan shall consist of three tranches as follows:

 

  (i) a tranche made available by the Commercial Facility Lenders (the “Bora Commercial Tranche”);

 

  (ii) a tranche made available by the GIEK Facility Lender (the “Bora GIEK Tranche”); and

 

  (iii) a tranche made available by the KEXIM Facility Lender (the “Bora KEXIM Tranche”).

 

  (c) Subject to Clause 2.1(a), the maximum aggregate amount available to, and available to be drawn by, Pacific Mistral Ltd., under the Term Loan Facility shall be 500,000,000 Dollars (the “Mistral Term Loan”) as such amount may be reduced in accordance with this Agreement (including pursuant to Clause 4.3(c), Clause 5.6 or Clause 5.10). The Mistral Term Loan shall consist of three tranches as follows:

 

  (i) a tranche made available by the Commercial Facility Lenders (the “Mistral Commercial Tranche”);

 

  (ii) a tranche made available by the GIEK Facility Lender (the “Mistral GIEK Tranche”); and

 

  (iii) a tranche made available by the KEXIM Facility Lender (the “Mistral KEXIM Tranche”).

 

  (d) Subject to Clause 2.1(a), the maximum aggregate amount available to, and available to be drawn by, Pacific Scirocco Ltd., under the Term Loan Facility shall be 500,000,000 Dollars (the “Scirocco Term Loan”) as such amount may be reduced in accordance with this Agreement (including pursuant to Clause 4.3(c), Clause 5.6 or Clause 5.10). The Scirocco Term Loan shall consist of three tranches as follows:

 

  (i) a tranche made available by the Commercial Facility Lenders (the “Scirocco Commercial Tranche”);

 

  (ii) a tranche made available by the GIEK Facility Lender (the “Scirocco GIEK Tranche”); and

 

  (iii) a tranche made available by the KEXIM Facility Lender (the “Scirocco KEXIM Tranche”).

 

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  (e) Subject to Clause 2.1(a), the maximum aggregate amount available to, and available to be drawn by, Pacific Santa Ana Ltd., under the Term Loan Facility shall be 500,000,000 Dollars (the “Santa Ana Term Loan”) as such amount may be reduced in accordance with this Agreement (including pursuant to Clause 4.3(c), Clause 5.6 or Clause 5.10). The Santa Ana Term Loan shall consist of three tranches as follows:

 

  (i) a tranche made available by the Commercial Facility Lenders (the “Santa Ana Commercial Tranche”);

 

  (ii) a tranche made available by the GIEK Facility Lender (the “Santa Ana GIEK Tranche”); and

 

  (iii)

a tranche made available by the KEXIM Facility Lender (the “Santa Ana KEXIM Tranche”)1.

 

  (f) The maximum aggregate amount available to, and available to be drawn by, all Borrowers under:

 

  (i) the Commercial Tranches shall not exceed 1,000,000,000 Dollars;

 

  (ii) the GIEK Tranches shall not exceed 350,000,000 Dollars; and

 

  (iii) the KEXIM Tranches shall not exceed 450,000,000 Dollars,

as each such amount may be reduced in accordance with this Agreement (including pursuant to Clause 5.6 or Clause 5.10).

 

2.2 Secured Parties’ rights and obligations

 

  (a) The obligations of each Secured Party under the Finance Documents are several. Failure by a Secured Party to perform its obligations under any Finance Document does not affect the obligations of any other Party under any Finance Document. No Secured Party is responsible for the obligations of any other Secured Party under any Finance Document.

 

  (b) The rights of each Secured Party under or in connection with the Finance Documents are separate and independent rights and any indebtedness arising under the Finance Documents to a Secured Party from an Obligor shall be a separate and independent debt.

 

  (c) Except as otherwise stated in the Finance Documents and subject always to Clause 28, Clause 29 and Clause 31.15, a Secured Party may enforce its rights under the Finance Documents separately.

 

2.3 Borrowers’ obligations

The obligations of the Borrowers under the Finance Documents including, for the avoidance of doubt, by Pacific Santa Ana S.à r.l., are joint and several. Any amount expressed to be payable under any Finance Document by “the Borrowers” including, for the avoidance of doubt, by Pacific Santa Ana S.à r.l., shall be discharged if paid in full by any Borrower (or two or more Borrowers collectively).

 

1 

This clause 2.1(e) has not been amended by the Second Amendment and Restatement Agreement.

 

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2.4 Obligors’ agent

 

  (a) Each Borrower by its execution of this Agreement irrevocably appoints the Guarantor to act on its behalf as its agent in relation to the Finance Documents and irrevocably authorises:

 

  (i) the Guarantor on its behalf to supply all information concerning itself contemplated by this Agreement to the Secured Parties and to give all notices and instructions (including any Utilisation Request), to execute on its behalf any Accession Deed, to make such agreements and to effect the relevant amendments capable of being given, made or effected by such Borrower notwithstanding that they may affect such Borrower, without further reference to, or the consent of, such Borrower; and

 

  (ii) each Secured Party to give to the Guarantor any notice, demand or other communication to be addressed to such Borrower in accordance with the Finance Documents,

and in each case such Borrower shall be bound as though such Borrower itself had given the notices and instructions (including any Utilisation Request) or executed or made the agreements or effected the amendments, supplements or variations, or received the relevant notice, demand or other communication.

 

  (b) Every act, omission, agreement, undertaking, settlement, waiver, amendment, notice or other communication given or made by the Guarantor or given to the Guarantor under any Finance Document on behalf of a Borrower or in connection with any Finance Document (whether or not known to any Borrower) shall be binding for all purposes on each Borrower as if such Borrower expressly had made, given, received or concurred with it. In the event of any conflict between any notices or other communications of the Guarantor and any Borrower, those of the Guarantor shall prevail.

 

2.5 Purpose

Each Borrower shall apply all amounts borrowed by it under its Term Loan towards Permitted Uses in accordance with the terms of this Agreement.

 

2.6 Monitoring

No Secured Party is bound to monitor or verify the application of any amount borrowed in accordance with this Agreement.

 

2.7 No further Utilisation

It is agreed and acknowledged that as from the Effective Date (as defined in the Second Amendment and Restatement Agreement) no further Utilisations of any amount shall be made by any Borrower.

 

3. CONDITIONS OF UTILISATION

 

3.1 Conditions precedent to the Financing Date

No Borrower may deliver a Utilisation Request or an Advance Notice in respect of its Term Loan unless the Intercreditor Agent has confirmed in writing to each Facility Agent and to the Guarantor that:

 

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  (a) all of the conditions precedent listed in Part 1 of Schedule 2 have been satisfied or waived; and

 

  (b) each Facility Agent has confirmed to the Intercreditor Agent that all of the documents and other evidence listed in Part 1 of Schedule 2 and delivered to the Intercreditor Agent are satisfactory in form and substance to such Facility Agent save to the extent that the requirement to provide such document or other evidence has been waived by the Intercreditor Agent,

and the Intercreditor Agent promptly shall deliver such written confirmation to each Facility Agent and to the Guarantor upon receipt of the confirmations from each Facility Agent delivered in accordance with Clause 3.1(b).

 

3.2 Conditions precedent to each Utilisation

The Lenders must comply with Clause 4.5 (including in respect of the initial Utilisation of any Term Loan) only if on the date of the Utilisation Request and on the proposed Utilisation Date, each condition precedent set out in Part 2 of Schedule 2 is satisfied or waived in accordance with this Agreement.

 

4. UTILISATION

 

4.1 Delivery of Utilisation Requests and Advance Notice

 

  (a) Subject to Clause 4.1(b), a Borrower may utilise its Term Loan in accordance with this Agreement by delivery of a duly completed Utilisation Request to the Intercreditor Agent, the Commercial Facility Agent, the KEXIM Facility Agent and the GIEK Facility Agent no later than the relevant Specified Time.

 

  (b) In respect of any proposed Utilisation, a Borrower must deliver an Advance Notice to the KEXIM Facility Agent no later than the relevant Specified Time. Each Advance Notice shall be revocable until such time as the Utilisation Request in respect of the relevant Utilisation referenced in such Advance Notice is delivered in accordance with Clause 4.1(a).

 

4.2 Completion of a Utilisation Request

 

  (a) Each Utilisation Request is irrevocable and shall not be regarded as having been duly completed unless:

 

  (i) it sets out:

 

  (A) the aggregate amount requested by the Borrower under all Tranches of its Term Loan in respect of that Utilisation Request; and

 

  (B) the individual amounts requested by the Borrower under each Tranche of its Term Loan in respect of that Utilisation Request, which amounts shall be calculated by such Borrower and be equal to the Tranche Proportion of each such Tranche;

 

  (ii) the proposed Utilisation Date specified in such Utilisation Request is within the Availability Period of the Relevant Term Loan;

 

  (iii) the currency and amount of the proposed Utilisation comply with Clause 4.3;

 

  (iv) the proposed Interest Period complies with Clause 7.1; and

 

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  (v) the Utilisation Request:

 

  (A) except in respect of the final Utilisation of a Term Loan, confirms that following the proposed Utilisation, sufficient Available Commitments shall remain available in order for each Borrower that has not made its Final Payment to make its Final Payment as required by the Shipbuilding Contract to which it is a party; and

 

  (B) confirms that the Proceeds of the proposed Utilisation shall be used for Permitted Uses only.

 

  (b) In respect of each Term Loan, only one Utilisation Request may be delivered each month; provided, however, that subject to Clause 4.2(d), a Borrower may deliver more than one Utilisation Request in any month, provided that the Proceeds of any such additional Utilisation shall be applied only to the payment of amounts due and payable under its Shipbuilding Contract.

 

  (c) Each Borrower has proposed a Utilisation Schedule for its Term Loan. Such Utilisation Schedule is indicative only. To the extent a Borrower reasonably anticipates any material deviation from the schedule of dates and/or amounts in its Utilisation Schedule at any time, such Borrower shall update its Utilisation Schedule and provide such updated Utilisation Schedule to the Intercreditor Agent. If Proceeds of the Loans are to be applied towards payments contemplated in the Construction Budget of a Borrower, the Utilisation Schedule for such Borrower (as updated from time to time in accordance with this Clause 4.2(c)) shall provide for the Utilisation in respect of such Proceeds to be made prior to the date such Proceeds are to be applied as contemplated by such Construction Budget.

 

  (d) Each Alternative Arrangement Borrower may request only one further Utilisation of its Term Loan following the date on which an Alternative Charter or Acceptable Charter, as the case may be, is signed by all parties thereto.

 

4.3 Currency and amount

 

  (a) The currency specified in a Utilisation Request must be Dollars.

 

  (b) The aggregate amount requested by a Borrower under all Tranches of its Term Loan in respect of a Utilisation Request must be a minimum of 5,000,000 Dollars and in an integral multiple of 1,000,000 Dollars.

 

  (c) The aggregate amount requested by a Borrower pursuant to all Utilisation Requests submitted by or on behalf of such Borrower under the Term Loan Facility shall not exceed the maximum aggregate amount available to such Borrower under the Term Loan Facility as specified in Clause 2.1 (and as such amount may be reduced in accordance with this Agreement (including pursuant to this Clause 4.3(c), Clause 5.6 and Clause 5.10)); provided, however, that if upon determination by the Intercreditor Agent in accordance with the terms of this Agreement, such Borrower’s Borrower Maximum Amount is an amount less than the maximum aggregate amount available to such Borrower under the Term Loan Facility as specified in Clause 2.1 at the time such determination is made, then the maximum amount that such Borrower may request pursuant to all Utilisation Requests shall be reduced to an amount equal to that Borrower’s Borrower Maximum Amount.

 

  (d)

The aggregate amount requested by a Borrower under the Commercial Tranche, GIEK Tranche or KEXIM Tranche of such Borrower’s Term Loan pursuant to a

 

9


  Utilisation Request, when aggregated with all amounts requested by all Borrowers from the Commercial Facility Lenders, GIEK Facility Lender or KEXIM Facility Lender (as applicable) pursuant to all Utilisation Requests made as at such date, shall not exceed the aggregate maximum amount made available by the Commercial Facility Lenders, GIEK Facility Lender or KEXIM Facility Lender (as applicable) to all Borrowers as specified in Clause 2.1(f) (as such amount may be reduced in accordance with this Agreement (including pursuant to Clause 5.6 and Clause 5.10)).

 

  (e) The aggregate amount requested by all Borrowers pursuant to all Utilisation Requests shall not exceed the Total Commitment (as such amount may be reduced in accordance with this Agreement (including pursuant to Clause 5.6 and Clause 5.10)).

 

4.4 Cost Certificate

Each Utilisation Request submitted by or on behalf of a Borrower shall be accompanied by a duly completed Cost Certificate.

 

4.5 Lenders’ participation

 

  (a) If the conditions set out in this Agreement have been met, each Lender shall make its participation in each Loan available by the Utilisation Date through its Facility Office.

 

  (b) Each Lender’s participation in each Loan shall be proportionate to its respective share of the Available Commitments immediately prior to the making of the Loan.

 

  (c) Each Facility Agent shall notify each Lender for which it is the Relevant Facility Agent of the amount of each Loan and the amount of its participation in that Loan by the Specified Time.

 

5. REPAYMENT, PREPAYMENT AND CANCELLATION

 

5.1 General payment terms

 

  (a) All payments (including any payment of interest) due to the Secured Parties shall be made in Dollars and in accordance with the terms of the Finance Documents.

 

  (b) If any payment due under a Finance Document otherwise would fall due on a day that is not a Business Day, such payment shall be due on the next succeeding Business Day in that month (if there is one) or on the preceding Business Day (if there is not). Any such extension or reduction of time under this Clause 5.1(b) shall be included in the computation of interest or fees (as the case may be) on any such amount so due.

 

  (c) During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement, interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.

 

5.2 Repayment

Each Borrower shall make payments in accordance with Clause 26.6(b) in respect of outstanding Loans under its Term Loan to the designated account of the Intercreditor Agent (and the Intercreditor Agent shall allocate such payments to each relevant Facility Agent for the account of each Lender for which it is the Relevant Facility Agent), of the aggregate

 

10


unpaid principal amount of such Loans in instalments payable on each Repayment Date, commencing with the First Repayment Date for such Term Loan, in accordance with each Repayment Schedule for such Term Loan. Any remaining unpaid principal, interest, fees and costs as at the Final Repayment Date for such Term Loan shall be due and payable on such Final Repayment Date.

 

5.3 Reborrowing

 

  (a) No Borrower may reborrow all or any part of any Loan under its Term Loan that is repaid or prepaid by or on behalf of it.

 

  (b) No Borrower may reborrow all or any part of the Term Loan Facility that is repaid or prepaid by or on behalf of any Borrower.

 

5.4 Voluntary prepayments

 

  (a) Subject to Clause 5.15, on not less than ten Business Days’ irrevocable prior written notice to the Intercreditor Agent and the Facility Agents, a Borrower may prepay the whole or any part of its Term Loan in a minimum amount of 10,000,000 Dollars or a multiple thereof.

 

  (b) For the avoidance of doubt, a Borrower may elect to prepay the whole or any part of its Term Loan whether or not any other Borrower also elects to prepay the whole or any part of its Term Loan.

 

5.5 Voluntary cancellation

 

  (a) Subject to Clause 5.15, on not less than ten Business Days’ irrevocable prior written notice to the Intercreditor Agent and the Facility Agents, the Borrowers acting jointly may cancel the whole or any part of the Available Commitment in a minimum amount of 10,000,000 Dollars or any multiple thereof.

 

  (b) No Available Commitment cancelled under this Agreement subsequently may be reinstated.

 

  (c) Any cancellation under this Clause 5.5 shall reduce the Available Commitments of the Lenders in respect of the Term Loan Facility in proportion to their respective shares of the aggregate Available Commitment immediately prior to such cancellation.

 

5.6 Availability Period, Acceptable Charters, Alternative Charters and automatic cancellation

 

  (a) All Commitments available to be drawn by a Borrower automatically shall cease to be available to such Borrower at the close of business in New York on the last day of the Availability Period of such Borrower’s Term Loan. If on such date the aggregate of the remaining Commitments able to be drawn by all Borrowers in accordance with this Agreement whose Availability Periods have not ended is less than the total Available Commitments as at such date, the Available Commitments automatically shall be reduced to the amount that is equal to the aggregate of the remaining amounts available to be drawn on such date by such Borrowers. All undrawn Commitments automatically shall be cancelled at the close of business in New York on the last day of the Availability Period that is the last Availability Period to end in accordance with this Agreement.

 

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  (b) If an Acceptable Charter or an Alternative Charter, as the case may be, has not been executed by all parties thereto in respect of a Vessel by the Delivery Date of such Vessel, subject to Clause 5.6(c), the Availability Period for the Term Loan of the Borrower that owns such Vessel shall be extended to the date falling 180 days after the Delivery Date of such Vessel provided that:

 

  (i) the Delivered Cost of such Vessel shall have been funded only with Equity contributed to such Borrower and, if applicable, Cost Overrun Undertaking Proceeds or with any proceeds of a Waiver Utilisation; and

 

  (ii) all Post-Completion Security (other than any Post-Completion Security relating to any Acceptable Charter) required to be granted by such Borrower has been provided to the satisfaction of the Intercreditor Agent.

 

  (c) If the Availability Period for any Term Loan is extended in accordance with Clause 5.6(b), then the maximum amount that otherwise would have been available to be drawn under such Term Loan in accordance with Clause 2.1 shall be reduced over time such that the maximum amount available to such Borrower, subject to Clause 2.1 and Clause 4, at any time during such extended Availability Period, is equal to the principal amount that would have been outstanding at such time calculated as if such Term Loan had been:

 

  (i) utilised in full by such Borrower at the Delivery Date of its Vessel and at the applicable maximum amount stated in Clause 2.1 for such Term Loan; and

 

  (ii) repaid in accordance with Clause 5.2 and each Repayment Schedule for such Term Loan had been prepared and delivered on that basis.

 

  (d) If at any time there is more than one Vessel for which the Delivery Date has occurred and in respect of which neither an Acceptable Charter nor an Alternative Charter has been executed by all parties thereto, then the Commitment of each Lender automatically shall be cancelled and the participation of each Lender in each outstanding Loan under each Term Loan, together with accrued interest, and all other amounts accrued under the Finance Documents immediately shall be due and payable by each of the Borrowers; provided, however, that no such cancellation shall occur and no such payment shall be required, provided that all Security (including all Post-Completion Security) required by this Agreement in respect of any Vessel that otherwise would have triggered such cancellation and payment obligations is and remains effective and perfected in accordance with this Agreement.

 

5.7 Illegality

If it becomes unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in the Term Loan Facility or any Term Loan:

 

  (a) that Lender promptly shall notify the Relevant Facility Agent upon becoming aware of that event;

 

  (b) upon receipt of such notification, the Relevant Facility Agent promptly shall notify the Intercreditor Agent and the Borrowers;

 

  (c) upon the Relevant Facility Agent notifying the Borrowers, the Commitment of that Lender immediately shall be cancelled; and

 

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  (d) each Borrower promptly shall repay that Lender’s participation in the Loans made to that Borrower on either (i) the last day of the Interest Period for each such Loan occurring after the Relevant Facility Agent has notified the Borrowers in accordance with Clause 5.7(b) (but in no event less than seven Business Days after receipt by the Borrowers of such notification) or (ii) if earlier, the date specified by the Lender in the notice delivered to the Relevant Facility Agent in accordance with Clause 5.7(a) (provided that such day falls at least seven Business Days after receipt by the Borrowers of the notification delivered in accordance with Clause 5.7(b) or if later, the last day of any grace period permitted by law).

 

5.8 Change of control

 

  (a) If any Person (or any group of Persons acting in concert) other than QPIL or any Affiliate of QPIL controls (directly or indirectly) the Guarantor (a “Guarantor Change of Control”), then unless the Guarantor Change of Control has been approved by the Intercreditor Agent, each Commitment of each Lender automatically shall be cancelled and the participation of each Lender in each outstanding Loan under each Term Loan, together with accrued interest, and all other amounts accrued under the Finance Documents immediately shall be due and payable by the Borrowers by the date required by Clause 5.15.

 

  (b) For the purpose of this Clause 5.8, “controls” means that any Person (or any group of Persons acting in concert) directly or indirectly owns or controls more than 30 per cent. of the equity share capital of the Guarantor or equity share capital having the right to cast more than 30 per cent. of the votes capable of being cast in a general meeting of the Guarantor.

 

  (c) For the purpose of this Clause 5.8, “acting in concert” means, a group of Persons who, in accordance with an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition directly or indirectly of shares in the Guarantor by any of them, either directly or indirectly, to obtain or consolidate control of the Guarantor.

 

5.9 Exceptional events

If a Borrower’s Vessel:

 

  (a) suffers a Major Casualty Event and the Intercreditor Agent has not approved a Repair Plan submitted by the relevant Borrower for the repair of the relevant Vessel in accordance with Clause 19.34;

 

  (b) suffers a Total Loss; or

 

  (c) otherwise is lost, sold or otherwise disposed of by such Borrower,

then on the earlier to occur of:

 

  (i) the date on which such Borrower receives any insurance or other proceeds in respect of such Major Casualty Event, Total Loss or other loss, sale or other disposal by such Borrower; and

 

  (ii) the date falling 180 days after such Major Casualty Event, Total Loss or other loss, sale or other disposal by such Borrower,

the Available Commitments automatically shall be cancelled by an amount equal to the maximum amount stated in Clause 2.1 in respect of such Borrower’s Term Loan

 

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(as such amount may have been reduced in accordance with this Agreement (including pursuant to Clause 4.3(c), Clause 5.6 or Clause 5.10)) minus the participation of each Lender in each outstanding Loan under such Term Loan. Upon such cancellation the participation of each Lender in each outstanding Loan under such Term Loan, together with accrued interest, and all other amounts accrued under the Finance Documents, immediately shall be due and payable by such Borrower.

For the avoidance of doubt, no cancellation of the Available Commitments will occur and no prepayment of the Relevant Borrower’s Term Loan will be required in accordance with this Clause 5.9 following a Major Casualty Event if the relevant Vessel affected by such Major Casualty Event has become a Released Vessel in accordance with Clause 5.17.

 

5.10 Reduction in Total Project Costs

 

  (a) If at any time the Total Project Costs are determined by any Obligor or Secured Party (and, in each case, confirmed by the Technical Consultant) (the “Reduced Total Project Costs”) to be less than the Total Project Costs as at the First Utilisation Date, and together the aggregate of the Available Commitments and the outstanding Loans is an amount that exceeds at such time 60 per cent. of such Reduced Total Project Costs (a “Project Cost Reduction”), then the relevant proportion of the Available Commitments shall be cancelled and, if applicable, the relevant proportion of the Loans shall be prepaid by the Borrowers in each case in accordance with Clause 5.10(b).

 

  (b) In the event of a Project Cost Reduction, the Borrowers shall:

 

  (i) cancel an amount equal to the lesser of either (x) all of the Available Commitments or (y) such portion of the Available Commitments as is necessary in order for the aggregate of the Available Commitments and the outstanding Loans to not exceed 60 per cent. of the Reduced Total Project Costs, and such that each Obligor otherwise continues to be in compliance with each of its obligations under this Agreement; and

 

  (ii) if following the cancellation in accordance with Clause 5.10(b)(i) of all Available Commitments, the aggregate of all Available Commitments and outstanding Loans still exceeds 60 per cent. of the Reduced Total Project Costs, the Borrowers shall prepay such Term Loan or Term Loans as the Borrowers may elect to the extent necessary in order for the aggregate of all Available Commitments and outstanding Loans to not exceed 60 per cent. of the Reduced Total Project Costs such that each Obligor otherwise continues to be in compliance with each of its obligations under this Agreement.

 

5.11 Prepayment from TPDI Put Option Account

 

  (a) If the Guarantor receives any amount from the TPDI Put Option Account in accordance with clause 2.3(a) or 2.3(c) of the Put Option Undertaking Agreement, the Guarantor promptly shall apply any such amounts in voluntary prepayment of any Term Loan.

 

  (b) If QPML makes or proposes to make a distribution to QPIL from the TPDI Put Option Account in accordance with clause 2.3(c) of the Put Option Undertaking Agreement and requests that the Guarantor cancel the Commitments in accordance with clause 2.3(c)(iii) of the Put Option Undertaking Agreement, the Guarantor promptly shall cancel the Commitments in the amount required by clause 2.3(c)(iii) of the Put Option Undertaking Agreement.

 

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5.12 Fair Market Value prepayments

If the Borrowers are required to make any cancellation and/or prepayment in accordance with Clause 19.29, the Borrowers shall cancel and/or prepay the Term Loan Facility in accordance with Clause 19.29.

 

5.13 GIEK/KEXIM put option

No later than 90 days prior to the Final Repayment Date of the Commercial Tranches, the Guarantor shall deliver written notice (the “Commercial Tranche Refinancing Notice”) to each of the GIEK Facility Lender and the KEXIM Facility Lender detailing the status and terms and conditions of any contemplated refinancing of the Commercial Tranches, together with a copy of an up to date Financial Model. Any such Lender that either:

 

  (a) does not timely receive a Commercial Tranche Refinancing Notice from the Guarantor; or

 

  (b) determines that the terms and conditions of the refinancing detailed in such Commercial Tranche Refinancing Notice is not satisfactory to it in such Lender’s sole discretion,

shall have the option, but not the obligation, to request by written notice to the Guarantor (which notice shall be delivered no later than 30 days after such Lender’s receipt of the Commercial Tranche Refinancing Notice or 60 days before the Final Repayment Date of the Commercial Tranches in the case that any such Lender does not timely receive a Commercial Tranche Refinancing Notice from the Guarantor), that each Borrower prepay in full the proportion of all Loans outstanding that relate to the GIEK Tranches or the KEXIM Tranches, as applicable, and following such request all such amounts shall be due and payable by the Borrowers on the Final Repayment Date of the Commercial Tranches without premium, penalty or additional fees of any kind.

 

5.14 Assignment by Charterer

 

  (a) If Total E&P Nigeria Limited assigns or transfers any of its rights or obligations as the Charterer under the Scirocco Charter to any other Current Participant in accordance with the terms of the Scirocco Charter, Pacific Scirocco Ltd. shall notify the Intercreditor Agent within five Business Days of Pacific Scirocco Ltd. receiving notice (or otherwise becoming aware) of such assignment or transfer.

 

  (b) If Petrobras assigns or transfers any of its rights or obligations as the charterer under the Mistral Drilling Contract to a Petrobras Affiliate other than a Qualifying Petrobras Affiliate, then Pacific Mistral Ltd. shall notify the Intercreditor Agent within five Business Days of Pacific Mistral Ltd. receiving notice (or otherwise becoming aware) of such assignment or transfer.

 

  (c) If the Intercreditor Agent has not (acting on the instruction of the Lenders) within 95 days after receipt by Pacific Scirocco Ltd. of notice of an assignment or transfer (referred to in paragraph (a) above), approved the relevant Current Participant as satisfactory to it as an Acceptable Charterer, and unless the Lenders otherwise agree, the participation of each Lender in each outstanding Loan under the Scirocco Term Loan, together with accrued interest, and all other amounts accrued under the Finance Documents in respect of the Scirocco Term Loan immediately shall be due and payable by the Borrowers in accordance with Clause 5.15.

 

  (d)

If the Intercreditor Agent has not (acting on the instruction of the Lenders) within 95 days after receipt by Pacific Mistral Ltd. of notice of an assignment or transfer

 

15


  (referred to in paragraph (b) above), approved the relevant Petrobras Affiliate as satisfactory to it as an Acceptable Charterer together with Pacific Drillship S.à r.l. and unless the Lenders otherwise agree, the participation of each Lender in each outstanding Loan under the Mistral Term Loan, together with accrued interest, and all other amounts accrued under the Finance Documents in respect of the Mistral Term Loan immediately shall be due and payable by the Borrowers in accordance with Clause 5.15.

 

5.15 Prepayment and cancellation—miscellaneous

 

  (a) Where any Loan made available to a Borrower becomes immediately due and payable or payable on a specified date in accordance with this Clause 5, such Borrower shall prepay such Loan within seven Business Days of such Loan becoming immediately due and payable in accordance with this Clause 5.15 or on such specified date (as applicable).

 

  (b) No repayment of any Loan is permitted except in accordance with the express terms of this Agreement.

 

  (c) Each prepayment shall be made:

 

  (i) together with accrued interest on the amount prepaid and any applicable Break Costs; and

 

  (ii) subject to Clause 5.15(d) and Clause 5.15(e), without any penalty or premium.

 

  (d) Any voluntary prepayment by a Borrower of any amount outstanding under a Commercial Tranche in accordance with Clause 5.4 and any voluntary cancellation of any Available Commitment of the Commercial Facility Lenders in accordance with Clause 5.5, if such voluntary prepayment or voluntary cancellation is made at any time prior to the date falling one year after the Vessel Completion Date, shall be subject to the payment to the Commercial Facility Agent (for the account of each Commercial Facility Lender) by that Borrower of the Commercial Facility Prepayment/Cancellation Fee, which such fee shall be distributed by the Commercial Facility Agent to each Commercial Facility Lender according to:

 

  (i) in the case of a prepayment, the proportion of the total amount prepaid in respect of the Commercial Tranche Loan that was advanced by that Commercial Facility Lender; and

 

  (ii) in the case of a cancellation, the proportion of the total Available Commitment to be cancelled that was committed by that Commercial Facility Lender.

 

  (e) Any mandatory or voluntary prepayment of any amount outstanding under a GIEK Tranche or a KEXIM Tranche (other than in accordance with Clause 5.13) and any mandatory or voluntary cancellation of any Available Commitment of the GIEK Facility Lender or the KEXIM Facility Lender shall be subject to the payment to the GIEK Facility Agent (for the account of the GIEK Facility Lender) or the KEXIM Facility Agent (for the account of the KEXIM Facility Lender), as applicable, of the GIEK Prepayment/Cancellation Fee or the KEXIM Prepayment/Cancellation Fee, as applicable, which fee shall be distributed by the GIEK Facility Agent or the KEXIM Facility Agent, as applicable, to the GIEK Facility Lender or the KEXIM Facility Lender.

 

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  (f) In the event of any prepayment made in accordance with this Clause 5, the funds from which such prepayment is to be made first shall be used to pay any amounts then due and payable to the Secured Parties (including any fees) and, thereafter, to make the relevant prepayment.

 

  (g) Each prepayment shall be made and applied, subject to Clause 5.15(f):

 

  (i) other than any prepayment in accordance with Clause 5.7 (which such prepayment shall be made and applied in accordance with Clause 5.7), to each Tranche of the Relevant Term Loan on a pro rata basis to the amounts outstanding under such Tranche under that Term Loan;

 

  (ii) other than any prepayment in accordance with Clause 5.7 (which such prepayment shall be made and applied in accordance with Clause 5.7), to the principal amounts payable in respect of each Tranche of the Relevant Term Loan in inverse order of maturity (including, for the avoidance of doubt, the final principal instalment of the Commercial Tranche payable in accordance with the applicable Repayment Schedule); and

 

  (iii) together with any interest payable in respect of that Term Loan and net scheduled payments due or termination costs payable in respect of any Interest Hedging Instrument relating to that Term Loan.

 

  (h) Each cancellation or reduction of any Commitment made or required in accordance with this Agreement shall reduce the Available Commitments of the Lenders on a pro rata basis.

 

5.16 Right of replacement or repayment and cancellation in relation to a single Lender

 

  (a) If:

 

  (i) any sum payable to any Lender by a Borrower is required to be increased under Clause 10.2(c);

 

  (ii) any Lender claims indemnification from a Borrower under Clause 10.3 or Clause 11.1; or

 

  (iii) it becomes illegal for any Lender to perform any of its obligations under this Agreement or to fund or maintain its participation in any Term Loan,

whilst the circumstances giving rise to the requirement for that increase, indemnification or illegality continue, the Guarantor may give the Relevant Facility Agent notice of its intention to replace that Lender in accordance with Clause 5.16(c).

 

  (b) Where:

 

  (i) either:

 

  (A) a Borrower wishes to enter into an Acceptable Charter for its Vessel, the proposed charter satisfies each part of paragraph (a) of the definition of Acceptable Time Charter or Acceptable Bareboat Charter (as the case may be); or

 

  (B)

an Alternative Arrangement Borrower wishes to enter into an Alternative Charter for its Vessel, the proposed charter satisfies each of paragraphs (a) to (e) of the definition of Alternative Charter,

 

17


  and in either case the Majority Lenders have confirmed to the Intercreditor Agent that they have approved such charter as an Acceptable Charter or an Alternative Charter (as the case may be); or

 

  (ii) a Borrower wishes to enter into an Acceptable Charter or an Alternative Charter for its Vessel with a Person who (or whose obligations under the relevant Acceptable Charter or Alternative Charter are guaranteed by an entity who):

 

  (A) satisfies the credit rating requirement set out in paragraph (a) of the definition of Acceptable Charterer and the Majority Lenders have confirmed to the Intercreditor Agent that they have approved such Person; or

 

  (B) does not satisfy the credit rating requirement set out in paragraph (a) of the definition of Acceptable Charterer and the Super Majority Lenders have confirmed to the Intercreditor Agent that they have approved such Person,

if any one or more Lenders has not approved such charter as an Acceptable Charter or Alternative Charter (as the case may be) or such Person as an Acceptable Charterer (as applicable) in accordance with this Agreement, the Guarantor may give the Relevant Facility Agent 15 Business Days’ notice of its intention to:

 

  (I) replace any such Lender in accordance with Clause 5.16(c); or

 

  (II) provided that the Guarantor has demonstrated to the satisfaction of the Intercreditor Agent that, following any such cancellation and, if applicable, prepayment, the Obligors shall have sufficient funds available in order to meet in full their payment obligations under each Transaction Document and in respect of the Total Project Costs (as calculated at the time of any such cancellation), cancel in full the then Commitment of such Lender and procure the repayment or prepayment in full of that Lender’s participation, if any, in the then outstanding Loans.

 

  (c) In the circumstances set out in Clause 5.16(a) and Clause 5.16(b), on the expiry of 15 Business Days’ notice given in accordance with Clause 5.16(b), a Borrower may replace each such Lender by requiring each such Lender to (and, to the extent permitted by law, each such Lender shall) transfer in accordance with Clause 30 all of its rights and obligations in respect of the Term Loan Facility to a Lender or other bank, financial institution, trust, fund or other entity selected by the Relevant Borrower that confirms its willingness to assume and does assume all the obligations of the relevant transferring Lender in respect of the Term Loan Facility in accordance with Clause 30 for a purchase price in cash or other cash payment payable at the time of the transfer equal to the outstanding principal amount of such Lender’s participation in the outstanding Loans and all accrued interest, Break Costs and other amounts payable in relation thereto under the Finance Documents.

 

  (d) The replacement of any Lender in accordance with Clause 5.16(c) or the cancellation of the Commitment of a Lender and, if applicable, repayment of such Lender’s participation in the outstanding Loans in accordance with Clauses 5.16(b)(II), 5.16(e) and 5.16(f), shall be subject to the following conditions:

 

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  (i) no Obligor shall have any right to replace any Agent in its capacity as such Agent;

 

  (ii) neither the Relevant Facility Agent nor any Lender shall have any obligation to find any replacement Lender;

 

  (iii) in no event shall any Lender replaced under Clause 5.16(c) or that has its Commitment cancelled and, if applicable, its participation in the outstanding Loans repaid in accordance with Clauses 5.16(b)(II), 5.16(e) and 5.16(f) be required to pay or surrender any of the fees received by such Lender in accordance with the Finance Documents;

 

  (iv) if any Lender to be replaced under Clause 5.16(c) or that has its Commitment cancelled and, if applicable, its participation in the outstanding Loans repaid in accordance with Clauses 5.16(b)(II), 5.16(e) and 5.16(f) also is a Hedging Party at that time, the Relevant Borrower, at the same time as it replaces such Person as a Lender in accordance with Clause 5.16(c) or cancels the Commitment of such Lender and, if applicable, repays such Lender in accordance with Clauses 5.16(b)(II), 5.16(e) and 5.16(f) also must replace it as a Hedging Party; and

 

  (v) the payment of any required Prepayment/Cancellation Fee.

 

  (e) On the expiry of the 15 Business Days’ notice given in accordance with Clause 5.16(b) in respect of any cancellation and, if applicable, prepayment, the Commitment of the relevant Lender in respect of the Term Loan Facility immediately shall be reduced to zero.

 

  (f) On the last day of the Interest Period for any Loan in which the relevant Lender participates and that ends after the expiry of the 15 Business Days’ notice given in accordance with Clause 5.16(b) in respect of any cancellation and, if applicable, prepayment, (or, if earlier, the date specified by the Guarantor in that notice), the Borrowers shall repay the relevant Lender’s participation in such Loan.

 

5.17 Release of one Vessel

 

  (a) If:

 

  (i) a Borrower has provided a form of charter for approval by the Intercreditor Agent as:

 

  (A) the initial Acceptable Charter for its Vessel; or

 

  (B) the initial Alternative Charter for its Vessel,

and such form of charter is not approved as an Acceptable Charter or Alternative Charter (as the case may be) in accordance with this Agreement; or

 

  (ii) following the occurrence of a Major Casualty Event the Intercreditor Agent has not approved a Repair Plan submitted by the relevant Borrower in accordance with Clause 19.34,

then the Guarantor may elect that the relevant Vessel shall be released from the scope of the transactions contemplated by the Transaction Documents in accordance with this Clause 5.17 provided that: (x) the Guarantor previously has not made such an

 

19


election in respect of any other Vessel; and (y) each Vessel other than the Vessel that is proposed to be released either shall be subject to: (1) an Acceptable Charter that has been signed by all parties thereto; or (2) an Alternative Charter that has been signed by all parties thereto and is fully effective or the effectiveness of which is subject only to the approval of the relevant local authority in the jurisdiction of operation of the Vessel as specified in such Alternative Charter. Such removed Vessel shall be the “Released Vessel”.

 

  (b) If in accordance with Clause 5.17(a) the Guarantor is entitled to elect a Vessel to be the Released Vessel and the Guarantor intends for such Vessel to become the Released Vessel, the Guarantor shall notify the Intercreditor Agent in writing of the same, which notice shall include:

 

  (i) the identity of the Vessel that the Guarantor proposes to become the Released Vessel;

 

  (ii) the date on which the Guarantor proposes that such Vessel shall become the Released Vessel, which date shall be at least 30 days after the date on which the Intercreditor Agent receives such notification (the “Release Date”); and

 

  (iii) any other information that relates to the release of the Vessel that the Intercreditor Agent shall have requested in writing from the Guarantor and that is necessary in order to give effect to the purposes of this Clause 5.17.

 

  (c) Upon receipt of any notice delivered in accordance with Clause 5.17(b), the Intercreditor Agent promptly shall notify each Facility Agent, each Hedging Party and the Security Trustee of receipt of such notice.

 

  (d) On the Release Date, the Available Commitments shall be cancelled in the amount of 450,000,000 Dollars (minus, in the case of any release of a Vessel in the circumstances described in Clause 5.17(a)(ii), the outstanding principal amount of the Loans made available to the Relevant Borrower under its Term Loan) on a pro rata basis in respect of the Available Commitment of each Lender and the Relevant Borrower shall not be permitted to submit any further Utilisation Request.

 

  (e) On the Release Date, the Required Equity Amount shall be reduced by an amount equal to the proportion of the Allocable Equity Share of the Relevant Borrower (calculated assuming that such Relevant Borrower would have utilised 450,000,000 Dollars of the Term Loan Facility) as a percentage of the aggregate Allocable Equity Share of all Borrowers (based upon the same assumption with regard to the Relevant Borrower) immediately prior to the Release Date and as such calculation of the revised Required Equity Amount shall be notified by the Intercreditor Agent.

 

  (f) Prior to any Vessel becoming the Released Vessel, the Relevant Borrower shall pre-pay (in accordance with Clause 5.4) in full any outstanding principal amounts of its Term Loan and all other amounts owing by it to any Secured Party under the Finance Documents.

 

  (g) Promptly following the Release Date, the Security Trustee and the Intercreditor Agent, with the co-operation of the other Parties, will release the Vessel and the Relevant Borrower from any Security created in respect of the Released Vessel, the Borrower or any asset of the Borrower.

 

  (h) Immediately upon a Vessel becoming the Released Vessel, the Relevant Borrower shall cease to be an Obligor and a member of the Group.

 

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6. INTEREST

 

6.1 Calculation of interest

 

  (a) Subject to Clause 6.2, the rate of interest on each Loan for each Interest Period is the percentage rate per annum that is the aggregate of:

 

  (i) the Applicable Margin determined in accordance with Clause 6.6 as at the Quotation Day;

 

  (ii) LIBOR applicable for such period; and

 

  (iii) the applicable Mandatory Cost, if any.

 

6.2 CIRR Interest Rate

 

  (a) Upon ten Business Days’ prior written notice to the GIEK Facility Agent and in any event not later than the date falling ten Business Days prior to the Delivery Date of such Borrower’s Vessel, a Borrower that is not an Alternative Arrangement Borrower may select that the CIRR Interest Rate shall apply in respect of the GIEK Tranche of each Loan made under its Term Loan.

 

  (b) Any selection by a Borrower (other than an Alternative Arrangement Borrower) of the CIRR Interest Rate in accordance with Clause 6.2(a) is irrevocable and, following such a selection, the CIRR Interest Rate shall be the interest rate payable in respect of the GIEK Facility Lender’s participation in each Loan made under the relevant Borrower’s Term Loan either:

 

  (i) if such Term Loan has not been Utilised prior to such selection, throughout the term of such Borrower’s Term Loan; or

 

  (ii) if such Borrower’s Term Loan has been Utilised prior to such selection, from the expiry of any then existing Interest Period in respect of each Loan made under such Borrower’s Term Loan and throughout the remaining term of such Borrower’s Term Loan.

 

6.3 Payment of interest

The Borrower to which a Loan has been made shall pay accrued interest on that Loan on the last day of each Interest Period (and other than in respect of any Interest Period ending no later than the date falling six months after the first Utilisation of its Term Loan, if the Interest Period is longer than three months, on the dates falling at three monthly intervals after the first day of such Interest Period). All computations of any rate of interest commission or fee under any Finance Document shall be based on a year of 360 days and the actual days elapsed.

 

6.4 Default interest

 

  (a) If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate, subject to Clause 6.4(b), that is two per cent. per annum higher than the rate that would have been payable if the overdue amount, during the period of non-payment, had constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Relevant Facility Agent (acting reasonably). Any interest accruing under this Clause 6.4 immediately shall be payable by the Obligor on demand by the Relevant Facility Agent.

 

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  (b) If any overdue amount consists of all or part of a Loan that became due on a day that was not the last day of an Interest Period relating to that Loan:

 

  (i) the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and

 

  (ii) the rate of interest applying to the overdue amount during that first Interest Period shall be two per cent. per annum higher than the rate that would have applied if the overdue amount had not become due.

 

  (c)

Default interest (if unpaid) arising on an overdue amount shall be compounded (to the extent permitted by law)2 with the overdue amount at the end of each Interest Period applicable to that overdue amount but shall remain immediately due and payable.

 

6.5 Notification of rates of interest

The Intercreditor Agent promptly shall notify the Relevant Borrower and each Facility Agent of the determination of a rate of interest under this Agreement, which rate shall be determined no later than the Specified Time and provided that, for the avoidance of doubt and not withstanding any other provision of this Agreement, any reduction to the Applicable Margin in accordance with paragraph (b)(ii) of the definition of Applicable Margin shall take effect immediately upon the relevant Extension Date. Each Facility Agent promptly shall notify the Lenders for which it is the Relevant Facility Agent of such interest rate.

 

6.6 Determination of Applicable Margin

 

  (a) On each receipt of the Financial Statements of the Guarantor in accordance with Clause 19.4, no later than the Specified Time the Intercreditor Agent shall calculate the Applicable Margin that shall apply for the fiscal quarter of the Guarantor that commences immediately following the fiscal quarter in respect of which such Financial Statements were provided and shall notify each Borrower and each Facility Agent of such determination.

 

  (b) Any Applicable Margin determined by the Intercreditor Agent in accordance with Clause 6.6(a) in respect of any fiscal quarter shall apply from the first day of the fiscal quarter commencing after the fiscal quarter in respect of which the Financial Statements were provided, and continuing for the duration of such fiscal quarter.

 

7. INTEREST PERIODS

 

7.1 Selection of Interest Periods

 

  (a) A Borrower may select an Interest Period for a Loan in the Utilisation Request for that Loan or (if the Loan has already been borrowed) in a Selection Notice.

 

  (b) Each Selection Notice for a Loan is irrevocable and must be delivered to the Facility Agents and the Intercreditor Agent by the Borrower to which that Loan was made not later than the Specified Time.

 

  (c) If a Borrower fails to deliver a Selection Notice to the Facility Agents and the Intercreditor Agent in accordance with Clause 7.1(b), the relevant Interest Period, subject to Clause 7.1(d), shall be three months.

 

2 

The compounding of interest under Luxembourg law is only possible on an annual basis.

 

22


  (d) Subject to this Clause 7.1, a Borrower may select an Interest Period of three or six months or any other period agreed between the Borrower and the Intercreditor Agent.

 

  (e) A Borrower may select an Interest Period of less than three months or six months, if necessary to ensure that there are Loans (with an aggregate outstanding amount equal to or greater than the repayment instalment) that have an Interest Period ending on a Repayment Date for such Borrower to make the repayment instalment due on that Repayment Date.

 

  (f) In the case of the first Interest Period of a Utilisation of a Term Loan, a Borrower shall select an Interest Period of less than three or six months if required to ensure that such first Interest Period ends on the same day as each Interest Period for any previous Utilisation of such Term Loan.

 

  (g) An Interest Period for a Loan shall not extend beyond the Final Repayment Date for the relevant Term Loan.

 

  (h) Each Interest Period for a Loan shall start on the Utilisation Date or (if already made) on the last day of its preceding Interest Period.

 

7.2 Non-Business Days

If an Interest Period otherwise would end on a day that is not a Business Day, such Interest Period shall end on the next succeeding Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

 

7.3 Consolidation of Loans

If two or more Interest Periods:

 

  (a) relate to Loans made by the same Lenders and to the same Borrower; and

 

  (b) end on the same date,

those Loans shall be consolidated into, and treated as, a single Loan on the last day of the Interest Period.

 

8. CHANGES TO THE CALCULATION OF INTEREST

 

8.1 Absence of quotations

Subject to Clause 8.2, if LIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by the Specified Time on the Quotation Day, the applicable LIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.

 

8.2 Market disruption

If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on the share of each Lender (other than the share of the GIEK Facility Lender if the Borrower has selected the CIRR Interest Rate in accordance with Clause 6.2) in that Loan for the Interest Period shall be the percentage rate per annum that is the sum of:

 

  (a) the Applicable Margin;

 

23


  (b) the rate notified to the Relevant Facility Agent by such Lender as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in that Loan from whatever source it reasonably may select; and

 

  (c) the Mandatory Cost, if any, applicable to such Lender’s participation in the Loan.

For the avoidance of doubt, if a Lender participating in any Loan is not affected by the relevant Market Disruption Event, the rate notified to the Relevant Facility Agent in accordance with Clause 8.2(b), shall be LIBOR applicable to the relevant Interest Period.

 

8.3 Alternative basis of interest or funding

 

  (a) If a Market Disruption Event occurs and the Intercreditor Agent or the relevant Borrower so requires, the Intercreditor Agent and the relevant Borrower shall enter into negotiations (for a period of not more than 30 days) with a view to agreeing a substitute basis for determining the rate of interest.

 

  (b) Any alternative basis for determining the rate of interest agreed in accordance with Clause 8.3(a) shall be binding on all Parties and shall continue to be the basis for determining the rate of interest in respect of the relevant Loan or Loans (other than any part of that Loan that has been provided by the GIEK Facility Lender if the Borrower has selected the CIRR Interest Rate in accordance with Clause 6.2) until the Intercreditor Agent confirms to the relevant Borrower or Borrowers that the Market Disruption Event referred to in Clause 8.3(a) no longer is continuing and thereafter that interest shall be calculated in accordance with Clause 6.1.

 

8.4 Break Costs

 

  (a) Each Borrower, within three Business Days of demand by a Secured Party, shall pay to that Secured Party its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by that Borrower on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.

 

  (b) Each Lender shall provide, as soon as reasonably practicable after a demand by the Relevant Facility Agent, a certificate confirming the amount of its Break Costs (if any) for any Interest Period in which they accrue.

 

9. FEES

 

9.1 Commitment fee

 

  (a) Subject to Clause 9.1(b), the Borrowers shall pay to each Facility Agent (for the account of each Lender for which it is the Relevant Facility Agent) a commitment fee computed at the rate of 50 per cent. of the Applicable Margin per annum on the Available Commitment of each such Lender from the date of this Agreement until the end of the Availability Period of all Term Loans.

 

  (b) Following any selection by a Borrower of the CIRR Interest Rate for the GIEK Tranche of its Term Loan in accordance with Clause 6.2, such Borrower shall pay to the GIEK Facility Agent (for the account of the GIEK Facility Lender) a commitment fee computed at the rate of 50 per cent. of the CIRR Applicable Margin per annum on the Available Commitment of the GIEK Facility Lender (in place of the commitment fee otherwise required to be paid by such Borrower to the GIEK Facility Agent in accordance with Clause 9.1(a)).

 

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  (c) The accrued commitment fee is payable by the Borrowers on the last day of each calendar quarter that ends during the Availability Period of any Term Loan, on the last day of the Availability Period of all Term Loans and, if cancelled in full, on the cancelled amount of the Commitment of each Lender in respect of the Term Loan Facility at the time the cancellation is effective.

 

9.2 Agency fee

The Borrowers shall pay to each Agent (for its own account) an agency fee in the amount and at the times agreed in the applicable Fee Letter.

 

10. TAX GROSS UP AND INDEMNITIES

 

10.1 Definitions

 

  (a) In this Agreement:

Protected Party” means a Secured Party that is or shall be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.

Tax Credit” means a credit against, relief or remission for, or repayment of any Tax.

Tax Deduction” means a deduction or withholding for or on account of Tax from a payment under a Finance Document.

Tax Payment” means either the increase in a payment made by an Obligor to a Secured Party under Clause 10.2 or a payment under Clause 10.3.

 

  (b) Unless a contrary indication appears, in this Clause 10 a reference to “determines” or “determined” means a determination made in the absolute discretion of the Person making the determination.

 

10.2 Tax gross-up

 

  (a) Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by any Legal Requirement.

 

  (b) Promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) the Guarantor shall notify the Intercreditor Agent accordingly. Similarly, a Lender shall notify the Intercreditor Agent on becoming so aware in respect of a payment payable to such Lender. If the Intercreditor Agent receives such notification from a Lender it promptly shall notify each Obligor.

 

  (c) If a Tax Deduction is required by any Legal Requirement to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount that (after making any Tax Deduction) leaves an amount equal to the payment that would have been due if no Tax Deduction had been required.

 

  (d) A payment shall not be increased under Clause 10.2(c) by reason of a Tax Deduction if on the date on which the payment falls due the Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without the Tax Deduction had that Lender complied with its obligations under Clause 10.2(g).

 

25


  (e) If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by any applicable Legal Requirement.

 

  (f) Within 30 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Secured Party entitled to the payment, evidence reasonably satisfactory to that Secured Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant Taxing Authority.

 

  (g) Each Lender and each Obligor shall co-operate in completing any procedural formalities necessary for that Obligor to obtain authorisation to make any payment without a Tax Deduction.

 

10.3 Tax indemnity

 

  (a) Within three Business Days of demand by the Intercreditor Agent (on behalf of a Protected Party) an Obligor shall pay to such Protected Party an amount equal to the loss, liability or cost that such Protected Party determines shall be or has been (directly or indirectly) suffered for or on account of Tax by such Protected Party in respect of a Finance Document.

 

  (b) Clause 10.3(a) shall not apply:

 

  (i) with respect to any Tax assessed on a Secured Party:

 

  (A) under the law of the jurisdiction in which such Secured Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Secured Party is treated as resident for tax purposes; or

 

  (B) under the law of the jurisdiction in which such Secured Party’s Facility Office is located in respect of amounts received or receivable in such jurisdiction,

if such Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by such Secured Party; or

 

  (ii) to the extent a loss, liability or cost:

 

  (A) is compensated for by an increased payment under Clause 10.2; or

 

  (B) would have been compensated for by an increased payment under Clause 10.2 but was not so compensated solely because the exclusion in Clause 10.2(d) applied.

 

  (c) A Protected Party making, or intending to make a claim under Clause 10.3(a) promptly shall notify the Intercreditor Agent of the event that shall give, or has given, rise to the claim, following which the Intercreditor Agent shall notify each Obligor.

 

  (d) On receiving a payment from an Obligor under this Clause 10.3, a Protected Party shall notify the Intercreditor Agent.

 

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10.4 Tax Credit

If an Obligor makes a Tax Payment and the Secured Party that received such Tax Payment determines that:

 

  (a) a Tax Credit is attributable either to an increased payment of which that Tax Payment forms part, or to that Tax Payment; and

 

  (b) such Secured Party has obtained, utilised and retained that Tax Credit,

such Secured Party shall pay an amount to such Obligor that such Secured Party determines shall leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been required to be made by such Obligor.

 

10.5 Stamp taxes

Each Borrower shall pay and, within three Business Days of demand, indemnify each Secured Party against any cost, loss or liability such Secured Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.

 

10.6 VAT

 

  (a) All amounts set out or expressed in a Finance Document to be payable to a Secured Party that (in whole or in part) constitute the consideration for a supply or supplies for VAT purposes shall be deemed to be exclusive of any VAT that is chargeable on such supply or supplies, and accordingly, subject to Clause 10.6(b), if VAT is or becomes chargeable on any supply made by any Secured Party to any Person under a Finance Document, that Person shall pay to such Secured Party (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of such VAT (and such Secured Party shall promptly provide an appropriate VAT invoice to such Person).

 

  (b) If VAT is or becomes chargeable on any supply made by any Secured Party (the “Supplier”) to any other Secured Party (the “Recipient”) under a Finance Document, and any Person other than the Recipient (the “Subject Party”) is required by the terms of any Finance Document to pay an amount equal to the consideration for such supply to the Supplier (rather than being required to reimburse the Recipient in respect of that consideration), such Person shall also pay to the Supplier (in addition to and at the same time as paying such amount) an amount equal to the amount of such VAT. The Recipient promptly shall pay to the Subject Party an amount equal to any credit or repayment obtained by the Recipient from the relevant tax authority that the Recipient reasonably determines is in respect of such VAT.

 

  (c) Where a Finance Document requires any Person to reimburse or indemnify a Secured Party for any cost or expense, that Person shall reimburse or indemnify (as the case may be) such Secured Party for the full amount of such cost or expense, including such part thereof as represents VAT, save to the extent that such Secured Party reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant Taxing Authority.

 

  (d) Any reference in this Clause 10.6 to any Party shall, at any time when such Party is treated as a member of a group for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to the representative member of such group at such time (the term “representative member” to have the same meaning as in the Value Added Tax Act 1994).

 

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11. INCREASED COSTS

 

11.1 Increased costs

 

  (a) Subject to Clause 11.3, within seven Business Days of a demand by the Intercreditor Agent, each Obligor shall pay for the account of a Secured Party the amount of any Increased Costs incurred by that Secured Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any Legal Requirement or (ii) compliance with any Legal Requirement made after the date of this Agreement.

 

  (b) In this Agreement “Increased Costs” means:

 

  (i) a reduction in the rate of return from the Term Loan Facility or on a Secured Party’s (or its Affiliate’s) overall capital;

 

  (ii) an additional or increased cost; or

 

  (iii) a reduction of any amount due and payable under any Finance Document,

that is incurred or suffered by a Secured Party or any of its Affiliates to the extent that it is attributable to that Secured Party having entered into any Finance Document, its Commitment or funding or performing its obligations under any Finance Document.

 

11.2 Increased cost claims

 

  (a) A Secured Party intending to make a claim in accordance with Clause 11.1 shall notify the Intercreditor Agent of the event giving rise to the claim, following which the Intercreditor Agent promptly shall notify the relevant Obligor.

 

  (b) As soon as practicable after a demand by the Intercreditor Agent, each Secured Party shall provide a certificate confirming the amount of its Increased Costs.

 

11.3 Exceptions

Clause 11.1 does not apply to the extent any Increased Cost is:

 

  (a) attributable to a Tax Deduction required by any Legal Requirement to be made by an Obligor;

 

  (b) compensated for by Clause 10.3 (or would have been compensated for under Clause 10.3 but was not so compensated solely because any of the exclusions in Clause 10.3(b) applied);

 

  (c) compensated for by the payment of the Mandatory Cost; or

 

  (d) attributable to the wilful breach by the relevant Secured Party or its Affiliates of any Legal Requirement.

 

12. OTHER INDEMNITIES

12.1 Currency indemnity

 

  (a) If any sum due from an Obligor under the Finance Documents (a “Sum”), or any order, judgment or award given or made in relation to a Sum, must be converted from the currency (the “First Currency”) in which that Sum is payable into another currency (the “Second Currency”) for the purpose of:

 

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  (i) making or filing a claim or proof against that Obligor; or

 

  (ii) obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

that Obligor as an independent obligation, within three Business Days of demand, shall indemnify each Secured Party to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that Person at the time of its receipt of that Sum.

 

  (b) Each Obligor waives any right it may have in any jurisdiction to pay any amount under any Finance Document in a currency or currency unit other than that in which it is expressed to be payable.

 

12.2 General indemnity

 

  (a) Each Borrower shall indemnify and hold harmless each Secured Party and such Secured Party’s officers, directors, employees, representatives and agents (together with the Secured Parties, each an “Indemnified Person”), from and against all losses, liabilities, expenses, claims, and damages (“Losses”) arising from claims of third parties against any Indemnified Person or otherwise incurred by reason of any Indemnified Person’s participation in the transactions contemplated by any Finance Document including without limitation any and all such Losses arising in connection with the release or presence of any hazardous substance by any Vessel, including all costs of:

 

  (i) removal and disposal of any such substance;

 

  (ii) all reasonable and documented costs required to cause the Vessels to be in compliance with all applicable environmental standards and Legal Requirements; and

 

  (iii) all reasonable and documented costs arising from such claims for damages to Persons or property as a result of the release or presence of any hazardous substances by a Vessel or as a result of a violation of applicable environmental standards or applicable Legal Requirements,

and shall reimburse any Indemnified Person in respect of any such amount paid by such Indemnified Person to any such third party, except to the extent resulting from the gross negligence, wilful misconduct or fraud of such Indemnified Person or any of its officers, employees or agents.

 

  (b) The obligations of the Obligors set forth in Clause 12.1 and in Clause 12.2 shall survive the termination of the Finance Documents and any resignation or removal of any Agent.

 

12.3 Other indemnities

Within three Business Days’ of demand, each Borrower shall indemnify each Secured Party against any cost, loss or liability incurred by that Secured Party as a result of:

 

  (a) the occurrence of any Event of Default;

 

29


  (b) a failure by such Obligor to pay any amount due under a Finance Document on its due date;

 

  (c) funding, or making arrangements to fund, its participation in a Loan requested by such Obligor in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Secured Party alone); or

 

  (d) a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment given to such Obligor.

12.4 Indemnity of Agents

Each Borrower promptly shall indemnify each Agent against any cost, loss or liability incurred by it (acting reasonably) as a result of:

 

  (a) investigating any event that it reasonably believes is an Event of Default or Potential Event of Default; or

 

  (b) acting or relying on any notice, request or instruction that it reasonably believes to be genuine, correct and appropriately authorised.

 

13. MITIGATION BY THE LENDERS

 

13.1 Mitigation

 

  (a) Each Secured Party, in consultation with the relevant Obligor or Obligors, shall take all reasonable steps to mitigate any circumstances that arise and that would result in any amount becoming payable under or in accordance with, or cancelled in accordance with, any of Clause 5.7, Clause 10, Clause 11 or paragraph 3 of Schedule 7 including, in the case of any Lender, transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.

 

  (b) Clause 13.1(a) does not in any way limit the obligations of any Obligor under any Finance Document.

 

13.2 Limitation of liability

 

  (a) Each Obligor promptly shall indemnify each Secured Party for all costs and expenses reasonably incurred by such Secured Party as a result of steps taken by it under Clause 13.1.

 

  (b) A Secured Party is not obliged to take any steps under Clause 13.1 if, in the opinion of that Secured Party (acting reasonably), to do so might be prejudicial to it.

 

14. COSTS AND EXPENSES

14.1 Transaction expenses

The Borrowers within three Business Days of demand shall pay to each Secured Party the amount of all costs and expenses (including legal fees) reasonably incurred by such Secured Party in connection with the negotiation, preparation, printing, execution and syndication of:

 

  (a) this Agreement, the other Finance Documents and any other documents referred to in this Agreement; and

 

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  (b) any other Finance Documents executed after the date of this Agreement.

 

14.2 Amendment costs

If an Obligor requests an amendment, waiver or consent, within three Business Days of demand, the Borrowers shall reimburse each Secured Party for the amount of all costs and expenses (including legal fees) reasonably incurred by such Secured Party in responding to, evaluating, negotiating or complying with that request.

 

14.3 Enforcement costs

Within three Business Days of demand, the Borrowers shall pay to each Secured Party the amount of all costs and expenses (including legal fees) incurred by such Secured Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

 

15. GUARANTEE

 

15.1 Guarantee and indemnity

The Guarantor irrevocably and unconditionally:

 

  (a) guarantees to each Secured Party punctual performance by each Borrower of all that Borrower’s obligations under the Finance Documents;

 

  (b) undertakes with each Secured Party that whenever a Borrower does not pay any amount when due under or in connection with any Finance Document, the Guarantor immediately on demand shall pay that amount as if it were the principal obligor; and

 

  (c) agrees with each Secured Party that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, as an independent and primary obligation, it shall indemnify that Secured Party immediately on demand against any cost, loss or liability it incurs as a result of a Borrower not paying any amount that, but for such unenforceability, invalidity or illegality, would have been payable by it under any Finance Document on the date when it would have been due. The amount payable by the Guarantor under this indemnity shall not exceed the amount it would have had to pay under this Clause 15 if the amount claimed had been recoverable on the basis of a guarantee.

 

15.2 Continuing guarantee

The guarantee of the Guarantor under this Clause 15 is a continuing guarantee and shall extend to the ultimate balance of each sum payable by each Borrower under each Finance Document, regardless of any intermediate payment or discharge in whole or in part.

 

15.3 Reinstatement

If any discharge, release or arrangement (whether in respect of the obligations of any Borrower or any security for those obligations or otherwise) is made by a Secured Party in whole or in part on the basis of any payment, security or other disposition that is avoided or must be restored in insolvency, liquidation, administration or otherwise, without limitation, then the liability of the Guarantor under this Clause 15 shall continue or be reinstated as if the discharge, release or arrangement had not occurred.

 

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15.4 Waiver of defences

The obligations of the Guarantor under this Clause 15 shall not be affected by any act, omission, matter or thing that, but for this Clause 15, would reduce, release or prejudice any of its obligations under this Clause 15 (without limitation and whether or not known to it or any Secured Party) including:

 

  (a) any time, waiver or consent granted to, or composition with, any Borrower or other Person;

 

  (b) the release of any Borrower or any other Person under the terms of any composition or arrangement with any creditor of any Obligor;

 

  (c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Borrower or other Person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

 

  (d) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of a Borrower or any other Person;

 

  (e) any amendment (however fundamental and whether or not more onerous) of any Finance Document or any other document or security including without limitation any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or security;

 

  (f) any unenforceability, illegality or invalidity of any obligation of any Person under any Finance Document or any other document or security; or

 

  (g) any insolvency or similar proceedings.

 

15.5 Immediate recourse

The Guarantor waives any right it may have of first requiring any Secured Party (or any trustee or agent on its behalf) to proceed against or enforce any other right or security or claim payment from any Person before claiming from the Guarantor under this Clause 15. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.

 

15.6 Appropriations

Until all amounts that may be or become payable by each Borrower under or in connection with each Finance Document irrevocably have been paid in full, each Secured Party (or any trustee or agent on its behalf) may:

 

  (a) refrain from applying or enforcing any other moneys, security or rights held or received by that Secured Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and the Guarantor shall not be entitled to the benefit of the same; and

 

  (b) hold in an interest-bearing suspense account any moneys received from the Guarantor or on account of the Guarantor’s liability under this Clause 15.

 

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15.7 Deferral of Guarantor’s rights

Until all amounts that may be or become payable by each Borrower under or in connection with each Finance Document irrevocably have been paid in full and unless otherwise instructed by the Intercreditor Agent, the Guarantor shall not exercise any rights that it may have by reason of performance by it of its obligations under the Finance Documents or by reason of any amount being payable, or liability arising, under this Clause 15:

 

  (a) to be indemnified by any Borrower;

 

  (b) to claim any contribution from any other guarantor of any Borrower’s obligations under the Finance Documents;

 

  (c) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any right of any Secured Party under any Finance Document, or of any other guarantee or security taken pursuant to, or in connection with, any Finance Document by any Secured Party;

 

  (d) to bring legal or other proceedings for an order requiring any Borrower to make any payment, or perform any obligation, in respect of which the Guarantor has given a guarantee, undertaking or indemnity;

 

  (e) to exercise any right of set-off against any Borrower; and/or

 

  (f) to claim or prove as a creditor of any Borrower in competition with any Secured Party.

If the Guarantor receives any benefit, payment or distribution in relation to any such right it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts that may be or become payable to the Secured Parties by the Borrowers under or in connection with the Finance Documents to be repaid in full on trust for the Secured Parties and promptly shall pay or transfer the same to the Intercreditor Agent or as otherwise instructed by the Intercreditor Agent for application in accordance with the Finance Documents.

 

15.8 Additional security

The guarantee of the Guarantor under this Clause 15 is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any Secured Party.

 

16. EQUITY AND COST OVERRUNS

 

16.1 Equity Undertaking

If at any time after the First Utilisation Date, the aggregate amount of Equity contributed to the Borrowers prior to such time and that has not been refunded in accordance with Clause 16.3 (the “Contributed Equity”) is less than the Required Equity Amount, the Guarantor undertakes to each Borrower and each Secured Party promptly (and promptly on demand by any Secured Party) to contribute Equity to the Borrowers in the amount equal to the difference between the Required Equity Amount and the amount of Contributed Equity.

 

16.2 Cost Overrun Undertaking

 

  (a) If at any time the Total Project Costs exceeds the aggregate of:

 

  (i) the Estimated Delivered Cost of all Vessels; and

 

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  (ii) the amount of any prior Cost Overrun Undertaking Proceeds provided by the Guarantor in accordance with Clause 16.2(b),

(a “Vessel Cost Overrun”), the Guarantor promptly shall notify the Security Trustee and the Intercreditor Agent of such Vessel Cost Overrun specifying the amount of such Vessel Cost Overrun.

 

  (b) Following the determination of a Vessel Cost Overrun in accordance with Clause 16.2(a), the Guarantor undertakes to each Borrower and to each Secured Party promptly to contribute to the Borrowers an amount equal to the amount of the relevant Vessel Cost Overrun, as and when the same is required in order to fund such Vessel Cost Overrun and any Borrower receiving such funds undertakes to apply such funds to Permitted Uses in connection with such Vessel Cost Overrun.

 

16.3 Refund of Equity following Vessel delivery and entry into Acceptable Charter or Alternative Charter

If (x) at any time after the Delivery Date of its Vessel and until and including the date of the final Utilisation of its Term Loan or, (y) in respect of an Alternative Arrangement Borrower, following the date on which any Excess Proceeds are paid into the Disbursement Account of such Alternative Arrangement Borrower in accordance with Clause 26.18(e):

 

  (a) a Borrower certifies in an Officer’s Certificate delivered to the Intercreditor Agent, at such time, that:

 

  (i) an Acceptable Charter or Alternative Charter is in place in respect of its Vessel;

 

  (ii) the aggregate of Equity contributed (and that remains contributed) to such Borrower and any Excess Proceeds that have been transferred to such Disbursement Account is greater than such Borrower’s Allocable Equity Share (the amount of such excess being the “Permitted Equity Refund Amount”); and

 

  (iii) following any proposed distribution in accordance with this Clause 16.3, the Equity contributed (and that remains contributed) to such Borrower will not be less than such Borrower’s Allocable Equity Share; and

 

  (b) the Guarantor certifies in an Officer’s Certificate delivered to the Intercreditor Agent that the Contributed Equity at such time is no less than the Required Equity Amount (and following any proposed distribution in accordance with this Clause 16.3 the Contributed Equity will not be less than the Required Equity Amount) and that there is no Vessel Cost Overrun that has not been funded in accordance with Clause 16.2,

then such Borrower shall have the right, notwithstanding Clause 26.10, to use any Proceeds (other than Cost Overrun Undertaking Proceeds) or, in respect of an Alternative Arrangement Borrower, any Excess Proceeds that are paid into its Disbursement Account in accordance with Clause 26.18(e), to make a distribution to the Guarantor of an amount equal to no more than the Permitted Equity Refund Amount provided that:

 

  (i) no Event of Default or Potential Event of Default shall have occurred and be continuing or would result from such distribution; and

 

34


  (ii) each of the Obligors and QPML are in compliance with all of their obligations under each Finance Document as at the date of such distribution, both before and after giving effect to such distribution.

 

16.4 Reallocation of Equity

 

  (a) Subject to the requirement that the Contributed Equity always be at least equal to the Required Equity Amount and subject to Clause 16.2(b) and Clause 26.2, at any time and notwithstanding Clause 16.3 or Clause 26.10, a Borrower may transfer to the Guarantor Equity Account an amount up to the Permitted Equity Refund Amount in relation to such Borrower.

 

  (b) Subject to Clause 26.2, the Guarantor may withdraw funds from the Guarantor Equity Account and pay such funds to the Disbursement Account of any Borrower as a contribution of Equity or as Cost Overrun Undertaking Proceeds. The Guarantor shall give notice to the Intercreditor Agent at the time of making any such payment as to whether such funds are to be treated for the purposes of this Agreement as Equity or Cost Overrun Undertaking Proceeds.

 

16.5 Charterer Furnished Items

 

  (a) The Guarantor may contribute funds to a Borrower to cover any costs and expenses to be incurred by such Borrower in fulfilling such Borrower’s obligations under any Acceptable Charter or Alternative Charter to provide any Charterer Furnished Items (a “Guarantor Contribution”). A Guarantor Contribution shall be made as and when such funds are required by such Borrower to pay the costs and expenses in respect of Charterer Furnished Items. Each Borrower undertakes to apply any Guarantor Contribution solely to the costs and expenses of Charterer Furnished Items.

 

  (b) If a Borrower has received and applied one or more Guarantor Contributions in accordance with Clause 16.5(a) and such Borrower receives from the relevant Acceptable Charterer (in accordance with the terms of the relevant Acceptable Charter) or Alternative Charter reimbursement of any costs and expenses previously funded through one or more Guarantor Contributions, then such Borrower shall have the right, notwithstanding Clause 26.10, to use such reimbursement amount to make a distribution to the Guarantor in an amount not greater than the relevant Guarantor Contributions, provided that:

 

  (i) no Event of Default or Potential Event of Default shall have occurred and being continuing or would result from such distribution; and

 

  (ii) each Obligor is in compliance with all of its obligations under each Finance Document as at the date of such distribution, both before and after giving effect to such distribution.

 

  (c) For the avoidance of doubt:

 

  (i) no Guarantor Contribution shall constitute Equity Undertaking Proceeds or Cost Overrun Undertaking Proceeds or be treated as Equity for any purpose; and

 

  (ii) the amount of any costs and expenses incurred by the Borrower in respect of any Charterer Furnished Items shall not be counted towards, or be considered as part of, the Delivered Cost of any Vessel.

 

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17. REPRESENTATIONS AND WARRANTIES

 

17.1 General

 

  (a) Each Obligor (other than the Guarantor in respect of those representations and warranties set out in Clauses 17.22, 17.24 and 17.26 to 17.29 and, in respect of Clause 17.8, only the Guarantor) makes each representation and warranty set out in this Clause 17 to and in favour of each Secured Party as of the date of this Agreement.

 

  (b) The Repeating Representations are deemed to be made by each Obligor (other than the Guarantor in respect of those representations and warranties set out in Clauses 17.22, 17.24 and 17.26 to 17.29 and, in respect of Clause 17.8, only the Guarantor) by reference to the facts and circumstances then existing on:

 

  (i) the Financing Date; and

 

  (ii) the date of each Utilisation Request, each Utilisation Date and, the first day of each Interest Period.

 

  (c) Each representation and warranty set out in this Clause 17 shall survive the date of this Agreement, the Financing Date and each Utilisation.

 

17.2 Organisation

It:

 

  (a) is a corporation duly organised, validly existing and in good standing under the laws of:

 

  (i) Liberia, in the case of Pacific Bora Ltd., Pacific Mistral Ltd. and Pacific Scirocco Ltd.; and

 

  (ii) Luxembourg, in the case of Pacific Santa Ana S.à r.l.

 

  (b) other than as shown in the corporate structure chart on page 5 of the supplement to the Information Memorandum, dated 16 August 2010, in respect of the Guarantor only, does not have any Subsidiaries or own any shares, capital stock, equity or other interest in any other Person; and

 

  (c) has all requisite corporate power and authority to:

 

  (i) own or hold under lease and operate the assets it purports to own or hold under lease;

 

  (ii) carry on its business as currently being conducted and as currently proposed to be conducted; and

 

  (iii) execute, deliver and perform its obligations under each Transaction Document to which it is a party.

 

17.3 Authorisation

It has or, upon execution of the same if the date for execution thereof has not yet occurred, will have duly authorised, executed and, if the same is in the form of a deed or its equivalent, delivered each Transaction Document to which it is a party.

 

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17.4 Legality, validity and enforceability

Each Transaction Document to which it is a party is a legally valid and binding obligation of it enforceable against it in accordance with the terms of such document except:

 

  (a) as may be limited by bankruptcy, insolvency, moratorium or other similar Legal Requirements affecting the enforcement of creditors’ rights generally; and

 

  (b) as enforceability thereof may be subject to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity.

 

17.5 Compliance with Legal Requirements and Consents

It is in compliance:

 

  (a) in all material respects with:

 

  (i) each Material Agreement to which it is party; and

 

  (ii) each Consent applicable to it or any of its assets;

 

  (b) in all respects with each Legal Requirement applicable to it or any of its assets.

 

17.6 Consent

Subject to the Reservations, each Consent required:

 

  (a) to enable it lawfully to enter into, exercise its rights and comply with its obligations in each Transaction Document to which it is party; and

 

  (b) to make each Transaction Document to which it is party admissible in evidence in its jurisdiction of incorporation,

has been obtained or effected and is in full force and effect.

 

17.7 No proceedings

There are no pending or, to its knowledge, threatened actions, suits, proceedings or investigations of any kind, including any arbitration proceedings or actions or proceedings of or before any Governmental Instrumentality, to which it is a party or to which any of its assets are subject, the claims of which, in the aggregate in respect of all such actions, suits, proceedings or investigations, exceed 5,000,000 Dollars (or the equivalent thereof in another currency or currencies) and, if adversely determined, that reasonably could be expected to have a Material Adverse Effect.

 

17.8 Financial Statements and Summary Financial Statements

 

  (a) In the case of the Guarantor, each set of its Financial Statements and Summary Financial Statements (as at the date at which such Financial Statements or Summary Financial Statements are prepared) delivered to the Intercreditor Agent prior to the date of this Agreement or in accordance with Clause 19.4, has been prepared in accordance with IFRS or, where each Obligor employs US GAAP in respect of its financial accounting, US GAAP, in each case in good faith, and on a reasonable basis, and presents fairly:

 

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  (i) in the case of the Financial Statements, the financial condition and operations of the Guarantor Group (on a consolidated basis) as at the date of such Financial Statements; and

 

  (ii) in the case of the Summary Financial Statements, each Obligor’s financial condition and operations as at the date of such Summary Financial Statements.

 

  (b) There has been no material adverse change in the business or financial condition of the Group since the date of its most recent Financial Statements provided in connection with the Information Memorandum being 31 December 2009.

 

  (c) There has been no material adverse change in the business or financial condition of the Group since the date of its most recent Financial Statements and Summary Financial Statements delivered in accordance with Clause 19.4.

 

17.9  Security Interests

Subject only to the Reservations and to the applicable qualifications set out in the legal opinions delivered to the Intercreditor Agent in accordance with this Agreement:

 

  (a) each Security Document to which it is party creates legally valid, binding and enforceable Security Interests (that such Security Document purports to create) over the assets that are the subject of such Security Document;

 

  (b) to the extent applicable, each action that reasonably is necessary to perfect the Secured Parties’ rights in and to the Secured Collateral and that can be taken by the relevant Obligor has been taken;

 

  (c) other than in respect of any Permitted Security, the Security granted under each Security Document to which it is party has or shall have first ranking priority and is not subject to any prior ranking or pari passu ranking; and

 

  (d) it is the sole legal and beneficial owner of each asset over which it purports to grant any Security Interest in accordance with any Security Document to which it is party.

 

17.10   Existing defaults

 

  (a) It is not in breach or default of any material obligation under any Material Agreement to which it is party.

 

  (b) To the best of its knowledge and belief, no Person (other than any Obligor) party to any Material Agreement is in breach or default of any material obligation under such Material Agreement.

 

17.11   Governing law and enforcement

 

  (a) The choice of English law as the governing law of any Finance Document stated to be governed by such law and to which it is a party is valid and binding on it.

 

  (b) Any judgment obtained in England in relation to any Finance Document governed by English law and to which it is a party is valid and binding on it.

 

  (c) The choice of the law of the State of New York as the governing law of any Finance Document stated to be governed by such law and to which it is a party is valid and binding on it.

 

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  (d) Any judgment obtained in the State of New York in relation to any Finance Document governed by the law of the State of New York and to which it is a party is valid and binding on it.

 

  (e) The choice of the law of the Federal Republic of Nigeria as the governing law of any Finance Document stated to be governed by such law and to which it is a party is valid and binding on it.

 

  (f) Any judgment obtained in the Federal Republic of Nigeria in relation to any Finance Document governed by the law of the Federal Republic of Nigeria and to which it is a party is valid and binding on it.

 

  (g) The choice of Norwegian law as the governing law of any Finance Document stated to be governed by such law and to which it is a party is valid and binding on it.

 

  (h) Any judgment obtained in Norway in relation to any Finance Document governed by Norwegian law and to which it is a party is valid and binding on it.

 

  (i) The choice of the laws of Luxembourg as the governing law of any Finance Document stated to be governed by such law and to which it is a party is valid and binding on it.

 

  (j) Any judgment obtained in Luxembourg in relation to any Finance Document governed by the laws of Luxembourg and to which it is a party is valid and binding on it.

 

  (k) The choice of the laws of Brazil as the governing law of any Finance Document stated to be governed by such law and to which it is a party is valid and binding on it.

 

  (l) Any judgment obtained in Brazil in relation to any Finance Document governed by the laws of Brazil and to which it is a party is valid and binding on it.

 

17.12   Deduction of Tax

It is not required to make any deduction for or on account of Tax from any payment it is required to make under any Finance Document.

 

17.13   No filing or stamp taxes

Under the Legal Requirements of Liberia, Luxembourg, England and Wales, the State of New York, Norway and Brazil it is not necessary that any Finance Document be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to any Finance Document or any transaction contemplated by any Finance Document, except for the recording of the Mortgages with the Office of the Deputy Commission of Maritime Affairs of the Republic of Liberia.

 

17.14   Taxes

It:

 

  (a) has filed, or caused to be filed, all Tax returns that are required to have been filed by it in any jurisdiction; and

 

  (b)

has paid all Taxes and other assessments due and payable by it (other than those Taxes and other assessments that are being contested in good faith by appropriate

 

39


  proceedings and for which adequate reserves have been established in accordance with IFRS or, where each Obligor employs US GAAP in respect of its financial accounting, US GAAP).

 

17.15   No other business

It has not conducted and presently does not conduct any business other than:

 

  (a) in the case of a Borrower, its entry into and performance of its obligations under each Transaction Document to which it is party, the ownership and chartering of its Vessel and all business ancillary to such activities; and

 

  (b) in the case of the Guarantor, its entry into and performance of its obligations under each Transaction Document to which it is party, the ownership of the common stock of its Subsidiaries and all business ancillary to such ownership.

 

17.16   Capital stock

The description of its authorised, issued and outstanding capital stock or, as the case may be, shares set out in Schedule 8 is true and correct.

 

17.17   Representations and warranties

Each representation and warranty of it contained in any Transaction Document to which it is party and in any instrument, agreement or certificate delivered with respect thereto or in connection therewith is true and correct in all material respects as of the last date on which it was required to be repeated thereunder (other than any representation or warranty in any Material Agreement that in accordance with the terms thereof does not repeat, in which case such representation or warranty shall only be required to be true and correct as of the date it was made in such Material Agreement).

 

17.18   Information Memorandum

 

  (a) Any factual information provided by any Obligor for the purposes of the Information Memorandum was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it was stated.

 

  (b) The financial projections contained in the Information Memorandum have been prepared on the basis of recent historical information and on the basis of reasonable assumptions.

 

  (c) Nothing has occurred or been omitted from the Information Memorandum and no information has been given or withheld that results in the information contained in the Information Memorandum being untrue or misleading in any material respect.

 

  (d) Since the date of the Information Memorandum, no event or circumstance has occurred that would render any information given in the Information Memorandum inaccurate, untrue or incomplete in any material respect.

 

  (e) The corporate structure chart on page 5 of the supplement to the Information Memorandum, dated 16 August 2010, is true, complete and accurate in all respects.

 

  (f) Notwithstanding the foregoing Clauses 17.18(a) to 17.18(e), no Obligor shall be deemed to give any representation or warranty with respect to any information or projection contained in the Information Memorandum that is indicated in the Information Memorandum as having been provided by or prepared by any third party.

 

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17.19   Pari passu ranking

Its payment obligations under each Finance Document to which it is party shall rank at least pari passu in right of payment with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by any Legal Requirement applying to companies generally.

 

17.20   No default

No Event of Default or Potential Event of Default has occurred and is continuing or reasonably might be expected to result from the making of any Utilisation.

 

17.21   No conflict

Neither the execution nor delivery of any Transaction Document to which it is a party nor its performance of the transactions contemplated thereby does or shall:

 

  (a) contravene any provision of its constitutional documents or any other Legal Requirement then applicable to, or binding on, it;

 

  (b) conflict with, or is or shall be inconsistent with, or has resulted or shall result in any breach or termination event of, or has constituted or shall constitute any default under, or has resulted or shall result in or requires or shall require the creation of any Security Interest upon any of its assets under, any agreement or instrument to which it is a party or by which it or any of its assets are or will be bound or to which it is subject (other than Permitted Security);

 

  (c) contravene any of its contractual obligations; or

 

  (d) other than with respect to any Consent that is or will be required with respect to itself or any of its assets, require the consent or approval of any Person that has not already been obtained or shall be obtained by the time it is required.

 

17.22   Environment

 

  (a) It has complied with the provisions of each environmental Legal Requirement applicable to its Vessel.

 

  (b) It has obtained all requisite environmental Consents applicable to its Vessel and is in compliance with each such environmental Consent.

 

  (c) There is no pending or, to its knowledge, threatened action, suit, proceeding or investigation of any kind in respect of its Vessel, relating to the environment, including any arbitration proceeding or actions or proceeding of or before any Governmental Instrumentality, to which it is a party or is subject.

 

  (d) There has been no material release of Hazardous Materials in connection with the operation of its Vessel.

 

17.23   Immunity

 

  (a) The execution by it of each Transaction Document to which it is a party constitutes, and the exercise by it of its respective rights and performance of its respective obligations under each such document shall constitute, private and commercial acts performed for private and commercial purposes.

 

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  (b) It is not entitled to claim sovereign immunity from suit, execution, attachment or other legal process in any proceedings taken in its jurisdiction of incorporation or any other jurisdiction in relation to any Transaction Document.

 

17.24   No sharing of earnings

There is not, nor shall there be, an agreement or arrangement whereby an amount received, currently or at any time in the future, by it under any Acceptable Charter or any Alternative Charter to which it is party may be shared with any Person except in accordance with Clause 26.17.

 

17.25   Insolvency

It is not bankrupt, insolvent nor unable (nor admits, nor has admitted its inability) to pay its debts, by reason of actual or anticipated financial difficulties, nor has it commenced, nor does it intend to commence, negotiations with one or more of its creditors with a view to rescheduling any of its Financial Indebtedness or to make any declaration of moratorium in respect of its Financial Indebtedness.

 

17.26   No amendment

No amendment has been made to any Shipbuilding Contract since the date of such Shipbuilding Contract (other than any such amendment that has been given to the Intercreditor Agent and is either referred to in Schedule 21 or, if made after the date of this Agreement, is made in accordance with the terms of this Agreement).

 

17.27   No Termination

No Acceptable Charterer has given any notice to it to terminate any Shipbuilding Contract or any Acceptable Charter or Alternative Charter, in each case to which it is party and it is not aware of any circumstance that would give rise to such Acceptable Charterer’s right to terminate any such Shipbuilding Contract or any such Acceptable Charter or Alternative Charter.

 

17.28   No Assignment

To the best of its knowledge and belief having made due enquiry, no Acceptable Charterer has:

 

  (a) assigned or transferred such Acceptable Charterer’s rights or obligations under the Acceptable Charter or Alternative Charter to which such Borrower is party other than (i) pursuant to an assignment or transfer by Total E&P Nigeria Limited to a Current Participant as contemplated by Clause 5.14(a)), (ii) pursuant to an assignment or transfer by Petrobras to a Qualifying Petrobras Affiliate, or (iii) to a security trustee (for the benefit of any Person providing financing to such Acceptable Charterer); or

 

  (b) sublet any Vessel to any Person, other than in accordance with the relevant Acceptable Charter or Alternative Charter.

 

17.29   No Force Majeure Notice

No Acceptable Charterer has given to it or received from it any notice of force majeure under any Acceptable Charter or Alternative Charter, in each case to which such Acceptable Charterer is party where the event of force majeure in respect of which such notice is given reasonably could be expected to have a Material Adverse Effect.

 

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17.30   Consolidated Subsidiaries of PDSA

 

  (a) It is consolidated in the financial statements of PDSA.

 

  (b) Each of the Manager and PDI is consolidated in the financial statements of PDSA.

 

18. FINANCIAL COVENANTS

The Guarantor covenants and agrees that until the Final Discharge Date:

 

18.1 Projected DSCR

The Projected DSCR for the following four fiscal quarters shall be not less than:

 

  (a) up to and including 30 June 2012, 1.1:1.0; and

 

  (b) after 30 June 2012, 1.2:1.0.

 

18.2 Historical DSCR

The Historical DSCR for the immediately preceding four fiscal quarters shall be not less than:

 

  (a) up to and including 31 December 2013, 1.1:1.0; and

 

  (b) after 31 December 2013, 1.2:1.0.

 

18.3 Maximum leverage

It shall ensure at all times that its Leverage Ratio does not exceed 65 per cent.

 

18.4 Minimum liquidity

It shall maintain at all times Guarantor Liquidity equal to at least the then applicable Required Guarantor Liquidity Amount.

 

18.5 Times for testing covenants

On the last Business Day of each fiscal quarter of the Guarantor commencing on:

 

  (a) in the case of the Projected DSCR covenant in Clause 18.1, the last Business Day of the fiscal quarter starting after the Vessel Completion Date;

 

  (b) in the case of the Historical DSCR covenant in Clause 18.2, the earlier to occur of (a) 31 December 2012 (or if not a Business Day, the immediately preceding Business Day); and (b) the last Business Day of the fiscal quarter during which the first anniversary of the Vessel Completion Date occurs;

 

  (c) in the case of the Leverage Ratio in Clause 18.3, the last Business Day of the fiscal quarter in which this Agreement is executed; and

 

  (d) in the case of the minimum liquidity covenant in Clause 18.4, the last Business Day of the fiscal quarter in which the Delivery Date of the first Vessel to be delivered occurs,

 

43


the financial covenants set out in this Clause 18 shall be tested and in respect of such dates the Guarantor shall provide an Officer’s Certificate demonstrating compliance with such covenants in accordance with Clause 19.4(c).

 

18.6 Calculation of Projected DSCR

If any Acceptable Charter or Alternative Charter is due to expire or terminate during a specified period in respect of which the Projected DSCR is calculated, the calculation of the Projected DSCR for the purposes of Clause 18.1 only may be based upon the assumption that such Acceptable Charter or Alternative Charter shall be renewed immediately upon the expiry or termination thereof and on the same terms and conditions as the then existing terms and conditions (other than with respect to the applicable charter day rate) and such calculation therefore may include revenue under such assumed Acceptable Charter or Alternative Charter provided that:

 

  (a) the assumed applicable charter day rate under any such assumed Acceptable Charter or Alternative Charter taken into account for the purposes of such calculation shall be the rate advised by an Approved Broker during the fiscal quarter of the Guarantor in which the Projected DSCR is tested and with reference to applicable charter day rates in the geographic region in which the relevant Vessel then is operating;

 

  (b) upon the actual expiration or termination of any such Acceptable Charter or Alternative Charter, assumed applicable charter day rates under such Acceptable Charter shall no longer be taken into account for the purposes of calculating the Projected DSCR;

 

  (c) if a replacement Acceptable Charter or Alternative Charter is entered into or the existing Acceptable Charter or Alternative Charter is renewed or extended, any calculation of the Projected DSCR shall be based upon such actual replacement or renewed or extended Acceptable Charter or Alternative Charter and not upon any assumptions as to the renewal of an Acceptable Charter or Alternative Charter as set out in this Clause 18.6;

 

  (d) such calculation shall take into account a maximum of 360 days of assumed applicable charter day rates in aggregate in respect of all Vessels; and

 

  (e) such calculation shall take into account a maximum of 270 days of assumed applicable charter day rates in aggregate in respect of any one Vessel.

 

19. AFFIRMATIVE COVENANTS

Each Borrower (and the Guarantor in respect of Clauses 19.2, 19.3, 19.4, 19.7, 19.8, 19.9(e), 19.11, 19.12, 19.13, 19.14 and 19.26 and, in respect of Clause 19.3(b), 19.4 and 19.11(b)(iv), only the Guarantor) covenants and agrees that until the Final Discharge Date it shall:

 

19.1 Use of Proceeds

Subject to the eligibility requirements under the Restricted Tranches, use the Proceeds solely for Permitted Uses.

 

19.2 Existence, conduct of business

Maintain and preserve:

 

  (a) its existence as

 

44


  (i) in the case of Pacific Bora Ltd., Pacific Mistral Ltd., and Pacific Scirocco Ltd. a Liberian corporation; and

 

  (ii) in the case of Pacific Santa Ana S.à r.l., a company existing under the laws of Luxembourg; and

 

  (b) all rights, privileges and franchises necessary in connection with the operation of its business in the ordinary course.

 

19.3 Accounts and operation of Accounts and other bank accounts of the Guarantor

 

  (a) Maintain its Accounts (other than any Operating Account, which it shall maintain with the Operating Accounts Bank) with the New York branch of the Accounts Bank and deposit, transfer or cause the transfer of any funds (including the Proceeds) received by it, in each case, in accordance with Clause 26.

 

  (b) In respect of the Guarantor only:

 

  (i) open and maintain with the New York branch of the Accounts Bank each bank account (other than its Accounts) that it opens or maintains; and

 

  (ii) except in respect of any account opened and maintained solely for the purpose of complying with Clause 18.4, if any such account is required under or otherwise opened in connection with the transactions contemplated by any Transaction Document (or the performance of any obligation under any Transaction Document) execute, record and perfect in favour of the Security Trustee, a first priority accounts pledge and an accounts control agreement, each substantially in the form set out in Schedule 29. For the avoidance of doubt, if any such account is opened by the Guarantor other than in connection with any such transaction or the performance of any such obligation, the Guarantor shall not be required to execute any accounts pledge or any accounts control agreement in respect of such account in favour of the Security Trustee and shall be permitted to deposit and withdraw funds from any such account without any restriction.

 

19.4 Annual and interim Financial Statements and compliance certificates

 

  (a) Provide the Intercreditor Agent as soon as the same are available, and in any event within 120 days after the close of each of the Guarantor’s fiscal years ending after the date of this Agreement, the Guarantor’s consolidated annual audited (by independent public accountants of recognised international standing appointed by it) Financial Statements for such fiscal year prepared on a basis consistent with IFRS or, where each Obligor employs US GAAP in respect of its financial accounting, US GAAP.

 

  (b) Provide the Intercreditor Agent as soon as the same are available, and in any event within 60 days after the close of each of the Guarantor’s fiscal quarters of each of the Guarantor’s fiscal years from the date of this Agreement, the Guarantor’s unaudited consolidated Financial Statements for such fiscal quarter prepared on a basis consistent with IFRS or, where each Obligor employs US GAAP in respect of its financial accounting, US GAAP.

 

  (c) Provide to the Intercreditor Agent together with each set of annual or quarterly Financial Statements delivered in accordance with this Clause 19.4, Summary Financial Statements detailing the financial condition of each Obligor in respect of the period to which such Summary Financial Statements relate.

 

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  (d) Provide to the Intercreditor Agent together with each set of annual or quarterly Financial Statements and Summary Financial Statements delivered in accordance with this Clause 19.4, an Officer’s Certificate of the Guarantor certifying that:

 

  (i) the relevant Financial Statements fairly represent its consolidated financial condition as at the date that such Financial Statements were drawn up and the Summary Financial Statements fairly represent the financial condition of each Obligor as at the date that such Summary Financial Statements were drawn up;

 

  (ii) it is in compliance (providing reasonably detailed supporting evidence as applicable thereof) with all of its covenants under:

 

  (A) Clause 18 that are required to be tested as at the last Business Day of the fiscal quarter to which such Financial Statements relate; and

 

  (B) Clause 16; and

 

  (iii) it and each of the Borrowers, QPML and Pacific Gibco is in compliance with all of its or their other obligations under the Finance Documents as at the date of such Officer’s Certificate.

 

19.5 Security assurance

Give such assurances and do all such things from time to time and at its own cost and expense as required by any applicable Legal Requirement or as the Security Trustee, acting reasonably, considers necessary to enable the Security Trustee to perfect, preserve, or protect any Security or to exercise any of the rights conferred on the Security Trustee.

 

19.6 Legal Requirements

Comply with all Legal Requirements (including Legal Requirements pertaining to the environment) applicable to it or any of its assets.

 

19.7 Consents

 

  (a) Promptly:

 

  (i) obtain, comply with and do all that is necessary to maintain in full force and effect; and

 

  (ii) provide certified copies to the Intercreditor Agent of,

any Consent required to enable it to perform its obligations under each Transaction Document to which it is party and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of each such Transaction Document.

 

  (b) Obtain and comply with all Consents applicable to it or any of its assets.

 

19.8 Books, accounts and records

Maintain proper books, accounts and records with respect to itself and its business in compliance with each applicable Legal Requirement and, in respect of the Guarantor only, with respect to its Financial Statements and Summary Financial Statements, prepare and maintain the same in accordance with IFRS or, where each Obligor employs US GAAP in respect of its financial accounting, US GAAP (consistently applied).

 

46


19.9 Construction Budgets, Annual Operating Budgets and associated Technical Consultant’s reports

 

  (a) Provide to the Intercreditor Agent no later than the Financing Date:

 

  (i) a Construction Budget in respect of its Vessel prepared in accordance with its customary accounting practices and with due care; and

 

  (ii) a report from the Technical Consultant in respect of such Construction Budget (which may be addressed in the report of the Technical Consultant in respect of such Borrower’s Vessel and as required to be delivered in accordance with paragraph 1.11 of Schedule 2) and commenting on such Construction Budget (including the reasonableness of the expected expenditures proposed in such Construction Budget),

in each case in form and substance satisfactory to the Intercreditor Agent.

 

  (b) If:

 

  (i) a Borrower or the Guarantor incurs or expects to incur expenditures that exceed by ten per cent. in the aggregate the amounts set forth in the relevant Borrower’s Construction Budget (other than any amounts relating to Financing Costs or incurred in respect of the turn-key, fixed sum set forth in any Shipbuilding Contract); or

 

  (ii) the actual Delivered Cost of a Vessel exceeds or is expected by the relevant Borrower or the Guarantor to exceed the Estimated Delivered Cost in respect of the relevant Vessel as set out in the Construction Budget delivered in respect of such Vessel by more than ten per cent,

in each case the Borrower promptly shall provide to the Intercreditor Agent an updated Construction Budget prepared in accordance with its customary accounting practices and with due care, together with an updated report from the Technical Consultant, in each case in form and substance satisfactory to the Intercreditor Agent.

 

  (c) Provide to the Intercreditor Agent at the same time as it submits to the Intercreditor Agent for the first time in relation to its Vessel a form of charter for approval as an Acceptable Charter or an Alternative Charter, an Initial Operating Budget in respect of its Vessel covering the period from the delivery of such Initial Operating Budget until 31 December 2011. Such Initial Operating Budget shall be prepared in accordance with the Relevant Borrower’s customary accounting practices and with due care, together with a report from the Technical Consultant in respect of such Initial Operating Budget (which may be addressed in the report of the Technical Consultant in respect of such Borrower’s Vessel and as required to be delivered in accordance with paragraph 2.12 of Schedule 2) and commenting on such Initial Operating Budget (including the reasonableness of the expected expenditures proposed in such Initial Operating Budget), in each case in form and substance satisfactory to the Intercreditor Agent.

 

  (d)

Provide to the Intercreditor Agent not less than 60 days and not more than 90 days prior to the first day of each year (commencing in 2011 in respect of an Annual Operating Budget for 2012), an Annual Operating Budget in respect of its Vessel prepared in accordance with the Relevant Borrower’s customary accounting practices and with due care, and, only if such Borrower’s Vessel commences operations in a new jurisdiction or pursuant to a new Acceptable Charter or a new Alternative Charter, together with an updated Technical Consultant’s report

 

47


  commenting on such Annual Operating Budget (including the reasonableness of the expected expenditures proposed in such Annual Operating Budget), in each case in form and substance satisfactory to the Intercreditor Agent.

 

  (e) If a Borrower or the Guarantor (or, in the case of the Mistral Charter, Pacific Drilling do Brasil Serviços de Perfuraçāo Ltda. or Pacific Drillship S.à r.l. (or any two or more of the Guarantor, Borrower, Pacific Drilling do Brasil Serviços de Perfuraçāo Ltda. and Pacific Drillship S.à r.l. collectively)) incurs or expects to incur any expenditure that exceeds the relevant line item or total expenditure as budgeted in the Initial Operating Budget or any Annual Operating Budget (as applicable) by more than five per cent., the Borrower promptly shall provide to the Intercreditor Agent written notification of the same together with a reasonably detailed explanation of any such anticipated or actual expenditure and a copy of any relevant supporting documentation in respect of the same.

 

  (f) Each Construction Budget, each Initial Operating Budget, each Annual Operating Budget and each update to any of the foregoing required by the terms of Clause 19.4 shall be delivered to the Intercreditor Agent in accordance with this Clause 19.9 together with an Officer’s Certificate of the relevant Borrower certifying the accuracy of the same.

 

  (g) Each Construction Budget, each Initial Operating Budget, each Annual Operating Budget, each Technical Consultant’s report and each update to any of the foregoing delivered in accordance with this Clause 19.9 shall be deemed approved to the extent that Majority Lenders have not objected to the form and substance of such document within 15 Business Days from the date of delivery of such document.

 

19.10 Insurances

Maintain Insurance Policies evidencing each Required Insurance required to be maintained by it.

 

19.11 Notices and other information

 

  (a) Promptly, upon acquiring or giving notice, or obtaining actual knowledge thereof (as the case may be) provide the Intercreditor Agent and the Security Trustee with notice of:

 

  (i) the occurrence of any Event of Default or Potential Event of Default under this Agreement describing in reasonable detail such Event of Default or Potential Event of Default and the steps being taken to remedy or avoid (respectively) such default;

 

  (ii) the occurrence of any litigation, claim, investigation, dispute (other than any dispute in respect of any invoice) or proceeding (including arbitration proceedings) in respect of claims in excess of 5,000,000 Dollars (or the equivalent thereof in another currency or currencies) pending, involving or affecting it and describing in reasonable detail such litigation, claim, investigation, dispute or proceeding;

 

  (iii) the occurrence of any dispute in respect of any invoice if such dispute is not resolved within 30 days of the date on which notice of the dispute first was issued by or to the relevant Obligor, describing in reasonable details such dispute;

 

48


  (iv) the occurrence of any arrest, Major Casualty Event or Total Loss of its Vessel or any other casualty event resulting in damage to its Vessel or loss of hire or charter payments in excess of 10,000,000 Dollars (or the equivalent thereof in another currency or currencies), and in each case describing in reasonable detail the circumstances thereof; and

 

  (v) the occurrence of the Delivery Date of its Vessel.

 

  (b) Promptly provide to the Intercreditor Agent:

 

  (i) upon request by the Intercreditor Agent, an Officer’s Certificate confirming that no Event of Default or Potential Event of Default is continuing;

 

  (ii) a copy of:

 

  (A) each document dispatched by it to its shareholders (or any class of them) or its creditors generally at the same time as such document is dispatched; and

 

  (B) any notice in respect of any force majeure given by it to, or received by it from, an Acceptable Charterer under any Acceptable Charter or any Alternative Charter;

 

  (iii) such further information regarding its financial condition, business and operations as any Secured Party (through the Intercreditor Agent) reasonably may request and that can be delivered without causing the relevant Obligor to be in breach of any confidentiality undertaking by which it is bound; and

 

  (iv) together with any Financial Statements delivered in accordance with Clause 19.4, an updated corporate organisation chart of the Guarantor Group if any additional Subsidiary of the Guarantor has been created since the date of the last Financial Statements to have been delivered by the Guarantor in accordance with Clause 19.4.

 

19.12   Taxes

Pay and discharge, before the same shall become delinquent, after giving effect to any applicable extensions, all Taxes assessed on it or its assets (including interest and penalties) (other than those Taxes that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with IFRS or, where each Obligor employs US GAAP in respect of its financial accounting, US GAAP).

 

19.13   Material Agreements

Unless any such non-compliance or failure to enforce otherwise is approved by the Intercreditor Agent, comply with all of its material obligations under each Material Agreement to which it is a party and enforce all of its material rights (other than any right to receive any de minimis sum of money) under each such Material Agreement.

 

19.14   Proper legal form

Take all action within its control necessary to ensure that each Material Agreement to which it is a party is in proper legal form for the enforcement thereof.

 

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19.15   Management of interest rate risk

Ensure that within 60 days of the later to occur of the first Utilisation Date in respect of its Term Loan and the signing of the first Acceptable Charter or first Alternative Charter in respect of its Vessel and at all times thereafter at least 75 per cent. of the maximum aggregate principal amount available and available to be drawn by it under the Term Loan Facility in accordance with Clause 2.1 (as such amount may be reduced in accordance with this Agreement (including pursuant to Clause 4.3(c), Clause 5.6 or Clause 5.10)) shall:

 

  (a) accrue interest at a fixed rate; or

 

  (b) benefit from interest rate hedging in accordance with Interest Hedging Instruments that in aggregate have the effect of fixing the interest rate payable on such percentage of such Term Loan.

 

19.16   Registration of Vessel

 

  (a) Procure and maintain the valid and effective provisional registration of its Vessel under the flag of Liberia.

 

  (b) Effect (or cause to be effected) the permanent registration of its Vessel under the flag of Liberia, within six months from the Delivery Date of such Vessel or such earlier date on which the provisional registration ceases to be valid and provide to the Intercreditor Agent:

 

  (i) a copy certified in an Officer’s Certificate of the relevant Obligor of the provisional certificate of registry; and

 

  (ii) a copy certified in an Officer’s Certificate of the relevant Obligor of the permanent certificate of registry,

for such Vessel in each case once issued by the Deputy Commissioner of Maritime Affairs of Liberia.

 

19.17   Customary Industry Practice

Operate and maintain its Vessel safely and in accordance with Customary Industry Practice and the requirements of the relevant Acceptable Charters and, in respect of any Alternative Arrangement Borrower, any Alternative Charters.

 

19.18   Maintenance of classification

Maintain the classification of its Vessel with one of Det Norske Veritas, the American Bureau of Shipping, or any other reputable classification society with the highest class for vessels of the same type as its Vessel and that is approved by the Intercreditor Agent.

 

19.19   Vessel Management

 

  (a) Ensure that (unless any Vessel is being chartered pursuant to an Acceptable Bareboat Charter and with the exception of the Pacific Santa Ana) its Vessel is managed, technically and commercially, by the Manager;

 

  (b) In the case of Pacific Santa Ana S.à r.l., ensure that its Vessel is managed, technically and commercially, by PDI.

 

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19.20   ISM Code

Ensure that on and from the Delivery Date of its Vessel it and its Vessel is in full compliance with the ISM Code in respect of such Vessel.

 

19.21   ISPS Code

Ensure that on and from the Delivery Date of its Vessel, it and its Vessel remains at all times in full compliance with the ISPS Code in respect of such Vessel.

 

19.22   Safety and compliance documentation

 

  (a) Furnish the Intercreditor Agent from time to time promptly on request with a copy of the Manager’s or PDSI’s “Document of Compliance”, any Vessel’s “Safety Management Certificate” or “International Ship Security Certificate” issued under the ISPS Code and any other documents necessary to evidence compliance with the ISM Code.

 

  (b) Comply with the Hurricane/Emergency Preparedness Plan in respect of its Vessel as delivered in accordance with Part 2 of Schedule 16 and promptly provide the Intercreditor Agent with any proposed amendment to such Hurricane/Emergency Preparedness Plan.

 

19.23   Acceptable Charter Direct Agreements

 

  (a) Procure that, in respect of:

 

  (i) each Acceptable Charter for its Vessel; and/or

 

  (ii) each Alternative Charter for its Vessel either:

 

  (x) with an initial term greater than 18 months; or

 

  (y) that is extended or renewed with the same Acceptable Charterer either in accordance with its express terms through the exercise of any extension option or with the approval of the Intercreditor Agent in accordance with this Agreement such that the period from the date on which any such extension option is exercised or the parties to such Acceptable Charter each have signed any such extension or renewal until the termination of such Alternative Charter (as extended or renewed) is greater than 18 months (including, for the avoidance of doubt: (1) any remaining term thereof that has not expired as at the date of such extension or renewal; and (2) the period for which such Alternative Charter has been extended or renewed beyond such initial term and, for the avoidance of doubt, excluding any period between the last day of the term of such Alternative Charter (prior to any such extension or renewal) and the first day of any extension or renewal period),

the Approved Charterer party to such Acceptable Charter or Alternative Charter enters into an Acceptable Charter Direct Agreement substantially in the form set out in Schedule 26 or such other form as may be satisfactory to the Intercreditor Agent.

 

  (b)

In respect of any Alternative Charter in respect of which an Acceptable Charter Direct Agreement is not required to be obtained in accordance with Clause

 

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  19.23(a), the relevant Alternative Arrangement Borrower shall be required to deliver to the Intercreditor Agent a notice of the assignment by way of security of such Alternative Charter acknowledged by the relevant Acceptable Charterer and in form and substance satisfactory to the Intercreditor Agent.

 

19.24   Payment instructions

 

  (a) Irrevocably instruct the Acceptable Charterer under each Acceptable Charter for its Vessel and, in respect of any Alternative Arrangement Borrower, each Alternative Charter for its Vessel to make all payments under such Acceptable Charter or Alternative Charter, except in the case of the Pacific Santa Ana:

 

  (i) into its Collection Account; or

 

  (ii) to the extent required by the relevant Acceptable Charter or Alternative Charter and permitted in accordance with this Agreement, the relevant Local Account.

 

  (b) In the case of the Pacific Santa Ana, Pacific Santa Ana S.à r.l. shall irrevocably instruct PDI to irrevocably instruct Chevron to pay all amounts due under the Chevron Drilling into the PDI Collection Account

 

  (c) In the case of the Pacific Mistral, Pacific Mistral Ltd. shall irrevocably instruct Pacific Drillship S.à r.l. to irrevocably instruct Petrobras to pay all amounts due under the Mistral Drilling Contract into the PD Sarl secured Account.

 

19.25   Obligation to rebuild or repair

If any proceeds of insurance are made available to it to rebuild or repair its Vessel and, following a Major Casualty Event, in accordance with an approved Repair Plan, to proceed diligently and in good faith with the reconstruction or repair of such Vessel.

 

19.26   “Know your customer” checks

If:

 

  (a) the introduction of or any change in (or in the interpretation, administration or application of) any Legal Requirement made after the date of this Agreement;

 

  (b) any change in the status of an Obligor after the date of this Agreement; or

 

  (c) a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,

obliges any Secured Party (or, in the case of Clause 19.26(c), any prospective new Lender) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, promptly upon the request of such Secured Party or prospective new Lender use its reasonable endeavours to supply, or procure the supply of, such documentation and other evidence as is requested by such Secured Party (for itself or on behalf of any Lender) or any Lender (for itself or, in the case of the event described in Clause 19.26(c), on behalf of any prospective new Lender) in order for such Secured Party or, in the case of the event described in Clause 19.26(c), any prospective new Lender to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable Legal Requirements in accordance with the transactions contemplated in the Finance Documents.

 

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19.27   Notice under Acceptable Charter Direct Agreement

If requested by the Security Trustee at any time in respect of its Vessel and to the extent that such Borrower is required to enter into an Acceptable Charter Direct Agreement in accordance with Clause 19.23, deliver to the Security Trustee a notice addressed to the Acceptable Charterer that is party to the Acceptable Charter or Alternative Charter for such Vessel, stating that it has no claim, and has no intention of making any claim against such Vessel, and/or such Acceptable Charterer in respect of any transfer or novation of such Acceptable Charter or Alternative Charter to the Security Trustee or any Substitute Owner (as defined in the relevant Acceptable Charter Direct Agreement to which it is party) or the entry into a new agreement by such Acceptable Charterer with a Replacement Owner (as defined in the relevant Acceptable Charter Direct Agreement) in accordance with such Acceptable Charter Direct Agreement.

 

19.28   Delivery Date obligations

 

  (a) On the Delivery Date of its Vessel:

 

  (i) execute and record in favour of the Security Trustee a first preferred mortgage substantially in the form set out in Schedule 9 and completed in accordance with Clause 19.28(b); and

 

  (ii) deliver to the Intercreditor Agent:

 

  (A) a copy certified in an Officer’s Certificate of the relevant Obligor of each of the Delivery Documents in the form required by the relevant Shipbuilding Contract; and

 

  (B) a legal opinion from counsel satisfactory to the Intercreditor Agent in form and substance satisfactory to the Intercreditor Agent and confirming, among other things, the enforceability, and due execution by such Borrower, of the mortgage referred to in Clause 19.28(a)(i).

 

  (b) In respect of each mortgage required to be executed in accordance with Clause 19.28(a), the:

 

  (i) maximum amount stated in such mortgage shall be equal to the total amount of the Senior Debt Obligations at the date of execution of such Mortgage by such Borrower; and

 

  (ii) the maturity date stated in such mortgage, at the time such mortgage is executed, shall be the latest date on which the principal or notional (as the case may be) amount of any Senior Debt Obligations is due and payable.

Any amount or date required to complete any mortgage shall be determined by the Intercreditor Agent on the basis of information supplied to it by the Secured Parties.

 

  (c) If at any time following the execution of any mortgage in accordance with Clause 19.28(a), any Secured Party in its reasonable discretion considers that:

 

  (i) the maximum amount stated in the mortgage; or

 

  (ii) the maturity date stated in such mortgage,

no longer may be adequate to secure the total amount of Senior Debt Obligations or if a Borrower enters into any Hedging Instrument, then such Secured Party or the Borrower, as applicable, shall notify the Intercreditor Agent and the Intercreditor Agent shall determine the then current maximum amount and maturity date in accordance with the principles set out in Clause 19.28(b).

 

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  (d) If any such maximum amount or maturity date determined by the Intercreditor Agent in accordance with Clause 19.28(c) differs from the then stated maximum amount and/or maturity date stated in such mortgage, then the relevant Borrower shall deliver an amendment to such mortgage to reflect the maximum amount and/or maturity date determined by the Intercreditor Agent in accordance with Clause 19.28(c) and such Borrower promptly shall authenticate, execute and deliver all instruments and documents, and take all further action, that may be necessary or desirable or that the Security Trustee reasonably may request in order to give effect to such amendment and to maintain the validity, perfection and priority of, or protect any Security Interest granted or purported to be granted by such mortgage.

 

  (e) At least seven days prior to the Delivery Date of its Vessel, provide to the Intercreditor Agent a duly completed copy of the New Vessel Notice.

19.29 Fair Market Value

 

  (a) As at the later to occur of the Delivery Date of its Vessel and the first Utilisation of the Term Loan made available to a Borrower, if the Fair Market Value of such Vessel is not at least equal to 125 per cent. of the aggregate of (x) the maximum amount stated in Clause 2.1 in respect of such Borrower’s Term Loan (as such amount may have been reduced in accordance with this Agreement (including pursuant to Clause 4.3(c), Clause 5.6 or Clause 5.10)) minus the aggregate amount of all Loans made under such Term Loan as at such date and (y) the principal amount outstanding under such Term Loan at such time (the “Required Fair Market Value”) the Intercreditor Agent may instruct the relevant Borrower to, and if so instructed such Borrower, as instructed, either shall:

 

  (i) provide an Acceptable Letter of Credit or other security satisfactory to the Intercreditor Agent in respect of the amount by which the Fair Market Value of the relevant Vessel is less than the Required Fair Market Value for such Vessel; or

 

  (ii) cancel the Available Commitments and/or prepay its Term Loan in accordance with Clause 5.12 in the amount by which the Fair Market Value of the relevant Vessel is less than the Required Fair Market Value for such Vessel.

 

  (b) On the Vessel Completion Date and as determined once a year thereafter on or about the anniversary of the Vessel Completion Date, if the aggregate Fair Market Value of all Vessels is not at least equal to:

 

  (i) until and excluding the date falling three years from the Delivery Date of the first Vessel to be delivered, 125 per cent. of the aggregate Available Commitments and all Loans outstanding in respect of all Term Loans;

 

  (ii) from and including the date falling three years from the Delivery Date of the first Vessel to be delivered and until and excluding the date falling four years from the Delivery Date of the first Vessel to be delivered, 135 per cent. of the aggregate Available Commitments and Loans outstanding in respect of all Term Loans; and

 

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  (iii) from and including the date falling four years from the Delivery Date of the first Vessel to be delivered, 140 per cent. of the aggregate Available Commitments and Loans outstanding in respect of all Term Loans,

the Intercreditor Agent may instruct a Borrower to and, if so instructed, such Borrower, as instructed, either shall:

 

  (A) provide an Acceptable Letter of Credit or other security satisfactory to the Intercreditor Agent in respect of its Fair Market Proportion of the total amount by which the aggregate Fair Market Value of all Vessels is less than the requisite percentage as set out in this Clause 19.29(b) of the aggregate Available Commitments and Loans outstanding in respect of all Term Loans; or

 

  (B) cancel the Available Commitments and/or prepay its Term Loan in accordance with Clause 5.12 in an amount equal to its Fair Market Proportion of the total amount by which the aggregate Fair Market Value of all Vessels is less than the requisite percentage as set out in this Clause 19.29(b) of the aggregate Available Commitments and Loans outstanding in respect of all Term Loans.

 

  (c) On the Vessel Completion Date and as determined once a year thereafter on or about the anniversary of the Vessel Completion Date, if the aggregate Fair Market Value of all Vessels is not at least equal to 105 per cent. of the aggregate of:

 

  (i) all Available Commitments and all Loans outstanding in respect of all Term Loans; and

 

  (ii) the maximum net amount payable by all Borrowers under the Hedging Instruments, such amount to be calculated on the basis that all Hedging Instruments will be terminated or closed out as at the date of such calculation,

the Intercreditor Agent may instruct each Borrower to and, if so instructed, each Borrower, as instructed, either shall:

 

  (A) provide an Acceptable Letter of Credit or other security satisfactory to the Intercreditor Agent in respect of its Fair Market Proportion of the total amount by which the aggregate Fair Market Value of all Vessels is less than 105 per cent. of the aggregate of all Available Commitments and all Loans outstanding in respect of all Term Loans plus the maximum net amount payable by all Borrowers under the Hedging Instruments (calculated on the basis that all Hedging Instruments will be terminated or closed out as at the date of such calculation); or

 

  (B) cancel the Available Commitments and/or prepay its Term Loan in accordance with Clause 5.12 in an amount equal to its Fair Market Proportion of the total amount by which the aggregate Fair Market Value of all Vessels is less than 105 per cent. of the aggregate of all Available Commitments and all Loans outstanding in respect of all Term Loans plus the maximum net amount payable by all Borrowers under the Hedging Instruments (calculated on the basis that all Hedging Instruments will be terminated or closed out as at the date of such calculation).

 

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19.30  Acceptable Letter of Credit

If its Vessel has been delivered and the Effective Date of any Acceptable Charter or Alternative Charter for such Vessel has not occurred or will not occur within a period of 90 days following the Delivery Date of such Vessel or the end of any previous Acceptable Charter (as applicable), ensure that an Acceptable Letter of Credit or Acceptable Guarantee is provided in an amount at least equal to the expected aggregate Senior Debt Service and net scheduled payments due in respect of any Hedging Instrument payable by it other than during any such 90 day period until the Effective Date of such Acceptable Charter or Alternative Charter.

 

19.31  Delivery Obligations

Ensure that on or prior to the Delivery Date in respect of its Vessel, each Delivery Obligation has been satisfied or waived by the Intercreditor Agent in respect of its Vessel.

 

19.32  Cost overrun letter of credit

Until the date falling 30 days after the Delivery Date of its Vessel, maintain the Acceptable Letter of Credit that it is required to provide in accordance with paragraph 2.17(b) of Part 1 of Schedule 2 in the amount specified therein.

 

19.33  Access to Vessel

Provide to the Intercreditor Agent and the Technical Consultant reasonable notice of all completion and acceptance tests carried out in respect of its Vessel and the work with respect to its Vessel and, subject to compliance with the terms of the relevant Shipbuilding Contract:

 

  (a) use reasonable efforts to procure that the Intercreditor Agent or its authorised representative and the Technical Consultant (the “Representatives”) are given such access to such Vessel as they may require whilst acceptance tests are carried out, on reasonable notice and at reasonable times and for the purposes only of observing such acceptance tests;

 

  (b) allow any Representative to inspect the results of the acceptance tests; and

 

  (c) allow any Representative to inspect and take copies of any records (including all drawings and specifications), contracts and documents relating to such Vessel,

subject to the Representatives complying with health and safety rules and procedures and any reasonable conditions (including, without limitation, the Representatives agreeing to keep confidential any proprietary information).

 

19.34  Major Casualty Event

 

  (a) Within 21 days of the occurrence of any Major Casualty Event in respect of its Vessel, submit to the Intercreditor Agent for approval by the Intercreditor Agent a reasonably detailed written proposal in respect of the repair of its Vessel following such Major Casualty Event (a “Repair Plan”). In determining whether to approve such plan the Intercreditor Agent shall give due regard to any off-hire or loss of earnings insurance that may be payable in respect of the relevant Major Casualty Event.

 

  (b)

If the Intercreditor Agent notifies a Borrower that it has approved any Repair Plan delivered by such Borrower in accordance with Clause 19.34(a), such Borrower promptly shall apply any insurance proceeds or other proceeds received by it in

 

56


  respect of such Major Casualty Event to the repair of its Vessel in accordance with such Repair Plan and Clause 26.5 and promptly following such application shall provide to the Intercreditor Agent reasonably detailed documentation satisfactory to the Intercreditor Agent demonstrating that such insurance proceeds or other proceeds have been applied by it in accordance with such approved Repair Plan.

 

  (c) If the Intercreditor Agent notifies a Borrower that it has not approved any Repair Plan delivered by such Borrower in accordance with Clause 19.34(a), such Borrower shall apply any insurance proceeds or other proceeds received by it in respect of such Major Casualty Event towards the prepayment of its Term Loan in accordance with Clause 5.9 and Clause 26.5.

 

20. NEGATIVE COVENANTS

Each Borrower (and the Guarantor in respect of Clauses 20.1 (other than Clause 20.1(a)(i), Clause 20.1(c) (as it relates to the corporate structure of the Group) and Clauses 20.1(d)), 20.3, 20.4, 20.5, 20.6, and 20.11 only) covenants and agrees that until the Final Discharge Date it shall not:

 

20.1 Business and constitutional documents

 

  (a) Change the nature of its business:

 

  (i) in the case of a Borrower, from its entry into and performance of its obligations under each Transaction Document to which it is party, the ownership and chartering of its Vessel and all business ancillary to such activities; and

 

  (ii) in the case of the Guarantor, from its entry into and performance of its obligations under each Transaction Document to which it is party, the ownership of the common stock of its Subsidiaries and all business ancillary to such ownership.

 

  (b) Engage in any business or undertaking that is not permitted by its constitutional documents.

 

  (c) Amend its fiscal year, its constitutional documents or the rights attaching to any share issued by it or the corporate structure of the Group (or any Subsidiary of any Obligor) as provided to the Intercreditor Agent on or about the date of the Second Amendment and Restatement Agreement, without the prior written consent of the Intercreditor Agent.

 

  (d) Hold any share, capital stock, equity or other interest in any other Person or to form, incorporate or hold any interest in any Subsidiary.

 

20.2 Additional obligations

Other than as expressly permitted or contemplated by any Transaction Document to which it is party, enter into any material agreement, contract or commitment (other than a charter agreement or a commitment to enter into a charter agreement, in each case, in respect of a Vessel that it plans to submit to the Intercreditor Agent for approval as an Acceptable Charter or an Alternative Charter by the Lenders) or incur any additional obligation without the prior written consent of the Intercreditor Agent.

 

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20.3 Other accounts

Open or maintain any bank account other than its Accounts or any Local Accounts except, in the case of the Guarantor, in accordance with Clause 19.3(b).

 

20.4 Affiliate transaction

Except as expressly provided for or contemplated in any Finance Document, enter into any transaction or series of related transactions with an Affiliate except on terms (when all documents and agreements relating to such transaction or series of related transactions are considered as a whole) not less favourable to it than as may be available on an arm’s length basis with an unaffiliated third party.

 

20.5 Merger

Enter into any amalgamation, demerger, merger or corporate reconstruction other than in the case of Pacific Santa Ana Ltd., which may form a Subsidiary, Pacific Santa Ana S.à r.l. and other than in the case of the Guarantor, which may enter into a restructuring that comprises the transfer of all of the shares in PDI to PDMS, to the extent that such action constitutes an amalgamation, demerger, merger or corporate reconstruction.

 

20.6 Limitations on Security

Create, assume, incur, permit or suffer to exist any Security Interest upon or in any of its assets, whether now owned or hereafter acquired, except for Permitted Security.

 

20.7 Material Agreements and Hurricane/Emergency Preparedness Plan

 

  (a) Other than as expressly contemplated by any Finance Document or pursuant to any change order in respect of expenditure that does not require any Borrower to provide an updated Construction Budget in accordance with Clause 19.9(b), amend or terminate a Material Agreement, except:

 

  (i) the Chevron Drilling Contract may be assigned by Pacific Santa Ana Ltd. to, and assumed by, PDI pursuant to the Assignment and Assumption Agreement;

 

  (ii) the Vessel Management Agreement in respect of the Pacific Santa Ana shall be terminated (and deemed rescinded) on or about the date of the Second Amendment and Restatement Agreement; and

 

  (iii) the Shipbuilding Contract in respect of the Pacific Santa Ana may be novated by way of a novation agreement pursuant to which Pacific Santa Ana Ltd. shall transfer all its rights and obligations therein to Pacific Santa Ana S.à r.l.

 

  (b) Amend the Hurricane/Emergency Preparedness Plan in respect of its Vessel as delivered in accordance with Part 2 of Schedule 16, without the prior written consent of the Intercreditor Agent.

 

20.8 Incurrence of Financial Indebtedness and investments

Incur Financial Indebtedness other than Permitted Indebtedness or make any investment other than:

 

  (a) the use of the Proceeds for Permitted Uses;

 

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  (b) in respect of any Interest Hedging Instrument or Other Hedging Instrument if permitted by this Agreement; or

 

  (c) in respect of funds on deposit in its Collection Account, Permitted Investments.

 

20.9  Asset sales

Except as otherwise expressly contemplated by this Agreement in respect of the charter of its Vessel in accordance with an Acceptable Charter or Alternative Charter and other than the transfer of the Pacific Santa Ana from Pacific Santa Ana Ltd. to Pacific Santa Ana S.à r.l. pursuant to the Contribution Agreement, enter into a single transaction or series of transactions (whether related or not) and whether voluntary or involuntary to sell, assign, lease, transfer or otherwise dispose of any asset, including its Vessel unless (a) the value of the asset disposed of does not exceed 5,000,000 Dollars and (b) the aggregate value of all assets disposed of by all of the Borrowers in the year of any such disposal does not exceed 15,000,000 Dollars.

 

20.10 Distributions and loans

 

  (a) Make any Distribution except as permitted expressly under Clause 16.3, Clause 16.4, Clause 16.5(b), Clause 26.5(b)(v)(B) or Clause 26.15(f).

 

  (b) Make any loan or provide any other form of credit (including in the form of guarantees or indemnities) to any Person other than an intercompany loan contemplated by Clause 26.17. For the avoidance of doubt, the payment of any costs and expenses by any Borrower in respect of any Charterer Furnished Items as permitted by this Agreement shall not constitute the making of any loan or the provision of any other form of credit for the purposes of this Clause 20.10(b).

 

20.11 Sovereign immunity

In any proceedings in the jurisdiction of its incorporation or elsewhere in connection with any of the Finance Documents, claim for itself or any of its assets sovereign immunity from suit, execution, attachment or other legal process.

 

20.12 Change of flag, registry or class certification

Change the flag, registry or class certification of its Vessel without the prior written consent of the Intercreditor Agent.

 

20.13 Transfer of shares

Cause, suffer, permit or consent to any transfer of its shares or common stock or issue additional shares or common stock.

 

20.14 Replacement of Manager

Replace the Manager with a substitute manager without the prior written consent of the Intercreditor Agent.

 

20.15 Interest Hedging Instruments and Other Hedging Instruments

 

  (a) Notwithstanding any provision of this Agreement or any other Finance Document to the contrary, enter into any Interest Hedging Instrument with any Person, unless:

 

  (i) the Hedging Party under such Interest Hedging Instrument:

 

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  (A) is a Permitted Hedge Provider;

 

  (B) has a credit rating of at least A3 from Moody’s or A- from S&P or Fitch, except in respect of NIBC Bank N.V. which shall be required to maintain a credit rating of at least Baa from Moody’s or BBB from S&P or Fitch; and

 

  (C) has delivered a duly executed Accession Deed;

 

  (ii) such Interest Hedging Instrument is a 2002 ISDA Master Agreement with accompanying schedule and confirmation and provides for the payment of scheduled payments only on dates on which interest is payable under the Relevant Borrower’s Term Loan; and

 

  (iii) the purpose of such Interest Hedging Instrument is to effect the conversion of a floating rate of interest to a fixed rate of interest only.

 

  (b) Notwithstanding any provision of this Agreement or any other Finance Document to the contrary, enter into any Other Hedging Instrument with any Person, unless:

 

  (i) the purpose of such Other Hedging Instrument is to hedge risks associated with foreign currency exchange in connection with any Acceptable Charter or Alternative Charter and such Other Hedging Instrument (if the same benefits from the Security) provides for the payment of scheduled payments only on dates on which interest is payable under the Relevant Borrower’s Term Loan;

 

  (ii) the Guarantor shall have submitted to the Intercreditor Agent at the same time as it submitted the relevant proposed Acceptable Charter or Alternative Charter to the Intercreditor Agent for approval in accordance with this Agreement, a proposal in respect of such Other Hedging Instrument that it proposes be entered into, such proposal to include:

 

  (A) copies of any documents that have been or are intended to be entered into with respect to such Other Hedging Instrument;

 

  (B) details of the identity of each proposed party to such Other Hedging Instrument including the provider of such Other Hedging Instrument (the “Other Hedge Provider”) and the proposed counterparty to such Other Hedging Instrument;

 

  (C) details as to whether it is intended that the Other Hedge Provider shall benefit from all or part of the Security and, if so, whether the Other Hedge Provider’s rights in respect of the Security shall be subordinated to the rights of the Secured Parties and, if so, the terms of any such subordination; and

 

  (D) any other information relating to such Other Hedging Instrument that the Secured Parties reasonably could request, including a copy of any supporting documentation;

 

  (iii) the Other Hedge Provider is a Permitted Hedge Provider; and

 

  (iv) the Intercreditor Agent shall have confirmed to the Guarantor that the execution of such Other Hedging Instrument shall be permitted under the Finance Documents and such Other Hedging Instrument shall be in form and substance acceptable to the Intercreditor Agent.

 

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20.16 New waters and Insurance Policies

Permit its Vessel to enter into the waters of any country or jurisdiction where to do so would, or reasonably could be expected to, result in all or any part of any Insurance Policy in respect of its Vessel being governed by the Legal Requirements of such country or jurisdiction where previously it was not or by any Legal Requirements that are not the same as those Legal Requirements governing any applicable Security Documents that have been entered into in respect of such Insurance Policy (in each case, the “New Legal Requirements”) unless and until the Intercreditor Agent shall have confirmed to the relevant Borrower that:

 

  (a) additional Security Interests satisfactory to it have been created and perfected by or on behalf of the relevant Borrower and any other relevant Person in respect of the relevant Insurance Policy and under the New Legal Requirements (the “Additional Insurance Security”); and

 

  (b) it has received one or more legal opinions in form and substance satisfactory to the Intercreditor Agent in respect of such Additional Insurance Security.

 

21. ADDITIONAL COVENANTS OF GUARANTOR

The Guarantor covenants and agrees that until the Final Discharge Date:

 

21.1 Shareholding in Pacific Santa Ana Ltd. and in each Borrower and shareholding in, and control of, PDSI and PDOL

It shall:

 

  (a) maintain a 100 per cent. ownership interest in the common stock or, as the case may be, the shares of Pacific Santa Ana Ltd., Pacific Bora Ltd., Pacific Mistral Ltd. and Pacific Scirocco Ltd. directly, and indirectly via Pacific Santa Ana Ltd. in the case of Pacific Santa Ana S.à r.l.;

 

  (b) maintain more than a 50 per cent. ownership interest in the common stock of PDSI and shall at all times control PDSI. For the purpose of this Clause 21.1(b) “control” means that the Guarantor directly or indirectly controls more than 50 per cent. of the equity share capital of PDSI or equity share capital having the right to cast more than 50 per cent. of the votes capable of being cast in a general meeting of PDSI;

 

  (c) maintain more than a 50 per cent. ownership interest in the common stock of PDOL and shall at all times control PDOL. For the purpose of this Clause 21.1(c) “control” means that the Guarantor directly or indirectly controls more than 50 per cent. of the equity share capital of PDOL or equity share capital having the right to cast more than 50 per cent. of the votes capable of being cast in a general meeting of PDOL; and

 

  (d) at all times maintain the right (directly or indirectly) to appoint a majority of the directors to the board of directors of PIDWAL and at all times ensure that the majority of directors appointed to such board is comprised of representatives appointed by it (directly or indirectly).

 

21.2 Guarantor Equity Account

It shall establish, maintain and make payments to and from the Guarantor Equity Account in accordance with Clause 26.12.

 

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21.3 Incurrence of Financial Indebtedness and investments

It shall not incur Financial Indebtedness other than as permitted expressly by this Agreement (including in accordance with Clause 15) or make any investment with the proceeds of any funds otherwise required to be on deposit in any Account.

 

21.4 Guarantor Distributions

It shall not make any Guarantor Distribution unless:

 

  (a) no Event of Default or Potential Event of Default is continuing or would result from such Guarantor Distribution; and

 

  (b) each Obligor is in compliance with all of its obligations under each Finance Document as at the date of such Guarantor Distribution, both before and after giving effect to such Guarantor Distribution.

 

21.5 Released Vessel and set off rights

Where:

 

  (a) an entity that formerly was a Borrower (“the Released Vessel Owner”) is party to or proposes to enter into a drilling contract, charter agreement or other agreement for the employment of a Released Vessel (“a Released Vessel Agreement”) with a Person that is (or that is an Affiliate (as defined below) of) an Acceptable Charterer under any Acceptable Charter or Alternative Charter then in effect with another Borrower (the “Existing Agreement”); and

 

  (b) the Existing Agreement contains provisions that allow such Acceptable Charterer to set off amounts payable under its Acceptable Charter or Alternative Charter against amounts owing under such Released Vessel Agreement;

it shall procure that such Released Vessel Owner shall not either:

 

  (i) amend the terms of the Released Vessel Agreement in any manner that reasonably would be expected to result in such Acceptable Charterer having the right to set off any materially greater amounts under the Existing Agreement or have the effect of materially increasing the likelihood or circumstances in which any such set off rights could be exercised under the Existing Agreement; or

 

  (ii) enter into a Released Vessel Agreement that is not substantially in the form presented for approval as an Acceptable Charter or Alternative Charter in accordance with this Agreement (save for changes that a prudent operator in accordance with Customary Industry Practice reasonably would not expect to have either of the effects specified in Clause 21.5(b)(i)),

in each case without the consent of the Intercreditor Agent (such consent not to be unreasonably withheld).

For the purposes of Clause 21.5(a) “Affiliate” shall have the meaning given to it in the relevant Existing Agreement to which the relevant Acceptable Charterer and a Borrower are a party.

 

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21.6 Financial statements of PSDA

It shall procure that each of Pacific Santa Ana S.à r.l., PDI and PDOL will remain consolidated in the financial statements of PDSA.

 

22. EVENTS OF DEFAULT

Each event set out in Clauses 22.1 to 22.23 shall be an “Event of Default”:

 

22.1 Non-payment

An Obligor or QPML does not pay on the due date any amount payable in accordance with a Finance Document at the place and in the currency in which it is expressed to be payable unless payment is made within three Business Days of its due date.

 

22.2 Insurance covenants

Any requirement of Clause 19.10 or Clause 25 is not satisfied.

 

22.3 Financial covenants

Any requirement of Clause 18 is not satisfied.

 

22.4 Acceptable Letters of Credit

Any requirement of Clause 19.30 is not satisfied.

 

22.5 Guarantor and QPML Undertakings and covenants

Any requirement of Clause 16.1, Clause 16.2, Clause 21, the Put Option Undertaking Agreement or the Pacific Santa Ana Share Pledge is not satisfied.

 

22.6 Use of Proceeds

Any requirement of Clause 19.1 is not satisfied.

 

22.7 Negative covenants

Any requirement of Clause 20 is not satisfied or any Person grants any Security Interest where it is prohibited from doing so in any Security Document.

 

22.8 Breach of other provisions of Finance Documents

Any Obligor, PIDWAL, QPML, PDMS, Pacific Drillship S.à r.l., PDI or Pacific Gibco shall breach or default under any term, condition, provision, covenant, representation or warranty contained in any Finance Document (other than those referred to in Clauses 22.1 to 22.7) that is not capable of being cured or, if capable of being cured, is not cured within 14 days of the earlier of:

 

  (a) notice by the Intercreditor Agent to the Guarantor; and

 

  (b) any Obligor, PIDWAL, QPML, PDMS, Pacific Drillship S.à r.l., PDI or Pacific Gibco becoming aware of such failure to comply.

 

22.9 Acceptable Charterers, Acceptable Charters and Alternative Charters

 

  (a)

Any (x) Charterer shall cease to be an Acceptable Charterer (other than pursuant to an assignment or transfer by Total E&P Nigeria Limited to a Current Participant as

 

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contemplated by Clause 5.14(a), or pursuant to an assignment or transfer by Petrobras to a Qualifying Petrobras Affiliate as contemplated by Clause 5.14(b)), (y) Person that is party to any Acceptable Charter or Alternative Charter shall breach or default under any material term, condition, provision or covenant contained in such Acceptable Charter or Alternative Charter or (z) Acceptable Charter or Alternative Charter shall have terminated, been revoked, been subject to assertion of invalidity or repudiation, or otherwise shall cease to be in full force and effect, in each case other than following the occurrence, in relation to the Vessel the subject of that Acceptable Charter or Alternative Charter, of any exceptional event contemplated by Clause 5.9(b) and provided that no Event of Default shall occur or be continuing as a result of the foregoing if (and in the case of the 22.9(a)(i)(B) only for so long as):

 

  (i) the relevant Borrower party to such Acceptable Charter or Alternative Charter shall have, in the case of (x) and (z) above:

 

  (A) both:

 

  (I) entered into a replacement Acceptable Charter or, in the case of an Alternative Arrangement Borrower, an Alternative Charter in accordance with this Agreement, in each case within 90 days of such event; and

 

  (II) provided an Acceptable Letter of Credit or Acceptable Guarantee to cover all Senior Debt Service and amounts due under any Interest Hedging Instruments of such Borrower until the Effective Date of any replacement Acceptable Charter or Alternative Charter; or

 

  (B) received, or will upon the expiry of any notice to terminate receive, payment of compensation into its Collection Account or any relevant Local Account in an amount satisfactory to the Intercreditor Agent in respect of such termination, revocation, assertion of invalidity, repudiation, or other cessation of the relevant Acceptable Charter or Alternative Charter to be in full force and effect; or

 

  (ii) the Guarantor remains in compliance with Clause 18 and each Obligor otherwise is in compliance with each of its obligations under the Finance Documents.

 

  (b) More than one Acceptable Charter or Alternative Charter shall have terminated, been revoked, been subject to assertion of invalidity or repudiation, or otherwise shall cease to be in full force and effect, provided that any such Acceptable Charter or Alternative Charter that has been replaced by the relevant Borrower in accordance with Clause 22.9(a)(i)(A) prior to the date on which an Event of Default otherwise would arise under this Clause 22.9(b) shall not be considered for the purposes of this Clause 22.9(b).

 

22.10 Cross default

 

  (a) Any Financial Indebtedness of any Obligor is not paid when due nor within any originally applicable grace period.

 

  (b) Any Financial Indebtedness of any Obligor is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).

 

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  (c) Any commitment for any Financial Indebtedness of any Obligor is cancelled or suspended by a creditor of any such Obligor as a result of an event of default (however described).

 

  (d) Any creditor of any Obligor becomes entitled to declare any Financial Indebtedness of such Obligor due and payable prior to its specified maturity as a result of an event of default (however described).

No Event of Default shall occur under this Clause 22.10 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (a) to (d) above is less than 5,000,000 Dollars (or the equivalent thereof in another currency or currencies).

 

22.11   Judgments

A final judgment or arbitral award shall be entered against any Obligor by a court or other competent tribunal, in an aggregate amount of 5,000,000 Dollars (or the equivalent thereof in another currency or currencies) or more, is not subject to appeal and such final judgment or award is not paid within 30 days of the date when it is due and payable.

 

22.12   Finance Documents

Any Finance Document is terminated, ceases to be in full force and effect or is incapable of enforcement, and such circumstances are not capable of being cured or, if capable of being cured, are not cured within 10 Business Days following the earlier of notice by the Intercreditor Agent to the Guarantor or any Obligor becoming aware of such event; provided that in respect of any termination, cessation to be in full force and effect or incapability of enforcement of any GIEK Guarantee such 10 Business Day period will be extended to 15 Business Days if such relevant circumstances are capable of being cured and such circumstances have not been caused by any action, inaction of, or any breach or default by, any Obligor or by any other Event of Default.

 

22.13   Unlawfulness

It is or becomes unlawful for an Obligor, Pacific Santa Ana Ltd., PIDWAL, PDMS or QPML to perform any of its obligations under any Finance Document to which it is party.

 

22.14   Repudiation

An Obligor, Pacific Santa Ana Ltd., PIDWAL, PDMS, Pacific Drillship S.à r.l., PDI, Pacific Gibco or QPML repudiates a Finance Document or evidences an intention to repudiate a Finance Document to which it is a party.

 

22.15   Security Documents

Any Security Interest in respect of any Secured Collateral created pursuant to any Security Document is not effective or the priority of any such Security Interest is not maintained in accordance with the terms thereof or any Security Interest required to be created in accordance with any Finance Document is not created and perfected in accordance with such Finance Document on and from the time required in accordance with such Finance Document.

 

22.16   Insolvency

 

  (a)

Any Obligor is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.

 

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  (b) The value of the assets of any Obligor is less than its liabilities (taking into account contingent and prospective liabilities).

 

  (c) A moratorium is declared in respect of any indebtedness of any Obligor.

 

22.17   Insolvency proceedings

Any corporate action, legal proceedings or other procedure or step is taken in relation to:

 

  (a) the suspension of payments, a moratorium of any indebtedness, winding-up, cessation of business, dissolution, administration or reorganisation of any Obligor (by way of voluntary arrangement, scheme of arrangement or otherwise but not including any voluntary reorganisation that is previously agreed in writing by the Intercreditor Agent and that does not involve the insolvency of any Obligor);

 

  (b) a composition, compromise, assignment or arrangement with any creditor of any Obligor;

 

  (c) the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of any Obligor or any of its material assets;

 

  (d) enforcement of any Security Interest over any assets of any Borrower; or

 

  (e) enforcement of any Security Interest over any assets of the Guarantor that are subject to any Security,

or any analogous procedure or step is taken in any jurisdiction.

This Clause 22.17 shall not apply to any winding-up petition that is frivolous or vexatious and is discharged, stayed or dismissed within 30 days of commencement.

 

22.18   Creditors’ process

Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of any Obligor having an aggregate value of 5,000,000 Dollars (or the equivalent thereof in another currency or currencies) or more and is not discharged within 14 days.

 

22.19   Misrepresentation

Any representation or warranty made or deemed repeated by any Obligor, Pacific Santa Ana Ltd., PIDWAL, PDMS or QPML in any Finance Document or any other document delivered by or on behalf of any Obligor, PIDWAL, PDMS or QPML under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made or repeated.

 

22.20   Breach of Material Agreements

Unless otherwise approved by the Intercreditor Agent, any Person that is party to any Material Agreement shall breach or default under any material term, condition, provision or covenant contained in any Material Agreement (other than any Acceptable Charter, Alternative Charter or any Insurance Policy) or any Material Agreement (other than any Acceptable Charter, Alternative Charter or any Insurance Policy) shall have terminated (other than by expiry through the effluxion of time in accordance with its terms and on the date scheduled for such expiry), been revoked, been subject to assertion of invalidity or repudiation, or otherwise shall cease to be in full force and effect and such event:

 

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  (a) is not capable of being cured; or

 

  (b) if capable of being cured, is not cured within the longer of (i) 14 days following the earlier of notice by the Intercreditor Agent to each Obligor or any Obligor becoming aware of such event or (ii) in respect of any breach or default, any applicable cure period under such Material Agreement (if any such cure period is provided for in such Material Agreement).

 

22.21   Material adverse change

Any event or circumstance (or combination of events or circumstances) occurs the effect of which has, or could reasonably be expected to have, a Material Adverse Effect (other than a Material Adverse Effect of the type described in paragraph (d) or paragraph (f) of the definition of Material Adverse Effect) in respect of any Obligor or the Group.

 

22.22   Change of control

Any Guarantor Change of Control occurs or the Guarantor ceases to own 100 per cent. of the common stock directly of Pacific Bora Ltd., Pacific Mistral Ltd., Pacific Santa Ana Ltd. and Pacific Scirocco Ltd. and indirectly via Pacific Santa Ana Ltd. in the case of Pacific Santa Ana S.à r.l.

 

22.23   Delayed Vessel delivery

The Delivery Date for any Vessel does not occur by the Final Permitted Delivery Date for such Vessel.

 

23.   REMEDIES

Upon the occurrence and during the continuation of an Event of Default, the Intercreditor Agent and/or the Security Trustee may take any one or more of the following actions:

 

  (a) the Intercreditor Agent and the Security Trustee may refuse to make any Utilisation or any payment from any Account or other funds held by the Security Trustee by or on behalf of any Obligor or suspend or terminate any Commitment;

 

  (b) subject to Clause 28.2(e), the Intercreditor Agent may declare that all or part of the Loans, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents including any costs, losses and expenses, immediately be due and payable or be payable on demand, whereupon they shall become immediately due and payable or payable on demand by the Intercreditor Agent (respectively);
 
  (c) the Intercreditor Agent and the Security Trustee may cure any breach or event of default under any Material Agreement by or relating to an Obligor or any other member of the Guarantor Group;
 
  (d)

subject to Clause 28.2(e), the Intercreditor Agent may deliver to the Security Trustee a notice identified as an enforcement direction specifying the Event of Default giving rise to such enforcement direction, together with a certification that such notice is given in accordance with this Agreement (an “Enforcement Direction”) confirming that the Security Trustee shall be authorised to commence the taking of Enforcement Action with respect to the Secured Collateral in accordance with the Intercreditor Agreement; and

 

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  (e) following receipt of an Enforcement Direction, the Security Trustee may take Enforcement Action in accordance with the Intercreditor Agreement.

 

24. CONSULTANTS AND REPORTS

 

  (a) An Insurance Consultant and a Technical Consultant (together, the “Independent Consultants”) have been appointed on behalf of all of the Lenders to prepare certain reports prior to the Financing Date. Each Independent Consultant shall be available to consult from time to time with the Lenders until the Final Discharge Date.

 

  (b) The Intercreditor Agent may remove from time to time any Independent Consultant and may appoint such replacement Independent Consultants as the Intercreditor Agent may choose.

 

  (c) All fees and expenses of each Independent Consultant shall be paid by the Borrowers in accordance with any letter or agreement in accordance with which such Independent Consultant was appointed.

 

  (d) Each Obligor shall co-operate with the Independent Consultants and shall use commercially reasonably endeavours to procure that each other party to a Material Agreement co-operates with each Independent Consultant.

 

25. INSURANCE

25.1 Scope of Required Insurances for each Vessel

 

  (a) Subject to Clause 25.4, each Borrower shall effect and maintain at all times (at its own cost and expense and at no cost or expense to any Secured Party) from and including the Delivery Date of its Vessel and in the joint names of such Borrower, the Manager, PDSA (including consolidated Subsidiaries of PDSA) and the Security Trustee (but as between the relevant Borrower and the Security Trustee, without the Security Trustee having any liability for any premium call):

 

  (i) insurance against:

 

  (A) fire and usual marine risks (including Excess Risks), which such insurance shall include cover against Named Wind Storm risks to the extent such Vessel is located outside the Gulf of Mexico (and Clauses 25.1(b) and 25.1(c) shall apply with respect to Vessels located in the Gulf of Mexico), in an amount (on an agreed value basis) not less than the applicable Required Insurance Amount and with a deductible of no more than 5,000,000 Dollars; and

 

  (B) loss of hire following fire and usual marine risks, in an amount equal to not less than 180 days hire and with a deductible of no more than 45 days,

with underwriters or insurance companies satisfactory to the Intercreditor Agent and (if applicable) through brokers satisfactory to the Intercreditor Agent, and by policies in form and content satisfactory to the Intercreditor Agent;

 

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  (ii) insurance against war risks as covered by the “English Institute War and Strikes Clauses” current from time to time, or their equivalent, extended as the “Marine Risks” policies and to include protection and indemnity war and terrorism risks either:

 

  (A) with underwriters or insurance companies satisfactory to the Intercreditor Agent and (if applicable) through brokers satisfactory to the Intercreditor Agent, and by policies in form and content satisfactory to the Intercreditor Agent; or

 

  (B) by entering such Vessel in an approved war risks association,

and including protection and indemnity liability up to at least the applicable Required Insurance Amount, excluding from such calculation in respect of such Required Insurance Amount any liability in respect of death, injury or damage to crew; and

 

  (iii) insurance for such Vessel’s full tonnage against protection and indemnity risks (including pollution liability risks), in an amount equal to the maximum limit of cover generally available from a protection and indemnity association that is a member of the International Group of P&I Clubs or excess liability insurers with underwriters or insurance companies satisfactory to the Intercreditor Agent and (if applicable) through brokers satisfactory to the Intercreditor Agent, and by policies in form and content satisfactory to the Intercreditor Agent for such aggregate amount of cover as shall be available on the open market for the Vessel (the “Maximum P&I Limit”).

 

  (b) With respect to the insurance required pursuant to Clause 25.1(a)(i)(A), and subject to Clause 25.1(c) and Clause 25.4, if two or more Uncovered Vessels are located at the same time in the Gulf of Mexico and/or any other region prone to Named Wind Storms (collectively, the “Relevant Regions”), the Obligors shall procure (at their own cost and expense and at no cost or expense to any Secured Party) that there is effected and maintained in respect of each Uncovered Vessel located in the Relevant Regions, from the date on which more than one Vessel is located in the Relevant Regions and, in each case, in the joint names of the Relevant Borrowers, the Manager and the Security Trustee (but as between the Relevant Borrowers and the Security Trustee, without the Security Trustee having any liability for any premium call), fleet policy insurance for Named Wind Storm risks in an amount not less than the applicable Required Named Wind Storm Insurance Amount and with a deductible of no more than 5,000,000 Dollars with underwriters or insurance companies satisfactory to the Intercreditor Agent and (if applicable) through brokers satisfactory to the Intercreditor Agent, and by policies in form and content satisfactory to the Intercreditor Agent. The insurance taken out pursuant to this Clause 25.1(b) in respect of the Uncovered Vessels in the Relevant Regions shall be applied to cover all such Uncovered Vessels located in the Relevant Regions at that time on a first loss basis.

 

  (c)

With respect to the insurance required pursuant to Clause 25.1(a)(i)(A), and subject to Clause 25.4, from and including the Release Date, the Obligors shall procure (at their own cost and expense and at no cost or expense to any Secured Party) that there is effected and maintained in respect of each Uncovered Vessel in the Relevant Regions, in the joint names of the Relevant Borrowers, the Manager and the Security Trustee (but as between the Relevant Borrowers and the Security Trustee, without the Security Trustee having any liability for any premium call), fleet policy insurance for Named Wind Storm risks in an amount not less than the

 

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  applicable Required Named Wind Storm Insurance Amount and with a deductible of no more than 5,000,000 Dollars with underwriters or insurance companies satisfactory to the Intercreditor Agent and (if applicable) through brokers satisfactory to the Intercreditor Agent, and by policies in form and content satisfactory to the Intercreditor Agent. The insurance taken out pursuant to this Clause 25.1(c) in respect of the Uncovered Vessels in the Relevant Regions shall be applied to cover all such Uncovered Vessels located in the Relevant Regions at that time on a first loss basis.

 

25.2 Permitted insurers

 

  (a) Required Insurance shall be effected and maintained with one or more insurers provided that each such insurer has a long-term credit rating of at least A3 from Moody’s or A- from S&P or Fitch.

 

  (b) Any insurer meeting the requirements of Clause 25.2(a) shall be deemed to be an insurance company or insurer satisfactory to the Intercreditor Agent for the purposes of Clause 25.1.

 

  (c) For the avoidance of doubt, captive insurance companies and mutual insurance schemes may be insurers under Clause 25, provided that:

 

  (i) any such captive insurance company or mutual insurance scheme satisfies the requirements of Clause 25.2(a);

 

  (ii) the relevant Insurance Policy issued by any such captive insurance company or mutual insurance scheme satisfies the requirements of Clause 25 in all respects; and

 

  (iii) all of the Relevant Borrower’s rights, title and interest in any Insurance Policy issued by any such captive insurance company or mutual insurance scheme are assigned by way of first priority, perfected security to the Security Trustee (on behalf of the Secured Parties).

 

25.3 Undertakings regarding Required Insurances

Without prejudice to its obligations under Clause 25.1 and Clause 25.2, in respect of the Vessel owned by it, each Borrower shall:

 

  (a) without the prior written consent of the Intercreditor Agent, not limit or reduce the scope of or sums recoverable from any Required Insurance below those required under this Clause 25, nor make, do, consent or agree to any act or omission that would or might render any Required Insurance invalid, void, voidable or unenforceable or render any sum paid out under any Required Insurance repayable in whole or in part;
 
  (b) not cause or permit such Vessel to be operated in any way inconsistent with the provisions or warranties of, or implied in, or outside the cover provided by, any Required Insurance or to be engaged in any voyage or to carry any cargo not permitted by any Required Insurance;
 
  (c) duly and punctually pay all premiums, calls, contributions or other sums of money from time to time payable in respect of any Required Insurance, and on request of the Intercreditor Agent produce the receipts for each sum paid by it;

 

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  (d) at least 15 days before any Insurance Policy expires, notify the Intercreditor Agent of:

 

  (i) the renewal plan for such Insurance Policy, including the names of the insurers and/or the war risks and protection and indemnity associations proposed to be employed for the purposes of the renewal of such Required Insurance; and

 

  (ii) the amount in which such Required Insurance is proposed to be renewed and the risks to be covered,

and procure that appropriate instructions for the renewal of such Required Insurance on the terms so specified are given to the brokers (if applicable) and associations in each case satisfactory (or deemed to be satisfactory) in accordance with Clause 25.1 or Clause 25.2 and, at least 5 days before such expiry (or within such shorter period as the Intercreditor Agent may from time to time agree), confirm in writing to the Intercreditor Agent that such renewals have been effected in accordance with the instructions so given and this Clause 25;

 

  (e) forthwith upon the effecting of any Required Insurance, ensure that each satisfactory broker (if applicable) or insurer and/or the war risk and protection and indemnity association provides the Intercreditor Agent with pro forma copies of:

 

  (i) each Insurance Policy that is to be effected or renewed; and

 

  (ii) a letter or letters of undertaking in the standard form customarily available from each such entity, in each case, stating the full particulars (including the dates and amounts) of the Required Insurance, including undertakings that:

 

  (A) it shall have endorsed on each Insurance Policy, when issued, a loss payee provision and notice of assignment, in form satisfactory to the Intercreditor Agent;

 

  (B) it shall not exercise any Security Interest in respect of any of the Insurance Policies on account of monies owing to it in priority to the Security Interest of the Security Trustee in any such Insurance Policy;

 

  (C) it shall advise the Intercreditor Agent forthwith of any material change to any term of the Required Insurance;

 

  (D) it shall notify the Intercreditor Agent, not less than 15 days before the expiry of the Required Insurance, in the event of it not having received notice of renewal instructions from the relevant Borrower in accordance with Clause 25.3(d), and, in the event of it receiving instructions to renew, it promptly shall notify the Intercreditor Agent of the terms of the instructions;

 

  (E) if the insurances required under Clauses 25.1(a)(i) and 25.1(a)(ii) are placed on a fleet basis, it shall procure the Insurance Policies on terms that shall not permit the relevant insurer to exercise any Security Interest for outstanding premiums or other amounts on any vessel not subject to the Security against any proceeds payable in respect of any of the Vessels, or cancel cover on any of the Vessels for lack of payment of any premium for a vessel that is not subject to the Security and, to the extent that any such Insurance Policy cannot be procured on such terms, it shall arrange for the issue of a separate Insurance Policy or Insurance Policies for any of the Vessels;

 

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  (f) not settle, release, compromise or abandon any claim in respect of any Total Loss or a Major Casualty Event for which the Intercreditor Agent has not approved a Repair Plan submitted by the Borrower in accordance with Clause 19.34 unless the Intercreditor Agent has given written notice that it is satisfied that such release, settlement, compromise or abandonment shall not prejudice the interests of the Secured Parties under or in relation to any Finance Document;

 

  (g) arrange for the execution and delivery of such guarantees as may from time to time be required by any protection and indemnity or war risks club or association in accordance with the rules of such club or association;

 

  (h) procure that the first priority Security Interest of the Security Trustee is noted on all Insurance Policies; and

 

  (i) in the event that the Guarantor or any Borrower receives payment of any moneys from any Required Insurances, save as provided in the loss payable clauses scheduled to the Insurance Policies, forthwith pay over the same to the Security Trustee and, until paid over, such moneys shall be held in trust for the Security Trustee by the Guarantor or such Borrower (as applicable).

 

25.4 Market Availability

 

  (a) Notwithstanding anything to the contrary in this Clause 25, no Borrower shall be required to maintain:

 

  (i) the insurance required in accordance with Clause 25.1(a)(iii) in an amount equal to the Maximum P&I Limit if such insurance (including the limits or deductibles or any other terms thereof) in an amount equal to the Maximum P&I Limit is not available on reasonable commercial terms (including cost), in which case the relevant Borrower may effect and maintain such insurance in an amount that represents the maximum amount available at that time on reasonable commercial terms, provided that such amount is not less than 50% of the Fair Market Value of its Vessel and provided that such Borrower (at its own cost and expense and at no cost or expense to any Secured Party) also shall have procured and have in full force and effect the Minimum Primary Insurance; and

 

  (ii) any insurance otherwise required to be maintained under this Clause 25 or obtain any policy endorsements on any such insurance, in each case, if such insurance (including the limits or deductibles or any other terms thereunder) or policy endorsements is not available in the commercial insurance market.

 

  (b) If at any time a Borrower is not required to maintain any insurance prescribed by this Clause 25 or in the amount prescribed in Clause 25.1, the relevant Borrower and the Intercreditor Agent shall confer at the end of every quarter from the date upon which the relevant Borrower’s obligations are so limited and in any event prior to renewal of the relevant policies to assess whether cover has become available on reasonable commercial terms or in the commercial insurance market, as the case may be, and such Borrower shall keep the Intercreditor Agent informed of the availability of such cover.
 
  (c) If the Intercreditor Agent disagrees with any Borrower as to whether

 

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  (i) the insurance required in accordance with Clause 25.1(a)(iii) is available in an amount equal to the Maximum P&I Limit on reasonable commercial terms or, if it is not so available, whether the amount proposed to be put in place by the relevant Borrower represents the maximum amount of such insurance that is available at that time on reasonable commercial terms; or

 

  (ii) any relevant insurance and/or policy endorsements are available in the commercial insurance market,

and the Intercreditor Agent and such Borrower fail to reach agreement on such matter within 30 days of the commencement of negotiations on such matter, they jointly shall refer the matter to an independent insurance expert (the “Insurance Expert”) (whose identity and terms of reference shall be agreed upon by such Borrower and the Intercreditor Agent or, in the absence of such agreement within 30 days of the commencement of negotiations on such matter, as specified by the Chairman of the Association of British Insurers) who shall make a determination within 30 days as to the availability of the available insurance. In making such determination, the Insurance Expert shall act as an expert and not as an arbitrator.

 

  (d) The determination by the Insurance Expert shall be binding on the Parties. If the Insurance Expert determines that the insurance required in accordance with Clause 25.1(a)(iii) is available in an amount equal to the Maximum P&I Limit on reasonable commercial terms (or, if not so available, the Insurance Expert otherwise determines the amount that represents the maximum amount of such insurance that is available at that time on reasonable commercial terms), or, as the case may be, that the relevant insurance or applicable policy endorsements are available in the commercial insurance market, or if the insurance required in accordance with Clause 25.1(a)(iii) subsequently becomes available in an amount equal to the Maximum P&I Limit on reasonable commercial terms or, as the case may be, the relevant insurance or policy endorsements that were not previously available subsequently become available in the commercial insurance market, the relevant Borrower promptly shall procure such insurance or policy endorsements, as the case may be.

 

  (e) The costs of the Insurance Expert shall be borne by the Borrowers, and the Borrowers shall bear their own costs in relation to the expert determination.

 

25.5 Mortgagee’s interest insurance

 

  (a) In respect of each Vessel, the Security Trustee, acting on the instructions of the Intercreditor Agent, shall be entitled from time to time with effect from the Delivery Date of such Vessel (at the cost and expense of the relevant Borrower and at no cost or expense to any Secured Party, hereunder in respect of all premiums and other expenses that are incurred in connection with or with a view to effect, maintain or renew any such insurance or dealing with, or considering, any matter arising out of any such insurance) to effect, maintain and renew any one or more of the following insurances, in such manner as the Security Trustee may from time to time consider appropriate, in the Required Insurance Amount for such insurance through insurers as may be available to the Security Trustee:

 

  (i) a mortgagee’s interest marine insurance providing for the indemnification of the Secured Parties for any losses under or in connection with any Finance Document that directly or indirectly result from loss, of or damage to, a Vessel or a liability of a Vessel, the Guarantor or a Borrower, being a loss or damage that is prima facie covered by a Required Insurance but in respect of which there is a non-payment (or reduced payment) by the underwriters by reason of, or on the basis of any allegation concerning:

 

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  (A) any act or omission on the part of the Guarantor or a Borrower, of the Manager or of any officer, employee or agent of any such Person, including any breach of warranty or condition or any non-disclosure relating to such Required Insurance;

 

  (B) any act or omission, whether deliberate, negligent or accidental, or any knowledge or privity of the Guarantor or a Borrower, of the Manager or of any officer, employee or agent of any such Person, including the casting away or damaging of any Vessel and/or any Vessel being unseaworthy; or

 

  (C) any other matter that is insured against under a mortgagee’s interest marine insurance policy from time to time generally available, whether or not similar to the foregoing; and

 

  (ii) a mortgagee’s interest additional perils policy providing for the indemnification of the Secured Parties against, amongst other things, any losses or other consequences of any environmental claim, including the risk of any expropriation, arrest or any form of detention of any Vessel, or the imposition of any Security Interest over any Vessel and/or any other matter insured against under a mortgagee’s interest additional perils (pollution) policy.

 

  (b) To the extent reasonably practicable, the Security Trustee shall give notice to the relevant Borrower before effecting any policy of insurance in accordance with this Clause 25.5 and, with any such notice, shall give details of the costs and expenses associated with such policy. Neither the Security Trustee’s rights nor the Borrowers’ obligations under this Clause 25.5 (including the Borrowers’ obligation to bear any costs and expenses associated with effecting, maintaining and renewing any insurances taken out in accordance with this Clause 25.5) shall be impaired or otherwise affected by any delay or failure by the Security Trustee to give notice in accordance with this Clause 25.5(b).

 

26. ACCOUNTS

26.1 Establishment of Accounts

 

  (a) Each Borrower has established and shall maintain the following Dollar denominated segregated interest bearing deposit accounts (the details of which are set out in Schedule 25 for each Borrower) in its own name with the Accounts Bank:

 

  (i) the “Collection Account”;

 

  (ii) the “Disbursement Account”;

 

  (iii) the “Debt Service Account”; and

 

  (iv) the “Debt Service Reserve Account”.

 

  (b) In no event shall the Accounts Bank be required or obliged to accept any deposit of funds into any Account in a currency other than Dollars.

 

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26.2 Control of Accounts

 

  (a) At all times, unless an Accounts Control Event shall have occurred and be continuing:

 

  (i) each Borrower and, in the case of the Guarantor Equity Account, the Guarantor, subject to Clause 26.2(b), shall be free to deposit, invest (and to vary or redeem such investment) and withdraw moneys from its Accounts in each case, in accordance with this Agreement;

 

  (ii) neither the Security Trustee, the Accounts Bank or, if applicable, the Operating Accounts Bank, except as expressly provided in this Agreement, shall:

 

  (A) have any duty to monitor any such deposit, investment or withdrawal;

 

  (B) be required to consider whether any such deposit, investment or withdrawal was made in accordance with this Agreement;

 

  (C) have any right to take any action (including initiating or joining in any proceeding) to disburse the amount standing to the credit of any Account from any Account or to approve, limit, impede, prohibit, restrict, dispute or condition any such withdrawal, transfer, application or payment of any amount to or from any Account or other exercise by any Obligor of its rights under this Agreement (and shall decline to pursue or use any right it may have to do so), unless, in each such case, it is subject to a binding order issued by a court in the jurisdiction where the Accounts are established and maintained, requiring it to do so; or

 

  (D) be under any duty to give any Account and any fund held thereby any greater degree of care than it gives its own similar assets.

 

  (b) Upon the occurrence and the continuance of an Accounts Control Event, each Obligor no longer shall be entitled to make any withdrawals, payments or transfers from any of their Accounts and the Security Trustee shall assume exclusive control of all such Accounts.

 

  (c) If the Security Trustee assumes exclusive control of any Accounts as provided in this Clause 26.2, it shall deliver a notice (the “Account Control Notice”) to the relevant Borrower or, in the case of the Guarantor Equity Account, the Guarantor and, in each case, the Accounts Bank and/or, if applicable, the Operating Accounts Bank, stating its intention to so assume exclusive control of the relevant Accounts, the date and time from which it shall assume such control and the Accounts Control Event that has given it the right to take such control.

 

  (d) If the Security Trustee assumes exclusive control of any Account in accordance with this Clause 26.2, it shall from the date specified in the Account Control Notice:

 

  (i) make payments from the relevant Borrower’s Collection Account to give effect to the priority established in the Cash Waterfall for such Borrower; and

 

  (ii)

if there are insufficient funds in the relevant Borrower’s Collection Account to make any payment required in accordance with such Borrower’s Cash Waterfall or otherwise by such Borrower, be permitted to liquidate any

 

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  Permitted Investment (without regard to maturity) and to draw on any Acceptable Letter of Credit in order to make any application required in accordance with such Cash Waterfall or to make any such other payment of such Borrower.

 

  (e) In furtherance, and not in limitation, of any other indemnity or limitation of liability with respect to the Security Trustee contained in this Agreement or in any other Finance Document, the Security Trustee shall not be liable for the selection of any Permitted Investments or any losses suffered by any Obligor, including losses due to early liquidation or market risk, that are a result of the Security Trustee’s exercise of its authority under Clause 26.2(d).

 

26.3 Deposit of funds

 

  (a) Each Borrower shall ensure that:

 

  (i) all Proceeds received by it are deposited in its Disbursement Account or otherwise applied in accordance with the requirements of any Restricted Tranche, that any Excess Proceeds shall be applied in accordance with Clause 16.3, Clause 26.18 and Clause 26.4; and

 

  (ii) all Revenues received by it are deposited in its Collection Account or, to the extent required by any Acceptable Charter or Alternative Charter, in its relevant Local Account before being swept into the Collection Account to the extent possible and in accordance with Schedule 35 and any approved Local Account Proposal.

 

  (b) Each Borrower, by no later than the date any Revenues required to be deposited into its Collection Account or any Local Account in accordance with Clause 26.3(a) are required to be paid by any Person, shall give each such Person, or the Person making payment on behalf of such Person (including banks making payments under letters of credit), irrevocable instructions to make all such payments (and any other payments of any Revenues to be made by such Person) directly to its Collection Account or Local Account (as applicable).

 

  (c) If any Borrower receives any Revenues required to be deposited into its Collection Account or any Local Account in accordance with Clause 26.3(a) other than by deposit into its Collection Account or Local Account (as applicable), then such amounts shall be received and held on trust for the Security Trustee (on behalf of the Secured Parties) and segregated from other funds of such Borrower and such Borrower promptly shall deposit, or cause to be deposited, such amounts in its Collection Account.

 

26.4 Disbursement Account

 

  (a) Funds shall be deposited in each Borrower’s Disbursement Account in accordance with Clause 26.3(a), Clause 16.4(b) and Clause 26.18(e).

 

  (b) Subject to Clause 26.2, funds on deposit in a Borrower’s Disbursement Account (other than any Excess Proceeds deposited in accordance with Clause 26.18(e)) may be withdrawn by such Borrower at any time and used for Permitted Uses (other than O&M Expenses prior to the delivery of such Borrower’s Vessel) in accordance with Clause 19.1 or paid to the Guarantor Equity Account in accordance with Clause 16.4(a).

 

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  (c) Any Excess Proceeds deposited into an Alternative Arrangement Borrower’s Disbursement Account in accordance with Clause 26.18(e) may be paid to the Guarantor only in accordance with Clause 16.3.

26.5 Collection Account

 

  (a) Funds shall be deposited in each Borrower’s Collection Account in accordance with Clause 26.3(a).

 

  (b) Subject to Clause 26.2, from and including the date on which funds are first deposited in its Collection Account, at any time (and no less frequently than once every 30 days following the first date on which funds in the Collection Account are applied in accordance with this Clause 26.5(b)), each Borrower shall apply the amount standing to the credit of its Collection Account in the following order of priority for payments and deposits (such Borrower’s “Cash Waterfall”), provided that, no amount may be withdrawn from such Borrower’s Collection Account in accordance with Clauses 26.5(b)(i) to (v) unless all amounts then required to be paid or transferred under any preceding such Clause have been paid or transferred in accordance with the terms of this Agreement:

 

  (i) first, to O&M Expenses then due and payable by such Borrower in accordance with Clause 19.1 or, following the Delivery Date of its Vessel and otherwise in accordance with Clause 26.8, to transfer to such Borrower’s Operating Account an amount up to the amount of O&M Expenses that will be due and payable by such Borrower within ten Business Days from the date of such transfer (but excluding, for the avoidance of doubt, any O&M Expenses due and payable by Pacific Drilling do Brasil Serviços de Perfuraçāo Ltda. or Pacific Drillship S.à r.l., as applicable, under the Mistral Charter, and any O&M Expense due and payable by PDI under the Chevron Drilling Contract);

 

  (ii) second, to transfer to such Borrower’s Debt Service Account, the amount necessary to ensure that the balance standing to the credit of its Debt Service Account is equal to the then applicable Debt Service Amount;

 

  (iii) third, to transfer to such Borrower’s Debt Service Reserve Account the amount necessary to ensure that the balance standing to the credit of its Debt Service Reserve Account is equal to the then applicable Debt Service Reserve Account Required Balance;

 

  (iv) fourth, to make any mandatory prepayment of such Borrower’s Term Loan then due and payable pursuant to Clause 5 (including, for the avoidance of doubt, any amount that has become immediately due and payable, but has not yet been paid due to the operation of Clause 5.15(a));

 

  (v) fifth, to:

 

  (A) in respect of any funds that are not to be used for Distributions in accordance with Clause 26.5(b)(v)(B), at such Borrower’s sole discretion, apply such funds to:

 

  (I) make voluntary prepayments of such Borrower’s Term Loan in accordance with the terms of this Agreement;

 

  (II) pay for costs and expenses incurred by such Borrower in fulfilling such Borrower’s obligations under any Acceptable Charter or Alternative Charter to provide any Charterer Furnished Items;

 

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  (III) make distributions in accordance with Clause 16.5(b);

 

  (IV) other Permitted Uses;

 

  (V) cash collateralise any letter of credit or similar support letter that constitutes Permitted Indebtedness in accordance with paragraph (c) of the definition of Permitted Indebtedness; or

 

  (VI) make any payment to the Guarantor Equity Account in accordance with Clause 16.4(a); or

 

  (B) subject to the conditions in Clause 26.10 being met, to make Distributions;

 

  (C) provided that no amount shall be paid (or required to be paid) in accordance with sub-paragraph 26.5(b)(v) above, at any time after Total E&P Nigeria Limited has assigned or transferred any of its rights and obligations as the Charterer under the Scirocco Charter to any other Current Participant in accordance with the terms of the Scirocco Charter, unless such transferee or assignee has been approved by the Lenders as an Acceptable Charterer or the Borrowers have pre-paid the Scirocco Term Loan in full in accordance with Clause 5.14(c).

 

  (c) The amounts to be withdrawn from its Collection Account and paid or transferred in accordance with Clause 26.5(b) shall be determined by the relevant Borrower.

26.6 Debt Service Account

 

  (a) Funds shall be deposited in each Borrower’s Debt Service Account in accordance with Clause 26.5(b)(ii).

 

  (b) Subject to Clause 26.2, on each date on which Senior Debt Service is due and payable (including each Repayment Date), the Accounts Bank shall, and each Borrower hereby irrevocably gives the Accounts Bank permission to, debit the relevant Borrower’s Debt Service Account and credit the designated account of the Intercreditor Agent in accordance with Clause 5.2 in order to pay Senior Debt Service then due and payable plus amounts then due and payable under the Interest Hedging Instruments applicable to such Borrower’s Senior Debt or Other Hedging Instruments approved by the Lenders in accordance with this Agreement (together the “Senior Debt Payments”), such payments to be made in the following order:

 

  (i) first, in or towards payment of any accrued fees and premiums comprised in such Senior Debt Payments;

 

  (ii) second, in or towards payment of any interest comprised in such Senior Debt Payments and net scheduled payments due in respect of any Interest Hedging Instrument or Other Hedging Instruments approved by the Lenders in accordance with this Agreement (excluding any liquidation or breakage costs and any termination costs in respect of any such Interest Hedging Instrument or Other Hedging Instruments approved by the Lenders in accordance with this Agreement);

 

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  (iii) third, in or towards payment of any principal (excluding mandatory prepayments) and termination costs in respect of any Interest Hedging Instrument or Other Hedging Instruments approved by the Lenders in accordance with this Agreement comprised in such Senior Debt Payments to the extent payment thereof is permitted in accordance with the Intercreditor Agreement; and

 

  (iv) fourth, in or towards payment of any other sums (excluding mandatory prepayments) comprised in such Senior Debt Payments.

 

  (c) If, on a date on which Senior Debt Service is due and payable by any Borrower (including each Repayment Date), following payment in accordance with Clause 26.6(b), there remain any funds standing to the credit of such Borrower’s Debt Service Account, such Borrower shall transfer such funds to its Collection Account.

 

26.7 Debt Service Reserve Account

 

  (a) Funds shall be deposited in each Borrower’s Debt Service Reserve Account in accordance with Clause 26.5(b)(iii) or, in respect of any Equity Undertaking Proceeds or other Equity contributed to the Borrowers in accordance with this Agreement, in accordance with Clause 26.4(b).

 

  (b) Subject to Clause 26.2, on each date on which Senior Debt Service is due and payable (including each Repayment Date), if there are insufficient funds standing to the credit of a Borrower’s Debt Service Account to permit such Borrower to make all Senior Debt Payments required to be made in accordance with Clause 26.6(b) on such date by such Borrower, then such Borrower may request that the Accounts Bank withdraw the funds on deposit in such Borrower’s Debt Service Reserve Account (in the amount required for such Borrower to pay such unpaid Senior Debt Payments) and use such amounts to pay such unpaid Senior Debt Payments. Such payments shall be applied in accordance with the requirements of Clause 26.6.

 

26.8 Operating Accounts

 

  (a) Subject to Clauses 26.8(b) to 26.8(f), each Borrower may open and maintain with the Operating Accounts Bank a Dollar denominated segregated deposit account in its own name as its “Operating Account”.

 

  (b) Promptly upon opening an Operating Account and in any event no later than ten Business Days before it first deposits any funds into such Operating Account, the relevant Borrower shall:

 

  (i) execute and record in favour of the Security Trustee a first priority accounts pledge and an accounts control agreement, each substantially in the form set out in Schedule 29 and which such agreements shall have been executed by all parties thereto including the Operating Accounts Bank (as relevant); and

 

  (ii) deliver to the Intercreditor Agent a legal opinion or legal opinions in respect of each such accounts pledge and accounts control agreement in each case in form and substance satisfactory to the Intercreditor Agent.

 

  (c) A Borrower shall deposit funds into its Operating Account only:

 

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  (i) after the Delivery Date of its Vessel and provided that no Potential Event of Default or Event of Default is continuing;

 

  (ii) from its Collection Account in accordance with Clause 26.5(b)(i); and

 

  (iii) no more frequently than once per week.

 

  (d) A Borrower shall withdraw funds on deposit in its Operating Account only to pay O&M Expenses then due and payable by such Borrower.

 

  (e) Prior to the date on which any Borrower first deposits any funds into an Operating Account, the Borrower shall procure that the Operating Accounts Bank shall accede to this Agreement and the Intercreditor Agreement by executing an Accession Deed in substantially the form as set out in Part D of Schedule 28 and, from the date of such accession, the Operating Accounts Bank shall be bound as Operating Accounts Bank by the terms and conditions, and shall be entitled to the rights afforded to the Operating Accounts Bank, in each case as set out in this Agreement and the Intercreditor Agreement.

 

  (f) Upon the occurrence of an Event of Default or a Potential Event of Default, the Security Trustee, by written notice to the Operating Accounts Bank, may instruct the Operating Accounts Bank to transfer all funds at that time on deposit in any Operating Account specified in such notice into the Collection Account of the same Borrower as specified in such notice and, as soon as possible following receipt of any such notice, the Operating Accounts Bank shall transfer all such funds in such manner.

26.9 Required balances

 

  (a) Following the payment in full of the amounts required to be paid in accordance with Clauses 26.6(b) and 26.7 on each Repayment Date, each Borrower shall:

 

  (i) recalculate the then applicable Debt Service Reserve Account Required Balance; and

 

  (ii) calculate the amount of the payment expected to be made in accordance with Clause 26.6(b) on the next Repayment Date,

and notify the Intercreditor Agent thereof (providing together with such notification any supporting information that may have been requested by such Borrower and received from any Secured Party and used to prepare any such recalculation or calculation (as the case may be)). The Intercreditor Agent promptly shall notify such Borrower of any dispute relating to the revised Debt Service Reserve Account Required Balance or the amount of any such payment expected to be made in accordance with Clause 26.6(b) on the next Repayment Date.

 

  (b) If, following the recalculation of the Debt Service Reserve Account Required Balance, the balance standing to the credit of the Debt Service Reserve Account of any Borrower is in excess of the Debt Service Reserve Account Required Balance for such Borrower then any such excess balance shall be transferred by such Borrower to its Collection Account or applied in accordance with Clause 26.17, provided that such Borrower shall not make any such transfer with respect to, and to the extent of, any disputed portion of the Debt Service Reserve Account Required Balance, as notified by the Intercreditor Agent to such Borrower in accordance with Clause 26.9(a).

 

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26.10   Distributions

A Borrower may make a Distribution only:

 

  (a) using the funds on deposit in its Collection Account;

 

  (b) if:

 

  (i) the date of such Distribution falls no earlier than the later to occur of:

 

  (A) 1 January 2014;

 

  (B) the date falling three years after the occurrence of the Delivery Date of the first Vessel to be delivered; and

 

  (C) where an Alternative Charter has been executed by any Alternative Arrangement Borrower, the date on which the Alternative Arrangement Period Expiry Date for each such Alternative Arrangement Borrower has occurred;

 

  (ii) no Event of Default or Potential Event of Default is continuing or would result from the making of such Distribution;

 

  (iii) each Obligor is in compliance with all of its obligations under each Finance Document as at the date of such Distribution, both before and after giving effect to such Distribution;

 

  (iv) a fully effective Acceptable Charter or Alternative Charter is in place for each Vessel;

 

  (v) each Borrower’s Debt Service Reserve Account is funded with the Debt Service Reserve Account Required Balance;

 

  (vi) the aggregate amount of all Distributions, made by all Borrowers in that year does not exceed 40 per cent. of the aggregate net income of all Borrowers in the previous year (as demonstrated by the audited Financial Statements of the Guarantor and the Summary Financial Statements in each case delivered in accordance with this Agreement in respect of such previous year and excluding for the purposes of such calculation of net income any non-cash tax expenses and any unrealised gains or losses on any financial instruments (including any equity securities)); and

 

  (vii) the most recent calculation of the Projected DSCR is based only on revenues under effective Acceptable Charters or Alternative Charters and does not include any assumption as to the renewal of any Acceptable Charter or Alternative Charter that is due to expire or terminate or as to any charter day rate; and

 

  (c) if such Borrower has delivered an Officer’s Certificate to the Intercreditor Agent certifying as to compliance with each item in Clause 26.10(b).

If: (x) the Guarantor has made a contribution of funds to a Borrower in order for such Borrower to make any prepayment in accordance with Clause 5.9; and (y) following the application of such funds to make such prepayment, such Borrower receives insurance or other proceeds in respect of the exceptional event that gave rise to the requirement to make such prepayment, then, at the request of such Borrower, the Intercreditor Agent shall enter into discussions in good faith regarding the possibility of securing any requisite consents that may be required for such Borrower to make a distribution of such proceeds to the Guarantor (in an amount no greater than the amount so contributed by the Guarantor).

 

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26.11 Payments from Accounts

 

  (a) The Accounts Bank and, if applicable, the Operating Accounts Bank each agree that it shall make such payments out of the funds on deposit in any Account maintained with it as may from time to time be required in accordance with the terms of this Agreement.

 

  (b) For the avoidance of doubt, funds on deposit in any Account must represent cleared funds and payments may only be made in relation to funds on deposit in any Account as at the close of business on the immediately preceding Business Day unless stated otherwise in this Agreement.

 

  (c) If there are insufficient cleared funds in any Account to make a payment in accordance with a Payment Instruction then the Accounts Bank or, if applicable, the Operating Accounts Bank shall attempt to inform the relevant Obligor of the shortfall as soon as practicable. Until the Accounts Bank or, if applicable, the Operating Accounts Bank is able to contact such Obligor and receive instructions, the Accounts Bank or, if applicable, the Operating Accounts Bank shall be under no obligation to make any payment in accordance with a Payment Instruction. The Accounts Bank or, if applicable, the Operating Accounts Bank shall be under no obligation to inform any other Person (including, but not limited to, any Person that is to receive the payment) if there are insufficient cleared funds credited to any Account to make a payment in accordance with a Payment Instruction.

 

  (d) Each instruction to:

 

  (i) the Accounts Bank in respect of a payment to be made from an Account shall be substantially in the form of Schedule 24 or in such other form as the relevant Parties may agree, shall be executed by an Authorised Representative of the relevant Obligor and shall be copied at the same time, if sent by:

 

  (A) an Obligor, to the Security Trustee and the Intercreditor Agent; or

 

  (B) the Security Trustee, to the relevant Borrower, the Guarantor and the Intercreditor Agent; and

 

  (ii) the Operating Accounts Bank in respect of a payment to be made from an Operating Account shall be in such form (and which may be given electronically) as the relevant Parties may agree provided that, if at any time the Accounts Bank and the Intercreditor Agent shall not have secured electronic access such that each such Agent may monitor all transactions that occur in respect of each Operating Account, including details of each payment into and each payment out of each Operating Account, such instruction shall be:

 

  (A) substantially in the form of Schedule 24; and

 

  (B) at the same time as it is sent by an Obligor, copied to the Accounts Bank, the Security Trustee and the Intercreditor Agent,

each such instruction, a “Payment Instruction”.

 

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  (e) Unless a longer period is otherwise stated in this Agreement, all Payment Instructions must have been received by the Accounts Bank or, if applicable, the Operating Accounts Bank:

 

  (i) in the case of payments to be made from an Account held with the Accounts Bank to another Account held with the Accounts Bank, by 5.00 pm (New York time) on the Business Day prior to the date of the intended payment; and

 

  (ii) in all other cases, at least three clear Business Days before the date on which the payment is to be made.

 

  (f) The Accounts Bank and, if applicable the Operating Accounts Bank, shall not be obliged to make any payment or otherwise to act on a Payment Instruction if it is unable:

 

  (i) to verify any signature on the Payment Instruction against the specimen signature provided for the relevant Party;

 

  (ii) (in the case of any Payment Instruction received by fax) to validate the authenticity of the request for the relevant Party, if so desired;

 

  (iii) to comply with the Payment Instruction because it is in any way incomplete or contains insufficient information; or

 

  (iv) to validate the authenticity of the request by telephoning a callback contact who is not the relevant Authorised Representative for the relevant Party,

 

  (v) and thereafter the Accounts Bank and, if applicable, the Operating Accounts Bank, may request any further information, clarification or verification (without liability for any resulting loss or delay) and refrain from taking any action pending receipt of such further information, clarification or verification to its satisfaction.

 

  (g) The Accounts Bank and, if applicable, the Operating Accounts Bank, shall be entitled to assume that:

 

  (i) no Account Control Notice has been issued in respect of any payment or transfer; and

 

  (ii) no Enforcement Direction has been issued in respect of any Account,

unless and until a Responsible Officer of the Accounts Bank or, if applicable the Operating Accounts Bank, has received any such notice or direction in accordance with this Agreement.

 

  (h) None of the restrictions contained in this Agreement on the withdrawal and transfer of funds from the Accounts shall affect any obligations of any Borrower, including, without limitation, any obligation to make any payment of any nature on the due date for payment thereof in accordance with any Finance Document.

 

  (i) The Accounts Bank and, if applicable, the Operating Accounts Bank, shall be entitled to treat each Payment Instruction as conclusive evidence of the same without any further investigation or enquiry. Each Obligor shall hold the Accounts Bank and, if applicable, the Operating Accounts Bank, harmless and no claim or dispute shall be raised by any Person for lack of conformity of the respective

 

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Payment Instruction. If any dispute or claim is raised, each Obligor shall indemnify and keep indemnified the Accounts Bank and, if applicable, the Operating Accounts Bank, for any loss, liability or claim, action, damages and expenses.

 

  (j) Each Obligor shall give the Accounts Bank and, if applicable, the Operating Accounts Bank, five clear Business Days’ notice in writing of any amendment to its Authorised Representatives or callback contacts giving the name, position, specimen signature (in the case of an Authorised Representative only) and telephone number of any new Authorised Representative or callback contacts. Any amendment of Authorised Representatives or callback contacts of any Borrower shall take effect upon the expiry of such five clear Business Days’ notice.

 

  (k) Any payment by the Accounts Bank or, if applicable, the Operating Accounts Bank under this Agreement shall be made without any deduction or withholding for or on account of any tax unless such deduction or withholding is required by any applicable Legal Requirement.

 

  (l) If the Accounts Bank or, if applicable, the Operating Accounts Bank, is required by any applicable Legal Requirement to make a deduction or withholding, it promptly shall inform the relevant Obligor and shall not pay an additional amount in respect of that deduction or withholding.

 

26.12   Guarantor Equity Account

 

  (a) The Guarantor shall establish and maintain a Dollar denominated segregated deposit account in its own name with the Accounts Bank as the “Guarantor Equity Account”.

 

  (b) Funds may be deposited into the Guarantor Equity Account in accordance with Clause 16.4(a).

 

  (c) Funds on deposit in the Guarantor Equity Account may be withdrawn by the Guarantor in accordance with Clause 16.4(b).

 

26.13   Funds standing to credit of Accounts

 

  (a) For the purposes of this Agreement, the amount standing to the credit of any Account at any time shall be deemed to be the sum of:

 

  (i) the aggregate amount of funds on deposit in such Account;

 

  (ii) in respect of any Collection Account, the aggregate amount of Permitted Investments in which all or part of the funds from such Collection Account are then being invested in accordance with Clause 26.14; and

 

  (iii) in respect of any Debt Service Reserve Account, the aggregate amount of any Acceptable Letter of Credit with which funds otherwise required to be on deposit in any Debt Service Reserve Account have been replaced in accordance with Clause 26.15.

 

  (b) For the purposes of Clause 26.13(a), the aggregate amount of Permitted Investments shall equal the sum of all payments of principal and interest owing on such Permitted Investments until the next Repayment Date, net of applicable withholding or other similar deductions, or, if greater, the amount for which such Permitted Investments may be sold or liquidated.

 

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  (c) If an Obligor is required to pay any amount from an Account, it must first use the funds then on deposit in such Account. If such funds are insufficient to pay the amount that the Obligor is required to pay, then the Obligor, in such amounts so that the required funds are available in such Account to make the relevant payment, shall (as applicable):

 

  (i) in respect of any Collection Account, liquidate the Permitted Investments in which all or part of the funds from such Account are then being invested; or

 

  (ii) in respect of any Debt Service Reserve Account, draw down under the Acceptable Letter of Credit with which funds otherwise required to be on deposit in such Account have been replaced.

 

  (d) Amounts standing to the credit of each Account shall remain the property of the relevant Obligor and shall be subject to the Security.

26.14   Permitted Investments

 

  (a) Subject to Clause 26.2, a Borrower, other than Pacific Santa Ana Ltd., by written notice substantially in the form of Schedule 30 and executed by an Authorised Representative of such Borrower (an “Investment Notification”) (with a copy to the Security Trustee and the Intercreditor Agent), may notify the Accounts Bank of its intention to invest any funds on deposit in its Collection Account in Permitted Investments selected by such Borrower.

 

  (b) Funds on deposit in any Collection Account may not be invested in any investment other than a Permitted Investment. Funds on deposit in any Account other than a Collection Account may not be invested in any investment, including Permitted Investments. In the absence of an Investment Notification, funds in any Collection Account shall remain in such Collection Account uninvested.

 

  (c) Unless and until the Accounts Bank has confirmed that it is satisfied that:

 

  (i) it has been given sufficiently detailed information in relation to a Permitted Investment in which a Borrower wishes to invest; and

 

  (ii) the Intercreditor Agent has confirmed to the Accounts Bank and the Security Trustee that the Intercreditor Agent is satisfied that the Secured Parties shall have a first ranking security interest in such Permitted Investment,

the Borrower shall refrain from purchasing or instructing any other Person to purchase such Permitted Investment.

 

  (d) All Permitted Investments shall be made by the Borrower or any other Person selected by the Borrower in the name of the relevant Borrower and each Borrower shall place or instruct such other Person to place each Permitted Investment in the name of such Borrower.

 

  (e) If any Permitted Investment terminates or ceases to be a Permitted Investment, the relevant Borrower shall liquidate or procure the liquidation of the Permitted Investment or shall reinvest or procure the reinvestment of the Permitted Investment in replacement Permitted Investments.

 

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  (f) No Secured Party shall be responsible for monitoring whether or not any investment is a Permitted Investment.

 

  (g) A Borrower’s right to instruct the manner of investment of funds on deposit in its Collection Account in Permitted Investments includes, but is not limited to the right:

 

  (i) to sell o